ON APPEAL FROM THE HIGH COURT OF JUSTICE
MRS. JUSTICE PROUDMAN
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE CARNWATH
LORD JUSTICE JACKSON
| JSC BTA Bank
|(1) ROMAN VLADIMIROVICH SOLODCHENKO
(2) PAUL KYTHREOTIS AND OTHERS
The second defendant was not present or represented
Hearing dates : 10 October 2011
Crown Copyright ©
Lord Justice Jackson :
Part 1 Introduction
Part 2 The Facts
Part 3 The Appeal to the Court of Appeal
Part 4 The Law
Part 5 Decision.
"The bank" means JSC BTA Bank, the claimant in this action and the appellant in the present appeal.
"Mr Kythreotis" means Mr Paul Kythreotis, the second defendant in this action and the respondent in the present appeal.
"Hogan Lovells" means Hogan Lovells International LLP, the bank's solicitors.
"Holman Fenwick" means Holman Fenwick Willan, Mr Kythreotis' solicitors between April and July 2011.
"The July order" means the worldwide freezing order made on 23rd July 2010 and sealed on 26th July 2010, as set out in Part 2 below.
"BVI" means British Virgin Islands.
"42. Unfortunately I bent under this duress and allowed Affidavits to be sworn in which I gave false evidence that I learned of Mr. Sadykov's beneficial ownership of the relevant BVI companies in May 2010, asserted that I received a letter from Mr. Sadykov in which he said that he was the beneficial owner of the relevant BVI companies in or around May 2010 (it was received by me in September 2010) and omitted to make any reference to the September 2010 instructions, and omitted to make any reference to Mr. Shalabayev.
43. Also, although I do not positively remember this, I surmise that I would have also instructed my employees to make documents available to Byrne & Partners which documents did not include references to Mr. Shalabayev but did include the executed Sadykov documents less the September instructions.
44. I greatly regret that I did this and offer my sincere apologies to the Court for allowing the false evidence contained in paragraph 48 of my Second Affidavit to be put forward in my name".
"We are not today dealing with any application for evidence to be heard by video link. If the respondent wishes to make such an application, he should do so as quickly as possible by notice to the appellants and to this court. This court has video link facilities, but I am informed by an officer of this court that it does not have funding for video linking from any overseas base. So the question of how it would be funded if the court gave permission would have to be considered, and suitable arrangement made".
"Sentences for contempt really fall into two different categories. There is the purely punitive sentence where the contemnor is being punished for a breach of an order which has occurred but which was a once and for all breach. A common example, of course, is a non-molestation order where the respondent does molest the petitioner and that is an offence for which he has to be punished. In fixing the sentence there can well be an element of deterrence to deter him from doing it again and to deter others from doing it. That is one category.
There is a second category which I might describe as a coercive sentence where the contemnor has been ordered to do something and is refusing to do it. Of course, a sentence in that case also has a punitive element since he has to be punished for having failed to do so up to the moment of the court hearing, but nevertheless, it also has a coercive element.
Now, it is at that point that it is necessary to realize that in earlier times the courts would in such circumstances have imposed an indefinite sentence. That is to say a man would be committed to prison until such time as he purged his contempt by complying with the order. Under the Contempt of Court Act 1981 a limit has been placed on such sentences, that limit being 2 years. It would be consistent with the previous practice of the courts and give full effect to the modification required by statute if courts considered imposing a 2-year sentence when the contemnor was in continuing and wilful breach of court orders. Whilst there might be cases in which such a sentence would be disproportionately severe, any wilful defiance of the court and its orders is necessarily a very serious offence and if the contemnor is aggrieved he has a remedy in his own hands – he can seek his immediate release by ceasing his defiance, complying with the order and thereby purging his contempt."
"During the course of this application it seemed to me that the penny was beginning to drop as far as these defendants were concerned. I think that they probably now realise the threat of imprisonment is real and that if they breach a court order in the future they probably can expect no mercy. For the moment, it is therefore not necessary for me to impose any custodial sentence but, on the other hand, the breach here was so serious that it must be reflected in a significant financial penalty on the partnership".
(i) Freezing orders are made for good reason and in order to prevent the dissipation or spiriting away of assets. Any substantial breach of such an order is a serious matter, which merits condign punishment.
(ii) Condign punishment for such contempt normally means a prison sentence. However, there may be circumstances in which a substantial fine is sufficient: for example, if the contempt has been purged and the relevant assets recovered.
(iii)Where there is a continuing failure to disclose relevant information, the court should consider imposing a long sentence, possibly even the maximum of two years, in order to encourage future co-operation by the contemnor.
(i) The contempt which the judge found proved was Mr Kythreotis' failure to comply with the disclosure provisions of the July freezing order during the period 29th July to 22nd September 2010.
(ii) In the pretence of purging his contempt, Mr Kythreotis made certain disclosure in late September and early October 2010.
(iii) In fact the disclosure which Mr Kythreotis made in September and October 2010 was misleading. His affidavit sworn on 28th September contained deliberate lies. Furthermore Mr Kythreotis concealed the existence of a huge archive of relevant emails.
(iv) Mr Kythreotis through instructions to his counsel on 18th October 2010 asserted that he had purged his contempt. In fact, as Mr Kythreotis (but not his counsel or solicitors)well knew, far from purging his contempt he had aggravated that contempt by putting forward false evidence.
Lord Justice Carnwath:
The Master of the Rolls: