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||Neutral Citation Number:  EWHC 667 (Comm)
||Case No: CL-2008-000305
Case No: CL-2008-000311
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
B e f o r e :
THE HON. MR JUSTICE POPPLEWELL
|| SOCIÉTÉ GÉNÉRALE
- and -
||(1) GOLDAS KUYUMCULUK SANAYI ITHALAT IHRACAT A.S.
(2) GOLDAS KIYMETLI MADENLER TICARETI A.S.
(3) MEYDAN DOVIZ VE KIYMETLI MADEN TICARET A.S.
(4) GOLDAS LLC
||(1) GOLDAS KUYUMCULUK SANAYI ITHALAT IHRACAT A.S.
(2) GOLDART HOLDINGS A.S.
Alexander Gunning QC & Rangan Chatterjee (instructed by Clifford Chance LLP)
for the Claimant
Stephen Moverley Smith QC & Hugh Miall (instructed by Morgan Rose Solicitors) for the Defendants
Hearing dates: 24, 25, 26 & 30 January 2017
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
The Hon. Mr Justice Popplewell :
- There are applications and cross applications in two actions. Société Générale ("SocGen"), the well-known international bank registered and headquartered in France, is the Claimant in both actions. The Defendants are various members of the Goldas group, which was at all material times a multinational gold jewellery manufacturer and retailer with its head office in Istanbul, Turkey. At the time in question the group comprised over 50 companies with a combined turnover of approximately US$8 billion, employing more than 3,500 people worldwide with retail outlets in many jurisdictions as well as mining concessions in Turkey and Mali. Goldas was responsible for some two thirds of all gold imports to Turkey in 2007, of which some 163 m.t, worth about US$3.6 billion, was purchased from SocGen. The actions arise out of particular supplies of gold bullion by SocGen to the Goldas group in 2007 and early 2008, worth about US$483 million, for which Goldas has failed to pay despite having used it in jewellery manufacture or sold it on. The majority was supplied to Goldas companies in Turkey, but one shipment went to a group company in Dubai, UAE.
- The First to Third Defendants (respectively "Kuyumculuk", "Kiymetli", and "Meydan") in CL-2008-000305, formerly Folio No 267 of 2008 ("Folio 267"), are companies incorporated in the Republic of Turkey. Kuyumculuk was a public company listed on the Istanbul Stock Exchange. The Fourth Defendant ("Goldas Dubai") is a company incorporated in Dubai, UAE. In CL-2008-000311, formerly Folio No 329 of 2008 ("Folio 329"), the First Defendant is Kuyumculuk. The Second Defendant ("Goldart") is a company incorporated in the Republic of Turkey.
- The claim form in Folio 267 was issued on 18 March 2008. It followed a freezing order granted by Kitchin J on Saturday 15 March 2008 at a without notice hearing. The freezing order was continued on 2 April 2008 by Burton J, who granted a further freezing order in support of the Folio 329 claim, which was commenced by a claim form issued on 4 April 2008.
- SocGen purported to serve the claim forms on the Turkish Defendants in Turkey and on Goldas Dubai in Dubai. The Defendants contended at the time that service in Turkey was not validly effected, and did not enter acknowledgements of service. It is now common ground that there was no valid service on the Turkish Defendants in Turkey. There remains a dispute as to whether service was validly effected on Goldas Dubai. SocGen took no further steps to progress the claims in England, but focused on protracted litigation with the Defendants in Turkey, including in particular insolvency proceedings in which claims to payment for the gold were advanced.
- By application notices issued on 9 February 2016, the Defendants seek orders that:
(1) the claim forms be struck out and/or dismissed, on the grounds that:
(a) the claim forms have not been served and the time for doing so under CPR Rule 7.5 has expired;
(b) alternatively the failure to progress the claims amounts to an abuse of process;
(2) the freezing orders be discharged on the grounds that:
(a) the claim forms are struck out and/or dismissed; alternatively
(b) there were misrepresentations and/or a failure to make full and frank disclosure in obtaining them;
(3) there be an inquiry as to damages under the cross undertaking given in support of the freezing orders.
- By application notices issued on 12 May 2016, SocGen sought orders:
(1) to overcome invalid service in Turkey and (if necessary) Dubai by one of three alternative routes, namely:
(a) an order for deemed service by an alternative method with retrospective effect pursuant to CPR Rule 6.15; or
(b) an order dispensing with service pursuant to CPR Rule 6.16; or
(c) an order extending time for service of the claim form pursuant to CPR Rule 7.6(3); this third ground has been abandoned;
(2) for summary judgment under CPR Part 24, including permission to apply for summary judgment prior to the filing of an acknowledgement of service under CPR Rule 24.4(1)(i).
