Deutsche Bank AG v Sebastian Holdings Incorporated and Another

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr Justice Cooke
Judgment Date24 June 2014
Neutral Citation[2014] EWHC 2073 (Comm)
Docket NumberCase No: 2009 Folio 83
Date24 June 2014

[2014] EWHC 2073 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Cooke

Case No: 2009 Folio 83

Between:
Deutsche Bank AG
Claimant
and
(1) Sebastian Holdings Incorporated
(2) Alexander Vik (Defendant for costs purposes only)
Defendants

Miss S. Tolaney QC and Mr J. MacDonald (instructed by Freshfields Bruckhaus Deringer LLP) for the claimant

Mr S. Rubin QC and Mr A. Fulton (instructed by Cooke, Young and Keidan LLP) for the 2nd defendant

Hearing dates: 16th and 17th June 2014

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.

Mr Justice Cooke Mr Justice Cooke

Introduction

1

On 8th November 2013, following trial, I gave judgment against the defendant (SHI) in the sum of US$243,023,089 and awarded the claimant (DBAG) 85% of its costs on the indemnity basis, requiring SHI to make an interim payment on account of costs of £34,517.115.30. These sums were to be paid by 4pm on 22nd November 2013. I refused permission to appeal and any stay of execution. Grounds of Appeal have been filed with the Court of Appeal but no stay of execution has been sought from it.

2

SHI has not paid the Judgment Debt or the Interim Costs and has said that it has insufficient funds to pay a fraction of the interim costs order. The defendant for costs purposes only, (Mr Vik) has made it clear that he will not put SHI in funds to pay the sums due.

3

On 3rd December 2013 I gave permission, on an application without notice, for Mr Vik to be joined by DBAG as a party to the proceedings for the purposes of costs alone and gave permission for service out of the jurisdiction upon him of an application for an order for payment by him of costs pursuant to section 51 of the Senior Courts Act 1981. I also gave directions for the service of any evidence upon which Mr Vik might wish to rely in opposition to the Non-Party Costs Application and for any challenge to the court's jurisdiction. The court's jurisdiction later became the subject of challenge on various grounds including (inter alia) the fact that permission was given to serve the proceedings by leaving the relevant documents at an address in Greenwich, Connecticut, in the USA.

4

On the 30th January 2014 I upheld Mr Vik's challenge to service upon him in that way, without deciding any of the other jurisdictional objections which he had raised. On that day I amended the order that I had previously made on 3rd December 2013, on the basis that service would be effected in accordance with the Hague Convention upon Mr Vik at his residence in Monaco. Under the terms of that order, Mr Vik was given 28 days from the date of service of the Non-Party Costs Application to file at court and serve on DBAG any evidence upon which he wished to rely in opposition to the application or to the court's jurisdiction. That time limit was extended in a consent order to 14th April 2014. Seventeen witness statements were filed by the parties for the purpose of this application within the timescale permitted by my order and on 9th June a further four witness statements were served by SHI in connection with the Court of Appeal proceedings in which permission to appeal is being sought against my judgment, upon which Mr Vik also relied (without objection from DBAG) in this application. (Seven of the seventeen witness statements to which I have already referred had already been filed in the Court of Appeal by SHI which were also relied on in the current applications.)

5

In my order of 30th January, I provided for a hearing to take place both of the Non-Party Costs Application and any application made by Mr Vik under CPR Pt 11 because it would be helpful to see the issues which were said to arise on the section 51 application in the context of the jurisdictional challenges mounted by Mr Vik on the basis of forum non conveniens and lis alibi pendens. Permission to appeal from that case management decision was refused by the Court of Appeal on 19th March 2014. In consequence, the matter came before me on 16th June when I heard the jurisdictional arguments first and dismissed Mr Vik's jurisdictional challenge. I said I would give my reasons for doing so and this judgment records those reasons first before proceeding to determine the Non-Party Costs application itself. Many of the factors relevant to the jurisdictional challenge are also relevant to the merits of the application itself and this judgment therefore contains elements of repetition.

