Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
THE HON MR JUSTICE HILDYARD
Between :
(1) BANK ST PETERSBURG (2) ALEXANDER SAVELYEV | Applicants/ Claimants |
- and - | |
(1) VITALY ARKHANGELSKY (2) JULIA ARKHANGELSKAYA | Respondents/ Defendants |
MR JUSTIN HIGGO (instructed by Baker & McKenzie LLP) appeared on behalf of the CLAIMANTS
The DEFENDANTS appeared by their McKenzie friend, MR PAVEL STROILOV
Judgment
Approved Supplemental Judgment
The Hon. Mr Justice Hildyard :
The purpose of this Supplemental Judgment is to address three issues that arose after I had formally handed down judgment (“my main Judgment”) in this matter on 14 November 2013.
Supplemental issue (1): Claimants’ application for permission to appeal
The first issue relates to my decision to exercise my jurisdiction under section 2(2) of the FLPA (as defined in my main Judgment) and thus allow the Defendants to bring a counterclaim in these proceedings.
The issue arises further to the citation to me, after giving my judgment, of two authorities in which the application of that section was specifically considered. One of them was in the Court of Appeal; neither of them had been cited at the main hearings, or indeed at any time until after I had delivered judgment.
The two authorities are (1) Harley & Others v Smith & Anor [2010] EWCA Civ 78 and (2) Naraji v Shelbourne & Others [2010] EWHC 3298 (Comm).
Counsel for the Claimants (Mr Higgo) sought to deploy these authorities, which had not been mentioned in the Skeleton Argument he had submitted earlier (and which I allowed Mr Stroilov some time to consider in consequence), in support of an application for permission to appeal my decision under section 2(2) of the FLPA.
Although Mr Higgo disavowed any suggestion that I had misunderstood the correct test, he submitted (with conspicuous moderation in the face of a somewhat tetchy reaction from me) that I had not properly applied it.
In particular, he submitted that I had not properly or sufficiently addressed my mind to whether there was a sufficient causal link between the limitation period of three years and the undue hardship relied upon.
Put shortly, he submitted that the true cause of the Defendants’ problems was not the limitation period prescribed by Russian law, but their failure over the course of three years properly to serve a Claim Form or make a counterclaim. The predicament might be regarded as regrettable; but it was not the consequence of the limitation period prescribed.
Mr Higgo emphasised especially the fact (as it is) that the Defendants had issued proceedings in both the BVI and Cyprus, and indeed in the Commercial Court in this jurisdiction, and that their failure to ground jurisdiction in good time was not the product of incapacity but distraction or alternatively their own choices.
Mr Higgo also suggested, more specifically, that the factors identified by me in paragraph 110 of my main Judgment did not properly address the true issue; and that paragraph 110(3), in which I depicted the Claimants as having played hardball, was misplaced in that all they were doing in refusing to accept service (it was contended) was to preserve a limitation defence (which should not be held against them).
Mr Higgo accepted that the point about the required causal link between the limitation period and the alleged hardship had not been brought out in previous argument, which had proceeded without the benefit of the illumination provided by the two cases to which I have referred.
As it was, the cases referred to in argument, and especially Frances Jones v Trollope Colls Cementation Overseas Limited [1990] WL 754869 (C/A), appeared to endorse the approach of Lord Denning MR (albeit not in the context of the FLPA) in Liberian Shipping Corporation v A. King and Sons Limited [1967] 1 Lloyds Rep 302, which I quoted in my main Judgment at paragraph 108.
Especially given (a) the fact that the authorities now relied upon had never been cited, (b) those authorities did need to be considered, and (c) if an appeal was required that might occasion dislocation to an already tight time-table (notwithstanding the postponement from January to May of the trial), it occurred to me that the circumstances were such that I should consider exercising my reserve jurisdiction to supplement or even review my judgment, as confirmed in a series of cases in the Court of Appeal, including In re Barrell Enterprises [1973] 1 WLR 19, Robinson v Bird [2003] EWCA Civ 1820 and (most recently) Space Airconditioning PLC v Guy & Anor [2012] EWCA Civ 1664 and in the Supreme Court in In re L (Children) (SC (E)) [2013] 1 WLR 634.
Accordingly, with as fresh a mind as possible, I have sought to re-address the question.
