JSC BTA Bank v Ereshchenko [2013] EWCA Civ 1961

[2013] EWCA Civ 1961

Case No A3/2012/1943

IN THE COURT OF APPEAL (CIVIL DIVISION)

[2012] EWHC 1891 (Ch)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

MR JUSTICE VOS

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 4 July 2013

Before

LORD JUSTICE LLOYD

LORD JUSTICE ELIAS

LORD JUSTICE BEATSON

Between

JSC BTA BANKAppellant

ANATOLY ERESHCHENKORespondent

JSC BTA BANK Claimant Appellant- and -ANATOLY ERESHCHENKO 17 th Defendant Respondent

Stephen Smith Q.C. and Emily Gillett (instructed by Hogan Lovells International LLP) for Appellant

Paul Lowenstein Q.C.(instructed by Stewarts Law LLP) for Respondent

Hearing Hearing dates: 5 and 6 June 2013

Judgment

Introduction and summary

[1]This judgment is given on a most unusual appeal. The order appealed was made by Mr Justice Vos on 10 July 2012. He dismissed the claimant Bank’s application to commit the respondent, Mr Ereshchenko, to prison for contempt of court, which was made on the basis of a contention that Mr Ereshchenko had given false and dishonest evidence. He said that he was not satisfied beyond reasonable doubt that Mr Ereshchenko had been dishonest. The Bank contends that the judge should have been so satisfied. It is perhaps a tribute to the forensic skill of Mr Stephen Smith Q.C., for the Bank (leading Miss Emily Gillett), that he was able to persuade Lord Justice Rimer to give permission to appeal, and to persuade this court that we needed to hear oral submissions from Mr Lowenstein Q.C., for Mr Ereshchenko, on at least some of the allegations. Nevertheless, despite Mr Smith’s advocacy I am in no doubt that the appeal should be dismissed.

[2]The appeal arises in the course of a major process of litigation by which the Bank seeks to recover losses suffered by it as a result of a large scale fraud committed on it by a Mr Ablyazov, its former Chairman, and others. The Bank has recently secured judgment from Mr Justice Teare after a long trial of several claims in the Commercial Court which form part of this litigation:

[2013] EWHC 510 (Comm)

. In the course of this fraud investments (AAA-rated and therefore known as the AAA Investments) worth around US$300 million which belonged to the Bank were misappropriated by transactions (referred to as the AAA Transactions) undertaken between June 2008 and January 2009, using two tiers of offshore entities: five companies incorporated in the BVI (thus, the BVI Defendants) and four other companies (the Further Recipients), with assistance from an English company, Eastbridge Capital Ltd (Eastbridge). Mr Ereshchenko was a director of Eastbridge from 2003, when it was incorporated, until May 2010. He is now a Defendant to the proceedings, but at first he was only the respondent to an application for relief of a Norwich Pharmacal nature, in the first place by way of a disclosure order made by Mr Justice Henderson on 3 November 2010 (the Disclosure Order). In response to this order Mr Ereshchenko made, first, a witness statement dated 10 December 2010 (the December witness statement), and then a confirmatory affidavit dated 15 December 2010 (the December affidavit). The Bank then applied for an order that he be cross-examined, having also added him as a Defendant. In response to the application for cross-examination Mr Ereshchenko made a witness statement dated 1 March 2011 (the March witness statement). Despite this he was ordered to attend for cross-examination, and he did so for three days on 28 to 30 June 2011 before Mr Justice Peter Smith. The cross-examination came to a sudden end, in circumstances described by the judge at paragraph 82 of his judgment, and the judge ordered Mr Ereshchenko to make a further affidavit, which he did on 19 July 2011 (the July affidavit).

[3]The allegations of contempt of court on which the committal application was based centre on things said by Mr Ereshchenko in, first the December witness statement, secondly the December affidavit, thirdly the March witness statement, and last the July affidavit.

[4]Mr Ereshchenko’s cross-examination resumed before Mr Justice Henderson in November 2011. Immediately after it had finished the Bank’s solicitors stated that they intended to apply for his committal, and they did so in December 2011. The trial of that application came on before Mr Justice Vos for eight days in June 2012, in the course of which Mr Ereshchenko was again cross-examined at length. The judge gave judgment on 10 July 2012 dismissing the application. His full and careful judgment has the reference

[2012] EWHC 1891 (Ch)

. It sets out the nature of the Bank’s case as to the fraud carried out upon it, as to the part said to have been played by Mr Ereshchenko, the course which the proceedings concerning him took, and the evidence given by him, as well as the judge’s own conclusions. I can therefore be shorter than I would otherwise have to be in setting the scene for the issues on the appeal.

[5]It is right to record that Mr Smith explained the Bank’s motivation in pursuing the committal application, and this appeal, as being that a large sum, over $40 million, is unaccounted for out of the proceeds of the AAA Transactions, which the Bank has not yet been able to trace. The Bank considers that Mr Ereshchenko knows more about what happened than he has yet been prepared to admit, and hopes that, if faced with an order for his committal to prison, he would at last disclose what he does know about what happened to that money. As I understand it, it is not alleged that Mr Ereshchenko is in continuing breach of the Disclosure Order, so whether this avowed objective of the Bank could be achieved in this way is a matter of speculation in any event.

[6]It is also appropriate to record that, on the one hand, the Bank has made extensive use of committal applications in relation to other persons involved, but that, on the other hand, we were told that all of those other persons have managed, in one way or another, to leave the jurisdiction of this court, so that the Bank has very limited, if any, recourse to any of them. Mr Ereshchenko, by contrast, is still here and has attended and been represented at all relevant hearings. He was present through the hearing of the appeal.

The allegations of contempt

[7]The Bank set out its case as to Mr Ereshchenko’s contempts in its application notice for committal, as required by the rules. Peter Smith J made an order on 20 March 2012 by which he directed pleadings as to the alleged contempts, so the Bank served Particulars of Contempt, identifying in some detail the material which it said supported its allegations of contempt, and Mr Ereshchenko served Points of Defence thereto.

[8]The Bank alleges substantive claims against Mr Ereshchenko, having made him a Defendant, which are set out in Re-Amended Particulars of Claim in the main action. The judge set these out at paragraph 102 of his judgment and commented that some of the allegations are the same as those comprised in the committal application. In the light of this overlap, Peter Smith J in March 2012 ordered that any fact found at the committal hearing was to be conclusive as between the parties unless fresh material became available which the court concluded had the potential to undermine the relevant finding. By the same order he also required the Bank to give certain disclosure to Mr Ereshchenko for the purposes of the committal application.

[9]Vos J had to consider eight allegations of contempt. Three of these were not pursued on appeal, so I need not mention them. The remaining five are as follows (see paragraph 9 of Vos J’s judgment):

“The following statements are alleged to have been made without an honest belief in their truth:- (1) That the respondent had attempted to comply with the Disclosure Order in full and had complied with the Disclosure Order so far as he was able (paragraph 24 of the December witness statement). (2) That the respondent knew nothing about the AAA Transactions (paragraph 4 of the December affidavit). (3) That the respondent had no more information relevant to the Disclosure Order and nothing further to add to the evidence provided in his December affidavit (paragraph 61 of the March witness statement). (4) That the respondent had limited involvement in the AAA Transactions (paragraph 10(a) of the July affidavit). (5) That the respondent’s recollection of the AAA Transactions is and always has been very limited (paragraph 10(b) of the July affidavit).”

[10]In essence the Bank contends that Mr Ereshchenko sought to distance himself from the AAA Transactions, and that his statements that he knew nothing about them could not have been made honestly.

[11]The Disclosure Order made by Henderson J required Mr Ereshchenko to answer, to the best of his ability and after making all reasonable enquiries, a set of questions about each of the BVI Defendants, the Further Recipients and Eastbridge, and a series of questions about various accounts and movements of funds, namely those involved in the AAA Transactions. Mr Ereshchenko’s answer was that he was unable to answer any of these questions except those concerning Eastbridge. At the beginning of the December witness statement he set out an explanation of his role and functions in Eastbridge. The bulk of the witness statement, including that which is said to have been a dishonestly false statement, is set out at length in the judge’s judgment at paragraph 110.

[12]As appears from that, Mr Ereshchenko said that he and a Mr Udovenko were principally active on behalf of Eastbridge, that he regarded Mr Udovenko as the real owner of Eastbridge, that Mr Udovenko was active in the field of corporate services, and was far more successful in that, as compared to his own activity seeking investment opportunities. He said that the BVI Defendants and the Further Recipients were dealt with by Mr Udovenko’s side of the business, not by him.

