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Canada Trust Company & Ors v Stolzenberg & Ors [1997] EWCA Civ 1545 (28th April, 1997)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1997/1545.html
Cite as:
[1997] WLR 1582,
[1998] ILPr 30,
[1997] EWCA Civ 1545,
[1997] CLC 1083,
[1997] 1 WLR 1582
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CANADA TRUST COMPANY and Others v. WOLFGANG OTTO STOLZENBERG and Others [1997] EWCA Civ 1545 (28th April, 1997)
IN
THE SUPREME COURT OF JUDICATURE
Pro
Forma
COURT
OF APPEAL (CIVIL DIVISION)
ON
APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY
DIVISION
Royal
Courts of Justice
Strand
London
WC2
Monday,
28th April 1997
B
e f o r e :
LORD
JUSTICE NOURSE
LORD
JUSTICE MILLETT
LORD
JUSTICE WARD
---------------
THE
CANADA TRUST COMPANY
and
Others
Plaintiffs
-v-
WOLFGANG
OTTO STOLZENBERG
and
Others
Defendants
---------------
Handed
Down Transcript of
Smith
Bernal Reporting Limited
180
Fleet Street London EC4A 2HD
Tel:
0171 831 3183 Fax: 0171 831 8838
(Official
Shorthand Writers to the Court)
---------------
MR
C CARR QC
and
MR
P MARSHALL
(instructed by Messrs Denton Hall) appeared on behalf of the Plaintiffs.
MR
A HOCHHAUSER QC
and
MR
M GRIFFITHS
(instructed by Messrs Richards Butler) appeared on behalf of the Gambazzi
Defendants.
MR
T IVORY
(instructed by Messrs Rakissons) appeared on behalf of the Fourth Defendant.
MR
J SMOUHA
(Miss P Hopkins 28.04.97) (instructed by Messrs Baker & McKenzie) appeared
on behalf of the Eleventh Defendant.
---------------
(JUDGMENT)
(As
approved by the Court)
©Crown
Copyright
LORD
JUSTICE NOURSE: In view of the shortage of time it has not been possible to
hand down the reasons for the decision we gave on Thursday in the usual way,
but Millett LJ's leading judgment has been reduced to a typescript and it will
be available for the parties at the end of this hearing for their use in the
further proceedings before the Judge. I emphasise that it is an unrevised
transcript for the use of the parties, so Millett LJ's judgment will be treated
as having been delivered orally.
LORD
JUSTICE MILLETT:
The
question in this appeal is whether it is a proper exercise of discretion to
refuse to make an order for the production of documents at an interlocutory
hearing on the sole ground that they are wanted in order to establish the
jurisdiction of the Court.
The appeal is brought by the Plaintiffs from an Order of Rattee J which he made
last Tuesday 22nd. April 1997. The Plaintiffs applied for Orders under RSC
Order 38 Rule 13 against third parties for the production of documents at a
hearing which is to take place today Monday 28th. April. The Judge is then due
to hear an application by the Defendants under Order 12 Rule 12 (8)(1)(a) for
the service of the Writ on them to be set aside for want of jurisdiction. The
Judge dismissed the Plaintiffs' application and refused leave to appeal. We
heard the appeal as a matter of urgency last Thursday 24th. April. We granted
leave to appeal and at 5.00 pm, at the conclusion of argument, we announced
that we would allow the appeal. We set aside the Judge's Order dismissing the
Plaintiffs' application and directed that it be restored for hearing by the
Judge today. We indicated that we would give our reasons this morning. I now
give my reasons.
The Plaintiffs are the Canadian trustees of a number of Canadian pension funds.
They claim that they have been the victims of a series of massive and complex
international frauds perpetrated over many years by the First Defendant. The
numerous transactions by which the alleged frauds were carried out took place
in several different jurisdictions which included the United Kingdom. In order
to recover the proceeds of the frauds the Plaintiffs have brought proceedings
not only against the First Defendant but also against 36 other parties in
various jurisdictions. Four of them are individuals. The Plaintiffs allege that
they were parties to the frauds. The others are companies and anstalts. The
Plaintiffs allege that some of them were parties to the frauds and that others
received the traceable proceeds of the frauds or assisted in their misdirection.
