Stephenson Harwood LLP v Medien Patentverwaltung AG
| Jurisdiction | England & Wales |
| Judge | Andrew Lenon |
| Judgment Date | 14 July 2020 |
| Neutral Citation | [2020] EWHC 1889 (Ch) |
| Date | 14 July 2020 |
| Court | Chancery Division |
| Docket Number | Appeal CH 2019 000169 |
[2020] EWHC 1889 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS & POPERTY COURTS
CHANCERY DIVISION (SITTNG AS AN APPELLATE COURT)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, PROPERTY, TRUSTS & PROBATE LIST (CH D)
(PT 2019 000087 DEPUTY MASTER BARTLETT 6 June 2019)
Royal Courts of Justice
Rolls Building, Fetter Lane, London EC4A 1NL
Andrew Lenon Q.C. (sitting as a Deputy Judge of the Chancery Division)
Appeal CH 2019 000169
Ali Reza Sinai (instructed by OGR Stock Denton LLP) for the Appellant
George Spalton (instructed by Griffin Law Limited) for the Respondent
Approved Judgment
Hearing date: 12 May 2020
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
The central question raised by this appeal is as to the correct procedure to be followed by a respondent to a stakeholder application who wishes to dispute the Court's jurisdiction to determine issues raised in that application.
In a stakeholder application made pursuant to CPR Part 86, the stakeholder, faced with competing claims to an asset in which it claims no interest itself, applies to the Court for directions as to whom the disputed asset should be paid or transferred. The application for directions is served on the competing claimants who, after acknowledging service, must serve a witness statement on the stakeholder setting out the grounds of their claim. The Court then makes directions as to how the stakeholder application is to be resolved, including directions as to what issues should be tried and who should be claimant and defendant. The stakeholder would not normally take any further active part in the proceedings.
Under CPR Part 11, a party wishing to dispute the jurisdiction of the Court to try a claim must make an application within 14 days after acknowledging service or else be treated as having accepted that the Court has jurisdiction to try the claim. In this case, the First Respondent (“MPV”) did not make a Part 11 application in response to the claim made by the claimant stakeholder (“Stephenson Harwood”) for directions, on the basis that this claim did not raise any substantive issues. MPV wishes, however, to dispute the Court's jurisdiction to determine the substantive issues raised by the claim of the Second Respondent (“Mr Kagan”) in the stakeholder application.
Deputy Master Bartlett held that MPV was not entitled to do so; its failure to make a Part 11 application meant that it was to be treated as having accepted the Court's jurisdiction to determine all issues arising in the stakeholder application, including the issues raised by Mr Kagan.
On this appeal, MPV contends that the Deputy Master's decision was based on a misreading of CPR Part 11, that MPV did not have to make a Part 11 application in order to dispute the Court's jurisdiction to determine issues raised by Mr Kagan and that the Court should order the monies which are the subject of the stakeholder application to be paid out to it. In response, Mr Kagan contends that the Deputy Master's interpretation of CPR Part 11 was correct, that MPV has submitted to the Court's jurisdiction and that, even if there had been no submission, the Court would have jurisdiction to determine the issues raised by Mr Kagan in any event.
Mr Kagan
Before setting out the background to the appeal, it is necessary to record that sadly Mr Irving Kagan, who was the original Second Respondent, died on 12 January 2020. On 3 February 2020, limited letters of administration were granted by the New York Surrogate Court to Mr Kagan's son, Mr Michael Kagan whom the Court substitutes as the Respondent to the appeal pursuant to CPR r.19.8(2)(a). In this judgment, references to Mr Kagan are to the late Mr Irving Kagan.
The background
In 2015 MPV, a Swiss company, brought patent infringement proceedings in the High Court against various parties. Stephenson Harwood were the solicitors on the record. Mr Kagan was a US Attorney practising and residing in New York. Mr Kagan had a consultancy business called Kagan Consultants. Mr Kagan had previously worked with MPV and assisted MPV with the patent infringement proceedings.
The patent proceedings in the UK were funded by a litigation funding company which paid Stephenson Harwood's fees, the disbursements and a US$5,000 monthly fee to Kagan Consultants or Mr Kagan personally. The patent proceedings were settled, alongside concurrent German litigation, in late 2018 for a global costs-inclusive payment of US$6.5m which was to be paid to Stephenson Harwood.
