POTTER LJ:
[1] This is the judgment of the Court to which all members have
contributed.
[2] The appeals and applications for permission to appeal before the
court have their origins in worldwide freezing orders and orders for cross-
examination made against each of the first to fourth defendants (to whom
for purposes of brevity, we will refer as D1, D2, D3 and D4) in exercise
of the powers of the English Court under s 25 of the Civil Jurisdiction
and Judgments Act 1982 ("the CJJA") to grant interim relief in support
of substantive proceedings abroad, in this case proceedings in the US
District Court for the Southern District of New York before the Honourable
Judge Rakoff ("the US action"). The point of principle which lies at the
heart of the appeals is whether a world-wide freezing order should be
made under s 25 of the CJJA in support of an action in another jurisdiction
in circumstances where the defendant in question is neither domiciled
nor resident within the jurisdiction and there is no substantial connection
between the relief sought and the territorial jurisdiction of the English
Court.
THE FACTUAL BACKGROUND
[3] The claimant is a large multinational company involved, together
with its affiliates, inter alia in the sale of cellular telephone equipment.
The defendants are members of a Turkish family who own a
telecommunications company, T. M. T. H. AS ("T."), which is the second
largest supplier of mobile telephone services in Turkey. D1 and D3 are the
sons, and D4 the daughter, of D2.
[4] The US action …arose out of the commercial relationship between the
claimant and N. on the one hand and T. on the other. T. is almost wholly
owned by companies in the ownership or control of the defendants. In
the US Action, the claimant's case is that each of D1-D4 fraudulently
induced it to enter into various financing agreements with T., whereby
the claimant advanced very large sums in order to enable T. to purchase
cellular infrastructure telephone equipment from companies within the
M. group of companies and to acquire a licence for the operation of T.'s
cellular telephone system in Turkey. The claimant alleges that each of
the defendants acted without any intention that the money should be
repaid and the proceedings allege that each is personally liable for the
whole amount outstanding. In addition to the allegation of fraudulent
procurement of the loans made to T., the claimant alleges that, in the light
of their actions taken at T. shareholder meetings on 24 April 2001 and
4 January 2002, the defendants conspired to do and dishonestly did the
following things:
i) By means of T. shareholder actions issued to S. T. U. B. H. AS ("S.
T."), a company also controlled by the defendants, new shares in T., thus
reducing from 66% to 22% the percentage of the share capital of T.
previously pledged to the claimant as security for its loans to T. by R. T. S.
AS ("R. T."), which company was the majority shareholder in T. and was in
turn controlled by D1-D3.
ii) By means of T. shareholder actions on 4 January 2002, relegated the
shares covered by the pledge to a new and subordinate class, whereby
T. were permitted to participate in and potentially transfer its assets to a
"foundation" which is not subject to Turkish company law; and
iii) Diverted monies loaned to T. by the claimant for the specific purpose
of purchasing equipment.
[5] The claimant's claims alleged common law fraud and civil conspiracy
under Illinois law for which ordinary compensatory damages were
claimed. They were also put on the basis of violations under the Racketeer
Influenced and Corrupt Organizations Act 18 USC ("RICO").
[6] On the day the US Action commenced, the claimant obtained a
temporary restraining order from the New York Court to prohibit D1-D4
from taking any further steps to prejudice the security for T.'s loans, and
to secure the attachment of various apartments and funds in New York
until further order. Such relief was granted pending the full hearing of the
claimant's motion for a preliminary injunction.
[7] On 30 January 2002 Cresswell J, on the ex parte application of the
claimant, granted a freezing injunction against D1 in respect of D1's
house in London and any other of his assets situated in England up to
the value of US$50 million ("the domestic injunction"). On the hearing of
that application, counsel for the claimant recognised during the hearing
that the US Court could not make a worldwide freezing order but stated
that the claimant reserved the right to apply to the English Court for
such an order against D1 in due course. On 15 February 2002 Cresswell
J continued the domestic injunction pending the hearing of an application
by D1 for its discharge.
[8] During March 2002 D1-D4 applied in the US Action to dismiss the US
proceedings for failure to join indispensable parties, insufficient service
of process, lack of personal jurisdiction and forum non conveniens. They
also filed motions to compel arbitration, and to dismiss for lack of subject
matter jurisdiction and failure to state a claim. These applications/motions
were eventually dismissed by Judge Rakoff on 30 September 2002.
[9] On 1 April 2002, Judge Rakoff denied the defendants' request
for a protective order to block service of process by the claimant on
them whilst in New York to give evidence on the claimant's motion for
preliminary injunctive relief.
[10] On 9-18 April 2002, Judge Rakoff conducted a 6-day inter partes
hearing involving oral testimony (though not from the defendants
personally) upon the claimant's and N.'s application in the US Action for a
preliminary injunction and attachment order. That relief was granted on 9
May 2002. …
[14] The relief granted by Judge Rakoff included a direction to the
defendants in the US action to deposit into the registry of the New
York court, by no later than 24 May 2002, the shares of T. held by S. T.
issued to it during the meeting of T. shareholders on 24 April 2001 and a
prohibition upon the defendants from taking any step directly or indirectly
to affect in any way the value, status or availability to the New York court
of the T. shares.
[15] As found by Judge Rakoff in a later opinion dated 22 August
2002, on 10 May 2002 D3, in defiance of the order of 9 May and in
contravention of his prior promise to the US court that he would hold the
T. shareholder resolutions in suspense, applied to the Turkish authorities
for registration of the resolutions so as to give them legal effect, which
registration was accomplished on 19 July 2002. Judge Rakoff found
that D1, D2 and D4 were all in a position to prevent registration of the
resolutions and were also in contempt for failing to do so.
[16] Further, as Judge Rakoff found, the defendants concealed from
the New York court that on 19, 29 and 30 April 2002 three distributors
of T. products, by separate law suits in three different Turkish courts,
applied for and obtained ex parte injunctions to prevent the transfer of T.
shares out of Turkey. The defendants thereafter failed to comply with the
order of 9 May 2002 requiring them to deposit the T. shares as collateral
by 24 May 2002 on the grounds that they were prevented from doing
so by those injunctions. The judge found that (until 28 May when the
defendants gave notice of the injunction) the defendants had purposely
kept the injunctions secret from the court, expressly instructing their
counsel not to reveal them and he held the defendants in contempt in that
respect also.
