Barnette v United States of America

This is an appeal from a judgment of Stanley Burnton J of 12 June 2002. Stanley Burnton J ordered the registration of an external confiscation order (“the confiscation order”) made on 15 November 1995 by Chief District Judge Moore in the United States District Court for the Middle District of Florida, Jacksonville Division. The appeal is a further stage in the litigation between the Government of the United States of America (“the Government”) and Kathleen Conway Montgomery and her former husband, Mr Larry Barnette, which has been continuing over 19 years initially in the United States and now in this country.

The issue on appeal is whether Stanley Burnton J as a matter of law, was entitled to register the confiscation order under section 97 of the Criminal Justice Act 1988 (“the 1988 Act”). The order related to the sum of US$ 7,876,207.60.

Section 97 of the 1988 Act provides:

The USA is a “designated country”. It is not disputed that the order is in force and not subject to appeal. In addition it is not contended before us that Mrs Montgomery did not have due notice of the proceedings. What is in dispute is whether it would be contrary to the interests of justice to register the order. Stanley Burnton J decided it would not be contrary to the interests of justice to register the order even though he accepted that the order would have been made in breach of the requirements of article 6 of the ECHR if article 6 had applied to the making of that order (which of course it did not as it was made in the USA). The Judge also came to the conclusion that the proceedings in the United States should be classified as criminal for the purposes of article 6. He decided that article 6.3, and in particular paragraph 6.3(c), would have been contravened by the proceedings in the USA if they had taken place in a country that was a party to the ECHR.

Article 6.1 provides that a litigant, in the determination of his civil rights and obligations or of any criminal charge against him is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Article 6.3(c) provides that:

For the purpose of the present appeal I can set out the facts shortly since Stanley Burnton J sensibly quotes in his judgment the passages in the speech of Lord Hoffman in Government of United States of America v Montgomery [2001] 1 WLR 196 which describe in detail the nature of the Government’s case and the history of the American litigation.

In summary, Mr Barnette, who is an American citizen, controlled two companies which carried out laundry contracts on behalf of the Government in Germany. He is alleged to have defrauded the Government of some $15 million in relation to those contracts. Part of the proceeds of the fraud were passed to a Panamanian company which he controlled called Old Dominion SA (“ODSA”). Shortly before Mr Barnette was indicted for fraud he transferred 800 of the 900 shares which he held in ODSA to Mrs Montgomery. In due course Mr Barnette was convicted of a number of offences of fraud and related offences, including offences under the Racketeer Influenced and Corrupt Organisations Act. On 15 October 1984, under a power contained in that Act, he was ordered to forfeit his interests in the shares. This order related back to 3 August 1982, prior to the date on which he transferred shares to Mrs Montgomery, his then wife, and to his children. He was also ordered to pay US$7,000,000 to the Government by way of restitution. Those orders were to be set off against each other so that Mr Barnette’s liability would be limited to US$7,000,000 or the value of the shares, whichever was the greater.

On 10 January 1985 Mr Barnette paid US$7,000,000 into court in satisfaction of a forfeiture order. Whether he would be under any further liability depended on the value of the ODSA shares. He did not comply with an order to provide information or subsequent orders for discovery as to the value of the shares.

Mrs Montgomery left Mr Barnette in 1983 and then took up citizenship in the Caribbean and residence in England. On 15 December 1992 the US Court made an order for discovery against Mrs Montgomery who was out of the jurisdiction and did not comply.

I now cannot do better than to refer to Lord Hoffman’s speech in the House of Lords where he stated:

However, Mr Barnette and Mrs Montgomery appealed to the US Courts of Appeal from the order of the District Court. On 20 November 1997, the appeals of both Mrs Montgomery and Mr Barnette were dismissed.

In the course of the hearing of the appeal, at the Court’s request the parties to the appeal submitted supplemental briefs as to whether, given the fugitive status of Mr Barnette and Mrs Montgomery, the court should even entertain the appeal. The Court having considered the briefs, decided under the fugitive disentitlement doctrine (“the doctrine”) to dismiss the appeal.