In November 2018, prior to the receipt of the settlement monies, Stephenson Harwood was notified of the existence of a claim by Mr Kagan against MPV. Essentially, Mr Kagan asserted that he was entitled to a success fee for services provided in connection with the patent proceedings. The quantum of the success fee was estimated to be around US$570,000. It was further asserted by Mr Kagan that he had a proprietary claim to this sum when received by Stephenson Harwood as part of the settlement monies, preventing it from being released to MPV in Switzerland.
In response to Mr Kagan's claim, MPV denied that it had any contractual relationship with Mr Kagan personally. It contended that its relationship was with Kagan Consulting to whom nothing further was due.
On 8 January 2019 Stephenson Harwood received a tranche of the settlement monies on behalf of MPV. In view of the competing claims made in correspondence on behalf of Mr Kagan and MPV, it decided to set aside and retain the sum of $570,000 which remains in Stephenson Harwood's client account pending the outcome of these proceedings (“the Monies”).
Further correspondence ensued in the course of which both MPV and Mr Kagan demanded that Stephenson Harwood pay the Monies to them and threatened legal action if their demands were not met. In these circumstances, Stephenson Harwood decided to make a stakeholder application to the court for directions.
The proceedings
The Part 8 Claim Form was issued on 30 January 2019 with Stephenson Harwood named as claimant and MPV and Mr Kagan as respondents. The details of the claim were set out in the Claim Form as follows:
“The Claimant seeks relief by way of a stakeholder claim under CPR 86.2 for directions as to the payment of monies currently held in the Claimant's client account (in the sum of US$570,000) for provision to be made for the Claimant's costs and for such other relief as the court thinks fit to grant.”
In the supporting witness statement, Richard Gywnne, a partner in Stephenson Harwood, set out the background and confirmed that Stephenson Harwood claimed no interest in the Monies, did not collude with any of the parties and was willing to pay the Monies into court or dispose of them as the Court directed.
On 14 February 2019 MPV and Mr Kagan filed acknowledgements of service. MPV's solicitors completed the acknowledgment of service form by ticking the box in Section B indicating that MPV intended to contest the claim and added the following details of the remedy they were seeking:
“The First Defendant claims that the monies currently held in the Claimant's client account in the sum of US$570,000 should immediately be paid to the First Defendant together with accrued interest”.
MPV's solicitors did not tick the box in Section C to indicate that MPV intended to dispute the Court's jurisdiction. Under Section E they stated that it had been agreed by Mr Kagan and MPV that they would exchange written evidence by 27 February 2019.
On 27 February 2019 the parties exchanged witness statements. MPV served a statement from Gerhard Lehmann, MPV's chief executive officer, in support of its claim that the Monies should be immediately released to MPV together with accrued interest. Mr Lehmann addressed the facts surrounding Mr Kagan's claim to a success fee, which he denied. He stated that he did not believe that the English court was the appropriate forum to determine the terms of the agreement between MPV and Mr Kagan or to determine what was agreed at a mediation which had taken place between the parties and that it should not try to do so in the stakeholder application. He confirmed that MPV had sufficient assets to pay any judgment obtained by Mr Kagan in the “the appropriate jurisdiction, which is likely to be a Court outside of the UK.” He concluded by asking the court to make an order that Stephenson Harwood pay the Monies to MPV forthwith together with accrued interest.
This witness statement was the first occasion on which MPV had indicated that it might dispute the jurisdiction of the English court to resolve issues raised in the stakeholder application. The witness statement did not specify where the alternative appropriate jurisdiction might be.
By a letter dated 21 March 2019 to Mr Kagan's solicitors, MPV's solicitors said: “we do not consider it appropriate for the Master to determine the underlying claim pursued by Mr Kagan by way of a trial within the stakeholder claim. This is not the jurisdiction in which to determine the claim.” By a letter dated 28 March 2019, Mr Kagan's solicitors asked MPV's solicitors to say what the correct jurisdiction would be for Mr Kagan's contractual claim as they had refused to do so on the telephone. In a letter the following day, MPV's solicitors said that Mr Kagan was claiming the Monies on the...
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