JSC BTA Bank v Ablyazov & Anor [2016] EWHC 230 (Comm)

Case No CL-2015-000549[2016] EWHC 230 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, 7 Rolls BuildingsDate 11/02/2016
London EC4A 1NL
Before
MR. JUSTICE TEARE
Between
JSC BTA BANKClaimantMUKHTAR ABLYAZOVFirst DefendantILYAS KHRAPUNOVSecond Defendant
Stephen Smith QC and Tim Akkouh (instructed by Hogan Lovells International LLP) for ClaimantCharles Samek QC and Marc Delehanty (instructed by Hughmans) for Second DefendantHearing Hearing dates: 26, 27 & 28 January 2016
JudgmentMr. Justice Teare :
[1]There has been considerable litigation in this court since 2009 between the Kazakhstan bank, JSC BTA Bank (“the Bank”), and its former chairman, Mr. Mukhtar Ablyazov (“Mr. Ablyazov”). Much of the litigation has concerned attempts by the Bank to enforce the worldwide freezing order (“the WFO”) granted by the court against Mr. Ablyazov in 2009 which attempts culminated in contempt proceedings against Mr. Ablyazov. The Bank established that Mr. Ablyazov breached the terms of the WFO and that certain individuals assisted him in doing so; see JSC BTA Bank v Ablyazov (No.8) [2013] 1 WLR 1331. The Bank now considers that Mr. Ablyazov’s son-in-law, Mr. Ilyas Khrapunov (“Mr. Khrapunov”) also assisted Mr. Ablyazov in breaching the WFO. In 2009, when the Bank says that Mr. Khrapunov conspired with Mr. Ablyazov to breach the WFO, Mr. Khrapunov was 25 years old. He had married Mr. Ablyazov’s daughter in 2007.[2]The Bank has commenced eleven actions and, following Mr. Ablyazov's flight from the jurisdiction on the eve of being committed to prison for contempt, has obtained judgments in default against Mr. Ablyazov for a total sum exceeding US$4.6 billion. But “the Bank has not succeeded in recovering amounts of a magnitude remotely approaching that sum via its enforcement efforts” (see the first affidavit in this action of Mr. Hardman, the Bank’s tireless solicitor at Hogan Lovells International). Notwithstanding the apparent paucity (at least in terms relative to the size of the judgment debt) of the Bank's recoveries and the long and undoubtedly hugely expensive years of litigation, the Bank’s desire to litigate appears undiminished. It has now opened up another front by taking proceedings against Mr. Khrapunov. In an action against Mr. Khrapunov commenced in July 2015 the Bank has alleged that since 2009 he has conspired with Mr. Ablyazov to prevent the Bank from making any substantial recovery by breaching the WFO, creating and using false and misleading documents and by taking whatever steps they considered necessary to prevent the Bank from recovering the judgments debts. By so doing it is said that they abused the process of the court and interfered with the administration of justice. The cause of action relied upon is the tort of conspiracy to injure by unlawful means, the unlawful means being serial contempts of court. They are summarised in paragraph 18 of the Particulars of Claim and particularised in paragraphs 27-35. The alleged unlawful dealings concerned assets of Swiss, Belizean and Russian companies. In support of that action the Bank obtained a WFO against Mr. Khrapunov which was granted by Males J. on 17 July 2015. Mr. Khrapunov has so far failed to produce any information as to his assets as required by that WFO.[3]Mr. Khrapunov has responded to this claim in a manner characteristic of defendants in this litigation, namely, with vigour. Mr. Samek QC has submitted on his behalf that the cause of action relied upon is “wholly unsustainable”, “bad in law” and “must fail”. The focus of this submission is the question whether a contempt can constitute unlawful means for the purposes of the tort. Further, in circumstances where Mr. Khrapunov is domiciled in Switzerland, the suggestion that this court has jurisdiction to hear and determine the claim against him pursuant to the Lugano Convention is said to be unsustainable. Mr. Khrapunov therefore asks the court to set aside the Claim Form and the WFO which was issued against him.[4]Thus the court must consider two questions of law. The first is whether the Bank has a cause of action known to the law. The second is whether this court has jurisdiction under the Lugano Convention to hear and determine the claim.[5]The Bank’s case on the facts is supported by a 40 page affidavit from Mr. Hardman. No evidence in opposition has been filed by Mr. Khrapunov. He has however sworn an affidavit in response to the WFO issued against him in which he has said that since 1 January 2013 (the relevant date specified in the WFO) he has not administered any assets with a value exceeding £10,000 for Mr. Ablyazov or dealt with any such assets in accordance with Mr. Ablyazov’s direct or indirect instructions.