[13]The December witness statement is set out starting with an introduction, describing Mr Ereshchenko’s position in Eastbridge, and that of Mr Udovenko by contrast, then dealing with the Disclosure Order, and last with an order made on 8 December. That order was made on an application by Mr Ereshchenko for an extension of time for his compliance with the Disclosure Order. Vos J, who heard that application on 8 December, granted on that day only an extension of two days. As he explained at paragraph 66 of his judgment under appeal, he made it clear that, if Mr Ereshchenko wanted a further extension beyond 10 December, he would need to tell the court what he had already done to comply with the Disclosure Order, what yet needed to be done and how long it would take. That seems to have been the purpose of paragraphs 22 to 24 of the December witness statement, although in the end Mr Ereshchenko did not apply for a further extension. It is in that context that he said this, at the beginning of paragraph 24 of the witness statement (I have added the underlining to show what is said to have been dishonest):

“I am also required to explain what steps I still need to take in order to comply with the Order. I have, however, in what I have set out above, attempted in fact to comply with the Order in full. It follows that I do not intend to apply to discharge the Order. I now believe that I have complied so far as I am able.”

[14]The December affidavit exhibited the witness statement and some other documents, verified the witness statement as true and correct, and said this, which is also said by the Bank to have been dishonest:

“I know nothing, so far as I can recall, about any of the transactions whereby US$300 million of AAA-rated investments were allegedly fraudulently transferred by the Bank to the BVI Defendants.”

[15]In his March witness statement, Mr Ereshchenko said, in essence, that he had nothing more to tell the Bank. Extensive passages from the witness statement are set out at paragraph 112 of the judgment. The passage which is identified in the committal application is at paragraph 61, which is as follows, the words underlined being the subject of the charge:

“For the reasons referred to above I have no more information required by the Order to give. That should be an end to the matter, since I am told that the Court will not make orders in vain and, if I am subject to cross-examination I have nothing further to add to the evidence I have already provided in my Affidavit.”

[16]The fourth and fifth statements alleged to have been dishonest were in the July affidavit, paragraph 10(a) and (b). These sub-paragraphs were as follows, the passages complained of being underlined:

“(a) As will be apparent from this affidavit and as I have maintained throughout, I had limited involvement in the Relevant Transactions and the time I spent dealing with these matters was minimal; (b) In light of the above, my recollection of these matters is, and has always been, very limited. I was previously unable to properly recall my involvement, not having reference to relevant contemporaneous documents. Before I was provided with the Bundles I only had access to a few isolated emails, selected by the Claimant to support its case that I was “intimately involved” with the Relevant Transactions. Whilst I knew this not to be the case, I did not recall the emails clearly and was unable to provide a proper explanation for them out of context;”

[17]The Bank’s application sought Mr Ereshchenko’s committal on the basis that he had given false written evidence in purported compliance with the Disclosure Order, and sought also, to the extent necessary, permission under CPR 32.14 to pursue allegations that he had made false statements in documents verified by statements of truth without an honest belief in their truth. That rule permits proceedings for contempt of court to be brought against a person if he makes a false statement in a document verified by a statement of truth without an honest belief as to its truth. The permission of the court is required for such a proceeding, now under CPR 81.17(4)(a) and 18, replacing provisions which at the time of the judgment below were in CPR 32.14 itself. In the present case the necessary permission was granted by Henderson J in January 2012.

[18]The contempts are alleged as criminal contempts, in that the Bank’s case is that Mr Ereshchenko intended, by making the dishonest statements, to interfere with the course of justice. The judge set out the law relevant to criminal contempt at paragraph 132 of his judgment, with which neither party took issue. The most important aspect is the one as to which there is the least possibility of any controversy, namely that the allegations must be proved by the Bank, and to the criminal standard of proof. It was therefore necessary for the Bank to prove beyond reasonable doubt that each of Mr Ereshchenko’s statements relied on was untrue at the time it was made, and that Mr Ereshchenko did not have an honest belief in its truth at that time. The judge attached importance to the need to focus on Mr Ereshchenko’s state of mind at each relevant date, and it seems to me that this was clearly right and necessary. Mr Ereshchenko has been able to give more information at a later stage of the process than he did previously, but it does not follow from this that he could have done so at the earlier stage and that he was therefore concealing information earlier of which he was aware, and was thus dishonest in asserting that he had said all he could at that time.

[19]In essence the Bank alleges, and must prove to the criminal standard, that at the time of the December witness statement, and on each later relevant occasion, Mr Ereshchenko knew more than he was admitting to, and knew that he did, and was therefore consciously and deliberately holding back information which he had and which he knew he was required by the Disclosure Order to reveal.

The judgment

[20]The judge set out a full account of the background to the situation from which the Disclosure Order arose, set out the allegations of contempt and then recounted the chronological background, in the course of which he mentioned several instances of involvement of Mr Ereshchenko in the sequence of events with some relevance to the fraud, and also the history of the proceedings concerning Mr Ereshchenko. He then reviewed the evidence, including Mr Ereshchenko’s written and oral evidence. Then, after his passage on the law to which I have already referred, he embarked on a discussion of the allegations of contempt at paragraph 134, first looking at it generally, and then dealing with the specific allegations from paragraph 142 onwards.

[21]In his consideration of the position generally, he made several points to which he attached significance. One is that he did not have before him all the evidence that there might be about the AAA Transactions and about Mr Ereshchenko’s involvement in them. The Bank had not been ordered to give general disclosure and had avowedly been careful to disclose to Mr Ereshchenko only those documents which it perceived that he was entitled to receive at that stage. The Bank had, of course, been ordered to give certain disclosure by Peter Smith J for the purposes of the committal application, but the time for general disclosure in the action had not yet arrived. At a trial of the action against Mr Ereshchenko, the judge said, the court would be in a better position to determine whether what he said in December 2010 about his recollection at that time was clearly false. Proceeding at the preliminary stage with its committal application, and with only limited disclosure, the judge said, “if there is doubt as to what may later be shown to be the case, Mr Ereshchenko will obviously have to be given the benefit of it”: paragraph 135. He went on to say this:

“136. This point is connected also with the inter-relation between this contempt application and the determination of the substantive issues pleaded against Mr Ereshchenko in respect of his alleged dishonest assistance in breaches of fiduciary duty. I have already set out the pleaded case. It is important to understand at the outset the consequence of deciding that Mr Ereshchenko had lied in the respects alleged in relation to the AAA Transactions. The allegation, in effect, is that Mr Ereshchenko did recall the details of the AAA Transactions, and could, therefore, have given further details about them, despite the absence of a great deal of contemporaneous documentation. Mr Smith argues, for reasons I shall come to, that it is obvious that Mr Ereshchenko must have recalled the AAA Transactions in December 2010. It is, of course, far more likely that the details of the AAA Transactions would have remained uppermost in Mr Ereshchenko’s mind if he was intimately involved with them as the Bank says he was. If I were to decide, therefore, that Mr Ereshchenko lied in saying he did not recall any details, I would be going a long way towards (if not actually) deciding that Mr Ereshchenko knew all about the AAA Transactions because he was a significant player in their creation and execution. The consequence would be that I would be taking a significant step (at least) towards deciding the issue in the action against him, namely whether he was liable for the dishonest assistance in a breach of fiduciary duty as claimed by the Bank.”

[22]Mr Ereshchenko’s case is that he is not liable to the Bank and that, although in a few instances he did something which had something to do with the AAA Transactions, he was no more than a bit part player in this respect, acting on the instruction or request of the main players who included Mr Udovenko.

[23]The judge also made the point that, when a court has to assess whether a witness is lying, it should have particular regard to what appears from the relevant documents, and that this may be particularly the case when the issue is whether a witness was lying in what he said at a specific time in the past, rather than in what he says in the course of giving evidence in court. That process would be much assisted by having not only full disclosure as for trial but also any other relevant oral evidence. He went on to say this:

“139. I want next to consider Mr Smith’s important submission that, in the light of the events between the nationalisation of the Bank in February 2009 and December 2010, it is inconceivable that Mr Ereshchenko did not know a great deal more than he was prepared to say about the AAA Transactions. Mr Smith points to the series of events recorded in my chronology. He relies on the cataclysmic collapse of the Bank and the flight to London of Mr Ablyazov and Mr Solodchenko; on Mr Surapbergenov’s visit to London and the concerns he expressed; on the initiation of “intense” legal proceedings by the Bank about which Mr Ereshchenko admitted he knew; the fact that Mr Surapbergenov was sentenced to 7 years in prison in Kazakhstan; the closing down of Eastbridge due to these events; on the disappearance of his partner, Mr Udovenko in December 2009; and on a whole host of other catastrophic circumstances that led to the collapse of Mr Ereshchenko’s business activities as he had known them. Mr Smith then points to Mr Ereshchenko’s own evidence that he was frightened and panicked by the service of the Disclosure Order. He submitted that all this added up to an inevitability that he knew what it was all about. He must have recognised the names of the BVI Defendants and the Further Recipients, with which he had been involved, from the Disclosure Order itself, and must have known that he had dealt on their behalf with the AAA Transactions. Accordingly, when Mr Ereshchenko said he could not recall the AAA Transactions, he was, according to Mr Smith, deliberately lying. 140. This is a formidable case. Were it to be advanced after the court had determined at a trial that Mr Ereshchenko’s role in the AAA Transactions was pivotal or at least instrumental (as the Bank suggests) it might be conclusive. But, in my judgment, at this stage of the proceedings, it is just one element, albeit an important one, to consider when seeking to evaluate the evidence as a whole.”