- SocGen had been supplying gold bullion to the Goldas group in increasing quantities since 2003. SocGen's case is that it did so "on consignment", that is on terms that the bullion remains the property of the bank as consignor unless and until it is priced and purchased by the consignee. In respect of each shipment SocGen and the relevant Goldas company executed a Bullion Consignment Agreement ("BCA"). The terms of the BCAs provided as follows:
(1) SocGen agreed to make available for supply to Goldas, at a defined location (typically the Goldas' company's registered office or as might subsequently be agreed elsewhere), a quantity of bullion up to a specified maximum.
(2) There were two stages to the supply. Goldas was entitled to call for delivery to it on consignment by requesting a shipment. Goldas could thereafter purchase the bullion or part of it by making a purchase request. Any unpurchased bullion at the end of the availability period was returnable to SocGen at the latter's request.
(3) Stage 1 was triggered by a shipment request by Goldas, which was to be confirmed by a shipment notice from SocGen accompanied by a proforma invoice in a specified form. The specified form of proforma invoice included an entry for a price, premium and consignment fee rate, but the terms of the BCA did not require any payment by Goldas on shipment or for so long as the bullion remained on consignment. Payment was not due unless and until Goldas decided to purchase by issuing a purchase request. Shipment was to be arranged by SocGen at Goldas' risk but with SocGen procuring insurance.
(4) Stage 2 was triggered by Goldas issuing a purchase request, whereupon the price was determined on a spot market basis plus an agreed premium. The purchase was to be followed by a final invoice in agreed form, which then fell for payment on the identified settlement date.
(5) Clause 6(a) of the BCA provided that title in the bullion was to remain with SocGen until the date of receipt of payment of the price. Clause 8 provided that until payment or return, Goldas was to hold the bullion on consignment at its vaults in safe custody on behalf of SocGen. Clause 8(b) provided that until purchase, Goldas was not to "commingle, deal, sell, use, invest, assign or otherwise dispose of any part of the Consigned Bullion".
(6) Clause 12 provided that upon an event of default, which included failure by Goldas to pay an amount due or to perform or observe any of Goldas' obligations, SocGen was entitled to cease shipments, demand payment of any outstanding amounts and demand the return, at Goldas' cost, of all Consigned Bullion.
(7) Clause 14(e) provided for English law and the submission by Goldas to the jurisdiction of the High Court in England.
- Goldas' case is that as a result of conversations and a course of dealing over the years, the gold supplied in 2007/2008 was not supplied on the terms of the BCAs; that, in particular, it was agreed that Goldas could use the gold in the manufacture and retailing of its jewellery once shipped and before paying for it, that being the very purpose of having such large quantities of gold delivered to it; and that property in the gold was treated as passing to Goldas at the latest on import, so that any claim in respect of the gold can only be for a money sum in contract, not for a contractual or proprietary remedy for delivery up of the gold or for damages for failure to do so.
- On 18 February 2008 Goldas' Mr Binatli told Mr Teboul of SocGen that Goldas had been using and selling gold on consignment before it had been purchased. At that date there were 15.725 metric tonnes of gold which had been shipped and not paid for, with a total value of approximately US$483 million. Of that quantity 4.425 MT had been the subject of purchase requests and priced, but remained to be paid for; the remaining 11.3 MT had not been the subject of purchase requests or priced. None of that gold has ever been paid for or returned to SocGen by Goldas. Kuyumculuk has also failed to repay three outstanding loans from SocGen totalling approximately US$9 million.
The procedural history
- Prior to commencing proceedings, SocGen applied for a freezing order supported by the first affidavit of Mr Teboul, the first affidavit of Mr Pinnell, a skeleton argument and a supplementary skeleton argument. After a hearing on Saturday 15 March 2008, Kitchin J granted a freezing order which included the following:
(1) by paragraph 5(1) a worldwide freezing order against Kuyumculuk in the sum of US$127,330,215.21;
(2) by paragraph 5(2) a worldwide freezing order against Kiymetli in the sum of US$257,703,343.07;
(3) by paragraph 5(3) a worldwide freezing order against Meydan in the sum of US$68,500,000;
(4) by paragraph 5(4) a worldwide freezing order against Goldas Dubai in the sum of US$14,500,000;
(5) by paragraph 9 an order for disclosure of assets by each Goldas Defendant within 72 hours of service, verified on affidavit 5 working days after service.