The cause of action

[6]It is important to note that the Bank does not have to persuade the court on this application that its cause of action will succeed. It only has to persuade the court that it has a good arguable case.[7]The tort of conspiracy to injure by unlawful means “involves an arrangement between two or more parties, whereby they effectively agree that at least one of them will use “unlawful means” against the claimant, and, although damage to the claimant need not be the predominant intention of any of the parties, the claimant must have suffered loss or damage as a result” (see Revenue and Customs Commissioners v Total Network [2008] 1 AC 1174 at paragraph 213 per Lord Neuberger). The only element of that definition which is in dispute on this application is whether at least one of the defendants used unlawful means.[8]Mr. Smith QC, on behalf of the Bank, submitted that it is “at least eminently arguable that a conspiracy to breach court orders and/or to create and use misleading documents and/or to abuse the process of the court and/or to intentionally interfere with the administration of justice constitutes unlawful means.”[9]In support of that submission he relied upon the decision of the Court of Appeal in Surzur Overseas Limited v Koros [1999] 2 Lloyd’s Rep. 611. In that case a freezing order was granted against Mr. Koros and others. Mr. Koros failed to disclose his interest in three shipowning companies. Later he sought to transfer the vessels to third party buyers but on terms which enabled the sellers to retain control over the vessels. Surzur became aware of possible dealings in the vessels and obtained a variation to the freezing order which covered the shares or other legal or beneficial interests in the three vessels. MOAs on the Norwegian Saleform, which were said to be false, were placed before Surzur seeking consent to the sale of the vessels. Surzur refused to consent and an application was made to the court. Rix J. refused to vary the freezing order. Further material, said to be false, was produced and another application was made to the court. Moore-Bick J. permitted the sale in accordance with the MOAs. Subsequently Surzur claimed damages from Koros and the other defendants. The cause of action relied upon was conspiracy to cause harm by unlawful means, namely, the creation of false documents, the making of fraudulent and misleading statements and the deploying in court of false evidence. At first instance the claim was held to have no prospects of success because the defendants were immune from suit on the basis of the witness immunity rule pursuant to which no action lies against parties or witnesses for anything said or done, even if falsely, in the course of proceedings in a court of justice. The Court of Appeal, basing itself on the speech of Lord Morris in Roy v Prior [1971] AC 470 at p.477, held that if an action is not brought simply in respect of false evidence but is brought in relation to some broader objective during the currency of which the false evidence was given the witness immunity rule does not apply. Thus, since the conspiracy was one to hide assets and cheat Surzur by the manufacture of false documents, the witness immunity rule did not apply. Waller LJ (with whom Aldous and Hirst LJJ agreed) added that:
“Abuse of process can very arguably be the unlawful means on which a conspiracy can be founded. …………a conspiracy which had its aim and objective of defeating an order of the court and obtaining the release from a Mareva of assets by persons who were not, I emphasise, parties to the original action, must be a conspiracy to abuse the process very akin to the malicious arrest which was the subject of Roy v Prior. There is no logic in creating an exception for malicious arrest, and not a conspiracy to abuse the process entailing the defeating of something very close to an arrest a Mareva injunction.”
[10]Surzur v Koros is, it seems to me, authority for the proposition that there is a good arguable case that a conspiracy to injure, by procuring the variation of a freezing order removing certain assets from it by creating false documents and giving false evidence, is actionable, the unlawful means being the creation of false documents and the giving of false evidence. However, the case did not decide that there is a good arguable case that a conspiracy to cause harm by procuring breaches of a freezing order is actionable because those were not the facts of the case. However, the terms in which the court’s decision was expressed, “a conspiracy to abuse the process entailing the defeating of …a Mareva injunction”, would appear apt to cover a conspiracy to cause harm by procuring breaches of a freezing order. Surzur v Koros therefore suggests but does not decide that breaches of a freezing order can amount to unlawful means for the purposes of the tort of conspiracy to injure by unlawful means.[11]Mr. Smith also relied upon certain of the observations in Total Network in which case the House of Lords considered whether criminal conduct could amount to unlawful means for the purposes of the tort of conspiracy to injure by unlawful means. The House of Lords held that (some) criminal conduct could amount to unlawful means. Mr. Smith noted that Lord Scott said at paragraph 56 that “the circumstances must be such as to make the conduct sufficiently reprehensible to justify imposing on those who have brought about the harm liability in damages for having done so”. Mr. Smith said that breaches of a WFO were also “sufficiently reprehensible” to justify imposing on those who have brought about the harm liability in damages for having done so. Mr. Smith next noted the approach of Lord Walker to the question whether criminal conduct amounted to unlawful means. Lord Walker observed at paragraph 90 that the man in the street, if asked, would say that a crime was an unlawful act and, at paragraph 91, that the reaction of a lawyer would be more informed but not essentially different. Lord Walker further observed at paragraph 93 that “all the statements of general principle in the classic cases seem to me to be consistent with the proposition that unlawful means …include both crimes and torts (whether or not they include conduct lower on the scale of blameworthiness) provided that they are indeed the means by which harm is intentionally inflicted on the claimant (rather than being merely incidental to it).” Mr. Smith said that contempt was no less serious than crime or tort and so should also be held to constitute unlawful means. Mr. Smith also referred to the judgment of Lord Mance at paragraph 120. Lord Mance, in reaching his conclusion that the offence of cheating the revenue amounted to unlawful means, relied upon the circumstance that the offence existed to protect the Revenue and therefore, where its commission is intentionally targeted at and injurious to the Revenue, there would be a lacuna in the law if the law did not recognise a civil liability. Mr. Smith said that the WFO issued against Mr. Ablyazov was made to protect the Bank and that the breaches of it which were procured by Mr. Ablyazov and Mr. Khrapunov were intended to and did cause harm to the Bank. He said that, adopting the reasoning of Lord Mance, the law should recognise a civil liability for such conduct. Finally, Mr. Smith relied upon the similar approach of Lord Neuberger at paragraph 221.