Yukos Finance BV & Ors v Lynch & Ors

This is an application by the First Defendant, Mr. Stephen Lynch, to set aside (i) an order dated 24 May 2016 by which Phillips J. extended the time for service of the Amended Claim Form on Mr. Lynch out of the jurisdiction until 22 May 2017 and (ii) an order dated 24 March 2017 by which Andrew Baker J. granted the Claimants retrospective permission to serve the Amended Claim Form out of the jurisdiction in Lebanon by means other than those provided for under CPR 6 and declared that service on Mr. Lynch on 1 January 2017 was good service. Mr. Lynch sought an order that the Amended Claim Form had not been validly served on him and a declaration that the English court had no jurisdiction to try the claim brought by the Claimants against him.

Mr. Lynch represented himself on this application. He provided the court with a skeleton argument of some 15 pages and then addressed the court with the assistance of a “speaking note” of some 48 pages. He made his points with clarity and firmness. He had earlier provided the court with a witness statement dated 16 May 2017.

It is unnecessary to say much about the underlying claim. The claim concerns the sale by auction of assets of Yukos Oil. It is said that Mr. Lynch and others acted unlawfully with regard to that auction and are liable to compensate the Claimants. Mr. Lynch accepts that he participated in the auction but has not addressed the claim against him because his application is not concerned with the merits of the claim but with the question of service.

On this application Mr. Lynch submitted that the order extending time for service out of the jurisdiction should be set aside on the grounds of (i) delay in service in Russia and (ii) failure to disclose failed attempts to serve a subpoena in Florida. With regard to the order retrospectively declaring that steps taken in Beirut Airport to serve him with these proceedings were good service he said that that order should be set aside on the grounds (i) that those steps were contrary to the law of Lebanon, (ii) that there was no good reason for the order and (iii) that the steps taken were not such as to bring the nature of the documents served on him to his attention. I shall consider each of these objections.

Mr. Lynch submitted that the order dated 24 May 2016 by Phillips J. ought not to have been made because there had been delay of up to 8 months in seeking to serve him in Russia.

The relevant chronology appears to have been as follows. The claim form was issued on 23 November 2015. The Second to Fourth Defendants were served within the jurisdiction between 15 and 18 January 2016. Permission to serve Mr. Lynch out of the jurisdiction in Florida and Moscow was obtained from Phillips J. on 23 March 2016. The Second to Fourth Defendants served their Defences between 6 and 9 May 2016. Attempts were made to serve the First Defendant in Florida between 6-29 April 2016 and between 17-18 May 2016. The deadline for service on Mr. Lynch expired on 22 May 2016, 6 months after the issue of the claim form.

The Claimants sought to effect service in Florida as a priority because they considered, on the basis of information from the Foreign Process Service, that service in Russia would take a minimum of 12 months. However, before applying on 20 May 2016 for an extension of time in which to effect service abroad, the Claimants had arranged for the Claim Form and other documents to be translated and “legalised” in preparation for service in Russia. Phillips J. extended time for service for some 12 months.

The alleged 8 month delay in serving Mr. Lynch is made up of 4 months after the issue of the claim form before applying for permission to serve the claim form out of the jurisdiction (thus from November 2015 until March 2016) and then a further 4 months to initiate service of the claim form in Russia (thus from March to July 2016, when the Claimants submitted full documentation to the Foreign Process Service).

The application seeking permission to serve out of the jurisdiction was supported by the first witness statement of Mr. O’Sullivan dated 22 March 2016. From that it is apparent (see paragraph 61) that the Claimants had anticipated that the claim form would be served on Mr. Lynch within the jurisdiction because it was thought that he travelled to England on a regular basis. However, they concluded that he had not travelled to England in the period since the claim had been issued and accordingly sought permission to serve out of the jurisdiction. It is also apparent (see paragraph 12) that the Claimants had sought to identify the countries where he was likely to be found. In these circumstances I am not persuaded that there was any material delay in seeking permission to serve out.

