Balkanbank v Taher and Others (No 3)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SAVILLE,LORD JUSTICE NEILL,LORD JUSTICE EVANS |
| Judgment Date | 18 November 1994 |
| Judgment citation (vLex) | [1994] EWCA Civ J1118-5 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | QBCMI 94/0736/B |
| Date | 18 November 1994 |
[1994] EWCA Civ J1118-5
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(Mr Justice Clarke)
Before: Lord Justice Neill Lord Justice Evans Lord Justice Saville
QBCMI 94/0736/B
MR S GEE QC and MR D CAVENDER (Instructed by Messrs Bermans, Finsbury Square) appeared on behalf of the Appellants/1st, 3rd and 4th Defendants
MR T SALOMAN QC and MR R BRIGHT (Instructed by Messrs Allen & Overy, London EC2V 6AD) appeared on behalf of the Respondent
( )
Friday, 18 November 1994
In October 1990 Balkanbank started an action in Ireland in which it alleged that a number of the defendants had acted fraudulently in relation to the obtaining of a loan of US$ 7 million from an American bank. In addition it was alleged that part of the loan had been used without the authority of Balkanbank. At the same time Balkanbank obtained a Mareva injunction in the Irish Court against the defendants, limited to assets within the jurisdiction of that Court.
A few days later Balkanbank, against the usual cross-undertaking as to damages, obtained a worldwide Mareva injunction in the English Commercial Court, in aid of the claims being made in the Irish proceedings.
Judgment in the Irish action was given in February 1992. The judge held that part of the loan had been used without authority but rejected the allegation that the loan had been obtained fraudulently. He held that Mr. Mironov, the President of Balkanbank, knew of and assented to the loan. The Mareva relief granted by the Irish Court was discharged, and it was ordered that there should be an inquiry as to damages suffered by the Defendants by reason of that injunction. In addition the judge dismissed a counterclaim advanced by the Fifth Defendant, Balkan International Limited. Various parts of the Irish judgment are now the subject of an appeal in that country.
So far as the English Court is concerned, the worldwide Mareva was discharged by consent in May 1992 leaving over the question, yet to be determined, whether the cross-undertaking as to damages should be enforced, though the parties have been engaged in preparing to deal with damages should that be the order of the Court. However, a few weeks earlier, three of the Defendants themselves obtained a Mareva injunction against Balkanbank in aid of their claim under this cross-undertaking; and this injunction is still in force.
The foregoing summarizes the essential background features of the litigation between the parties. As well as the trial and appeal in Ireland there have been and continue to be many long and expensive interlocutory battles between them both here and in Ireland, in which each side has sought to obtain some advantage over the other.
We are concerned with one of those battles. Three of the Defendants have sought to make counterclaims against Balkanbank in this country in the worldwide Mareva proceedings. Via Holdings Limited (the Third Defendants) wish to counterclaim for damages for breach of the joint venture agreement which has given rise to the disputes between the parties and for alleged breaches of fiduciary duties said to have been owed by Balkanbank to this company, and also, together with Mr Taher (the First Defendant) and Taher Meats (Ireland) Limited (the Fourth Defendants) for a Declaration that their losses were caused by the granting of the Mareva injunction in Ireland.
These counterclaims would appear to have been prompted by the fact that Balkanbank have contended, in the course of preparation for the hearing on the cross-undertaking for damages, that any losses sustained by these Defendants were not caused by the granting of the English worldwide Mareva, but by the Irish Mareva or the fact that Balkanbank was alleging fraud. This the Defendants dispute, but if they are wrong they wish to protect their position by either getting a declaration that the Irish Mareva caused the losses (for use by way of estoppel in the Irish Courts) or by advancing a claim that (among other things) the unfounded allegations of fraud made by Balkanbank amounted to a breach of the joint venture agreement or other duties owed by Balkanbank for which the latter should pay damages.
Balkanbank submit that the Court does not have jurisdiction to entertain these counterclaims. Clarke J accepted this submission and struck them out. This is an appeal from that ruling.