[24]Proceeding from that towards his examination of the particular allegations of contempt, the judge said that he had considered carefully all the documents available to him and all the evidence before him, particularly concentrating on the witness statements and affidavits made by Mr Ereshchenko. He said in paragraph 141:

“I have tried to see, in the case of each of the statements said to be a lie, whether there is material upon which I can be satisfied, so that I am sure, that Mr Ereshchenko’s statement was a lie.”

[25]The judge took the first two alleged contempts together, these being, as he said, central to the Bank’s case. His treatment of these two is at the heart of the appeal. I will set out in full his paragraphs 143 to 148:

“143. One of the points with which I have found difficulty has been Mr Ereshchenko’s denial that he recognised the names of the BVI Defendants or the Further Recipients when he received the Disclosure Order. He said, as I have quoted above, that he struggled to match the names with Mr Surapbergenov’s transactions. I find it hard to accept that Mr Ereshchenko did not know what he was being asked about when he was served with the Disclosure Order. I say that because of the build up of disastrous events upon which Mr Smith relies, and because Mr Ereshchenko’s own December statement says that he has “no knowledge about the establishment of the BVI Defendants or the Further Recipients” indicating that he was familiar with those companies. Even if he did play a peripheral role in the AAA Transactions as he maintains, the documents show that he had relatively frequently seen the names of these companies in the headings to emails and in other documents. Even if he was not a central player, the Disclosure Order would surely have jogged his recollection. Moreover, the fact that Mr Ereshchenko was frightened and panicked when he got the Disclosure Order indicates to me that he knew that it signalled his involvement in the litigation that had caused his business to collapse and his colleagues to disappear. 144. This conclusion does not, however, lead inexorably, as Mr Smith submitted, to the conclusion that Mr Ereshchenko lied in the respects pleaded. Nor indeed that he lied about his recollection of the BVI Defendants. I rather think, as I put to the parties in closing submissions, that Mr Ereshchenko behaved like an ostrich. He knew that his worst fears had been realised when he received the Disclosure Order. He knew that he was becoming embroiled in the litigation that had engulfed his former colleagues, but he did not want to admit it, even to himself. In this context, his reaction was rather like the ostrich sticking its head in the sand – and in Mr Ereshchenko’s case, I think, not daring to look up in case his already frightening situation became worse. This was, I think, why he did not properly read the materials served by the Bank until much later, when in the lead up to the June cross-examination, he finally plucked up the courage to face his problems. 145. My view of events is, I think, confirmed by Mr Ereshchenko’s cultural and personal characteristics. He is undoubtedly an intelligent man. He is also very precise, even meticulous. Indeed, it seems that Mr Surapberganov used him specifically because he, unlike his colleagues, could get things done when they needed to be done. Moreover, I do not think what he says about his Soviet/Russian upbringing is to be ignored. I am sure that citizens are circumspect about dealings with courts and authorities in Russia, and I accept what Mr Ereshchenko has said repeatedly about not wishing to say anything unless he was sure it was right. This, I think, partly explains the unhelpful nature of the December statement. Mr Ereshchenko knows that he would have been better served if he had explained matters in more detail in his December statement, but he did not do so. I also think he was very ill-advised to make the December statement on 10th December 2010 in such a rush, without coming back to the court on 10th December 2010 (as I had specifically invited him to do) to ask for more time on the basis of a proper explanation of what had been done so far (to answer the 199 questions) and what needed to be done. 146. None of this, however, leads to the conclusion that the court can be satisfied beyond reasonable doubt that Mr Ereshchenko deliberately lied in saying either that he had attempted to comply with the Disclosure Order in full so far as he was able, or that he knew nothing, as far as he could recall, about the AAA Transactions. If the second statement had stood entirely alone, I would not have thought it truthful (at least on the present evidence). But it did not. It has to be read with the December statement in which Mr Ereshchenko explains why he cannot recall the necessary details of the AAA Transactions. It must be remembered that he was not being asked to give a freestyle description of all he could remember about the AAA Transactions. He was being asked to answer a series of extremely detailed questions about specific transactions that had taken place some 2 to 2½ years before, and in respect of which he had no documents to hand. Mr Ereshchenko’s meticulous approach led him to say, truthfully as he saw it: if you ask me today whether I can tell you, without documents, who instructed the payment of $x by A to B on the nth June 2008, I simply cannot recall. I would not be surprised if he could not. And it is to be remembered that he is not charged with failure to answer the questions in the Disclosure Order, but only with falsely saying that he could recall nothing about the AAA Transactions – in the context of his December statement. 147. It is also to be remembered that in paragraphs 4-19 of his December statement, Mr Ereshchenko does explain the reasons why he said he could not recall the necessary details of the AAA Transactions. Of course, he would have been better to say that he would be pleased to help if the documents were provided – or even generally. But he did not, probably because of what he had seen had happened to his former colleagues and his obvious fear of what was going to happen next. 148. Taking all the evidence into account, I am wholly unable to conclude at this stage, beyond reasonable doubt or so that I am sure, that Mr Ereshchenko lied when he made these two statements, or that he made these statements without any belief in their truth. I think he was being careful about what he said – perhaps unduly careful – but that is a different thing. I do not rule out that, after a full trial, these statements may look different. But taking the matter today as I must, I cannot determine that Mr Ereshchenko committed a contempt of court by saying in December 2010 either that he had attempted to comply with the Disclosure Order in full so far as he was able, or that he knew nothing, as far as he could recall, about the AAA Transactions (in the context of his December statement).”

[26]This passage was subjected to close scrutiny in the course of the hearing before us. Mr Smith submitted that the third sentence of paragraph 143 should be read as if it opened with the words “I do not accept”. He also suggested that the first sentence should be taken as meaning that the judge did not accept Mr Ereshchenko’s denial. He pointed to the opening of paragraph 144 which shows that the judge considered that he had set out a “conclusion” in the previous paragraph, and he submitted that the conclusion, which is not stated in terms, was that Mr Ereshchenko did recognise the names of the BVI Defendants and the Further Recipients when he was served with the Disclosure Order. Mr Lowenstein complained that to focus on the first sentence of paragraph 143 was a new point for the Bank, and evidently an afterthought, and it is fair to say that, in context, the sentence reads as an introduction to a discussion the details of which were to follow. The afterthought point is well made, but does not lead to anything if the passage is correctly to be read as Mr Smith contends. As I see it, the judge identified in that first sentence the statement of Mr Ereshchenko with which he had a problem, and he then went on to explain what gave rise to the problem. The first sentence of paragraph 144 shows that this led him to a conclusion adverse to Mr Ereshchenko, but, as he went on to explain, not one which he regarded as sufficient to prove the Bank’s case. In that context, it seems to me that the correct reading of this passage in the judgment is to read the conclusion as being that the statement with which he had the problem had been shown not to be true, for the reasons stated in paragraph 143. Therefore I take the first sentence of paragraph 143, together with the first sentence of paragraph 144, as amounting to a holding that Mr Ereshchenko did recognise the names of the BVI Defendants and the Further Recipients when he was served with the Disclosure Order. Thus, in this respect I accept Mr Smith’s submission. I do not accept that the same applies to the third sentence of paragraph 143 which is in more general terms. I do not consider that the judge’s conclusion, referred to in paragraph 144, was that Mr Ereshchenko “did know what he was being asked about” when served with the Disclosure Order. That would be too vague and unspecific to be the content of a finding in the context of a committal application. I therefore proceed on the basis that the judge held that Mr Ereshchenko did recognise the names of the BVI Defendants and of the Further Recipients when he received the Disclosure Order in November 2010.

[27]Mr Smith also placed reliance on a comment by the judge in the course of the argument as to whether he should give permission to appeal. In general, I deprecate the use of external material of this kind (a passing remark taken from a transcript which the judge will not have had the opportunity to check or revise) in order to construe the terms of a judgment, especially a reserved judgment such as this was. There may be instances in which the use of some material external to the judgment itself is appropriate. In the present case I consider that it was inappropriate, and it was in any event unnecessary; I will therefore say no more about it.