There
is no single natural forum (except perhaps Canada) for the conduct of such
litigation. The Plaintiffs decided to bring the main proceedings in England,
basing the jurisdiction on the alleged residence of the First Defendant in the
United Kingdom and claiming that the other Defendants were necessary or proper
parties to the proceedings. It is common ground that the Court's jurisdiction
in respect of all the Defendants stands or falls by its jurisdiction in respect
of the First Defendant, and that this in turn depends on whether or not he was
domiciled in the United Kingdom within the meaning of the Civil Jurisdiction
and Judgments Act 1982 (which broadly corresponds with the English concepts of
residence and substantial connection) at the relevant date. The Plaintiffs
contend that the relevant date for this purpose is the date on which the Writ
was issued; the Defendants contend that it is the date on which it was served
on the First Defendant.
On
15th. May 1996 the Plaintiffs made an ex parte application to Rimer J for
interlocutory relief against all the Defendants. The Plaintiffs say that at
that time they had good reason to believe that the First Defendant was
domiciled in the United Kingdom within the meaning of the 1982 Act. He owned a
house in Chester Square London SW1 which he occupied and which he had given as
his place of residence for at least the past seven years, and he appeared to
have a substantial connection with the United Kingdom. He was believed also to
have other places of residence in Canada, France and Germany. The Plaintiffs
told Rimer J. what they knew and evidently satisfied him that the First
Defendant was arguably resident in and had a substantial connection with the
United Kingdom, although he was probably also resident elsewhere both within
and outside Convention countries.
The
evidence in support of the Plaintiffs' application for protective relief was
extensive. The hearing before Rimer J was not continuous. It occupied 9 days in
Court and there were many days when the Judge read the papers in his room. The
hearing was not concluded until 31st. July 1996, when the Judge granted
extensive relief including world-wide Mareva injunctions; and further
references were made to the Judge from time to time thereafter. The Writ was
issued on 1st. August 1996.
It
was considered essential for the Plaintiffs' protection that the proceedings
should not come to the attention of any of the Defendants until protective
orders were in place against them not only in England but also in the other
jurisdictions where the funds were held. Accordingly, the Judge dispensed with
the usual undertaking to serve the Writ forthwith. He agreed to the Plaintiffs'
proposal to serve the proceedings at the same time as or immediately after
service of all the protective orders which were obtained here and abroad. He
gave leave to serve out of the jurisdiction and for substituted service in six
different jurisdictions. These included Panama, Liechtenstein, Switzerland and
Netherlands Antilles.
In
the event it became necessary for the Writ to be renewed and for the Judge to
make fresh Orders which he did on 26th. February 1997. The Plaintiffs were
successful in obtaining protective orders in the overseas jurisdictions but the
process proved to be cumbersome and time-consuming (particularly in
Switzerland). The Writ was indorsed with a certificate in the form required by
Order 6 Rule 7 (1)(b) and was eventually served together with the various
protective orders on all the Defendants on 11th. March 1997. It was served on
the First Defendant at the house in Chester Square.
In
the meantime, in July 1996, the Plaintiffs learned that the First Defendant was
in the process of selling his house in Chester Square. Contracts were exchanged
on 22nd. July 1996 and completion took place in mid-August. The First
Defendant's furniture was put into temporary storage in North London. The
Plaintiffs sensibly abstained from making enquiries of the purchasers or their
solicitors for the time being because of the risk that this would prematurely
alert the Defendants to the existence of the proceedings. They did, however,
tell the Judge of the sale of the house. The Plaintiffs' private investigators
reported that the First Defendant was frequently to be found in England, but
they were unable to discover a current address for him. In accordance with
their continuing duty to the Court the Plaintiffs kept the Judge informed of
developments as they occurred.
