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Cite as: [2017] EWHC 2564 (Comm)

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Neutral Citation Number: [2017] EWHC 2564 (Comm)
Neutral Citation Number: [2017] EWHC 2564 (Comm)


Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
19 October 2017

B e f o r e :


(formerly OJSC BANK OF MOSCOW and PJSC BM–BANK) Claimant
(a company incorporated in Russia) Claimant


Mr Tim Penny QC (instructed by PCB Litigation LLP) for the Claimant
The Defendants did not appear
Hearing dates: 10, 11, 12 and 19 October 2017



Crown Copyright ©

    Mr Justice Phillips :

  1. By an Application Notice dated 30 June 2017, issued in claim CL 2015-000846 ("the main proceedings"), the claimant ("the Bank") applied to commit the first defendant ("Mr Chernyakov") and his wife, the second defendant ("Ms Erokhova"), for contempt of court.
  2. On the same date the Bank issued a Part 8 Claim Form against Ms Erokhova in claim CL 2017-000415, seeking permission to apply to commit her for interfering with the administration of justice by assisting Mr Chernyakov to commit breaches of an order of the court, such breaches being certain of those specified in the Application Notice issued in the main proceedings. Permission was granted by Teare J on 7 August 2017.
  3. The applications were personally served on Mr Chernyakov and Ms Erokova (together, "the defendants") and were listed for hearing for three days commencing on 10 October 2017, preceded by a day's pre-reading. The defendants were fully engaged in the preparation for the hearing, including requesting the provision of translation for the hearing and serving their own skeleton argument in Russian (their first language) on Friday 6 October 2017, in which they stated their intention to attend the hearing and to give oral evidence.
  4. The Non-Attendance of the Defendants

  5. Neither defendant attended court on 10 October 2017 and each failed to answer phone calls or respond to voicemails, texts or emails (in English and in Russian), notwithstanding that the phone numbers and email addresses used were known to belong to them and to have been in recent use. On 11 October 2017 I issued bench warrants for them to be brought before the court.
  6. On 12 October 2017 the Tipstaff reported that the defendants were no longer at their rented property in Christchurch Road, Surbiton, which appeared empty and unoccupied. Neighbours had informed the Tipstaff that a removal van had been seen at the property about two weeks before and that the defendants had not been seen there since then. The rental agent for the property was unaware that the defendants had left. The Tipstaff indicated that, on current information, he had exhausted all avenues of enquiry as to the defendants' whereabouts.
  7. It therefore appears that, whilst pretending to be preparing for the committal hearing and requiring the Bank to go to considerable trouble and expense to cater for their attendance, the defendants were planning not to attend and were taking steps to put themselves beyond the reach of the court.
  8. In those circumstances, and having regard to the principles outlined by Roth J in JSC BTA Bank v Stepanov [2010] EWHC 794 (Ch), I determined that the defendants had unequivocally waived their right to attend the hearing of the committal applications and that it was just and appropriate to continue the hearing in their absence. The hearing duly proceeded on 12 October 2017.
  9. The consequence of the defendants not attending was that there was no evidence before the court by way of answer to the evidence filed by the Bank in support of the applications. Such answers as the defendants have given are in the form of correspondence and written submissions. In determining the applications I have considered carefully the defendants' responses, but have had to bear in mind that they are not only unsworn assertions, but are assertions which the defendants have chosen not to support at the hearing either by giving evidence or even by attending to address the court.
  10. Nevertheless, the burden of proving each allegation of contempt to the criminal standard of proof remains firmly on the Bank.
  11. The Procedural History