So far as the alleged delay thereafter is concerned it was, it seems to me, appropriate for the Claimants to seek to serve in Florida as a priority given that service in Russia was likely to take a minimum of 12 months. Once the attempt at service in Florida had failed the Claimants properly applied for an extension of time for service out of the jurisdiction before the 6 month period had elapsed. I have not been able to ascertain from the evidence the reason why the full documentation was not provided to the Foreign Process Service until 15 July 2016 but such date was less than 2 months after the order of Phillips J. and some 10 months before the time for service out would expire. I am not persuaded that this delay, if such it was, was such that the order of Phillips J. should be set aside.

Mr. Lynch says that the Claimants failed to disclose to the court, when seeking an extension of time for service out of the jurisdiction, that the Claimants had failed to serve a subpoena which had been issued by the Florida court. The application notice alleges that the Claimants misled the court as to Mr. Lynch’s whereabouts. In his skeleton argument Mr. Lynch suggested that the failed service of the subpoena had not been disclosed in order that the Claimants could describe their attempts to serve the claim form in this action in Florida as legitimate.

Mr. O’Sullivan replied to this serious allegation in his seventh witness statement. The subpoena was issued in connection with Yukos-related litigation in the Netherlands. It was obtained in December 2015 when the Claimants expected Mr. Lynch to come to Florida. It is said that he changed his travel plans and left the US in order to avoid service. Subsequently a second subpoena was obtained in May 2017 and was validly served on Mr. Lynch at Miami International Airport. Mr. O’Sullivan’s answer to the serious allegation is that “the Claimants believed and still believe that the First Defendant has owned and maintained a residence at the US address and continues to use the US address from time to time.”

There is a conflict of evidence as to whether Mr. Lynch owns or maintains a residence in Florida but for present purposes what is important is that the Claimants believe their case that he has a residence there to be true. There was therefore no attempt to mislead the court as to the whereabouts of Mr. Lynch. The Claimants did not inform the court of the failed attempt to serve the subpoena in Florida but that failed attempt did not cause the Claimants to believe that he did not have a residence there. Rather, they thought that he had been careful to avoid being served. I am not persuaded that the information was material; the information would not have caused the court to refuse to permit service in Florida. But if it were material, I am not persuaded that the Claimant’s failure to disclose it was so serious that Phillips J.’s order should be set aside.

The first point taken by Mr. Lynch is that the method of service was contrary to the law of Lebanon. The purported service took place on 1 January 2017. That date is a public holiday in Lebanon, service cannot take place on a public holiday and therefore service on a public holiday is contrary to the law of Lebanon.

The difficulty with this submission is that the only evidence before the court of local law was adduced by the Claimants from Mr. Baroudi, a member of the Beirut Bar Association. He stated in his witness statement dated 31 January 2017 that whilst service on 1 January would not constitute good service in Lebanese law the delivery of foreign court documents to a person in Lebanon on that day would not be contrary to Lebanese law. Mr. Lynch challenges that expression of opinion, effectively saying that if service on a public holiday is invalid then it must be contrary to Lebanese law. In my view Mr. Lynch’s challenge fails to understand the distinction between something which is invalid (of no effect) and something which is contrary to law (forbidden). I accept Mr. Baroudi’s opinion because there is no evidence that it misstates the effect of Lebanese law and his opinion is intelligible to an English common lawyer.

The second point taken by Mr. Lynch is that there was no good reason to make an order pursuant to CPR 6.15 that the steps taken to serve Mr. Lynch in Beirut airport on 1 January should be regarded as good service.

This matter was carefully considered by Andrew Baker J. on 24 March 2017. He held that there was good reason, namely (i) despite reasonable efforts it had not been possible to serve Mr. Lynch in the US or in Russia, (ii) there was reason to believe that Mr. Lynch was seeking to avoid being served, (iii) if the Claimants’ case is to be effectively litigated it was important that Mr. Lynch be served so that he can participate in the case to the extent he may choose, (iv) he is one of several defendants, is a necessary and proper party and it would be unfair to the Claimants and the other defendants if the court were unable to proceed against Mr. Lynch also and (v) Mr. Lynch is aware of the proceedings.