In explaining the rationale for the doctrine, the US Courts of Appeal said:

The Courts of Appeal came to the following conclusions about the conduct of Mrs Montgomery:

The fact that the US Courts of Appeal dismissed the appeal on the basis of the doctrine meant that it was not necessary for the Court in the body of its judgment to deal with the merits of Mrs Montgomery’s appeal. However, it did provide footnotes dealing with certain of her contentions. First of all it indicated that it did not accept that this was a situation where she was being held responsible in an in persona judgment against her husband. The Court said that: “the basis for the District Court’s holding her in contempt, . . . , was not the conviction of her husband, but instead her refusal to comply with clear orders from the court regarding property she claimed to own that was the subject of the forfeiture judgment. Non-parties that actively aid and abet a party in violating a court order may be held in contempt of court”.

The Courts of Appeal also concluded that the confiscation order was a civil and not a criminal contempt order. Pointing out that a criminal contempt order results in a sentence for a definite time without possibility of modification while a civil order only lasts so long as is necessary “until compliance”.

The Courts of Appeal also concluded that the District Court had personal jurisdiction over Mrs Montgomery because she had aided and abetted Mr Barnette, “every step of the way – in hiding funds and financial information subject to the forfeitured judgment of which she had notice, to the discovery requests of which she had notice, and to the Show Cause Order of which she had notice”. The Court’s final footnote refers to the fact that the Courts of Appeal appreciated that means exist for the enforcement by foreign governments but pointed out those are proceedings over which the US courts have no control.

In his very attractive argument before this Court, Mr Lewis focussed primarily on two submissions. They are:

If the ECHR had applied in the United States, the confiscation order would have been made in contravention of article 6 and article 1 of Protocol 1 in the ECHR.

This being the case, our courts, if they register the order, would be contravening section 6 of the Human Rights Act 1998 (the “1998 Act”).

It is by no means obvious as to why section 6 should have any role to play in relation to the jurisdiction of this Court under section 97 of the 1988 Act. The Court in exercising its jurisdiction in relation to section 97 is acting in aid of the enforcement of the orders of the courts of designated countries and territories. How is it suggested that the courts of this jurisdiction could be contravening section 6 by exercising their jurisdiction under section 97? Section 6 of the 1998 Act provides so far as relevant:

If a court in this jurisdiction properly applies section 97, because of the matters of which it has to be satisfied before doing so under section 97 (1)(a), (b) and (c), the court should not in practice decide to enforce an order where it is, in particular, contrary to article 6 to do so. This is because article 6 is concerned with ensuring a fair trial and if a person against whom an order is sought has not had a fair trial then it is to be expected a court will decide that it would not be in the interests of justice to enforce the order. The same point can be made as to the other provision of the Convention relied on by Mrs Montgomery, namely article 1 of the First Protocol which provides;

In view of the terms of article 1 of the First Protocol again it appears that if the Court applies section 97 there will be no question of registering an order when it is not in the public interest or not in accordance with the conditions provided for by law to do so. As to international law there is no suggestion in this case that any general principle is being infringed.

Turning to section 6 of the 1998 Act it is important to recognise that the court that is referred to in section 6 is a court in this jurisdiction. Because of the terms of section 97 (1)(c) and its requirement that enforcement shall not be contrary to the interests of jurisdiction, it is difficult to understand how a court here could contravene section 6. However, Mr Lewis argues to the contrary. He submits the act of registration will directly expose a claimant to enforcement of an order which was made in breach of article 6 and in direct violation of article 1 of Protocol 1 assuming the orders of the US court are subjected to the standards of justice required by article 6 and article 1 of Protocol 1.

His support for this submission is the decision of the European Court in Soering v United Kingdom [1989] 11 EHHR 439. In Soering the issue before the European Court was whether the United Kingdom Secretary of State’s decision to extradite the applicant could give rise to a breach of article 3 of the ECHR because of the conditions to which prisoners who are detained pending execution are subjected on death row in the United States. The decision of the ECtHR that it did constitute a breach of article 3 is explained by the fact that the extradition of an individual in these circumstances would result in a violation of article 3. A violation of article 3 was the foreseeable consequence of the UK court enforcing the Secretary of State’s decision that the applicant shall be extradited to the US. This was the position notwithstanding that the foreseeable consequences would be suffered outside the jurisdiction of the country ordering extradition and the US is not subject to the Convention.

