Air Foyle Ltd and Another. v Center Capital Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Gross |
| Judgment Date | 03 December 2002 |
| Neutral Citation | [2002] EWHC 2535 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2002/420 |
| Date | 03 December 2002 |
[2002] EWHC 2535 (Comm)
The Honourable Mr Justice Gross
Case No: 2002/420
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Mr Bernard Eder QC & Mr Richard Millett (instructed by S J Berwin, and Richard Slowe (Solicitor-Advocate) of S J Berwin) for the Claimant
Mr Philip Shepherd & Mr Bajul Shah (instructed by Hill Taylor Dickinson) for the Defendant
Hearing dates : 4 November 2002 – 6 November 2002
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Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
………………………..
THE HON MR JUSTICE GROSS
Mr Justice Gross:
INTRODUCTION
This case concerns an Antonov AN124–100 aircraft ("the aircraft"). The aircraft is presently at Manston in Kent, where it has been since October 2001. It is subject to a Consent Order made by Moore-Bick,J on 26 th April, 2002, which prevents its removal from the jurisdiction.
The First Claimant ("AF") claims ownership of the aircraft on the basis of a purchase at an auction held in The Netherlands ("Holland" or "the Dutch", as appropriate) on the 4 th December, 2000, pursuant to an order made by the Dutch Court, dated 7 th June, 2000. The aircraft was physically located in Holland, on the 7 th June and the 4 th December, 2000 and when the aircraft was subsequently delivered to AF. The role of the Second Claimant is immaterial and no more need be said of it.
The Defendant ("CC") claims ownership on the basis of having purchased the aircraft from its former owner, a Russian Federation ("Russia" or "the Russian", as appropriate) company called Ayaks Closed Joint Stock Company ("Ayaks"), pursuant to a contract of sale, governed by Russian law, dated 20 th October, 2000. It is to be noted that the aircraft is and was at all material times registered in Russia.
As will be appreciated, the fundamental issue between the parties is who, as between AF and CC, has valid title to the aircraft.
This is the trial of Preliminary Issues, originally ordered by Morison,J. on the 6 th August, 2002, in the following terms:
"1. There shall be tried as a preliminary issue…. the following question namely, on the assumption only for the purposes of the preliminary issues that the judgments of the Russian courts relied upon by the Defendant were obtained regularly, in accordance with due process and were not perverse, such that the enforcement and recognition of such judgments by this court does not offend against English public policy,
"Whether any of the claims and/or causes of action or defences advanced by or on behalf of the First Claimant have already been determined expressly or by necessary implication in previous legal proceedings between the First Claimant and the Defendant by the Courts of The Netherlands and/or the Courts of the Russian Federation."
If the answer to the question posed at 1 above is "yes", which are the issues and/or causes of action, what is the effect if any of such determination and does it make a difference whether the Dutch court would not have recognised and enforced the Russian judgments ?"
The trial in this Court began on Monday 4 th November. On the morning of Tuesday 5 th November, I was informed that certain of the Russian judgments hitherto relied on by CC had been, as it would appear, set aside by the Supreme Arbitrazh Court of the Russian Federation ("the SAC") and returned to be re-heard at first instance. Such re-hearing will not take place for some time. The written judgment of the SAC is not yet available. It is further possible (but not certain) that the judgment of the SAC will have ramifications for the other Russian judgments to which reference will be made. Understandably, the trial adjourned for a short time so that consideration could be given as to whether it should proceed. In the event, it was agreed that it should but on the basis of the assumption that the Russian judgments in question had not been set aside. Effect was given to this assumption by incorporating in the Preliminary Issues, the following wording "as existing as at 1 st November, 2002" in paragraph 1 thereof, so that that paragraph now reads as follows:
"1. There shall be tried as a preliminary issue…. the following question namely, on the assumption only for the purposes of the preliminary issues that the judgments of the Russian courts, relied upon by the Defendant as existing as at 1 November 2002 were obtained regularly…."
italics added; the paragraph then continues as set out above. By proceeding in this manner, the available "slot" has been utilised and it has been possible to determine whether AF is in any event entitled to succeed, even on the most favourable assumption for CC, namely the survival of all the Russian judgments in question.