(6) by Schedule B paragraph (1) a cross undertaking in damages in the usual form.
(7) by Schedule B paragraph (2) an undertaking to issue and serve a claim form in the form produced to the court in draft "as soon as practicable".
- The claim form in Folio 267 was not issued on the next working day, Monday 17 March 2008, but on the following day, Tuesday 18 March 2008. No reason has been given for this apparent breach of the undertaking to issue as soon as practicable.
- The Folio 267 claim form did not include particulars of claim but articulated the brief details of the claim as follows:
(1) In respect of the 4.425 m.t. of bullion, an order for delivery up of the gold, alternatively for the money due under the priced purchase contracts (unquantified), alternatively for damages for failure to deliver up or pay for the gold;
(2) In respect of the 11.3 m.t. of bullion, an order for delivery up of the gold, alternatively damages for failure to deliver it up;
(3) In respect of the Kuyumculuk loan, a claim for repayment in an unquantified sum.
- It is to be noted that it was only in relation to the 4.425 m.t. of gold and the Kuyumculuk loan that the claim form made claims in debt; and in those respects did not articulate the amount of the alleged debt. There was no claim in debt for the 11.3 m.t., in respect of which a contractual or proprietary claim for delivery up or damages for failure to do so was the only claim advanced.
- Steps were taken on behalf of SocGen to serve the claim form on Kuyumculuk, Kiymetli and Meydan in Turkey with the assistance of a local law firm, Pekin & Pekin ("Pekin"):
(1) According to an affidavit of a senior partner of Pekin, Ms Dirican, she attended at Kuyumculuk's Istanbul offices on 24 March 2008 and asked to see representatives of Kuyumculuk and Kiymetli or anyone else authorised to receive service; she was put through on the phone from the front desk to Ms Bayram, an attorney, who told Ms Dirican that she was in a meeting with Kuyumculuk's and Kiymetli's representatives, that they would not accept service, and that if Ms Dirican wished she could deliver the documents to the Neighbourhood Executive Officer stating that Goldas had refrained from accepting service. Mr Sedat Yalinkaya of Goldas, who was in the meeting with Ms Bayram at the time, denies that any advice was given or any suggestion made by Ms Bayram as to how to serve the documents, but rather that Ms Bayram simply said that service was rejected and should be effected in accordance with the law.
(2) Ms Dirican deposes that later that evening she attended at Meydan's offices and personally handed the documents to a Mr Enver Akarsu who had previously accepted service of other proceedings. When he stated that he did not wish to accept service she told him that it was too late and service had been effected. Meydan says that it has no record of this occurring.
(3) The following day Ms Dirican sent the documents by registered post to Kulumkuluk and Kiymetli, but they were returned the same day with a note of refusal of service. Also on 25 March 2008 she caused a Notary Public to serve the claim form and accompanying documents on the relevant local Neighbourhood Executive Officer.
- Ms Dirican provided an affidavit to SocGen's London solicitors, Clifford Chance LLP, deposing that personal service on Mr Akarsu (in the case of Meydan) and delivery to the Neighbourhood Executive Officer (in the case of Kumukuluk and Kiymetli) was good service in accordance with Turkish law. It is now common ground that such advice was erroneous because service fell to be made in accordance with the 1965 Hague Convention on the Service Abroad of Judicial and Extraterritorial Documents in Civil and Commercial Matters ("the Hague Convention"), or under a 1931 bilateral treaty which is irrelevant for present purposes. Under Article 2 of the Hague Convention service is required through the relevant designated central authority, which in Turkey's case is the Ministry of Justice. Article 10 allows for direct methods of service permitted by local law provided the State of destination does not object; however Turkey had registered its objection to any of the methods enumerated in Article 10 and accordingly the only valid method of service of foreign process in Turkey was through the Ministry of Justice.
- No explanation has been given for failing to attempt service for over a week. Since the documents which it was first attempted to serve on 24 March were in English, the delay cannot be explained by any delay in obtaining translations. It therefore appears that SocGen would have been in breach of the undertaking given to Kitchin J on 15 March to serve as soon as practicable, even if service had been validly made when first attempted on 24 March.
