Tseitline v Mikhelson & Ors

On 4 October 2014 process servers acting on behalf of the claimant (“Mr Tseitline”) purported to effect personal service of these proceedings on the first defendant (“Mr Mikhelson”). They first attempted to do so as Mr Mikhelson arrived at the Whitechapel Gallery (“the Gallery”) in London, accompanied by his daughter, Victoria Mikhelson. Further attempts took place after the process servers had followed Mr Mikhelson into the Gallery.

By Application Notice dated 17 November 2014 Mr Mikhelson challenges the jurisdiction of the court. The first ground of challenge is that he has not been served with the proceedings. The second and alternative ground is that, if he has been served, England is not the appropriate forum for the determination of the claim, Mr Mikhelson contending that Russia is clearly and distinctly more appropriate. By cross-application dated 1 December 2014 Mr Tseitline seeks an order that, if the attempts at personal service of proceedings on Mr Mikhelson were ineffective, any errors be waived or rectified or the attempts be constituted good service or service otherwise be dispensed with.

On 18 December 2014 Burton J directed that the issues relating to service of the proceedings be determined prior to the forum issue. This is my judgment on the question of whether Mr Mikelson was validly served or should otherwise be deemed to have been served.

Mr Tseitline is a businessman resident in Israel. Mr Mikhelson understands him to be a national of both Russia and Israel.

Mr Mikhelson is a businessman resident in Russia and it appears to be common ground that he is a Russian national. He asserts that, apart from a few words, he does not speak or understand English. Mr Tseitline did not seriously challenge that assertion.

Mr Tseitline’s claim in the proceedings is in respect of alleged breaches of an agreement he made with Mr Mikhelson in 2007 relating to the commercial development of real estate in St Petersburg owned by a company in which Mr Tseitline held a controlling stake. The claim form was issued on 13 June 2014 and amended on 8 September 2014. It is not necessary, for the present purpose of determining issues as to service, to consider the claim in any greater detail.

Mr Mikhelson’s uncontested evidence is that he rarely travels to the UK, but was in London from 3 to 5 October 2014, having arrived on a private chartered flight from Moscow at about 4pm on Friday 3 October. The main purpose of his visit was to attend a private reception at the Gallery the following evening to mark the opening of an exhibition organised by the V-A-C foundation, of which Mr Mikhelson is the founder and president. The foundation is named after his daughter Victoria, who had arrived in London earlier on 3 October from New York, where she lives and studies Art History. Victoria Mikhelson is a fluent English speaker, having lived in London as well as New York. Mr Mikhelson spent Friday evening with his daughter, Teresa Mavica (the director of the V-A-C foundation), various acquaintances and his interpreter, Ekaterina Burgess.

On Saturday 4 October Mr Mikhelson and his daughter were chauffeur-driven to the Gallery, arriving outside at about 6.20pm. Awaiting their arrival were the two process servers, Paul Austin and Darren Harber, each in possession of an envelope, marked only with the printed name of Mr Tseitline’s solicitors. The envelope contained a sealed copy of the amended claim form (with certified Russian translation) and the response pack, together with a covering letter in English and Russian. Mr Harber also held in his hand a covert camera, the size of a key fob, with which he recorded what he could of the process which then ensued of attempting to effect personal service on Mr Mikhelson. At the invitation of the parties I have viewed Mr Harber’s video recording and considered the parties’ respective attempts to transcribe what can be heard on that recording. Mr Austin, Mr Harber and Ms Burgess have each made one witness statement and Mr Mikhelson, Victoria Mikhelson and Teresa Mavica have each made two witness statements giving their version of events.

The events which occurred outside the Gallery are relatively clear from the video recording. They can be summarised as follows:

Mr Austin and Mr Harber accompanied Mr Mikhelson and his daughter as they entered the Gallery, walking through a short passageway to the foyer. At this point the video recording became less steady as Mr Harber took out his envelope containing the documents for service. Further, given Mr Harber’s proximity to a number of other people and his own close involvement as described below, he was unable to capture all of the relevant events in the recording. However, the following is apparent:

Mr Mikhelson’s evidence is that, as he does not speak English and as nobody translated what was being said to him, at no point did he know or even suspect that ‘the ambush’ by Mr Austin and Mr Harber had anything to do with English legal proceedings, let alone that it was an attempt to serve him with legal documents. Mr Austin, on the other hand, states that there were exchanges between Mr Mikhelson and his daughter in Russian which were not picked up on the video recording and that it was plain to him, from Mr Mikhelson’s reactions, that Mr Mikhelson understood what was taking place.

