SUPREME COURT FINDS CONTEMPT OF COURT CONSTITUTES UNLAWFUL MEANS FOR THE TORT OF CONSPIRACYThe Supreme Court has held that contempt of court can constitute unlawful means for the purpose of the tort of conspiracy: JSC BTA Bank v Khrapunov [2018] UKSC 19.
The decision is significant as it confirms that third parties may find themselves exposed to litigation and subject to damages if they conspire in the commission of a contempt of court. The Supreme Court made a number of interesting observations on the scope of the economic torts more generally and, on a matter of wider interest, also hinted that the law might develop to allow litigants to recover damages for contempt of court in the absence of a conspiracy.
The latter point could have potentially far-reaching practical consequences. Until now, contempt of court has generally been regarded as a matter between the wrongdoer and the court, rather than a wrong actionable by private parties who have suffered loss as a result. This decision leaves the door open for a litigant to argue that civil damages are recoverable for an opponent’s contempt of court.
Gary Milner-Moore and Kate Emanuel from our disputes team consider the conspiracy aspect of the decision further below. The decision is also of interest for its consideration of the issue of jurisdiction, which is considered in a separate blog post here.
Background
The Supreme Court’s decision relates to the long-running litigation between JSC BTA Bank and its former chairman and controlling shareholder, Mr Ablyazov, who is alleged to have embezzled in excess of US$6 billion during his tenure. Despite having obtained several orders against Mr Ablyzov, including a worldwide freezing order, a receivership order and default judgments totalling US$ 4.6 billion, the Bank has not been able to trace Mr Ablyzov or his assets and is said to have recovered very little.
In 2015, the Bank brought a claim against Mr Ablyazov and his son-in-law, Mr Khrapunov, resident in Switzerland. It was alleged that Mr Khrapunov, who was aware of the freezing and receivership orders, had conspired with Mr Ablyazov to help dissipate and conceal his assets.
The claim against Mr Khrapunov was framed as one for the tort of conspiracy by unlawful means. In the course of a challenge to the jurisdiction of the English courts, Mr Khrapunov raised as a threshold issue the defence that contempt of court could not qualify as “unlawful” means. Picking up on a theme that has been the subject of considerable debate in the authorities it was his position that a party’s conduct could only qualify as “unlawful” if that conduct was independently actionable at the instance of the claimant.
Decision
The Supreme Court rejected Mr Khrapunov’s argument. In doing so, it clarified the nature and scope of the tort of conspiracy and made a number of interesting observations on contempt of court.
Absence of a just cause or excuse
The law recognises that a person has a right to advance his or her own interests by lawful means even if doing so has the effect of damaging the economic interests of others. However, identifying the point at which harmful conduct transgresses legitimate bounds is, as the Supreme Court put it, “a task of exceptional delicacy”.
In the context of conspiracy, the Supreme Court noted that the boundaries depend on the form of conspiracy alleged. Conspiracy can take two forms: “lawful means” conspiracy and “unlawful means” conspiracy. To establish conspiracy by lawful means, the defendant need not have acted unlawfully but must have acted with the predominant purpose of injuring the claimant. By contrast, in unlawful means conspiracy, the conduct in question must be unlawful but the injury to the claimant need not be the defendant’s predominant purpose, and may be incidental.
What is, however, common to both forms of the tort, and the reason both are actionable, is the absence of a just cause or excuse for the defendant’s conduct: There can be no just cause or excuse for harming the economic interests of others where the tortfeaser’s predominant intention is to injure the claimant (as is the case in lawful means conspiracy). Similarly, there can be no such just cause or excuse where a party uses unlawful means in order to do so, because a party has no right to advance his own economic interests by unlawful means.
If the underlying basis for imposing liability for conspiracy is best understood as the absence of a just cause or excuse, the key question in determining whether conduct is “unlawful” is not whether the conduct concerned gives rise to a cause of action independent of conspiracy (as has been held to be the case in some of the other economic torts, notably the tort of causing loss by unlawful means). Rather, it is whether the conduct concerned is of a nature which affords the defendant a just cause or excuse. Seen in this way, it is unsurprising that the Supreme Court found that the contempt of court in which Mr Khrapunov was complicit was “unlawful”. Neither Mr Khrapunov nor Mr Ablyzov had any right to, or legitimate interest in, the proceeds of assets that were concealed from attachment by the Bank. As such, neither party’s conduct could be excused on the basis that it was in furtherance of a legitimate economic interest.
The Supreme Court’s clarification of the basis for imposing liability in conspiracy cases is of wider importance in that it is likely to inform the way in which the scope of the unlawfulness requirement in future conspiracy cases is interpreted, particularly those based upon conduct based upon other forms of culpability. The judgment also suggests that the law is unlikely to develop in a way that recognises a unified theory of the economic torts with a single test for unlawfulness across the various causes of action.
The “preclusionary rule” of public policy
Mr Khrupunov also argued that there was a “preclusionary rule” of public policy that persons in contempt of court should not be exposed to anything other than penal sanctions at the discretion of court. Recognising a civil claim for conspiracy to commit contempt of court would cut across that notion, in that such a claim could be pursued at the instance of a private party. It would therefore be contrary to public policy.
The Supreme Court rejected that argument. It noted that it is commonplace for the same act to give rise to both criminal and civil liability, in which event the sentence for the crime will be discretionary but the civil consequences will not.