[17] On 30 May 2002, Moore-Bick J, having granted permission for the
joinder of D2-D4 in the English proceedings, granted freezing injunctions
against each of D1-D4 in respect of their worldwide assets up to US$200
million ("the worldwide injunctions"). His injunctions contained the usual
ancillary provisions requiring the defendants to provide information about
their assets.
[18] At that hearing, Moore-Bick J, prior to making his order, expressed
concern that, in relation to D2 and D3, there was no evidence to suggest
that they had assets within, or any connection with, this jurisdiction;
and that, unlike the precedent afforded by Republic of Haiti v Duvalier
[1990] 1 QB 202, [1989] 1 All ER 456, there was no person present
within the jurisdiction against whom the order for disclosure sought could
be enforced. He nonetheless was persuaded to make his order in respect
of all defendants.
[19] On 13 June 2002, Steel J refused an application by D1 to stay
the order requiring him to provide information about his assets until
an application to discharge the worldwide injunction against him had
been heard. Directions were given for the hearing of his application to
discharge the worldwide injunction on 17 July 2002. On 17 June 2002
a similar application by D4 was dismissed by Toulson J. Appeals by D1
and D4 against those orders were dismissed by the Court of Appeal (Lord
Woolf CJ, Waller and Sedley LJJ) on 26 June 2002.
[20] On 14 June D4, and on 21 June D2 and D3, applied to have the
worldwide orders made against them set aside.
[21] On 1 July 2002 D1, and on 4 July 2002 D4, supplied witness
statements which purported to give details of their assets. Affidavits as to
their assets were provided on 29 July 2002.
[22] On 8 July 2002 D2 and D3 supplied witness statements in which
they stated that they had no association with England, visiting it only
occasionally and owning no assets here, asserting that they were Turkish
citizens. They said they accepted the jurisdiction of the Turkish courts but
did not accept that the English courts had jurisdiction over them. They
made no disclosure of their assets worldwide as ordered.
[23] On 22 July 2002, Steel J dismissed the applications of all defendants
to discharge the domestic and worldwide freezing injunctions.
[24] On 12 August 2002 Steel J ordered that D1 and D4 submit
themselves to cross-examination on their assets and on 11 September
2002 Andrew Smith J ordered that they attend court to be cross-
examined on 19 and 20 November 2002 respectively. …
[26] On 14 August 2002, D2 and D3 supplied affidavits as to their
assets. The relevant order had provided that each should disclose
his assets worldwide exceeding £ 10,000 in value, whether solely or
jointly and whether held in his own name or not, giving the value,
location and details of such assets. The affidavits supplied failed to
comply with those requirements. D2 referred to his business interests
and shareholdings in Turkey and disclosed real estate interests in New
York, but on the grounds that he was a wealthy businessman with a
wide range of commercial enterprises and possessed of assets which
it would take three or four people many months to list accurately, he
limited disclosure of his business and other assets to a shareholding
of 14.2% in a Turkish company called C. Electrik said to be valued at
"well above £ 200,000,000", which was the maximum threshold imposed
by the freezing order against him. D3 for his part disclosed a list of his
shareholdings in various companies within the family group and property
and assets in New York, but disclosed only the par or nominal value (as
opposed to the true value) of the shares and otherwise identified no
assets of value in excess of £ 10,000. He also simply stated that he had
no 'relevant' bank accounts.
[27] On 18 October 2002, Steel J ordered that D2 and D3 attend court
to be cross-examined on their assets on 20 and 21 January 2003
respectively. In the course of his judgment he criticised the lack of
frankness of D2 and D3 as persons who were leading members of a family
listed as one of the 'Fortune 500' and reported to be worth more than a
billion dollars. On the basis of material shown to him, he also concluded
that D3 had lied in respect of the state of his New York bank account at
the Chase bank and had failed to identify all the Turkish companies in
which he had an interest.
[28] D1 and D4 did not appear for cross-examination on 19 and 20
November.
[29] On 27 November 2002 the defendants, T. and others successfully
applied to the Turkish court for an injunction purporting to stay the
US action and all other ancillary proceedings including the English
proceedings.
[30] On 28 and 29 November 2002, Gross J heard applications for
contempt of court in respect of the non-appearance of D1 and D4 in
the course of which he was informed of the 27 November order of the
Turkish court. He found contempt proved but deferred consideration
of the appropriate penalty to 20 December 2002, meanwhile making a
further order that D1 and D4 attend for cross-examination on 16 and 17
December or, failing that, to attend in Turkey on those days to be cross-
examined by video link. The latter provision was included in response to
a specific assurance that D1 and D4 were willing to give evidence by that
method.
[31] Again those orders were disobeyed and, on 20 December 2002,
Gross J held D1 and D4 to be in further contempt of court for failure
to comply with his order of 29 November and ordered that they be
committed to prison for contempt for respectively 15 and 6 months.
[32] D2 and D3 also failed to appear for cross-examination on 20 January
2003 pursuant to the order of Steel J on 18 October 2002 and, on 20
January 2003 Cooke J refused their application for a stay of the order
requiring them to attend pending the hearing of their appeal to this court.
He gave directions for the hearing of the claimant's application to commit
them for contempt in respect of their non-appearance.
[33] On 31 January 2003 Gross J held D2 and D3 to be in contempt of
court for failure to attend for cross-examination and ordered that they
each be committed to prison for 15 months.
[34] All the defendants are currently believed to be in Turkey.
[35] In parallel to the English proceedings, and following the 27
November order of the Turkish court, the following further proceedings
took place prior to the hearing before this court.
[36] On 6 December 2002 the claimant applied to the Turkish court to
have the judge who granted the 27 November order removed on grounds
of bias and on 10 December 2002 filed a motion before Judge Rakoff
requiring the defendants to withdraw or stay the action before the Turkish
court and cause the 27 November Turkish order to be dissolved.
