20 January 2020


International Cases

RY JSC BTA Bank (Respondent) v. Khrapunov (Appellant)

United Kingdom

21.03.2018

Civil

Liability in tort, delict or quasi-delict can only arise, if a causal connection can be established between damage and event in which that damage originates

In facts of present case, between May 2005 and February 2009, Mr. Mukhtar Ablyazov was the chairman and controlling shareholder of the claimant, a bank incorporated in Kazakhstan. It is alleged that during this period, he embezzled some US$6 billion of the Bank’s funds. In February 2009, the Bank was nationalised and Mr Ablyazov was removed from office. He fled to England, where he ultimately obtained asylum. In August 2009, the Bank began proceedings against him in the Commercial Court, alleging misappropriation of its funds. Other proceedings followed, in the Commercial Court and the Chancery Division. Mr Ablyazov was ultimately the defendant in eleven actions brought by the Bank against him, either alone or in conjunction with alleged associates.

The Bank obtained a disclosure order requiring Mr Ablyazov to identify and disclose the whereabouts of his assets and a worldwide freezing order preventing him from dealing with them. Subsequently, in August 2010, the High Court appointed receivers over all of Mr Ablyazov’s assets. Later that year, the Bank obtained a number of search and disclosure orders. These yielded a haul of documents revealing a large number of undisclosed assets and a network of undisclosed companies through which Mr Ablyazov had sought to put them out of the reach of the Bank.

In 2011, the Bank applied for an order committing Mr. Ablyazov for contempt of Court. Teare J gave judgment holding that, Mr. Ablyazov had failed to disclose his assets in breach of the disclosure order, that he had disposed of certain of them in breach of the freezing order and the receivership order, and that he had given false evidence and forged documents in an attempt to cover his tracks. Teare J sentenced him to 22 months imprisonment. However, by the time that the judgment was handed down, the bird had flown. Mr. Ablyazov fled the country on receipt of the judge’s draft judgment. He spent some time in prison in France pending the resolution of an application by Russia for his extradition, which ultimately failed. His present whereabouts are unknown. On 29 February 2012, Teare J ordered that, Mr. Ablyazov’s defences in the Commercial Court actions should be struck out unless he gave full disclosure of his assets and surrendered himself to the tipstaff. He did neither of these things, and default judgments were subsequently obtained against him in four of the actions for sums exceeding US$4.6 billion and in a fifth for damages to be assessed. Very little has been recovered.

The present appeal arises out of an application by Mr. Khrapunov contesting the jurisdiction of the English Court. The application is made on two grounds. The first is that there is no such tort as the Bank asserts, because contempt of court cannot constitute unlawful means for the purpose of the tort of conspiracy. The second ground is that, Mr. Khrapunov being domiciled in Switzerland, there is no jurisdiction under the Lugano Convention unless the claim falls within the special jurisdiction conferred by Article 5(3) on the Courts of “the place where the harmful event occurred”.

Conspiracy is both a crime, now of limited ambit, and a tort. The essence of the crime is the agreement or understanding that the parties will act unlawfully, whether or not it is implemented. The overt acts done pursuant to it are relevant, if at all, only as evidence of the agreement or understanding. It is sometimes suggested that the position in tort is different.

Bank’s pleaded allegations disclose a good cause of action for conspiracy to injure it by unlawful means. The Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters 2007, by which both Switzerland and the United Kingdom are bound, lays down a general rule (Article 2) that a person should be sued in his or her state of domicile. However, it provides for special jurisdiction in further provisions including Articles 5 and 6.

In Handelskwekerij G J Bier BV v Mines de Potasse d’Alsace SA (“Bier”), the Court of Justice held that, Article 5(3) of the Brussels Convention must be understood as intended to cover both (a) the place where the damage occurred and (b) the place of the event giving rise to it, with the result that the defendant may be sued at the option of the claimant “either in the courts for the place where the damage occurred or in the courts for the place of the event which gives rise to and is at the origin of that damage” .

It is well established that, the special jurisdiction provisions in Brussels/Lugano scheme are derogations from the general rule conferring jurisdiction on the courts of the place of the Defendant’s domicile. As a result, they must be strictly interpreted.

From an early stage in the development of the jurisprudence on Article 5(3) of the Brussels Convention, the Court of Justice in applying the second limb of the Bier test, has emphasised the notion of the originating event. In Bier itself the Court observed that liability in tort, delict or quasi-delict can only arise if a causal connection can be established between the damage and “the event in which that damage originates” (at para 16) and went on to formulate the two limbs as permitting the exercise of jurisdiction “either in the courts for the place where the damage occurred or in the courts for the place of the event which gives rise to and is at the origin of that damage”

The Court of Justice emphasises the relevant harmful event which sets the tort in motion, thereby providing a greater degree of certainty in the application of the Convention. This gives effect to an important policy of the Brussels/Lugano scheme, recognised in Bier at para 21, by promoting “a helpful connecting factor with the jurisdiction of a Court particularly near to the cause of the damage”.

The Court of Appeal correctly identified the place where the conspiratorial agreement was made as the place of the event which gives rise to and is at the origin of the damage. In entering into the agreement Mr. Khrapunov would have encouraged and procured the commission of unlawful acts by agreeing to help Mr. Ablyazov to carry the scheme into effect. Thereafter, Mr. Khrapunov’s alleged dealing with assets the subject of the freezing and receivership orders would have been undertaken pursuant to and in implementation of that agreement, whether or not he was acting on instructions from Mr. Ablyazov. The making of the agreement in England should, be regarded as the harmful event which set the tort in motion. Mr. Khrapunov’s appeal dismissed.

Tags : Conspiratorial agreement Damages Jurisdiction

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