Caterpillar Financial Services (Dubai) Ltd v National Gulf Construction LLC & Ors

This is an application to serve out of the jurisdiction and also for alternative service. The claim is to enforce two judgments. The first, against the first and second defendants, is a judgment of the DIFC dated 13 October 2020 for something over $16 million plus interest. The second judgment, against the third and fourth defendants, is a judgment of the Dubai Court of Appeal dated 4 March 2020 for something approaching AED 44 million plus interest.

The claimants wish to enforce those judgments in England and Wales. The defendants are all resident in Dubai in the UAE and permission of the court is therefore required.

The claimant is part of the Caterpillar Group and provides finance to businesses in Dubai which buy Caterpillar equipment, and in this case it provided finance to the first and second defendants by some twenty-four separate advances. The third and fourth defendants are the guarantors of the first two defendants’ obligations. The fourth defendant is the Chief Executive Officer of the first and second defendants. The third defendant does not appear to have any formal status with the companies. He does not, in particular, appear to be an officer.

The first and second defendants fell into default on their obligations under the financing arrangements, and that led to the proceedings in the DIFC against them and, in due course, judgment. Separate proceedings on the guarantees were taken against the third and fourth defendants in the domestic Dubai courts. Judgment was obtained and an appeal against that judgment was unsuccessful. Both judgments, as I understand it, are currently stayed following an administrative decree imposing a stay and designed to ring-fence the group’s assets. I should say that the claimant is part of a much larger group of companies.

Mr Montagu-Smith, who appeared on behalf of the claimants, tells me that this is not an insolvency procedure as such, but it means that companies such as the claimant cannot enforce any judgments against the assets of the first and second defendants without the permission of a specially constituted committee. He was unable to tell me what, if any, steps had so far been taken to obtain such permission.

The application for enforcement came before Jacobs J on the papers. He raised concerns which led to the renewed oral application before me this morning. Those concerns essentially relate to whether the claimant could show a real prospect of a legitimate benefit in enforcing these judgments in England and Wales.

It is common ground that, on an application for permission to serve out, the claimant must satisfy three requirements. The first is that there is a serious issue to be tried on the merits of the claim; the second, that there is a good arguable case that the claim falls within one of the heads of jurisdiction in Practice Direction 6B, paragraph 3.1; and the third is two-pronged: first, that England is clearly or distinctly the appropriate forum for the trial and, secondly, that the court should exercise its residual discretion under the gateway itself to allow service out.

Mr Montagu-Smith suggested that Jacobs J had perhaps conflated these latter two aspects of permission to serve out. I am not convinced that he did, despite the language that he used, but, in any event, it seemed to me that there could be no real argument but that England was the appropriate, indeed the only forum in which an application could properly be made for enforcement of a judgment in England. If authority were needed for that proposition, it can be found in the judgment of the Master of the Rolls in Fonu v Demirel, [2007] EWCA Civ. 799; [2007] 1 WLR 2508 at [45].

As to the residual discretion, it was accepted by Mr Montagu-Smith that the claimant must show a real prospect of legitimate benefit. Again, this is a test that derives from the Fonu case. As to this, he accepted that there was no evidence that any of the defendants had assets within the jurisdiction, but he said that it is not impossible that assets may come into the jurisdiction in the future. He points to the fact that one of the many companies in the defendants’ group is an import and export company, and he says that there is therefore a reasonable prospect that some transactions in which it is engaged may involve import or export to or from England, or financial arrangements involving the movement of assets through London.

A particular concern of the claimant’s, he said, was the dissipation of assets. Tracking devices fitted to some of the equipment in question show that some of the plant has been moved to Saudi Arabia and Yemen despite an express undertaking on oath by the defendants’ solicitors or lawyers that the assets remained in the UAE and that immediate inspection would be afforded to the claimants. At the lowest, he said, the evidence is that the defendants have been stalling, and there is clear evidence that they have been physically moving their assets around the Gulf. The whereabouts of the defendants’ assets is therefore a matter of considerable concern to the claimant.

It is not in dispute that if the judgment is enforced, his client will be able to use the Part 71 procedure to cross-examine the third and fourth defendants as to their own assets in connection with the enforcement of the judgment against them. Mr Montagu-Smith accepted that it is not normally permissible to use Part 71 to get an order to cross-examine an officer of a foreign company where neither the company nor the officer are themselves within the jurisdiction: see Masri v Consolidated Contractors International (UK) Ltd (No.4), [2009] UKHL 43; [2010] 1 AC 90. However, he submits that this is purely a territorial restriction and that if (as would be the case if I were to enforce the judgments) the fourth defendant can be cross-examined on his own assets, there is no bar to him being cross-examined additionally about the assets of the first and second defendants under Part 71.2.

