Deutsche Bank AG v Vik & Anor

This is the second judgment which I have had to give in this matter which concerns questions of procedure and service in the context of an application for a committal order. My first judgment was given on 16 December 2016; see [2016] EWHC 3222 (Comm). The background is apparent from that judgment. I need not repeat it. I held that Deutsche Bank (“DB”) was entitled to proceed by way of CPR Part 81 when seeking a committal order against Mr. Vik; see paragraphs 3-10. I further held that DB’s application for permission to serve Mr. Vik out of the jurisdiction must be dismissed because there was no applicable jurisdictional gateway; see paragraphs 15-21.

However, it had always been DB’s position that permission to serve an application for committal out of the jurisdiction was not in fact required. This judgment concerns that issue and an application for alternative service.

Miss Tolaney QC submitted that for three reasons permission to serve out was not required. First, it was said that the application to commit for contempt was an ordinary incident of the Part 71 order which had been validly made. Second, it was said that Mr. Vik had submitted to the jurisdiction. Third, it was said that permission was not required because of the effect of Article 24(5) of the Recast Brussels Regulation.

Miss Tolaney submitted that where the court already has substantive jurisdiction over a person to make an order, permission to serve out of the jurisdiction an application for committal alleging breach of that order is not required; the court has jurisdiction to make orders which are the ordinary incidents of that substantive jurisdiction, including in particular orders for costs and committal. In the present case it was submitted that the court has substantive jurisdiction over Mr. Vik because he was personally served within the jurisdiction with an order made pursuant to CPR Part 71, namely, an order dated 20 July 2015 requiring him to provide documents in SHI’s control relating to SHI’s means of paying the judgment debt and to attend court to be cross-examined about SHI’s means. I shall refer to that order as the "Part 71 order". Although Mr. Vik provided some documents and attended for cross-examination DB contends that Mr. Vik failed to provide many documents and lied under oath. It is said that DB’s application to commit Mr. Vik for contempt is an ordinary incident of litigation and in particular of the Part 71 order and so, although Mr. Vik is presently out of the jurisdiction, the application to commit him may be served on him out of the jurisdiction. Miss Tolaney relies upon a decision of mine, Marketmaker Technology Limited v CMC Group plc [2008] EWHC 1556 (QB).

Mr. Matthews QC, on behalf of Mr. Vik, submits that DB’s argument as advanced by Miss Tolaney is mistaken. He says that the existence of jurisdiction in respect of the Part 71 order cannot found jurisdiction in respect of a new claim against a foreign defendant (and for which permission to serve out could not be obtained). Mr. Matthews relies upon Dar Al Arkan Real Estate Development Co v Refai [2015] 1 WLR 135 to support his submission that contempt applications are “new” proceedings. He submits that Miss Tolaney’s reliance on Marketmaker is misplaced because it concerned a committal claim against a claimant who had invoked the court’s jurisdiction by bringing a substantive claim here; see Glencore v Exter [2002] EWCA Civ 528. Marketmaker was a simple and orthodox application of the principle identified in Glencore that a claimant who commences a claim submits to the jurisdiction without reservation and so is subject to all new claims which might be brought against him by the defendant.

As a matter of principle where jurisdiction in respect of a claim or an order is established over a person the jurisdiction which is established must include, in my judgment, jurisdiction in respect of matters which are incidental to that claim or order. I did not understand that principle to be denied by Mr. Matthews because he accepted that where jurisdiction over a person is established in respect of a claim the court has jurisdiction to make an order for costs against that person in respect of that claim. An order for costs is incidental to the claim in respect of which the court has jurisdiction over the defendant. The question in the present case is whether an order for committal is incidental to the Part 71 order.

An order of a court must carry with it the means to enforce that order. If it did not there would be no utility in the order for it could be disobeyed without the threat of sanction. The means to enforce an order are therefore a necessary incident of the order. An order for committal is one of the means by which court orders are enforced. For that reason an order for committal is, in my judgment, a necessary incident of a court order. That is clearly demonstrated by the presence of a penal notice at the beginning of the Part 71 order. I therefore consider that in circumstances where the court has jurisdiction to make the Part 71 order against Mr. Vik the court also has jurisdiction to make a committal order against him. Permission to serve the application to commit Mr. Vik for contempt out of the jurisdiction is not required because he is already subject to the jurisdiction of this court in respect of the Part 71 order and all matters which are incidents of that order, one of which is an order for committal for contempt of the Part 71 order. Thus it was that in my earlier judgment I indicated that, had it been necessary to decide the issue, I would have accepted Miss Tolaney’s submission that where a valid order has been made against a person pursuant to CPR 71.2 whilst he was within the jurisdiction an order for committal can be sought against him pursuant to CPR 71.8 notwithstanding that he has since left the jurisdiction; see paragraphs 11-14 of my earlier judgment. If that is so for the summary contempt procedure provided by CPR 71.8 it must also be for the longer procedure provided by CPR 81 (pursuant to which DB is now proceeding).