[12]Were matters to rest there it would seem to me that Mr. Smith had established a strong case for saying that breaches of a WFO can constitute unlawful means for the purposes of the tort of conspiracy to injure by unlawful means. However, Mr. Samek QC, on behalf of Mr. Khrapunov, submitted that breaches of court orders cannot amount to unlawful means for the purposes of the tort of conspiracy to injure by unlawful means. He submitted that this follows from the judgment of Morgan J. in Digicel (St. Lucia) Limited v Cable & Wireless [2010] EWHC 774 (Ch) and also from Total Network.[13]Mr. Samek submitted that in Digicel Morgan J. held that non-actionable breaches of a non-criminal statute or regulation do not constitute unlawful means for the purposes of the tort of conspiracy to injure by unlawful means. Since the unlawful means alleged by the Bank are not torts, are not actionable and are not criminal the Bank’s cause of action must fail. I am unable to accept this submission as to the effect of Digicel. Whilst it is true that Morgan J. held that non-actionable breaches of a non-criminal statute or regulation do not constitute unlawful means for the purposes of the tort of conspiracy to injure by unlawful means, Morgan J. was not considering the question whether breach of a court order could constitute unlawful means. His extensive and careful judgment on the question whether non-actionable breaches of a non-criminal statute can constitute unlawful means (see Annex I to his judgment paragraphs 4-62) does not assist, and was not intended to assist, on the question whether breaches of a court order can constitute unlawful means.[14]Mr. Samek submitted that there was no right to damages for contempt and that Total Network established that breaches of a court’s order could only be dealt with by way of the penalties available for contempt such as committal.To allow an action for damages based upon contempt being unlawful means would subvert that basic rule. He submitted that “the reason why the alleged wrongdoing in this case is not actionable by the Bank is because of the positive rule precluding actionability for damages in the case of breaches of court orders. Accordingly, it further follows that an unlawful means conspiracy based on such alleged wrongdoing would circumvent that positive rule.” He also submitted that it would be unprincipled to allow an award of damages against Mr. Khrapunov for conspiracy based upon breaches of the WFO in circumstances where the other party to the alleged conspiracy, Mr. Ablyazov, could not be made liable in damages for his breaches of the WFO. Finally, he submitted that expanding the categories of unlawful means to include contempt would be too great an extension of the law which can only develop by incremental steps.[15]In response Mr. Smith said that there was no positive rule that the court had no power to order the payment of damages for contempt. He said that statements in the authorities in support of the suggested positive rule were mistaken and that other authorities supported the proposition that orders for the payment of damages could be made in contempt proceedings.[16]It is therefore necessary to consider whether there is or is not a positive rule of the common law excluding an order for damages where a court order is breached. I was taken to a number of authorities on this matter which I have reviewed. Rather than lengthen the body of this judgment I have set out my review of those authorities in an appendix to this judgment.[17]The law of contempt is concerned with maintaining and defending the authority of the court in the public interest. As Pearson LJ stated in Chapman v Honig [1963] 2 QB 502 at p. 522 “the jurisdiction exists and is exercised ...for the protection of the administration of justice and not for the protection of individuals”. Those who disobey orders of the court may be punished for their contempt. Although it is usually an individual who instigates proceedings for contempt and although he hopes that by doing so the contemnor will decide to respect his rights the law of contempt is not focussed upon compensating litigants who have suffered loss as a result of failures to obey orders of the court. That is the concern of the private law of obligations, typically contract and tort. The law of contempt is focussed upon punishing those who fail to obey orders of the court with the aim of thereby maintaining the authority of the court in the public interest. Principle would therefore suggest that the court, when exercising its contempt jurisdiction, does not have power to compensate individuals by an order for damages.[18]The absence of a power to order the payment of damages is also suggested by the rules of court governing contempt proceedings. Thus CPR Part 81.2 refers to the power of the court to order committal, sequestration or fines for contempt. No mention is there made of the availability of an order for the payment of damages.[19]In Customs and Excise Commissioners v Barclays Bank [2007] 1 AC 181 the House of Lords had to consider whether a bank which had been informed of a freezing order but which had failed to prevent payments out of the account owed a duty of care to the claimant who had obtained the freezing order. The House of Lords held that no duty of care was owed. In the course of explaining why there was no duty of care, the judges emphasised that the court’s orders were only enforceable by its power to punish for contempt; see the Appendix for the observations of Lords Bingham, Hoffmann and Rodger in this regard. Had an order for the payment of damages been available for contempt the availability of such an order would have been very relevant to the issue in Customs and Excise Commissioners v Barclays Bank and the judges would have expressed themselves very differently. Only one made reference to compensation but did so in tentative terms; see the Appendix for Lord Mance's observation. But if there had been a well-recognised jurisdiction to order the payment of damages to compensate for loss Lord Mance would have expressed himself rather differently.[20]Some authorities suggest that there is jurisdiction to award damages for contempt. They are Couling v Coxe (1848) 6 CB 703, Fairclough v The Manchester Ship Canal (1897) 41 Sol. Journal 225, In re Mileage Conference Group of the Tyre Manufacturers’ Conference Ltd.’s Agreement [1966] 1 WLR 1137 and The Messiniaki Tolmi [1983] 1 Lloyd’s Rep. 666. (These case were perhaps what Mr. Collins QC had in mind in Parker v Rasalingham (unrep.,3 July 2000) when he referred to there being “some authority” for the proposition that the court had jurisdiction to award damages for breach of an injunction.) But none of these authorities grapples with the principle that the law of contempt is concerned with the public interest and not with private compensation. That principle is reflected in both the CPR and in the relatively recent observations of the House of Lords on the law of contempt in Customs and Excise Commissioners v Barclays Bank. However, the House of Lords did not consider the authorities listed at the beginning of this paragraph.