- On 25 March 2008 Kuyumculuk, Kiymetli and Meydan each wrote to SocGen stating that they were aware that an attempt had been made to serve some official court documents in relation to English Court proceedings "in an unofficial and invalid manner". The letters went on to say that service was required in accordance with the Hague Convention and that there had been no acceptance of service. Copies of the letters were faxed to Clifford Chance.
- On 27 March 2008 Kuyumculuk, Kiymetli and Meydan each wrote again to SocGen by fax, post and courier, copied to Clifford Chance, stating that they were aware that various attempts had been made to deliver court documents which did not constitute good service under Turkish law; and that service was required to be effected on the Turkish companies in accordance with the Hague Convention. The letters went on to invite SocGen, if the latter took a contrary view that the attempts to deliver documents constituted effective service, to notify them by return and to set out the basis for such a view. A letter in similar terms was sent on behalf of Goldas Dubai on the same date, notwithstanding that there had at that stage been no attempt at service on Goldas Dubai in Dubai.
- On 7 April 2008 Turkish lawyers acting for the Turkish Goldas companies, Postacioglu, wrote to the Notary Public returning the letters by which service had purportedly been made on the Neighbourhood Executive Officer. The letter explained that service was required under Articles 3 to 6 of the Hague Convention through the Ministry of Justice, and that valid service had not been effected, requiring the Notary Public to notify SocGen of the contents of the letter, which it did by service on Pekin who responded by letter of 8 April 2008.
- It is clear from the correspondence that all four defendants, (including Goldas Dubai), were aware of the contents of the claim form in Folio 267 from 27 March 2008 at the latest. Whilst it undoubtedly came to the Defendants' notice, it was not effectively served in Turkey, with the result that the disclosure obligations in paragraph 9 of the freezing order never came into effect for the Turkish Defendants. No such disclosure was provided by any of the Goldas Defendants.
- Service on Goldas Dubai in Dubai had to be effected through diplomatic channels pursuant to the Treaty between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates on Judicial Assistance in Civil and Commercial Matters (Treaty Series No. 1 of 2009), which came into force on 2 April 2008 ("The Dubai Bilateral Treaty"). The process required SocGen to lodge documents for service at the Foreign Process Section of the Royal Courts of Justice, giving rise to a request from the Senior Master of the High Court of Justice, Queen's Bench Division to the Dubai judicial authorities to effect service. The process involves the request being sent by the Senior Master to the Foreign and Commonwealth Office, thence to the UAE Embassy in London, thence to the UAE Ministry of Foreign Affairs, thence to the UAE Ministry of Justice, and thence to the relevant UAE court for service on the defendant by the court bailiff. It is not clear when the documents were lodged with the Foreign Process Section, but it appears that that had occurred by the time the freezing order application came before Burton J on the return date, 2 April 2008, as SocGen was required to have done by its undertaking to serve as soon as practicable.
- On the return date, the Goldas defendants did not participate. Burton J was told that service had been effected in Turkey (as SocGen believed, supported by Ms Dirican's affidavit) and that service through diplomatic channels in Dubai was expected to take up to 6 months. The freezing order was continued. In addition, Burton J was asked to make a further freezing order against Kuyumculuk and Goldart in support of a claim against them as guarantors of certain of the liabilities of the other Goldas companies in respect of the bullion which was the subject matter of Folio 267. The guarantees are admitted and no issues of liability arise thereunder separately from issues as to the underlying liabilities which were guaranteed. Burton J made a further freezing order in support of the guarantee claims, expressed to run until trial or further order without a return date. The guarantee claims were advanced in the claim form in Folio 329 subsequently issued on Friday 4 April 2008. Again this was not the next working day and appears to have been in breach of the undertaking given to Burton J to issue as soon as practicable. The brief details of claim in the Folio 329 claim form identified the guarantees being relied on and claimed "sums due….under" them, but did not identify the sums alleged to be due or the nature of the liabilities relied on.
- SocGen purported to serve the Folio 329 claim form in Turkey on 14 April 2008 by the Notary Public sending it by post to Kuyumculuk's and Goldart's registered addresses. By letter of 16 April 2008 Postacioglu wrote to Pekin via the Notary Public in similar terms to their 7 April letter, disputing the validity of service and referring again to the requirement that service be effected in accordance with the Hague Convention. It is to be inferred that the contents of the Folio 329 claim form had come to the relevant Defendants' attention by that time. Following a response from Pekin claiming that valid service had been effected, Postacioglu wrote again via the Notary Public on 1 May 2008 pointing out that service could only be effected through the Ministry of Justice under the Hague Convention.