Mr. Matthews submitted that where jurisdiction is established over a person outside England and Wales the court's jurisdiction over that person is limited to the claim in respect of which jurisdiction is established. Jurisdiction in respect of a new claim cannot simply be added to the first claim. That is an uncontroversial submission. But Mr. Matthews submitted that for the purposes of that principle an order for committal is a new claim.

The foundation of Mr. Matthews' submission that an application to commit for contempt is a new claim is Dar Al Arkan Real Estate Development v Refai and others [2015] 1 WLR 135. In that case there was an application to commit for contempt the managing director of the claimant company. The question for the court was whether the court’s powers under CPR 81 could be exercised against an officer of the claimant company who was outside the jurisdiction of the court and if so whether permission could be given for service out of the jurisdiction pursuant to PD 6B paragraph 3.1(3). It was held that the court’s powers pursuant to Part 81 could be exercised against an officer who was outside the jurisdiction of the court. It was further held that permission could be given for service out of the jurisdiction. On the latter question the court had to consider whether an application for a committal order was a “proceeding” within CPR 6.2. It had been argued that “proceedings” were the substantive proceedings and not committal proceedings. Beatson LJ (with whom Richards and Briggs LJJ agreed) held that an application for committal is the commencement of proceedings. Beatson LJ rejected the argument that not all contempt applications involve separate proceedings. He held that an application pursuant to CPR 81 involved “new” proceedings.

A number of matters may be noted about this decision. First, the court was not considering a case, like the present case, where jurisdiction to make an order against the alleged contemnor had already been established. The court did not therefore consider whether the jurisdiction so established extended to and included orders which were incidental to the order in respect of which jurisdiction existed. Second, the court was considering the question whether an application to commit for contempt was an application to commence proceedings within CPR 6.2. Third, it was in that context that it was said that an application to commit for contempt involves “new” proceedings.

I accept that an application to commit for contempt is an application to commence “proceedings” for contempt and that such proceedings can fairly be described as “new”. However, I am unable to accept that such an application cannot also be described as “incidental” to an order which has been validly made against a person whilst he was within the jurisdiction of the court and in respect of which it is said that he has acted in contempt. I have already explained why, in my judgment, such an application is properly to be regarded as incidental to the order. I do not consider that I am bound by Dar Al Arkan to regard such an application as other than incidental to the order.

Mr. Matthews rightly submits that there is a public interest in ensuring that the English court does not overstep its territorial reach. However, in this case the court had jurisdiction to make the Part 71 order against Mr. Vik because he was physically within the jurisdiction; see the judgment of Cooke J. at [2015] EWHC 2773 (QB). Thus the territorial reach of the English court was not overstepped. In my judgment, when an application incidental to the Part 71 order is issued DB does not need to establish jurisdiction again simply because Mr. Vik is now outside the jurisdiction. The matter is no different from the case where permission is obtained to serve a claim out of the jurisdiction and thereafter the claimant wishes to make an application against the defendant which is incidental to the claim in respect of which he obtained permission to serve out. The claimant does not need to establish jurisdiction a second time.

Those are my reasons for accepting Miss Tolaney’s first submission. It is unnecessary to mention the two cases relied upon by Miss Tolaney but, for completeness, I shall do so. Marketmaker Technology Limited v CMC Group plc [2008] EWHC 1556 (QB) was a case where a company and its owner and controller, Mr. Taher, commenced proceedings in this jurisdiction against the defendants. They obtained a worldwide freezing order which was subsequently discharged for want of full and frank disclosure. The claim was subsequently struck out. Following applications to cross-examine Mr. Taher a committal order was sought against him. Mr. Taher sought to challenge the court’s jurisdiction to make such an order on the basis that the defendant had not sought and obtained permission to serve out of the jurisdiction the contempt application. This challenge failed. I held that Mr. Taher had submitted to the jurisdiction by commencing an action against the defendants and that that submission included a submission to the incidents of the litigation he had commenced. The ensuing application for a committal for contempt was an ordinary incident of the litigation commenced by the claimant and Mr. Taher. Accordingly permission to serve out was not required; see paragraphs 26-27 of my judgment in that case.

