Deutsche Bank AG v Sebastian Holdings Inc. Alexander Vik (Defendant for costs purposes only/Respondent)
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 16 December 2016 |
| Neutral Citation | [2016] EWHC 3222 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 December 2016 |
| Docket Number | Case No: CL-2009-000709 |
[2016] EWHC 3222 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter lane, London EC4A 1NL
Mr. Justice Teare
Case No: CL-2009-000709
Sonia Tolaney QC, James MacDonaldandAndrew Lodder (instructed by Freshfields Bruckhaus Deringer LLP) for the Applicant
Duncan Matthews QC and Charlotte Tan (instructed by Taylor Vinters LLP) for the Respondent
Hearing dates: 28 July and 9 December 2016
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.
Introduction
Sebastian Holdings Inc. ("SHI"), the Defendant, conducted substantial foreign exchange and equities trading with Deutsche Bank ("DB"), the Claimant. This trading became loss making and when SHI failed to meet margin calls DB took proceedings to recover the debts owed to it. DB was awarded judgment in the sum of US$243m. plus 85% of its costs on an indemnity basis. SHI is the creature company of Mr. Vik, its former, and until April 2015, sole director and shareholder. Accordingly he has been held to be liable to pay DB £36m. on account in respect of its costs. He has paid that amount on account of costs but SHI has not paid the judgment debt. It appears that Mr. Vik has taken action to strip SHI of any assets. It was in those circumstances that I made an order on 20 July 2015 requiring Mr. Vik to provide documents in SHI's control relating to SHI's means of paying the judgment debt and to attend court in order to be cross-examined about SHI's means. That order was served on Mr. Vik when he was within the jurisdiction. Mr. Vik applied to set aside the order. That application was dismissed by Cooke J. He subsequently provided some disclosure and attended this court for cross-examination. DB contends that Mr. Vik deliberately failed to disclose many documents and lied under oath. As a result it has issued an application seeking permission under CPR 6.38 to serve an application for a suspended committal order out of the jurisdiction, an order permitting personal service of the committal application on Mr. Vik in Monaco where he resides and, in the event that he does not accept personal service, an order under CPR 81.10(5) and CPR 6.15 dispensing with personal service and permitting DB to serve the committal application via email and registered post on Mr. Vik's solicitors, Taylor Vinters LLP.
The issues
In response to this application Mr. Vik has advanced three points of law. First, it is said that the court can only make a suspended committal order pursuant to CPR 71.8, second, it is said that CPR 71 does not have extra-territorial effect and third, it is said that there is no jurisdictional gateway pursuant to CPR PD 6B. All three issues raise issues of construction of the CPR.
Is DB constrained by the provisions of CPR71.8?
CPR 71 provides for a judgment debtor or officer of a judgment debtor to be required to attend court to provide information for the purpose of enabling a judgment creditor to enforce a judgment or order against him. CPR 71.2 sets out the procedure to be followed to obtain such an order and CPR 71.8, entitled "Failure to comply with order", provides as follows:
"(1) If a person against whom an order has been made under rule 71.2—
(a) fails to attend court;
(b) refuses at the hearing to take the oath or to answer any question; or
(c) otherwise fails to comply with the order,
the court will refer the matter to a High Court judge or Circuit Judge.
(2) That judge may, subject to paragraphs (3) and (4), make a committal order against the person.
…….
(4) If a committal order is made, the judge will direct that –
(a) the order shall be suspended provided that the person—
(i) attends court at a time and place specified in the order; and
(ii) complies with all the terms of that order and the original order; and
(b) if the person fails to comply with any term on which the committal order is suspended, he shall be brought before a judge to consider whether the committal order should be discharged.
(Part 81 contains provisions in relation to committal.)"
CPR 81.1 states that Part 81 sets out the procedure in respect of contempt of court. CPR 81.2 states that Part 81 is concerned only with procedure and does not itself confer upon the court power to make an order for committal. CPR 81.4(1)(a) provides that if a person required by a judgment or order to do an act does not do it within the required time then the judgment or order may be enforced by an order for committal. CPR 81.10 states how the committal application is to be made. In particular, the grounds on which the application is made must be set out and each act of contempt alleged must be identified. The application notice and the evidence in support must be served personally unless the court dispenses with such service.
