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Supreme Court reinvigorates tort of Conspiracy to Injure by Unlawful Means
On Wednesday 21 March the Supreme Court delivered judgment in JSC BTA Bank (respondent) v Khrapunov (appellant)  UKSC 19. The case is vitally important for all commercial and civil fraud practitioners. Below is a short note prepared by Charles Samek QC and Marc Delehanty, who acted for the appellant on the appeal, on the implications of the judgment. CLICK HERE for the judgment.
The conclusions of the Supreme Court and the main implications of the judgment are as follows:
- The tort of conspiracy has had new life breathed into it in that the Supreme Court has made clear that liability will depend on whether there is a just cause or excuse for the defendants combining with each other to use unlawful means. The answer to that question depends on the nature of the unlawfulness and its relationship with the resultant damage caused to the claimant. This has the potential to bring within the scope of unlawful means any form of unlawfulness – even a breach of contract. Whether any particular unlawfulness will count as unlawful means should now be decided by reference to the above-stated test as applied to the particular facts in the case.
- Criminal contempt of court qualifies as unlawful means.
- The issue of whether damages may be recoverable for contempt of court has been left open, albeit that it remains to be seen whether first-instance judges will consider that they are bound to follow the decision of the Court of Appeal below which had held there to be no such cause of action.
- The jurisdictional issue arising under the Brussels / Lugano scheme of identifying the place of the event giving rise to the damage (limb (b) of the so-called Bier test) has been resolved in conspiracy cases by the answer that it is the place where the conspiracy was hatched, even though it may have been implemented elsewhere. This gives considerable scope to claimants to seek to ground jurisdiction in England and Wales by advancing just a good arguable case that a conspiracy was entered into here – whether by a face-to-face meeting or meetings or by exchange of correspondence including emails.
- The Supreme Court also approved the test of asking what it is that ‘sets the tort in motion’ as correctly reflecting the European jurisprudence for identifying the place of the event giving rise to the damage under limb (b) of the Bier test. The Supreme Court emphasized that whilst such question must not be answered by applying national law, yet national law is relevant in determining the nature of the cause of action and thus in identifying what is legally relevant conduct for the purpose of seeing what it is that ‘sets the tort in motion’.
- There is, however, likely to be little prospect of a claimant establishing jurisdiction based on England and Wales being the place where the damage was suffered unless it can be shown that the initial damage was suffered here. The fact that a claimant may have been caused damage because an English judgment or arbitral award was impaired because it could not be executed will not qualify. So, in this case, the claimant was held in the courts below to have suffered damage because it was unable to execute against relevant assets, all of which were situate abroad. The claimant sought permission to appeal from the Supreme Court but permission was refused, even though the claimant’s complaint was that damage was suffered because it was unable to execute so as to satisfy its English judgments.
- Persons who would not otherwise be subject to the English court’s jurisdiction because they are domiciled abroad and not affected by any prior English court orders, will now find themselves in the cross-hairs. It will be sufficient that they conspired in England even though all other factors are placed outside the jurisdiction. This will apply even to persons who do not come within the scope of an English worldwide freezing order because they are third parties outside the jurisdiction and are persons whom the English worldwide freezing order expressly provides (by way of the Babanaft proviso) that it does not affect such persons.
The claimant bank brought a claim for damages for the tort of conspiracy to injure by unlawful means against both Mr Ablyazov and Mr Khrapunov. It alleged that Mr Khrapunov conspired with Mr Ablyazov from 2009 to deal with the assets of the latter so as to prevent the Bank from recovering the monies that Mr Ablyazov allegedly misappropriated from it and/or damages or compensation.
The claimant bank alleged that, pursuant to the conspiracy, Mr Khrapunov dealt with various assets all of which were situate abroad.
The claimant asserted that these alleged dealings were unlawful because they were in breach of the English worldwide freezing and receivership orders against Mr Ablyazov.
Mr Khrapunov had not been served with those orders. Nor was he a respondent to them. Both orders contained forms of the Babanaft proviso providing that persons outside England and Wales would not be affected by the order unless certain conditions were fulfilled. Those conditions were not fulfilled in the case of Mr Khrapunov.
The claimant claimed loss and damage on the basis that it has been unable to enforce its judgments against Mr Ablyazov against the foreign assets.
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Specifically in this case:
- Breach of the worldwide freezing and receivership orders constituted criminal contempt of court and qualified as unlawful means for the purpose of the tort of conspiracy to injure by unlawful means.
- There was no relevant public policy which prevented such breaches, even though the facts constituting the breaches gave rise to no independent cause of action, so qualifying or which prevented a cause of action in unlawful means conspiracy.
- The Supreme Court held that there was sufficient evidence to conclude, for jurisdiction purposes, that the alleged conspiracy was hatched in London; that in entering into it, Mr Khrapunov would have encouraged and procured the commission of unlawful acts by agreeing to help put Mr Ablyazov’s scheme into effect; that Mr Khrapunov’s alleged dealings with the assets would have been undertaken pursuant to and in implementation of the alleged conspiratorial agreement. For that reason, the making of the alleged conspiratorial agreement (in London) was to be regarded as the event which set the tort in motion.