Mr. Matthews submitted that my decision in Marketmaker is to be explained as an example of the principle that where a claimant out of the jurisdiction commences a claim in this jurisdiction he exposes himself to all claims which the defendant might wish to bring against him including new counterclaims and contempt applications. I accept that the facts of Marketmaker did indeed concern a claimant out of the jurisdiction and that the authorities to which I referred in that case illustrate that principle. I also accept that where a claimant has obtained leave to serve a claim on a defendant out of the jurisdiction the claimant cannot add a new claim to the proceedings in respect of which he had not obtained permission. However, whilst the facts of Marketmaker were materially different from the facts of the present case I do not accept, for the reasons I have given, that where an order has been validly made against a person an application to commit that person for contempt of that order must be regarded as the equivalent of a new claim for which permission to serve out is required.

VIS Trading v Nazarov and others [2016] 4 WLR 1 is a case where two defendants were found liable to the claimant. The judgment debt was not paid and the claimant obtained an order against the first defendant pursuant to CPR 71. The first defendant was out of the jurisdiction and gave evidence by video link from Uzbekistan. The claimant was dissatisfied with the documents provided and the evidence given and so issued an application to commit the first defendant for contempt. That application proceeded without any suggestion that it could not proceed in circumstances where the first defendant was out of the jurisdiction. Whilst I am not surprised that there was no such suggestion there must be a limit to the persuasive authority of this case in circumstances where the point argued in the present case was not debated.

My conclusion on Miss Tolaney’s first submission renders it unnecessary to deal with her two further submissions. I shall therefore deal with them shortly.

Miss Tolaney said that Mr. Vik had in fact submitted to the jurisdiction. After his challenge to the court’s jurisdiction to make the Part 71 order had been dismissed by Cooke J. Mr. Vik chose to provide documents and to attend court to be cross-examined. Reliance was placed on (i) the fact that Mr. Vik had a choice whether to comply with the Part 71 order or to refuse to participate on the grounds that he did not recognise the court’s jurisdiction over him and (ii) the fact that after he had been cross-examined his counsel said that he had “voluntarily attended this court to undergo this process”.

Mr. Matthews said that the test was whether Mr. Vik had taken some step which was only necessary or useful if his objection to the jurisdiction had been waived; see Williams and Glyn’s Bank v Asto Dinamico Compania Naviera [1984] 1 WLR 438 at p.443A. Reliance was also placed on Sage v Double A Hydraulics Limited The Times Law Reports 2 April 1992 where Farquharson LJ said “a useful test was whether a disinterested bystander with knowledge of the case would have regarded the acts of the defendant, or his solicitors, as inconsistent with the making and maintaining of his challenge.”

Mr. Vik challenged both the existence of the court’s jurisdiction to make the Part 71 order and, if there was jurisdiction, the decision to exercise it in the circumstances of the case. That challenge failed. He then sought to comply with the Part 71 order. When he did so he did not say that he was complying under protest. Nor did he seek permission to appeal from the decision. However, I do not consider that the disinterested bystander with knowledge of the case would have regarded the action of Mr. Vik as inconsistent with the making and maintaining of his challenge. He had made his challenge and had lost. Whilst he could have refused to participate and sought permission to appeal I think it would be harsh and unrealistic to conclude that he no longer maintained his objection to the jurisdiction. The disinterested bystander would, I think, have regarded Mr. Vik as bowing to the inevitable rather than accepting that the court had jurisdiction over him. His actions were not only necessary or useful if his objection had been waived. His actions were necessary and useful because his challenge had failed. As Mr. Vik said during his cross-examination on 11 December 2015 “the order was nevertheless confirmed, and, you know, I don’t want to go to prison, so – and I want to comply with the Order to the best of my ability …” It is true that his counsel said that he had “voluntarily” attended the court but in one sense he had, because he could have remained out of the jurisdiction. However, in the light of Mr. Vik’s own words, it would appear that he did so under compulsion. I would not therefore have concluded that Mr. Vik had submitted to the jurisdiction.

Reliance was also placed by Miss Tolaney on Mr. Vik’s litigation of certain costs matters in October and November 2016. These were applications to set aside or vary an order made by Sir Jeremy Cooke on 10 October 2016 concerning the non-party costs order made against Mr. Vik. I do not see how this is relevant to a submission to the jurisdiction in respect of the Part 71 order which concerns not costs but the outstanding judgment debt.

Miss Tolaney’s final submission on this part of the case was that permission to serve out was not required because of the effect of Article 24(5) of the (Recast) Brussels Regulation. That provides that in proceedings concerned with the enforcement of judgments the courts of the member state in which the judgment has been or is to be enforced shall have exclusive jurisdiction regardless of the domicile of the parties. Under Article 2 “judgment” is widely defined to mean “any judgment …………whatever the judgment may be called, including a decree, order, decision or writ of execution……”.

