England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice
		2nd July 2015

MR. JUSTICE GREEN:

A. Introduction

1. There is before the court today an application for relief against sanctions made by Mrs. Olga Yampolskaya ("the applicant") pursuant to CPR rule 3.9.
2. The sanction imposed was the striking out of her appeal against the registration of two judgments (of 20^th March 2014 and 19^th June 2014) obtained in the courts of Lithuania against her. These judgments are for sums of approximately £10 million plus interest and costs, and were made in favour of AB Bankas Snoras ("the respondent").

B. The judgments Regulation: Council Regulation 44/2001

3. The respondent has attempted to register these judgments under the terms of Council Regulation 44/2001 ("the Judgments Regulation"). This Regulation applies to judgments given before 10^th January 2015.
4. There are three provisions of the Judgments Regulation of particular relevance to the facts of the present case. Article 33(1) of the Judgments Regulation states:

"A judgment given in a Member State shall be recognised in the other Member States without any special procedure being required."

Article 36 addresses the power and jurisdiction of the foreign court to review the merits of the court delivering the judgment in issue. It provides as follows:

"Under no circumstances may a foreign judgment be reviewed as to its substance."

5. Article 34 defines circumstances where a judgment shall not be recognised, and in particular Article 34(1) states:

" A judgment shall not be recognised:

1. if such recognition is manifestly contrary to public policy in the Member State in which recognition is sought;

Subparagraph 2 provides that a judgment shall not be recognised where it was given in default of appearance. That provision then goes on to elaborate upon what is meant by "in default of appearance".

6. Recitals 16 and 17 of the Judgments Regulation explain the policy and purpose underlying the recognition provisions. Recital 16 emphasises that:

" Mutual trust in the administration of justice in the [European] Community justifies judgments given in a Member State being recognised automatically without the need for any procedure except in cases of dispute."

Recital 17 makes an important point about the efficiency of the recognition procedure that should apply. It states as follows:

"By virtue of the same principle of mutual trust, the procedure for making enforceable in one Member State a judgment given in another must be efficient and rapid. To that end, the declaration that a judgment is enforceable should be issued virtually automatically after purely formal checks of the documents supplied, without there being any possibility for the court to raise of its own motion any of the grounds for non-enforcement provided for by this Regulation."

7. It is an important principle relevant to the facts of the present case that this court is required under EU law to trust the courts of Lithuania. The practical effect of this is that, prima facie, I have no power to go behind the findings of the Lithuanian courts.

C. The judgments sought to be registered

8. In the present case there are two judgments of Lithuanian Courts which are sought to be registered. I need to say a little about the first set of proceedings in particular. On 20^th March 2014, the Lithuanian Court entered judgment against the applicant. However, the applicant now says that the hearing leading to this judgment occurred without her knowledge and presence, and without her involvement. She says that she was not represented. She appealed that judgment and on 6^th May 2015 the Vilnius Regional Court rejected the appeal relying upon two mandates said to establish that the applicant gave authority to lawyers to act on her behalf in the court below. I have seen a full translation of the judgment, which treats those mandates as valid and effective. The applicant's application, therefore, to set aside the first judgment failed. I now understand that the applicant has appealed yet again the judgment of the Vilnius Regional Court of May 2015, alleging the mandates in question to be forgeries. She refers to a ruling of a court in Russia, which has found that mandates ostensibly signed by her were, in fact, forgeries. No one before me has been able to provide details of the latest appeal in Lithuania, or when it will be heard or decided.
9. I should add, for the sake of completeness, that the applicant makes a similar complaint about the second Lithuanian judgment of 19^th June 2014. However, she has not appealed that judgment.