On 6 October 2014 the Claimant’s solicitors wrote to Mr Mikhelson at a number of residential and business addresses in Russia (among others) stating that he had been personally served on 4 October and enclosing copies of the documents which had been in the envelopes that day. On 20 October 2014 Mr Mikhelson filed an Acknowledgment of Service indicating an intention to contest the jurisdiction of the court.

CPR 6.5 provides:

“(3)

A claim form is served personally on –

(a)

an individual by leaving it with that individual;”

The Rules provide no further guidance as to the interpretation of that provision.

In Kenneth Allison Ltd v A.E. Limehouse & Co [1992] 2 AC 105 the House of Lords considered what was meant by “leaving a document with the person to be served”, being the equivalent (and effectively identical) requirement for personal service in the former RSC (Order 65 r 2). Lord Bridge of Harwich stated, at p. 113E:

“There is abundant authority for the proposition that personal service requires that the document be handed to the person to be served or, if he will not accept it, that he be told what the document contains and the document be left with or near him.”

At p. 124C Lord Goff of Chieveley stated as follows:

“Prima facie, the process server must hand the relevant document to the person upon whom it has to be served. The only concession to practicality is that, if that person will not accept the document, the process server may tell him what the document contains and leave it with him or near him.”

Both parties accepted that the above test, recognising a distinction between where a document is accepted (the first limb) and where it was not accepted (the second limb), was equally applicable to personal service under CPR 6.5(3). However, the parties differed as to meaning, effect and consequences of the Kenneth Allison test in a number of respects, giving rise to the following issues:

In Banque Russe et Francaise v Clarke [1894] WN 203 the Court of Appeal held that:

“Handing to a defendant a writ…enclosed in an envelope, whether sealed up or not, the defendant not being informed of its contents, and having no knowledge that an action has been or is about to be commenced against him, is not good personal service.”

In Re A Debtor [1939] Ch 251 the Court of Appeal held that delivery of a bankruptcy petition in an envelope to the debtor, without any indication of the contents, was not valid personal service. Sir Wilfred Greene MR, at p. 256, stated that in such a situation:

“… what is after all the essential thing in service cannot have been complied with, the essential thing being that the documents served shall be brought to the personal knowledge of the person whose concern it is … In the case of a writ it could not be suggested, I venture to think, that mere proof of delivery of a sealed envelope containing the copy of the writ, or notice of the writ, would be sufficient service … It is no exaggeration to say that the practice in regard to writs and the requirements of the law in regard to the service of writs are, and have always been, regarded as matters strictissimi juris. In the case of the service of a bankruptcy petition, I can see nothing in the section and Rules which can fairly be construed as relaxing the strict requirements which are to be found in the case of the service of writs and other documents under the Rules of the Supreme Court. I therefore hold that Mr Blagden’s first point, namely, that mere proof of delivery of the documents in a sealed envelope without more would be sufficient, fails.”

In that case the petitioner argued that, as the envelope was addressed to the debtor and was opened, it should be inferred that the contents of the petition had come to the knowledge of the debtor. That contention was rejected by Sir Wilfred Green MR at p. 257, in robust terms:

“I find it quite impossible to draw inferences of that kind in a matter of so strict a nature as service. It would be intolerable, and would lead to the gravest injustice, if a litigant who was desirous of bringing his opponent before the Court by proper process could satisfy the requirements of the law as to service by proving facts such as those and asking the Court thereon to draw an inference as to the crucial fact having happened, the crucial fact being the coming of the document into the hand of the person to be served in such manner that the nature of it is brought to his mind …

I am not laying down any general rule as to the circumstances in which it may be possible to provide service notwithstanding delivery in a sealed envelope. For example, if the envelope were opened by the addressee in the presence of the server and the contents inspected, that would be one case.”

