Mr Justice Coulson:
Introduction
1. On 4th April 2008, following an application pursuant to CPR 74.3 by
the second respondent, made without notice, Master Leslie registered for
enforcement a Polish judgment, dated 5th September 2002, against the
appellant in favour of the respondents. The appellant, whom I shall call
BSL, now seeks to set aside that order pursuant to CPR 74.8, for which
appeal permission is not required.
2. BSL import and process frozen fish. The first respondent died in
January 2004. The second respondent, whom I shall call Mr Kruk, is his
son. Until the first respondent's death, the respondents were partners in a
firm called PPH KIM.
Background
3. In June 2000, BSL contracted with a Polish company called Odra Baltic,
pursuant to which Odra Baltic delivered frozen fish to BSL at Grimsby.
Payment was made under a letter of credit facility on presentation of
conforming documents.
4. On or about 21st February 2001, pursuant to this facility, Odra Baltic
presented to the confirming bank a set of documents on which they relied
in seeking payment of some £45,000-odd for a consignment of frozen
fish. The documents included a CMR note, which identified Odra Baltic as
sender and owner of the goods and PPH KIM as the carrier. I understand
that on about that date, in accordance with the contract, 75% of this
sum was paid by BSL to Odra Baltic. Five days later, on 26th February,
PPH KIM delivered what appears to be the same consignment of fish to
Grimsby and sought payment in the sum of £45,000-odd, on the basis
that they owned the fish. The second set of documents included a CMR
which recorded PPH KIM as being both sender and carrier. It is, to say the
least, curious that there are different CMRs for what appears to be the
same consignment of fish.
5. BSL refused to pay PPH KIM for what they considered to be the same
goods as those for which they had already paid Odra Baltic. It is this
dispute which remains at the heart of the issues between the parties.
6. PPH KIM's alleged right to be paid for this consignment of frozen
fish had been asserted even before the fish were delivered to Grimsby.
There is a fax from PPH KIM to BSL, dated 23rd February 2001, which
states: "I do not know what kind of deals you have with Odra Baltic and
Arek Bielaszewski but this shipment will be done by US, KIM, because
the GOODS are ours. So our invoices are correct, CMR is correct and
everything from our side is correct – and if you want to know more about
Mr Bielaszewski phone Martyn. And if you still have questions do not
hesitate to phone ME not Arek."
7. Thereafter, there were repeated chasers sent by the Respondents
in respect of the money outstanding. Those chasers were faxed and
dated 28th February, 4th March, 8th March and 20th March 2001. BSL's
position, as set out in their fax of 1st March 2001, was that they had paid
Odra Baltic and that Odra Baltic had said that they had paid PPH KIM.
BSL reiterated that in such circumstances, PPH KIM were "wrongly and
fraudulently endeavouring to extract payment" from BSL for goods to
which they do not have rightful title.
8. Over the next 18 months there were further letters of claim and letters
of rebuttal from BSL, but the dispute was never resolved.
9. On 5th September 2002, the District Court of Koszalin
10. in Poland made a payment order in favour of the Respondents against
BSL in the sum of £45,048 plus interest and costs. Pursuant to Polish civil
procedure, the making of that order meant that BSL had 14 days to file
any objections. In the absence of such objections, the payment order
would then be validated as a final judgment.
11. On 13th September 2002, a copy of that payment order, translated
by a certificated translator into English, was sent by PPH KIM to BSL
under cover of a fax, which said: "On 5th September the Regional Court in
Koszalin
gave a significant order to pay by BSL to PPH KIM the amount of £45,048
GBP plus interest till the day of pay (5,578.55 GBP today 16/9/02) and
the amount of legal proceedings costs. Attached you can find the order to
pay translated by a certificated translator. In accordance with Convention
from Lugano dated 16th September 1988 which signatory is also United
Kingdom with High Court of Justice above mentioned order to pay is also
respected by British law authorities."