D. A summary of the background facts

10. The applicant is married to Mr. Vladimir Antonov. He was a former director and shareholder of the respondent bank. It is said by the respondent that he was one of a small number of individuals who exercised effective control over the bank. In November 2011 Mr. Antonov was arrested in London by the Metropolitan Police. I am informed that this was at the request of the authorities in Lithuania. They alleged serious financial irregularities at the bank. In December 2011 the bank was put into the bankruptcy process by the Lithuanian Court.
11. The English High Court in May 2012 granted to the administrator of the bank a worldwide freezing injunction against Mr. Antonov, the relevant sum was in the order of €482 million.
12. In January 2014 Magistrates at Westminster Magistrates' Court ordered the extradition of Mr. Antonov to Lithuania. He now stands accused in the Lithuanian courts of various counts of fraud. Proceedings have been commenced in the High Court (Commercial Court) by the respondent's bank, through its administrator, against Mr. Antonov and his business partners. These are now stayed pending determination of extradition proceedings. It is apparent from the evidence before me that the applicant still seeks the advice and assistance of her husband, Mr. Antonov, in relation to matters concerning litigation.
13. I turn now to the specific judgments in issue in these proceedings. I have already observed that in March and June 2014 the Lithuanian Court delivered two judgments against Mr. Antonov, the applicant and various others for sums approximating to €10 million plus interest and costs, and that the court has subsequently rejected arguments on behalf of the applicant as to the effectiveness of the authority she gave to the relevant lawyers acting for her in these proceedings. Both of these judgments were the subject of a registration order on the part of the High Court on 12^th December 2014. An interim charging order was made over property belonging to the applicant on 19^th December 2014. The registration order was served on the applicant on 23^rd December 2014 which gave the applicant until 23^rd January 2015 to lodge an appeal. However, on 19^th January 2015, Mishcon de Reya (acting for the applicant) contacted Linklaters (acting for the bank) contending that service had not been properly effected. The bank agreed to make an appointment on the evening on 22^nd January 2015 to re-serve the registration order. Subsequently, the applicant filed her appeal on 6^th February 2015. Evidence before the court in the form of a letter from HMCTS required the applicant to file her appeal bundle by 16^th March 2015. As I understand matters at this stage the applicant was acting as a litigant in person.
14. On 13^th February 2015, the bank's solicitors, Linklaters, wrote to the applicant. In that letter Linklaters set out reasons why, in their view, her appeal was misconceived. However, they suggested to the applicant that she consult a Citizens Advice Bureau; they also gave a website reference for the organisation. She was directed to her email box where she would find official guide books for litigants in person. There is no dispute between the parties but that contained within such documentation are the usual exhortations to litigants in person to be aware of and comply with court timetables. Nonetheless, the applicant failed to file a bundle by 16^th March 2015 as required. An 'unless' order was made on 26^th March 2015 requiring the filing of a bundle by 1^st April 2015. She failed to comply.
15. The applicant, in a second witness statement, has explained what occurred at that point. In paras. 11 and 12 of her statement the applicant says as follows:

"11. My first witness statement, in particular paragraphs 14 to 16 thereof, explains the confusion which led to my failing to lodge an Appeal Bundle in time and, therefore, my appeal being struck out. By way of further explanation and clarification, I recall that I received a voicemail message that day on my mobile telephone from the Court about lodging a bundle by 4.00 pm that day. Having re-listened to the message for the purpose of producing this statement, it is now clear to me what is being said. However, at the time, I knew nothing about an obligation to lodge a bundle as I had not read the letter from the Court of 6 February 2015 but had just passed it to my husband. I understand from him that he too had overlooked the need to lodge a bundle. In any case, I knew that the hearing relating to the Interim Charging Order had, at one stage, been fixed for 16 March 2015 and I was worried that I might be due in Court that day. So I immediately telephoned my husband and told him that I had had a message from the Court and I was worried that there might be a hearing that day after all.