[21]The decision which I must make is difficult for a first instance judge. Having reflected upon principle and the authorities I find the argument from principle compelling (buttressed as it is by the CPR and the recent observations in the House of Lords) and to be preferred to the contrary argument based upon the several cases marshalled by Mr. Smith (one very old case, two obiter observations and one in which it was accepted that it is arguable that damages can be awarded for contempt). I have therefore concluded that the court does not have power to order damages for contempt. I have expressed my conclusion shortly in this judgment but my further comments upon the authorities can be found in the appendix to this judgment.[22]The next stage in Mr. Samek's argument is that “the alleged wrongdoing in this case is not actionable by the Bank ...because of the positive rule precluding actionability for damages in the case of breaches of court orders …it further follows that an unlawful means conspiracy based on such alleged wrongdoing would circumvent that positive rule.” However, all that the “positive rule” does is provide that the court’s powers to punish for contempt do not include or extend to a power to order the payment of damages for loss caused by contempt. Where reliance is placed on another tort such as conspiracy to injure by the use of unlawful means it does not appear to me to follow from the “positive rule” that a contempt cannot amount to unlawful means for the purposes of that tort. Allowing a contempt to amount to unlawful means for the purposes of the tort of conspiracy to injure by the use of unlawful means would not circumvent the “positive rule”. The “positive rule” simply means that where reliance is placed on contempt alone as a reason for ordering the payment of damages the court will not order the payment of damages. Where, however, reliance is placed on a conspiracy to injure by the use of unlawful means, namely a contempt, the “positive rule” has no role because reliance is not being placed on contempt alone as reason for ordering the payment of damages. The significance of being able to rely upon a recognised tort was mentioned by Pearson LJ in Chapman v Honig at p.520 and by Stuart-Smith LJ in Nunes v Agrawal at paragraph 12.[23]Mr. Samek said that the approach of the House of Lords in Total Network supported his argument. The House of Lords held that there was no intention in the Value Added Tax Act to bar the Commissioners from recovering damages for conspiracy. But had there been, said Mr. Samek, such intention would have been analogous to the “positive rule” of common law which precluded the recovery for damages for contempt. I do not accept the suggested analogy. Had there been discerned in the Value Added Tax Act an intention to bar the Commissioners from recovering damages for conspiracy the courts would give effect to that intention because it was the intention of Parliament that the Commissioners could not rely upon the tort of conspiracy. But the “positive rule” of common law on which reliance is placed is not concerned with the tort of conspiracy. For this reason I do not accept Mr. Samek’s submission that the decision in Surzur “does notsurvive” the reasoning in Total Network.[24]The decision in Customs and Excise Commissioners v Barclays Bank was that a third party with knowledge of a freezing order was not liable in the tort of negligence for damages caused by his failure to obey its terms. I have considered whether, by parity of reasoning, a third party with knowledge of a freezing order who conspires with the defendant against whom the freezing order has been issued to breach the terms of the order is not liable in the tort of conspiracy to injure by the use of unlawful means. The claim failed in Customs and Excise Commissioners v Barclays Bank because the circumstances of the case did not give rise to a duty of care owed by the third party to the claimant in the action. Thus a cause of action could not be established. However, liability in the tort of conspiracy to injure by unlawful means arises from intentional conduct and not from an omission to exercise care where there was a duty to exercise care. The Bank clearly has an arguable case that there was a conspiracy to injure. The only question is whether the injury was to be caused by means which, for the purposes of the tort, are properly to be regarded as unlawful. I do not consider that the reasoning of the House of Lords in Customs and Excise Commissioners v Barclays Bank precludes the court from regarding a contempt as unlawful means for the purposes of the tort of conspiracy.[25]For the reasons given by Mr. Smith and which I have summarised above, the reasoning of the House of Lords in Total Network, when deciding that the crime of cheating the revenue amounts to unlawful means, provides strong support for concluding that a contempt also amounts to unlawful means. Mr. Samek submitted that to allow contempt to qualify as unlawful means was too great an extension of the law. However, I regard it as a principled incremental step justified by the reasoning of the House of Lords in Total Network. Morgan J. in Digicel refused to extend unlawful means to embrace non-criminal breaches of regulations but in my judgment contempts of court, certainly those as serious as the contempts alleged in this case which amount to a very serious interference with the administration of justice, and in particular with the WFO which was issued to protect the Bank, and are punishable by committal to prison, sequestration of assets or fines, are sufficiently reprehensible to justify treating them as unlawful means. The man in the street would agree.[26]I have therefore concluded that the Bank has established by its pleading and the evidence adduced in support of that pleading a good arguable case that Mr. Khrapunov has committed the tort of conspiracy to injure by unlawful means.[27]The question arose during argument whether it was unprincipled to have a situation in which Mr. Ablyazov could not be ordered to pay damages for his contempt whereas Mr. Khrapunov could be made liable in damages for conspiring to injure the Bank by unlawful means, namely, assisting Mr. Ablyazov to act in contempt of court by breaching the WFO. However, I consider this to be a false contrast. Both Mr. Ablyazov and Mr. Khrapunov are alleged to have been party to the conspiracy to injure the Bank by the use of unlawful means. If that conspiracy is established they are both liable in damages for the tort. It is true that Mr. Ablyazov would not be liable in damages simply as a result of acting in contempt. But as was established in Total Network means can be unlawful even though those means are not in themselves actionable. Where there is a conspiracy to injure the liability stems from the conspiracy. “It is in the fact of the conspiracy that the unlawfulness resides” (per Lord Hope in Total Network at paragraph 44). “The gist of conspiracy is damage intentionally inflicted by persons who combine for that purpose” (see Lord Walker in Total Network at paragraph 100).

