JSC VTB Bank v Skurikhin

MR JUSTICE FLAUX: This is an application on behalf of the VTB Bank by Mr Tim Penny, counsel, for the committal for contempt of court of judgment debtor and defendant Mr Pavel Skurikhin.

The background to the matter is that following summary judgment hearing before Simon J on 7 March 2014, Simon J entered judgment against Mr Skurikhin in a sum of Russian rubles which was the equivalent of some £10 million in relation to and by way of enforcement of a series of judgments obtained by the Bank against Mr Skurikhin in Russia.

A short stay of execution was granted on certain conditions with which Mr Skurikhin did not comply and in those circumstances the stay fell away. The Bank then applied to Males J for an order for attendance by Mr Skurikhin for oral examination pursuant to Rule 71 of the Civil Procedure Rules, and an order was made by Males J on 3 April 2014 which contained a penal notice on its face and required Mr Skurikhin to attend for oral examination before a Master pursuant to CPR 71.2.

The claimant Bank applied at that stage for an order for alternative service of the order on the solicitors who were then acting for Mr Skurikhin, Fried Frank. On 6 May Males J made an order for alternative service on Fried Frank and specifically ordered that compliance with that order was deemed to be compliance with the requirements of CPR 71.3 in relation to service.

On 9 May the matter was listed for hearing on 10 July 2014 before Master Eyre, and on that day (9 May) the Bank’s solicitors, PCB Litigation, served the orders including the endorsement for a hearing before Master Eyre and the supporting witness statement on Fried Frank in accordance with the order of Males J on 6 May.

On 6 June, Fried Frank applied to come off the record both before the Commercial Court and in the Court of Appeal. In the address for service box on the form for the Court of Appeal, an email address for Mr Skurikhin was provided by the solicitors and thereafter the Bank pursued the application which they had in fact issued immediately prior to the order made by Simon J on 7 March for a worldwide freezing order against Mr Skurikhin, and on 12 June 2014 they obtained a worldwide freezing order from Eder J. That was a hearing which was on notice to Mr Skurikhin given at that email address.

The learned judge granted the worldwide freezing order which contained a penal notice in the normal way. Paragraph 12 of the order provided that within 21 days of the order being served on him, the defendant should provide details of all his worldwide assets excluding £15,000. Paragraph 15 of the order provided that again within 21 days he should swear and serve an affidavit setting out that information and exhibiting all relevant documentation and paragraph 18 of that order provided for alternative service of the order on the defendant by sending a copy by email to the email address which had been identified by Fried Frank, alternatively by registered letter to various addresses for the defendant of which the Bank was aware in Russia.

On 2 July, the Bank duly sent by email to that email address for the defendant the order that had been made by Males J on 3 April for examination of Mr Skurikhin before Master Eyre together with the endorsement that had been stamped on that order for attendance on 10 July. The position was that there was no response from Mr Skurikhin to that service of the order upon him and there was no request made by him for payment of his travel and attendance expenses pursuant to CPR 71.5. It is quite clear in my judgment (i) that Mr Skurikhin was well aware of the order and that the order required his attendance before the Master on 10 July and (ii) that he deliberately failed to comply with that order to attend for an examination of the debtor, 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. He having failed to attend before the Master, the Master referred the matter back to the Commercial Court. The application for committal was issued by the Bank on 11 July.

So far as the position in relation to the worldwide freezing injunction is concerned, that was served on the defendant again at the same email address by email on 13 June. The email from PCB Litigation drew specific attention to the obligations imposed upon the defendant under paragraphs 12 and 15 of the order of Eder J to the effect that disclosure of assets and an affidavit in support was required. Pursuant to the rules of court, the time for service of the affidavit of assets and production of the information under paragraphs 12 and 15 expired on 7 July of this year. That order of Eder J was also for good measure served by PCB Litigation on Fried Frank. By that stage, they had made an application to come off the record. It is again quite clear that Mr Skurikhin is aware of the terms of the order of Eder J and has knowingly and deliberately and intentionally failed to comply with the terms in that order, again, as I see it, in an attempt to thwart the attempts by the Bank to enforce its judgments against him.