12. My husband told me that it was not possible that there could be a hearing that day because the hearing on 16 March 2015 had been adjourned with the agreement of James Hennah. However, he said he would telephone Linklaters to confirm the position. I was not privy to the conversation my husband had with Mr. Hennah of Linklaters, but I can confirm that he subsequently rang me back to say that he had spoken to Linklaters and that there was no problem. I have already mentioned that I was acting in person at the time and, in view of my poor understanding of the English legal process and my limited English, I was very much dependent on my husband's help and assistance in understanding what was required of me. I should add that, having re-read my first statement, the impression I gave in paragraph 14 that I was aware of the need to lodge a bundle at that time is wrong. As stated above, I did not read the Court's letter of 6 February 2015 at the time. The first I knew of the need to lodge a bundle was some little time after I instructed Withers LLP."

16. As is recorded in that witness statement, no appeal bundle was filed, and the appeal was struck out. As of the date of this hearing an appeal bundle remains unserved, though this will be because the High Court will not accept an appeal bundle in relation to an action which has been struck out.

E. The application for relief

17. The principles governing relief from sanctions are encapsulated in CPR rule 3.9 and have been elaborated upon by the Court of Appeal in Denton v TH White Limited [2014] EWCA (Civ) 906, which explains and modifies somewhat the earlier judgment of the Court of Appeal in Mitchell v Mirror Group Newspapers [2013] EWCA (Civ) 1537. The test is now familiar to judges and practitioners. It sets out a three stage test which was described in para. 24 of Denton in the following terms:

"The first stage is to identify and assess the seriousness and significance of the 'failure to comply with any rule, practice direction or court order' which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate 'all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b)]'."

18. The Supreme Court in Global Torch Limited v Apex Global Management Limited (No.2) [2014] UKSC 64 has made clear that in ordinary cases a court will not be required to undertake an assessment of the underlying merits, nor would it be appropriate to do so (see paras. 29 and 30 per Lord Neuberger). However, this is not an absolute rule. Lord Neuberger, in para. 31 stated thus:

"In principle, where a person has a strong enough case to obtain summary judgment, he is not normally susceptible to the argument that he must face a trial. And, in practical terms, the risk involved in considering the ultimate merits would be much reduced: the merits would be relevant in relatively few cases, and, in those cases, unless the court could be quickly persuaded that the outcome was clear, it would refuse to consider the merits. Accordingly, there is force in the argument that a party who has a strong enough case to obtain summary judgment should, as an exception to the general rule, be entitled to rely on that fact in relation to case management decisions."

F. The application to the facts of the three stage test set out in Denton

19. The first part of the test requires me to identify and assess the seriousness and significance of the failure to comply with the rule or direction or court order which engages CPR rule 3.1. In this regard Mr. Wardell QC, who appears today for the applicant, submits that, viewed in the round, the tardy lodging of an appeal bundle is a purely administrative default. This is not least because the appeal bundle will only be read by the judge some weeks or, more likely, months later. Hearing dates are not fixed upon the basis of the lodging of such bundles. It is submitted that the failure has not caused prejudice to the respondent or to the court system.
20. Mr. Amey, for the respondent bank, submits that the delay is significant, now three months. Further, that the courts have treated failures to serve appeal bundles as serious and significant. He relies in particular upon the judgment of Supperstone J in Davis Solicitors LLP v Rajah [2015] EWHC 519. In that case the judge held as follows in paras. 25 and 26:

"25. Ms. Ballard submits that the failure to file an appeal bundle was not a significant breach of CPR PD 52B because all relevant documents had been served on the Defendants and the Claimant had complied with all court orders in every other respect. There was, she submits, no prejudice to the Defendants because permission to appeal had not yet been granted and therefore there was no need for them to incur any costs.