12. Although there is no dispute that BSL received the translated payment
order, it appears that BSL ignored both the payment order and the
contents of the fax. The evidence of Mr Winning, BSL's group business
director, seeks to explain how this came about. It can be found in his
supplemental statement and I set it out in full:
"3. In paragraph 16 of my first witness statement I referred to the
fact that BSL was not able to contest the judgment before it was given
because we were not informed of the proceedings. I wish to clarify that
statement.
4. At page 52 of the annexure to my first witness statement is a fax from
PPH KIM to Bloomsbury International Limited dated 13th September
2002. The fax referred to the Regional Court of Koszalin having made a
significant order to pay on 5th September and enclosed with the fax was a
translation of the order.
5. I am informed by Marcin Dowgiallo, BSL's Polish lawyer, that under
Polish law the payment order must be served by the court (not by a party
to the proceedings) and that only service by the court constitutes official
notification of a payment order. The fax from PPH KIM did not therefore
constitute official notification or service of the order on Bloomsbury
International Limited. Given the background and history of the matter,
I consider the fax from PPH KIM to be nothing more than an attempt to
secure payment of an illegitimate debt procured as a result of fraud and I
disregarded it for that reason."
13. Thereafter, PPH KIM sent a number of further faxes, dated 30th
December 2002, and 16th and 25th March 2003, all of which referred to
the court order in their favour and sought payment in accordance with
that order. Those faxes too were apparently ignored by BSL.
14. It seems that the payment order was sent by the Polish court to
England for service by the High Court here. Service was effected by first
class post on 28th May 2003. It is BSL's case that they never received the
documents so served. They say that this non-service might be explained
by:
(a) Up to 21st June 2002, BSL had been called Bloomsbury International
Limited. The company had changed its name at that point and the new
name had been registered at Companies House. However, when the
High Court effected service in May 2003, the order was addressed to
Bloomsbury International Limited, not BSL.
(b) The order was posted to an address in Mayfair. At the time that it
was posted on 28 May 2003, this address was BSL's registered office.
However, it appears that it was no longer their actual address. BSL
had sought to register a change of address with Companies House in a
document which was dated 28th April and received by Companies House
in early June. The change was registered on 7th June 2003, which was
after the service by post of the Polish court order. I deal in a little more
detail below with the consequences of those events.
15. On 20th August 2003, there having been no response from BSL to the
payment order of September 2002, the District Court of Koszalin validated
the payment order. It is this judgment which is the subject of the appeal.
16. It is not precisely clear from the papers when BSL became aware
of the validation. It appeared from their original evidence that they
became aware of it immediately it happened because, according to his
first statement, they instructed Mr Dowgiallo in about August 2003 in
connection with that order. However, in his supplementary statement,
Mr Dowgiallo now says that he was mistaken and that he was not first
instructed until May 2004. He does not explain how that mistake came
about.
17. At all events, BSL's appeal against the judgment of the District Court
went to the Regional Court of Koszalin, having been launched on 28th
May 2004. It raised amongst other things the deficiencies with service in
London in May 2003. The appeal was unsuccessful. There was a further
appeal to the Court of Appeal of Gdansk on 24th September 2004. That
was dismissed on 16th December 2004. A still further appeal, to the
Court of Appeal of Szczecin, was dismissed on 28th September 2005. As
I understand it, on each occasion the courts rejected BSL's arguments
as to how and why the order had not been properly served in May 2003.
The Polish courts concluded that the matters which I have set out in
paragraph 13 above were not a proper explanation for the alleged non-
receipt of the documents and that BSL were at fault for failing to put in
hand proper arrangements for the redelivery of their mail.
18. It appears from the documents that the appeals in Poland, to which
I have referred at paragraph 16 above, were triggered by events here
in the UK. On 14th May 2004, a fortnight before the first appeal was
launched against the Polish judgment, a statutory demand was served at
BSL's registered office in London. In his skeleton argument, Mr Rothschild,
who appeared for BSL today, stated that this was the first time that BSL
had been formally notified of the Polish proceedings, a contention which
demonstrates both then and now that BSL's case hinges on the point
which has already been rejected by the Polish appellate courts, namely
the absence of actual service on or about 28th May 2003.