[28]The reference in the second sentence of paragraph 143 is to a passage in Mr Ereshchenko’s cross-examination before Vos J, where Mr Smith was putting questions to him about what he said in the December witness statement. For the reasons which I have given, I accept Mr Smith’s argument that the judge did conclude that Mr Ereshchenko did recognise the names of the BVI Defendants and the Further Recipients when he received the Disclosure Order, and it follows that the judge did not accept that part of the evidence given by Mr Ereshchenko under cross-examination.

[29]However, the judge went on to say, in paragraph 144, that reaching this conclusion did not show that Mr Ereshchenko had lied when making the statements alleged to have been a contempt of court, nor (as a separate point) that he had lied about his recollection of the BVI Defendants. Mr Smith submitted to us that in this the judge was wrong. If Mr Ereshchenko lied in the relevant answers in cross-examination, he contended, it must follow (beyond reasonable doubt) that he had lied when he said in the December witness statement that he had attempted to comply with the Disclosure Order in full so far as he was able and, by the same token, when he said in the December affidavit that he knew nothing, so far as he could recall, about the AAA Transactions. He also criticised the judge’s analogy with the behaviour of an ostrich, which he submitted, even if justified, could provide no valid reason for saying that Mr Ereshchenko was not in contempt of court. I will come to those submissions in due course, together with Mr Smith’s other points on the judgment.

[30]The judge then moved on to deal with the third allegation of contempt, based on Mr Ereshchenko’s statement in the March witness statement that he had no more relevant information and nothing to add to what he had already said. He dealt with this in paragraphs 149 and 150:

“149. Mr Smith’s point about this statement is that Mr Ereshchenko had had 2½ months since his December statement, that he had had more time to read the evidence produced by the Bank and the available contemporaneous documents and that he had had nothing much else to do. This analysis is not borne out by the evidence. Undoubtedly, the Bank had not left Mr Ereshchenko alone in the intervening period. It had restrained him from travelling, joined him in as a defendant to the action, searched Eastbridge, and applied to cross-examine him. Moreover, I think that Mr Ereshchenko was, by 1st March 2011, still somewhat in denial. He had not yet reached the position where he decided that he needed to face the Bank head-on, which was the position he reached by the June cross-examination at the latest. I, therefore, accept his evidence that he had, by 1st March 2011, still only read limited parts of the case against him – however stupid that was. 150. I can only repeat that Mr Ereshchenko is a careful man and was a careful witness. He made many mistakes, but I cannot be satisfied at this stage beyond reasonable doubt or so that I am sure that he lied when he said in his March statement that he had no more information relevant to the Disclosure Order and nothing further to add to the evidence provided in his December affidavit.”

[31]Then the judge dealt with the fourth and fifth allegations of contempt, both based on statements in the July affidavit. He said that he could not be satisfied beyond reasonable doubt or so that he was sure that either of these statements was deliberately false. He went on to say this, at paragraphs 152 and 153:

“152. The question of whether Mr Ereshchenko had limited involvement in the AAA Transactions is a matter for the trial. I cannot say how the evidence will then look. Whether involvement is “limited” is anyway a matter of judgment. There is a legitimate range within which different people might use the word to describe different levels of involvement. The documents I have seen do show, as I have said, that others were certainly far more intimately involved in the AAA Transactions. It will be for the Judge at trial to decide what Mr Ereshchenko did and whether that amounted to a culpable involvement or not. Once that decision is made, this question may look different. 153. The same comments can properly be made about the question of the truthfulness of Mr Ereshchenko’s statement in July 2011 that his recollection of the AAA Transactions is and always has been very limited. As I put to Mr Smith on the first day of the committal hearing, it is always going to be difficult, without hard evidence of what a witness recalled at a particular time, to prove beyond reasonable doubt that he lied when he claimed to have a poor recollection. There was no hard evidence that Mr Ereshchenko actually recalled more about the AAA Transactions than he was saying either in July 2011, March 2011 or indeed in December 2010.”

[32]In turn he said that the same comments could properly be made about the truthfulness of his statement in July 2011 that his recollection of the AAA Transactions was and had always been very limited.

[33]After a further section dealing with the three alleged contempts which are not pursued on appeal, he concluded with a passage which deserves quotation:

“159. Both parties to this application have treated the committal application somewhat like a state trial. I formed the view early on in the hearing that they had got it rather out of proportion. A committal of this kind needs to be clear – beyond reasonable doubt. Finely balanced judgments about a witnesses’ state of knowledge at particular times against the backdrop of years of complex documentation have no sensible place in such an application. 160. All that said, nothing that I have said in this judgment should be taken as determining anything finally in the action. If the Bank had left this committal application over until after the trial, things might, as I have repeatedly said, have looked different. I know not. 161. I am, however, quite clear that, on the present evidence, the Bank has failed to prove beyond reasonable doubt that Mr Ereshchenko lied in any of the 8 specific respects that it particularised. Put shortly, I cannot now be sure that Mr Ereshchenko knew more about the AAA Transactions than he was saying in his December statement, nor that he had not answered any of the 199 specific questions in the Disclosure Order as far as he was able at the time. Nor can I now be sure that he knew he had access to documents that might have helped him respond. [That comment is relevant to the three allegations of contempt which are not pursued on this appeal.] 162. As I have tried to explain in this judgment, Mr Ereshchenko’s approach in his December statement, December affidavit and March affidavit was not helpful. He would have done much better to have explained more and to have offered to help the Bank to ascertain the answers to their questions – particularly the few that they really wanted to know the answers to, like where the US$45 million left in Bubris had ended up. Mr Ereshchenko’s fright and panic did not help the situation, and I am convinced that his ostrich-like response was itself the cause of much of what happened. 163. Since the July affidavit (in July 2011), Mr Ereshchenko has been rather more forthcoming, and I have seen no evidence that leads me to believe that there is presently any evidence tending to show that the recent explanations he has given have not been accurate. 164. If the Bank wishes to pursue its case against Mr Ereshchenko, it must prepare for trial. There is no evidence that Mr Ereshchenko obtained any money from the alleged fraud in relation to the AAA Transactions, but that does not mean that he may not be liable for dishonest assistance in breaches of fiduciary duty. Nothing I have said in this judgment based on exiguous evidence should be taken by either party as being a comment either way on the substantive issues. They are for another day.”

The appellant’s challenge to the judge’s conclusions

[34]Six grounds of appeal were set out, at some length, with the Appellant’s Notice. They were as follows (in summary, and without the supporting particulars), referring to the five contempt allegations which are still in issue as A1 to A5: i) The judge erred by concluding that Mr Ereshchenko had not knowingly given false evidence as alleged by the Bank in allegations A1 to A3 because the judge found that between November/December 2010 and March 2011 Mr Ereshchenko had behaved like an ostrich. ii) The judge erred in making the factual finding that Mr Ereshchenko had behaved like an ostrich when responding to the Disclosure Order by his December witness statement and December affidavit and when making his March witness statement, because this finding was inconsistent in three material respects. iii) The judge erred in finding that Mr Ereshchenko had not read properly those materials relevant to the questions posed by the Disclosure Order served on his solicitors in November 2010 and subsequently provided to him and/or had not been made aware of their contents, either before making his December witness statement and December affidavit or before making his March witness statement. iv) The judge erred in finding that Mr Ereshchenko’s statement in the December affidavit that “I know nothing, so far as I can recall, about any of the transactions whereby US$300 million of AAA-rated investments were allegedly fraudulently transferred by the Bank to the BVI Defendants” was simply referring back to his December witness statement, should not be read as standing entirely alone and therefore did not support a finding that it had been made untruthfully. v) Certain of the judge’s findings of fact were inaccurate and/or incomplete and/or failed to take account of relevant evidence such that the judge’s conclusion that he could not be satisfied that Mr Ereshchenko knowingly gave false evidence cannot be sustained. vi) The judge was wrong to conclude that there was insufficient evidence to find established to the requisite standard that Mr Ereshchenko made statements in the July affidavit, that his involvement in the AAA Transactions was limited and his recollection of the AAA Transactions was and always had been very limited, knowing that they were false.

[35]Mummery LJ refused permission to appeal on a consideration of the papers, treating the challenge as being to the judge’s findings of fact. In the advocate’s statement lodged in accordance with the Practice Direction to CPR Part 52 in advance of the oral renewal of the permission to appeal application, Mr Smith and Ms Gillett argued that the judge made one central error of law or principle, namely in holding that, behaving “like an ostrich” and making the statements that he did in December and in March, Mr Ereshchenko was not in breach of the Disclosure Order. They contended that a respondent who deliberately refuses to engage with the order by properly applying his mind to the questions posed in it, and doing so after making proper enquiries, cannot truthfully say that he has no relevant information to give, if, supposing that he had applied his mind properly to the questions and had made proper enquiries before answering them, he would have provided relevant information. They submitted that this error of law, if not corrected, could undermine or frustrate the effectiveness and purpose of disclosure orders.