26. I reject this submission. Paragraph 6.3 of PD 52B requires an appeal bundle, paginated and indexed, to be filed as soon as practicable, but in any event within 35 days of the filing of the Appellant's Notice, which in this case was by 4 February 2014. Paragraph 6.4 identifies the documents that must be included in the appeal bundle and the documents that should also be considered for inclusion. Not only did the Claimant fail to comply with the Practice Direction, but Ms. Ballard ignored the 'unless' order of Judge Wulwik of 3 March 2014 relating to the lodging of an appeal bundle. She made no application to set aside the 'unless' order. It was only after the order of 31 March 2014 striking out the appeal that she wrote to the court. In fact, as Mr. Dean, for the Defendants, observes it was not strictly necessary for the judge to make the order of 31 March 2014 as the Claimant's failure to lodge an appeal bundle by 4pm on 17 March 2014 would have resulted in the appeal being struck out without further order, pursuant to the terms of the order of 3 March 2014."

At para. 33 Supperstone J added this:

" Ms. Ballard has explained why the default occurred. I do not consider any explanation she has given constitutes a good reason. She has put forward reasons for not complying with PD 52B 6.3 and 6.4 which indicate a continuing lack of understanding of the importance of the rules. The purpose of PD 52B 6.3 and 6.4 is clear. It is to assist the orderly conduct of appeals throughout the appeal process."

I would add that in para. 35, in the last sentence thereof, the judge apparently took into account as an additional consideration what he described as a fact that:

"…Ms. Ballard had deliberately decided not to comply with the Practice Direction and the 'unless' order because she considered that what she had done in terms of filing and serving documents for the appeal was sufficient."

21. In Denton the Court of Appeal emphasised that the test was not whether the breach was trivial but whether it was serious and significant. In the overall scheme of the administration of justice a failure to serve an appeal bundle out of time is, in my view, a significant breach essentially for the good administration reasons described by Supperstone J in Davis. Litigants frequently underestimate the impact on the timetabling of the end trial if non-adherence to the rules occur at earlier stages. The routine non-observance of procedural rules was one of the reasons why the Court of Appeal in Denton has urged the adoption of a more robust approach to case management. It is for this reason that the categorisation of non-service as significant and serious is dealt with in largely abstract terms by Supperstone J in Davis, although, as I have recorded, he did take into account that the applicant's conduct was considered to be deliberate. I do accept that there are degrees of seriousness and a court is entitled to have regard to the context in which the default occurs. However, in short, adherence to procedural steps does, in practice, matter.
22. The present case concerns registration of a judgment obtained elsewhere within the EU. The process of registration is intended to be easy, swift and seamless. In this case, according to the agreed chronology, which has been prepared for the court, the progress of the registration has not been smooth, swift or seamless; it has been awkward and delayed. In my judgment, in this context, I am bound to treat the default as significant and serious. It is relevant that what the High Court is here concerned with is a registration action where the foreign court has already considered the merits. The scope for a person seeking to defend against registration is very substantially less than in other litigation where the merits remain live throughout. The essential premise underlying registration proceedings is that the receiving court acts more or less automatically.
23. I turn now to the second stage of the Denton test – why the default occurred? In her witness statement the applicant has provided an account of why she failed to serve the appeal bundle in time. There has been some argument before me in which the respondent submits that I should view the applicant as having engaged in deliberate delaying tactics. I propose to address this issue upon the basis only of the matters admitted to by the applicant herself. I am not in a position to form a fair view about a number of the allegations which have been made.
24. Boiled down to its bare essentials, the applicant describes a picture of a person who neglectfully failed to look at court documents, sought advice from her husband who, on her own account, also overlooked the contents and significance of documents, or misread them, and in circumstances where the applicant's husband in turn sought advice from the respondent bank's legal advisers. It is said that they proffered advice which was less than helpful, for instance, failing to remind the applicant's husband about the need to lodge an appeal bundle. In his skeleton argument Mr. Wardell QC, for the applicant, puts the position in the following way in paras. 18 and 19:

"18. The failure to lodge the bundle was principally due to the fact that Mrs. Yampolskaya and her husband had overlooked the need to do so. This was compounded by the fact that Mrs. Yampolskaya believed that the telephone message received on 16 March 2015 had something to do with the hearing that had been due to be held that day. This resulted in her husband seeking reassurance about the wrong point.