The approach of the ECtHR is reflected in the following paragraphs of their judgment:

The Soering case is dealing with a very different situation from that which we have to consider on this appeal. In Soering the action of the court in this jurisdiction would be the direct cause of the breach of the prohibition in article 3 which is one of the most fundamental provisions of the ECHR. Here it cannot be said even if the conduct of the District Court and the Courts of Appeal in the United States has been inconsistent with the standards of conduct required by article 6 or article 1 of the First Protocol, that the decision to register under the 1988 Act gives rise to any breach of article 6 of the Convention. This is for the simple reason that any conduct which could be a breach of the Convention in the United States had already taken place prior to the English proceedings. In any event, the reference in paragraph 119 of the judgment in Soering to a future flagrant breach of article 6 was no more than a dicta which should not be applied to the enforcement of a court order of a non-Contracting state. Furthermore, if there was any breach by the United States courts of article 6 (which I do not accept) that breach was certainly not flagrant.

There are difficulties in seeking to judge the procedures of a court in a jurisdiction to which the Convention does not apply by applying article 6. The complaint which is made is in relation to the doctrine. A court outside the United States is ill qualified to assess how important the doctrine is to upholding the integrity of orders of the District Court and the United States Courts of Appeal. At one time, the courts in this jurisdiction adopted a very similar approach to that of the United States courts where there had been a significant contempt on the part of a party to litigation. An example is Hadkinson v Hadkinson [1952] P288.

It is not without interest that in that case Denning LJ did not rule out applying the equivalent of the doctrine in the appropriate circumstances. Denning LJ said:

The approach of the courts in this jurisdiction today would be different from that which it was in 1952. However, this fact does not mean that the decision in Hadkinson is not of any relevance. Hadkinson does indicate that public policy considerations can justify the approach adopted in the United States. Mr Lewis also referred to the very recent decision of this court in the case of Maronier v Larmer [2002] EWCA Civ 774 decided on 29 May 2002. That was a case which was also concerned with the registration of a judgment. That case, however, involved the application of article 27(1) of the 1968 Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial matters (the Brussels Convention) and involved a judgment of another signatory state to the ECHR, Holland. Under article 27 of the Brussels Convention a judgment was not to be recognised if “such recognition is contrary to public policy in the State in which recognition is sought”. The facts as Lord Phillips, the Master of the Rolls, pointed out in his judgment were surprising in that the procedure of a Rotterdam court in the Netherlands permitted Mr Maronier to reactivate an action that had been stayed for 12 years without requiring fresh service of an appropriate process on the other party (see paragraph 36). The Court came to the conclusion that it would be contrary to public policy to register that judgment because there was a denial of a fair trial. The Court in coming to that conclusion informed their decision with the requirements of article 6. Their decision to come to this conclusion is wholly understandable and no doubt a court would come to the same conclusion if there was an attempt to register a judgment under the 1988 Act obtained in such circumstances. It would not be in the interests of justice to do so. However, such a conclusion could be reached without relying upon article 6 and section 6 of 1998 Act, it would follow from the language of section 97 (1)(c).

In relation to the different issue as to whether it was in the interests of justice to register the confiscation order, I do not suggest that the jurisprudence under article 6 is necessarily irrelevant. It may throw light on what is to be regarded as in the interests of justice. However, in the majority of cases I suggest it will be unnecessary to refer in detail to the ECHR jurisprudence. In most cases, whether or not it is in the interests of justice to register, will be answered by examining the facts of what occurred in the foreign jurisdiction in which the judgment which is intended to be registered was given. The desirability of not becoming too closely engaged with the jurisprudence relating to article 6 is emphasised by the fact that that jurisprudence can be technical. For example, the requirements of article 6 differ depending on whether the proceedings involve “the determination of a criminal charge”. Whether a criminal charge is involved is itself a technical issue.

Stanley Burnton J came to the conclusion that the forfeiture proceedings in United States were criminal in nature. I would not dissent from this conclusion. However, he did not specifically consider whether the proceedings involved “the determination of a criminal charge”. Whether they did is a debateable issue on the outcome of which I prefer not to speculate. It is highly artificial to evaluate what the US courts regard as being civil proceedings by directly applying the approach to article 6 which would be adopted in a Convention country. (This is made particularly significant because the categorisation of the proceedings by domestic law is a significant consideration in determining whether the proceedings are appropriately regarded as civil or criminal for the purposes of article 6.)