[36]They also argued that the judge determined issues of fact wrongly, as a result of looking at the evidence or drawing inferences from the evidence in a manner which was distorted or infected by the error of principle and which failed to remain within the bounds of a properly reasoned determination.

[37]The oral application for permission to appeal came before Rimer LJ. In his judgment he referred to Mummery LJ’s reasons for refusing permission to appeal and said that he had intuitive sympathy for the view expressed, appeals on a question of fact being inherently difficult and appeals against a refusal to find that an allegation has been proved to the criminal standard being likely to be extra difficult. However he was satisfied that there were reasonably arguable grounds of appeal, as set out in the skeleton argument and the advocate’s statement, and as put to him in Mr Smith’s oral submissions.

Discussion

[38]An appeal against the judge’s refusal to commit for contempt of court is legally possible, with permission, and there are some examples in the reports, but they are very rare. Jarmain v Chatterton

(1882) 20 Ch D 493

showed that it was possible, and in that case, as also in Lenton v Tregoning

[1960] 1 All ER 717

, the Court of Appeal took a different view from the judge of the effect of the order and, on that view, held that a contempt had been committed. In neither of those cases was there any dispute as to the relevant facts. In Knight v Clifton

[1971] Ch 700

the judge had ordered the respondent to the committal application to pay the costs but had said that he did not find a contempt proved (see

[1971] Ch 706

G). The respondent appealed against the order for costs and the applicant cross-appealed against the failure to find a contempt proved. The Court of Appeal dismissed the cross-appeal, in particular because they did not have all the evidence that had been before the judge: see Russell LJ at page 707G to H, Sachs LJ at page 721C to 722E and 723A to B and Buckley LJ at page 723F to H. In Attorney-General v Hislop

[1991] 1 QB 514

the facts were not in dispute but the judge had declined to infer from those facts that there was a real risk of prejudice to a fair trial of pending proceedings, a question which had to be determined objectively. The Court of Appeal held that he was wrong not to draw that inference. It imposed a fine on the Defendants. In Government of Sierra Leone v Davenport

[2002] EWCA Civ 230

the judge had held that the respondent to the committal application had failed in certain respects to comply with certain disclosure provisions in a freezing order, but had eventually provided all of the required disclosure. On that basis he declined to impose any sanction other than to order the respondent to pay the applicant’s costs, subject to some disallowance. The Government sought to appeal both against the judge’s finding on the evidence that there was no continuing contempt and also against the refusal to impose a sanction other than costs, and it contended that permission to appeal was not required. The Court of Appeal held that permission to appeal was required, and they declined to give such permission. So although it is legally possible for a person in the position of the Bank to challenge a judge’s failure to find that a contempt of court has been committed, even where the facts were in dispute on the evidence before the judge, the precedents are not encouraging for such an appeal.

[39]Even in cases where the facts in issue need to be proved only to the civil standard, it is rare to find an appeal put on the basis that the judge wrongly failed to make a given finding of fact where the evidence on the point is contested, as distinct from an appeal on the basis that a particular finding of fact which the judge did make was unsupported by any adequate evidence. One example of such an appeal, where the issue was whether a person who had given evidence before the judge was honest or dishonest, is Twinsectra Ltd v Yardley

[2002] 2 AC 164

. Carnwath J at trial had held that a Mr Leach, a solicitor, was not dishonest in undertaking certain acts. The Court of Appeal held that he ought to have found that Mr Leach had acted dishonestly in the relevant respects. The House of Lords held that the Court of Appeal should not have substituted its own finding of dishonesty. Lord Hutton said this at paragraph 43:

“It is only in exceptional circumstances that an appellate court should reverse a finding by a trial judge on a question of fact (and particularly on the state of mind of a party) when the judge has had the advantage of seeing the party giving evidence in the witness box. Therefore I do not think that it would have been right for the Court of Appeal in this case to have come to a different conclusion from the judge and to have held that Mr Leach was dishonest in that when he transferred the moneys to Mr Yardley he knew that his conduct was dishonest by the standards of responsible and honest solicitors.”

[40]It was and is common ground that, if and insofar as the Bank’s case depends on the judge drawing an inference as to Mr Ereshchenko’s state of mind, then the Bank’s case can only succeed if the inference of dishonesty is the only possible inference that can reasonably be drawn. If more than one reasonable inference could be drawn and if any of them is inconsistent with a finding of contempt, then the Bank’s application must fail. The judge recorded this at paragraph 132(iv), citing Teare J in his judgment on the committal application in relation to Mr Ablyazov

[2012] EWHC 237 (Comm)

, who in turn relied on what David Richards J said at paragraph 30 in Daltel v Makki

[2005] EWHC 749 (Ch)

, an observation that was not contested or questioned on the appeal by Mr Makki to the Court of Appeal,

[2006] EWCA Civ 94

[41]As indicated above, Mr Smith’s first challenge to the judge’s conclusions, which he sought to characterise as a point of law, was based on the judge likening Mr Ereshchenko to an ostrich, a comparison which we were told was the judge’s own idea, mentioned for the first time in closing submissions. Analogies can be useful but they can also be misleading. They can, at any rate, distract attention from the substance of the point, and from the rest of the judge’s treatment of it. Here the issue was whether(a) Mr Ereshchenko was telling the truth in what he said in the respects which were charged as contempts, and

(b) if not, whether he had, or did not have, an honest belief at the time that the relevant statement was true. Mr Smith argued that it could not and should not be a defence for a respondent to a committal application to reply from a position in which he has hidden his head in the sand, or in which he is (as the judge said at paragraph 149) in a state of denial. Mr Smith argued that such a state of mind amounts to a deliberate refusal to engage with the obligations under the order, such that Mr Ereshchenko must have known that he was not responding to the order to the best of his ability. In particular, he submitted that Mr Ereshchenko had deliberately refused to engage with the obligations under the Disclosure Order by refusing to apply his mind properly to the questions posed and to his obligation to make reasonable enquiries. He said that, if Mr Ereshchenko would have been able to provide more information if he had applied his mind to the questions properly and had made all reasonable enquiries, then his actual answer must necessarily be untruthful and must also have been made without an honest belief as to its truth.

[42]I do not accept that proposition. What the Bank has to persuade the court of, to make out its case of contempt as regards each or any of the statements in question, is that Mr Ereshchenko’s statement was not true, and that when he made it he knew it was not true or did not honestly believe it to be true. That applies to every aspect of Mr Ereshchenko’s relevant statements. If Mr Ereshchenko had not in fact made all reasonable enquiries before making his statement in answer to the Disclosure Order, then in that respect the answer may be untrue, if the answer includes a statement (express or implicit) that he has made all reasonable enquiries. The Bank may be able to show that this is the case if Mr Ereshchenko has not applied his mind properly to the obligation. That is an objective question. But to prove this does not show that Mr Ereshchenko knew that his enquiries, whatever they may have been, were not all that he could and should reasonably have made. That question is subjective and depends on Mr Ereshchenko’s state of mind when he made the statement. It is not to be overridden by a policy position that a respondent must not be allowed to “get away” with making an objectively inadequate compliance with the order. To show that not all reasonable enquiries have been made may be enough to justify a supplementary order designed to reinforce the original obligations. It does not by itself justify a finding of criminal contempt, based on dishonesty.

[43]The ostrich analogy is not comparable to the analogy often made with the conduct of Admiral Nelson at the battle of Copenhagen in 1801 when he is said to have put his telescope to his blind rather than to his sighted eye, in order to be able to say that he had not seen the signal requiring him to desist from the intended attack on the enemy ships. In such a case the person in question can be regarded as knowing the true position, in that he deliberately refrains from asking the question or undertaking the enquiry, because he knows, or has a very shrewd idea, what the answer or the result would be and wants to be able to deny that he knows it. In a case of that kind it may well be that the person in question can be said to know the true position. The case is not put against Mr Ereshchenko on that basis.

[44]Accordingly, it does not assist the Bank to criticise the judge’s ostrich analogy. What the Bank must show is that the judge could not properly fail to hold not only that Mr Ereshchenko had not made all reasonable enquiries open to him that might enable him to answer the questions, but that, when he made the statements in question in December 2010, he knew that he had not done so. For this reason, the first ground of appeal is not made out. The Bank faces the same challenge in this respect as on the other charges of contempt.