I have, not without some hesitation, concluded that I should confirm the view I previously expressed, but add certain further reasoning to address more specifically the authorities and submissions lately made.
I start with the authorities. Mr Higgo presented these as requiring a causal connection between the foreign limitation period concerned and the failure to bring proceedings in time. I find it easier to consider the question as being (as Popplewell J took it to be in Naraji v Shelbourne, see paragraph 176) whether the time period prescribed by the limitation provision is such that its application would deprive the claimant of his claim in circumstances where he did not have a reasonable opportunity to pursue it if acting with reasonable diligence and with knowledge of its potential application.
Reasonable diligence in the context needs to be measured against, amongst other things:
(a) any unusual difficulties of effecting the steps necessary to bring the claim;
(b) the reasonableness of any expectation of the claimant (though subsequently falsified) that a particular means of bringing the claim within the period will be effective;
(c) any efforts in fact made, albeit without success, to bring the claim, and the reasons for their failure; and
(d) any special factors which have made it unusually difficult for the claimant to bring the proceedings within the time prescribed by the foreign limitation law.
On the other hand, it seems to me established that the Court will not accept as justifying the disapplication of a foreign limitation law:
(a) hardship caused, not by lack of time, but by a factor unconnected with the specific period prescribed, such as wrong advice as to the application of the period (see Harley v Smith at paragraph 53), although I note that in Hellenic Steel Co v Svolamar Shipping Co [1990] 1 Lloyd’s Rep 541, a Greek limitation law was disapplied on the ground that “it would…constitute a real and undue hardship if the plaintiffs were to be denied the opportunity of pursuing their claim by an incident of foreign law by which the parties did not realise that their contract was governed”;
(b) the mere fact that the period specified by the foreign limitation law is less generous than the period allowed under English law (ibid at paragraph 55); or
(c) hardship that, however regrettable, is no greater in the particular circumstances than would normally be the case (ibid).
I consider that the factors I have identified in paragraph 110 of my main Judgment, as elaborated below, justify my conclusion that the application of the Russian limitation period would cause undue hardship in the particular circumstances of this case:
the inherent likelihood of difficulties, delays and expense of effecting service in Russia of proceedings calling into question the integrity of the processes of the Russian legal authorities;
the impecuniosity of the Defendants, in consequence of those Russian proceedings brought and their exile;
the reasonableness of their expectation, in my judgment, that there would be no objection in point of service to them being able to bring claims now comprised in their counterclaim, since although (as HHJ Mackie QC held) no agreement was eventually made as to service, the purpose of the Exclusive Jurisdiction Agreement was to enable all matters substantively in issue to be tried out in the English Courts;
the limited time available in which to effect service (if that was required to interrupt the Russian limitation period) after the Exclusive Jurisdiction Agreement;
the efforts made, albeit late and after an extension granted by Christopher Clarke J, to serve the Claim Form within the period of its validity;
what I still regard overall as a “hardball” approach of the Claimants in refusing to accept service without any sufficient explanation as to the reasons for that refusal, nor any indication that if brought by way of counterclaim in the existing Chancery proceedings they would not oppose that;
the time lapsed between February 2013 and the Defendants’ application to pursue a counterclaim is largely referable to my own reluctance to deal with the question of a counterclaim until after the Commercial Court had determined whether to permit the proceedings to continue in that court without requiring service of the Claim Form; and
overall, the disproportionality and unfairness and undue hardship in denying the Defendants the opportunity to bring claims of which the Claimants have long been aware, accept are the obverse of the declaratory relief that the Claimants seek, and which it was agreed should be litigated substantively in this jurisdiction.