In essence the submission of Miss Sonia Tolaney QC on behalf of DB is as follows. The court's power to order committal is an inherent power which is not conferred by the CPR. It derives from the inherent jurisdiction of the courts to compel obedience with their orders. CPR 71 and CPR 81 merely set out the procedures to be followed in order to obtain an order of committal. CPR 81 contains a generally applicable procedure for committal whereas CPR 71.8 provides a summary and streamlined procedure which is only available to enforce orders made under CPR 71.2. In the present case both procedures are available to DB.
In essence the submission of Duncan Matthews QC on behalf of Mr. Vik is as follows. Given that the committal is sought in respect of alleged breaches of an order made under CPR 71 the court only has power to make an order for committal in accordance with the provisions of CPR 71.8. That is so because CPR 71.8 only empowers the court to make an order for a suspended committal rather than an order for immediate imprisonment and prescribes a specific procedure to be followed. The restrictions imposed cannot be outflanked or circumvented by proceeding under CPR 81 or the court's inherent jurisdiction. Unlike CPR 81, which seeks to regulate the court's inherent jurisdiction to commit for contempt, CPR 71.8 is a discrete form of statutory contempt.
The power to commit to prison for contempt is a common law power; see Griffin v Griffin [2000] 2 FLR 44 at paragraph 21 per Hale LJ. This supports Miss Tolaney's submission that the court's power to commit for contempt is not conferred by the CPR. Indeed that is what CPR 81.2 states. There is no such statement in Part 71 and there is a note in the White Book at paragraph 3C-21, upon which Mr. Matthews relies, which states that CPR 71 gives the court power to commit for contempt not for the purpose of enforcing judgments but for the purpose of enforcing procedural orders and suggests that CPR 71 may be regarded, at least indirectly, as constituting a discrete form of statutory contempt of court liability. However, I was not persuaded by that note. It seems to me that the court's common law power to commit for contempt applies as much to the enforcement of a judgment as it does to enforcement of a procedural order. I further consider that both CPR 81 and CPR 71 provide for the procedure to be followed when that common law power or jurisdiction is exercised. The question raised by Mr. Matthews' submission is whether a party who alleges breach of an order made under CPR 71 must proceed under the provisions of CPR 71.8 or whether he can elect to proceed under CPR 81.
It is apparent from Broomleigh Housing Association v Okonkwo [2010] EWCA Civ 1113 that CPR 71.8 was designed to meet criticisms that the procedure for ensuring co-operation with an order for oral examination was too slow and that CPR 71.8 was intended to streamline the process, subject to appropriate protections; see paragraph 28 per Carnwarth LJ. Thus, although the court must be satisfied to the criminal standard that there has been a contempt, there is no requirement that an application notice must be served and there is no requirement to set out or serve the detailed grounds for the committal. If the court is not satisfied to the criminal standard that there has been a contempt the court can adjourn the application and give directions for a hearing.
If CPR 71 provides a streamlined or summary process then one would expect that either it or the more detailed process of CPR 81 could be used by the person seeking a committal order, the choice depending upon whether the case was appropriate for the summary or streamlined process or not. Where the alleged contempt is simple, such as a failure to attend court, the streamlined process may be appropriate. But where the alleged contempt is more difficult to prove, such as a failure to answer questions honestly, the more detailed process may be appropriate. Thus in this very case when counsel for DB, dissatisfied with Mr. Vik's answers, requested the court to make a suspended committal order pursuant to CPR 71.8 Cooke J. stated that the application could not be determined that day, that it would have to be properly formulated and he drew counsel's attention to CPR 81.10; see pages 219 and 232 of the transcript for the hearing on 11 December 2015. Cooke J. obviously thought that even though there had been an alleged breach of the order made pursuant to CPR 71 it was appropriate for the allegation of contempt to be determined pursuant to the procedure set out in CPR 81. The express reference in CPR 71.8 to CPR 81 is consistent with that approach. I...
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