19. I should also mention that these events have led to a criminal
investigation in Poland. On 31st March 2006, the investigation
was cancelled and this decision was unsuccessfully challenged by
Mr Dowgiallo, who then brought a private indictment against the
respondents. Those proceedings too were ordered to be cancelled on
two separate occasions. However, it is right to note that the most recent
cancellation order was set aside by the Regional Court in Koszalin on 7th
May 2008. The criminal proceedings in Poland, therefore, remain live.
20. The indefatigable Mr Dowgiallo has also provided a second statement,
dated 24th June and served this morning, which indicates that he has
launched further civil proceedings on behalf of BSL, namely "a complaint
and application for resumption of proceedings". This further appeal
complains, amongst other things, about 'a forged consignment note' and
'a felony' on the part of the respondents. I would venture the opinion that
it is unlikely that one consignment of frozen fish has ever generated quite
so many different sets of civil and criminal proceedings.
The Ambit of the Present Application
21. By reason of the very recent reactivation of the civil proceedings in
Poland, Mr Kwiatkoswki, who appeared on behalf of Kruk, the surviving
respondent, properly accepted that, pursuant to Article 37 of EC
Regulation 44/2001, the Court would have no alternative but to stay
these proceedings until after the conclusion of those civil proceedings
in Poland. Initially, he thought that this meant that I should adjourn
the entire appeal. However, I pointed out that I could still deal with the
three points raised by way of appeal on the part of BSL. I said that if I
concluded that that appeal should fail, I would then stay the proceedings
until after the end of the civil and criminal proceedings in Poland. If, on
the other hand, I concluded that the appeal should succeed, then there
would be no registered judgment and the question of a stay would simply
not arise.
22. Both parties took instructions and agreed that, since both sides were
ready and able to deal with the substance of the appeal, the hearing
should continue on that basis. Accordingly, I should now deal in turn with
the three points that are raised on this appeal. However, as will be seen
from my analysis, and as Mr Rothschild very properly accepted, it is the
first ground that lies at the heart of this appeal application.
Ground 1 of the Appeal: Article 34.2 of Regulation 44/2001
23. Article 34.2 of Regulation 44/2001 provides as follows:
"A judgment shall not be recognised … where it was given in default of
appearance if the defendant was not served with the document which
instituted the proceedings or with an equivalent document in sufficient
time and in such a way as to enable him to arrange for his defence unless
the defendant failed to commence proceedings to challenge the judgment
when it was possible for him to do so."
24. On behalf of BSL it is submitted that they were not served with the
document which instituted these proceedings in sufficient time or in
such a way as to enable them to arrange their defence. Accordingly, it
was said that the Polish judgment of September 2002, subsequently
validated in August 2003, should not be recognised. As noted above, this
submission concentrates on the assertion that BSL did not in fact receive
the documents served by the High Court in London on 28th May 2008.
25. A number of Strasbourg authorities were drawn to my attention
dealing with issues relating to service. In case 166/80 Klomps v Michel
[1981] ECR 1-1593, the court concluded that, even if a court of the State
in which the judgment was given had already found that service had been
effected, the court seized in the other contracting State was still required
to consider whether such service was effected in sufficient time to enable
the defendant to arrange for his defence. In the judgment, it was stated
that:
"19. … Nevertheless the court must consider whether in a particular
case there are exceptional circumstances which warrant the conclusion
that, although service was duly effected, it was however inadequate for
the purposes of enabling the defendant to take steps to arrange for his
defence and accordingly could not cause the time stipulated by Article
27.2 [the predecessor to Article 34.2] to begin to run.
20. In considering whether it is confronted with such a case the court in
which enforcement is sought may take account of all the circumstances
of the case in point, including the means employed for effecting service,
the relations between the plaintiff and the defendant or the nature of
the steps which had to be taken in order to prevent judgment from
being given in default. If, for example, the dispute concerns commercial
relations and if the document which instituted the proceedings was served
at an address at which the defendant carries on his business activities,
the mere fact that the defendant was absent at the time of service should
not normally prevent him from arranging his defence, above all if the
action necessary to avoid a judgment in default may be taken informally
and even by a representative."