The jurisdiction issue

[28]It is common ground that Mr. Khrapunov is domiciled in Switzerland. Article 2 of the Lugano Convention therefore provides that he shall be sued there. Mr. Smith relied upon Articles 5 and 6 of the Lugano Convention as giving this court “special” jurisdiction to hear and determine the claims against Mr. Khrapunov. The Bank must establish that in relation to these articles it has much the better argument as explained in Canada Trust v Stolzenberg (No.2) [1998] 1 WLR 547 at pp.555-557 and Lady Brownlie v Four Seasons [2015] EWCA Civ 665 at paragraphs 17-24.[29]In his oral submissions Mr. Smith dealt first with Article 6 which he suggested was the “shorter answer”.

Mr. Ablyazov’s domicile

[30]The Bank claimed that this court has jurisdiction because Mr. Ablyazov is domiciled in England and accordingly Mr. Khrapunov may be sued here pursuant to Article 6 paragraph 1 which provides:
“A person domiciled in a State bound by this Convention may also be sued: 1. Where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”
[31]Mr. Smith submitted that Mr. Ablyazov is domiciled in England. Mr. Samek submitted that Mr. Ablyazov is not domiciled in England. Mr. Samek submitted that the matter fell to be tested as at the date on which proceedings were commenced against Mr. Khrapunov, namely, July 2015. That was not disputed. This common ground is consistent with the decision in Petrotrade Inc. v Smith [1999] 1 WLR 457 in which Thomas J. held at pp. 462-466 that the relevant date for the purposes of Article 6 is the date on which the proceedings were issued. In this case the proceedings alleging the tort of conspiracy against both Mr. Ablyazov and Mr. Khrapunov were issued in July 2015. There was also no dispute that the claims against Mr. Ablyazov and Mr. Khrapunov were so closely connected that it is expedient to hear and determine them together.[32]The meaning of domicile for the purposes of the Lugano Convention is set out in section 41A(2) of the Civil Jurisdiction and Judgments Act 1982. A person is domiciled in the UK if he is resident in the UK and the nature and circumstances of his residence indicate that he has a substantial connection with the UK. Residence was explained by the Court of Appeal in Bank of Dubai v Fouad Haji Abbas [1997] ILPr. 308 as denoting a settled or usual place of abode. It connoted some degree of permanence or continuity; see Saville LJ at paragraphs 10-11. In R v Barnet LBC ex p. Shah [1983] 2 AC 309 Lord Scarman said at p. 344 B-D:
“The residence must be voluntarily adopted. Enforced presence by reason of kidnapping or imprisonment, or a Robinson Crusoe existence on a desert island with no opportunity of escape, may be so overwhelming a factor as to negative the will to be where one is. ………Education, business or profession, employment, health, family, or merely love of the place spring to mind as common reasons for a choice of regular abode. And there may well be many others. All that is necessary is that the purpose of living where one does has a sufficient degree of continuity to be properly described as settled.”
[33]The circumstances in which the court must consider the place of Mr. Ablyazov's residence and hence his domicile are, to the say least, unusual. Mr. Smith submitted that Mr. Ablyazov cut off all ties with Kazakhstan when he fled to London from that country in 2009. He bought properties here, settled here and was granted asylum here. I accept that from 2009 until February 2012 he was resident and therefore domiciled here. However, fearing (correctly) that he was about to be imprisoned for contempt, Mr. Ablyazov fled the jurisdiction in February 2012. He was “on the run to avoid his sentence” but continued to instruct his lawyers “from some safe, but unknown, haven”; see BTA v Ablyazov [2013] 1 WLR 1331 at paragraph 107. His appeal against his committal was dismissed by the Court of Appeal in November 2012. In July 2013 he was found in the south of France and was arrested on 31 July. Since then he has been held in custody in France fighting extradition to Russia. I was informed by Mr. Smith that Mr. Ablyazov’s application for permission to appeal the contempt judgment to the Supreme Court was dismissed in the spring of 2014.