  12. The subject matter of the main proceedings is the enforcement of judgments of the Russian courts based on personal guarantees provided by Mr Chernyakov to the Bank to secure the indebtedness of a Russian company named NPO Kosmos, of which Mr Chernyakov was the majority shareholder and President. On 30 November 2015 the Bank issued the claim form in the main proceedings against Mr Chernyakov, seeking to enforce the Russian judgments by common law action in a sum in excess of £150 million.
  13. On 14 January 2016 the claim form was amended to add claims against Ms Erokhova and Norwind Shipping Ltd ("Norwind"), a BVI company controlled by Mr Chernyakov, those claims relating to a purported loan of €6 million by Norwind to Ms Erokhova, a loan which the Bank contends was a sham or otherwise a transaction at undervalue within the meaning of s. 423 of the Insolvency Act 1986.
  14. On 28 October 2016 the Bank obtained summary judgment against Mr Chernyakov in a rouble sum equivalent to about £190 million. The claims against Ms Erokhova and Norwind are yet to be determined, together with certain residual claims against Mr Chernyakov.
  15. The Bank has continued to take steps to enforce its judgments against Mr Chernyakov, but to date has recovered no more than about £2.5m. On 4 July 2017 Mr Chernyakov was adjudged bankrupt in this jurisdiction.
  16. The Freezing Injunctions and Disclosure Orders

  17. In the course of the main proceedings the court made the following Orders:
  18. i) On 27 November 2015, shortly before the commencement of the main proceedings, Cooke J granted a worldwide freezing injunction against Mr Chernyakov on a without notice basis, freezing his assets up to the value of £150 million and requiring him to disclose all his assets worldwide which exceed £10,000 in value within 2 working days;

    ii) On 11 December 2015 Knowles J continued the worldwide freezing injunction against Mr Chernyakov until trial;

    iii) On 17 December 2015 Knowles J made a worldwide freezing injunction against Ms Erokhova on a without notice basis, limited to the sum of £4.5m;

    iv) On 15 January Knowles J continued the freezing injunction against Ms Erokhova until trial;

    v) On 29 June 2016, following cross-examination of Mr Chernyakov as to his assets, Andrew Baker QC (as he then was) made an order requiring Mr Chernyakov to disclose various documents including:

    a) Copies of bank statements for the period 16 October 2014 until 1 October 2015 in respect of the bank accounts with number AE02040000032090050002 held at Rakbank in Dubai ("A/c 50002");
    b) Copies of statements for the credit card issued by Rakbank with number 512304xxxxxx4003 for the period from 16 October 2014 until 20 September 2016 ("A/c 4003").

    vi) On 28 October 2016, after granting summary judgment, Cranston J continued the worldwide freezing order against Mr Chernyakov until satisfaction of the judgment.

  19. The Bank has demonstrated that each of the above orders was personally served on the relevant defendant and that each was endorsed with an appropriate penal notice. The defendants, who were represented by solicitors at the relevant times, have at no time suggested otherwise. Neither has it been suggested that either of the defendants did not fully understand the terms of the orders and their requirements.
  20. I am also satisfied that all relevant requirements of CPR Part 81 and the associated Practice Direction have been met. In particular, I should record that, since the defendants' solicitors (Grosvenor Law) ceased to represent them on 17 March 2017, the Bank has on several occasions reminded the defendants that they may have an entitlement to criminal legal aid in respect of these contempt proceedings. The defendants have not obtained legal aid, but it is clear that they have had some legal assistance in drafting their written submissions responding to these applications.
  21. I directed that the entirely of the hearing be conducted in public, notwithstanding that certain of the material on which the Bank relies was personal financial information obtained from the defendants by compulsion or pursuant to search orders. In my judgment the requirement that committal applications be determined in public in this case outweighs any confidentiality the defendants might have claimed (had they been present) in the material in question.
  22. The Grounds of Committal

  23. The Bank advanced 8 Grounds for Committal against Mr Chernyakov but did not pursue Grounds 2 or 7 at the hearing. The Bank applied at the hearing to split Grounds 4 into two parts. As the defendants had good notice of that proposal and as it did not make any substantive difference to the nature of the allegations advanced, I granted permission for that amendment.
  24. The Bank advanced 4 Grounds for Committal against Ms Erokhova, the first being that she assisted Mr Chernyakov in relation to the breach alleged at Ground 3 of the application against Mr Chernyakov.
  25. I will consider each of the Grounds below in the order in which they were advanced in the Bank's skeleton argument and at the hearing by Tim Penny QC, counsel for the Bank.
  26. (i) Failure to Provide Bank Statements: Ground 4(b) against Mr Chernyakov