Mr Lord, leading counsel for Mr Tseitline, submitted that the above authorities no longer represent the law, the modern approach to service of a originating process requiring only that specified steps be taken (which, since 1979, have included sending by post) which would be reasonably likely to enable the person to be served to ascertain the contents of the document: it is, he contended, unnecessary to demonstrate that the document actually came to the intended recipient’s attention, referring to Cooper v Scott-Farnell [1969] 1 WLR 120 at p.132D per Phillimore LJ, a case concerning service of a county court claim by post. Thus, he submitted, the first limb of the Kenneth Allison test simply requires that the document to be served be handed over, so that it could be inspected, with no requirement that the recipient need understand what he had been given.

Mr Lord’s summary of the modern approach is plainly right (and is expressly implemented by the Rules) in relation to methods of service other than personal service. CPR 6.14 provides that service is deemed to have taken place two business days after completion of the relevant step specified in CPR 7.5(1), so that, for example, service by post is deemed to have taken place two days after posting and service by email is deemed effective two days after the email is sent, regardless of whether the document is actually received, let alone read, by the person to be served. In relation to personal service, however, the ‘relevant step’ under CPR 7.5 is that specified in rule 6.5(3) – leaving the document with the person to be served. The ‘deeming’ provision therefore does nothing to mitigate the pre-existing requirements of personal service in any way.

In my judgment there is nothing in the Rules nor in the authorities which supports the contention that personal service can now be effected without the nature of the document being readily apparent or known to the recipient or otherwise explained to him so that he can be taken to know its nature. Personal service remains the required method of service of judgments or orders fixing or varying time to do an act (CPR 81.6), save where it is specifically dispensed with, and is a pre-requisite of committal for contempt of such an order (CPR 81.5). That requirement is imposed precisely because it is only if such a judgment or order has been brought to the recipient’s attention that it would be appropriate to pursue committal proceedings against him for breach of the order. If, as Mr Lord contends, personal service could be effected without that being achieved, it would undermine the essential feature of personal service and the intention of those provisions which specifically require service by that means.

Thus I do not accept that the first limb of the Kenneth Allison test should be read as applying to situations where the nature of the document being handed over is not readily apparent, such as where it is contained in an unmarked envelope. There is no reason to believe that Lord Bridge and Lord Goff intended to overrule or doubt the authorities referred to above in relation to purported service of a document in an envelope: indeed, the Banque Russe decision was cited in argument in support of the very proposition endorsed by both Law Lords (seep. 110B).

It follows that the reference in the first limb of the Kenneth Allison test to a document being ‘handed to’ a recipient is to the handing over of the document itself, in a situation where its nature is immediately and readily apparent on its face. Indeed, if the document’s nature is not apparent on its face, it is difficult to see how the document could be said to have been ‘accepted’ by the recipient in any meaningful sense. If it has not been accepted, the case falls within the second limb of the test, where an explanation is required. The reason why an explanation is required under the second limb was itself explained by Hoffman LJ in Walters v Whitelock (Unreported, 19 August 1994):

“The purpose of the requirement that he be told is that he should not be able to say that he ignored the document on the grounds that it was simply junk mail or something which did not necessarily require his attention at all.”

That reasoning applies with equal force to a recipient who has been handed (and has taken) an unmarked envelope: in the absence of any explanation or other basis for knowing what it contained he might discard it as junk mail without ever appreciating its contents required his attention.

Mr Choo-Choy, leading counsel for Mr Mikhelson, submitted that if documents are left with a defendant, but are then taken away immediately afterwards whilst the defendant is walking away, that does not amount to a ‘leaving’ of the documents.

That submission is, however, difficult to reconcile with Nottingham Building Society v Peter Bennett & Co (a firm) (1997, The Times 26 February). In that case a process server had handed documents to a partner of the defendant firm but, when the partner read them and objected to their form, took them back. The Court of Appeal rejected the contention that the documents had not been ‘left with’ the partner, Waite LJ stating:

“The Oxford English dictionary gives, as the primary meaning of the transitive verb ‘to leave’:

‘To cause or let remain’ and ‘to depart without taking’

There appears to be a difference between those two nuances of meaning, in that one describes the mere process of allowing to remain, and the other introduces an element of departure without removal. It is understandable, given those alternative senses of the verb, that the judge should have found it a difficult point. Was the concept of ‘leaving’ a document introduced by the Rule to be regarded in the former sense or the latter?

