In a claim by JSC BTA Bank against the son-in-law of its former Chairman alleging conspiracy to injure by unlawful means, the Court of Appeal held that breach of the terms of a freezing order could qualify as the requisite unlawful means: Khrapunov v JSC BTA Bank  EWCA Civ 40.
The decision serves as a reminder that those who are not themselves parties to litigation or subject to court orders may remain exposed to claims in conspiracy where they assist in the breach of a court order.
Gary Milner-Moore and Kate Emanuel from our disputes team consider the decision further below.
The judgment is also of interest for its consideration of jurisdictional issues in economic tort claims and, in particular, where the event giving rise to damage takes place in a claim for conspiracy to injure by unlawful means. That part of the decision is considered in a separate blog post here.
As outlined in our post on the jurisdiction aspects, this decision is the latest in the long-running saga of litigation between JSC BTA Bank and its former Chairman, Mr Ablyazov. The Bank has claims in excess of US$4.6 billion against Mr Ablyazov in relation to alleged misconduct of the Bank’s affairs, and judgments have been entered against him. This set of proceedings concerns a claim by the Bank against Mr Ablyazov’s son-in-law, Mr Khrapunov, for the tort of conspiracy to injure the Bank by unlawful means. It is alleged that Mr Khrapunov conspired with Mr Ablyazov to hide Mr Ablyazov’s assets from the Bank or dissipate them, in breach of an English worldwide freezing order and receivership order.
The unlawful means relied upon are breaches of the freezing and receivership orders.For the purposes of establishing the English court’s jurisdiction, the Bank had to establish that it had a good arguable case in the tort of conspiracy by unlawful means against Mr Khrapunov. Mr Khrapunov did not adduce any evidence denying that he had assisted Mr Ablyazov’s attempts to avoid the effect of the freezing order but instead argued that a breach of a freezing order was not capable, as a matter of law, of qualifying as the “unlawful means” necessary to establish the tort.
At first instance, Teare J rejected that argument and found that breach of a freezing order could amount to unlawful means for the purpose of the tort of conspiracy. Mr Khrapunov appealed to the Court of Appeal (on this and other aspects of the decision).
In the Court of Appeal, the Bank argued that it could establish unlawful means on the basis that damages are, in principle, available for breach of a court order and, because Mr Khrapunov did not deny that he had conspired to breach the freezing order, there was a good arguable case against him. Mr Khrapunov argued, by contrast, that damages are never available for breach of a court order.
The Court of Appeal rejected both arguments:
- As to the Bank’s case, the Court of Appeal found that damages are not recoverable for the simple breach of a court order, as this does not in itself constitute a cause of action in private law. That was made clear in Customs and Excise Commissioners v Barclays Bank plc  UKHL 28 (considered here), where the House of Lords held that a third party bank owed no duty of care to a claimant not to violate the terms of the order, for example by releasing frozen funds. The House of Lords’ reasoning was based, in part, on the principle that a defendant, similarly, owes no duty of care to the claimant because his duty of compliance is owed to the court and the remedy for breach is punishment for contempt, not civil damages. The position would only be different if there was an additional, separate voluntary assumption of responsibility on the part of a person who had notice of the order.
- The Court of Appeal similarly rejected Mr Khrapunov’s contrary submission that damages could never be awarded where a breach of a court order is relied upon as an element of a recognised cause of action (as in the case in the tort of conspiracy by unlawful means). It referred to authorities where a claimant has been permitted to rely on a breach of a court order as part of a recognised cause of action, for example in cases where a court order has embodied a contractual agreement and breach of the order is relied upon as a breach of the agreement (see Acrow (Automation) Ltd v Rex Chainbelt Inc.  1 WLR 1676, CA).
In rejecting the parties’ respective positions, which it described as “extreme”, the Court of Appeal held that the true question was not whether the unlawful act relied upon constituted a separately actionable tort in private law but, rather, whether breaches of a court order qualified as unlawful means for the purpose of a claim in conspiracy.
The test for unlawful means differs between the torts of conspiracy by unlawful means and the related, but distinct, tort of intentional infliction of harm by unlawful means (see the decisions of the House of Lords in OBG Ltd v Allan  1 AC 1, outlined here, which considered amongst other things the tort of intentional infliction of harm by unlawful means, and Revenue and Customs Commissioners v Total Networks  UKHL 19, where the House of Lords expressly declined to apply the reformulation of the law in OBG v Allen to the tort of conspiracy). Accordingly, there is no recognised requirement in the tort of conspiracy that the relevant unlawful means be independently actionable in private law.
Against that background, the Court of Appeal held that contempt of court in the form of a breach of the freezing order did qualify as unlawful means for the purposes of the tort of conspiracy (or, at the very least, there was a good arguable case that it did, which was sufficient to satisfy the threshold test on a jurisdiction challenge).
In doing so, the Court of Appeal had regard to the wider ambit of unlawful means in the context of the tort of conspiracy where unlawful means include simple crimes, including those not independently actionable by anyone in private law (such as the conspiracy to cheat the Revenue which was the subject of Total Networks) as well as torts and breaches of contract. In the Court of Appeal’s judgment, the deliberate flouting of the freezing order with a view to harming the interests of the Bank was clearly wrongful, “ranking in the scale of reprehensibility below some crimes but rather above others, and above simple torts and breaches of contract”. Indeed, it amounted to a very serious interference with the administration of justice, and subject to jurisdictional issues would be punishable by committal to prison, sequestration of assets or fines.
The Court of Appeal likened the position to the situation in Surzur Overseas Ltd v Koros  2 Lloyd’s Rep 611 where the conspiracy alleged had involved deploying false evidence to deceive the court into varying a freezing injunction to release assets, with the result that the claimant suffered loss. In that case, the Court of Appeal refused to strike out the claim, on the basis that it had a realistic prospect of success.
Accordingly, the Court of Appeal concluded that the Bank had a good arguable case that Mr Khrapunov was liable in damages under the tort of conspiracy by unlawful means.