I confirm that I have taken into account in reaching this conclusion:
the fact that the Defendants did serve proceedings in BVI and Cyprus (which I regard as two-edged given that BVI declined jurisdiction and the proceedings in Cyprus were against different parties, and were withdrawn before the availability of that jurisdiction was determined);
the fact that the Defendants were aware, at all material times and in particular in and after making the Exclusive Jurisdiction Agreement, of the time bar applicable under Russian law of limitations (and they issued a Claim Form in the Commercial Court with expedition accordingly);
the fact that in the BVI proceedings the Defendants had legal representation (Withers and Conyers Dill), as they did in this jurisdiction between May 2012 and January 2013 (Mr Paul Diamond of Counsel, acting on direct access instructions);
the Defendants’ delay in taking steps to serve the Claim Form they had issued, the paucity of any justification for it, and their stubbornness in adhering to the course of separate proceedings in the Commercial Court, rather than seeking to bring a counterclaim in the existing proceedings in the Chancery division;
the Claimants’ contention that they were fully entitled to refuse service of proceedings in light of the delays and the fact that (a) the Russian time period had expired by the time service was sought to be effected and (b) a counterclaim in the existing proceedings rather than a claim in another Division was apposite;
the fact that the Commercial Court declined to waive service of the Claim Form despite arguments not dissimilar to those I have adumbrated above;
all the circumstances described or referred to in the evidence and witness statements provided to me; and
the exceptional nature of the jurisdiction to disapply a foreign time bar, and the concomitant requirement to exercise it sparingly.
In all the circumstances, and having revisited the arguments and evidence put before me both before and after my main Judgment, I confirm my decision to permit the Defendants to bring a counterclaim subject to the exceptions set out in my main Judgment.
Lastly under this heading, and by way of postscript, I should record that I permitted further argument, in light of this Supplemental Judgment, as to whether permission to appeal this aspect of the matter should be given. I decided to refuse permission, and leave the question to the Court of Appeal if the Claimants are to pursue it. Albeit that I had reached my conclusion with some hesitation, I consider my decision to be an exercise of my discretion, there being no issue as to my jurisdiction; and it seems to me also that the Court of Appeal will be better placed to deal with the two matters potentially before it (the appeal from this order, if brought, and the appeal for which Lewison LJ has already given permission in relation to service of the Commercial Court claim). Obviously, it may be necessary to revisit the trial time-table according to the progress of those appeals.
Supplemental issue (2): Defendants’ application for permission to appeal
The second issue is whether I should give the Defendants permission to appeal (a) my refusal, for the reasons I have sought to give in my main Judgment, to grant relief to prevent the Claimants seeking to enforce their Russian judgments whilst the proceedings here are pending and they have the benefit of a freezing order, and (b) my characterisation of the conduct of the Defendants in paragraphs 147 to 150 of my main Judgment.
As to (a) and the issue of parallel enforcement of the Russian Judgments, Mr Stroilov clarified orally that he did not so much wish to challenge my refusal to grant an anti-suit injunction as to re-invite me or the Court of Appeal to require the Claimants to cease any further steps to enforce the Russian Judgments during the pendency of these proceedings and the freezing order.
I accept (and regret) that although I identified this alternative suggested route to the Defendants’ desired result in paragraph 43 of my main Judgment, I did not consider it separately from my discussion whether to grant an anti-suit injunction.
Mr Stroilov perfectly properly, and with his usual politeness, urged that the reasons I had given in paragraph 79 of my main Judgment for refusing an anti-suit injunction (put shortly, the exorbitant nature and effect if granted) would not apply to a variation of the freezing order and more particularly the cross-undertakings given to support it.
The main problems, as I see it, are:
the only jurisdictions in which (so far as I am aware) the Claimants are pursuing enforcement proceedings are Bulgaria, France and Russia;
as stated in paragraph 81 of my main Judgment, Bulgaria and France were expressly and deliberately excepted from the usual cross-undertakings given as the price of the grant of the freezing orders since they were already on foot and being contested by the Defendants (including in the court of appeal in Bulgaria);
it would be a big step to seek to impede by requiring a cross-undertaking to prevent the enforcement of Russian Judgments in the Russian Federation itself;
my conclusions as regards the Exclusive Jurisdiction Agreement as set out in my main Judgment seem to me to tell quite strongly against my stepping in to (in effect) extend protection which was available to be agreed but was not; and
the reality and substance of requiring cross-undertakings now would be to achieve by the back door that which I declined, in my discretion, to order by the front door of an injunction.
I should perhaps add that I did consider carefully this other possible route: but I did not then and do not now consider it would be right to adopt it.
That being a discretionary matter, I do not consider I should give permission to appeal this issue.
As to (b) in paragraph 23 above, the second issue for which permission to appeal is sought relates to the factors I took into account, especially in relation to the conduct of the parties, in assessing whether or not to adjourn the trial.