Once the intended recipient (assuming him to have required knowledge of its nature) has been given a sufficient degree of possession of the document to enable him to exercise dominion over it for any period of time however brief, the document has been ‘left with him’ in the sense intended by the Rule.”

Although the Court of Appeal in the Nottingham Building Society case was considering a case under the first limb of the Kenneth Allison test, where the documents had been accepted, the reasoning is no less applicable to situations where documents have been left with or near the person to be served within the second limb of that test. Further, and in any event, it is difficult to see how the fact that the process server picks up the documents after the recipient has walked away from or otherwise abandoned them can have any effect on whether they had been left with the recipient prior to that abandonment.

Mr Lord’s original submission was that it was sufficient for the purposes of the second limb of the Kenneth Allison testto provide an explanation of the document which would be understood by an English speaker, whether or not such an explanation would in fact be understood by the person to be served; the person seeking to serve would, he submitted, have ‘told’ the recipient the nature of the document, the test being entirely objective. There is, he contended, no obligation when serving within the jurisdiction to find a process server who speaks the same foreign language as the intended recipient or otherwise arrange the presence of an interpreter: there is no case in which such a requirement has been recognised.

However, Mr Lord accepted during the course of argument that it would not be sufficient to provide an oral explanation to someone who was known to have impaired hearing: similarly, an explanation in English to someone who was known not to understand English (and had nobody to interpret) would not amount to telling them the nature of the document. Mr Lord’s resulting position was the question of whether the intended recipient was told the nature of the document must be considered from the point of view of the party effecting service, given their knowledge of the recipient. If the explanation was reasonably likely to be understood from that point of view, the recipient should be regarded as having been ‘told’ whether or not they in fact understood.

Mr Choo-Choy submitted that the second limb of Kenneth Allison requires both that the intended recipient be told what the document is and that he should have knowledge of its nature: a partly objective and partly subjective test. Thus, he contended, a sufficient explanation must be given, but it must be one which results in the intended recipient having actual knowledge of the nature of the document.

The question of what amounts to ‘telling’ in this context was considered by Hoffman LJ in Walters v Whitelock (above). In that case a process server left papers relating to a committal application with the defendant by poking the documents into his jacket, following which they fell or were thrown to the floor. Hoffman LJ, treating the case as one where the documents were not accepted but had been left with the defendant (within the second limb of the definition in Kenneth Allison case) stated:

“The question in this case is whether the process server can be said to have told the appellant what the documents contained. The evidence, as we have seen, is that he said: “I have documents for you.” It is accepted that the appellant was familiar with the process server from all the previous occasions on which he had been served, and that he must therefore have known that the documents related to this litigation in which he was involved.

With what degree of particularity does the rule require that the person served be told what the documents contain? In my judgment, one must look at this in a practical way. I think it is sufficient if it is brought to his attention that it is a legal document which requires his attention in connection with proceedings. The purpose of the requirement that he be told is that he should not be able to say that he ignored the document on the grounds that it was simply junk mail or something which did not necessarily require his attention at all. ”

In Elkateb v Elkateb [2001] FCA 1537 the Federal Court of Australia considered the meaning of O7.r2(2) of the Federal Court Rules, a provision that effectively codifies the second limb of the Kenneth Allison test, as follows:

“If a person refuses to accept service of a document, personal service may be effected on him by putting the document down in his presence and telling him the nature of it.”

Stone J rejected a contention that a process server had not sufficiently identified the nature of a bankruptcy petition for the purposes of the provision, stating:

“13.

The question then is whether the respondent was informed of the nature of the document … Although the word “nature” may be somewhat vague, it is clear that the rule is not very demanding ... Further, the person served need not be informed of the “nature” of the document orally ... Thus if the “nature” of the document is clear on its face and the document is not placed in an envelope or otherwise concealed, r 2(2) will be satisfied ...

14.

I should also note that, whichever account [of what was said by the process server] is adopted, it is likely that the respondent would have been able to deduce the nature of the document served from his past dealings with the applicant in this Court, including contested proceedings regarding the bankruptcy notice. Thus, the conversation took place in a context where there was some element of assumed knowledge between the parties. In Taylor v Marmaras [1954] VicLawRp 66; [1954] VLR 476 it was decided that, where the person served knew the nature of the document from past history in relation to a matter, service would be valid despite the fact that the nature of the document was not clearly stated by the process server.