26. In case 49/84 Debaecker v Bouwman [1985] ECR 1-1779, the policy
behind Article 27.2 of the Brussels Convention was described in the
following terms:
"11. It follows from the wording of Article 27 that the courts of a
contracting state may refuse to recognize a judgment only on one of the
grounds expressly mentioned in that provision. One of those grounds
is that laid down in paragraph (2), in order to ensure the adequate
protection of the rights of a defendant against whom judgment is given
in default of appearance abroad. Article 27(2) provides that a judgment
shall not be recognized '... if the defendant was not duly served with the
document which instituted the proceedings in sufficient time to enable
him to arrange for his defence'. That provision takes account of the fact
that certain Contracting States make provision for the fictitious service
of process where the defendant has no known place of residence. The
effects that are deemed to follow from such fictitious service vary and the
probability of the defendant's actually being informed of service, so as to
give him sufficient time to prepare his defence, may vary considerably,
depending on the type of fictitious service provided for in each legal
system.
12. For that reason Article 27(2) must be interpreted as being intended
to protect the right of a defendant to defend himself when recognition of
judgment given in default in another Contracting State is sought, even
if the rules on service laid down in that Contracting State were complied
with."
In addition, in Debaecker, at paragraphs 29-32 of the judgment and
conclusion 3, the court expressed the view that, if service was not
effected for reasons which were the responsibility of the defendant, that
is to say the party on whom service was or was attempted to be made,
then that was a matter which the court should take into account when
considering registration of a subsequent judgment.
27. Subsequent cases such as Case C-123/91 Minalmet GmbH v Brandeis
Ltd ECR 1-5661 and Orams v Apostolides [2006] EWHC 226 (QB); All ER
(Comm) 1; reiterate the self-evident point that challenges to a judgment
after the event, on grounds such as the failure to effect proper service
and the like, will not usually be as effective and/or have less chance of
success than challenges made to a claim before judgment is entered.
28. In summary, therefore, it seems to me that the relevant principles are
these:
(a) What matters most under Article 32.4 is not form but function;
whether the defending party has been given a proper opportunity to
contest the proceedings prior to the entering of judgment.
(b) The mere fact that service has been found to be good in one State
is not binding on the court of registration in another State and the court
must always bear in mind that challenges made after the event are more
difficult to sustain.
(c) However, the court's findings relating to the service in one State
may be taken into account in the other, because all the circumstances
relevant to questions of service (including whether non-service was the
defendant's fault) are to be taken into account by the court in considering
the application of Article 34.2.
29. In my judgment, applying those principles to the facts of the present
case, BSL have not made out any ground for setting aside the registration
under Article 34.2. There are two separate reasons for that conclusion. I
deal first with the fax of 13th September 2002, which may have been sent
the following day, 14th September 2002.
30. As I have indicated, that document enclosed a certificated English
translation of the court order – the payment order – that instituted
these proceedings. BSL therefore knew, if they had read the documents
that they were sent by the respondents, that they could challenge the
payment order if they so chose, but only had limited time in which to do
so. However, BSL ignored the document and eventually the payment order
was validated. In such circumstances, it seems to me that the mischief at
which Article 34.2 of the regulations is aimed simply did not arise in the
present case. BSL knew, or should have known, from the outset that they
were required to 'arrange for their defence' – challenge the payment order
in the District Court of Koszalin – if they wanted that payment order not
to be validated.