  27. It is not in dispute that, despite the Order of Andrew Baker QC referred to above, Mr Chernyakov has not provided the statement of account specified in that Order, namely, those for his Rakbank Savings Account (A/c 50002) and for his Rakbank Credit Card (A/c 4003) for the period to the beginning of October 2015 and the end of September 2015 respectively. The Bank alleges that Mr Chernyakov was thereby in deliberate breach of the Order and, further, that he swore a false affidavit in this regard, confirming information he had provided via his then solicitor in their letter dated 27 July 2016.
  28. Mr Chernyakov has provided two excuses for not providing the bank statements for this period. The first, set out in written submissions to the court dated 7 June 2017, is the assertion that it is likely that his credit card only became operational in August 2015 and his savings account was only opened in August or September 2015, so that there were, in fact, no documents to disclose.
  29. However, the statements for account belonging to a company named KOCMOC-D with Rakbank shows transfers to A/c 50002 in May 2015, giving the lie to Mr Chernyakov's assertion in that regard. Further, forensic analysis of Mr Chernyakov's statements shows that sums were paid into his credit card A/c 4003 from as early as 14 July 2015, demonstrating that account was in operation from at least May 2015. Indeed, sums totalling AED 660,000 were spent on that card for which Mr Chernyakov has disclosed no statement of account.
  30. The second excuse given by Mr Chernyakov is that, in order to obtain the relevant statements, he was required to send Rakbank a written mandate completed in manuscript and, further, that his associate Mr Jernakov was required to attend the branch in Dubai in person, but Mr Jernakov could not do so as he had left Dubai for the summer months. However, when Mr Chernyakov's electronic devices were searched pursuant to court order, documents found included emails from Mr Jernakov attaching bank statements which had been obtained from Rakbank. Whilst it is apparent from the emails that the statements were electronic statements, each of them attaching reference to the availability of online banking with Rakbank, the versions eventually disclosed by Mr Chernyakov's then solicitors, Grosvenor Law, did not reveal that they were electronic statements and did not include the page revealing the availability of online banking. It is entirely clear from that material that Mr Chernyakov (or Mr Jernakov on his behalf) has electronic access to his Rakbank accounts, but that that fact was intentionally hidden from the Bank, and no doubt also from Grosvenor Law. Mr Chernyakov's protestations to the contrary are plainly untrue.
  31. In the light of the above I am satisfied that the Bank has established to the criminal standard of proof that Mr Chernyakov has deliberately and intentionally disobeyed the court's order to produce statements for the relevant period and has deliberately given false evidence on affidavit in that regard, with the intention of interfering with the course of justice. I have no doubt that breach (and the associated lie) was in order to hide assets from the Bank, including those referred to in the next two grounds.
  32. (ii) Failure to Disclose the Sale Proceeds of the Superyacht: Ground 4(a) against Mr Cherynakov

  33. The Order of Knowles J dated 11 December 2015 required Mr Chernyakov, by 16 December 2015, to serve an affidavit setting out information and documents including:
  34. i) An explanation of what had become of the proceeds of sale of the super yacht known as "St David" and their current location; and

    ii) Copies of the bank statements showing where and by whom the proceeds of sale of the super yacht were paid and their current location.