15.

… It also seems that, had Mr Elkateb not appreciated the importance of the document or been aware of its nature, he would not have known to file a notice of intention to oppose the petition …”

In my judgment it is plain from these authorities (and from the special nature and role of personal service discussed above) that the process of leaving a document with the intended recipient must result in them acquiring knowledge that it is a legal document which requires their attention in connection with proceedings. Whilst this is expressed as requiring that the intended recipient be ‘told’ the nature of the document, the focus is on the knowledge of the recipient, not the process by which it is acquired. Whilst in most cases knowledge of the nature of the document will be found to have been imparted by a simple explanation, it is clear that it can be also readily be inferred from pre-existing knowledge, prior dealings or from conduct at the time of or after service, including conduct in evading service: see Barclays Bank of Swaziland Ltd v Hahn [1989] 1 WLR 506 at 512A.

It is common ground that it is for Mr Tseitline to demonstrate a good arguable case that service was effected on Mr Mikhelson.

Mr Choo-Choy submitted that, as Mr Mikhelson is resident and domiciled abroad, the question of service goes to jurisdiction. Therefore, he submitted, in order to demonstrate a good arguable case the claimant must establish ‘a much better argument on the material available’ than the defendant, referred to as ‘the Canada Trust gloss’ (Canada Trust v Stolzenburg (No.2) [1998] 1 WLR 547 CA at 555, approved by Lord Steyn in the House of Lords, [2002] 1 AC 1 at p.13). He accepted, however, that this was, from the outset, recognised to be a lower standard than the balance of probabilities and that the most recent decision of the Court of Appeal on the point (Aeroflot v Berezovsky [2013] 2 CLC 206 at para 50)expresses the view that the word ‘much’ should now be omitted from the test, requiring only that the claimant has the better of the argument.

However, the present case does not arise in the context of an application to serve a party out of the jurisdiction, but is a simple question of whether personal service was effected in the jurisdiction under domestic rules of service. I recognise that Langley J in Cherney v Deripaska [2007] I.L.Pr 49 appears to have regarded the Canada Trust gloss as extending to issues of personal service on a foreigner in the jurisdiction, but I can see no reason why the test for whether domestic service has been effected within the jurisdiction should differ depending on the domicile of the defendant. I am fortified in that conclusion by the observation of Longmore LJ in Kazakhstan Kagazy Plc v Arip [2014] EWCA Civ 381 at para 25 appearing to confine the Canada Trust gloss to applications for service out of the jurisdiction.

In any event, the parties were agreed that the precise formulation of the standard of proof was unlikely to be of significance in the present case, particularly given that the events in question are largely evident from the video recording, enabling me to reach relatively firm conclusions as to what took place.

By Mr Austin, outside the Gallery

Mr Lord contended that Mr Mikhelson was personally served with the claim form whilst standing by his car outside the Gallery. Two issues arise in relation to that contention. The first is whether the document was indeed ‘handed to’ Mr Mikhelson or otherwise left with him. The second is whether the document was in any event served given that it was contained in an envelope and Mr Austin’s explanation of its contents was in English. Given my conclusions as to the relevant law relating to service of a document in an unmarked envelope, it would be necessary to be satisfied that Mr Mikhelson acquired knowledge of the nature of the contents of the envelope.

As to the first issue, although Mr Austin proffered the envelope to Mr Mikhelson as they stood by the car outside the Gallery, and although Mr Mikhelson took hold of it for a few seconds before releasing his grip, Mr Austin at all times retained his own hold on the envelope and was left holding it at the end of the episode.

Mr Lord submitted that, in those circumstances, the document had been handed to Mr Mikhelson and was within his control. I do not agree. In my judgment, a process server who does not release the relevant document and retains control of the document at the end of the purported service cannot be said to have ‘left’ the document with the person to be served. The process server has not completed the process of handing the document to the person to be served (the basic requirement specified in Kenneth Allison) and the intended recipient has not been given a sufficient degree of possession of the document to enable him to exercise dominion over it for even a short period of time (as required by the test propounded in the Nottingham Building Society case). On any analysis, the term ‘leaving with’ connotes relinquishing control of the document, something Mr Austin simply did not do outside the Gallery. That is, in my view, the short and complete answer to the contention that service was effected outside the Gallery. That attempt did not amount to valid personal service.

