Neutral Citation Number: [2010] EWHC 794 (Ch)
Case No. HC09C01562
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Date: Wednesday, 31 st March 2010
Before:
MR. JUSTICE ROTH
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B E T W E E N :
JSC BTA BANK | Claimant | |
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ALEXANDER YU STEPANOV | Defendant |
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MR. A. STEINFELD QC and MR. J. BRIGHTWELL (instructed by Lovells LLP) appeared on behalf of the Claimant.
THE DEFENDANT was not represented and did not appear.
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J U D G M E N T (As approved by the Judge)
MR. JUSTICE ROTH:
This is an application for committal for a contempt of court of the defendant,
Mr. Alexander Stepanov, on grounds that the defendant has wholly failed to comply with disclosure obligations imposed in two orders for injunctions made by Mr. Justice Briggs on 14th October 2009. Although those orders were obtained on without notice applications and the defendant, at that time, was acting in person, his previous solicitors having come off the record about a week beforehand, the orders (endorsed with a penal notice in the usual way) were served at the address in England that he had then nominated for service and also as attachments to an e-mail to a Mr. Pleshchev in Moscow, who had described himself in a witness statement previously submitted on behalf of the defendant as someone who has worked with him very closely for many years. Moreover, it is clear that the orders came to the attention of the defendant by December 2009 at the latest, when he appointed new solicitors to act for him (Messrs. S. J. Berwin).
Those injunctions were ordered after proceedings had been commenced for recovery of a sum of about US $365m, plus interest, arising from a loan facility granted by the claimant, a company incorporated in Kazakhstan, to an English company in respect of which facility the defendant had provided security by way of a deed of charge over a shareholding.
It is not necessary for present purposes to go into the details of the claim, save to say that, first, under the deed of charge, the defendant agreed irrevocably to the jurisdiction of the English court; secondly, that the defendant served a defence to the claim but, on 5th October 2009, he wrote to the claimant’s solicitors saying that he no longer intends to continue to defend the proceedings; and, thirdly, that on 14th October 2009 summary judgment was given by Mr. Justice Briggs for the sum of just under US $469m plus indemnity costs.
On 17th December 2009 the defendant’s new solicitors, Messrs. S. J. Berwin, wrote to the claimant’s solicitors with reference to the two injunctions in respect of which these committal proceedings are brought. After noting that no committal application could be brought because those orders had not been personally served on Mr. Stepanov and that he would have to be served in Russia, their letter states:
“However, without prejudice to his position with respect to personal service, Mr. Stepanov is willing to provide relevant information on his assets and the assets of Energomash (UK). Given the holiday period (both here and in Russia where the public holidays end on 10th January 2010), it is unlikely to be possible to provide the affidavit until the second part of January 2010. Nonetheless our client will be making every effort to gather the appropriate information as expeditiously as possible.”
That letter was followed up by a further letter, on 6th January 2010, which stated:
“As already explained in previous correspondence, our client is making every effort to provide an affidavit on his assets and the assets of Energomash (UK) as expediently as possible. We shall revert to you once we are in a position to offer dates on which you can expect to receive it.”
No such information has ever been provided nor were any further letters sent by the defendant, or his solicitors, indicating when they were expecting to provide it.
The claimant was unable to effect personal service of the two orders of 14th October 2009 and, on 19th February 2010, Mr. Justice Briggs made two further orders, one in respect of each of those earlier orders of 14th October 2009, by which he ordered substituted service by delivery at the offices of the defendant’s solicitors, Messrs. S. J. Berwin, which would be deemed to be good service three working days after the documents had been so delivered. The judge also ordered that the defendant should comply with the disclosure obligations in those previous orders 48 hours after that deemed date of service.
The evidence before me shows that the orders were so delivered to S. J. Berwin at about 4.30p.m. that day (that is 19th February 2010). Accordingly, pursuant to Mr. Justice Briggs’ orders, they were deemed to be served on 25th February 2010 and compliance was required by 27th February 2010.