  35. Mr Chernyakov purported to provide the required information in his third affidavit dated 16 December 2015. However, forensic examination revealed that Mr Chernyakov had failed to disclose that proceeds of the sale of the yacht were paid into the KOCMOC-D account in April 2015 totalling over AED 2,370,000 and that on 14 May 2015 and 17 May 2015 KOCMOC-D paid AED 1.138 million into Mr Chernyakov's Rakbank Savings A/c 50002. Further, as Mr Chernyakov did not disclose statements for account 50002 for that period (as discussed above) he did not disclose what further use was made of those proceeds.
  36. I am therefore satisfied so that I am sure that that Mr Chernyakov committed a deliberate and intentional breach of the Order of Knowles J in the respect set out above.
  37. (iii) Failure to Disclose the ICD Bond: Ground 1 against Mr Chernyakov

  38. A search of Mr Chernyakov's flat in Dubai found a brochure for an ICD Funding Ltd bond, dated April 2015, providing for a coupon at 4.625% pa paid on 21 May and 21 November each year. Mr Chernyakov's disclosed statements for A/c 50002 for November 2015 revealed a coupon payment from which the Bank was able to work out that Mr Chernyakov had acquired but had not disclosed an ICD Funding Ltd Bond with a value of US$560,000. Part of that purchase may have been funded by a loan from Rakbank, but approximately US$250,000 had been funded by some other means. The source of that funding was not apparent because of his failure to disclose his earlier bank statements for A/c 50002. One distinct possibility is that it was funded by the undisclosed proceeds of the sale of the super yacht.
  39. Mr Chernyakov has not denied that the ICD Bond is one of his assets and that it was not disclosed by him in response to the disclosure orders. He simply claims that he did not know that he was the owner of the Bond, further asserting that it must have been purchased by Mr Jernakov, or possibly even by Rakbank, without his knowledge.
  40. It is inherently incredible that Mr Chernyakov was unaware of an asset of that size, paying interest into his savings account. It is even more incredible that he would not have learnt of its existence from Mr Jernakov once the main proceedings had been commenced and he had been ordered to provide full disclosure of his assets. If Mr Chernyakov had attended and given evidence I would, of course, have had to assess the veracity of his contention in this regard. But given that his assertion remains unsupported by any evidence and one which he has refused to advance at the committal hearing, I can give it no credence whatsoever.
  41. I am accordingly satisfied that the Bank has established to the requisite criminal standard, that is, so that I am sure, that Mr Chernyakov deliberately and intentionally failed to disclose the existence of the ICD Bond and deliberately gave false evidence on affidavit when he failed to disclose its existence as one of his assets, intending in so doing to interfere with the course of justice.
  42. (iv) The Dubai Safe: Ground 3 against Mr Chernyakov and Ground 1 against Ms Erokhova

  43. Examination of text messages between Ms Erokhova and Mr Dumitru Znacovan, who was a driver and assistant to Mr Chernyakov, reveals that in early October 2016 Mr Znacovan travelled to Dubai and on 2 October 2016 visited Mr Chernyakov's flat. The texts record Mr Znacovan saying that he had to arrange to meet someone and was to give them "60" and that he was at the flat awaiting the passcode for the safe. In due course Ms Erokhova transmitted the relevant passcode.
  44. The Bank asserts that these exchanges demonstrate that Mr Chernyakov had undisclosed cash in the safe in Dubai, amounting to some AED 60,000 or US$60,000, in either case in excess of the £10,000 threshold above which Mr Chernyakov was required to disclose assets. It is further asserted that Mr Chernyakov dissipated that sum through Mr Znacovan and that Ms Erokhova assisted in that process.
  45. Mr Chernyokov and Ms Erokhova have disputed that account. Their explanation is that works were being done to their apartment in Moscow which were funded on their behalf by Ms Erokhova's mother. According to them, the reference to "60" was to 60,000 roubles (about £1,000) which Mr Znakovan already had in his possession and were to be paid to a person who had lent monies to Ms Erokhova's mother. They therefore assert that the sum in question was not taken from the safe and in any event was less than the £10,000 threshold for disclosure. Mr Penny does not assert that payment of £1,000, if that was all it was, would be a dissipation of which the Bank would complain.
  46. The Bank, however, asserts that the defendants' contention is fanciful and should be rejected. The Bank points out that it would be strange for Mr Znakovan to be arranging to meet someone to hand over approximately £1,000 worth of cash and that adverse inferences should be drawn from the defendants' delay in providing an explanation and their claim that they needed to consult with their lawyers before so doing.
  47. In my judgment it is plain from the text messages that the references to the proposed cash payment and the need for the passcode to the safe were linked, demonstrating that the cash was to be taken by Mr Znakovan from the safe. The areas of uncertainty is as to the currency of the cash in question, which was not stated in the text messages. Had the defendants attended and given evidence, I would have been able to assess the veracity of their contentions in that regard. However, in the absence of any evidence to support their contentions, and their deliberate decision not attend the hearing, I infer that their implausible account is untrue in its entirety.
  48. I am accordingly satisfied that the Bank has established to the criminal standard, so that I am sure, that (i) Mr Chernyakov deliberately and intentionally failed to disclose a substantial sum of cash in his safe in Dubai, (ii) that at least AED 60,000 was deliberately and intentionally dissipated by Mr Chernyakov, and (iii) that Ms Erokhova deliberately and intentionally assisted in those breaches of the relevant freezing orders.
  49. (v) CM Property Management Ltd: Ground 5 against Mr Chernyakov