It will further be apparent from the terms of the Preliminary Issues that this trial proceeds on the assumption that both the Dutch and the Russian proceedings were (procedurally) valid. I turn next to the factual history.
THE CHRONOLOGY
(I) Developments in Holland and a Russian contract of sale: On the 19 th May, 2000, the bailiff for the Cantonal Court of Maastricht (a Mr. Sinkiewicz) impounded or arrested the aircraft and appointed a Mr. Marinus as the "custodian" of the aircraft. The aircraft was arrested at the request of Bank Imperial Inc. ("BI" or "the arrestor"), a Russian Bank, in respect of a mortgage debt, unpaid by Ayaks (the then owner of the aircraft). The aircraft was then physically located at Maastricht airport.
The position and status of a "custodian" were described by the Dutch Law experts, as follows:
(1) In his Affidavit, Mr. Van der Wiel, the Dutch Law expert, called by CC, said this:
"The task of a custodian is to look after the arrested object in the interest of the arrestor … to pay the expenses, caused by the arrest, like in this case the costs, charged by the airfield for the fact that the arrested plane was standing at the airfield. Dutch law then gives the custodian the right to sell the arrested object to recover those costs…."
(2) In cross-examination, Prof. De Ly, the Dutch law expert called by AF, said that while the custodian was appointed at the behest of the arrestor, he was designated by the Court; he did not have the "public office" functions that notaries or bailiffs have in Holland; however:
"….. he is not a contractual custodian. He is a judicial custodian. He is appointed by a court and works primarily under the authority of a court."
On the 25 th May, 2000, the custodian, Mr. Marinus, petitioned the Maastricht District Court under Art. 858 of the Dutch Civil Code to sell the aircraft, because of unpaid custody and other charges and because of safety considerations (the aircraft, where then situated, constituted an obstruction). As to the question of costs, the Petition said this:
"The petitioner-custodian does not have sufficient funds to pay the expenses accumulated to date, that is parking money and for other operations of the airport, or even to fund in the short-term the expenses […of relocation..]..
The distrainer [ie., BI] has not provided any money to the petitioner, or for that matter any guarantee in respect of the above-mentioned expenses.
The distrainer has intimated that he is unable to do this.
The embargo was laid on the aeroplane as security for the claim of the bank on the owner of the aeroplane on account of the funding provided prior to the purchase of the plane."
With considerable foresight, the Petition continued as follows:
"It is important for all of the parties to achieve the sale of the plane soon. Numerous legal procedures are pending with respect to the aeroplane, which can go on for years for your court and for judicial instances in other countries (Russia, England). There is no prospect of the procedures being finalised within a reasonable period of time. And all the time the custody of the aeroplane, no matter where it is located, is clocking up.
Selling the aircraft will cost money too, but these are one-off costs. The proceeds, after deduction of expenses, will be deposited in the … fund, and the parties may then arrange for the proceeds to be distributed. After this no further expenses will be incurred, which would reduce the value of the object, quite the contrary, the sum of money deposited in the … fund can earn interest."
The Petition referred to an auction as the "obvious method" of selling the aircraft.
Pausing there, Art. 858 of the Dutch Civil Code provided as follows:
"1. If the costs of sequestration are not paid to the sequestrator in good time, he may sell the sequestered property in a manner to be determined by the president of the District Court at his request; the proceeds shall take the place of the property sequestered and shall be paid into court for the benefit of the interested party after deduction of the costs of sequestration and of the sale.
If the sequestration is based on an attachment the president shall not grant the request until after the judgment debtor(*) has been called for a hearing.
There shall be no appeal from a positive award by virtue of this section."
(*) Although the words "judgment debtor" appear in the translation of Art. 858 available to the Court, it became plain during the hearing that Art. 858 was applicable in situations (such as this) where there was no judgment or judgment debtor. Indeed, as Mr. Van der Wiel remarked, the Art. 858 procedure was akin (a matter to be considered further) to the procedure utilised in the English Admiralty Court when making an order for the sale, pendente lite, of a vessel under arrest. For present purposes, accordingly, it is preferable to...
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