[34]As at July 2015 Mr. Ablyazov had been in a French gaol for 2 years. He had fled from England. Until he was apprehended in the south of France in July 2013 he was on the run and in a real sense had no settled place of abode. He would flee to wherever he felt that he would be safe from arrest and detention. But it appears to me to be arguable that he had not abandoned England as his place of residence and domicile so long as his appeal against his committal for contempt remained to be finally determined. Had that appeal been successful he would, I suppose, have returned to England. However, well over a year before July 2015 that appeal had been finally determined. Mr. Ablyazov had demonstrated by his flight from England that he had no wish to remain in England if he was liable to be arrested and imprisoned. It had once been a safe haven for him but was no longer. In July 2015 he was in a French gaol awaiting extradition, not to England, but to Russia. He was appealing against extradition but if that appeal had been successful he would no doubt have wished either to remain in France or to go to whichever country in which he felt safe from arrest and detention. He would not have been safe from arrest and detention in England because of his own choice to act in contempt of the English court.[35]In these unusual circumstances the question which must be determined is, it seems to me, whether as at July 2015 Mr. Ablyazov had abandoned England as his country of residence and hence domicile. No doubt it can be said of some fugitives from justice that their ties and connections with England are such that, although they are presently abroad and on the run, they have not abandoned England as their place of residence and hence domicile. But Mr. Ablyazov has no ties or connections with England. He fled to England from Kazakhstan. When his refusal to obey orders of the court led to his being sentenced to imprisonment for contempt he chose to flee from England. He appears to be financially able, notwithstanding the Bank's efforts to seize his assets in satisfaction of their judgments, to live where he pleases. Whilst it is, I suppose possible, that if he were not extradited to Russia he would choose to return to England and submit to imprisonment here that appears to me to be unlikely. No evidence was adduced by the Bank to suggest that this was likely.[36]I have therefore concluded that the Bank is unable to establish the necessary good arguable case that as at July 2015 Mr. Ablyazov had not abandoned England as his country of residence and hence of domicile so that he remained resident in and hence domiciled in England. On the contrary it seems to me likely that Mr. Ablyazov has abandoned England as his place of residence and hence of domicile. I am certainly unable to say that the Bank has much the better argument on the application of Article 6.[37]Mr. Smith said that Mr. Ablyazov cannot take advantage of his own wrong in fleeing from the jurisdiction in breach of a court order that he remain within the jurisdiction. In this regard he relied upon the following observation of Lord Scarman in R v Barnet LBC ex p. Shah at pp.343 H – 344 A:
“It was wrong in principle that a man could rely on his own unlawful act to secure an advantage which could [not] have been obtained if he had acted lawfully.”
But it is not Mr. Ablyazov who is seeking to rely upon his flight from the jurisdiction. It is Mr. Khrapunov. In my judgment Mr. Khrapunov is entitled to rely upon the facts as they were in July 2015 when the Bank commenced proceedings against him and Mr. Ablyazov claiming damages for conspiracy and to submit that as at that date Mr. Ablyazov had ceased to reside in England and thereby to be domiciled in England.

The place where the harmful event occurred

[38]Article 5 paragraph 3 provides that a person may be sued in matters relating to tort “in the courts for the place where the harmful event occurred or may occur”. The Bank relies upon this “special” jurisdiction in order to say that Mr. Khrapunov may be sued in England.[39]The meaning of “the place where the harmful event occurred” has been considered by the European Court of Justice in Handelskwekerij GJ Bier v Mines de Potasse d’Alsace SA [1978] 1 QB 708. That phrase was held to cover both the place of the event giving rise to the damage and also the place where the damage occurred. Mr. Smith submitted that England was both the place of the event giving rise to the damage (because the conspiracy was said to have been hatched in England) and the place where the damage occurred (because the Bank’s cause of action, the WFO and its judgment against Mr. Ablyazov were in England and had been damaged). Mr. Samek said that the place of the event giving rise to the damage was the place where the conspiracy was put into action (which was not England) and that the damage occurred in the place where the assets which had been dealt with in breach of the WFO were located (which was not England).