In the event, I decided to do so: and that is what the Defendants wanted, although they pressed for a delay until October 2014 (whereas I considered that it should be possible to achieve a start date in May 2014). As to my decision to adjourn, they do not, therefore, seek to appeal the result; and I do not think there is any basis for an appeal against reasons alone. Mr Stroilov indicated that the Defendants wished to appeal against my decision to adjourn until May rather than October. But that is a matter of trial management and discretion, and my conclusion that the parties should be able to be ready by then was not based upon their past conduct, but on my assessment as to what it is reasonable to expect of them. I do not consider there to be any basis for permitting an appeal of my decision in this regard.
I appreciate that the Defendants may be concerned lest the paragraphs of which they seek to complain may be deployed against them at trial. Without in any way detracting from or seeking to soften my repeated warnings to them to focus now on trial preparation and to abide by the revised directions given, I would add this comfort: as the Trial Judge I should be well placed to separate out interlocutory observations from final findings.
Supplemental issue (3): Costs
The third and last issue I need to address is the difficult question as to the proper orders for the costs of the four applications dealt with in my main Judgment.
I consider that these should be dealt with individually, rather than in the round, and as follows:
(1) Fortification
The Defendants' application for fortification of the cross-undertaking in damages in the freezing order was dismissed. The Claimants applied for their costs of the application to be reserved to the Trial Judge with no payment on account on the basis that costs should follow the event. The Defendants conceded that they should bear the costs. The Defendants must pay the costs in any event, such costs to be subject of detailed assessment if not agreed.
(2) Anti-suit Injunction
The Defendants' application for a worldwide anti-suit injunction was dismissed. The Claimants applied for their costs of the application to be reserved to the Trial Judge with no payment on account, on the basis that costs should follow the event. The Defendants conceded that they had failed but Mr Stroilov submitted that the Court should reflect its concerns about the Claimant’s conduct in harrying the Defendants in other jurisdictions by not awarding them costs or directing costs to be in the case. Mr Stroilov submitted additionally that what he called a “neutral” order was appropriate in relation to the Defendants’ alternative application for a cross-undertaking to be given to prevent enforcement proceedings elsewhere as the price of continuing the freezing order.
I have concluded that costs should follow the event: the Defendants must pay the costs in any event, such costs to be subject of detailed assessment, if not agreed. I would not have made any order for a payment on account in this regard either: but the Claimants conceded that anyway.
Adjournment of trial date
The Defendants' application for an adjournment of the trial date succeeded, although the Court adjourned the trial until May 2014 rather than October 2014. The Defendants do not seek their costs on the basis that the application did not fully succeed and the fact that the Defendants cannot be said not to have been responsible for some of the delays. The Claimants submit that the application was appropriately resisted and that the adjournment represented a significant indulgence to the Defendants: they seek an order that the Defendants pay their costs.
In my view, it had become obvious that a fair trial could not take place in January 2014. I had intimated as much previously. I do not criticise the Claimants for placing the decision in the hands of the Court, since the adjournment of a trial affects other litigants and is not a matter purely for the parties to agree themselves. However, I consider that the Claimants’ opposition was disproportionate and overdone.
I need to balance against that, however, the latitude granted to the Defendants by the Court, and the fact that the Defendants were seeking to be relieved from directions and a trial date which with more focus earlier on might have been achieved. It would not be appropriate to make any form of order in favour of the Defendants.
I think the fairest balance is to make no order as to costs.
(4) Permission to introduce a counterclaim
The Defendants' application for permission to introduce a counterclaim succeeded in substantial part, including on the issue of most difficulty and importance as to whether the claim was time-barred. However, the Court struck out part of the counterclaim and required the Claimants to re- particularise their counterclaim.
The Defendants applied for their costs of the application on the basis that their application had succeeded. The Claimants resisted this application on the basis that the standard order in applications for permission to amend was for the applicant to pay the costs of and caused by the amendment (i.e. the costs both of the application and any consequential amendments to the pleadings).
I consider that all the parties envisaged that all substantive issues should be tried out between them; and it was conceded by the Claimants (not surprisingly in view of the form of their own proceedings for declaratory relief) that the Defendants' counterclaim was “the other side of the coin”.
I consider that the fairest order is to reserve these costs to the Trial Judge, who will be in a better position to assess whether the effort has been worth the resources expended.