Karafarin Bank v Mansoury-Dara

This is an application by the Defendant to stay the proceedings in this action on the grounds that there are concurrent proceedings in Iran or, in the alternative, that the proceedings be stayed pending the conclusion of the concurrent proceedings in Iran.

The claim brought against the Defendant is for sums due on 13 cheques. He is said to be liable on the cheques pursuant to the law of Iran which is the governing law.

This application to stay the English proceedings is most unusual. An earlier application to stay these proceedings on the grounds that Iran was the most appropriate forum was not pursued when it was appreciated that the decision of the European Court in Osuwu v Jackson [2005] QB 801 prevented any such application. Thereafter the Defendant submitted to the jurisdiction of this court and filed a defence. Directions were given for the trial of the action. The trial is due to commence on 6 July 2009. Thus the application which was made on 11 May was made less than two months before the trial date.

The application was heard on the penultimate day of last term and it was not possible to give judgment on the final day of term. In view of the imminence of the forthcoming trial and the work required to prepare for that trial the parties need to know the outcome of the Defendant’s application as soon as possible. I have reached the clear conclusion that the application should be dismissed and will express my view shortly.

The explanation for this application being made so late in the day is as follows.

Unknown to the Defendant the Claimant had, before commencing the English proceedings, commenced proceedings in Iran on 4 of the 13 cheques. In 2006 the Claimant presented the four cheques to the Tehran Revolutionary Public Prosecutor’s Office for the purpose of requesting the commencement of criminal and civil proceedings against the Defendant. The Defendant was convicted in his absence of a criminal offence in relation to those cheques and sentenced to two years imprisonment. Civil judgments on those cheques were also obtained against the Defendant.

When the Defendant issued an application to stay the English proceedings in this court in November 2007 on the grounds that Iran was the most appropriate forum he was unaware of the criminal convictions and civil judgments against him in Iran. Although the basis of that application was that Iran was the most appropriate forum the Claimant did not disclose the existence of the civil (or criminal) judgments in Iran.

As a result of disclosure made in these proceedings (four of the cheques bore the stamp of the Public Prosecutor) it seems that the Defendant suspected that there might have been proceedings against him in Iran. By 30 August 2008 and probably before that date the Defendant’s Iranian lawyer learnt of the Iranian convictions and judgments. The Defendant himself learnt of the judgments by 7 September 2008. (Footnote: ¹) The Claimant confirmed the existence of the criminal convictions and civil proceedings by letter dated 12 September 2008.

The Defendant soon took action in Iran to have the criminal convictions set aside. However, when a pre-trial review took place before this court in November 2008 no suggestion was made by the Defendant that an application such as that which is now made might be made. Instead, directions were given for disclosure, exchange of witness statements and expert reports, for the trial date of 2 February 2009 to be vacated and a new trial date to be fixed for not before 1 June 2009.

In December 2008 the criminal conviction is relation to one cheque was set aside.

On 16 March 2009 the Defendant requested the Claimant to undertake either to apply to the Iranian court to set aside the Iranian judgments or to withdraw the proceedings commenced in this jurisdiction. The Claimant failed to give either undertaking but by letter dated 17 April 2009 said that it was prepared to agree not to enforce the Iranian judgments without first giving the Defendant reasonable notice in writing.

On 6 May 2009 the remaining criminal convictions were set aside. The Iranian lawyer representing the Claimant has stated that the Presiding Judge asked if the Claimant had applied for writ of enforcement. He replied that they had not and “as the Presiding Judge seemed surprised, I decided to request a writ of enforcement.” He described such writ as necessary preliminary step in enforcement proceedings. The Judge granted such writ.

On 11 May 2009 the application to stay the English proceedings was made and on 12 May 2009 an appeal against the civil judgments was commenced in Iran.

I accept that this application could not have been brought before the date when the Defendant or those advising him were aware of the Iranian judgments. That was probably before 30 August 2008 but the precise date is not apparent. Although it is readily understandable that the Defendant’s priority was to seek to overturn the criminal convictions in Iran that does not explain why this court was not informed at the pre-trial review in November 2008 that an application such as is now being made was a possibility. Indeed, since the Defendant or those advising him knew of the Iranian proceedings by 30 August 2008 at the latest this application ought to have been made at the pre-trial review. In the event the Defendant delayed until 11 May 2009 before making this application. When I asked why this application was made so late I was told that the Defendant wanted to present his application in the most favourable manner and that it was right to make the application once the Defendant was in a position to commence the civil appeals in Iran. The Defendant said that this after the hearing on 6 May 2009 in Iran. I asked whether it followed that the decision to make the application so late was a tactical decision. Counsel said that he could not say whether there was a tactical decision to delay because the Defendant had instructed his current solicitors and counsel on 29 April 2009 but the matter had been mooted at the end of 2008. Legal professional privilege was not waived and so I do not therefore know what the reason for the delay was. If there was a tactical decision to delay making the application until the Defendant was in a position to commence his appeal against the civil judgments in Iran that would plainly not be an acceptable explanation. If there was no such tactical decision then there was an unexplained and therefore unacceptable delay from November 2008 until May 2009. The request for an undertaking was made on 16 March 2009 but, if an application such as that which has now been made was to be made, that request ought to have been made before the pre-trial hearing in November 2008.