  50. On 2 December 2015, in his initial asset disclosure, Mr Chernyakov disclosed that he was the sole legal and beneficial owner of four properties in Germany. However, when he came to serve his affidavit confirming the asset position on 4 December 2015, Mr Chernyakov disclosed, correctly, that the properties were owned by CM Property Management GmbH ("CMPM"), of which he held a 51% interest through a wholly owned company named Gelovenia Holdings Ltd ("Gelovenia"). The remaining 49% was held by Mr Oleg Metla.
  51. The Bank's allegation is that Mr Chernyakov has attempted to hide his 100% beneficial interest by referring to Mr Metla's apparent 49% interest. The Bank points to the fact that the properties were transferred to CMPM just one month after the Russian judgments and that the sale was funded by a loan of €2 million from Gelovenia, which took a mortgage over the properties accordingly. The assertion is that Mr Metla's 49% interest is a sham, designed to defraud Mr Chernyakov's creditors.
  52. The Bank further refers to a letter dated 29 June 2015 on CMPM notepaper, addressed to "To Whom It May Concern" and signed by Mr Metla. The letter is described as a reference letter and confirms that Mr Chernyakov is the beneficial owner of CM Property Management. It further states that Mr Chernyakov is financially responsible for the company.
  53. Mr Chernyakov has maintained that Mr Metla does indeed have a genuine 49% beneficial interest, asserting that interest was transferred to him because Mr Chernyakov owed him money. He further asserts that the reference letter was provided to enable Mr Chernyakov to apply for a parking permit in Hammersmith and Fulham in respect of the vehicle registered to CM Property Management. No evidence of the debt owed to Mr Metla or of the application for a parking permit have, however, been provided.
  54. Whilst there is plainly a strong case that Mr Metla's interest is a sham or is held as nominee for Mr Chernyakov, that interest arises from shareholdings which are indisputable and indeed are not challenged in these proceedings. Whilst it may well be that the Bank may ultimately be able to establish that Mr Metla is no more a nominee for Mr Chernyakov, I am not satisfied that I can reach that conclusion beyond all reasonable doubt on the hearing of these applications. In that regard, I note that Mr Chernyakov did disclose from the outset his beneficial interest in the properties and thereafter simply disclosed the corporate structure through which his interest is held. I would add that it is unclear what Mr Chernyakov would gain through lying in this situation, both because the ownership structure is apparent to the Bank and also because Mr Chernyakov's trustee in bankruptcy should be able to realise the value of the relevant properties through Gelovenia's interest as mortgagee.
  55. I therefore do not find that this ground is established to the required standard.
  56. (vi) The Tagore Promissory Note: Ground 6 against Mr Chernyakov

