Reminder of the potentially serious consequences of breaching a freezing order

Lucy Hayes

In JSC VTB Bank v Skurikhin [2014] EWHC 4613 (Comm), Pavel Skurikhin was sentenced to 12 months’ imprisonment for contempt of court after failing to comply with disclosure obligations contained within a freezing order. This judgment demonstrates the potentially serious consequences of breaching a freezing order, but also notes that a breach must be extremely serious before the maximum sentence of two years would be considered.

Background

JSC VTB Bank had brought claims worth several million pounds against Pavel Skurikhin in Russia. Judgments were obtained against him, which the bank then used in support of an application for summary judgment in the English Commercial court. At a hearing in February 2014, Mr Skurikhin argued that the Russian judgments were obtained by fraud and the bank’s real goal was to take control of Mr Skurikhin’s business at a substantial undervalue. Mr Justice Simon rejected Mr Skurikhin’s arguments, stating that they “lacked all reality” and were an “artificial construct erected to avoid the consequences of the true position”.

In the following months, an order was made for attendance for oral examination by Mr Skurikhin, and then a freezing order requiring him to provide details of all his worldwide assets. In June 2014, his solicitors applied to come off the record, and so the orders were served on Mr Skurikhin using substituted service via email and to various addresses in Russia of which the bank was aware.

Judgment

At the hearing on October 2014 (of which the transcript has only just become available), Mr Justice Flaux was satisfied that Mr Skurikhin “was well aware of the order” and that “he deliberately failed to comply… as part of what appears to be an overall plan on his part to seek to thwart the Bank’s attempts to enforce its judgments against him”.

In considering an appropriate penalty for contempt in relation to the freezing order, Flaux J considered the sentence of 22 months imposed on Mukhtar Ablyazov in JSC BTA Bank v Ablyazov (No 8) [2012] EWCA Civ 1411, which he described as “a particularly egregious case of contempt”. Flaux J commented that “whatever else one says about Mr Skurikhin it does not mean that he is, at least yet, in the same league as Mr Ablyazov”. Nonetheless he felt an immediate sentence was necessary because “the only explanation” for Mr Skurikhin’s failure to comply with the disclosure obligations of the freezing order was that it was “a deliberate attempt to thwart the Bank in enforcing its judgments”.

Mr Skurikhin was sentenced to 12 months’ imprisonment in respect of the freezing orders, and a four month suspended sentence for his failure to attend for examination.

JSC VTB Bank v Skurikhin [2014] EWHC 4613 (Comm)

The judgment is available to Practical Law subscribers here.

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