Place where the damage occurred

[40]The meaning of the “place where the damage occurred” has been considered by the European Court of Justice in several cases since Bier. Fortunately for me they have recently been reviewed by the Court of Appeal in AMT Futures Ltd. v Marzillier [2015] QB 699 at paragraphs 17-34. Christopher Clarke LJ summarised the effect of the authorities at paragraph 54 by asking the following “questions(i) what is "the place where the event giving rise to the damage … directly produced its harmful effects upon" AMTF (the Dumez France case [1990] ECR I-49)";(ii) where was the "actual damage" which "elsewhere can be felt" or the "initial damage" suffered (the Marinari case [1996] QB 217 ); and(iii) what was “the place where the damage which can be attributed to the harmful event ...by "a direct and causal link" (the Réunion Européenne case [2000] QB 690) was sustained”. I consider that I should ask those questions in order to determine the place where the damage occurred. In answering those questions I am mindful of the approach of Popplewell J. at first instance in AMT Futures which was approved by the Court of Appeal at paragraph 32:
"The search will be for the element of damage which is closest in causal proximity to the harmful event. This is because it is this causal connection which justifies attribution of jurisdiction to the courts of the place where damage occurs: see the Bier case [1978] QB 708, paras 16-17 and the Dumez France case [1990] ECR I-49, para 20."
[41]What is the place where the event giving rise to the damage directly produced its harmful effects upon the Bank? It is arguable that that place is England because that is where its chose in action, its WFO and its judgment are to be found and they have all been reduced in value as a result of the alleged actions of Mr. Khrapunov. However, I am not persuaded that that is the right answer to the question. In a real sense the Bank suffered “harmful effects” in the place where the asset was wrongly dealt with in breach of the WFO. The assets were variously located in Switzerland, Belize and Russia; see paragraphs 19-26 of the Particulars of Claim. As a result of wrongful dealings with those assets the Bank’s opportunity to seize those assets in execution of the judgment was either lost or impeded. Indeed, the Bank's own pleading of its loss and damage includes its inability to enforce against those assets; see paragraph 36 of the Particulars of Claim. That is the element of damage which is closest in causal proximity to the harmful event. It occurred not in England but in one or more foreign jurisdictions As Mr. Samek observed, if one asks what would have happened had the alleged conspiracy not been committed, the answer is that the assets of Mr. Ablyazov would have been available for the Bank to execute against in the foreign jurisdictions where they were located. It is unrealistic to suppose that Mr. Ablyazov would honour the judgments against him in England. That indicates that the alleged conspiracy “directly produced its harmful effects upon the Bank” in those foreign jurisdictions and not in England. Mr. Smith suggested that equitable execution receivers would have realised the relevant assets and then used the net proceeds of sale to discharge the judgment debts in England. But again, the Bank’s loss is the receivers’s inability to realise the assets abroad.[42]Where was the "actual damage" which "elsewhere can be felt" suffered? Where was the "initial damage" suffered ? For the reasons which I have just given the initial damage was suffered in one or more foreign jurisdictions. That damage was felt by the Bank in England because its chose in action, WFO and judgments were reduced in value.[43]What was the place where the damage which can be attributed to the harmful event by "a direct and causal link" sustained? Again, for the reasons which I have given the damage which can be attributed to the conspiracy by a direct and causal link was sustained in the foreign jurisdiction where the Bank’s opportunity to execute its judgments was lost or hindered.[44]I have therefore concluded that if the court applies, as it must, the Community construction of “the place where the damage occurred”, the Bank’s damage did not occur in England.