31. I have set out Mr Winning's explanation for these events at paragraph
11 above. It seems clear that he had forgotten about the fax even when
he produced his first statement. The explanation in his second statement
comes down to this: because of a procedural rule of which he was
unaware until later (namely that in Poland the court serves the payment
order, not the party who obtained it), the production to him by fax of
the payment order on 13/14th September 2002 could be ignored with
impunity, and the absence of the service of precisely the same document
from another fax machine, this time belonging to the District Court, is
somehow fatal to the respondent's case. I am bound to reject such an
argument. I consider it to be wholly contrary to Article 34.2. It is clear,
as I have said, that BSL had been given the opportunity to defend the
proceedings and chose not to do so.
32. In the course of his able submissions, Mr Rothschild made a slightly
different point, again taken from Mr Winning's second statement, to
seek to justify the failure to act on the fax. That was the contention that,
because a number of faxes had been sent over the months, and indeed
years, by the respondents/PPH KIM to BSL, it was reasonable for BSL
to view the fax of 13th September as being one of a series of ongoing
commercial threats for the outstanding money. It was, so he submitted,
a document which BSL were entitled to treat as being nothing out of the
ordinary.
33. I do not accept that submission. It seems to me that this was a
document which made plain that a court order had been made against
BSL, and it enclosed a copy of that order in English. It was, therefore,
different to every other document that was sent by the respondents/
PPH KIM to BSL between 2001 and 2004. Moreover, it was followed by
a number of later faxes which referred expressly to the court order, and
the difference that it was said this court order made to the respondents'
position. Accordingly, BSL had more than sufficient warning about what
was happening. Indeed, as it turned out, there was a lengthy period
between September 2002 and August 2003 when they could have
challenged the payment order. They failed to do so.
34. Moreover, it was not as if the fax of 13th September was somehow
standing alone, as the only document referring to the order of the
District Court: on the contrary, it was one of a number of documents
which expressly drew the terms of the court order to BSL's attention.
Accordingly, it seems to me, BSL can only have themselves to blame for
failing to do anything about it.
35. There is, however, a second string to the respondents' bow and
a second reason why I would conclude that Article 34.2 has not been
triggered here. Assume that I am wrong about the fax of 13th September
2001. I would still conclude that proper service had been effected in May
2003 and, if not, that any failure of service was BSL's responsibility, such
that they cannot now seek to rely on Article 34.2. The reasons for that
view are these.
36. First, the efficacy of service in May 2003 raises the same point which
has been dealt with by the Polish appellate courts. Although I accept
that such decisions are not binding on me, it is contrary to the spirit and
principle of Regulation 44, and the express preambles to that Regulation
at paragraphs 16 to 18 (which were properly drawn to my attention by
Mr Kwiatowski), for this court to ride roughshod over those decisions and
effectively ignore their conclusions. The question of service was dealt with
in great detail by no less than three appellate courts in Poland and each
time it was concluded that effective service had occurred.
37. Secondly, I consider that the service of the documents at the address
which was, as at 28th May 2003, the registered address of BSL, was good
service in accordance with the CPR. It was therefore compliant not only
with Polish practice but also the practice in this country.
38. Thirdly, I would conclude that if, as BSL maintain, they did not receive
the documents that were posted, then that was regrettably their own
responsibility. Since the address in Mayfair was their registered address as
at 28th May 2003, the very least they should have done, if they were no
longer using it as their offices, was to come to an arrangement with the
Post Office whereby any documents addressed to the old address would
be readdressed to their new address. That is standard practice. It appears
that no such arrangements were made. That must be a highly relevant
factor which, in accordance with the principle set out at paragraphs 25
and 27(c) above, would lead me to conclude that BSL could not utilise
Article 34.2 to try and make good that default.
39. Accordingly, by reference either to the fax of 13th September 2002
or the service of the documents by the High Court in May 2003, I would
reject the first and principal ground of this appeal.
Grounds 2 and 3 of the Appeal: Article 53.2 of Regulation 44
40. The second point taken by BSL is by reference to Articles 53 to 55 of
the Regulations. Those Articles make plain that a certificate is required
from the Member State where the judgment was given, and the standard
form of that certificate must make clear that the judgment was one that
could be enforced in the Member State, in this case Poland.