[37] On 27 December 2002 the claimant filed its response in the Turkish
court, seeking to discharge the 27 November order. However the judge
who granted the order decided to withdraw from the matter pending the
resolution of the claimant's application to have him removed, transferring
the application to another court.
[38] On 6 January 2003 Judge Rakoff ruled on the claimant's motion of 10
December 2002 and ordered the defendants to take all necessary steps
to withdraw and cause to be dissolved the 27 November Turkish order. He
further enjoined the defendants from initiating similar proceedings.
[39] On 17 January 2003, a second Turkish anti-suit injunction was
obtained by 36 T. employees against the claimant and the defendants to
stay proceedings in New York, England and other jurisdictions in which M.
had started court proceedings against the defendants (Germany, France,
Bermuda and the Channel Islands), the claimant and the defendants
being prohibited from taking part in all such court proceedings. On the
same date, the claimant's application to have the judge who made the 27
November Turkish order removed was dismissed and fines imposed on the
claimant for requesting such removal.
[40] On 31 January 2003, at a hearing before Judge Rakoff, the
defendants made clear that they did not intend to appear at the
substantive trial before the New York court either in person or through
counsel and the judge decided to hold a bench trial without the jury,
giving directions for receipt of written and live evidence from the claimant
and N..
[41] The bench trial has since taken place and judgment has been
reserved.
[42] Since reserving our judgment, we have been informed that on
7 March 2003 the US Court of Appeals allowed an appeal from Judge
Rakoff's decision granting the preliminary injunction in May 2002, but
only in so far as his decision related to claims under RICO, on grounds
that the RICO claims were "unripe" (ie premature). The RICO claims were
dismissed "without prejudice to reinstatement once the ripeness difficulty
is resolved" and the Court stated that "This dismissal in no way alters the
effect or scope of the preliminary injunction which remains in place."
[43] The following appeals and applications for permission to appeal are
now before us.
i) Appeals by the D1-D3 (2002/1648) and by D4 (2002/1647) against
the refusal of Steel J on 22 July 2002 to discharge the worldwide freezing
orders granted by Moore-Bick J on 30 May 2002 pursuant to permission to
appeal given by Rix LJ on 22 December 2002 ("the worldwide appeals").
ii) An appeal (2002/2346) by D2 and D3 against the order of Steel J dated
18 October 2002 that they attend court to be cross-examined pursuant to
permission given by Rix LJ on 22 December 2002.
iii) An application for permission to appeal (2002/1824) by D1 and D4
against the order of Steel J that they attend to be cross-examined, those
applications having been adjourned by this court on 27 January 2003 to
be heard by this court.
iv) An application by D1 and D4 for permission to appeal (2003/0077)
against the order of Gross J dated 29 November 2002 refusing to vary
or set aside the orders of Steel J requiring them to attend for cross-
examination.
v) An appeal (2003/0076) by D1 and D4 against their committal for
contempt of court, for which permission to appeal is not required: see ss
13(1) and (2) of the Administration of Justice Act 1960 ("the 1960 Act").
vi) An appeal (2003/0307) by D2 and D3 against their committal for
contempt of court.
[44] In addition, a preliminary issue arises as to whether this court should
hear any of the defendants' appeals in circumstances where they are all in
contempt of court and have made it clear that they will continue to flout
the orders of the court whatever the outcome of their appeals. It is both
logical and constructive to turn to this issue first.
SHOULD THE DEFENDANTS' APPEALS/APPLICATIONS BE HEARD?
… [46] On 27 January 2003, upon the application of D1 and D4 to this
court (Rix and Scott-Baker LJJ) for oral reconsideration of Rix LJ's earlier
refusal to grant permission to appeal against the order for their cross-
examination, the claimant submitted that, in view of their contempt
of court, the defendants should not be heard on any of the impending
appeals or applications. In the light of the arguments raised, there was
insufficient time for the court to deal with that submission. However,
in adjourning the application to be heard together with the matters in
respect of which permission to appeal had already been granted, Rix LJ
indicated (a) that, but for the contempt point he would as single judge
have granted permission to appeal (having already done so in respect of
D2 and D3) and (b) that, if the attitude of D1-D4 was that, whatever the
outcome of their appeals, they would flout the orders of the English court,
it might be a serious impediment to their being heard. He told counsel
to obtain instructions as to what the attitude of the defendants was for
the purposes of the instant hearing. It has been made clear to us on this
appeal that none of the defendants intends to comply with the orders
of this court, the gravamen of their case being and remaining that the
original worldwide freezing orders should not have been made and that
Steel J was in error in refusing to discharge them. …
[54] In our view, the arguments in this case as to comity, exorbitancy and
expediency raised in relation to relief granted under s 25 of the CJJA are
arguments the resolution of which are likely to have effects wider than the
case itself and, if and in so far as the court considers that the defendants
are right in their arguments, it would be wrong that the freezing orders
should stand.
[55] In addition to that general consideration, and whilst wholly
deprecating the defiant attitude of the defendants which has, as appears
from the evidence before us, been part and parcel of a series of tactical
delays and regrettable lack of frankness in two jurisdictions, we bear in
mind that the defendants' appeals are essentially defensive in nature.