In order to obtain the worldwide Mareva injunction Balkanbank issued an Originating Summons. Order 28 rule 7 of the Rules of the Supreme Court provides as follows:-
Clarke J concluded that the words "action begun by originating summons" in Order 28 rule 7(1) are confined to actions in which the plaintiff seeks some substantive relief from the Court ie the resolution of the merits of some dispute existing between the plaintiff and the defendant; that the claim of Balkanbank was for interim relief in support of proceedings abroad where the merits of the disputes between the parties would be litigated; and that accordingly the matter fell outside this Rule.
Section 151 of the Supreme Court Act 1981 defines "action" as meaning (unless the context otherwise requires) any civil proceedings commenced by writ or in any other manner prescribed by rules of court. The claim for a worldwide Mareva injunction was properly made by an Originating Summons under Order 5 rule 3, since Balkanbank was making an application for such relief under Section 25 of the Civil Jurisdiction and Judgments Act 1982. This Section (as later amended) gives the English Court power to grant interim relief (which includes worldwide Mareva relief) where (among other things) proceedings whose subject matter is within the scope of the 1968 Convention as determined by Article 1 have been commenced in a Brussels or Lugano Contracting State other than the United Kingdom. The action brought by Balkanbank in Ireland falls within this description.
In these circumstances the Appellants submit that they are defendants to an action begun by originating summons and that accordingly Order 28 rule 7 (1) gives the Court jurisdiction to entertain their counterclaim.
The underlying reasons why the right to counterclaim exists are twofold.
In the first place, it is in general terms clearly desirable and in the interests of justice to avoid multiplicity of proceedings. This principle is, as the Appellants point out, enshrined in statute: see Section 49(2) of the Supreme Court Act 1981 which expressly enjoins the court (subject to any statutory provisions to the contrary) to exercise its jurisdiction in every cause and matter before it so as to secure that, so far as is possible, all matters in dispute between the parties are completely and finally determined and all multuplicity of legal proceedings with respect to any of those matters is avoided.
The same Section also provides that, among other things, the Court shall give "the same effect as hitherto" to all rights and counterclaims. In this regard Section 39 of the Supreme Court of Judicature (Consolidation) Act 1925 gave the Court power to grant to any defendant "all such relief against any plaintiff…as the defendant has properly claimed by his pleading and as the Court or Judge might have granted in any suit instituted for that purpose by that defendant against the same plaintiff." Section 225 of the 1925 Act defines "plaintiff" as including "every person asking any relief…against any other person by any form of proceeding whether the proceeding is by action, suit, petition, motion, summons or otherwise." Section 36 of the 1925 Act applies Section 39 (subject to the express provisions of any other Act) to "every civil cause or matter commenced in the High Court." The fact that for jurisdictional reasons the defendant would not have been able to launch a separate suit against the plaintiff in this country is irrelevant: see Metal Scrap v Kate Shipping [1990] 1 WLR 115 at 128.
These provisions in the 1925 Act reflect the fundamental changes introduced by the Judicature Act 1873; cf McGowan v Middleton (1883) 9 QBD 464.
In the second place, it would also seem in general terms to be only fair and just that those who choose to bring proceedings in this country should be open to suit in return, so that any submission which involves the proposition that a party can seek relief in our courts without running the risk of being sued in return necessarily requires, in the interests of justice, to be very closely examined: see, for example, Derby & Co. Ltd v Larsson [1976] 1 WLR 202, per Lord Russell at 205.
The Appellants rely on both these reasons. In their submission, their counterclaims are calculated to avoid multiplicity of proceedings, since the whole question of causation of their alleged losses can be dealt with in one hearing, together with their claim under the cross-undertaking as to damages. The cross-undertaking as to damages is an integral part of the Mareva relief sought by Balkanbank. In resisting the defendants' claims in respect of this cross-undertaking, it is Balkanbank who has raised the contention that the losses allegedly sustained by the Appellants were not caused by the English injunction, but by the Irish injunction or the fraud allegations. It is surely unfair, submit the Appellants, that Balkanbank can raise these causations issues in the proceedings, but the Appellants are precluded from raising the same issues by way of counterclaim.
Set against these arguments is the fact that in exercising its jurisdiction under Section 25 of the Civil...
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