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The decision confirms that claims for unlawful means conspiracy can be brought against individuals outside the court's jurisdiction who facilitate breaches of freezing orders.
The Court of Appeal has unanimously held that a Monegasque lawyer who carried out his client's instructions to transfer funds in breach of an English worldwide freezing order was liable for unlawful means conspiracy: Lakatamia Shipping Co Ltd v Su [2025] EWCA Civ 1389.
The decision concerns the standard "Babanaft proviso" included in worldwide freezing orders issued by the English courts. This provides that "the terms of this order do not affect or concern anyone outside the jurisdiction of this court" apart from the respondent of the order and other specified exceptions (introduced by Babanaft Co SA v Bassatne [1990] Ch 13). Overturning the High Court (see our previous post here), the Court of Appeal held that the Babanaft proviso does not provide an individual outside the territorial jurisdiction of the English court with a defence to liability for unlawful means conspiracy.
The Court of Appeal's decision means that any person who has notice of an English freezing order and who assists in the breach of that order runs the risk of being held liable for civil damages by the English courts. The decision provides welcome assurance to parties with the benefit of an English freezing order that they may have a remedy against persons who cause them loss by helping to flout the order, even if those persons are located abroad.
Background
The claimant company had for around 10 years been attempting to enforce two English High Court judgments for breach of contract against an individual, Mr Su. The judgment sums remained largely unsatisfied, and the amount outstanding stood at over US$60 million.
Mr Su had been committed to prison for numerous breaches of a worldwide freezing order over his assets, including for failing to disclose his interest in two Monaco villas and dissipating the proceeds of their sale.
The present proceedings were against Mr Su and third parties, based on their involvement in the dissipation of the sale proceeds. One of those was a Monegasque lawyer, Mr Zabaldano, who was retained by the company that was the registered owner of the villas and received the sale proceeds (Cresta). On instructions from Mr Chang (who was the other defendant in the proceedings and a director of Cresta), Mr Zabaldano had transferred nearly €27 million of the proceeds from his firm's client account to another company, from where the funds were further dissipated. It was not disputed that Mr Zabaldano was aware of the existence of the English judgments against Mr Su and had seen the freezing order. However, he argued that he did not know that Cresta was beneficially owned by Mr Su.
At first instance, the High Court found that Mr Zabaldano had known, at the time he transferred the proceeds of the sale, that Mr Su was bound by a worldwide freezing order, that the judgment debt had not been discharged and that Cresta was beneficially owned by Mr Su. Despite these findings, the High Court declined to find Mr Zabaldano liable for unlawful means conspiracy on the basis that he was entitled to the benefit of the Babanaft proviso contained in the freezing order.
The High Court also dismissed the alternative claim against Mr Zabaldano for knowingly inducing or procuring a violation of a party's rights under a judgment (the "Marex tort" claim). This was on the basis that Mr Zabaldano did not have the necessary intention to violate the claimant's judgment rights as he genuinely believed he was entitled, and obliged by his professional obligations, to transfer the sale proceeds. Further, or in the alternative, that genuine belief provided Mr Zabaldano with a defence of justification
The High Court also dismissed the unlawful means conspiracy claim against Mr Chang on the basis that, at the time he ordered Mr Zabaldano to transfer the sale proceeds, he was not aware that Mr Su was bound by the freezing order or still owed the judgment debt. As a consequence of its decisions concerning Mr Zabaldano and Mr Chang, the High Court dismissed the unlawful means conspiracy claim against Mr Su as he could not be liable for conspiracy on his own.
The claimant company appealed on all grounds to the Court of Appeal.
Decision
The Court of Appeal (Lord Justice Males, Lady Justice Falk, and Sir Julian Flaux) unanimously allowed the appeal in respect of the unlawful means conspiracy claims. In light of this conclusion, the Court of Appeal declined to decide on the alternative Marex tort claim. The court noted that this was a novel and developing tort and therefore resolution of whether justification can be a defence to a claim, and whether a defendant's genuine belief that they were entitled to act as they did negates the intention requirement, should await a case in which those issues are critical and there has been full argument by both parties.