Once
the proceedings were served, the Plaintiffs' solicitors contacted the
solicitors who had acted in the purchase of the house at Chester Square with a
view to obtaining evidence of the First Defendant's current whereabouts. They
learned that the First Defendant had told the purchasers at the time of the
sale that "he was moving to Paris." The Plaintiffs' solicitors promptly
reported this to Rimer J.
By
25th. March the Plaintiffs knew that some of the Defendants were likely to
challenge the jurisdiction of the Court. They did so by serving a Notice of
Motion under Order 12 Rule 8 on 14th. April. The hearing was fixed for today
28th. April. The Defendants' evidence in support of their application made it
clear that they did not know whether the First Defendant was resident in
England at the relevant date. The Defendants' case was that the evidence
assembled by the Plaintiffs (the substance of which the Plaintiffs' solicitors
had conveyed to them) was insufficient to establish the First Defendant's
residence in England at the relevant date. Moreover they did not accept that
the First Defendant had been properly served in accordance with Order 10 Rule
1(2) (service on a defendant at his last known address). Whether such service
was good service within the Rules depends on whether the First Defendant was
present within the jurisdiction when the Writ was delivered to the house at
Chester Square. The Plaintiffs claim to have evidence that he was.
The
Plaintiffs intend primarily to rely on the evidence of the First Defendant's
past residence in and substantial connection with the United Kingdom together
with the evidence of his continuing presence here. But the Defendants do not
accept that this is enough. Accordingly, the Plaintiffs applied under Order 38
Rule 13 for orders directed against a number of banks and other bodies with
whom the First Defendant is known to have maintained accounts or to have
corresponded requiring them to produce copies of the documents in their
possession which are likely to furnish evidence of the First Defendant's
address at the relevant date. Because of their obligations of confidence it was
reasonable to assume that they would be unwilling to provide such information
to the Plaintiffs without a Court order. The application was opposed by the
Defendants and Rattee J dismissed it.
As
the transcript of the hearing shows, the Judge was troubled whether he had
jurisdiction to make the order sought (or if he had a theoretical jurisdiction
whether it was one which it would ever be appropriate to exercise) where the
documents the production of which was sought were required in order to
establish the jurisdiction of the Court. He asked whether there was any
precedent for the making of such an order. He was told correctly that there was
not, though he was referred to
Rome
v Punjab National Bank
[1989]
2 All ER 136 where Hirst J. held that the Court had power to order discovery of
documents on a defendant's application to set aside a writ for irregularity of
service but would do so only very rarely and only where it was necessary for
the fair disposal of the application. Hirst J. relied on Order 12 Rule 8(5)
(power to give directions) for the power to order discovery, but in the event
he dismissed the application on the ground that the documents were not
necessary for the fair disposal of the application.
Speaking
for myself, I have some doubt whether Order 12 Rule 8(5) alone provides a
sufficient basis for an order for discovery. But it certainly cannot be relied
upon to justify an order against non-parties. The Plaintiffs do not rely upon
it. They rely exclusively on Order 38 Rule 13.
The
Judge's reasons appear from the following passages taken from an unrevised
transcript of his extempore judgment.
"...I
accept the submission of the Defendants that the orders sought by the
Plaintiffs would be an inappropriate use of the Court's power to order the
production of documents by third parties conferred by Order 38 Rule 13. Mr.
Hochhauser, on behalf of the majority of the Defendants applying to set aside
the service of the Writ on them, as he put it, this is really an attempt by the
Plaintiffs to lift the proceedings [against] his clients off the ground by
their own bootlaces (
sic).