[45]These are the subject of the other grounds of appeal and, as regards the ostrich analogy, of the second. Mr Smith argued that, on the basis that Mr Ereshchenko was (as the judge found) intelligent, very precise, meticulous and careful, he could not honestly have said what he did, in the relevant respects, or honestly have failed to make such reasonable enquires as were open to him at the time, including failing to read all the relevant documentary material which was available to him having been served on his solicitors in connection with the Disclosure Order. Nor could he have been acting honestly when he made “many mistakes” in the March witness statement: see paragraph 150 of the judgment.

[46]Mr Smith’s argument on this point proceeds from a starting position that in paragraph 143 of his judgment the judge rejected an important aspect of Mr Ereshchenko’s defence to the committal application, which was that when he was served with the Disclosure Order and read about what he was required to disclose, he did not recall the names of any of the BVI Defendants: see his Points of Defence paragraph 11(2)(vi), and other passages identified in the Bank’s skeleton argument, including in Mr Ereshchenko’s fourth affidavit and in his oral evidence at the committal hearing. From this Mr Smith proceeded to argue that, if Mr Ereshchenko was lying in his evidence given before and at the committal hearing in the summer of 2012 about his state of mind in December 2010, then he must have been dishonest when he said what he did in December 2010. That is a conclusion which a judge could draw, but it seems to me plain that it does not follow as a matter of logic or necessity, so that it was not the only conclusion open to the judge. The questions are distinct. For a person to tell a lie about one thing does not show that he has previously lied about another thing or even about the same thing. His state of mind has to be assessed as regards each occasion and statement separately. On the reading of paragraph 143 for which Mr Smith contends, and which I accept for reasons given at paragraph [26] above, the judge knew that he was rejecting some of Mr Ereshchenko’s evidence given at the committal hearing. That is what paragraph 143 is all about. In turn paragraph 144 is addressed to the question whether that rejection leads inevitably to the conclusion that Mr Ereshchenko had lied in making his statements in December. The proposition that the judge did not, properly or at all, take into account the fact that he had rejected relevant evidence given by Mr Ereshchenko at the committal hearing when he considered whether Mr Ereshchenko had been dishonest in making his earlier statement flies in the face of the judge’s reasoning in paragraph 144. Moreover the direct attack on the judge’s reasoning seems to me to be unjustified. A conclusion that Mr Ereshchenko lied in saying (later) that he did not recognise the names of the BVI Defendants or the Further Recipients in November and December 2010 simply does not show that he could then remember anything about the AAA Transactions or that he knew something which he was obliged to disclose in answer to the Disclosure Order and was deliberately concealing it by what he said in the December witness statement and affidavit.

[47]The third ground of appeal is aimed at the judge’s finding that even by the time of the March witness statement Mr Ereshchenko had not properly read the materials served by the Bank in relation to the Disclosure

[48]One criticism of the judge’s judgment which is relevant to this attack is made in terms in the Bank’s skeleton argument in relation to the sixth ground of appeal. However it is not limited in relevance to that aspect of the case. It focuses on the judge’s comment in paragraph 153 (see paragraph [31] above) that it would be difficult for the Bank to prove beyond reasonable doubt that Mr Ereshchenko had lied in previous statements about his recollection “without hard evidence”, and that there was no such hard evidence. Mr Smith complained in his skeleton argument that the judge did not explain what he meant by hard evidence. His argument is that there was plenty of circumstantial material from which the judge could draw the inference that Mr Ereshchenko had been lying as to the state of his recollection. He has to accept that the case based on inference has to be made out so strongly that the only reasonably possible inference is that Mr Ereshchenko was dishonest. Logically it is no doubt true that he might be able to make his case out, based on inferences, to the necessary standard even without some independent contemporary corroborative material, which I take it is the sort of thing that the judge had in mind in his reference to “hard evidence”. All the judge said in this passage was that it would be difficult to make the case out without hard evidence. That is an obvious and fair comment. It did not, as Mr Smith contends, expose the Bank to a higher standard of proof than was correct. I do not see how it could be taken to have done since the case had to be proved beyond reasonable doubt.

[49]Leaving that aside as a red herring, arguments of the kind that I have referred to in paragraph [47] above amount to saying that the judge did not give proper weight to one aspect or another of the evidence given before him. A particularly clear example of that is found in the fifth ground of appeal, summarised in the skeleton argument as “inaccurate/incomplete findings of fact and/or failure to take into account relevant matters”. Mr Smith pointed out here that at paragraph 118 the judge summarised an important aspect of Mr Ereshchenko’s evidence at the committal hearing under cross-examination by setting out seventeen points which the judge said he derived from his own notes. Mr Smith went on in the skeleton argument to say that the judge relied on his note “and seemingly nothing more”, and then argued that the summary was materially inaccurate and incomplete and that the judge had failed to take into account material admissions made by Mr Ereshchenko elsewhere in his evidence. The skeleton argument then set out, over two and a half closely typed pages, points in respect of which it was contended the judge had failed to take account of some material statement in the evidence.

[50]I have to say that, apart from the high degree of professional expertise with which this exercise was conducted, and the level of supporting detail, made possible because of the very substantial documentation in the case, including transcripts of every hearing, the process reminded me of some of the many applications for permission to appeal which this court often receives from litigants in person seeking to explain with supporting detail why a judge’s decision as to the credibility of one witness rather than another in hotly contested litigation in the county court should be regarded as wrong and should therefore be set aside on appeal.

[51]The exercise on which Mr Smith embarked in this respect seems to me altogether inappropriate, and to defy the many observations of both this and the ultimate appellate court as to the respect which an appellate court must give to findings of fact – especially findings of fact as to honesty or otherwise – made by a trial judge who has seen the relevant witnesses give oral evidence. I have quoted one such comment, from Twinsectra v Yardley (see paragraph [39] above), because it was about a finding of dishonesty by the Court of Appeal which the trial judge had declined to make, and which the House of Lords held the Court of Appeal should not have made. We were referred to such very familiar cases, relevant on this subject, as Biogen v Medeva

[1997] RPC 1

(Lord Hoffmann at page 45), Assicurazioni Generali v Arab Insurance Group

[2002] EWCA Civ 1642

, [2003] 1 W.L.R. 577, and Datec Electronic Holdings v United Parcels Services

[2007] UKHL 23

, [2007] 1 W.L.R. 1325. In Biogen Lord Hoffmann’s familiar words of caution were addressed to cases where no issue of credibility of a witness arose. His warning ought not to need to be reiterated in a case where credibility is directly at stake. But since, as it seems to me, much of the Bank’s appeal involves an approach which fails to have proper regard for Lord Hoffmann’s words, I will repeat here the most relevant passage:

“The need for appellate caution in reversing the judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance … of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation.”

[52]It is not a proper appellate process to comb through pages of documentary evidence and pages of transcripts of oral evidence to find points of detail not mentioned by the judge which can be said to be inconsistent with things that the judge did say. That is not proper even if, as here, the judge did have access to the transcript, and it is all the less so in other litigation where the judge had to proceed only on the basis of his own note of the evidence. Occasionally there is a case where what a judge has said in the judgment makes it plain that he has proceeded on a false basis as to what the evidence was on a really material point. Sometimes what the judge says about an important issue of fact shows that his reasoning is not correct, for example because it defies plausibility. There are cases, fortunately rare, in which the judge’s explanation as to his resolution of conflicts of factual evidence fails the test of adequate reasoning, as in English v Emery Reimbold & Strick

[2002] EWCA Civ 605

, [2002] 1 W.L.R. 2409. But it is not right for an appellate court to be invited to trawl through the documents and other evidence in detail in the way Mr Smith sought to do, in order to revisit the judge’s assessment of the evidence. This should not be done even in seeking to persuade a court that a judge ought not to have made a finding of fact that he did make, and where the ordinary civil standard of proof applies. It is the more inappropriate to embark on such an exercise in an attempt to persuade an appellate court that the trial judge ought to have made a finding of fact that he refused to make. It is that much more inappropriate when the finding in question is one as to the honesty or dishonesty of a person who has given oral evidence before the judge, and all the more so in turn when the criminal standard of proof has to be satisfied for the finding to be made. In a case where the challenge is to a judge’s finding of fact made on the ordinary civil standard, the criterion has been said to be less than perversity (see Ward LJ at paragraph 197 in Assicurazioni Generali). In a case such as this where the challenge is to the judge’s failure to make a finding of fact, as to dishonesty, on the criminal standard, it seems to me that perversity would be the correct test. The finding must be based on an inference so compelling that no judge could fail to draw it.