- At about this time SocGen decided not to progress the English proceedings, at least for the time being. The decision is described and explained by Mr Surgeoner of Clifford Chance in his first witness statement. He says that it was made in the light of advice received from Pekin in mid-April 2008, and Goldas' non-participation in the English proceedings. The decision is described in these terms: "In the light of the advice from Pekin, SocGen subsequently took the decision to advance matters by instituting bankruptcy proceedings against Goldas in Turkey. The intention in relation to the English claims was to keep the position under review and revisit the matter once the outcome of the Turkish bankruptcy proceedings was known."
- The advice from Pekin, in which privilege was said not to be waived, was described as being to the effect that an English default judgment, without a review of the merits, would not be enforceable in Turkey; that it would likely take 1½ to 2 years to complete the process of recognition and enforcement of a final judgment in Turkey; that Goldas did not have sufficient assets to meet the sums claimed; that trying to rely on an English judgment would mean a loss of time and additional expense for SocGen without any benefit in terms of recovery before the Turkish courts; that accordingly bankruptcy proceedings should be commenced, in which the Turkish court would determine the existence of the debt which could be proved on the available existing evidence; and that any judgment of an English court would only be supportive evidence which would not be necessary to file the bankruptcy request.
- Mr. Surgeoner is not specific about when the decision to put the English proceedings on hold was made, save that it was subsequent to Pekin's advice in mid-April 2008. Insolvency proceedings were not commenced in Turkey until January 2009. However since no further steps were taken to progress the English proceedings and the decision is described as having been made "in the light of" Pekin's advice in mid-April 2008, I infer that the decision was made shortly thereafter, i.e. in mid-April 2008.
- Thereafter the process of service of the Folio 267 claim form on Goldas Dubai through diplomatic channels ran its course. On 8 May 2008 the request was made by the Senior Master and sent to the FCO. The request for service from the Senior Master included a request that evidence of service or inability to serve be officially certified to the English Court. Thereafter the request passed through the channels identified above until service was attempted on 24 July 2008.
- On 23 September 2008, the Foreign Process Section sent to Clifford Chance a letter received from the Dubai authorities enclosing evidence of non-service of the documents. Enclosed was (1) a letter of 7 September 2008 from the British Embassy in Dubai stating that as per the UAE Ministry of Foreign Affairs, Goldas Dubai refused to receive the documents, and that a note from the Dubai courts stated that when the court bailiff went to serve the documents he spoke to an employee who refused to receive the documents; and (2) a letter of 12 September 2008 from the FCO to the Foreign Process Section stating that the UAE Ministry of Foreign Affairs had returned the request for service unexecuted. Clifford Chance can have been in no doubt that it was being told that service had not been validly effected on Goldas Dubai.
- The only additional evidence before this Court of what happened when service was attempted is in the form of the certificate of the process server signed on 24 July 2008. The certificate is in proforma form with a box ticked against the rubric (in translation from the Arabic) "Summons not delivered"; the proforma includes a number of specific reasons which could be ticked, the last of which is "other reasons" under which the process server had written (again in translation): "They refused to accept receipt. On Thursday 24/7/2008 at 10:20 a.m., in Abu-Hail District, I, Abdullah Ahmed, process server at the Dubai courts of the United Arab Emirates, proceeded to serve notice to the party to be summoned at the address given. At the company's headquarters, I spoke to employee, Faisal Mahmoud Bashir, who refused to accept the documents. A report of this was drawn up."
- The initial evidence advanced in Mr Rose's first witness statement on behalf of Goldas Dubai in these applications was that there had been no attempt at service on Goldas Dubai. When the documents identified above were then put in evidence by SocGen, the responsive evidence from Goldas was that Mr Bashir was a junior office assistant employed by Goldas Dubai who had no authority to accept service of proceedings; and that Goldas Dubai were unable to contact him to establish what in fact occurred and has no record of the attempted service described. The upshot is that the best evidence of what happened, which SocGen now says amounted to good service, is the content of the process server's certificate.
- By this time SocGen had already decided not to take further steps, at least for the time being, to progress the English proceedings pending insolvency proceedings in Turkey. Insolvency proceedings were instituted by SocGen in Turkey in January 2009. They have been hotly contested and their lengthy history has involved numerous applications and decisions. The present position is that bankruptcy has been rejected by first instance decisions or on appeal, but SocGen is pursuing appeals or applications for correction of judgments which have yet to be determined.