The Jurisdictional Challenge

Material non-disclosure

6

Mr Stephen Rubin QC for Mr Vik submitted that DBAG had failed to tell me, on the ex parte application for service out, of its intention to commence proceedings in New York and Connecticut, which it instituted on 3rd December 2013 and 13th December 2013 respectively. It is a fair inference that DBAG had both sets of proceedings in mind at the time of seeking permission to serve the section 51 application out of the jurisdiction. There is however nothing in this objection as, at the time when I amended the order on 30th January 2013 setting aside the provision for service in Greenwich Connecticut and amending the time limits for submission of evidence following service in Monaco, I was fully aware of the New York and Connecticut proceedings as a result of reading the second witness statement of Ms Asgarian which exhibited the relevant papers setting out DBAG's complaint in each of those jurisdictions. Whilst I had not decided any points relating to jurisdiction other than service in my judgment of 30th January, any issue of non-disclosure fell away because I knew exactly what the position was when giving leave to serve out of the jurisdiction by a different method on 30th January.

7

Moreover, as Lord Justice Tomlinson pointed out in refusing permission to appeal my order for directions, there is no arguable oppression or irregularity in DBAG seeking to pursue alternative and distinct routes to possible recovery from Mr Vik of the expenditure incurred by it in obtaining judgment against SHI. Whilst conscious of the decisions relied on by Mr Vik, namely David Shaw Silverware, North America Limited v Denby Pottery Company Ltd [2013] EWHC 4458 (QB) at paragraphs 9 and 10, Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350, and Kazakhstan Kagazy Plc v Maksat Askaruly Arip [2014] EWCA 381, it would have made no difference to me when granting permission to serve out had I known on 3rd December 2013 of the intent to issue proceedings and their intended ambit in the USA. I did know that DBAG was intending to enforce the judgment in the United States when making my order but not of the basis upon which it was intended to pursue proceedings to enforce.

8

In the light of my knowledge of 30th January and the order I made on that day, Mr Vik's point has no remaining force at all.

Lis alibi pendens

9

As is plain from a number of authorities, an application under section 51 does not involve the assertion of a cause of action but is a request for the exercise by the English court of a statutory discretion in relation to proceedings in which the court already has jurisdiction and, as here, has usually already given judgment against a party subject to that jurisdiction. No court in any other jurisdiction could exercise this discretion (see Rix J in the Ikarian Reefer (No. 2) [1999] 2 Lloyd's Rep 603 at 626.

10

As Lewison LJ remarked in Threlfall v ECD Insight Ltd [2014] 2 Costs LR 129 at paragraph 13, if a non-party costs order is made against a company director or shareholder, it is wrong to characterise this as piercing or lifting the corporate veil or to say that the company and the director or shareholder are one and the same. The separate personality of a corporation, even a single member corporation, is deeply embedded in our law for the purpose of dealing with legal rights and obligations. By contrast, the exercise of the statutory discretion to make a non-party costs order leaves the rights and obligations exactly where they are. The fact that the making of such an order is discretionary demonstrates that the question is not one of rights and obligations of a non-party, for no obligation exists unless and until the court exercises its discretion. Moreover, the fact that the discretion, if exercised, is exercised against a non-party has the effect of underlining the proposition that the non-party has no substantive liability in respect of the cause of action in question.

11

DBAG, in the US proceedings, both in New York and in Connecticut, claim against Mr Vik as the alter ego of SHI (and, in New York, also of Beatrice). Whilst the Complaints place reliance upon certain findings in my judgment of 8th November 2013, the cause of action asserted against Mr Vik is based upon the concept, under the law of the relevant states, that Mr Vik and SHI can effectively be treated as one and the same because of his total control of the companies, his ownership of them (until 30th October 2008 in the case of Beatrice) and his use of their assets as belonging to him. It is alleged that the transfers to which reference is made in my judgment at paragraph 1435 (and other additional transfers), amounting to US$1 billion approximately, were fraudulent transfers effected upon Mr Vik's instructions which should be set aside or for which damages should be payable. It is said that Mr Vik retained the legal and/or beneficial interest in the transferred funds.

12

It is clear that the proceedings in the United States and the application made by DBAG under section 51 of the Senior Courts Act do not constitute the same lis. Whilst DBAG seeks a discretionary order from this court that Mr Vik be made liable for the costs...

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