[53]The fourth ground of appeal is of a somewhat different nature. The Bank points to the judge’s statement in paragraph 146 that, if the statement in the December affidavit that Mr Ereshchenko knew nothing, so far as he could recall, about the AAA Transactions, had stood alone he would not have regarded it as truthful on the evidence then before him. The judge went on in that paragraph and the following two paragraphs to explain why he did not accept that it was a dishonest statement. Mr Smith argued that the judge’s reasons did not justify his conclusion, so that the judge should have held to his first statement as to the dishonesty of Mr Ereshchenko in saying what he did in the affidavit.

[54]I have set out paragraphs 146 to 148 of the judgment at paragraph [25] above. The judge makes several points there. One is that the December affidavit must be read in the context of the December witness statement, and that the latter contains an explanation of why Mr Ereshchenko could not recall the details of the AAA Transactions. He also noted that Mr Ereshchenko was not required, under the Disclosure Order, to give a general description of what he could remember about the transactions but rather he had to address a series of specific questions about specific transactions in relation to which he had no documents to hand. The judge’s conclusion, set out at paragraph 148, was that, taking all the evidence into account, he was “wholly unable to conclude at this stage, beyond reasonable doubt or so that I am sure, that Mr Ereshchenko lied when he made these two statements, or that he made these statements without any belief in their truth”. The second of the two statements referred to is the one in the December affidavit to which this ground of appeal is relevant.

[55]Mr Smith’s case as to the judge’s supposed error in this respect is that, as a matter of the proper construction of the December affidavit, the statement in question was a free-standing statement, not limited to confirmation of what Mr Ereshchenko had said in the December witness statement, which he had verified in terms in the previous sentence. It was an additional and general assertion that he knew nothing about the transactions. Mr Smith also relies on what Mr Ereshchenko said about this statement in his fourth affidavit, sworn on 18 May 2012. In that affidavit Mr Ereshchenko made a number of references to what he had said in the December affidavit and to the subject of his knowledge and recollection of the AAA Transactions, as it was at different relevant dates. These include a passage in paragraph 46, under a heading more specifically relevant to the charge based on the July affidavit (“My involvement in the relevant transactions was limited”), a passage in paragraph 52 (under the general heading Health Issues), and a passage, on which Mr Smith relies, in paragraph 58, which was under a heading referring in terms to the second charge of contempt and the December affidavit. All of these need to be taken into account. So would any evidence given by Mr Ereshchenko under cross-examination at the committal hearing on this point, but Mr Smith did not show us any such evidence. He told us that he had put the points to Mr Ereshchenko when cross-examining him, but that the witness had held to his earlier evidence.

[56]I do not propose to set out all the material passages from the May 2012 affidavit. From Mr Smith’s point of view the best passage is in paragraph 58, as follows:

“Therefore, while the wording of this statement [i.e. the statement which is the subject of the charge] is perhaps unclear, my intention in making the statement was to convey the fact that I could not at that time recall anything in relation to the specific transactions/transfers set out in the schedule[s] to the Disclosure Order because, as explained above, I did not recognise them.”

[57]Mr Smith’s essential proposition is that this statement, taken with the judge’s conclusion that Mr Ereshchenko did recognise the names of the BVI Defendants when he was served with the Disclosure Order, proves that he did know something about the AAA Transactions in December 2010, and he was therefore lying when he said he knew nothing about them. This contention relies on specific material and amounts to saying that one statement in the judgment is incompatible with another, the latter being an express finding by the judge, so that the conclusion drawn from the first statement cannot stand as a matter of logic. However, in my judgment the ground of appeal is not well made. For the judge to have held (as I have explained at paragraph [26] above) that Mr Ereshchenko did recognise the names of the BVI Defendants and the Further Recipients when he received the Disclosure Order does not of itself show that he then recalled anything about the AAA Transactions. The judge recorded at paragraph 139 Mr Smith’s submission that not only did Mr Ereshchenko recognise the names of the companies but that he must also have known that he had dealt on their behalf with the AAA Transactions. The judge accepted the first submission but not the second. The two were logically independent, and to find that the second was not made out was not incompatible with having found that the first was established. Therefore Mr Smith’s premise is not sound. Paragraph 58 of the May 2012 affidavit is not contradicted by the judge’s finding in paragraph 143 of the judgment as I have set it out above.

[58]More generally, it seems to me that the judge was right to say that the statement in question in the December affidavit had to be read in the context of the December witness statement as a whole, and that, on that basis, it was a fair and proper conclusion for the judge to say that, whatever might have been the position otherwise, as it stood he could not conclude that the statement had been made dishonestly. That is not a conclusion which it is open to the Court of Appeal to override.

[59]The sixth ground of appeal relates to the fourth and fifth statements charged as contempts, namely his statement in the July affidavit that his involvement in the AAA Transactions and his recollection of those transactions had been very limited. In part this ground of appeal is put forward on the basis that the other charges were made good, but in part it is free-standing. I have referred above to Mr Smith’s criticism of the judge’s reference to the need for hard evidence. Another point made by the judge was that a statement that his involvement or his recollection was limited “is anyway a matter of judgment”: paragraph 152 (see paragraph [31] above for the full passage). Mr Smith accepted that the observation is correct as matter of language but argued that the judge ought to have decided what exactly it was that Mr Ereshchenko meant by “limited” in each of these two contexts, and should then have decided whether he was telling the truth by reference to that meaning. I do not accept that proposition. It would have required the judge, faced with the contempt allegation that the respondent was dishonest when he made a fairly general observation such as each of these was, to spend time, first, in working out, according to the evidence before him, exactly what it was that the witness meant when he used the word “limited” on each occasion. That would be inherently a difficult process, bearing in mind that any finding of a meaning other than the most favourable reading from the point of view of the witness would have to be established beyond reasonable doubt. In practice the outcome might well be that the word had to be read in the most favourable sense from the witness’ point of view. Having undertaken that process the judge would then have to decide whether he could be satisfied, beyond reasonable doubt, that, according to that meaning of the word, the witness had been lying when he used the word. The proposition that the judge should have undertaken those tasks on this committal application seems to me fanciful and, what is more, by no means consistent with that aspect of the overriding objective which requires the court, in effect, to bear in mind the need to ration the amount of its time which is devoted to a given case: CPR 1.1(2)(e).

[60]As Mr Lowenstein pointed out, the Bank chose what it wanted to complain about by way of the committal application, when it wanted to mount the application and how it wanted to pursue it. It seems to me that if the Bank could have made good the first three of its charges of contempt, which are based on more specific statements than these others, it would not have needed to rely on these further charges, and if it were not able to make the first three good, it was most unlikely to be able to make the others good. Accordingly, to devote as much time and effort as Mr Smith submitted was necessary to the fourth and fifth charges would have been disproportionate.

[61]Another point which is relevant to these particular charges, but also generally, is the relationship between proving the case at the committal hearing and proving it at trial. Mr Smith said that no objection had been taken on behalf of Mr Ereshchenko to the committal application being pursued in advance of trial, and he explained the Bank’s motivation, as I have mentioned above, as being to try to obtain from Mr Ereshchenko the information which the Bank believes he must have which would enable the Bank to trace the missing $40 million. On that footing he sought to criticise the judge’s attitude, expressed at a number of points in the judgment and summarised at paragraph 160, which he submitted amounted to a failure to grasp and decide the issues which fell for decision on the committal application. I do not accept that submission. The judge expressed two distinct concerns as regards the circumstances in which the committal application was brought to hearing, as compared with the hypothetical situation in which it had not been made, or not brought on, until after a trial. One was the possibility of a finding on the committal application which might affect the forensic position, even if not formally the findings of fact, at trial. Mr Justice Peter Smith’s order mentioned above at paragraph [8] recognised the possibility of such an effect in terms of findings. Mr Justice Vos was evidently aware of it as regards a possible effect on the trial process of a less specific but perhaps even more significant nature, for example at paragraph 136.

[62]The judge’s other concern was that he was asked to determine the relevant issues of fact with reference to documentation which might turn out to have been less full than would be available after general disclosure for trial purposes: see (as one of several examples) paragraph 138. Both of these concerns are connected.

[63]It seems to me that it was entirely legitimate for the judge to have regard to both of these factors, and to be cautious in his approach to the fact-finding process arising on the committal application because of those factors. Of course, because of the need to apply the criminal standard of proof, if the judge was in any doubt, the Bank could not make out its case, so it is not a question of giving Mr Ereshchenko the benefit of any doubt: he had to have that in any event. But it was fair and proper for the judge to take these points into account when considering the evidence as it was put before him and in deciding whether he was left in any doubt.