- No further steps were taken by either party in the English proceedings until Goldas' applications of 9 February 2016. SocGen took no active steps to progress the English proceedings until their responsive applications of 12 May 2016.
- The position during the period of some 8 years in which SocGen took no steps to progress the proceedings is characterised by the following features:
(1) The delay is the result of a conscious decision by SocGen in April 2008 not to progress the proceedings; SocGen contends that it was a decision to put the proceedings on hold subject to review in the light of the Turkish insolvency proceedings; Goldas contends that it was in reality a decision by SocGen to abandon the proceedings.
(2) The freezing orders granted by Kitchin J and Burton J remained in place throughout. It is to be inferred that SocGen's decision not to progress the proceedings also involved a decision to maintain the freezing orders in place indefinitely and even if the Turkish proceedings had the desired result so that the English proceedings would never be progressed.
(3) In relation to service of both claim forms in Turkey:
(a) Kuyumculuk, Kiymetli, Meydan and Goldart had received copies of the claim forms in March and April 2008 respectively and were aware of their content;
(b) Kuyumculuk, Kiymetli, Meydan and Goldart were contending, correctly, that there had been no valid service and that service could only validly be effected through the Ministry of Justice under the Hague Convention;
(c) SocGen and its legal advisers in Turkey (Pekin) and London (Clifford Chance) were aware that Kuyumculuk, Kiymetli, Meydan and Goldart were contending that service could only validly be effected through the Ministry of Justice under the Hague Convention and that there had been no valid service; SocGen and Clifford Chance incorrectly believed that there had been valid service as a result of the incorrect advice from Pekin.
(4) As regards service of the Folio 267 claim form in Dubai:
(a) at the time, and until expert evidence was prepared for these applications, SocGen and Clifford Chance must have believed that service had not been validly effected; that was the substance of the communications received through diplomatic channels and there is no suggestion that any further advice was taken at the time or that the opinion of Mr Briggs was obtained otherwise than for the purposes of the present applications;
(b) at the time, and until the SocGen evidence served in these applications, Goldas Dubai reasonably believed that there had been no attempt at service on it in Dubai; this is the inference from Mr Rose's first witness statement attesting to that belief.
(5) The claims are more than six years old and the Goldas Defendants have an accrued limitation defence.
Validity of Service in Dubai
- I heard evidence on Dubai law from Mr Al Ansi on behalf of Goldas and Mr Briggs on behalf of SocGen. Each produced two reports and gave oral evidence. Mr Al Ansi's reports were served in English, signed by him. However when he came to give evidence the Court was told, without any prior notice to the Court or SocGen, that although he could give evidence in English it was intended that he give evidence through an interpreter. This was a thoroughly unsatisfactory way of proceeding. If his command of English was not good enough for him to feel comfortable giving evidence in English, he should have provided his reports in his native language, and advance notice should have been given to SocGen of the desire to give evidence through an interpreter so that it could have an Arabic speaker in court if it wished. It is sometimes convenient for a foreign witness whose command of the language is good but not perfect to give evidence in English with the benefit of an interpreter on hand in case of occasional potential difficulty over a particular word or phrase. Having been told that Mr Al Ansi could give his evidence in English, I ruled that he should do so, with the assistance of the interpreter if it proved necessary, which is what occurred. In the event, his evidence was not always easy to follow even when given in Arabic and translated by the interpreter. More significantly, he introduced or sought to introduce new authorities and arguments late in his evidence and did not appear to understand the role of an expert in giving evidence to an English Court; rather he behaved as an advocate for the position adopted by the party instructing him.
- No such criticism could be made of Mr Briggs. His deficiency, however, was that he is not an Arabic speaker and does not practice in the UAE courts, before whom with a few exceptions only UAE nationals are permitted to appear. Whilst he has over 25 years of legal experience giving advice in commercial dispute resolution, when it came to the issues which were critical in this case he was doing little more than offering an interpretation as a matter of construction of the (unofficial) English translation of the relevant procedural code in Arabic, or of extracts from authorities in Arabic in respect of which he was reliant on others to determine which part from the Arabic was selected for translation. He was not therefore in a very different position from the Court in forming a view as to how the relevant provisions would be interpreted or applied in Dubai.