  57. Mr Chernyakov disclosed that he had an interest in a company named Tagore Global Ltd ("Tagore") and further disclosed that Tagore had €372,000 in its bank accounts, stating that Tagore had no other assets.
  58. The Bank challenges that assertion on the basis of its discovery of a "promissory note sale agreement" dated 11 August 2015 pursuant to which Tagore agreed to buy promissory notes to be issued by Extrale Ltd for €330,000. The promissory notes so purchased were to have a face value of €400,000 and be payable on 11 January 2019. The Bank accordingly asserts that Mr Chernyakov failed to disclose that Tagore has a further asset, namely, a promissory note €400,000.
  59. Mr Chernyakov's response is that, despite the agreement, Tagore never paid for the promissory notes and so did not receive them. He further asserts that, if Tagore had paid for the promissory notes, it would have reduced its cash balance by that sum accordingly.
  60. Whilst I can place little weight on Mr Chernyakov's assertions given that he has not supported them with any evidence, it is nevertheless the case that there is no evidence that Tagore did pay the specified sum, let alone that it received promissory notes in exchange. In those circumstances I am not satisfied to the requisite standard that Mr Chernyakov has breached the relevant disclosure provisions of the freezing injunctions in that regard.
  61. (vi) The Erokhova Promissory Note: Ground 2 against Ms Erokhova

  62. On 24 September 2015 Ms Erokhova received €6 million in her account with Hellenic Bank in Cyprus, a payment made by Norwind pursuant to the purported loan agreement challenged in these proceedings. The next day €300,000 of that sum was transferred to Extrale Ltd. That payment was pursuant to a promissory note sale agreement dated 11 September 2015 between Ms Erokhova and Extrale Ltd, whereby Ms Erokhova agreed to purchase promissory notes worth €350,000 for the sum of €300,000, payment of the promissory notes being due on 11 January 2019. The Bank asserts that Ms Erokhova failed to disclose promissory notes (or her entitlement to them) when she gave her asset disclosure pursuant to the Order of Knowles J.
  63. Ms Erokhova does not dispute that she made the payment nor that she received or was otherwise entitled to a promissory note. Her first explanation was that when she gave her disclosure, three months after she had purchased the promissory notes, that those notes had no value. However, Ms Erokhova, who was formerly a banker, must have believed that the promissory notes had significant value when they were purchased. Further, she has provided no explanation as to how and why that changed in the short period before she gave her disclosure, and certainly none supported by any evidence.
  64. Ms Erokhova, in her written submissions served on 6 October, further contended that the payment to Extrale Ltd was by way of part repayment of the purported loan from Norwind. However, that assertion makes no sense, both because it was an immediate onward transmission of part of the purported loan and because it was paid in exchange for promissory notes of greater value, at least on their face. But in any event, the breach of the disclosure requirements was in failing to disclose the promissory notes she accepts she had acquired.
  65. In the circumstances, I am satisfied so that I am sure that Mrs Erokhova's failure to disclose the promissory notes (or her entitlement to them) was a deliberate and intentional breach of the Order of Knowles J and that she is accordingly in contempt of court.
  66. (viii) The Nord Construction Transfer: Ground 8 against Mr Chernyakov

