Swiss Life Ag (a Company incorporated in Switzerland) v Moses Kraus (aka Moses Krausz)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Green |
| Judgment Date | 22 July 2015 |
| Neutral Citation | [2015] EWHC 2133 (QB) |
| Docket Number | Case No: QB/2015/0011 |
| Court | Queen's Bench Division |
| Date | 22 July 2015 |
[2015] EWHC 2133 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Green
Case No: QB/2015/0011
Ian Croxford QC and Clare Stanley QC (instructed by Gordon Dadds LLP) for the Claimant
Edward Levey (in writing) and Mr Moses Kraus(z)in person)
Hearing date: 23 rd June 2015
A. Introduction, issues and conclusions
There is before the Court an appeal brought by Swiss Life AG ("Swiss Life") from the decision of Deputy Master Eyre of 16 th December 2014 striking out the Appellant's claim and giving summary judgment to the Defendant Mr Moses Kraus ("Mr Kraus"). The claim by Swiss Life was to enforce the costs component of a Default Judgment made on 13 th December 2013 by the US District Court (Southern District of New York) ("the Default Judgment"). As I explain more fully below the costs claim amounts to c. $1.5m; however the underlying damages award amounts to c. $150m. The judgment (as to both damages and costs) was made in favour of Swiss Life in respect of a Third Party Claim against Mr Kraus and a Lichtenstein company, Caruso AG ("Caruso") under ( inter alia) the Racketeer Influenced and Corrupt Organisation Act ("RICO"). I refer to these proceedings in this judgment as the "Third Party proceedings". The appeal by Swiss Life against the refusal to enforce the Default Judgment is brought with the permission of the Deputy Master by Order dated 18 th December 2014 1. In determining this appeal I am considering whether the Deputy Master wrongly concluded that the summary judgment test was met. There is no need to set out in any details the law relating to the test to be applied by this court on an appeal from such a judgment. For the reasons I set out below I am satisfied that the Deputy Master clearly erred and should not have granted summary judgment. The Deputy Judge did not address himself to the law on the issue of the "real plaintiff". He did not therefore address the relevant facts. There are serious issues to be tried upon which Swiss Life has a proper case to advance.
The Default Judgment relates to the allegedly unlawful conduct of (inter alia) Mr Kraus in the context of a range of proceedings in the US, Switzerland and Israel in which it is said by Swiss Life that Mr Kraus acted unlawfully and wrongly and also in contravention of RICO. One part, but only one part, of that conduct concerns a law suit commenced in New York against Swiss Life by various plaintiffs who are said to be nominees or ciphers of Mr Kraus. I describe this action below where it is referred to as the "Main Action". In the Default Judgment an order was made for the damages to be quantified in the future at an "inquest". The damages were also to be subjected to a trebling pursuant to the penal provisions of RICO. Swiss Life was also awarded its costs. As I understand matters the award of costs was made pursuant to express statutory provision in RICO; costs are not (unlike in this jurisdiction) normally awarded in ordinary litigation.
It is also important to record at the outset that the costs and the damages were awarded for conduct which went beyond the facts of the Main Action. There is however no break down of either the damages or the costs in the New York proceedings so that it is not stated how much is to be allocated to each of the various objected to acts which are the subject matter of the Third Party proceedings.
Swiss life has now brought proceedings to enforce the costs element of the Default Judgment; this is notwithstanding that (albeit subsequent to the commencement of this action) in August 2014 the quantification process occurred and Swiss Life now has an order that Mr Kraus pay trebled damages of in excess of $150,000,000. Mr Kraus applied to the Deputy Master for summary judgment and/or to strike out the costs enforcement proceedings because he had not, he contended, submitted to the jurisdiction of the US courts in either the Main Action, or, the Third Party proceedings and the Default Judgment in the Third party proceedings was therefore not enforceable in England & Wales in the High Court. The Deputy Master agreed. Hence this appeal.
The issues arising on the appeal can be summarised as follows.
First, did Mr Kraus submit to jurisdiction in the Main Action by reason of his actions in initiating and controlling the Main Action via the named (nominal) plaintiffs (the real plaintiff point)?
Secondly, if Mr Kraus can be said to have submitted to jurisdiction in relation to the Main Action did he thereby submit to the jurisdiction in relation to the Third Party proceedings given that they, at least in some measure, relate to the conduct which is the subject matter of the Main Action (the related action point)?
