In Khrapunov v JSC BTA Bank, the Court of Appeal has ruled that a third party who helped a defendant dissipate his assets in breach of a worldwide freezing order and receivership order is liable for conspiracy to injure by unlawful means. Contempt of court for breach of the court order qualified as the requisite unlawful means.
This decision arises from proceedings between JSC Bank (“the Bank”) and Mukhtar Ablyazov which have been on-going since 2009. The Bank has claims in excess of US$4.6 billion against Mr Ablyazov, its former Chairman, in relation to alleged misconduct of the Bank’s affairs and diversion of its assets. Judgment against Mr Ablyazov was entered in August 2014.
The proceedings in question involved Mr Ablyazov’s son-in-law, Ilyas Khrapunov. Mr Khrapunov worked closely with his father-in-law and allegedly helped him administer his assets, moving them beyond the reach of the Bank, in breach of a worldwide freezing order (“WFO”) and receivership order (“RO”). The Bank brought a claim against Mr Khrapunov for conspiracy to injure the Bank by unlawful means, arguing that breach of the WFO and RO constituted the requisite unlawful means.
Mr Khrapunov did not deny the allegations that he had helped his father-in-law dissipate his assets in breach of the WFO and RO so no evidence was heard on this point. The submissions centred around whether the Bank had any cause of action based on breach of the WFO and RO.
At first instance, Mr Justice Teare rejected the Bank’s argument that breach of a court order in itself amounted to a cause of action in damages against Mr Khrapunov. However, the judge held that the Bank had a good arguable case against Mr Khrapunov for conspiracy to injure by unlawful means and that breach of the WFO and RO qualified as the requisite unlawful means.
Court of Appeal
The above points were appealed by the claimant and defendant, respectively.
The Bank’s submissions
The Bank submitted that damages are recoverable for breach of a court order. The Court of Appeal judges agreed with Teare J and rejected this submission, holding that breach of a court order does not in itself constitute a cause of action in private law. Several cases were referred to in support of this decision, including, most notably, the decision in Customs and Excise Commissioners v Barclays Bank plc  UKHL 28. In Barclays Bank it was held that a claimant could not sue a third party bank which had released funds which were subject to a freezing order, even though the bank had notice of the freezing order. This was because breach of a court order was only actionable by the court. It was also held that the defendant could not himself be sued for breach of the freezing order because a party to proceedings does not owe a duty of care to the opposing party. Therefore, the claimant in Barclays Bank had no cause of action for breach of the court order.
Notwithstanding this, the Court of Appeal noted that there was no rule to the effect that damages could never be awarded where breach of a court order constituted part of a cause of action. The cases considered merely made the point that breach of a court order alone is not a cause of action in private law.
Mr Khrapunov’s submissions
Mr Khrapunov argued that the Bank could not successfully bring a claim against him for conspiracy to injure by unlawful means because there is a positive rule of law that damages can never be awarded where a necessary element of the cause of action is breach of a court order. This assertion was rejected for the following three reasons:
- First, there is no authority in favour of it. In support of his submission, Mr Khrapunov had relied on Barclays Bank and In re Hudson  Ch 209. However, the Court of Appeal held that although these cases stood as authority that breach of a court order does not in itself constitute a cause of action for breach of contract, they do not address the wider question of whether contempt of court can constitute the unlawful means in a claim for unlawful means conspiracy.
- Secondly, there is authority which contradicts it. Acrow (Automation) Ltd v Rex Chainbelt Inc.  1 WLR 1676 concerned a claim under the tort of intentional infliction of harm by unlawful means. In this case, acting to aid or abet a breach of a court order in circumstances giving rise to liability for contempt of court constituted unlawful means.
- Finally, the Court of Appeal held that there is no public policy reason why a rule such as that proposed by Mr Khrapunov should exist.
Having considered the parties’ submissions, the judge turned to the “real point in issue“, namely whether contempt of court for breach of the WFO and RO constituted unlawful means for the purposes of the tort of unlawful means conspiracy. For this he turned to the judgment in Revenue and Customs Commissioners v Total Network SL  1 AC 1174, which held that relevant unlawful means can include simple crimes not independently actionable in private law (such as, in Total Network, conspiring to cheat the Revenue), torts and breaches of contract. The Court of Appeal judges agreed with Teare J that the judgment in Total Network provided strong support for the view that civil contempt of court for breach of a court order (such as in the present case) qualifies as unlawful means for the purposes of the tort of conspiracy.
The judgment serves as a reminder that third parties could be liable for conspiracy if they assist a defendant in breaching a court order. The judgment will be welcome to those seeking relief in relation to breach of a court order, as it establishes a possible means of redress.
Pippa Borton is an associate at Nabarro LLP, currently on secondment to Olswang.