Their stance in this jurisdiction has been one of resistance to a series
of restrictive and intrusive orders sought by the claimant in foreign
proceedings, rather than a voluntary invocation of the powers of the
English court for their own benefit. This seems to us to bear on the
proportionality of precluding them, as parties in contempt, from what
would otherwise be their right of appeal against the freezing orders
to which the orders for cross-examination were ancillary. In all the
circumstances, we take the view that the defendants should be heard
upon, and their arguments treated as addressed to, all of their appeals
and applications now before us. …
[58]…, we content ourselves with the following observations. First, it is
not clear to what extent the proposition was the subject of argument
before Laddie J or to what European authority he was referred. Second,
it is clear to us that the defendants should not be denied the right to be
heard in respect of their alleged contempt and to address the issue as
to jurisdiction in that context. Third, as Mr Leggatt has pointed out, the
claimant does not in any event contend that the court should decline
to hear the defendants' appeals simply on the grounds that they are in
contempt, but rather that they are abusing the process of the court by
seeking to prosecute their appeal against the first order of Steel J, at
the same time making it clear that they have no intention of complying
with the orders of the court whatever the outcome of their appeals. It
is clear that the right of access to the court which is implied in art 6 is
not an absolute right but one that is open to restriction provided that
the restriction has a legitimate aim in the public interest and the means
employed to realise that aim are proportionate: see Brown v Stott [2001]
2 All ER 97, [2001] 2 WLR 817 per Lord Bingham at 836B – D and Lord
Hope at 851H – 852A. The test of proportionality is to be applied on a
case by case basis: per Lord Bingham at 836C. As it seems to us, this is
reflected in the approach of the House of Lords in the Morgan Grampian
case, the width of the discretion there recognised being apt to allow
issues of proportionality to be properly considered and applied by the
court in coming to its decision whether or not to hear a contemnor.
THE WORLDWIDE FREEZING ORDERS
[59] The applications before Steel J fell into three categories:
i) an application by D1 to discharge the domestic injunction granted
against him by Cresswell J, on the grounds that risk of dissipation had not
been demonstrated.
ii) an application by D1-D3 to discharge the worldwide injunctions granted
against them by Moore-Bick J, on the grounds that it was inexpedient for
the court to exercise its jurisdiction under s 25 of the CJJA.
iii) an application by D4 to discharge the worldwide injunction against her,
principally upon the ground that the claimant had failed to show a good
arguable case against her.
[60] The application under (i) was unsuccessful and is not the subject of
appeal. However permission to appeal was granted by Rix LJ in respect of
(ii) and (iii).
THE LAW AS TO JURISDICTION
[61] The statutory provisions governing the exercise of the court's
jurisdiction are s 37(1) of the Supreme Court Act 1981 which empowers
the court to "grant an injunction... in all cases in which it appears to be
just and convenient to do so", and s 25 of the CJJA, which was originally
applicable only in cases when substantive proceedings were pending
in a Brussels or Lugano contracting state and the subject matter of the
proceedings was within the scope of the Brussels or Lugano conventions.
However s 25 was extended by SI 1997 No 302 (which came into force on
1 April 1997) to non-convention countries and to proceedings outside the
scope of the conventions. Section 25 now empowers the court to grant all
forms of interim relief in aid of foreign courts, unless:
"in the opinion of the court, the fact that the court has no jurisdiction
apart from this section in relation to the subject matter of the proceedings
in question makes it inexpedient for the court to grant it."…
[62] On the face of these statutory provisions, no criterion or guide line is
provided as to the test to be applied by the court in considering whether it
is inexpedient to grant an order. …
[63] There are three reported cases in the Court of Appeal in which the
exercise of the English court's powers under s 25 has been considered
in detail, namely Republic of Haiti v Duvalier [1990] 1 QB 202, [1989] 1
All ER 456, the case of Cuoghi last referred to, and Refco Inc v Eastern
Trading Co [1999] 1 Lloyds Rep 159. …
On any application under s 25 this court must recognise that its role
is subordinate to and must be supportive of that of the primary Court.
For my part, I cannot see any significance in the distinction between
a case where application has been made to the primary Court and has
been refused and a case where this Court is satisfied that application
to the primary Court would be pointless because it would inevitably be
refused. That was not in my opinion the distinction intended to be drawn
in Cuoghi. It is the ground on which the application, whether actual or
contemplated, would be refused which is relevant.
The jurisdiction of national courts is primarily territorial, being ordinarily
dependent on the presence of persons or assets within their jurisdiction.
…But judicial comity requires restraint, based on mutual respect not
only for the integrity of one another's process, but also for one another's
procedural and substantive laws. The test is an objective one. It does not
depend upon the personal attitude of the Judge of the foreign Court or
on whether the individual Judge would find our assistance objectionable.
Comity involves respect for the foreign courts' jurisdiction and process,
not respect for the foreign Judges' feelings. A court which is invited to
exercise its ancillary jurisdiction to provide assistance to the court seized
of the substantive proceedings need feel no reluctance in supplying
a want of territorial jurisdiction but for which the other court would
have acted. But it should be very slow to grant relief which the primary
Court would not have granted even against persons present within its
own jurisdiction and having assets there. Assisting a foreign Court by
supplying a want of territorial jurisdiction is plainly within the policy of
the Act; assisting plaintiffs by offering them a lower standard of proof is
not obviously within the legislative policy. I recognise, however, that the
dividing line may sometimes be hard to draw, and that the distinction is
not by any means necessarily decisive. I do not wish to be understood
to be circumscribing a valuable jurisdiction, but rather to be indicating
matters relevant to be taken into account when the court is invited to
exercise it."…
[THE DECISION OF STEEL J
[81] The judge dealt first with the application of D4. Since she was a
resident in England and had assets here, her case did not raise issues
as to territorial connection or jurisdiction. However, it was argued on her
behalf that no good arguable case was established against her, nor had
the claimant established risk of dissipation, because there was no material
available to Judge Rakoff which justified his treating her as a knowing
participant in the defendants' alleged fraud or that she had diluted the
claimant's collateral security with knowledge of the claimant's rights. …
[92] He concluded as follows:
"What then are the considerations here? Firstly, one defendant (D4) is
resident within the jurisdiction with a substantial property here. The
second defendant also has substantial property within the jurisdiction.
More importantly, perhaps, all four were involved in fraudulent business
together. All were directors. All were shareholders. All were engaged in
the family meetings held on Sundays. I accept the submission made by
Mr Leggatt that it is artificial to treat them other than as a unit.
Taken together, these establish, in my judgment, significant connecting
factors with the jurisdiction and certainly there is no other jurisdiction
having significant connecting factors, at least on the information presently
available other than the United States and Turkey. Furthermore, as I have
already sought to elaborate, these defendants have jointly demonstrated
a tenacious determination to keep their assets, including the T. shares
from M. and/or the grasp of the New York courts. In addition, the
New York judge has made a very strong finding on the strength of the
claimant's case on dishonesty.