- The Dubai Bilateral Treaty provides by Article 10 that the competent authority, in this case the UAE Ministry of Justice, is to serve the documents in accordance with its applicable domestic law and rules in relation to service. Article 10(2) permits an alternative method of service if specified in the request for service and provided it does not contravene domestic law. There was no such request in this case, but it is potentially relevant that SocGen could have procured a request for service by an alternative method, in particular in September 2008 when it was told that service had not been validly effected. Article 11(2) provides that service will be confirmed by a certificate of service, or where service is not effected a statement of the reason for failure to serve. This is obviously designed to provide a simple and conclusive mechanism for determining whether service has been effective. The local competent authority, in this case the Dubai Ministry of Justice, is best placed to determine and certify whether its local rules for service have or have not been fulfilled.
- The relevant procedural rules for service in Dubai are contained in the Dubai Civil Procedure Code in force at the time ("the CPC"). The important articles are Articles 9.2, 10, 13, 14 and 90 which at the material time provided (in unofficial translation) as follows:
"Save as provided for in special laws, a copy of the service shall be delivered in the following manner:
2 - In connection with private companies, societies and establishments and other private bodies corporate, the copy of the service shall be delivered at the centre of management of the person representing them at law or to his representative and in the event that such persons are not there the copy of the service shall be delivered to an employee of their offices and if they have no centre of management the copy shall be delivered to the representative thereof in person or at his domicile."
"Service shall be deemed completed with full effect as from the time of the delivering of the copy in accordance with the foregoing provisions."
"The procedure shall be void if the law expressly provides that it shall be void or if it is impaired by a fundamental defect or failure by reason of which the purpose of the procedure has not been accomplished.
In case the purpose of the procedure has been achieved, the nullity shall not be decided in spite of the stipulation thereon."
"Save in cases relating to nullity by reason of public order:
1 - Only a person in whose interest the law has provided for nullity may rely on it.
2 - A party who has been instrumental in it may not rely on it.
3. The nullity shall cease if the person in whose interest the law has provided for it waives it expressly or impliedly."
"Any voidness of service of statements of claim or documents of summons to attend arising out of a defect in service or in specifying which court or the date of the session shall cease by the attendance of the person served at the session specified in that service or by lodgement of his memorandum of defence, without prejudice to his right to adjourn to the end of the time limited for appearing."
- Article 9.2 is the operative provision. If a company has a centre of management (which Goldas Dubai had), service is required to take place there on (1) the authorised legal representative or that person's representative; alternatively and only if they are not there (2) an employee. There is no evidence that the process server asked for or attempted to serve on the authorised legal representative or his representative. However I accept the submission made by Mr Gunning QC on behalf of SocGen that it is to be inferred that a court process server would have been familiar with the procedural hierarchy and would likely have sought the legal representative or his representative before tendering the documents to an employee.
- The first critical question is whether what the process server described happening amounted to "delivery". The process server's report states that he spoke to Mr Bashir who refused to accept the documents. This suggests an oral exchange but no attempt at physical tender or delivery or transfer.
- Mr Briggs' evidence was that this would constitute delivery for the purposes of Article 9.2 and 10, but he had no support in case law or writings to support that view and he based it simply on his reading of the wording of the Code. In my view, an oral exchange without any attempt at physical tender or transfer would not amount to compliance with Article 9.2. If the Arabic is accurately translated as "delivery", what occurred is not within the natural meaning of delivery. Moreover the certificate produced by the process server ticked the box marked not "delivered" (again in translation) by which he must have meant that the process was ineffective. He can be expected to know what was necessary in relation to documents he had to serve in domestic proceedings, which after all was his job. This too was the interpretation put on the events by the UAE authorities in returning the request stating that it was unexecuted.
- Mr Briggs invoked support for the contrary view from the fact Article 10 of the Code had been subsequently amended with effect from 20 November 2014, and opined that the amended version should be treated as clarificatory of what had previously been applicable. The amended Article 10, not in force at the time, provides:
The notification shall be considered effective in accordance with the following:
1. From the time of delivering a copy thereof in accordance with the preceding provisions; and
2. From the date of receiving the letter of the Ministry of Foreign Affairs or the diplomatic mission indicating the receipt of the notified person of the notification copy or he abstained from receiving the same.
3. From the date of service by the registered mail with acknowledgement of receipt, fax or e-mail;
4. From the date the display or publication is completed in accordance with the provisions of this Chapter."
- This seems to me to support the view I have reached on the interpretation of Article 9.2, rather than undermine it. In particular it is clearly intended to be a substantive change, with four different types of service addressed, only one of which takes time as starting to run from abstention from receiving the document. It clearly is not clarificatory of the previous regimen but new and prospective.