The court has to be satisfied to a criminal standard of proof that the defendant is in contempt of court. I have no doubt on the material that is before the court that the defendant is in contempt of court in both the respects identified. I am also quite satisfied that the Bank has complied with all the requirements of the rules of the court with which they need to comply before the court will make an order for committal of the defendant for contempt.

In those circumstances it only remains to consider what is the appropriate penalty to impose upon the defendant in relation to the contempt which he has undoubtedly committed. I propose to consider firstly the contempt in relation to the worldwide freezing order which in many ways is the more serious contempt, but I do not lost sight of the fact that, as I have said, these are all essentially part of the same pattern of behaviour and I also have to have in mind the overall seriousness of the offending on the part of the defendant in order to ensure that I do not impose too severe a sentence overall.

Mr Penny drew my attention to a number of decisions in the Court of Appeal in the Ablyazov litigation, specifically the decision in JSC BTA Bank v Solodchenko and others (No 2) [2011] EWCA Civ 1241, [2012] 1 WLR 350 and the judgment of Jackson LJ at page 360 where at paragraph 55, having reviewed the earlier authorities he said this:

“From this review of authority I derive the following propositions concerning sentence for civil contempt, when such contempt consists of non-compliance with the disclosure provisions of a freezing order:

“(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.”

And then paragraph 56:

“In the case of continuing breach, out of fairness to the contemnor, the court may see fit to indicate (a) what portion of the sentence should be served in any event as punishment for past breaches and (b) what portion of the sentence the court might consider remitting in the event of prompt and full compliance thereafter. Any such indication would be persuasive, but not binding upon a future court.”

Those principles were applied subsequently by the Court of Appeal in JSC BTA Bank v Ablyazov (No 8) [2012] EWCA Civ 1411, [2013] 1WLR 1331 which was the appeal by Mr Ablyazov against the sentence imposed by Teare J in this court of 22 months’ imprisonment for contempt of court. One has to bear in mind that that was a particularly egregious case of contempt and therefore one has to be a little cautious before one uses that as any real guidance as to whether or not that would be the correct level of sentence, despite what Jackson LJ had said in the Solodchenko case, and I have in mind particularly the by now well-known paragraph 202 of Maurice Kay LJ judgment where he refers to Mr Ablyazov in these terms:

“it is difficult to imagine a party to commercial litigation who has acted with more cynicism, opportunism and deviousness towards court orders as Ablyazov.”

Whatever else one says about Mr Skurikhin it does not mean that he is, at least yet, in the same league as Mr Ablyazov.

Those principles were also confirmed and applied by the Court of Appeal in the subsequent case of Templeton Insurance Ltd v Thomas & Anor [2013] EWCA Civ 35 at paragraph 42 of the judgment of Rix LJ.

It does seem to me that it is appropriate to impose a sentence of immediate imprisonment on Mr Skurikhin in relation to his failure to comply with the disclosure obligations in the freezing order, not least because those are matters in relation to which the freezing injunction is intended to be by way of assistance to the Bank in enforcing judgments already obtained and the only explanation for a deliberate breach of the obligation to disclose assets must be a deliberate attempt to thwart the Bank in enforcing its judgments and therefore is a particularly serious case of a contemnor in effect cocking a snook at this court.

In the circumstances, it seems to me that the appropriate sentence to be imposed upon the defendant in respect of that particular contempt of court is one of twelve months’ imprisonment. So far as the failure to attend for examination is concerned, that, pursuant to the rules and specifically 71.8(4), is one where if the court rules at its discretion that a sentence of immediate imprisonment should be imposed, the court will suspend that sentence in effect to enable the judgment debtor to purge his contempt by attending the subsequent hearing either before the judge or before the Master. So far as that contempt is concerned, again it is a serious matter. It seems to me in the exercise of my discretion that it is appropriate to impose a sentence of immediate imprisonment, although it will be suspended pursuant to 71.8(4) and the sentence there will be a sentence of four months’ imprisonment to be served consecutively with the sentence of twelve months’ imprisonment. I should add in relation to the sentence of twelve months’ imprisonment that is twelve months concurrent on each of the contempts under paragraph 12 and 15, so the overall sentence is one of 16 months’ imprisonment. So far as the sentence for four months is concerned, that will be suspended pursuant to 71.8(4). That is the sentence of the court.