Viewed as a whole, it seems to me that the facts of this case are even
stronger than Duvalier in crying out for some form of international co-
operation. It is not even suggested, either by the defendants or, for what
it is worth, the United States court, that the relief that has been sought
and obtained in this jurisdiction in some way cuts across the US court. On
the face of it, it is clearly and usefully supplementary.
Accordingly, for all those reasons, I dismiss these applications."…
GOOD ARGUABLE CASE AGAINST D4
[94] As already made clear, in stating that it would be an abuse of process
for D4 to raise questions as to whether or not there was a good arguable
case Steel J adopted the approach laid down in Johnson v Gore-Wood
in which, at [2002] 2 AC 31, Lord Bingham stated that in relation to the
question whether or not a plea raised or an issue challenged amounted to
an abuse of process required:
"... a broad, merits-based judgment which takes account of the public
and private interests involved and also takes account of all the facts of
the case, focusing attention on the crucial question whether, in all the
circumstances, a party is misusing or abusing the process of the court by
seeking to raise before it the issue which could have been raised before.
As one cannot comprehensively list all possible forms of abuse, so one
cannot formulate any hard and fast rule to determine whether, on given
facts, abuse is to be found or not.. "
[95] The judge gave five reasons for the view which he expressed.
i) The US court was the natural forum for determining the strength of the
case against the defendants as the substantive proceedings were taking
place in the US and the case against them was based on US law.
ii) The US court had made its findings following an inter partes hearing
lasting six days in which each party had had an opportunity to adduce
such oral and written evidence as it saw fit.
iii) The proposition advanced by D4 before him that she was not properly
impleaded at all in the US action or, in the alternative, that she was as
a matter of fact simply a housewife who was the unwitting tool of her
brothers, was open but had not been argued in the US court.
iv) If her suggestion were true that some of the evidence adduced by the
plaintiffs at the preliminary injunction hearing in New York took her by
surprise, it was open to her under US law to file a motion to reconsider;
no such motion had been filed.
v) The whole purpose of attempting to relitigate the 'no arguable case'
issue in England was to establish and maintain inconsistent decisions
between the English court and the US court. This was evident because
in the defendants' appeal lodged from Judge Rakoff's decision to the US
Second Circuit Court of Appeals, the case which D4 was seeking to make
in the English court had not been raised on the appeal.
[96] It is not in dispute between the parties that the principle of abuse of
process is capable of applying where the relevant earlier proceedings have
taken place before a foreign court: see House of Spring Gardens v Waite
[1991] 1 QB 241, [1990] 2 All ER 990 at 251 and Owens Bank v Etoile
Commerciale [1995] 1 WLR 44 at 51. D4 has advanced three reasons why
the doctrine of abuse of process was inapplicable in this case. First, it is
said that under English common law rules the US court was not a court of
competent jurisdiction. Second, it is said that the US court's decision was
not a 'final' decision on the merits. Third, it is said that D4 did not have
a proper opportunity to dispute the case against her at the preliminary
injunction hearing before the US court.
[97] The first two points taken are based upon the proposition that
Henderson v Henderson abuse of process, as now understood, although
separate and distinct from cause of action and issue estoppel, has much
in common with them: see Johnson v Gore-Wood at 31A-B and, that
being so, by analogy with those types of estoppel, the Henderson v
Henderson principle should only be applied where it is clear (i) that
the decision or determination relied on was made by a foreign court of
competent jurisdiction and (ii) the decision upon the issue later sought
to be raised is a final and binding decision on the merits: see The Sennar
(No 2) [1985] 2 All ER 104, [1985] 1 WLR 490 at 499B per Lord Brandon.
In relation to (i), the complaint is made that the claimant failed to show,
and the judge to consider, whether the New York court was a court of
competent jurisdiction. …The argument now made is that, although
D4 was not resident or present in New York when the proceedings
were served, the claimant produced no evidence to show that she had
voluntarily submitted to the jurisdiction of the New York court. That
argument is dealt with and rejected at paras 129 to 133 below.
[98] As to (ii), in the light of the observations of the House of Lords in
Johnson v Gore-Wood, we reject any general proposition that the scope
and ingredients of the doctrine of abuse of process are trammelled by the
technicalities of issue estoppel: see also Hunter v Chief Constable of the
West Midlands Police [1982] AC 529 per Lord Diplock at 536 and House of
Spring Gardens Ltd v Waite [1991] 1 QB 241, [1990] 2 All ER 990 at 254E
– 255D. …
[99] As it seems to us, in a situation when an application for Mareva-
type relief is made under s 25 against an unwilling defendant in support
of contested proceedings in a foreign jurisdiction, it is difficult to see that
it can be regarded as an 'unjust harassment' of the claimant to permit
the defendant to raise any point before the court which is relevant to its
consideration of the claimant's entitlement to the ancillary relief sought. …
[102] We do not go so far as to say, and it is not necessary to decide,
that there are no circumstances in which the doctrine of abuse of process
could be invoked in relation to points omitted to be taken in prior
interlocutory proceedings, whether here or abroad. Mr Leggatt argues
that, in the context of proceedings under s 25 of the CJJA, where (as
here) the foreign court in interlocutory proceedings has itself determined
that a good arguable case exists against the defendants, that is, or falls to
be treated as, a final decision upon that issue for the purposes of the s 25
jurisdiction of this court. We do not think that is correct. The requirement
that the claimant must establish that Mareva-type relief would be granted
if the substantive proceedings were brought in England requires a decision
of the judge based on English procedures and the approach of the English
court to the nature and sufficiency of the evidence in a situation where
the claimant has come to England to obtain a remedy unavailable to him
in the substantive foreign proceedings. It is frequently, indeed usually,
the position that s 25 proceedings are brought following issue and service
of the foreign proceedings but before there has been any decision of the
foreign court which examines the strength or arguability of the claimant's
substantive case. However, whether or not that is the position, in our view
the English court is required, once issue is joined in the s 25 proceedings,
to make a separate exercise of judgment rather than a simple acceptance
of the decision of the foreign court in interlocutory proceedings decided
on the principles applicable, the evidence then available, and the levels of
proof required in that jurisdiction.
