Arros Invest Ltd v Nishanov
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins |
| Judgment Date | 23 March 2004 |
| Neutral Citation | [2004] EWHC 576 (Ch) |
| Court | Chancery Division |
| Docket Number | CH/2003/APP/0825 |
| Date | 23 March 2004 |
[2004] EWHC 576 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Appeal against the order of Master Moncaster
dated October 28, 2003 (HC02 C 02648)
Mr Justice Lawrence Collins
CH/2003/APP/0825
Mr Andrew Twigger (instructed by Howard Kennedy) for the Appellant/Claimant
Mr Jonathan Brettler (instructed by Edwin Coe) for the Respondent/First Defendant
(Approved by the Court for handing down)
Hearing Date: March 17, 2004
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
()
I Introduction
This is an appeal by Arros Invest Ltd ("the claimant") from the order of Master Moncaster of October 28, 2003. In a very full and careful judgment, the Master set aside service on the first defendant ("Mr Nishanov") on the ground that he had not been served with the claim form before it had expired, and refused to extend its validity. The appeal is from the first part of the order.
The claim is made by the claimant against its two former directors in relation to the alleged diversion of $4.9 million belonging to the claimant. The claimant was wound up by the court on June 7, 2000 on the petition of Tatneft, a Russian oil trading company. The petition debt was an arbitration award of about US$4,900,000 representing the price of crude oil purchased by the claimant from Tatneft. The claimant brought these proceedings against its former directors (Mr Nishanov and Mr Fazlyev), alleging that they had dishonestly diverted from the claimant the bulk of the proceeds of sale of the oil purchased from Tatneft and sold on by the claimant to Lukoil. These proceedings are in substance a claim by Tatneft, which is funding the liquidator, that it was defrauded by both Mr Fazlyev and Mr Nishanov in the oil purchase transaction.
Mr Nishanov has had a distinguished diplomatic and political career, and he denies the allegations.
The procedural history is as follows:
(a) Permission to serve the claim form out of the jurisdiction was given on August 12, 2002, and it was issued on September 17, 2002;
(b) The period of validity of the claim form consequently expired on March 17, 2003: CPR Rule 7.5(3).
(c) The claim form (with translations and accompanying documents) was sent by registered mail on March 12, 2002 by a Russian lawyer, Mr Tsepov;
(d) The claim form was sent (through a private courier company acting on behalf of the Russian postal service) to a property which Mr Nishanov owned, but at which he did not reside, at the time;
(e) The claim form was delivered at that address (which was Mr Nishanov's registered address for the purposes of the nationality rules of the Russian Federation) on March 13, 2003, and a "confirmation of receipt" was signed by Ms Davydova, a babysitter employed by Mr Nishanov's tenants;
(f) Mr Nishanov did not himself receive the claim form until March 19, 2003 (i.e. two days after the expiry of the validity of the claim form).
Mr Nishanov applied on April 16, 2003 to set aside service on the grounds that (a) the claimant failed to serve the proceedings on him within the 6 month period allowed by CPR Rule 7.5(3); and (b) permission to serve out ought to be set aside because the claimant had failed to demonstrate a good arguable case or a prima facie case against Mr Nishanov on the merits or on the jurisdiction of the court under CPR Rule 6.20.
It was agreed at the hearing before the Master that the question of service ought to be disposed of first: if Mr Nishanov had not been served, the other questions did not arise in relation to the proceedings.
Mr Nishanov's position at the outset of the proceedings was that service should have been effected through diplomatic channels. But the Russian Federation is a party to the Hague Service Convention which provides in Article 10:
"Provided the State of destination does not object, the present Convention shall not interfere with?
(a) the freedom to send judicial documents, by postal channels, directly to persons abroad,
(b) the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination,
(c) the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination."
Russia has not objected to such methods of service.
By CPR Rule 6.24(1)(a):
"(1) Where a claim form is to be served out of the jurisdiction, it may be served by any method?