41. BSL point out that there is no such certificate in the present case.
It was said that, although this was a technical point, it was not simply a
formality because there was reason to doubt that the Polish court would
provide such a certificate. The reasons given for that are two-fold, namely
that, first, it appeared that Mr Kruk had not got a copy of the original
order and that, secondly, because the his father (the first respondent) has
now died, execution of the judgment should be suspended until the his
heirs have been established.
42. Article 55, however, makes clear that the certificate is not mandatory
if the court of registration considers that it has sufficient information
before it to dispense with its production. I am in no doubt that there
is sufficient information before me to allow me to dispense with the
production of the certificate. As I have previously noted, three Polish
appellate courts have rejected BSL's dogged attempts to set aside this
judgment. I can only conclude, therefore, that the courts of Poland have
reached the view that this judgment is enforceable. I do not believe,
therefore, that in those circumstances this omission, which Mr Rothschild
very fairly accepted was highly technical, can found a successful appeal.
43. As to the question of the first respondent's heirs, I accept that Mr
Kruk should have got that position sorted out before, and not after, the
application to Master Leslie. It was plainly something that he had not
done. However, it is now agreed that Mr Kruk has the necessary authority
to act for the heirs, and I have seen documents which give him that
authority. It seems to me that this later evidence disposes with that point.
Accordingly, it does not seem to me that the absence of the certificate
under Article 54 is relevant or can sustain a successful appeal.
44. As to ground 3 of the appeal, that was a different way of putting the
point that the Mr Kruk had not notified the court of the death of the first
respondent. I have effectively dealt with that above. Ground 3 therefore
adds nothing.
45. Accordingly, for all the reasons noted above, I reject BSL's appeal
against the order of Master Leslie.
Stay
46. BSL's underlying position, however, is that because of the most recent
appeal in Poland launched earlier this month, and because of the ongoing
criminal investigation, it would be unjust for this court to do anything
other than to stay these proceedings. As I have previously indicated, Mr
Kwiatowski properly accepted that that was the right order for the court to
make if, as I have done, I refuse BSL's appeal.
47. For what it is worth, I am in no doubt that both counsel were correct
to say that, in these circumstances, the proceedings should be stayed.
The court has the power to make such an order pursuant to Article 46.3
of the Regulations and pursuant to RSC Order 46, rule 11 and Order 47,
rule 1: see Noirhomme v Walklate [1992] 1 Lloyd's Rep 427. In addition,
as Mr Rothschild correctly pointed out in his skeleton, it is trite law that
"it is improper that a learned judge should compel persons to pay money
in any event which monies it may subsequently be held by a higher
court they were under no legal duty to pay at all": see Bloor v Liverpool
Derricking & Carrying Co. Ltd (1936) 3 All ER 399 at 406. The question
is whether I should exercise that power in favour of BSL and stay these
proceedings until after the conclusion of the relevant criminal and civil
proceedings in Poland. I am in no doubt that I should.
48. I have taken into account the following factors as being relevant to
that conclusion:
(a) There is an ongoing criminal investigation in Poland. Whilst the court
may be a little sceptical as to whether it might provide any sort of result,
because of the delays and the fact that it has been cancelled on at least
two occasions, it is fair to say that the most recent ruling of the Polish
Court has been to reinstate that investigation (see paragraph 18 above).
(b) If the criminal investigation resulted in a positive conclusion, there
would be a real possibility that the sums due pursuant to the judgment
would have to be repaid to BSL. That is clear from the evidence of Mr
Dowgiallo. It therefore must be appropriate to stay the proceedings until
that investigation has been concluded, so that the sums that are the
subject of the judgment are not yet paid over to Mr Kruk.
(c) In addition, there is now a civil appeal which, as is accepted on behalf
of Mr Kruk, might render the original Polish judgment a nullity. Until that
appeal has been resolved, it would again be quite wrong to make any
order other than to stay these proceedings.
Accordingly, I stay these proceedings until after the conclusion of both the
criminal investigation in Poland and the most recent civil appeal in that
country. I would ask the parties to agree the precise formulation of the
order.