Varsani v Relfo Ltd (In Liquidation)

This is an appeal by the defendant, Bhimji Jadva Velji Varsani, from an order dated 18 September 2009 of Mr Jules Sher QC, sitting as a deputy High Court Judge, by which he dismissed the Appellant’s application dated 23 February 2009 (“the Application”) for the following relief:

“Orders Pursuant to CPR Part 11 as follows (i) declaring that this Court has no jurisdiction to try this Claim, alternatively (ii) that this Court should not exercise any jurisdiction which it may have; and (iii) orders setting aside the Claim Form and setting aside service thereof; or, alternatively (iv) an order staying these proceedings.”

The notice of Application set out the grounds for the application as follows:

“The grounds on which the Defendant applies for the orders above are that the English Courts are not the proper forum for trying the subject matter of the Claim, res judicata, lis alibi pendens, estoppel and the other grounds set out in the witness statement of the Defendant dated the 23^rd day of February 2009 and served/filed in support of this application …”

On the hearing of the Application one of the arguments advanced on behalf of the Appellant was that the premises at which the claim form was served, 9 Gainsborough Gardens, Edgware, Middlesex HA8 5BT (“the Edgware House”), was not the Appellant’s “usual or last known residence” within CPR 6.9 and so the proceedings had not been properly served. The deputy Judge rejected that argument. This appeal is restricted to whether he was right to do so. The Appellant claims that the proceedings can only properly be served on him in Kenya, where he works and lives for most of the year, and so permission to serve out of the jurisdiction must first be obtained by the claimant, Relfo Limited (“Relfo”), for that purpose.

CPR 6.9 is set out in the Appendix to this judgment.

The following summary is largely taken from the deputy Judge’s full and careful judgment.

Relfo is in voluntary liquidation. In June 2001 it sold a property for approximately £4 million, giving rise to an estimated tax liability of about £1.26 million. About £3.5 million was distributed to shareholders by way of dividend net of tax. The tax remained unpaid, and on 26 April 2004 Her Majesty’s Revenue and Customs (“HMRC”) issued to Relfo a “Notice Warning of Legal Proceedings”, stating that the company owed HMRC some £1.4 million, and requiring payment by 3 May 2004. On 4 May 2004 £500,000 was transferred out of Relfo to the credit of an account of a company registered in the British Virgin Islands. On 5 May 2004 $878,479.35, equivalent to 98.7% of £500,000, was remitted by that company to the Appellant’s bank account with the Singapore branch of Citibank. On 23 July 2004 Relfo was placed into voluntary liquidation. The majority creditor was HMRC.

Relfo sued the Appellant in Singapore, alleging that the £500,000 had been paid by its director, Devji Ramji Gorecia, in breach of fiduciary duty and that the Appellant was liable to account for the sum paid to his Citibank account on the basis of knowing receipt or, alternatively, dishonestly assisting Mr Gorecia's breach of fiduciary duty. In addition, there was a proprietary claim to that sum.

The proceedings came to trial before Mrs Justice Judith Prakash in the High Court of Singapore between 18 and 22 February 2008. She held that Mr Gorecia had acted in breach of fiduciary duty in paying away the £500,000, and that there was sufficient evidence that the sum received by the Appellant into his Citibank account represented the traceable proceeds of Relfo's money which Mr Gorecia paid away. She found further that the Appellant knew that the money received by him was traceable to Mr Gorecia's breach of trust and that it would be unconscionable for him to retain it. She held, however, that the claim in Singapore amounted to an indirect enforcement of the revenue laws of the United Kingdom and, for that reason, the claim had to be dismissed. On 12 January 2009 the Singapore Court of Appeal dismissed Relfo’s appeal.

Relfo then commenced proceedings in England for the same relief. The claim form was issued on 26 January 2009. Relfo, wishing to take advantage of CPR 6.9(2), did not serve the claim form personally but left it with the Appellant’s father at the Edgware House. The Appellant learned of the existence of the documents two days later.

The Appellant has a business in Nairobi, which is known as the Patel Concrete Company, and which he conducts with his brother. The Appellant is a British citizen. Being a foreigner in Kenya, he is required to obtain an entry permit under class H, which is issued to non-Kenyan citizens carrying on various types of business activity in Kenya, and which is issued for a two year period. An Aliens Certificate, again issued for a two year period, is also required. The Appellant’s residential address in Nairobi is Mpaka Road off the main 3^rd Parklands Road. There is no evidence, and so the deputy Judge made no findings, as to what that property comprises or under what title or legal right it is held or occupied by the Appellant.