The second issue therefore does not strictly arise for decision. However, it will be apparent from the discussion below that I am satisfied that Mr Mikhelson, despite not speaking English, acquired knowledge of the nature of the documents in the envelope when Mr Austin proffered that envelope to him whilst they were standing in the road outside the Gallery. Had Mr Austin released the envelope before Mr Mikhelson let go of it himself, it would have amounted to good personal service of the claim form.

By the time Mr Mikhelson encountered Mr Harber in the foyer of the Gallery it was plain that Mr Mikhelson was not willing to and did not accept the envelope. It is therefore necessary for Mr Tseitline to establish a good arguable case, within the second limb of the test in Kenneth Allison, that (i) the envelope was left with ornear Mr Mikhelson and (ii) he was ‘told’ what it contained, in the sense discussed above.

On the first aspect, Mr Harber’s actions, no matter which version is most accurate, clearly amounted to leaving the documents with or near Mr Mikhelson. The envelope was placed on Mr Mikhelson’s upper body and fell (or was thrown by him) to the ground by his feet, so there is no doubt that it was left near him and that Mr Harber had relinquished control of the envelope to him. An almost identical process was regarded as ‘leaving’ the document in Walters.

As indicated above, Mr Choo-Choy argued that, because Mr Harber picked up the envelope and lodged it between Victoria Mikhelson’s back and her bag whilst Mr Mikhelson was walking away, it was not left with him. For the reasons given above, in particular the reasoning in Nottingham Building Society, it matters not if documents are taken away by the process server if the recipient had sufficient control as to be able to exercise dominion over them, even for the briefest period: the documents have been left with the person being served.

The second and more controversial question is whether Mr Mikhelson was told what the documents contained. In his second statement Mr Mikhelson acknowledged that, when Mr Harber attempted to serve him, he realised that Mr Austin and Mr Harber were together and acting in concert, so Mr Austin’s actions and statements are an integral part in considering what Mr Mikhelson was told.

Mr Austin spoke directly to Mr Mikhelson on numerous occasions, in English, saying he was serving High Court papers and/or that the papers related to the High Court. It seems clear (and Mr Choo Choy did not ultimately dispute) that, if Mr Mikhelson had been an English speaker, such information would have been sufficient to entail that he had been told what the envelope contained. He would have known that the documents inside were claim papers requiring his attention in relation to High Court proceedings.

Despite Mr Mikhelson’s protestations to the contrary, and those of his companions at the Gallery, I am entirely satisfied (well beyond finding there to be a good arguable case) that the gist of what Mr Austin had been saying had been communicated to Mr Mikhelson by his English speaking companions by the time Mr Mikhelson encountered Mr Harber, so that he fully appreciated that the envelope contained claim papers relating to court proceedings. In particular:

I therefore find that Mr Mikhelson was told the nature of the document being served in the presence of persons who could be expected to and did translate what was said to him. Further, I find that he thereby acquired knowledge of its nature. He was therefore personally served with the claim form on 4 October.

In view of my conclusion above that valid personal service was effected on Mr Mikhelson inside the Gallery, Mr Tseitline’s application does not require determination. It is sufficient to state that, if I had found that Mr Tseitline had failed to effect valid personal service on Mr Mikhelson, it would not have been appropriate to have dispensed with service under CPR 6.16 (requiring exceptional circumstances) or otherwise have deemed service to have been effected under CPR 6.15 (requiring good reason). Where, as here, a defendant can only be served out of the jurisdiction in accordance with the relevant provisions of CPR Pt 6 (absent valid personal service within the jurisdiction), a claimant should not be allowed to circumvent those provisions and prevent the defendant challenging the efficacy of any service purportedly effected by that route: see Cherney v Deripaska [2007] I.L. Pr 49 per Langley J at para 53 and the cases there cited. The position is even clearer where, as here, the defendant is domiciled in a Hague Convention State: there will rarely be good reason to circumvent the agreed service process under that Convention, alternative service only being permitted in exceptional circumstances: see Cecil v Bayat [2011] 1 WLR 3086.

For the reasons set out above, I find that Mr Mikhelson was validly and effectively served with the claim form on 4 October 2014. The first ground of his challenge to the jurisdiction of the court accordingly fails.