Mr. Matthews said that this submission was mistaken on two counts. First, notwithstanding the wide terms of Article 2 the Part 71 order is not within the extended definition of judgment because it related to the taking of evidence and the disclosure of documents. The committal application was therefore not a proceeding concerned with the enforcement of a judgment. Second, the court was bound by the decision of the Court of Appeal in Choudhary v Bhattar [2010] 2 All ER 1031 that the predecessor to Article 24(5) does not apply where the respondent to the application is not domiciled within a member state. Mr. Vik is domiciled in Monaco which is not a member state.

The first submission derives from paragraph 187 in the Schlosser report which suggests that the wide definition of “judgment” extended to any decision governing the legal relationships of parties but not to decisions which arranged the further conduct of proceedings. The Schlosser report has a special status in relation to the interpretation of the Brussels Regulation; see Dicey at paragraph 11-012. As a result the textbooks on this subject all agree that the definition of “judgment” is not as wide as it might otherwise appear to be. Thus Dicey notes at paragraph 14-204 footnote 793 that orders for discovery and the taking of evidence are not within its scope of the definition. Similarly, Cheshire & North say at p.599 footnote 25 that orders of a procedural nature are not included. Briggs, Civil Jurisdiction and Judgments, 6^th ed. says at p.635 that the definition does not extend to interlocutory directions upon the conduct of proceedings such as orders providing for the taking of evidence. All three textbooks cite as authority the Schlosser report at paragraph 187.

I accept that the Schlosser report requires the wide words of the definition to be limited in the sense explained both by the report and by the textbooks. But the important question, it seems to me, is whether the Part 71 order can properly be described as an order for the taking of evidence and disclosure and not one which governs the legal relationships of the parties. Part 71 contains rules which provide that a judgment debtor (or an officer of a corporate judgment debtor) shall attend court to provide information for the purpose of enabling a judgment creditor to enforce a judgment against the judgment debtor. Thus Part 71 assumes that the legal relationships of the parties have already been determined by a judgment and that information is required to enable that judgment to be enforced. Whilst the Part 71 order provides for the provision of information (by the production of documents and the answering of questions) it is different in character from a procedural order for the giving of discovery and exchange of evidence to enable a dispute between parties as to their legal rights to be resolved. It is not an interlocutory order but an order made after final judgment to enable that judgment to be enforced. In those circumstances it seems to me that it is not the sort of interlocutory direction or order which the Schlosser report indicated was not caught by the wide definition of “judgment” in the Regulation. Indeed, it is not an interlocutory order at all but an order designed to ensure that effect is given to the court’s final determination of the parties’ legal relationships. I therefore consider that there is no reason to exclude the Part 71 order from the wide definition of “judgment” in Article 2 of the Regulation.

The second submission is based upon the decision of the Court of Appeal in Choudhary which concerned, not the Recast Brussels Regulation, but its predecessor. The Court of Appeal has since said, obiter, that the argument for saying that Choudhary was decided per incuriam is compelling; see Dar Al Arkan at paragraphs 59-64 per Beatson LJ. The reasons why Choudhary was decided per incuriam were set out at first instance by Andrew Smith J. at [2013] EWHC 4112 (QB) at paragraphs 44-52 and concern three judgments of the ECJ which, had the relevant passages been considered by the earlier Court of Appeal, would have persuaded it to reach a different decision. It was that reasoning that the later Court of Appeal said was compelling. In circumstances where Article 24(5) is in different terms from its predecessor and states in terms that it applies “regardless of the domicile of the parties” (as opposed to “regardless of domicile”) I do not consider that I should regard the decision in Choudhary as a decision which is binding on this court as to the true construction of Article 24(5) of the Recast Brussels Regulation. That article was not considered in Choudhary. Its reasoning is no doubt of persuasive authority but that authority is very substantially diminished by the later (obiter) decision in Dar Al Arkan that the decision in Choudhary was per incuriam. In my judgment the amended wording of Article 24(5) together with the reasoning of Andrew Smith J. and the approval of that reasoning by the Court of Appeal in Dar Al Arkan makes it clear that the exclusive jurisdiction provisions in the article apply “regardless of the domicile of the parties.” Thus the fact that Mr. Vik is not domiciled in a member state is an irrelevant consideration.

For these reasons, shortly expressed, I would, if necessary, have acceded to Miss Tolaney’s submission that permission to serve out was not required by reason of Article 24(5) of the Recast Brussels Regulation.