This committal application was issued on 9th March 2010. Although such an application normally also requires personal service, on 9th March 2010 Mr. Justice Newey made an order dispensing with personal service and ordering that delivery to Messrs. S. J. Berwin would be deemed to be good service three working days thereafter. There is an affidavit before me that service was made by delivery to S. J. Berwin on 9th March 2010 by personally handing the orders, and the supporting evidence, to the personal assistant to Mr. Jonathan Goldberg, the partner at S.J. Berwin who had custody of the matter on behalf of the defendant and whose name appears on the letters from S. J. Berwin from which I have quoted. I am satisfied that the defendant was duly served with the committal application in accordance with Mr. Justice Newey’s order and, as S. J. Berwin were then still on the record, I think it is clear that the defendant must be aware of these proceedings.
However, at this hearing the defendant was not present and S. J. Berwin came off the record on 25th March. Notice of change of solicitors, sent by S. J. Berwin to the claimant’s solicitors, is signed by the defendant himself and nominates an address in London for service on him, thereafter, namely, the office of Law Debenture Corporate Services Ltd. The claimant’s solicitors accordingly sent an e-mail yesterday, of which the court has been shown a copy, to Law Debenture Corporate Services Ltd., informing them of the court in which this application would be made today. I have caused the Usher to call the defendant outside court and there has been no response.
The initial question therefore before the court is whether to hear this application in the defendant’s absence. Normally, the court requires the attendance of a defendant for a committal hearing and the usual course on non-attendance is to issue a bench warrant and adjourn the matter so that the warrant can be executed and the defendant brought before the court for the application to commit him or her to be heard. But the claimant invites me not to take that course as, it submits, that is likely to lead to prolonged, or conceivably indefinite, adjournment as I am informed that the defendant is in Russia and the whole history of his conduct of this litigation points to a disinclination to attend or comply with court orders.
The court has jurisdiction to hear a contempt application in the absence of the defendant in exceptional circumstances. In Lamb v Lamb [1983] FLR 278 Lord Justice Oliver, in his judgment in the Court of Appeal, said this:
“… I see the danger of hearing any application for committal for contempt, which is, after all, a quasi-criminal proceeding, ex parte. It is, I think, established that it is something that should only be done in exceptional circumstances but the question is always one for the discretion of the judge who has to hear the matter. He has to balance the desirability of making an immediate hearing, the urgency of the matter, and so on, against the possibility that the evidence before him may not be complete. But here, if the evidence was to be believed, and there is no reason why it should not have been (and indeed it was not, I think, substantially challenged on the subsequent hearing), the judge was faced with what he considered to be a flagrant and deliberate contempt of court committed only two days after the injunction had been granted, an injunction which had been fully explained to the respondent and in circumstances in which the respondent could be under no illusion about the consequences of a breach. He had to balance the desirability of obtaining the respondent’s account of the matter against the possibility that, in the case where the petitioner had been complaining of harassment, such harassment as had taken place was again going to be committed and in his discretion he came to the conclusion that it was a case which he ought to hear ex parte and deal with on that basis. I am not, speaking for myself, on the present material, prepared to say that in making that decision he was wrong.”
As is clear from that extract, the circumstances there were very different but those observations offer useful guidance. I would only add that it is not entirely clear from that extract in what respect those proceedings were ex parte. The present proceedings are not in any sense without notice. For the reasons I have explained, they are proceedings on notice where the defendant has failed to appear.