The Appellant and his wife are registered at HM Land Registry as joint legal proprietors of the Edgware House. It was transferred to him in 2005 when, according to evidence given by the Appellant in Singapore, his wife and children (who are not British citizens) “settled” in the United Kingdom. He and his wife have three children, who were aged 9, 19 and 20 at the time of the deputy Judge’s judgment. They all live in the Edgware House, together with the Appellant’s father, mother and disabled sister. There is no estrangement between the Appellant and his wife. He visits and stays with his wife and family in the Edgware House every year when and to the extent that his work permits. He stayed there for 27 days in 2002, 49 in 2003, 43 in 2005, 38 in 2006, 53 in 2007 and 31 in 2008.

The Appellant has other assets in the jurisdiction. He is the joint owner of a freehold property in Crawley known as Crabbet Park Equitation Centre, of which he has a one third beneficial interest. He says that interest belongs to him and his wife in equal shares. The property is worth £1,200,000, and is let as an equestrian centre.

As I have said, the Appellant is a British citizen and holds a full British passport. This came about, according to the deputy Judge, in the following way. The Appellant’s last passport showed him as a British Overseas Citizen. It was issued in 2002, and did not expire until 2012. His current passport, showing him as a full British citizen, was issued on 24 November 2003. Section 12 of the Nationality, Immigration and Asylum Act 2002 gave British Overseas Citizens the right to apply for registration as British citizens from 30 April 2003. The deputy Judge drew the inference that the Appellant made a positive decision to convert his passport as soon as he was able to do so.

In the Singapore proceedings the Appellant affirmed in various affidavits that the Edgware House was his residence, or at least one of them, and described it as his “home”. In his 1^st affidavit dated 5 September 2007 he first gave as his address the Edgware House, and then added “also residing at”his address in Nairobi. In Paragraph 2 of that affidavit he stated he resided both in Kenya and the United Kingdom. In Paragraph 85 he stated that he is a British citizen and has property in the United Kingdom and that the liquidator could easily have sued him in the United Kingdom. In his 3^rd affidavit dated 15 October 2007 he again first gave as his address the Edgware House, and then added “also residing at”an address his Nairobi address. In Paragraph 35(c) of that affidavit he said:

“[The liquidator of Relfo] is in the United Kingdom and I have a home in the United Kingdom free from encumbrance. Why should he take me on in Singapore which is so far from home for both parties and incurs so much cost; he can always continue this fight in the United Kingdom, home ground to both parties, where I have more assets.”

For the sake of completeness, I should say that the above facts present a very different picture from the Appellant’s witness statement of 23 February 2009 in support of the Application. In paragraph 3 of that witness statement the Appellant says that he is domiciled in the Republic of Kenya; he is an habitual and permanent resident of Nairobi; and he is not a domiciliary of the United Kingdom. In paragraph 4 he says that he has lived all his life in Kenya, and only travels to the United Kingdom for a holiday once a year, staying for a period not exceeding one month. In paragraph 5 he says that it is his father who lives in the Edgware House. That, in essence, was the factual basis upon which the Appellant asserted that he had no residence in the United Kingdom. It was only in the course of the proceedings, including evidence given for the purposes of an application for a freezing order in respect of the Appellant’s assets, that the more detailed picture emerged by the time of the hearing before the deputy Judge.

The legal test applied by the deputy Judge was whether Relfo was able to satisfy the Court that there is a “good arguable case” that the Edgware House was the Appellant’s “usual or last known residence” when the proceedings were served in January 2009. The deputy Judge explained the application of that test in paragraph [20] of his judgment in the following way:

“That is a lower test than proof “on a balance of probabilities” but, because the issue is determined, effectively finally, at the interlocutory stage, a “good arguable case” requires the claimant to establish that it has a much better argument on the available material than the defendant: Canada Trust Co v Stolzenburg (No. 2) [1998] 1 WLR 547,555 (CA), approved at [2002] 1 AC 13 (HL); Bols Distilleries BV v Superior Yacht Services Ltd [2007] 1 WLR 12 at 22 (PC).”