19. It is important that English is not her first language and that she did not have the benefit of legal advice. Whilst no criticism is levelled at Mr. Hennah, it is unfortunate that he did not remind Mr. Antonov of the need to lodge the bundle during either of his conversations on 16 March 2015."

25. The respondent takes a different view of events. It is accepted that in principle a court might well take the fact that a litigant in person is indigent or impecunious, or unable to speak the language into account. In principle I agree either under stage 2 and/or 3 that this is or may be a relevant consideration. However, not every litigant in person is in the same position and there are major differences in terms of access to advice or representation, or resources. Not every litigant in person is to be treated as the same.
26. In the present case the applicant is plainly a sophisticated person with sufficient access to resources to protect her interests. This is not to undermine the position that she and her husband find themselves in, but her position is not comparable to that of many litigants in person who find themselves before these courts. The respondent bank also submits that the default was not due to some obscure technicality, it was due to carelessness and to the failure to read a court document that, on its face, is relatively clear and unambiguous. It is also submitted that Linklaters (the bank's solicitors) had already indicated to the applicant that she obtain legal advice, for example from a Citizens Advice Bureau, but this suggestion was not followed up. It is pointed out that the applicant now has the services of highly reputable solicitors and counsel, and has given no explanation which would explain why there was a failure earlier to take advice. It is also pointed out that the applicant's husband had access to lawyers and that he was in a position to advise her.
27. There are a number of puzzling inconsistencies in the applicant's evidence but it is not necessary for me to decide or resolve these particular discrepancies. The nub of the position is that the applicant failed to read court documents, referred them to her husband who also misread or misunderstood them. But in circumstances where the advice was sought of lawyers acting for the other side, where those lawyers politely declined to proffer advice. In my view no criticism can be levelled at Linklaters for gently and politely brushing off the applicant. It was her responsibility to obtain advice and not theirs to give it.
28. The question here is whether it was careless on her part in failing to read documents, and incompetent on the part of her husband in misreading or misconstruing them and, if so, whether this is acceptable as an explanation. In my view it cannot be. I do not accept that these are satisfactory explanations, in particular in the context of a system of registration, when merits are irrelevant, which is intended to be expeditious and informal and, in large measure, automatic. In principle, an applicant in the position of this applicant, who fails to read court documents, or who fails to take the chance to obtain advice, cannot readily be heard to refer to these as adequate explanations. I might have taken a different view in relation to a genuinely indigent or impoverished litigant in person, but this is not the case here.
29. I turn now to Denton stage 3. This requires me to stand back and evaluate all the circumstances from the perspective of fairness and proportionality. I return to the essential nature of these proceedings, namely, registration of a foreign judgment of a court of an EU Member State. The judgments in Lithuania have addressed the question of the authority of lawyers appearing on the applicant's behalf. The Vilnius Regional Court has ruled against the applicant. There is no appeal against the judgment of June 2014. It is in any event clear that judgments subject to appeal may be registered abroad and, under Article 36 of the Judgments Regulation, this court is simply not allowed to review the substance of the Lithuanian decisions.
30. This is a case where, on the basis of those judgments I am entitled, applying the test in Global Torch Limited, to take account of the merits and conclude that the applicant has no right to delay registration further. Mr. Wardell submitted that if the applicant is correct and authority was procured in the Lithuanian proceedings by fraud and forgery, palpable injustice will result. But this is a skilful attempt on the part of Mr. Wardell to seek to suck this court into the forbidden territory of the merits. If the applicant prevails on her appeal in Lithuania she is entitled to raise this post-registration, in order to prevent enforcement. Indeed, I make clear that nothing I say in this judgment is intended to express any view about the merits or otherwise of any application that might in the future be made to stay enforcement in the light of developments before the Lithuanian courts on appeal.
31. However, I can see nothing in the facts which would, in the context of the stage 3 test, preclude registration.

G. Conclusion

32. In conclusion and for these reasons the application for relief against sanction does not succeed.
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