Conclusion

[64]For the reasons that I have set out above, I am satisfied that the Bank has failed to make out any of its grounds of appeal against Mr Justice Vos’ order. The conclusion to which the judge refers at the beginning of his paragraph 144, which I read in the way explained at paragraph [26] above, does not amount to a holding that Mr Ereshchenko was lying when he made any of the first three statements which are charged as contempts. The judge’s ostrich analogy may or may not have been helpful, but it does not offer the Bank a basis for saying that, if the analogy was rightly drawn, Mr Ereshchenko should have been found to be dishonest in his statements complained of. The Bank’s criticisms of the factual basis for the ostrich analogy are not made out. The judge was entitled to say that the statement in the December affidavit had to be read in context and, so read, was not untruthful. The judge was also entitled to hold that the relevant statements in the July affidavit had not been shown to have been made dishonestly. Mr Smith’s attack on the judge’s weighing up of the evidence, and his contention that the judge had erred by failing to take into account one feature of the evidence or another, said to be significant and to be incompatible with the judge’s conclusions, is not justified.

[65]The task assumed by the Bank on the appeal was to seek to persuade the Court of Appeal that the judge, having seen Mr Ereshchenko give evidence under cross-examination for several days and having declined to find that he was dishonest in the respects charged, had failed so lamentably in his assessment of the evidence that, if only he had considered it properly, he must have been satisfied, beyond reasonable doubt, that Mr Ereshchenko had been dishonest in making one or more of the relevant statements. That was an extraordinarily difficult task. Despite Mr Smith’s thorough written and oral advocacy on the appeal, I am satisfied that the Bank got nowhere near satisfying the burden that it undertook.

[66]I mention only for completeness that we had some submissions about the element in criminal contempt of intending to interfere with the administration of justice. Since the point could not arise unless Mr Ereshchenko were shown to have been dishonest in making one or more of the five statements in question, and since the judge held that this had not been shown, for reasons which, as I have explained, I regard as unchallengeable on this appeal, it is unnecessary to go into this distinct aspect of the case.

[67]I have not mentioned in this judgment every point made to us in writing or during the day and a half of oral submissions, any more than the judge mentioned every point made in the course of the hearing before him, in evidence or in submissions. I have taken advantage of our having been provided with a transcript of the hearing before us to review not only all the written submissions but also all the oral arguments addressed to us. Having done so I am satisfied that the Bank’s appeal is not well made out on any of the grounds of appeal. Accordingly I would dismiss the appeal.

[68]I agree that the appeal should be dismissed for the reasons given by Lord Justice Lloyd. For reasons given by Lord Justice Beatson, I also consider that where the party initiating contempt proceedings has also brought substantive proceedings against the same defendant, it should only be in exceptional cases that the court should allow the contempt action to be heard ahead of the trial. This is particularly so where, as here, the resolution of the contempt charge depends upon a consideration of evidence which can be more appropriately assessed in the light of full disclosure at trial.

[69]I am grateful to my Lord, Lord Justice Lloyd, for his comprehensive description and analysis of the facts and legal issues in this appeal. I agree with both his conclusion that the appeal should be dismissed and with his reasoning. In particular, I too consider that the minute analysis of the fine detail of the material before the judge is inappropriate in an appellate court, particularly where the issue is the judge’s assessment of a person’s honesty.

[70]I would like to make additional observations about the problems of an application to commit which is heard, as this was, before the trial of the substantive dispute between the parties where (as will be common) there is an overlap between the issues relevant to the application and those which arise in the substantive dispute. In this case the judge stated (see judgment, [103], [136] and [138]) that a number of the substantive claims are the same as those relied on in the application to commit.

[71]Where proceedings for criminal contempt are instituted by the person who has also brought substantive proceedings against the defendant, it is important for the applicant and for the court to keep in mind (see Malgar Ltd v RE Leach (Engineering) Ltd

[1999] EWHC 843 (Ch)

[2000] FSR 393

) that the allegation is of a public wrong, and its primary purpose should not be to vindicate a private right. The circumstances of this case show how, despite this, the private interests of the applicant can assume or at least appear to assume primary importance.

[72]This case also shows that, when the course of action chosen is an application to commit for criminal contempt, there is a risk of using valuable and scarce court time on satellite litigation: see Daltel v Makki

[2005] EWHC 749 (Ch)

per David Richards J. The hearings before the judge and this court occupied a total of ten days, with additional time needed for the preparation of the judgments. The issue before the judge at the hearing was not fully resolved at that stage because of the state of the evidence put before the court by the applicant and the judge’s belief that the position might appear different after the trial. It was in part for such reasons that, in Malgar Ltd v RE Leach (Engineering) Ltd, the Vice-Chancellor indicated that while committal before trial might be appropriate in a very clear case, it might be better, in many cases, for the application to take place after the trial when the evidential position would be clearer. Malgar’s case illustrates the need for caution even at the outset, and the importance of the public control provided by the requirement that the court give permission for the institution of such proceedings.

[73]The Bank has chosen to proceed in the way that it has in relation to Mr Ereshchenko for the reasons summarised by Lloyd LJ at [5] above. Mr Smith also stated that proceeding to trial against a defendant like Mr Ereshchenko, who has only limited means, risks obtaining a judgment that cannot be enforced while leaving the Bank no further forward in tracking down the missing $42 million. In the over two years since Mr Ereshchenko served his defence to the claim against him, there has been no reply by the Bank and only one case management conference. The Bank’s position is that it has been very busy with other proceedings arising out of the systematic fraud against it, including this application to commit.

[74]I accept that a litigant whose dispute is against a person who may be judgment-proof may have a legitimate interest in seeking to protect its interest by means other than proceeding to trial. But where what is contemplated is recourse to criminal contempt, particular care is needed because of the risk that the litigant’s primary purpose is in fact to vindicate a private right. In December 2011 when the Bank applied to commit Mr Ereshchenko, in view of his responses and his admission in his cross-examination before Peter Smith J that he had been lying in the circumstances summarised by the judge at [82] of his judgment, it is understandable why permission to pursue the allegations was given by Henderson J. I consider that it was legitimate at that stage for a judge to regard the Bank’s private aim of tracking down the missing millions as mirroring the public interest in maintaining the court’s authority that is necessary for criminal committal proceedings. Notwithstanding this, I also recognise that, even at that stage, a plausible argument could have been made that, in the light of Mr Ereshchenko’s admissions,there was no attempt to interfere with the course of justice of a sufficient seriousness to warrant criminal committal proceedings before the trial of the substantive dispute. That was the conclusion reached by the Vice-Chancellor in Malgar’s case about alleged falsehoods that were not persisted in.

[75]The public interest presented through the prism of the Bank’s private interests was fully ventilated at the eight day hearing before the judge. Before him, the Bank justified its application to commit Mr Ereshchenko in the following way. It submitted in paragraphs 32 – 34 of its skeleton argument below, that, if it did not take steps to coerce compliance with the orders of the court, there would be little purpose or utility in it pursuing the perpetrators of the frauds through the court, and the court’s authority and the administration of justice “will inevitably fall into disrepute”. This it stated was because the individuals who orchestrated and assisted the frauds would be encouraged by the apparent lack of effective enforcement of the court’s orders.

[76]The judge concluded that, in the light of the grounds upon which committal was sought and the evidence before him, he could not be satisfied that Mr Ereshchenko was guilty of criminal contempt. At that stage, it was incumbent on the Bank to re-assess whether it could still be said that its legitimate private aims mirrored the public interest so as to justify continuing with the committal proceedings or whether its primary purpose was in fact to vindicate its private right. In my view, at that stage it could no longer be said that the two interests mirrored each other, and to pursue an appeal was ill-judged.

Order

see paragraphs 144 and 149 of the judgment. Mr Smith argued that it was plain that Mr Ereshchenko had read and was fully aware of the contents of the documentary material served by the Bank even before he made his December witness statement and affidavit and certainly before he made the March witness statement. In support of this contention Mr Smith pointed to passages in the March witness statement which referred to the documentary material. For example, at paragraph 34 Mr Ereshchenko said that upon receipt by his solicitors of the material on 22 November 2010 “there was a lot therefore to do and assimilate in a very short time frame”. He argued, on the basis of this and other passages, that it was shown that Mr Ereshchenko had himself read and assimilated the material properly and fully by the time he made his December witness statement. He also submitted that Mr Ereshchenko could not have given any meaningful instructions to his lawyers or have taken full advice from them without himself having read and considered fully all the available material, and what is more that those lawyers, when taking instructions from him and giving him advice, must have appreciated the position if Mr Ereshchenko had not read, or been made aware of, sufficient of the material to be advised and to give instructions properly, and, if he had not, then they must have ensured that he did.

Cited in 1 later judgment

Dar Al Arkan Real Estate Development Co & Anor v Refai & Ors 2014