The deputy Judge first addressed the Appellant’s contention that he did not reside in England at all, and that the Edgware House was the residence of his wife and children but not of the Appellant. The Judge rejected that contention, He found that the “quality” of the Appellant’s use of the Edgware House was as a home: it was where his immediate and wider family lived; where he returned each year from 2005 when his wife and children settled in the United Kingdom; and was the place described by the Appellant as his home in the Singapore proceedings. It was common ground before the deputy Judge that, on the ordinary meaning of “reside”, one can reside in more than one place at the same time. He did not doubt that the Appellant resided in Kenya, but that did not detract from the possibility that he resided in England as well; and, in view of the quality of his occupation of the Edgware House as his home, the deputy Judge found that he did.

The Judge distinguished Cherney v Deripaska [2007] EWHC 965 (Comm), [2007] 2 All ER (Comm) 785, and OJSC Oil Company Yugraneft (in liquidation) v Abramovich [2008] EWHC 2613 (Comm). In each of those cases it was held that the defendant, who was an exceptionally wealthy businessman with houses in several countries and whose primary business interests were not in the United Kingdom, was not resident in the United Kingdom for the purposes of Council Regulation (EC) No 44/2201) on jurisdiction and the Civil Jurisdiction and Judgments Order 2001 SI 2001/3929 even though he had a substantial house in London, and stayed there from time to time during the year on business trips. By contrast with the Edgware House, they were not homes where the defendant’s family lived.

Turning to the issue of whether the Edgware House was not merely the Appellant’s residence but his “usual” residence, the deputy Judge considered that it was and that there was a danger of over analysis. His reasoning in paragraph [33] of hi judgment was as follows:

““Usual” is an ordinary English word. It is not a term of art. It means, in its ordinary signification, that which is in ordinary use. There is a notion of regularity about it but not necessarily of comparative intensity of use. Contrasted with the word “principal” in the very same CPR 6.9(2), it would at least be wrong to read any such comparative element into it. It may not add very much to the simple word “residence”, although it does serve to emphasise the element of regularity and continuity of occupation of the property concerned. In my view, on the evidence before me, the claimant has a much better case in establishing that [the Edgware House”] is a usual residence of the defendant than the latter has of establishing the contrary.”

The deputy Judge then turned to the alternative contention of Relfo that, even if the Edgware House was not the Appellant’s “usual residence”, it was his “last known residence” for the purposes of CPR 6.9. The Appellant’s riposte was that a “last known residence” cannot be a place where the defendant is currently residing. The deputy Judge rejected the Appellant’s submission. He said that, had he held that one can only have one usual residence and that the Appellant’s usual residence was in Kenya, he would have held that the Edgware House was one of his residences last known to Relfo despite the fact that he was still resident there. He explained in paragraph [34] of his judgment:

“Although the paradigm case for the operation of the rule is a residence where the defendant was resident once but is resident no more, there is nothing in it which restricts its operation to such circumstances.”

The deputy Judge’s description of the persuasive burden on Relfo in paragraph [20] of his judgment has not been challenged on this appeal.

On the question whether the Edgware House was the Appellant’s “usual residence” for the purpose of CPR 6.9, Mr Isaac Jacob, who appeared for the Appellant on the appeal, concentrated his oral submissions on the meaning of “usual” rather than on seeking to persuade us that the deputy Judge was not entitled to conclude the Appellant did not reside at all at the Edgware Road at the date of service. He submitted that an important policy consideration underlying the proper interpretation of the provisions of CPR 6.9 is the need of a person served with proceedings to be able to respond timeously to the claim. In that context he referred to the provisions of CPR Part 10, which entitle a claimant to obtain judgment if an acknowledgement of service is not filed within the specified period. He said that, in the light of that policy consideration, “usual” must denote something which is current, and that the contrast is between “usual” and “occasional”. Where the defendant has more than one residence, that requires, he submitted, a test of comparative use. He did not entirely exclude, for such a test, some qualitative element, that is to say having some regard to the nature of the use that the defendant makes of the premises, including what arrangements the defendant has made or might be expected to make for documents, including something like a claim form, to be forwarded to him or her if not physically present at the time. He rejected, however, any significance in the presence of a defendant’s wife and family on the ground that what is relevant is the presence and residence of the defendant.