"In my judgment it is for the Plaintiffs to adduce evidence to prove proper
service on the relevant Defendants. Either they can adduce evidence to
establish a prima facie case for the First Defendant's domicile in the United
Kingdom at the relevant time or they cannot. If they can then they will succeed
in resisting the Defendants' application to set aside service because the
affidavit filed by the Defendants on their application to set aside service
contained no positive evidence to rebut the Plaintiffs' evidence on such
domicile. It consists largely of comments on the Plaintiffs' evidence. Thus, if
the evidence available to the Plaintiffs at the time of the issue of the Writ
or its service, whichever is held to be relevant, was sufficient to justify
service on the relevant Defendants on the footing that the First Defendant was
domiciled in the United Kingdom, such service is proper and the Defendants'
application to set it aside would fail.
If
such evidence was insufficient for that purpose then the Writ should not have
been certified as appropriate for service on the relevant Defendants without
the leave of the Court under Order 11 of the Rules of the Supreme Court. If the
latter is the case, it cannot, in my judgment, be right that the Defendants
should be purportedly served ex hypothesi improperly and then such improper
service used by the Plaintiffs as a means of obtaining, by orders of the Court,
evidence of third parties in the hope of improving the Plaintiffs' case as to
the First Defendant's domicile so as to justify the service on the Defendants
retrospectively
.
It
follows in my judgment that the orders sought by the Plaintiffs would represent
an inappropriate exercise of the Court's discretion under Order 38 Rule 13 and
I dismiss the application...
"
(my emphasis).
This
passage was criticised by the Plaintiffs as suggesting that they should have
had sufficient evidence in their possession at the relevant date to justify the
indorsement on the Writ or the service of the Writ as the case might be, and
that after acquired evidence should not be entertained. But the Defendants'
submissions have never gone to this length, and I do not think that the Judge
intended this. The distinction which he had in mind was not between evidence
which the Plaintiffs had assembled at the relevant date and evidence which they
obtained later, but between evidence which they were able to obtain by their
own efforts and evidence which they needed the assistance of the Court to
obtain. In saying that
"...it
is for the Plaintiffs to adduce evidence to prove proper service on the
relevant Defendants"
the
Judge was not saying that they had to do it at the date of service, but that
they had to do it without the aid of the Court's process. The Plaintiffs
acknowledged that it would be an abuse of process to initiate proceedings
without having reasonable grounds for believing that the Court had
jurisdiction, and that in such a case the Court might properly refuse its
assistance to enable them to justify the proceedings
ex
post facto
.
But that is not this case.
The
Judge did not treat the matter as one of discretion. He treated it as one of
principle. He refused the application on the ground that, where the issue is
one of jurisdiction, the Court will not lend its process to a Plaintiff to
enable him to establish jurisdiction. This is the "bootstrap" argument. The
Court cannot assume that it has jurisdiction, for that is the very question to
be decided. Yet unless the Court assumes that it has jurisdiction, how can it
make the Orders sought?
With
all respect to the Judge, I think that this reasoning confuses two different
jurisdictions. One is the jurisdiction to try the issues in the Action. That is
disputed. It derives from the Brussels Convention and the 1982 Act. It depends
on whether the First Defendant was domiciled in the United Kingdom at the
relevant date. The other is the jurisdiction to decide whether it has
jurisdiction to try the issues in the Action. This is an inherent jurisdiction.
It does not derive from the Brussels Convention or the 1982 Act. Its existence
is beyond dispute.
The
High Court is a Court of unlimited jurisdiction. This does not mean that its
jurisdiction is universal and unrestricted. It means that, unlike inferior
courts and tribunals, it has jurisdiction to decide the existence and limits of
its own jurisdiction. It has an indisputable jurisdiction (of the second kind)
to decide whether or not it has jurisdiction (of the first kind) to entertain
substantive proceedings. If it decides that it has no jurisdiction (of the
first kind) to entertain them, its decision is nevertheless one made within its
jurisdiction (of the second kind). If it makes a mistake and erroneously
assumes a jurisdiction (of the first kind) to entertain substantive proceedings
which it does not truly possess, it makes an error of fact or law, but it is
not one which goes to its own jurisdiction (of the second kind). It is inherent
in the rule of law itself that somewhere in any judicial system there must be a
court which possesses jurisdiction to determine the limits of its own
jurisdiction.