  67. Mr Chernyakov disclosed that he was the beneficial owner of Nord Construction Ltd ("Nord"), a company incorporated in the British Virgin Islands. He further disclosed an account in the name of Nord held at Societe Generale in Switzerland. On 28 December 2015, the Bank obtained an Order from the District Court at Zurich freezing that account, an Order which Mr Chernyakov never challenged.
  68. During August and September 2016, solicitors for the Bank and solicitors for Mr Chernyakov (Grosvenor Law) agreed that the Nord Construction funds could be transferred to a specified bank account in this jurisdiction to be used for living and legal expenses.
  69. However, on 12 May 2017, approximately €263,000 was transferred out of the Societe Generale account, not to the specified account in this jurisdiction but to an account in the name of Nord at Alpha Bank in Cyprus. Although the Bank had obtained a freezing injunction in Cyprus, it was one which was being challenged by Mr Chernyakov (successfully as it turned out). Cyprus is also the jurisdiction to which it appears that the defendants intend to move if and when they are able to do so.
  70. Mr Chernyakov's explanation is that he believed he did not need to tell the Bank's solicitors that the monies were being transferred to Cyprus. That assertion is incredible on its face, and would have been difficult to believe even if Mr Chernyakov had attended and given evidence to support it. In his deliberate absence, I have no difficulty in rejecting it entirely.
  71. Mr Penny has very properly drawn to my attention the question of whether the relevant Order, that of Cranston J made after granting summary judgment, applied to the assets of a separate legal entity namely, Nord. I am entirely satisfied that it did cover those assets. First, Cranston J's Order follows the terms of the standard Commercial Court freezing injunction, covering not only assets beneficially owned by the subject of the freezing order, but also assets directly or indirectly controlled by that person: see JSC BTA Bank v Ablyazov (No 10) [2015] 1 WLR 4754 SC, as further explained in Gee on Commercial Injunctions 6th Ed. pp 664-665 and by Snowden J in Yossifoff v Donnerstein [2015] EWHC 3357 (Ch). Secondly, paragraph 5 of the Order of Cranston J made express reference to the freezing of assets set out in Schedule C to the Order of Knowles J of 11 December 2015. That Schedule expressly included Mr Chernyakov's 100% beneficial interest in Nord and the funds then in that company's account with SocGen in Switzerland.
  72. In the light of the above, I am satisfied so that I am sure that Mr Chernyakov deliberately and intentionally breached the Cranston J Order in transferring the relevant funds to Cyprus or otherwise permitting them to be transferred.
  73. (ix) The Harrods Credit: Grounds 3 & 4 against Ms Erokhova

  74. On 24 September 2015 Harrods Ltd, operator of the well known department store, issued a "pro forma" invoice to Ms Erokhova in respect of a number of items of luxury furniture and other goods, giving a total (slightly in excess of the correct figure) of £501,129. On 5 October 2015 precisely that sum was transferred from Tagore to Harrods, the Tagore bank statement stating that it was a "Payment on behalf of customer Mrs Erokhova Anastasia". Ms Erokhova states that the transfer was a gift from Mr Chernyakov.
  75. Thereafter Ms Erokhova steadily drew down against that sum standing to her credit with Harrods, buying many luxury items (but not the same as those specified in the pro forma invoice) and also items of clothing and other day-to-day purchases.
  76. As at 17 December 2015, the date of the without notice freezing order granted by Knowles J against Ms Erokhova, just over £212,000 remained of that credit. Ms Erokhova did not refer to that credit in her disclosure required by the freezing order, nor did she refer to it in her affidavit verifying that such disclosure. Ms Erokhova continued thereafter to draw down upon that credit, spending all £212,000.
  77. Ground 3 of the Committal Application against Ms Erokhova relates to her failure to disclose the credit. Ms Erokhova's answer is that the sums paid to Harrods were "spent" when so paid, with the result that there was no asset for Ms Erokhova to disclose. However, the documents give the lie to that assertion. It is entirely clear that no goods had been purchased at the date of the transfer and that the pro forma invoice was simply by way of indication of what sum was required to be transferred in order to fund the subsequent purchase of the goods there listed or, no doubt, similar goods of similar value. In the event Ms Erokhova drew down upon the credit at Harrods as and when she wished, just as would be the case with any other form of credit balance with a bank or other financial institution. The suggestion that that Ms Erokhova, a former banker, believed that the sum held at Harrods did not constitute an asset, is incredible on its face. As Ms Erkhova has not attempted to support that assertion with evidence, I have no hesitation in rejecting it entirely.
  78. I am accordingly satisfied so that I am sure that Ms Erokhova deliberately and intentionally breached the disclosure provisions in the Order of Knowles J and deliberately gave false evidence about her assets on affidavit with the intention of interfering with the course of justice.
  79. The Bank further alleges that Ms Erokhova's expenditure at Harrods breached the freezing orders against her, both because of the amounts spent exceeded the amounts she was allowed to spend on living expenses and because, at least until 29 February 2016, she was in breach of the obligation to state the source of such expenditure.
  80. There is no doubt that, as Ms Erokhova did not disclose assets greater than the limit of the freezing injunctions granted against her by Knowles J, she was not entitled to spend sums other than those permitted by way of living expenses from a specified source and by way of legal expenses. It follows that her expenditure at Harrods was in contravention of those injunctions. As she has provided no explanation for such breach, other than the one which I have rejected above, I am satisfied so that I am sure that she deliberately and intentionally breached the freezing injunctions against her, at least until 29 February 2016.
  81. Conclusion on liability

