Michael, Estate of & Ors v The Islamic Republic of Iran & Anor

On 15 July 2019 the Claimants issued an application notice seeking an order in the following terms:

“An order pursuant to CPR 3 and /or CPR 32.1 and/or the Court’s inherent jurisdiction for permission to adduce and rely upon (i) the second witness statement of Mr Curtis Mechling dated 10 July 2019 (which provides further evidence of the extent of Iran’s diplomatic presence in New York) and (ii) an expert report of the Honorable Timothy K Lewis (which addresses the nature of the jurisdiction of the US District Court of the District of Columbia); and that the court be able to have regard (if necessary) to this evidence when determining the state immunity issues as defined in the order of Mr Justice Goose dated 7 November 2018.

The reason for seeking this order is that it became plain in light of the arguments advanced by the Defendants for the first time at the hearing of this case between 2 and 5 July 2019 that evidence on these two issues could (depending on the court’s decision on the Claimants’ primary case about section 31(1)(a) Civil Jurisdiction and Judgments Act 1982) be essential for the correct, and fair, resolution of these claims. For that reason, and those set out further in the fifth witness statement of Mr Jeremy Andrews, it is appropriate to grant the order sought.”

As the application notice states, the evidence in support of it is a witness statement from Mr Jeremy Andrews of DLA Piper LLP, the Claimants’ solicitors. The witness statement is dated 12 July 2019.

These proceedings stem from the Claimants’ application to enforce in England and Wales twelve Judgments of the United States District Court for the District of Columbia. These Judgments arise out of terrorist incidents occurring in a number of Middle Eastern countries and, in one case, in New York.

The proceedings have a long procedural history dating back to the issue of the Claim

Both the service issues and the state immunity issues were ordered to be listed to be heard together on the first available date after 6 May 2019 with a time estimate of 4 days.

A detailed timetable for the preliminary issues was ordered as follows:

“4.

The timetable in relation to the preliminary issues shall be as follows:

4.1

The Defendants shall file their additional evidence in relation to the preliminary issues by 4pm on Friday 11 January 2017;

4.2

The Claimants shall submit evidence in response by 4pm Friday 8 March 2019;

4.3

The Defendants have the right to submit evidence in rebuttal by 4pm Friday 5 April 2019;

4.4

The evidence referred to in paragraphs 4.1-4.3 above may include expert evidence on matters of US law of relevance to the preliminary issues if the parties are so advised;

…

4.7

Skeleton arguments are to be exchanged by close of business 2 clear days before the start of the hearing”.

The evidence filed by the parties was as follows:

The hearing of the preliminary issues took place between Tuesday 2 July 2019 and Friday 5 July 2019. All the submissions on state immunity were completed. There was not enough time to deal with the service issues. These were adjourned to be heard on Monday 22 July 2019.

The matters to be decided in relation to the state immunity issues are complex. They fall into three main categories namely:

This application concerns only the matters arising under section 31(1)(a). Those matters fall under two main subheadings:

Before I turn to the detail, I will return to the timetabling. Absent this application I intended to send out a draft Judgment on the state immunity issues during the week commencing 15 July 2019. After hearing the service issues on 22 July 2019, it was my intention to send out a draft Judgment on those issues within a few days of that hearing. I had hoped that the entire Judgment (consolidated as one Judgment) would have been handed down before the end of term on 31 July 2019. Whether that would have been possible, and whether an order could have been made, including consequential orders, is not known. It is right to say that, during the hearing of 5 July 2019, counsel for both sides agreed that time was not of the essence, and that the formal hand down of the Judgment and consequential orders could if necessary be left to the beginning of the new term in October 2019.

During the evening of Friday 12 July 2019 my clerk sent to me details of the proposed order and documents in support of it. At that stage the application notice requested that the application be dealt with on paper. On Saturday 13 July 2019 I caused my clerk to send an email to the parties stating, inter alia, that I did not believe that dealing with the application without a hearing was possible, unless the Defendants consented. The Defendants did consent and I have received written submissions from both sides during the week commencing 15 July 2019. This judgment is based on those written submissions.