The basis of this application as explained in written and oral submissions appeared to me to be threefold.

First, it was said that the Claimant was abusing the process of this court by bringing proceedings on all 13 cheques when they had already commenced proceedings and obtained judgment against the Defendant in respect of 4 cheques. In this regard reliance was placed upon Australian Commercial Research and Devlopment Ltd v ANZ McCaughran Merchant Bank Ltd. [1989] 3 All ER 65 in which Sir Nicolas Browne-Wilkinson V-C. stated (at pp.69-70) that where a plaintiff seeks to pursue the same defendant in two jurisdictions in relation to the same subject matter he is required to elect which set of proceedings he wishes to pursue. That is because the effect of such conduct is vexatious and oppressive.

Secondly, it was said that the proceedings in Iran were lis alibi pendens and that the English proceedings should be stayed pursuant to the following principle stated by Lord Diplock in The Abidin Daver [1984] 1 AC 398 at p.411:

“Where a suit about a particular subject matter between a plaintiff and a defendant is already pending in a foreign court which is a natural and appropriate forum for the resolution of the dispute between them, and the defendant in the foreign suit seeks to institute as plaintiff an action in England about the same subject matter to which the person who is plaintiff in the foreign suit is made defendant, then the additional inconvenience and expense which must result from allowing two sets of legal proceedings to be pursued concurrently in two different countries where the same facts will be in issue and the testimony of the same witnesses required, can only be justified if the would-be plaintiff can establish objectively by cogent evidence that there is some personal or judicial advantage that would be available to him only in the English action that is of such importance that it would cause injustice to him to deprive him of it. ”

Thirdly, in support of the alternative application for a stay pending the determination of the Iranian appeals, reliance was placed on s.34 of the Civil Jurisdiction and Judgments Act 1982 and case management considerations.

The Claimant said that there was no abuse, that Osuwu v Jackson prevented an application based upon lis alibi pendens and that there was no basis for a stay based upon s.34 of the Civil Jurisdiction and Judgments Act 1982 and case management considerations.

Prima facie it is an abuse of process for a claimant to pursue a defendant for the same debt or damages in two jurisdictions. That is recognised by the statement of principle of Sir Nicolas Browne-Wilksinson V-C in Australian Commercial Research and Devlopment Ltd v ANZ McCaughran Merchant Bank Ltd. S.34 of the Civil Jurisdiction and Judgments Act 1982 gives statutory force to that principle where a judgment has been obtained abroad but also recognises that further proceedings may be commenced in England if the judgment obtained abroad “is not enforceable or entitled to recognition in England and Wales”.

When the English proceedings were commenced the Iranian judgments could not be enforced in this jurisdiction (where it is thought the Defendant has assets) because the judgment in Iran was obtained in the absence of the Defendant and in circumstances where he would not have been regarded as having submitted to the jurisdiction. It was therefore necessary for the Claimant to commence fresh proceedings in this jurisdiction. Such proceedings were permitted by s.34 of the Civil Jurisdiction and Judgments Act 1982. In those circumstances I do not consider that the commencement of fresh proceedings can properly be said to have been an abuse of the process of this court. It was permitted by statute. Further, the judgment in Iran extended to only four of the cheques.

When, in April 2009, the Claimant refused to undertake to take steps to set aside the Iranian judgments the Defendant chose, having first set aside the criminal convictions in Iran, to seek to have the Iranian judgments set aside on appeal. It is impossible to say that this was unreasonable on his part. Outstanding civil judgments can have adverse consequences notwithstanding that the judgment creditor may choose not to enforce them without notice to the Defendant. Thus, as a result of the Claimant’s refusal to give the undertaking requested, the Defendant is taking steps to set aside the civil judgments against him in Iran (in respect of four cheques) whilst at the same time taking steps to defend the English proceedings (in respect of thirteen cheques, including the four which are the subject of the proceedings in Iran).

I was and have been very concerned that in those circumstances the continuation of the proceedings in this jurisdiction by the Claimant whilst refusing to take steps to have the Iranian judgments set aside is an abuse of the process of this court by the Claimant. I was very concerned that it was oppressive and vexatious for the Defendant to have to defend the proceedings in this country (in relation to all thirteen cheques) whilst at the same time taking steps to set aside the Iranian judgments (albeit in relation to only four cheques).

However, I have reached the conclusion that the continuation of the English proceedings cannot properly be regarded as an abuse of the process of this court for these reasons:

(i)

S.34 of the Civil Jurisdiction and Judgments Act 1982 provides that proceedings may be commenced in this jurisdiction notwithstanding that judgment on the same cause of action has been obtained in another jurisdiction if the foreign judgment is not enforceable or entitled to recognition in England and Wales. It is important to note that the section does not require the claimant to take steps to have the judgment in the other jurisdiction set aside. This indicates that the Claimant’s refusal to undertake to apply to have the Iranian judgments set aside is consistent with the statute and that the fact that the Defendant may therefore have to incur expense in seeking to have the Iranian judgments set aside on appeal at the same time as having to defend the English proceedings is not to be regarded as oppressive or as amounting to an abuse comparable to having to defend the same cause of action in two jurisdictions simultaneously.