The place of the event giving rise to the damage

[45]Mr. Smith has submitted that the place of the event giving rise to the damage was the place where the conspiracy was hatched and that that place was England. The Bank has not pleaded that the conspiracy was hatched in England. It has merely pleaded that Mr. Ablyazov and Mr. Khrapunov conspired together “in about 2009”. But in his skeleton argument Mr. Smith has submitted that “it is appropriate to infer” that they did so in England on the grounds that Mr. Ablyazov will have been the driving force with Mr. Khrapunov being a willing participant, that Mr. Ablyazov lived in England between late January/early February 2009 and February 2012 and that Mr. Ablyazov’s suggestion of a conspiracy will have been made from England and that Mr. Khrapunov would have either visited England and agreed to the conspiracy or would have communicated his assent by phone or email, such assent being received by Mr. Ablyazov within the jurisdiction. No evidence has been given by Mr. Khrapunov in response to the Bank’s allegation of conspiracy. In those circumstances and having regard to the Bank’s evidence I accept that the Bank has a good arguable case that the alleged conspiracy was hatched in England though it does not appear to me to be certain that it did. Mr. Samek has cautioned against determining the question of jurisdiction on “uncertain factors” (see Marinari v Lloyd’s Bank [1996] QB 217 at paragraph 19) but that is an unattractive submission where his client has chosen to say nothing in response to the allegation of conspiracy.[46]However, the question remains whether the event which gave rise to the damage was the hatching of the conspiracy in England or the implementation of that conspiracy by dealing abroad with foreign assets. Whilst Mr. Khrapunov would not have caused damage to the Bank had he not entered into the conspiracy, in a real sense the event which gave rise to the damage was the implementation of the alleged conspiracy.[47]Mr. Smith has relied upon the approach of Rix J. in Domicrest v Swiss Bank Corpn. [1999] QB 548 which concerned a claim for negligent misstatement. Rix J. held (at p.567 H) that in such a case the place where the harmful event gave rise to the damage is the place where the misstatement originates. “…it is the representor’s negligent speech rather than the hearer’s receipt of it which best identifies the harmful event which sets the tort in motion.” (see p.568 B)[48]The decision and reasoning in Domicrest have been followed in two cases involving the tort of conspiracy. In ABC1 v BFT [2003] EWCA Civ 205 at paragraph 41, Mance LJ applied the approach of Rix J. to the tort of conspiracy but it appears that in that case not only was the conspiracy hatched in Tunisia but the fraudulent accounts were also prepared there and sent from there. The decision does not therefore assist in resolving the dispute in this case. Similarly, in Sunderland Marine Mutual Insurance v Wiseman [2007] 1 CLC 989 the conspiracy to defraud underwriters by scuttling a vessel was hatched in Scotland and put into effect when the vessel sailed from Scotland. Thereafter, fraudulent misrepresentations that the sinking was accidental were also made in Scotland; see paragraphs 9, 11, 34 and 36. So, again, the decision of Langley J. in that case does not assist in resolving the dispute in the present case.[49]I am not persuaded that because the place of the event giving rise to the damage in a misstatement case is the place from which the misstatement originates so the place of the event giving rise to the damage in a conspiracy is the place in which the conspiracy was hatched. Whereas a misstatement causes damage when it is made a conspiracy only causes damage when it is implemented.[50]Mr. Smith also relied upon Shevill v Presse Alliance [1995] 2 AC 18 at paragraphs 24-29, a defamation case. But I was not persuaded that a helpful analogy could be drawn between the tort of defamation and the tort of conspiracy to injure by unlawful means. They are different torts with different elements.[51]In my judgment it is necessary to keep well in mind that the court is seeking to identify the place of the event which gave rise to the damage, not the tort. The damage, for the reasons which I have given, occurred in the places where the assets, which were the subject of wrongful dealing, were located. The place of the event giving rise to that damage seems to me to be the place in which the conspiracy was implemented. It is the implementation of the conspiracy which gave rise to that damage.[52]But where was the conspiracy implemented? Mr. Smith submitted that at least until February 2012 the conspiracy will have been implemented by instructions given by Mr. Ablyazov in London. This submission, as I understood it, was based upon the same circumstances which made it appropriate to infer that the conspiracy had been hatched in London. There is force in this submission. At any rate I consider that the Bank has much the better argument on this point. It is likely that the necessary decisions and instructions to implement the conspiracy were taken in and issued from Tower 42 in the City of London. But after 16 February 2012 Mr. Ablyazov cannot have given any further instructions from London.[53]The Particulars of Claim identify the dates on which the various assets are alleged to have been wrongly dealt with by Mr. Khrapunov. The dates on which the necessary decisions and instructions were taken and issued can be inferred from them. Thus, the court has jurisdiction against Mr. Khrapunov in relation to the allegations concerning the Swiss Assets (see paragraph 28 of the Particulars of Claim) and Green Life, so far as concerns payments made before 16 February 2012 (see paragraph 30). But the dealings with the shares in and assets of Pyshma occurred after 16 February 2012 (see paragraph 32) and so the court cannot assume jurisdiction over Mr. Khrapunov in relation to them. The dealings in the shares in Paveletskaya and Cosmos which took place on 17 February 2012 and 16 February 2012 were probably instigated before that date and so the court has jurisdiction in relation to them but not in relation to the later dealings or in relation to any dealings in Marine Gardens, all of which post-dated 16 February 2012 (see paragraph 34).

Conclusion

[54]The Bank has a good arguable case against Mr. Khrapunov in damages for the tort of conspiracy to injure by unlawful means. The Bank is able to establish that this court has jurisdiction over him pursuant to Article 5(3) of the Lugano Convention with regard to the damage caused by the wrongful dealing in assets of Mr. Ablyazov before 16 February 2012. I must therefore dismiss the application to set aside the claim form and the WFO issued against Mr. Khrapunov, though both may require to be amended so as to conform with this judgment. For example, in the light of my decision on jurisdiction it is not clear to me that the injunction against future dealings with Mr. Ablyazov’s assets can be maintained or that the obligation to provide disclosure of assets of Mr. Ablyazov in which Mr. Khrapunov has dealt with since January 2013 can be maintained. These matters (and perhaps others) will have to be debated when judgment is handed down.[55]The Bank has also applied for permission to cross-examine Mr. Khrapunov as to his purported compliance with paragraphs 7 and 8 of the WFO (disclosure of his assets and of those assets of Mr. Ablyazov which he has administered since 1 January 2013). The circumstances in which it is appropriate to make such an order have been set out in Jeningon v Assaubayev [2010] EWHC 2351 (Ch) by Vos J.[56]Although the order sought appears to relate both to Mr. Khrapunov’s own assets and those of Mr. Ablyazov in which he has dealt since January 2013 the debate before me primarily concerned the latter. I would therefore prefer to deal with this application after it is clear in what terms the injunction and disclosure obligations are to continue.

Cited in 8 later judgments