The first issue concerns two organisations. These are the Alavi Foundation and 650 Fifth Avenue Company. The evidence from the documents is that the Alavi Foundation is a public charitable association incorporated in New York and 650 Fifth Avenue Company is a partnership comprising two partners, Assa Corporation and the Alavi Foundation. Assa Corporation is a New York corporation incorporated in 1989 and dissolved in 2010.

The second issue concerns whether or not the Claimants can prove that the Defendants had a presence in the United States by virtue of their United Nations delegation.

The Claimants relied on a case in the United States District Court for the Southern District in New York so as to attempt to establish that the Defendants were present in the United States. This case is Kirschenbaum et al v 650 Fifth Avenue [257 F.Supp.3d4 63(S.D.N.Y.2017]. From this case the Claimants say that this Court should find that both the Alavi Foundation and 650 Fifth Avenue Company were agents or instrumentalities of Iran. The Defendants submit that findings in the Kirschenbaum case are not admissible in this court as evidence of the facts decided.

However, in their skeleton argument, counsel for the Defendants made this further submission:

“53.

Finally, the US is a federal system and the US Judgments emanate from state rather than federal courts. Accordingly, it is submitted that the Claimants would have to show that Iran were present in the state (District of Columbia) rather than the Federation (USA). Whilst the former embassy was of course in Washington DC, the Alavi Foundation and 650 Fifth Avenue

Company are both New York entities. Accordingly the Claimants’ arguments for presence via these two entities cannot succeed in any event.”

During the hearing the Defendants accepted that the District of Columbia Court was in fact a federal court.

Relying on the case of Adams v Cape Industries plc [1990] 1 Ch 433, the Defendants submit that the English Court cannot take judicial notice of whether the court in the District Columbia had jurisdiction such that the presence of a body in New York state is subject to its jurisdiction. They said it is a fact to be proven and there is no evidence before the court.

The Claimants’ response was that it is a matter of law whether a state is present within the jurisdiction of a foreign court. Alternatively, they submitted that the point could

Mr Andrews’ statement in support of the application encapsulates the situation if the Defendants are allowed to take the point. He says:

“8.

If, contrary to the Claimants’ submission, the court considers that this argument can be raised by the Defendants even though they have adduced no evidence in respect of it, the Lewis Report is filed to provide the court with evidence on US law regarding the jurisdiction of the DC district court in order to assist the court in determining the matter with the benefit of all appropriate evidence before it.”

Mr Lewis is a former federal judge. In his report dated 12 July 2019 he deals in some detail with the jurisdiction of the United States District Court for the District of Columbia. In brief it appears that his opinion is that this court had jurisdiction irrespective of where the Alavi Foundation and 650 Fifth Avenue Company were present in the United States.

As an alternative means of proving presence, the Claimants argued for the first time during the hearing, and on the last day of the hearing, that Iran’s presence at the United Nations (“UN”) in New York sufficed to fulfil any requirement of presence pursuant to section 31(1)(a) of the 1982 Act. They relied upon some evidence given in Mr Howarth’s second witness statement at [145] - [148]. This is evidence about Iran’s permanent mission to the UN with its Headquarters in New York. This evidence was given in the context that Mr Howarth was saying why the Defendants did not have a relevant presence in the United States.

The Defendants objected to the Claimants raising this argument. They said it had never been raised before. The Claimants accepted that it had not been raised before.

As I previously said, Mr Howarth mentioned Iran’s UN delegation in his statement when dealing with why the Defendants do not have a presence in the United States. Mr Andrews responded in his statement of 15 March 2019 in some detail to Mr Howarth’s statement. Mr Andrews nowhere suggested that UN presence would suffice. In my judgment, whatever Mr Brook had said in his statement in 2014, if the Claimants wished to submit that, alternative to their primary argument, a presence was required and it could be established by the presence referable to the UN delegation, then it was incumbent upon them to make this point in some way (eg in witness statements) well in advance of the hearing so that the Defendants had a proper opportunity to address it evidentially and legally. I shall return to this point later.

The Defendants submit that the situation is akin to a very late amendment application i.e. an application to amend where the final hearing date has been fixed and where permitting the amendments will cause the final hearing to be lost. It is true that the application to adduce further evidence is extremely late and follows what was thought to have been the closure of all submissions on the state immunity issues. However, the final hearing date has not been lost in the sense that the four days have been used. The majority of the time used during those four days will remain relevant.