Contempt proceedings are quasi-criminal proceedings, as Lord Justice Oliver there emphasises, and they are criminal proceedings for the purposes of Article 6 of the European Convention on Human Rights. I was therefore referred to consideration by the House of Lords as to when a criminal trial can take place in the absence of the defendant. This was in the case of R v Jones (Anthony) [2002] UKHL 5 [2003] 1 AC 1. There their Lordships approved, with one qualification, the guidance given in that case in the Court of Appeal in a judgment of the court delivered by Lord Justice Rose, R v Hayward [2001] QB 862. The Court of Appeal, after noting the general right of a defendant to be present at his trial and indeed to be legally represented, and the discretion of the trial judge to proceed without him, said this (at para.22):
“That discretion must be exercised with great care and it is only in rare and exceptional cases that it should be exercised in favour of a trial taking place or continuing, particularly if the defendant is unrepresented. In exercising that discretion fairness to the defence is of prime importance, but fairness to the prosecution must also be taken into account. The judge must have regard to all the circumstances of the case, including in particular …”
The Court of Appeal then set out various factors to be considered, which I read omitting the one that was disapproved by Lord Bingham on appeal in the House of Lords:
“(1) The nature and circumstances of the defendant’s behaviour in absenting himself from the trial or disrupting it, as the case may be and, in particular, whether his behaviour was deliberate, voluntary and such as plainly waived his right to appear;
Whether an adjournment might result in the defendant being caught or attending voluntarily and/or not disrupting the proceedings;
The likely length of such an adjournment;
Whether the defendant, though absent, is, or wishes to be, legally represented at the trial or has, by his conduct, waived his right to representation.”
(5) concerns an absent defendant’s legal representations which does not here apply:
“(6) The extent of the disadvantage to the defendant in not being able to give his account of events, having regard to the nature of the evidence against him.”
(7) concerns the risk of the jury reaching an improper conclusion about the absence of the defendant and so obviously does not apply; and (8) refers to the seriousness of the offence:
“(9) The general public interest and the particular interest of victims and witnesses that a trial should take place within a reasonable time of the events to which it relates.”
The remainder are not relevant.
Applying those to the present case, here the defendant, until very recently, was represented by a well-known firm of solicitors. He had every opportunity to make representations to the court, with their assistance, and he would be aware of today’s proceedings. The lack of response, the lack of any appearance by him or on his behalf today, in those circumstances, is, in my judgment, a deliberate absence and a voluntary decision on his part for which no excuse is put forward.
Secondly, any adjournment is unlikely to result in the defendant being apprehended in the foreseeable future. There is evidence before me that he is now in Russia and, at my direction, a supplementary affidavit will be filed explaining the source of that information. It is clear, in any event, on the material before me, that he resides in Russia: that is his address on the deed of charge, and the letter from him of 5th October 2009, to which I referred, was sent from Moscow. Thirdly, any adjournment, therefore, might be prolonged.
Fourthly, in causing his solicitors, who had been acting, to come off the record after service of this committal application (and I note in parenthesis that they are the second firm to have acted for him in these proceedings) and in failing to submit any representation to this court, he has, in my view, waived his right to representation at this hearing, although, of course, he has not waived his right to a fair hearing of this application.
Taking the next several categories together, it is not notable that in R v Jones the circumstances concerned a criminal trial on a charge of conspiracy to rob. Here the position is very different. The allegations are that the precise terms of two orders for disclosure by specified dates were not complied with. The evidence of breach of those orders is thus very simple and there is no apparent disadvantage to the defendant in not being represented or present before the court today. There appears to me to be no real risk of reaching an improper conclusion on the question of contempt.
Finally, the reference to the general public interest appears to me of particular importance in proceedings of this nature. While it is, of course, not a case of the interest of witnesses in the present case, as in the criminal trial to which the Court of Appeal were referring in R v Jones, here what is alleged is that there was flagrant disobedience of orders of this court. In my view, it is not right that a defendant should be able to avoid or postpone for a potentially extended period the determination of sanction for such breaches, should they be established, through his failure to attend on an application to commit for contempt that has been endorsed with the required warning notice.
Moreover, in his judgment in the House of Lords in R v Jones, Lord Bingham said this, at para.14:
“The judge’s overriding concern will be to ensure that the trial, if conducted in the absence of the defendant, will be as fair as circumstances permit and lead to a just outcome.”
He proceeded to observe that it is the presence through the trial of legal representatives, with no object other than to protect the interests of their client, that provides a valuable safeguard against the possibility of error and oversight. Those observations were, of course, particularly pertinent in the context of a criminal trial on indictment.
