Mr Alexander Vik v Deutsche Bank AG
| Jurisdiction | England & Wales |
| Judge | Lord Justice Gross,Lord Justice Lewison,Lord Justice Leggatt |
| Judgment Date | 06 September 2018 |
| Neutral Citation | [2018] EWCA Civ 2011 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A4/2017/1082 |
| Date | 06 September 2018 |
[2018] EWCA Civ 2011
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
The Hon. Mr Justice Teare
[2018] EWHC 3265 (Com)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Gross
Lord Justice Lewison
and
Lord Justice Leggatt
Case No: A4/2017/1082
Duncan Matthews QC, Charlotte Tan and Alistair Wooder (instructed by Brecher LLP) for the Appellant
Sonia Tolaney QC, James MacDonald and Andrew Lodder (instructed by Freshfields Bruckhaus Deringer LLP) for the Respondent
Hearing dates: 27 and 28 June 2018
Judgment Approved
INTRODUCTION
This case highlights the tension which can exist between important interests: enforcing court orders on the one hand; keeping within the jurisdictional limits of the Court, especially as individual liberty is at risk, on the other. Both are indeed facets of the Rule of Law.
The reality of the matter is that the Appellant (“Mr Vik”), as found by Teare J (in one of the judgments under appeal), “…is a man who will do what is necessary to prevent DB obtaining its judgment debt”. That said, whatever the underlying “merits”, the Respondent (“DB”) is not entitled to succeed unless its submissions are justified in terms of the jurisdictional limits of this Court.
The present proceedings arise out of DB's efforts to enforce a judgment debt, said now to amount to over US$320 million (“the judgment debt”), owed to DB by Sebastian Holdings. Inc. (“SHI”). Mr Vik, described by DB as “a Monaco domiciled ultra high net worth individual”, was at all material times SHI's sole shareholder and director. Following a lengthy trial in the Commercial Court, Cooke J ordered SHI to pay DB the judgment debt in November 2013.
In his judgment dated 16 th December, 2016, [2016] EWHC 3222 (Comm) (“the first judgment”), Teare J summarised the position succinctly as follows:
“1.….[SHI]…, the Defendant, conducted substantial foreign exchange and equities trading with….[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….”
In those circumstances, on the 20 th July, 2015, DB obtained an order from Teare J, pursuant to CPR 71.2 (“the CPR 71 order”), requiring Mr Vik (as Teare J continued, ibid):
“…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…..”
It is to be underlined, as Teare J recorded, that the CPR 71 order was served personally on Mr Vik while he was present, albeit briefly, in the jurisdiction.
Mr Vik denies any non-compliance with the CPR 71 order. The upshot, however, was that DB, again in Teare J's words ( ibid):
“….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 committal application to which Teare J referred (“the committal application”) was made by DB pursuant to CPR 81.4. In broad terms, Mr Vik contended that the Court lacked jurisdiction to enforce the CPR 71 order against him.
In the first judgment, Teare J held as follows:
i) The Court had jurisdiction under CPR 81.4 and/or CPR 71.8 to commit Mr Vik for breach of the CPR 71 order, even though Mr Vik had left the jurisdiction. There was no dispute that CPR 81.4 had extra-territorial effect and DB was not restricted to applying for a committal order pursuant to CPR 71.8. In any event, CPR 71.8 had extra-territorial effect.
ii) However, the Court had no jurisdiction pursuant to PD6B 3.1(10) to grant permission to serve the CPR 81.4 committal application out of the jurisdiction. The question of alternative service fell away.
Subsequently, in a second judgment dated 3 rd March, 2017 (“the second judgment”), [2017] EWHC 459 (Comm), Teare J held that permission to serve the committal application on Mr Vik was not required. This was so because the Court already had incidental jurisdiction over Mr Vik to enforce the CPR 71 order. Further and if need be, Teare J would have acceded to the DB submission that the DB application fell within Art. 24(5) of the Recast Brussels Regulation (“the Recast Regulation”). Finally, Teare J held that the committal application could be served on Mr Vik by alternative means, namely, on his solicitors.
Teare J made an order dated 24 th March, 2017 (“the Jurisdiction Order”), reflecting both the first and second judgments. Insofar as material, it was in these terms:
“1. The Court has subject-matter jurisdiction to hear committal proceedings against Mr Vik for alleged breaches of the CPR 71.2 Order, notwithstanding that Mr Vik is not within the jurisdiction.
2. DBAG [i.e., DB] is not entitled to permission to serve the Committal Application out of the jurisdiction in Monaco under CPR 6.38 and Practice Direction 6B 3.1(10).
3. Permission is not required for DBAG to serve the Committal Application on Mr Vik out of the jurisdiction in Monaco.
4. DBAG has permission under CPR 81.10(5) (and if required CPR 6.15) to dispense with personal service of the Committal Application and to serve the Committal Application on Mr Vik's solicitors….”
Before this Court, Mr Vik appeals against paras. 1, 3 and (consequentially) 4 of the Jurisdiction Order, while DB cross-appeals against para. 2.
The appeal and cross-appeal thus give rise to five principal issues:
i) Whether it was open to DB to make the committal application under CPR 81.4 rather than CPR 71.8, when the complaint relates to an alleged breach of CPR 71.2? (“Issue I: Availability of CPR 81?”)
ii) If DB had made the committal application under CPR 71.8, whether it was entitled to pursue it against a respondent out of the jurisdiction (as Mr Vik was)? (“Issue II: Does CPR 71.8 have extraterritorial effect?”)
iii) Was the committal application incidental to the CPR 71 order? (“Issue III: Was the committal application incidental to the CPR 71 order?”)
iv) Was the committal application within Art. 24(5) of the Recast Regulation? (“Issue IV: The Recast Regulation?”)
v) By way of the cross-appeal, did the CPR 71 order come within the wording of CPR 6.38 and PD 6B 3.1(10)? (“Issue V: Gateway 10?”)
In overview, should Mr Vik succeed on Issue I, then the appeal must succeed and the cross-appeal must fail. On the other hand, should Mr Vik fail on Issue I, then he would need to succeed on all of Issues III, IV and V for the appeal to be allowed and the cross-appeal (in the case of Issue V) to fail; failure on any of Issues III, IV and V would, on this hypothesis, be fatal to Mr Vik's case. As will become apparent, upon analysis, Issue II is hypothetical.
We were most grateful to Mr Matthews QC, for Mr Vik and Ms Tolaney QC, for DB, together with their respective teams, for the quality of their assistance.
ISSUE I: CPR 71 – AVAILABILITY OF CPR 81?
(1) The CPR provisions: It is convenient to begin with the relevant provisions of CPR Parts 71 and 81.
The scope of CPR 71 appears from r. 71.1, namely, that Part 71 contains rules:
“…which provide for 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.”
As will be recollected, the CPR 71 order was obtained pursuant to r. 71.2, which includes provision (r.71.2(1)(b)) for requiring an officer of a corporate judgment debtor to attend court to provide information about the judgment debtor's means or any other matter about which information is needed to enforce a judgment or order.
R. 71.2(6) provides as follows:
“A person served with an order issued under this rule must –
(a) attend court at the time and place specified in the order;
(b) when he does so, produce at court documents in his control which are described in the order; and
(c) answer on oath such questions as the court may require.”
R. 71.2(7) provides for an order under this rule to contain a penal notice and the CPR 71 order (in this case) did contain such a notice, addressed to Mr Vik, in these terms:
“You must obey this order. If you do not, you may be sent to prison for contempt of court.”
R. 71.8 was introduced by amendment to the CPR in 2001. It is headed “Failure to comply with an order” and 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;
(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...
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