[103] Furthermore we do not think that it should be regarded as per
se abusive of the English court's process that points are raised and
arguments advanced in the English court which were not deployed
before the foreign court. There may be a variety of reasons why that is
so, whether because of deliberate omission, accidental oversight, non-
availability of evidence, legal advice or tactical decision, none of which in
itself involves abuse of this court's process. …
[105] All that said, it is quite clear that the judge went on to consider the
merits of the arguments raised by D4 in relation to which he was entitled
(as he clearly did) to take the five points which he had identified into
account when assessing the strength and credibility of D4's assertions.
Where there is available to the judge on an application under s 25 a
reasoned judgment of a foreign court at an interlocutory stage upon
the merits or arguability of the defendant's claim, that judgment will
inevitably form the judge's starting-point in relation to the question
of 'good arguable case' and, depending upon the apparent cogency of
the reasoning and the force of any arguments raised by the defendant,
is likely to prove conclusive. In this case it is apparent that the judge,
having first expressed a view that D4's stance amounted to an abuse of
process, nonetheless went on to consider and exercise his own judgment
in respect of the points raised before him. A number of arguments have
been urged upon us to show that he reached the wrong conclusion, but
no error in reasoning has been demonstrated and we see no reason to
disturb his decision in respect of D4.
EXPEDIENCY (D1-D3)
[106] Whilst acknowledging that the decision of the judge upon an
application under s 25 of the CJJA and the considerations of expediency
arising under s 25(2) were ultimately matters for the judge's discretion,
Mr Strauss attacks its exercise on the basis that the judge's reasoning and
reading of the authorities was flawed in certain respects.
[113] Mr Leggatt QC for the claimant has stressed the very wide
discretion available to the court under s 25 and has argued in support of
the reasons given by the judge.
[114] The issue in this case arises because, on the face of it, the only
fetter placed upon the otherwise apparently unlimited powers which the
court has as a result of the combination of s 37 of the Supreme Court
Act, s 25 of the CJJA, and Rule 6.20 of the CPR is its power to refuse
to grant relief if its absence of jurisdiction apart from s 25 makes such
grant 'inexpedient'. It is plain that, in relation to the grant of worldwide
relief, the jurisdiction is based on assumed personal jurisdiction; as such
it has the potential for extra-territorial effect in the case of non-residents
with assets abroad. …However, even in the case of art 24 of the Brussels
Convention it has been made clear that:
"... the granting of provisional or protective measures on the basis of
Article 24 is conditional on, inter alia, the existence of a real connecting
link between the subject matter of the measures sought and the territorial
jurisdiction of the contracting state of the court before which those
measures are sought."
see (Van Uden Maritime BV v Kommanditgesellschaft In Firma Deco-Line
[1999] QB 1225, [1999] 2 WLR 1181 at 1210 para 40).
Further, in so far as 'police' action is concerned, policing is only practicable
and therefore expedient if the court acting in that role has power to
enforce its powers if disobeyed. In that respect the principle in Derby v
Weldon already quoted plainly has application and is apt to be applied in
cases of this kind.
[115] As the authorities show, there are five particular considerations
which the court should bear in mind, when considering the question
whether it is inexpedient to make an order. First, whether the making of
the order will interfere with the management of the case in the primary
court eg where the order is inconsistent with an order in the primary
court or overlaps with it. That consideration does not arise in the present
case. Second, whether it is the policy in the primary jurisdiction not
itself to make worldwide freezing/disclosure orders. Third, whether
there is a danger that the orders made will give rise to disharmony or
confusion and/or risk of conflicting inconsistent or overlapping orders in
other jurisdictions, in particular the courts of the state where the person
enjoined resides or where the assets affected are located. If so, then
respect for the territorial jurisdiction of that state should discourage the
English court from using its unusually wide powers against a foreign
defendant. Fourth, whether at the time the order is sought there is likely
to be a potential conflict as to jurisdiction rendering it inappropriate and
inexpedient to make a worldwide order. Fifth, whether, in a case where
jurisdiction is resisted and disobedience to be expected, the court will be
making an order which it cannot enforce. …
[117] In the light of our observations we turn briefly to the points made
by Mr Strauss …
[118] First, we do not consider that the judge was wrong to say that in
Cuoghi Millett LJ had rejected the notion that the court's power to grant
s 25 relief ancillary to a claim in a foreign court was circumscribed by the
availability of similar relief in that court. It is plain that he did reject it,
from his observations quoted at para 72 above; see also the observations
of Morritt LJ in Refco at p 172. While the context in which Millett LJ
did so was that of a Convention case, his remarks were not limited to
such cases. We accept, however, that the court in Cuoghi stressed the
subordinate nature of the English court's role under s 25 and emphasised
that those courts best able to make the orders effective were the courts
of the defendant's residence or the place where his assets were located.
Steel J did not overlook these matters; he simply did not attach decisive
weight to them in his eventual decision on expediency. …
[120] Second, we agree that the judge should have attached, but did
not attach, weight to the likelihood of conflict, disharmony and confusion
developing between the Turkish courts and the English court if the latter
made a worldwide freezing order which was likely to inhibit dealings in the
shares or other assets of D2 and D3 in Turkey.
[121] Third, we consider that this was a case where the principle stated in
Derby v Weldon required consideration and application in the light of the
absence of any connection between D2 and D3 and this jurisdiction.
[122] Fourth, as we have already indicated at para 116 above, we
consider that the judge erred in his collective treatment of the defendants
for the purpose of establishing a connection with the jurisdiction in
relation to expediency.
[123] Fifth, albeit the fraud alleged against the defendants was, if correct,
fraud on a massive scale, we do not think it stands relevant comparison
with the Duvalier case for the reasons advanced by Mr Strauss (see para
111 above). Finally, we also agree that no question of comity arose for
consideration in the Duvalier case which rendered it inconsistent with the
submissions made for D1 to D3.