(ii)

In continuing the proceedings since the pre-trial review in November 2008 the Claimant has been acting pursuant to the directions of this court in circumstances where the Claimant had confirmed the existence of the Iranian judgments on 12 September 2008 (and the Defendant or those advising him were aware of those judgments since before 31 August 2008) and no application to stay based upon those judgments had been made or even suggested as a possibility at the pre-trial review, as it ought to have been.

(iii)

Further, the Iranian judgments concern only 4 of the 13 cheques. Thus in respect of the additional 9 cheques no judgment has been obtained in Iran.

The Defendant relied upon the principle in The Abidin Daver [1984] AC 398 which I have already quoted. It was said that since it was the Claimant who had brought proceedings both in Iran and in this jurisdiction, the present case was a yet stronger case. The Claimant submitted that a stay could not be granted on these grounds, relying on Osuwu v Jackson [2005] QB 801, and said that in any event it was not an appropriate case for a stay having regard to the Defendant’s delay and to the circumstance that the ability of the Claimant to enforce an English judgment against the Defendant’s assets is a legitimate juridical advantage of which it would be unjust to deprive the Claimant.

I have reached the conclusion that the answer to the lis alibi pendens argument mirrors the answer I have given in relation to the abuse application. It may be assumed that Iran was the natural and appropriate forum for the Claimant’s claim but the ability to enforce an English judgment against assets of the Defendant in England is a legitimate juridical advantage that is only available to the Claimant in England. The Iranian judgments cannot be enforced in Iran because the Defendant has no assets there and cannot be enforced in England because they were obtained in the absence of the Defendant in circumstances where he had not submitted to the jurisdiction of the Iranian court. That legitimate advantage is of sufficient importance to the Claimant that it would cause the Claimant injustice to deprive the Claimant of it, particularly in circumstances where, since the pre-trial review in November 2008 when no application for a stay was made, the Claimant has been acting in this action pursuant to the directions of this court. Further, there is no lis alibi pendens in relation to nine of the thirteen cheques.

In view of this conclusion it is not necessary for me to consider whether the decision in Osuwu v Jackson bars an application for a stay based upon lis alibi pendens. The arguments addressed to me on that question involved consideration not only of Osuwu v Jackson itself but also of further decisions of the English courts in Konkola Copper Mines v Coromin Ltd. [2005] 2 All ER (Comm) 637 and Winnetka Trading Corp. v Julius Baer International [2008] EWHC 3146 (Ch) and of the opinions expressed in leading textbooks, The Conflict of Laws by Dicey, Morris and Collins 14^thed. at para. 12-002 and Civil Jurisdiction and Judgments by Briggs 4^thed. at para. 2.226. Consideration of that question would delay the production of this judgment which would not be appropriate in circumstances where the trial date is fixed for next month.

S.34 of the above Act together with case management considerations provide the basis of the alternative application that the English proceedings be stayed pending the determination of the appeals against the Iranian civil judgments. It is accepted that the Iranian judgments were unenforceable in England when the English proceedings were commenced. However, it is said that the Defendant voluntarily submitted to the jurisdiction of the Iranian courts when he appealed against them and that, if the appeals fail, the Iranian judgments “are likely to be enforceable and be entitled to recognition in this country.” The judgments in relation to the four cheques could then be enforced and the Claimant could ask the English court to recognise the findings of the Iranian court with regard to the remaining nine cheques. If, however, the appeals succeed then “there will be an issue estoppel in relation to the four cheques” and “the Defendant will be entitled to rely on the findings of the Iranian courts to defend the claim for the remaining nine cheques”. It is far more appropriate that the Iranian courts, rather than the English courts, decide questions of Iranian law.

However, assuming that an appeal against the Iranian judgments involves a submission to the jurisdiction such that the judgments, although initially unenforceable here, become enforceable the fatal difficulty with this application is that the only estimate before the court as to when the Iranian appeal court will reach a decision is 1-2 years. By contrast the trial in England is fixed for July 2009 and the Defendant has delayed in making this application since November 2008 when the pre-trial review was heard. In the meantime the parties have prepared for the trial. Case management considerations are therefore very strongly in favour of permitting the English trial to go ahead, rather than in staying the proceedings.

During the course of the hearing counsel for the Defendant informed me that the Defendant had offered to undertake, in return for a stay of the English proceedings, that he would not remove his assets from the jurisdiction. That offer was rejected. Assuming that such an undertaking is still on offer the question arises whether the giving of such an undertaking means that substantial justice can be done in Iran and that I should therefore reach a different decision on this application. I do not think it does. First, the Iranian appeal will take one to two years whereas the English trial will take place next month. Secondly, it is not certain that the pursuit of the appeal will have the effect that the Defendant has retrospectively submitted to the jurisdiction of the Iranian courts so that the Iranian judgments will become enforceable in this jurisdiction.

For these reasons, which I have endeavoured to express shortly in view of the impending trial, both the primary and alternative applications for a stay must be dismissed.