In
my judgment, therefore, the process of the Court is not confined to the case
where jurisdiction (of the first kind) has already been established. By
acceding to the Plaintiffs' application to order the production of documents at
the hearing of the Defendants' application to set aside service of the Writ the
Court will not be making any assumption that it has jurisdiction to try the
Action. It will not be exercising that disputed jurisdiction, but a very
different jurisdiction, that is to say its undoubted jurisdiction to determine
its own jurisdiction by hearing and deciding the Defendants' application.
It
follows that the Judge's reasons for dismissing the Plaintiffs' application
cannot be supported. The Defendants attempted to support his decision on other
grounds. They submitted that the documents were not necessary for the fair
disposal of their own application to set aside service of the Writ, since the
Plaintiffs could rely on the evidence already before the Court. But it is not
necessary for a party seeking orders for the production of documents to concede
that without them his case must fail. It is sufficient that it may do so.
Seeing that the Defendants are strenuously contending that it will, it hardly
lies in their mouths to claim that the documents are not "necessary" on this
ground.
Counsel
for the Fourth Defendant relied on the terms of Order 38 Rule 13(2) (which
provides that no person shall be compelled to produce any document at a
proceeding in a cause or matter which he could not be compelled to produce at
the trial of that cause or matter). He pointed out that the First Defendant's
domicile will not be in issue at the trial of the Action. Accordingly, he
submitted, the third parties could not be compelled to produce the documents in
question at trial since they would not be relevant to any issue at trial.
I
do not accept this. The history and object of the predecessor of Order 39 Rule
13 were explained by Lindley LJ in
Elder
v Carter
(1890) 25 QBD 194. Its object was to remove the difficulties which existed at
Common Law in compelling production of documents except at the trial of an
Action. It did so by conferring a similar power to order documents to be
produced for the purpose of interlocutory proceedings in an Action. It was not
intended to give parties rights to the production of documents which they did
not possess before, but merely to advance the time at which they could require
their production. It follows, in my view, that the relevance of the documents
must be tested by reference to the issues in the proceedings for which they are
required. Given the history and purpose of the Rule, the concluding words of
Order 38 Rule 13(2) must in my judgment be read as meaning "which he could not
be compelled to produce if the proceeding were the trial of the cause or matter."
Accordingly,
I am of opinion that the appeal should be allowed and the Judge's decision
should be set aside. We do not, however, consider that it is appropriate for
us to exercise the discretion ourselves. Accordingly, we directed that the
Plaintiffs' application be restored for hearing by the Judge. He will have to
consider the competing considerations which the parties will urge upon him,
weigh up the consequences of making the Orders sought as against the possible
consequences of refusing them, and decide where the greater risk of injustice
lies. He will also no doubt bear in mind the statement which Hirst J. made in
Rome
v Punjab Bank
(supra)
that
"the
court will only exercise its powers under this heading very rarely, and will
require the clearest possible demonstration from the party seeking discovery
that it is necessary for the fair disposal of the Action...it would be most
undesirable, and productive of extra delay and unnecessary expense, if
applications for discovery were to become a common feature [of applications to
set aside leave granted under Order 11 Rule 1]."
Interlocutory
hearings to establish the right to bring an Action should not be turned into
mini-trials of the Action itself. There is a particular danger of this where
reliance is placed on certain of the paragraphs of Order 11 Rule 1. There is
perhaps less danger in a case of the present kind. Even so, the Court must be
conscious of the need to avoid a major trial at the early stage, though not at
the risk of doing injustice.