[124] In those circumstances, it is appropriate for us to revisit the
exercise of the judge's discretion informed by developments since his
decision.
[125] In this connection, the court is no longer faced simply with the
potential for conflict with the courts of the domicile of D2 and D3 in
Turkey, but with a situation in which the Turkish court has granted
anti-suit injunctions against the claimant pursuing both the primary
proceedings in the US and the ancillary proceedings here and the claimant
is participating in those proceedings. It also appears that, at the suit of
T. employees, an injunction has been granted to stay execution of such
proceedings, prohibiting both the claimant and the defendants from taking
part in those proceedings. Albeit Gross J found, and there is no reason to
doubt, that D2 and D3 colluded in those proceedings, they well illustrate
the wisdom of the principle that where there is reason in cases of this
kind to suppose that the order made against a foreign defendant will be
disobeyed and that, if that should occur, no real sanction would exist,
then the court should refrain from making an order. In the light of the
defendants' behaviour in the US proceedings and the stance taken in their
witness statements, there was every reason to suppose that the orders
of the English court would be disobeyed and that, if that were so, then no
real sanction would exist against D2 and D3. While we well understand
the concern of the judge to assist in a case of international fraud, it is
above all, as it seems to us, this consideration which he overlooked and
which, quite apart from considerations of comity, it is important to bear in
mind in a case where the connection of the defendant with this country is
tenuous or non-existent. In our view the circumstances before the judge
did indeed render it inexpedient to grant the relief claimed against D2
and D3 when no sanction was available against them in the event of their
disobedience.
[126] In the case of D2 and D3 therefore we would allow their appeals
against the order of Steel J dated 22 July 2002 by which he refused to
discharge the worldwide freezing orders against them.
[127] Turning to the position of D4 and D1, we see no reason to
disturb the decision of the judge. D4 did not, nor could she, dispute the
jurisdiction of the court to grant worldwide relief against her. She was
resident and had substantial assets here and the principal ground put
forward in support of her application for discharge of the order of Moore-
Bick J was the failure of the claimant to establish an arguable case against
her. That was a submission which, like the judge, we have rejected. It was
well within the judge's discretion in the circumstances of the case to make
a worldwide order against her and we see no reason to disturb it.
[128] So far as D1 is concerned, he did not dispute the jurisdiction of the
English court to make the order originally made against him for domestic
relief in respect of his house and other assets here. His application
for discharge of that order rested solely upon the ground that risk of
dissipation had not been demonstrated (in respect of which no appeal
is pursued). His objection to the grant of worldwide relief against him in
respect of his foreign assets was couched in largely similar terms to those
of D2 and D3. There was thus reason to suppose in his case that relief
in those terms might be disobeyed. However, his was not a case where
the court would be devoid of means of enforcement if that were so, by
reason of the existence within the jurisdiction of assets worth millions of
pounds. The rationale of the principle stated in Derby v Weldon was thus
not available to assist D4. In those circumstances, we are not prepared to
interfere with the judge's exercise of discretion in an apparently serious
case of international fraud.
TWO NEW GROUNDS FOR DISCHARGING THE FREEZING ORDERS
[129] Two further grounds have been advanced by the defendants for
saying that the injunction should be discharged. They were not argued
before the judge but we will consider them as far as possible. Both relate
to the enforceability of any judgment of the US Court.
[130] Firstly it is said is that the US Court had no personal jurisdiction
over D2, D3 and D4 because they were not present in and had not
submitted to its jurisdiction. That court was not therefore competent to
assume jurisdiction over them and so its judgment is not enforceable
here. It must follow that freezing relief ancillary to and in anticipation of
such a judgment should not be granted: it would be inexpedient to do so.
…
[132] Whether the judgment of a foreign court is enforceable has to be
determined as a matter of English private international law. The judgment
of an otherwise competent court to whose jurisdiction a defendant has
submitted is enforceable. By s 33 of the CJJA, a person against whom
judgment has been given shall not be regarded as having submitted to
the jurisdiction of the foreign court by reason only of the fact that he
appeared only to contest the jurisdiction of that court. In this case, it is
quite obvious from the history of D4's participation in the US proceedings
that her appearance was not confined simply to contesting jurisdiction.
[133] D4 however, relies on the exception to the general rule, as stated
by Scott J in Adams v Cape Industries [1990] Ch 433 at 461, that steps
which:
"would not have been regarded by the domestic law of the foreign court
as a submission to the jurisdiction ought not... to be so regarded here,
notwithstanding that if they had been steps taken in an English Court they
might have constituted a submission."
This therefore takes us back to the procedural law of the US Court, as
to the effect of which there is a clear conflict which it is not possible
for this court to resolve. D4 must bear the consequences of this. Mr
MacLean submits that there was no argument before Moore-Bick J, or
evidence placed before Steel J, to establish that the New York court
was a competent forum as a matter of English law. However, as already
indicated, no such objection was raised or point taken before Steel J If
the point had been raised, the issue of US law could have been properly
defined and resolved if necessary, bearing in mind that the respondents
had only to show a good arguable case that D4 had submitted to the
jurisdiction of the US Court. On the uncontentious material which is before
us we have no doubt that such a case is made out.
[134] The second new ground relates to the effect of s 5 of the Protection
of Trading Interests Act 1980. This makes a judgment for "multiple
damages" unenforceable in the UK By s 5 (3) such a judgment:
"means a judgment for an amount doubling, trebling or otherwise
multiplying a sum assessed as compensation for the loss or damage
sustained by the person in whose favour the judgment has been given."
[135] As already indicated, the respondents' claim in New York included a
RICO claim for treble and punitive damages (but now see para 42 above).
It has been submitted to us that any judgment which included a RICO
element would be wholly unenforceable here and that, as the final US
judgment is likely to contain such an element, it is inexpedient to grant
freezing relief in aid of its enforcement.