Primarily, however, the comparative test which Mr Jacob submitted should be applied, and which he said the deputy Judge wrongly failed to apply, is one based on frequency and duration of residence. He accepted that, on such a test, it is possible that a defendant may not only have more than one residence, but may have more than one “usual” residence. He gave the example of a defendant who spends three days each week at one residence and the remaining four days at another residence. He contrasted such a situation with the facts of the present case where the Appellant spends only 4 to 8 weeks each year at the Edgware House, but not at the same time each year, and the rest of the year in Kenya or elsewhere. He said that, on those facts, it is plain that the Edgware House was the Appellant’s occasional address, and his Nairobi address was his usual residence. He submitted that the deputy Judge’s approach gives little, if any, weight to the word “usual” over and above mere “residence”. It fails to make any distinction between usual and intermittent use, such as holiday use, which, he said, is the use which the Appellant makes of the Edgware House.

Mr Jacob criticised the deputy Judge for relying on the contrast between “usual” residence, on the one hand, and “principal” place of business and “principal” office, on the other hand, in the table in CPR 6.9(2). He submitted that those expressions are “ejusdem generis”, in that they are being used “in the same sense”. He accepted that there could be more that one “usual” residence, whereas there could only be one “principal” place of business, but he emphasised that in both cases a comparative exercise is required. He submitted that, by contrast, the deputy Judge had given no weight to the word “current” in CPR 6.9(3).

Mr Jacob also submitted that the deputy Judge was wrong to place any reliance on the descriptions of the Edgware House as the Appellant’s residence and his “home” in his affidavits in the Singapore proceedings. He submitted that it is for the court to determine what is a “usual” residence, and that, in any event, the expression is not concerned with concepts of domesticity. Finally, on the issue of “usual residence”, he submitted that the deputy Judge was wrong to dismiss the relevance of Deripaska and Abramovich since the facts of those cases and of the present case are, so far as concerns the present issue, materially the same.

As to the provisions in CPR 6.9 relating to “last known residence”, Mr Jacob submitted that it is implicit in those provisions that only a last known usual residence could qualify as such a residence. He said that was equally true of the expressions “current residence” mentioned in CPR 6.9 (3) and “last known address” in CPR 6.9 (6).

Whether a defendant’s use of a property characterises it as his or her “residence”, that is to say the defendant can fairly be described as residing there, is a question of fact and degree. In the present case, the Edgware House is owned by the Appellant and his wife, and is the place where his wife, children, mother, father and sister permanently live. It is the place which the Appellant has affirmed in court proceedings is not only his “residence” but his “home”. While such affirmation is not conclusive, it is plainly highly material. The Appellant visits that home every year to see his family, staying for not inconsiderable periods of time, as and when his work in Kenya permits him to do so. It is, in an obvious and very real sense, his “family home.” Taking those facts together, it seems to me quite impossible to contend that the Appellant does not reside at the Edgware House at all. The Appellant himself did not contend to the contrary in his witness statement in support of the Application. To be fair to Mr Jacob, the contrary was barely pressed by him.

The deputy Judge was also entitled, and indeed correct, to conclude that the Edgware House was the Appellant’s “usual” residence for the purposes of CPR 6.9. As I have said, Mr Jacob conceded that it is possible to have more than one “usual” residence. That is also borne out by the distinction between “usual residence” and “principal” place of business and “principal” office in CPR 6.9 which, contrary to Mr Jacob’s submission, I consider the deputy Judge was right to take into account.

I do not accept Mr Jacob’s submission that, in determining whether a residence is a “usual” residence within CPR 6.9, the test to be applied is essentially one of merely comparing the duration of periods of occupation, taking little account of the nature or “quality” of use of the premises, and ignoring altogether that the premises are occupied permanently by the defendant’s family and that the premises can fairly be described as the family home. Mr Jacob’s suggested approach is too narrow and artificial. I agree with Mr Peter Shaw, counsel for Relfo, that the critical test is the defendant’s pattern of life. In Levene v Commissioners of Inland Revenue [1928] AC 217 the House of Lords considered whether the taxpayer was “ordinarily resident” for the purposes of income tax. Viscount Cave LC said at page 225:

“The suggestion that in order to determine whether a man ordinarily resides in this country you must count the days in which he spends here and those which he spends elsewhere, and that it is only if any year the former are more numerous than the latter that he can be held to be ordinarily resident here, appears to me to be without substance”.

Lord Warrington said at page 232:

“A member of this House may well be said to be ordinarily resident in London during the Parliamentary session and in the country during the recess. If it has any definite meaning I should say it means according to the way in which a man’s life is usually ordered”.