Thirdly, did Mr Kraus submit to jurisdiction in the Third Party proceedings because of a letter that he wrote to the Judge on 22 nd January 2013 in the context of those Third Party proceedings (the 22 nd January 2013 letter point)?
Fourthly, even if Mr Kraus can be said prima facie to have submitted to the jurisdiction of the New York Courts in relation to the Third Party proceedings does he has available to him other defences which can be said now to be so compelling as to justify upholding the Deputy Master? Three possible defences arise:
— Abuse of process: Because it is an abuse to seek to recover costs when the intention is, when the costs enforcement proceedings are successful, thereafter to seek to recover the damages element of the same Default Judgment (the abuse of process point);
— Non-severability: Because the costs claim covers matter which go well beyond the matters relied upon in the Main Action and the Court cannot enforce such collateral matters and where the recoverable and non-recoverable costs elements are non-severable, leading to refusal to enforce the whole claim.
— High Court no power to entertain claim under Protection of Trading Interest Act 1980: Because the Court has no power to entertain an action such as the present because it is a claim under a judgment which includes penal treble damages objectionable either under common law as a foreign penalty or because the courts are statutorily barred from entertaining such a claim pursuant to section 5 Protection of Trading Interest Act 1980 ("PTIA 1980").
In relation to the PTIA 1980 it has long been assumed that the judicial practice of awarding treble damages (objectionable and egregious to English eyes) was a device dreamt up by US lawyers in the context of antitrust ( pace Section 4, Clayton Act 1914) and then extended to other areas of public policy, such as RICO. However, its origins lie, in actual fact, in this jurisdiction in the Statute of Monopolies of 1624 which prohibited the granting of royal monopolies and held them to be void. It also introduced a right to treble damages for those who were " hindered, grieved or disturbed" by any monopoly or letters patent. The Protection of Trading Interests Act 1980 (PTIA 1980) has seen English law come full circle. In 1624 treble damages were vogue; by 1980 they were rogue.
In relation to these issues I have to decide, in effect, whether Swiss Life has an arguable case to go to trial. I have decided that it does. In particular:
i) I conclude that it has an arguable case that Mr Kraus was the "real plaintiff" in the Main Action. On the basis of the case law as it stands it is properly arguable that a person who uses ciphers or nominees to act on his behalf in foreign litigation can be said properly to submit to the jurisdiction of that foreign court, in effect, through the nominees or ciphers.
ii) I also conclude that it is arguable that in acting as the "real plaintiff" Mr Kraus not only submitted to the jurisdiction of the US courts in the Main Action but that the Third Party proceedings are "related", at least in part.
iii) I have also indentified in this judgment defences which Mr Klaus has alluded to. But none are so clear cut that they can justify refusing the appeal. They will have to be tried.
iv) Finally, I have decided that in one respect the Deputy Master was correct in rejecting submission to jurisdiction upon the basis of the letter of 22 nd January 2013. In my judgment this is not arguable as a basis for jurisdiction.
v) The net effect however is that the appeal must be allowed.
B. Summary of relevant facts
(a) The "Main Action"
The origins of this appeal lie in proceedings brought against Swiss Life by various plaintiffs alleging breach of contract arising out of various endowment policies and loans issued by Swiss Life.
The plaintiffs in the Main Action were members of the Chassidic Jewish communities in New York State who resided or used to reside in Brooklyn, New York. In this judgment I refer to them as the "Moskovitz Plaintiffs". Between 1988 and 1995 Swiss Life sold "mixed life" or endowment insurance policies on the life or marriage of a child (the "Marriage Policies") through a number of authorised brokers and representatives. Mr Kraus, a resident of London, was an insurance broker affiliated with Caruso, an authorised broker, who also had an affiliation with another brokerage firm, Bituswiss SA ("Bituswiss"). It was alleged that Mr Kraus signed an agreement between Caruso and Swiss Life permitting him to sell the Marriage Policies in New York. These policies paid benefits to the named beneficiary, a child of the policy purchaser, when the beneficiary died, married, or reached a certain age without marrying. The policy holders paid annual premiums and earned dividends on the Marriage Policies and could borrow against them after a specified period of time. It was alleged that, in soliciting broker arrangements with...
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