[136] Is it right that if a single judgment for damages contains a
compensatory and a RICO element no part of that judgment can be
enforced here because of the effect of s 5 of the 1980 Act? There is
support for the view that it is in one sentence of Parker J's judgment in
British Airways Board v Laker Airways Ltd [1984] QB 142, 161 E and in
Dicey (13th Edn 2000) at para 246, but the point has not been considered
in any detail by the English Courts. However, it is unnecessary to decide
the point in this case because the claimant is pursuing a case for damages
for common law fraud and conspiracy and violations of other US statutes
for which the only relief sought or available is compensatory damages.
Compensatory damages at common law, including interest of more than
US $2 billion are claimed. For the purposes of the present proceedings the
claimant has shown that it has a good arguable case that it will recover
a very substantial amount of compensatory damages. It has not sought
to show before this court that it is likely to recover RICO damages. Nor,
understandably, have the defendants contended that it will do so. It
follows that in the present proceedings this point gets the defendants
nowhere.
[137] For these reasons, the two new grounds advanced do not afford
any additional reason for discharging the freezing orders against the
defendants.
THE ORDERS FOR CROSS-EXAMINATION
… [139] A number of points were originally taken as to why the orders
for cross-examination should not have been made. D2 and D3 were
refused permission to appeal on all but one of their points (see para 43(ii)
above) and made no renewed application in respect of the other points.
D1 and D4's application for permission to appeal (see para 43(iii)) was
only pursued before us in relation to the point on which D2 and D3 had
permission. The point on which permission was granted is called "the US
$200m. point". Shortly what is said is that the freezing order in each case
is limited to $200m., the defendants each disclosed assets worth at least
this amount, and thus it was wrong to order them to be cross-examined.
[140] The freezing orders were in a standard form. …
[141] We have already referred to Steel J's findings about the inadequacy
of the defendants disclosure in response to these orders (see paras
25 and 27 above). The defendants cannot therefore say that cross-
examination should not have been ordered because they had complied
with the orders for disclosure. Nevertheless, by reference to the
inadequate disclosure which they did make and assertions made by the
claimant as to the worth of their assets, the defendants say that, before
they were ordered to be cross-examined, they had each disclosed assets
worth more than $200m.
[142] The purpose for which disclosure of assets is required and, where
disclosure is inadequate, cross-examination is ordered, is to enable the
claimant to make the freezing order effective. So in this case Mr Strauss
submits, once assets of more than US $200m. had been disclosed, no
legitimate purpose was served by ordering cross-examination to discover
whether there were further undisclosed assets. As the defendants were
free to deal with their assets in excess of $200m., they should not have
been required to disclose assets in excess of that value and the disclosure
orders should, as the defendants asked, have been varied to reflect this.
[143] There is no English authority to support this submission. …
[146] The purpose of disclosure is to make the freezing order effective. In
the ordinary way a defendant is required to disclose all his assets above
a certain value. This is because, if he can choose which assets to disclose
he is likely to choose those which are the least available or accessible to
the claimant for the purposes of execution. That is what the claimant says
the defendants have done in this case. If there are assets which are more
readily available, a claimant is entitled to be told what they are. In such
circumstances a freezing order may be varied, so that particular assets
are attached and others are released and, in this way, the order may be
made more effective.
[147] In this case we have no doubt that the judges in their discretion
were right to order cross-examination of the defendants. The piecemeal,
late, untruthful and manifestly incomplete disclosure which the
defendants gave amply justified the view that cross-examination was
just and convenient because it might reveal assets which would make the
freezing order more effective.
THE FINDINGS OF CONTEMPT AND THE COMMITTAL ORDERS
[148] As we have upheld the freezing orders and orders for cross-
examination made against D1 and D4 it is conceded that the findings
of contempt and the committal orders made against them cannot be
challenged. However, on behalf of D2 and D3, it is contended that the
consequence of our having allowed the appeal and set aside the freezing
orders should be that the findings of contempt and the consequent order
for their committal to prison must also be set aside, because the English
courts had no jurisdiction to make freezing and cross-examination orders
against these defendants and/or because the Human Rights Act compels
such a conclusion. Alternatively, this court has a discretion to set aside
the orders under s 13 (3) of the Administration of Justice Act 1960. …
[ [150] …Section 25 (1) of the CJJA gives the High Court jurisdiction to
grant interim relief in aid of substantive proceedings of any kind and
wherever taking place. CPR 6.20 (4) allows a claim form to be served out
of the jurisdiction when "a claim" is made for an interim remedy under s
25. There is no requirement that the claim should ultimately succeed, and
the defendants have not demonstrated that, on the information before
Moore-Bick J, permission to serve the claim form on them out of the
jurisdiction should have been refused. The English court did have, and still
has, jurisdiction over the defendants. It was and is a separate question
as to whether it was inexpedient to grant interim relief against them. We
have disagreed with the judge below by holding that it was inexpedient in
the case of D2 and D3 but that does not mean that we have decided that
the English court had no jurisdiction over the defendants. …
[155] … If the freezing and cross-examination orders were not made in
excess of jurisdiction and were therefore valid unless or until they were
overturned by a superior court, the consequent findings of contempt and
committal were likewise valid.
[156] Thus, we conclude that the various findings of contempt should
stand, despite the fact that in the cases of D2 and D3 we have set aside
the freezing and cross-examination orders. As to sentence, because
we have set aside those orders we do not think that the sentences of
imprisonment on D2 and D3 should stand. Nevertheless these were
contempts of orders which should have been obeyed unless and until
they were set aside, and we will hear counsel on what penalty (if any) we
should impose and/or what order for costs we should make in the light of
our decision.
Conclusion
i) The appeals of D2 and D3 will be allowed.
ii) The appeals of D2 and D3 will be allowed to the extent that the orders
for their imprisonment will be set aside. However the findings of contempt
will stand and the question of any penalty to be substituted will be
deferred for further submissions.
iii) The appeals of D1 and D4 will be dismissed. Their applications for
permission to appeal will be allowed, but their appeals will be dismissed.
DISPOSITION:
Judgment accordingly.