The settled pattern of the Appellant’s life is to visit the Edgware House, as his family home, regularly each year, albeit not at the same time each year, for reasonably extensive periods of time in order to see and stay with his family. It is in marked contrast to the facts in Deripaska and Abramovich which, like the deputy Judge, I consider of no assistance and not remotely like the present case. Mr Deripaska, for example, was spending something like 20 to 30 nights a year in his London house at the relevant time, but the majority of his visits were for single nights and involved a constant flow of business meetings. He had houses in several countries including three in France. He had significant business interests in England but they formed a minimal part of his total interests, which were largely Russian. His family did not live in the London house, although they also visited it sporadically. He was in the house at the same time as his wife for only 5 nights in 2005 and 7 in 2006.

In Mr Abramovich’s case, his visits to London were almost exclusively related to his ownership of the Chelsea Football Club, in respect of which he had no executive function, and attendance at football matches. Although in the past his wife began to live in England during the school term time to be with the children who were being educated here, and he flew in and out of England to visit them, by the relevant time in late 2007, when the proceedings were issued and served, he had divorced his wife, he did not visit her and chiefly saw his children outside term time in Russia or on holidays outside England. The judge concluded that the centre of his relationship with his children was not in England.

Those were cases in which the court found that the defendant was not resident in England at all for the purposes of jurisdiction, and so the question of “usual” residence never arose as a serious issue for determination. The marked difference between the settled pattern of the Appellant’s life in the present case in relation to his use and occupation of the Edgware House, and the facts of those cases, provides a good illustration of cases which fall plainly on different sides of the line of what is and is not a “usual” residence.

For those short reasons, I consider that the deputy Judge was both entitled and right to conclude that the claim form was properly served on the Appellant at the Edgware House. Accordingly, I would dismiss this appeal.

This makes it unnecessary to consider the alternative ground on which the deputy Judge dismissed the challenge to service, namely that the proceedings were properly served at the Edgware House as the “last known residence” of the Appellant within CPR 6.9. We heard wide ranging submissions from both counsel on those provisions. They have highlighted a number of difficulties and obscurities in the wording of CPR 6.9. Mr Shaw pointed out, for example, that the table in CPR 6.9 does not expressly indicate that service at the “last known residence” is only permissible if the defendant is no longer residing or known or believed to be residing at the residence. The provisions do not deal expressly with the situation, such as the present, where the claimant has actual or constructive knowledge that the defendant is residing at two different premises, but there is a doubt or issue as to which of them is the “usual” residence. Nor is there anything in CPR 6.9 (3) to (6) to indicate whether or not the defendant’s current residence or current address or last known address, mentioned in those provisions, must be believed to be the defendant’s current or last known usual address or usual residence. Nor was either counsel able to explain the presence of the words “the defendant’s usual address” in CPR 6.9 (6). In short, where the defendant continues to reside at premises which are not the defendant’s usual residence, there is doubt as to when, and, if so, how the provisions of CPR 6.9 (3) to (6) are engaged and operate. I do not consider it is appropriate to try to resolve those doubts on this appeal where it is not necessary for the resolution of the appeal to do so. They are, however, matters which it would be desirable for the CPR Committee to consider.

For completeness I should also mention two further submissions of Mr Shaw in opposing the appeal. He submitted that the deputy Judge ought to have dismissed the Application out of hand because it was not a stated ground of the Application that the claim form had not been served at the Appellant’s usual or last known residence within CPR 6.9. That point was apparently contained in written submissions to the deputy Judge but not advanced before him in oral submissions. Mr Shaw rightly placed the submission at the very end of his oral address to us, and even then with a perceptible lack of enthusiasm. The submission has no merit. It seems to me that the Application and the evidence in support are sufficiently wide fairly to embrace the challenge under CPR 6.9. Further, that challenge was argued fully before the deputy Judge and dealt with carefully and in detail in his judgment. No oral submission was made to him that he should not entertain argument on the point, which is presumably why it is not addressed at all in his judgment. Finally, and in any event, no cross-notice of appeal or respondent’s notice has been served.

Mr Shaw also submitted that the Appellant’s affirmations in the Singapore proceedings that he resided at the Edgware House gave rise to an estoppel. I am very doubtful that is correct: but, in any event, this does not address the question of the Appellant’s “usual” residence, and the argument itself has not been the subject of any respondent’s notice.

For those reasons I would dismiss this appeal.