An application to commit for contempt must be served personally. DB wishes to serve the application on Mr. Vik personally in Monaco in accordance with Monegasque law (which permits personal service). To that end DB has requested that Mr. Vik specify a date, time and place when it would be convenient for personal service to be effected in Monaco. It is accepted that he does not have to do so but he has chosen not to do so and so DB seeks permission to serve the application by alternative means pursuant to CPR 81.10(5), namely by email and post to Mr. Vik’s London solicitors Brecher LLP.

Monaco is party to the Hague Convention. In those circumstances it is accepted that service by alternative means should be regarded as “exceptional, to be permitted in special circumstances only”; see Cecil v Bayat [2011] 1 WLR 3086 at paragraph 65 per Stanley Burnton LJ. Service by alternative means “may be justified by facts specific to the defendant, as where there are grounds for believing that he has or will seek to avoid personal service where that is the only method permitted by the foreign law”; see Cecil v Bayat at paragraph 68 per Stanley Burnton LJ. In the present case DB says that there are grounds to believe that Mr. Vik will seek to avoid personal service in Monaco.

The history of this case demonstrates that Mr. Vik is a man who will do what is necessary to prevent DB obtaining its judgment debt. Thus, in his judgment on the application for a non-party costs order against Mr. Vik, Cooke J. noted that in the main action he had found that Mr. Vik had transferred assets out of SHI with a view to depleting those assets and making it more difficult for DB to recover sums due from SHI. Cooke J. also noted that the conduct of extensive parts of the defence and counterclaim in the main action, which was controlled by Mr. Vik, was “reprehensible, involved impropriety and …dishonesty on Mr. Vik’s part”; see Deutsche Bank AG v Sebastian Holdings Inc. [2014] 4 Costs LR 711 at paragraphs 66 and 74. Nevertheless, when dealing with an application to set aside service of the application for the non-party costs order Cooke J. did not suggest that those findings in the main action as to the conduct of Mr. Vik amounted to evidence that Mr. Vik was attempting to avoid service such that service by alternative means was appropriate; see Deutsche Bank AG v Sebastian Holdings Inc. [2014] 1 All ER (Comm) 733 at paragraphs 28-31. Cooke J. said that should service prove difficult or should evidence show that Mr. Vik was seeking to evade service then an order for service by alternative means would be available. Cooke J. said much the same in December 2015 at the end of the hearing when Mr. Vik was examined pursuant to the Part 71 order.

Miss Tolaney submitted that there was now evidence that Mr. Vik was seeking to avoid personal service. On 24 March 2016 DB’s solicitors requested Mr. Vik’s solicitors to confirm that they were instructed to accept service of the committal application. In the absence of such confirmation they asked for details of Mr. Vik’s anticipated whereabouts between 15 April and 30 June 2016 and a convenient date so that arrangements could be made for personal service. On 7 April 2016 Mr. Vik’s solicitors said that Mr. Vik had been travelling and that they had not had an opportunity to take proper instructions, though they anticipated being able to do so shortly. On 15 April 2016 a substantive response was sought but none was forthcoming. Further chasing letters were sent on 2 and 16 June 2016. Notwithstanding Mr. Vik’s failure to instruct his solicitors to accept service he has instructed solicitors and counsel to oppose DB’s committal application. Miss Tolaney submitted that this evidence shows that there is reason to believe that Mr. Vik will seek to avoid personal service. Mr. Matthews submitted that any such conclusion is unjustified.

I accept that Mr. Vik is not obliged to assist DB in effecting personal service on him and that Mr. Vik is entitled to challenge DB’s asserted right to bring a committal application. But the fact is that he has failed to provide a place and date of his choosing at which he would be available for personal service. That is some evidence that he is unwilling to be served personally and that he may well take steps to avoid service. When that evidence is considered against the background of his conduct in this litigation as summarised by Cooke J. I consider it very likely (notwithstanding that Mr. Vik has paid the costs awarded against him and attended court pursuant to the Part 71 order) that he will take steps to avoid personal service in Monaco. I am therefore persuaded that there are special circumstances in this case which justify, exceptionally, an order for service of the committal application by alternative means. I am not persuaded that it is merely convenient or that it will save time if service is effected by alternative means. Rather, I am persuaded that if DB attempts to serve Mr. Vik personally in Monaco they will probably fail to do so as a result of efforts by Mr. Vik to avoid personal service.

I shall therefore order service by alternative means, namely, by service on his solicitors. There is no doubt that that will bring the application to his notice. Indeed, I have no doubt that he is already well aware of it. He would not otherwise have instructed solicitors and counsel to oppose the making of the committal application.

Permission to serve the committal application on Mr. Vik out of the jurisdiction is not required. The committal application may be served on him by alternative means, namely, on his solicitors.