The
Judge may also wish to consider the extent to which this can be regarded as an
exceptional case. I do not refer to the scale and complexity of the Plaintiffs'
claim, nor to the serious risk of the disappearance of the funds which are the
subject-matter of the proceedings if the Action is dismissed before protective
measures are put in place elsewhere, though such matters will be relevant for
the Judge to consider. I refer rather to the fact that the nature of the
dealings in which the Defendants are alleged to have participated and the need
to protect the Plaintiffs (which Rimer J accepted) made it necessary to delay
service of the Writ for an unusually long period during which there may have
been changes in the circumstances on which the Court's jurisdiction depends.
This is highly unusual. It is also, however, the factor which has given rise to
the present difficulties in which the Plaintiffs find themselves.
I
cannot part with this case without expressing my personal disquiet at a rule (
which as I understand it does not derive from the Convention or from any
decision of the European Court of Justice but is said to be a rule of our own
domestic law) which makes the jurisdiction of the Court depend on circumstances
prevailing long after what, on any realistic appraisal of the position, was the
commencement of the proceedings. In my experience, and as the present case
demonstrates, such a rule is capable of working serious injustice. It may need
to be reconsidered at the highest level. In the meantime, it is at least
arguably incumbent on the Court not to compound the possible injustice by
withholding the assistance which it can properly give to parties seeking to
establish its jurisdiction at the relevant date.
LORD
JUSTICE WARD: I agree.
LORD
JUSTICE NOURSE: I also agree. Yes, Mr Marshall?
MR
MARSHALL: I take it that will be something we will receive in due course.
LORD
JUSTICE NOURSE: It will be distributed immediately after this hearing.
MR
MARSHALL: I am very grateful. So we can take it that the judgment has been
delivered effectively already.
LORD
JUSTICE NOURSE: Certainly.
MR
MARSHALL: I am very grateful. So the only question that arises now is as to
the costs of the hearings that have taken place before you. I would ask for
the costs of the appeal to be granted in our favour since we are dealing
effectively with a point of principle, but for the costs below to be reserved
to the Judge who has still to deal with the matter as a matter of discretion
presumably later on today or in due course, as thought appropriate.
LORD
JUSTICE NOURSE: The correct order would appear provisionally to be that the
costs of the hearing below should be costs in the rehearing rather than
reserved.
MR
MARSHALL: I respectfully accept your Lordship's suggestion that that would be
the appropriate course.
LORD
JUSTICE NOURSE: Shall we see what the defendants say?
MR
HOCHHAUSER: My Lord, certainly so far as the costs below are concerned, they
should be costs in the rehearing. So far as the costs of the appeal are
concerned, I would ask that they be the plaintiffs' costs in the motion on this
ground. In the event that the plaintiffs are ultimately unsuccessful then this
would have been a completely fruitless exercise and in those circumstances I
would respectfully submit that the defendants should not have to pay the
plaintiffs' costs of having to come before your Lordships. If, on the other
hand, they obtain the relief that they seek in whole or in part it would be
appropriate for them to have the costs of the appeal and the plaintiffs' costs
in the motion would reflect the equity of the situation.
LORD
JUSTICE NOURSE: Any of the other defendants? Mr. Ivory?
MR
IVORY: I would adopt those submissions, my Lord.
MISS
HOPKINS: I would also adopt those submissions, my Lord.
LORD
JUSTICE NOURSE: Thank you. Do you want to say anything, Mr Marshall?
MR
MARSHALL: All I would say is that we would not have to be here at all had this
point of principle been adopted by the defendants in the hearing below. It is
simply because of that we have had to appeal. If the matter of discretion was
dealt with and only that then no doubt there would have been no need for an
appeal and it would have been dealt with by the learned Judge.
(Their
Lordships confer)
LORD
JUSTICE NOURSE: We think you are entitled to the costs of the appeal, Mr
Marshall. So we will make that order and we will make the other order already
accepted in relation to the costs of the hearing below.
MR
MARSHALL: I am very grateful, my Lord. I believe that is all. Thank you very
much indeed for delivering your Lordships' judgment so quickly and for hearing
us so quickly. I am very grateful.
MR
HOCHHAUSER: I would adopt that submission.
-
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© 1997 Crown Copyright