By contrast Mr. Lynch submitted that the only reason for urgency arose from the Claimants’ delay in seeking and obtaining permission to serve out of the jurisdiction. I disagree; there was no such delay (see above). He further submitted that he could have been served in Russia. But valid service would take considerable time. He further submitted that he was not apprised of the nature of the claim against him. However, his witness statement, skeleton argument and speaking note plainly show that he is.

There were other reasons relied upon by Andrew Baker J. for concluding that there was good reason to make the order, in particular that there was reason to believe that Mr. Lynch was seeking to avoid being served. There is evidence that at a hearing in the Netherlands on 28 and 29 November 2016 counsel for Promneftstroy, a corporate vehicle of which Mr. Lynch was at the time “the sole executive body (general director)”, stated that Mr. Lynch’s absence from the hearing was “due to the risk of service in person with respect to proceedings by Yukos in England.” In his oral submissions in reply Mr. Lynch said that he did not attend the Netherlands court, that he had no lawyers and that he did not speak with them. However, the words recorded as having been spoken by counsel for a corporate vehicle managed by Mr. Lynch clearly support the suggestion that he was anxious to avoid being served.

Documents received from the Foreign Process Service indicate that Mr. Lynch was notified of the time and place for service of proceedings on him in Moscow in September and October 2016 but that he did not appear. These documents were exhibited to Mr. O’Sullivan’s sixth witness statement which was served out of time. Mr. Lynch objected to reliance upon them saying that he needs time to make inquiries of the Russian court. However, given that the documents have been forwarded to the Foreign Process Service by the Russian authorities and concern the efficacy of steps to serve Mr. Lynch in Russia I consider that the court ought to take them into account whilst recognising that Mr. Lynch has not had an opportunity to make enquiries of the Russian court. The documents tend to support the case that Mr. Lynch is seeking to avoid being served.

The other reason relied upon by Andrew Baker J. for concluding that there was good reason to make the order was that in circumstances where the case was proceeding against the other defendants it would be unfair to the Claimants and the other defendants if the case could not proceed against Mr. Lynch also. My Lynch said in his oral submissions in reply that he could appear at the trial as a witness. I do not consider that this would remedy the potential unfairness. The court’s ability to do justice to all parties will or at any rate may be impeded if Mr. Lynch is not a party to the proceedings.

Having considered the reasons given by Andrew Baker J. and Mr. Lynch’s response to those reasons I, like Andrew Baker J., consider that there is good reason for an order pursuant to CPR 6.15. I would summarise the good reason in this way. (i) The Claimants have failed to serve Mr. Lynch in Florida where they expected him to be found. (ii) The Claimants expected substantial delay in serving him in Russia. It now appears that an attempt to serve was made in late 2016 but that Mr. Lynch failed to attend the appropriate court. (iii) Mere delay in service does not generally amount to good reason for service by alternative means. (iv) But in the present case there are two further factors: (a) there is reason to believe that Mr. Lynch is seeking to avoid being served (though he denies the suggestion) and (b) the other defendants have been served and have filed defences so that the court’s ability to decide the case fairly and justly as between all parties will be assisted if Mr. Lynch is also regarded as having been served. (v) Mr. Lynch is obviously aware of the proceedings against him.

There remains the question whether the nature of the documents served on Mr. Lynch in Beirut Airport was sufficiently made known to him. The applicable test is set out by Phillips J. in Tseitline v Mikhelson and others [2015] EWHC 3065 (Comm) at paragraph 34 as follows:

“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 … 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 v Hahn [1989] 1 WLR 506 at 512A.”

It is therefore necessary to set out what happened at Beirut airport. A first hand account is given in the first witness statement of Mr. May, a private investigator instructed by the Claimants to deliver the Claim Form and other documents to Mr. Lynch. In his statement dated 31 January 2017 he recounted what happened at the check in at Beirut Airport on 1 January 2017 when he encountered Mr. Lynch.