I should say that there is no objection based on an argument that the Claimants need relief from sanctions. What the Defendants submit is that the Court applies the principles in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm) where Carr J said at [38]:

“Drawing these authorities together, the relevant principles can be stated simply as follows :

a)

whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted;

b)

where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission;

c)

a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept;

d)

lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done;

e)

gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation;

f)

it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay;

g)

a much stricter view is taken nowadays of non-compliance with the Civil Procedure Rules and directions of the Court. The achievement of justice means somethingdifferent now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so.”

The Claimants submit that the principles I should apply are rather those stated by

In fact, on analysis, apart from the factor in Su Ling about the loss of the trial date, the principles in both cases are essentially the same. Both (i) refer to whether there is a good reason for the late application, (ii) emphasise the significance of the new material as a factor, (iii) require consideration of prejudice to each party to be considered and (iv) refer to the need to do justice to all the parties having regard to the overriding objective.

As to the overriding objective, Carr J’s points in (a), (e), (f) and (g) are just as applicable to this case as to the case of a late amendment application.

I have cited the relevant passages from the Su-Ling and Foster cases. I remind myself that in the case of Kimathi and others v Foreign and CommonwealthOffice [2017] EWHC 2145 (QB) at [34] I reviewed a number of authorities and said that I did not read them as requiring, as a precondition to the Court granting a late amendment, evidence showing why the change is sought so late and was not sought earlier. I continued [34.6]:

“It is a factor to be weighed in the balance, that a properly informed application of justice to all litigants is the key to the Court’s power to grant an amendment – see in particular Swain v Mason at paragraph 68-74 and the principles distilled in SuLing at paragraph 38 and in particular at paragraph 38(a)”

The Defendants make a number of points. I shall summarise them as follows:

In Mr Andrews’ witness statement at [6]-[7] he says that if the Defendants wish to rely on an argument that presence elsewhere in the United States does not constitute presence for the purposes of enforcing the Judgments of the DC District Court, then it was incumbent on the Defendants to raise this in evidence and not to wait until the hearing and deploy it in submissions.

The onus is on the Claimants to prove factual jurisdiction. In Adams the Court received evidence from foreign jurists and heard detailed submissions. It also had to rule on disputed evidence on the foreign law. In detailed obiter dicta the Court of Appeal considered what they described as “the country issue”. Relevant passages are before Scott J at first instance at [1990] 1 Ch 433 at 484D-492G, and in the Court of Appeal beginning at page 550F, in particular at page 556F.

The Claimants refer to the fact that throughout, from the time of the appearance before Singh J in 2012, their case has always been that what was being enforced were 12 federal court judgments and that the Defendants could be said to be legally present in the United States. Their case was that this presence was satisfied by the entities in New York.

The Claimants say that the Defendants, who did raise various legal arguments in their witness statements, should have raised also the fact that they were taking the federal court’s jurisdictional reach point. Further, the Defendants’ witness statements specifically referred to the issue as being presence in the United States, not presence within any possible restricted jurisdictional reach of the federal court in the District of Columbia.

In the Claimants’ written submission at [19], it is said that the Defendants’ account of the procedural history ignores the fact that their own case proceeded on the basis that the question for the court was whether there was presence in the United States. In Mr Howarth’s second witness statement [117] he said: “I turn now to what Singh J described as the “other main issue” in his considerations, the question of whether the Court would have jurisdiction to enforce the District Court’s Judgment pursuant to common law on the basis that the government of Iran had a presence in the United States.” This emphasis on presence in the United States, with no reference to the jurisdictional reach of the District of Columbia Court is repeated in a number of subsequent paragraphs. At no stage was it raised that, for the purposes of rule 43 in Dicey, Morris & Collins, the question was whether Iran was present in a particular state under the jurisdictional reach of the District of Columbia Court.

Unfortunately, this is not a case where there has been pleadings. If there had been, I take the view that it would have been for the Defendants to raise this issue in a

I strongly suspect that both parties overlooked this point until the Defendants prepared their skeleton. Even then they made an error as to the level of the District of Columbia Court. I feel confident that had they seen the point earlier they would have raised it via witness statements or correspondence.