The circumstances of this committal application are very different. Here, in urging me to proceed in the absence of the defendant, Mr. Steinfeld QC submits, first, that this is not a case where there can be any possible defence. The circumstances of non-compliance are very clear and so there is no realistic risk of any error in proceeding to determine whether or not there has been a contempt. Secondly, that committal proceedings are very different from a criminal trial since the sentence that the court will impose, if the contempt is established, in a case where it is what he referred to as a “coercive” sentence, designed to ensure that the defendant will comply with the orders of the court, is open to variation or discharge by the court on application by the contemnor if the contempt is purged.
Taking all these matters into account, I agree that this is an exceptional case where it is appropriate for the court to proceed in the absence of this defendant. I note that Mr. Jonathan Hurst QC, sitting as a Deputy Judge of the High Court, took a similar course in International Finance Corporation v DSML Offshore Ltd & Ors [2005] EWHC 534 (Comm), judgment of 23 March 2005, to a transcript of which I was helpfully referred. Accordingly, I proceeded to hear this application in the absence of the defendant. The obligations with which the defendant is alleged to have failed to comply are contained in the two orders of Mr. Justice Briggs of 14th October 2009. The first is a worldwide freezing order. By para.6(1) of that order the defendant was ordered:
“to the best of his ability to inform the applicant’s solicitors of all of his assets worldwide exceeding US $15,000 in value, whether in his own name or not and whether solely or jointly owned, giving the value, location and details of all such assets.”
The second order was an injunction order concerning dealings surrounding the company, Energomash (UK) Ltd, and various associated or related companies. That injunction, by para.2(c), ordered the defendant:
“to the best of his ability inform the applicant’s solicitors of all assets of more than US $100,000 disposed of by Energomash (UK) Ltd, or by any of the companies listed in Schedule C or in any other company in which Energomash (UK) Ltd has a shareholding since 1 January 2009 and of the value received by such company in consideration for each disposal (with the exception of disposals carried out in the ordinary course of business).”
And in para.2(d) that the defendant must:
“to the best of his ability inform the applicant’s solicitors of the location of all of the property now representing the assets referred to in paragraph 2(c).”
The dates for compliance with those orders were extended, as I have explained earlier, by the subsequent orders of Mr. Justice Briggs of 19th February 2010.
I remind myself that in contempt proceedings the court must apply the criminal standard of proof. On the evidence before the court, in an affidavit of Mr. Hardman, a partner in the claimant’s solicitors, it is clear to me that there has been complete non-compliance with the provisions of the orders that I have just read. Notwithstanding what was said in the two letters from S. J. Berwin last December, to which I have referred, no information whatsoever has been provided. I am therefore sure, to the criminal standard, that there has been a breach of these provisions of the orders in the respects alleged, and I find that the contempt is proved.
I therefore consider the question of penalty. The maximum sentence for contempt of court by statue is 2 years. In Lightfoot v Lightfoot [1989] FLR 414, in the Court of Appeal, Lord Donaldson MR, with whose judgment Lady Justice Butler-Sloss agreed, said this:
“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. 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 realise 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 two 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 two-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.”
That approach was followed and applied by Mr. Justice Neuberger (as he then was) in Shalson v Russo [Unreported] 9 July 2001.
As is clear from what Lord Donaldson said, the imposition of a two year sentence cannot be automatic. Sentencing is always a matter of judgment on the particular facts that have to be considered. Here there has been, in my judgment, a flagrant disobedience of the court’s orders; secondly, there has been no attempt whatever to explain or excuse that disobedience; thirdly, this is a case where there has been judgment for very significant sums of money against this defendant, and the orders in question were in support of the claimant’s rights resulting from that judgment; fourthly, the defendant was, until very recently, represented by experienced solicitors but has now withdrawn instructions from them after these proceedings for contempt were served and made no attempt to appear or be represented before the court. In my view, it is, therefore, entirely appropriate in this case to impose a two year sentence of imprisonment given the seriousness of the circumstances, with an express provision that the defendant can apply to vary or discharge that order. I therefore make such an order. I will also direct that with the order there is served the claimant’s solicitor’s note of this hearing, including this judgment, and a copy of the claimant’s counsel’s skeleton argument. I will also include in the order an undertaking to make and file a supplementary affidavit as referred to in this judgment. I will consider further with counsel the terms of the order to be made.
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