  82. In summary, I am satisfied so that I am sure that Grounds 1, 3, 4a, 4b and 8 of the Committal Application against Mr Chernyakov have been established and that he stands to be committed for contempt of court in respect of those breaches of the relevant court orders. I am not satisfied that Grounds 5 and 6 have been established to the requisite standard.
  83. As regards Ms Erokhova, I am satisfied so that I am sure that each of Grounds 1 to 4 of the Committal Application against her have been established so that she stands to be committed for contempt in respect of those breaches of the orders against her.
  84. I accept Mr Penny's contention that the conduct I have found proved against the defendants demonstrates that they have engaged in course of dishonest and deliberate obstruction, designed to hide from the Bank the true extent of their assets and their location. That conduct appears to have continued right up to this hearing, the defendants having led the Bank and Court to believe they would attend when plainly they had no intention of so doing but instead made arrangements to go into hiding, and, perhaps, to flee the jurisdiction in further breach of orders against them.
  85. I will hear from Mr Penny (and the defendants, should they be apprehended or otherwise voluntarily attend) as to the appropriate procedures to deal with the sentencing exercise which must follow.
  86. [After handing down the above Judgment on liability on 19 October 2017 and hearing further submissions]

    Sanctions for contempt

  87. Having found the defendants to be in contempt of court as set out the judgment handed down today (above), and having heard further from Mr Penny for the Bank, it is my duty to set out the sentences to be imposed on the defendants in that regard. As the defendants continue to ignore all communications in relation to these proceedings and show no intention of participating further, there is no point in adopting the usual course of adjourning the question of sanctions: such an adjournment would serve no purpose and would waste more costs and court time.
  88. The relevant principles which guide the approach of the court in this type of case were summarised by the Court of Appeal in JSC BTA Bank v Solodchenko (No.2) [2011] EWCA Civ 1241 as follows:
  89. 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 two years, in order to encourage future co-operation by the contemnor.

  90. In the case of Mr Chernyakov, it is plain that he has dishonestly and with persistent intent failed and refused to disclose key documents required to enable the Bank to trace and enforce against assets which should be available to satisfy the judgments the Bank has obtained from courts in Russia and in this jurisdiction. His conduct has thwarted those efforts and continues to do so. Such conduct is aggravated by his conduct in relation to these committal proceedings as set out in my judgment on liability above. The appropriate course is to impose the maximum sentence of two years' imprisonment, and I do so.
  91. I indicate that I regard one year of that sentence as being in respect of Mr Chernyakov's historic contempt of court which he cannot now remedy. The further one year is imposed in order to encourage his future co-operation with the orders in respect of which he remains in continuing breach. If he were to comply hereafter, he would be entitled to apply for a reduction of his sentence, and I indicate, without binding the court in any way, that he is likely to obtain the suspension of the sentence to the extent of approximately 12 months.
  92. In the case of Miss Erokhova, her breaches have also been deliberate and designed to thwart the Bank's recovery efforts and the proper administration of justice. However, in her case the breaches were less egregious. I also take into account that Miss Erokhova has a very small child (about 10 months old). Nevertheless, I consider that a custodial sentence is necessary to mark the importance the court places on compliance with orders of this type. I sentence her to four months' imprisonment. I should make it plain that it is open to Ms Erokhova to apply to the court to seek to purge her contempt by apologising and making such restitution as she is able and, if she does so, further consideration will be given to her sentence and, in particular, as to whether it should be suspended.

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