Although it was not necessary to decide the point, the Supreme Court took the opportunity to observe that the question of whether damages are in fact available for contempt of court remains an open question, stating in terms that: “we do not think that the last word has necessarily been said on this subject in this court”.
The decision is significant as it confirms that third parties may find themselves exposed to litigation and subject to damages if they conspire in the commission of a contempt of court. The Supreme Court made a number of interesting observations on the scope of the economic torts more generally and, on a matter of wider interest, also hinted that the law might develop to allow litigants to recover damages for contempt of court in the absence of a conspiracy.
The latter point could have potentially far-reaching practical consequences. Until now, contempt of court has generally been regarded as a matter between the wrongdoer and the court, rather than a wrong actionable by private parties who have suffered loss as a result. This decision leaves the door open for a litigant to argue that civil damages are recoverable for an opponent’s contempt of court.
Gary Milner-Moore and Kate Emanuel from our disputes team consider the conspiracy aspect of the decision further below. The decision is also of interest for its consideration of the issue of jurisdiction, which is considered in a separate blog post here.
Background
The Supreme Court’s decision relates to the long-running litigation between JSC BTA Bank and its former chairman and controlling shareholder, Mr Ablyazov, who is alleged to have embezzled in excess of US$6 billion during his tenure. Despite having obtained several orders against Mr Ablyzov, including a worldwide freezing order, a receivership order and default judgments totalling US$ 4.6 billion, the Bank has not been able to trace Mr Ablyzov or his assets and is said to have recovered very little.
In 2015, the Bank brought a claim against Mr Ablyazov and his son-in-law, Mr Khrapunov, resident in Switzerland. It was alleged that Mr Khrapunov, who was aware of the freezing and receivership orders, had conspired with Mr Ablyazov to help dissipate and conceal his assets.
The claim against Mr Khrapunov was framed as one for the tort of conspiracy by unlawful means. In the course of a challenge to the jurisdiction of the English courts, Mr Khrapunov raised as a threshold issue the defence that contempt of court could not qualify as “unlawful” means. Picking up on a theme that has been the subject of considerable debate in the authorities it was his position that a party’s conduct could only qualify as “unlawful” if that conduct was independently actionable at the instance of the claimant.
Decision
The Supreme Court rejected Mr Khrapunov’s argument. In doing so, it clarified the nature and scope of the tort of conspiracy and made a number of interesting observations on contempt of court.
Absence of a just cause or excuse
The law recognises that a person has a right to advance his or her own interests by lawful means even if doing so has the effect of damaging the economic interests of others. However, identifying the point at which harmful conduct transgresses legitimate bounds is, as the Supreme Court put it, “a task of exceptional delicacy”.
In the context of conspiracy, the Supreme Court noted that the boundaries depend on the form of conspiracy alleged. Conspiracy can take two forms: “lawful means” conspiracy and “unlawful means” conspiracy. To establish conspiracy by lawful means, the defendant need not have acted unlawfully but must have acted with the predominant purpose of injuring the claimant. By contrast, in unlawful means conspiracy, the conduct in question must be unlawful but the injury to the claimant need not be the defendant’s predominant purpose, and may be incidental.
What is, however, common to both forms of the tort, and the reason both are actionable, is the absence of a just cause or excuse for the defendant’s conduct: There can be no just cause or excuse for harming the economic interests of others where the tortfeaser’s predominant intention is to injure the claimant (as is the case in lawful means conspiracy). Similarly, there can be no such just cause or excuse where a party uses unlawful means in order to do so, because a party has no right to advance his own economic interests by unlawful means.
If the underlying basis for imposing liability for conspiracy is best understood as the absence of a just cause or excuse, the key question in determining whether conduct is “unlawful” is not whether the conduct concerned gives rise to a cause of action independent of conspiracy (as has been held to be the case in some of the other economic torts, notably the tort of causing loss by unlawful means). Rather, it is whether the conduct concerned is of a nature which affords the defendant a just cause or excuse. Seen in this way, it is unsurprising that the Supreme Court found that the contempt of court in which Mr Khrapunov was complicit was “unlawful”. Neither Mr Khrapunov nor Mr Ablyzov had any right to, or legitimate interest in, the proceeds of assets that were concealed from attachment by the Bank. As such, neither party’s conduct could be excused on the basis that it was in furtherance of a legitimate economic interest.
The Supreme Court’s clarification of the basis for imposing liability in conspiracy cases is of wider importance in that it is likely to inform the way in which the scope of the unlawfulness requirement in future conspiracy cases is interpreted, particularly those based upon conduct based upon other forms of culpability. The judgment also suggests that the law is unlikely to develop in a way that recognises a unified theory of the economic torts with a single test for unlawfulness across the various causes of action.
The “preclusionary rule” of public policy
Mr Khrupunov also argued that there was a “preclusionary rule” of public policy that persons in contempt of court should not be exposed to anything other than penal sanctions at the discretion of court. Recognising a civil claim for conspiracy to commit contempt of court would cut across that notion, in that such a claim could be pursued at the instance of a private party. It would therefore be contrary to public policy.
The Supreme Court rejected that argument. It noted that it is commonplace for the same act to give rise to both criminal and civil liability, in which event the sentence for the crime will be discretionary but the civil consequences will not.
Although it was not necessary to decide the point, the Supreme Court took the opportunity to observe that the question of whether damages are in fact available for contempt of court remains an open question, stating in terms that: “we do not think that the last word has necessarily been said on this subject in this court”.