(a) permitted by the law of the country in which it is to be served: …"
II Applicable Russian Code for service: evidence
Domestic Russian rules on service of proceedings depend on whether the case comes within the jurisdiction of the courts of common jurisdiction or courts of specialised jurisdiction. In the case of the former the Code of Civil Procedure ("CPC") applies, and in the case of the latter the rules of the specialised jurisdiction apply. In the present case the only specialised jurisdiction which is potentially relevant are the Arbitrazh courts, which deal with (inter alia) commercial disputes. Their procedure is governed by the Arbitrazh Procedural Code ("APC").
The first issue on this appeal is whether it is the service provisions of the CPC or of the APC which apply. This point arises because it is common ground that if the proceedings are of a character which, had they been commenced in Russia, would fall within the CPC, and not within the APC, then service would not have been validly effected by post. The Master assumed in favour of the claimants that the APC applied, but went on to hold that service had not been effected in time. By Respondent's notice Mr Nishanov argues that the Master ought to have determined the application in his favour on the ground that the CPC applied.
The evidence developed in this way:
(a) In his witness statement in support of the application Mr Nishanov said that the documents were delivered to a property at which he no longer resided, and that the claimant did not adopt the correct channels in arranging for service. The person who signed for the documents at the residence was the babysitter. The proceedings should have been served through diplomatic channels.
(b) In correspondence the claimant's solicitors indicated that they had been entitled to serve process under CPR Rule 6.24(1)(a) in accordance with the CPC, and that it was permissible to serve the proceedings with translations by registered post with notice of receipt addressed to the last known address.
(c) Mr Tsepov made a witness statement on July 15, 2003 for the claimant in which he said that he had arranged for service on the registered address of Mr Nishanov. Employees of his firm attempted to serve Mr Nishanov personally, but it turned out that he was not at the address, although a person or persons at the address confirmed that the apartment was owned by him. Following unsuccessful attempts to trace and serve him personally, the proceedings were sent by registered mail to the registered address.
(d) Mr Nishanov's solicitors produced on July 15, 2003 a witness statement, to which they appended an opinion of Mr Liakhov, in which he said that under the Civil Procedure Code of the Russian Federation personal service was required (subject to some exceptions not relevant in this case).
(e) On July 17, 2003 Master Moncaster ordered that the claimants should serve any further evidence by 4 p.m. on August 14, 2003, and that unless such evidence was served by then they be debarred from relying on any further evidence and that Mr Nishanov serve any evidence in reply by September 18, 2003, and that the application be adjourned to be heard on October 1, 2003.
(f) As a result the claimants produced an expert report by Ms Olga Baglay dated August 13, 2003, and Mr Nishanov produced an expert report by Andrei Liakhov dated September 18, 2003.
(g) Shortly before the substantive hearing before the Master on October 1, 2003, the claimant's counsel's skeleton argument sought to rely on provisions of the APC which Mr Nishanov says were not the subject of Ms Baglay's evidence, but to which he responded by producing at the hearing before Master Moncaster further material in the form of an email from Mr Liakhov dated September 30, 2003.
Ms Baglay is a qualified Russian lawyer employed by Messrs Watson Farley & Williams, and has practised in litigation and arbitration for some eight years. But she does not hold herself out as a specialist in Russian civil procedure. Nor does Mr Liakhov, a qualified Russian lawyer employed by Messrs Norton Rose, who has both academic and professional qualifications, appear to do so.
The only provisions relating to the jurisdiction of the APC which were before the court were these:
Article 33
"1. Arbitrazh courts deal with cases of:
1) Insolvency (bankruptcy);
2) Disputes concerning the establishment, reorganisation and liquidation of organisations;
3) Disputes concerning refusal to grant state registration, evasion of registering legal entities and individual entrepreneurs;
4) Disputes between a shareholder and a shareholding company, parties to other types of business associations and societies, themselves resulting from the activity of business associations and societies, excepting labour disputes;
5) Protection of business reputation in business and other economic activity;
6) Other cases resulting from business and other economic activity...
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