I was slightly troubled by this point initially, as it seemed to me potentially to undermine the position that a foreign officer of a foreign company cannot be cross-examined as to assets under Part 71, but I am persuaded by Mr Montagu-Smith that this is merely a territorial obstacle and that Part 71.2 is, at least arguably, sufficiently broad to permit such cross-examination if the court otherwise has territorial jurisdiction over the prospective cross-examinee. At the very least, there is a reasonable argument to this effect, and I accept that this is not a hearing where the application under Part 71 is itself to be debated. Accordingly, it would only be if I thought the answer were absolutely clear against the claimant’s argument that I should discount that possibility.

Mr Montagu-Smith suggested that I could also get some flavour from the Fonu case of what might be considered a legitimate benefit more generally, although he accepted that that was a case on very different facts, where the defendant had been found guilty of fraud, where he had no assets in the country where he carried on business and was resident, and where there was evidence of him having set up trusts in the Cayman Islands and used the international banking system to move and conceal his assets. There was also a time bar point in the case.

By contrast, of course, this is a very different situation. Prima facie, the defendants do have assets in their home territory and there is no evidence before me that they have been using the international banking system to conceal assets through shadowy trusts in convenient jurisdictions; nor is there any time bar point.

Mr Montagu-Smith also drew my attention to the judgment of Sir Michael Burton in Habib Bank Ltd v Central Bank of Sudan, [2014] EWHC 2288 (Comm), where he suggested that the flipside of the residual discretion under paragraph 3.1 was whether enforcement would be abusive. He submitted that a judgment creditor has an enforceable debt and that it would be a strong thing indeed for a court to refuse enforcement of such a legitimate debt on grounds of abuse.

On balance, I am persuaded that Mr Montagu-Smith has demonstrated a real prospect of legitimate benefit. It is undoubtedly somewhat speculative as to whether there ever will be any assets in England, but I accept that discovering the whereabouts of the defendant’s assets is important, particularly in the context of the evidence to date of dissipation, and that there is at least an arguable case that if enforcement is permitted, it will be possible to use the Part 71 procedure to cross-examine the fourth defendant as to the whereabouts of the assets of the first two defendants.

I therefore grant permission to serve the proceedings out of the jurisdiction. I am satisfied that the current stay in Dubai is no bar to enforcement, although that might of course be a relevant factor in due course if and when any application is made to execute the judgments.

I turn therefore to the application for service by an alternative method. The claimant seeks permission to make service by email on the fourth defendant and on the third defendant.
I accept that the methods identified are such as would be likely to bring the proceedings to the defendants’ attention. The only point is whether the claimant can show the requisite good reason for making such an order. I note that there is no requirement to demonstrate exceptional circumstances as such. However, there is a permissive treaty in force between the United Kingdom and the UAE, which provides that service will usually be made through diplomatic channels. The High Court in Cesfin Ventures LLC v Al Ghaith Al Qubaisi, [2021] EWHC 3311 (Ch.) held that this treaty does not make such service an exclusive method and that the power of the court under Part 6.15 is not ousted. It was also held in that case that, despite the debate in the authorities, where the treaty is a non-exclusive treaty, it is not necessary to go as far as showing exceptional circumstances before some other method can be adopted.

The reason why Mr Montagu-Smith says that the diplomatic route is inadequate in this case is that there is evidence that it is taking longer than usual, apparently over eight months, due to Covid-related reasons. However, in itself, this is not an inordinately long period, and it is certainly nothing like the eighteen months to two years that was in issue in the Ablyazov case. Also, as he fairly accepted, he was unable to demonstrate any particular urgency in this matter. No assets have been identified in this country against which immediate enforcement can be made, there is no immediate prospect of any such assets coming within the jurisdiction, no trial or other hearing date is in peril and it is, as I pointed out, in any event some eighteen months or two years since the relevant judgments were obtained. So the claimant can hardly be said to have been proceeding with any very great haste to date.

Mr Montagu-Smith accepted that the treaty represented an agreement between the United Kingdom and the UAE as to how process should ordinarily be served, and he further accepted that he could not really complain if the evidence was that it was just taking the normal time. However, he said that whereas the evidence was that the process used to take six to nine months, it was now taking longer. I have very great sympathy with the claimant’s desire to get a move on but, given the delays to date and the lack of any obvious urgency, I simply find myself unable to conclude that the difference (if any at all) between “over eight months” and “six to nine months” is so great as to amount to a good reason. I therefore refuse permission for alternative service.

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