First, the Court of Appeal set out the elements of unlawful means conspiracy as summarised by Cockerill J in FM Capital Partners Ltd v Marino [2018] EWHC 1768 (Comm):
- A combination, arrangement or understanding between two or more people. However, it is not necessary for the conspirators to all join the conspiracy at the same time, provided they are all sufficiently aware of the surrounding circumstances and share the same object.
- An intention to injure another, albeit that need not be the sole or predominant intention. The necessary intent can be inferred, and will often need to be, from the primary facts. Where conspirators intentionally injure the claimant and use unlawful means to do so, it is no defence for them to show that their primary purpose was to further or protect their own interests.
- In some cases, there may be no specific intent, but intention to injure results from the inevitability of loss. However, foresight that unlawful conduct may or will probably damage the claimant cannot be equated with intention.
- Concerted action (in the sense of active participation) consequent upon the combination or understanding.
- Use of unlawful means as part of the concerted action (but the unlawful means does not need to be independently actionable).
- Loss caused to the target of the conspiracy.
The Court of Appeal also noted that Bryan J had made further points in an earlier judgment in these proceedings, including that there is no requirement that all the conspirators will use unlawful means. The Court of Appeal found this to be significant as it meant that, even if Mr Zabaldano had acted lawfully in accordance with Monegasque law, Mr Su undoubtedly acted unlawfully in procuring the transfer of funds in breach of the freezing order and Mr Zabaldano assisted him to achieve this objective.
As to Mr Zabaldano, the Court of Appeal held that he was liable for unlawful means conspiracy. The Court of Appeal concluded that the approach taken by the High Court had been foreclosed by previous Court of Appeal and Supreme Court decisions in JSC BTA Bank v Ablyazov (No 14) ([2017] EWCA Civ 40, and [2018] UKSC 19 respectively), by which the High Court was bound. These decisions held that the Babanaft proviso affords no defence to liability for unlawful means conspiracy to a person outside the territorial jurisdiction of the English courts (as distinct from a defence to proceedings for contempt of court).
In Ablyazov, Mr Ablyazov (who had lived in England for a number of years but who later fled to France to avoid being committed to prison for contempt of court) had breached the terms of a freezing order against him by dealing with his assets contrary to the terms of the order. He had been assisted in such dealing by a Mr Khrapunov, who lived in Switzerland.
In the present case, the High Court had considered that the Supreme Court's Ablyazov decision could be distinguished on two grounds. First, in Ablyazov, the conspiracy was assumed to have occurred in England, while in this case the conspiracy occurred outside the jurisdiction. The Court of Appeal noted that this was a factual difference but said it had no relevance to the effect of the Babanaft proviso. Second, the High Court had suggested that the passages of the Supreme Court's decision in Ablyazov that dealt with the Babanaft proviso were considering a different issue - whether a rule existed preventing persons in contempt of court from being exposed to anything other than criminal penalties. Consequently, the Supreme Court had not considered the impact of the proviso on Mr Khrapunov, who was outside the jurisdiction of the English courts, but rather its impact on Mr Ablyazov, who was within the jurisdiction. The Court of Appeal said this was a misunderstanding of the case: the whole Supreme Court decision had been concerned with the position of Mr Khrapunov, a foreigner outside the jurisdiction who did have the benefit of the Babanaft proviso.
With regards to Mr Chang, despite the high threshold for doing so, the Court of Appeal rejected the High Court's findings of fact, noting that they were "plainly wrong". As a director of at least three companies who were subject to the freezing order and had liability judgments entered against them, the Court of Appeal said it "beggars belief" that he did not know of the judgment debt or freezing order when the villas were sold and the proceeds of the sale were dissipated. Or if he did not know, that could only have been because he had deliberately turned a blind eye, which was sufficient to hold him liable for conspiracy.
As to Mr Su, the claim against him had only failed because no other party had been found liable for conspiracy (he could not be liable on his own). Since the Court of Appeal had concluded that the claims against Mr Zabaldano and Mr Chang should have succeeded, it also held Mr Su liable for conspiracy.
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