Technically, and in the absence of pleadings, I regard the Defendants’ case as correct. It is for the Claimants to prove their case. I do not accept the Claimants’ alternative submission that it was for the Defendants to raise expert evidence that the United States is not one country for English conflict of laws’ purposes.

Nevertheless, in the above circumstances as a whole, I take the view that there was a good reason why the Claimants did not adduce evidence on this point before. For reasons to which I now turn, the overriding objective, taking into account other relevant matters, militates in favour of allowing this evidence.

In relation to the application to adduce the Lewis Report the Defendants make these points:

Dealing with the points apart from good reason:

Ultimately, I have to make a decision to apply the overriding objective. The overriding objective must be informed by the factors set out by Carr J in Su-Ling. I do not lose sight of them. They must be seen against the backdrop that I have found good reason for not adducing the evidence earlier. Considering that factor and the factors of saving expense, dealing with the case expeditiously, allotting to it an appropriate share of the Court’s resources, while taking into account the need to allot resources to other cases and enforcing compliance with orders on the one hand, there are factors to weigh in the balance on the other hand. These are that I have to deal with the case in ways which are proportionate to the amount of money involved, the importance of the case, the complexity of the issues and the financial position of each party. The amount of money involved is over $600million. The importance of the case, both financially and considering the facts underlying the US Judgments, is very high, as is the complexity of the issues. There is no suggestion that the financial position of the Defendants is a factor which should weigh against allowing this evidence. I also have to ensure that, apart from dealing with the case expeditiously, it is dealt with “fairly”. Finally, the overriding objective itself is to enable “the courts to deal with cases justly and at proportionate costs”. I take the view that the balance is in favour of allowing the Lewis Report to be adduced in evidence albeit at this very late stage.

This is particularly so since, it seems to me, that there is a sensible means of dealing proportionately with this part of the Application. I have decided to send out, contemporaneously with this judgment, my judgment on the State immunity issues.

I have set out above what Mr Andrews said at [10]–[12] of his witness statement.

My state of mind prior to the application being made was that I would not have allowed the Claimants to rely upon the UN presence argument. This was because it was raised far too late and the Defendants were prejudiced by the lateness. It would require a detailed exposition of and/or evidence about the UN presence and it purpose. The Defendants had had no proper opportunity to assess it evidentially and legally. I was of the view, and remain of the view, that the Claimants were not entitled to rely upon what Mr Brook said in his 2014 statement.

Unlike the first part of the application where I have found that there was good reason for the evidence not being adduced earlier, there is no such good reason here. Whether to rely upon the Iranian UN presence is something of clear primary importance which, if it was to form part of the Claimants’ case, should have been appreciated from the outset, or at least well in time to comply with Goose J’s directions. The reliance said to have been made upon Mr Brook’s statement is no proper basis for the Claimants’ deciding how to present their own case.

The Claimants’ submission is:

As I have previously set out, Mr Howarth’s second witness statement raised the question of the UN delegation expressly to say why it was not presence for the meaning of section of 31(1)(a).

The Claimants say that it would be extremely unjust to decide the case without considering evidence about the extent of Iran’s diplomatic presence through its UN mission because the Defendants have changed their position and seek to persuade the Court adopt a presence test which they say can be satisfied by diplomatic presence. They rely on the further matter that in the skeleton exchange shortly prior to the hearing, counsel for the Defendants at paragraph 26 (5) said, relying on the KuwaitAirways, “the House of Lords has confirmed that even the presence of a mission for the purposes of diplomatic intercourse should not automatically equate to a legal presence within the jurisdiction” (my underlining).

If the Claimants did rely on Mr Brook’s statement prior to the hearing, then it was not appropriate for them to do so. My reasons are:

The Defendants make these further points:

Looking again at the principles I have to apply and the overriding objective, it seems to me that the balance is firmly tipped against the Claimants in this part of the Application. That is because:

For the above reasons I allow the application to rely on the Lewis Report but refuse the application to rely upon the second statement of Mr Mechling and its enclosures.