UK: Court Of Appeal Holds No Permission Required To Serve Committal Application On Director Out Of The Jurisdiction, Where The Court Had Jurisdiction To Make The Original Order Against Him

Last Updated: 6 October 2018
Article by Herbert Smith Freehills

The Court of Appeal has held that, where a court had jurisdiction to make an order for examination of a company director based on his presence in the jurisdiction, permission to serve out of the jurisdiction was not required for a committal application alleging the director had not complied with the order in full. This was on the basis that the committal application was incidental to the original order: Vik v Deutsche Bank AG [2018] EWCA Civ 2011.

Although it did not need to decide the point, given its conclusions outlined above, the court's provisional view was that a committal application may come within article 24(5) of the recast Brussels Regulation, which provides for exclusive jurisdiction where a claim concerns enforcement of a judgment.

Failing that, if permission to serve outside of the jurisdiction is required, the court's provisional view was that no relevant gateway applied, and this was an issue which should be considered by the Civil Procedure Rules Committee.

Background

The proceedings arise out of the bank's efforts to enforce a judgment debt said to amount to over US$320 million owed by Sebastian Holdings Inc ("SHI"), a company in which Alexander Vik was the sole shareholder and director.

The bank obtained an order against Mr Vik under CPR 71 requiring him to attend court to provide documents and be cross examined about SHI's assets (which it claims Mr Vik has stripped away). That order was served on him when he was temporarily in the jurisdiction. He applied unsuccessfully to set aside the order (see our post on that decision here) and so the examination went ahead and some disclosure was provided.

The bank took the view that Mr Vik had deliberately failed to disclose many documents and had lied under oath. It therefore sought to issue and serve committal proceedings against Mr Vik.

Decision

The Court of Appeal held (Lord Justice Gross giving the judgment of the court) that the court's permission was not required to serve the committal application on Mr Vik out of the jurisdiction. There were five principal issues before the court.

Could the committal application be made under CPR 81.4 or did it have to be made under CPR 71.8?

CPR 81.4 is the general provision providing for an order for committal where a person has disobeyed a judgment or order. CPR 71.8, in contrast, contains specific rules regarding committal where there has been non-compliance with an order for oral examination under CPR 71.

It was accepted by the parties that CPR 81 had extraterritorial effect, whereas the question of whether CPR 71.8 had extraterritorial effect was in dispute (see below). Mr Vik argued that the committal application could only be made under CPR 71.8, not CPR 81, since it related to alleged breaches of an order made under CPR 71.

The Court of Appeal held that the procedures in CPR 71 and CPR 81 were complementary. CPR 71 was appropriate in straightforward cases and CPR 81 in more complex cases. The power to commit for contempt is a common law power and both parts of the CPR merely set out the procedures to be followed, depending on the circumstances.

Was the committal application incidental to the CPR 71 order?

Mr Vik's case was that the committal application was a new claim and there was no applicable jurisdictional gateway to bring him before the English court. The bank argued that the committal application was an ordinary incident of the CPR 71 order, which had been validly made and served on Mr Vik within the jurisdiction, so no permission to serve outside of the jurisdiction was required.

The Court of Appeal agreed with the bank, and the analysis by the High Court at first instance: a court order must carry with it the means to enforce that order; the means to enforce an order are therefore a necessary incident of that order; an order for committal is one of the means of enforcing court orders; accordingly, a committal application is incidental to a CPR 71 order.

If CPR 71.8 applied, did it have extraterritorial effect?

The High Court was inclined to accept that it did, but as the issue was academic and hypothetical the Court of Appeal expressed no view on this.

Was the committal application within article 24(5) of the recast Brussels Regulation?

This article provides that, in proceedings concerned with the enforcement of judgments, the courts of the member state in which the judgment has been or is to be enforced have exclusive jurisdiction, regardless of domicile.

The Court of Appeal's provisional view, expressed in summary terms, was that article 24(5) did apply. It struggled to see why the CPR 71 order was not a "judgment" within the broad definition given to that term in the Regulation (which expressly includes an order of a court or tribunal). Article 24 applies regardless of domicile, as is made clear in its wording. The decision to the contrary in Choudhary v Bhattar [2009] EWCA Civ 1176 was based on the previous wording of the article, and may have been reached without all relevant authorities before the court. The suggestion that committal proceedings are not concerned with the "enforcement" of judgments seemed improbable to the Court of Appeal.

Did a committal application come within gateway 10?

Under CPR 6.36 a claimant can serve a claim form out of the jurisdiction with the court's permission where the claim comes within one of the "gateways" contained in Practice Direction (PD) 6B. Gateway 10 applies where: "A claim is made to enforce any judgment or arbitral award."

The judge at first instance held that, while the committal application was a claim to enforce the court's order under CPR 71, that was not a judgment within the meaning of gateway 10. There was therefore no specific jurisdictional gateway in the PD permitting service out of the jurisdiction of an application to commit an officer of a company for contempt of an order, even where the fact that the officer was out of the jurisdiction was no bar to the making of the application.

The Court of Appeal concluded, provisionally, that there may well be considerable force in the view taken by the High Court judge.

The Court of Appeal thought this was a matter which the Rules Committee should consider. It commented that where permission was required to serve a committal application on an officer of a company, in circumstances where the fact that he is out of the jurisdiction is no bar to the application, it must be in the public interest that there should be a specific jurisdictional gateway permitting this.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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