“I placed a black material bag containing the Documents immediately in front of Mr. Lynch on the check-in counter…and said words to the effect of “I am here to deliver some documents to you”. The Documents contained therein were visible and easily accessible to Mr. Lynch. Mr. Lynch appeared somewhat flustered, nodded his head in agreement and murmured “OK” in a weak but audible tone. I saw Mr. Lynch place a hand on the black material bag and I walked away from him and the check-in counter. ”

He commented upon photographs taken by a colleague.

“The photographs show Mr. Lynch placing his right hand on the black material bag…while turning to speak to the male beside him….The photographs show Mr. Lynch inspecting the Documents contained in the black material bag by leafing through the Documents with both hands.”

Mr. May said that he later spoke to the check-in attendant present at the time who told him that Mr. Lynch had said words to the effect of “these are documents that I don’t want to take. Call security.”

Mr. Lynch in his witness statement dated 16 May 2017 gave this account.

“When I was at the check-in for Aeroflot a casually dressed man, not known to me, approached me and thrust into my arms a black cloth sack saying “these are the papers for you, I don’t know what they are”. After pushing the cloth sack into my arms the man immediately released the sack and left. I immediately put the sack on the check-in counter in front of me. The sack said, “Tulip Royal Hotel” and “Laundry”. I could not tell what was in the sack. The Aeroflot representative who was directly in front of me asked me whether I knew the man who had given me the sack or knew what was in the sack. I told him I did not. The Aeroflot representative told me not to touch the sack and called airport security. He then instructed me to leave the check-in area without touching or taking the sack with me. ”

Mr. May replied to that account in his second witness statement dated 21 June 2017 to which was exhibited a video taken by his colleague. Mr. Lynch did not object to the video being admitted in evidence. Mr. May disagreed that he had thrust or pushed the bag into Mr. Lynch’s arms. He said he placed the bag in front of Mr. Lynch on the check-in counter. He said that he did not say “these papers are for you, I don’t know what they are”. He said he expressly recalled using the word “documents” and was well aware that they related to legal proceedings in London. He accepted that the bag bore the words “Royal Tulip Luxury Hotels” but not that they bore the word “Laundry”. He recalled that the Documents were clearly visible within the bag. He commented that the photographs and video showed Mr. Lynch inspecting the Documents in the bag by leafing through them with both hands.

Mr. Lynch in his speaking note commented upon the video and maintained his account of the exchange. He also pointed out that he was not wearing his glasses and could not know what the documents said. He denied that he had leafed through the documents.

There is no evidence that Mr. Lynch was told that the documents related to legal proceedings in London or that such documents were being served on him. They were described to him either as “documents” (according to Mr. May) or “”papers”, (according to Mr. Lynch). But the photographs, in particular those at pp.10 and 11 of the exhibit to Mr. May’s first witness statement, show Mr. Lynch inspecting the contents of the bag with both hands in a manner consistent with the expression “leafing through documents”. The video confirms that, though such “leafing through” did not last long. The photographs and video confirm Mr. May’s evidence that the documents were visible and easily accessible.

The question is whether it can be inferred from the events at Beirut Airport that Mr. Lynch had knowledge that the documents or papers were legal documents or papers which required his attention in connection with proceedings. In circumstances where the documents were visible and easily accessible and where Mr. Lynch leafed through them I consider that it can be safely inferred that Mr. Lynch knew that they were legal documents that required his attention in connection with proceedings. I have of course noted Mr. Lynch’s evidence that he could not tell what was in the sack or bag but I am confident that it can be inferred from the fact that he leafed through the documents that he appreciated that the sack or bag contained legal documents that required his attention in connection with proceedings. I have also noted Mr. Lynch’s comment in the course of his submissions that he was not wearing his glasses at the time and could not know what the documents said. He had not mentioned this in his witness statement from which I infer that, although he uses glasses (he used them when addressing me in court) the absence of his glasses at the time was not such as to prevent him from ascertaining the nature of the documents. That is also suggested by the manner in which he is seen to be leafing through the documents in the video and photographs.

For the reasons which I have given Mr. Lynch’s challenges to the orders of Phillips J. and Andrew Baker J. dated, respectively, 24 May 2016 and 24 March 2017 are dismissed. Mr. Lynch’s application for an order declaring that the court has no jurisdiction over him must also be dismissed.