Mr Lewis was anxious to invoke section 6 of the 1998 Act because of the decision of the Privy Council in HM Advocate and Another v R [2003] 2 WLR 317. That case was not concerned with section 6 but with section 57(2) of the Scotland Act 1998, which is in different but similar language to section 6. By a majority of 3 to 2, the Privy Council came to the conclusion that where there had been an infringement of article 6(1) because of unreasonable delay in prosecuting proceedings, the Lord Advocate was without jurisdiction to continue to pursue a prosecution since to do so would be incompatible with the Convention. The decision in that case was different to the decision reached in this jurisdiction on the different language of section 6 in Attorney General’s Reference (No. 2 of 2001) [2001] 1 WLR 1869. The latter case is on appeal to the House of Lords but unless the appeal is allowed, the effect of section 6 and section 57(2) of the Scotland Act 1998 will be different. So for the time being at any rate, the decision in HM Advocate and Another v R is of no assistance to Mr Lewis. However, the fact that we do not know what will be the outcome of the appeal in the Attorney General’s Reference case is of limited significance because as I have indicated already the outcome of this appeal can be determined by applying the language of section 97(1)(c).

Mr Lewis contends that in answering this question it is necessary to look both at what occurred before the District Court and before the Courts of Appeal in the United States. I accept that submission. However, looking at the situation as a whole, I agree entirely with Stanley Burnton J’s view that it is in the interests of justice to register the confiscation order. There is no dispute that the confiscation order which was made was an order falling within section 97. In addition the order was no longer subject to appeal. As to receipt of notice of the proceedings, that is again not in dispute. The only issue that remains is whether it would be the contrary to the interests of justice to enforce the order since, as was accepted before Stanley Burnton J, where the court has a discretion as to whether to do so, the normal course is for our courts to register an external confiscation order that satisfies the conditions of section 97. This is for reasons of comity and because the order is by definition aimed at recovering money or other property obtained as a result of or in connection with crime. It is usually in the interests of justice that the courts in different jurisdictions should assist each other in the fight against crime.

It is important to note that whereas before Stanley Burnton J, Mrs Montgomery had taken a number of different points, Stanley Burnton J confined his permission to appeal to the issue arising from the application of the doctrine by the US Courts of Appeal. My conclusion is that the application of the doctrine here does not make it unjust to register the confiscation order. This is particularly the case here because although the Courts of Appeal applied the doctrine for the reasons it gave, it did in fact determine the majority of the arguments relied upon by Mrs Montgomery. It determined the issue as to whether the District Court had personal jurisdiction over her. The Courts of Appeal also held that the basis of her liability was as an ‘aider and abetter’. I agree with the view of Stanley Burton J that while the decision of the Courts of Appeal did not address all the issues raised on behalf of Mrs Montgomery, what was decided by the Courts of Appeal went a long way to justifying the making of the confiscation order.

I also agree with Stanley Burnton J that what is or what is not to be regarded as being in the interests of justice has to be determined according to English law. English law is sufficiently flexible to make an appropriate allowance for the different approaches to achieving justice adopted in different jurisdictions. Here an analogy can be drawn with the approach of the European Court of Human Rights to the differing procedures of contracting states. That Court extends a margin of appreciation to different member states. In a similar way, the courts here should adopt when assessing the practice and procedure of foreign jurisdictions, a broad non-technical approach. Mr Lewis relied upon the decision of Laddie J in Waite v Waite & Others (No. 005776 of 31 July 1998). At paragraph 20 of his judgment Laddie J said:

I recognise the force of Laddie J’s comments however, care has to be exercised when seeking to apply them to the decision of courts either in this jurisdiction or in a foreign jurisdiction. Where a party is guilty of contempt there may be no other sanction available if he is outside the jurisdiction of the court. The reason for the doctrine being applied by the US Courts of Appeal in Mrs Montgomery’s case was not to vindicate the dignity of the court, but because the court thought it was the only available sanction which could achieve obedience to the order of the court. As Sir Nicholas Browne Wilkinson VC explained in the case of re Joki T Holdings Limited [1992] 1 WLR 1196:

In our courts, if a party flagrantly disobeys an order of the court, the court can dismiss his claim or give judgment for the other party or stay the proceedings. Here Mrs Montgomery was not deprived of being represented. The merits of her contentions had been fully considered at first instance. On appeal some of her contentions had been considered. She was, on the findings of the first instance court, undoubtedly assisting her former husband to place beyond the reaches of the court, the profits of his fraudulent conduct.

There will be many situations where there will be alternatives open to a court which make it unnecessary to adopt the approach of the US Courts of Appeal. In such cases it may be unjust to register the order. The answer depends on the facts. Here in the circumstances of this case, judged against the background of the standards of justice required by article 6, Stanley Burnton J was right to register the order.

I would dismiss the appeal.

I agree

I also agree