- Moreover the crucial new wording comes in Article 10.2, not Article 10.1: it is not intended to apply to domestic service generally. Article 10.1 is in the same terms as the old Article 10 and requires delivery "in accordance with the preceding provisions" which include Article 9.2 in materially the same form referring to delivery. The contrast in the language used between abstaining from receipt (Article 10.2) and delivery (Article 10.1) suggests that they are different concepts and that delivery means in the Arabic what it would mean in translation i.e. transfer or at least attempted transfer.
- It is also significant that the new Article 10.2 applies only where there is a letter from the Ministry of Foreign Affairs or the diplomatic mission. This must be a reference to cases of service of domestic process outside Dubai, in another Emirate or outside the UAE, in which service is evidenced by a letter from a representative body of that foreign territory. Mr Briggs suggested that the new Article 10.2 applied to service within Dubai of foreign process, but the reference to a Ministry of Foreign Affairs or diplomatic mission makes no sense in that context: it cannot sensibly mean the requesting country's Ministry of Foreign Affairs who would not be qualified to judge the question; nor can it sensibly mean the Dubai Ministry of Foreign Affairs because determining when domestic service took place in Dubai cannot sensibly have been intended to be tied to a letter from the Dubai Foreign Ministry; nor would the alternative of "a diplomatic mission" make sense if addressed to Dubai entities rather than foreign missions. What is contemplated is the foreign ministry or mission in a territory outside Dubai where Dubai proceedings require service outside Dubai.
- Mr Briggs' alternative point, indeed it would perhaps be fair to describe it as his main point, was that the effect of Articles 13 and 14 was that service would be treated as effective if the recipient in fact had notice and/or was deliberately evading service. I am unable to accept that this assists SocGen in this case. The question which arises under the Dubai Bilateral Treaty is whether service was effected in accordance with Dubai's domestic laws and rules (Treaty Article 10) and that is what has to be certified (Treaty Article 11). That is a separate question from whether defective service or non-service is something which the unserved party can invoke so as to render subsequent proceedings a nullity as a matter of domestic Dubai law. The decision of the Union Supreme Court 228/Judicial year 22 of 18 April 2001 stated that nullity is a sanction imposed by the legislature on the breach of a procedural rule, which results in that procedure being erased and all procedures arising out of it being erased if they are based on it. So defective service renders proceedings a nullity, and a declaration of nullity may be granted, but subject to the qualifications which Articles 13, 14 and 90 impose. Articles 13, 14 and 90 are applicable to situations where despite the absence or invalidity of service the party will not be entitled to treat the proceedings as a nullity because he has appeared, or had notice, so that the purpose of service is fulfilled, or has been instrumental in the nullity by evading service. In those circumstances the Dubai courts will not make a declaration of nullity, which is a sanction imposed for non compliance with the rules. Nullity and a declaration of nullity are thus concepts applicable to domestic UAE proceedings and at a stage which is logically separate from and anterior to the question whether service has validly been effected. This is what is suggested by the language of the provisions "the nullity shall not be decided" (Article 13), "a party may not rely on it" (Article 14) and "voidness …shall cease… by the attendance"; and by the cases which I was shown applying those rules. Mr Briggs conceded that this was "arguable" and in my view it is the correct approach to the Civil Procedure Code on the basis of its wording and the authorities to which I was referred.
- Accordingly the position in respect of service of the Folio 267 claim form in Dubai is exactly that which was certified and communicated to SocGen in September 2008, and which SocGen and its legal advisers believed to be the case for the next 7 years or more, namely that service was not validly effected. It was not effected by a method permitted by a Treaty pursuant to CPR Rule 6.40(3)(b); and it was not effected by a method permitted by the law of the country in which it was to be served pursuant to Rule 6.40(3)(c).
Validating service by an alternative method or dispensing with service
- The parties disagreed on the applicable principles. On behalf of Goldas it was argued that both for validating service by an alternative method under Rule 6.15, and dispensing with service under Rule 6.16, what was required were exceptional circumstances and that there were particular impediments where service fell to be made in accordance with the Hague Convention and where a time bar defence had accrued. On behalf of SocGen it was argued that although exceptional circumstances were required for dispensing with service under Rule 6.16, all that was required under Rule 6.15 was a good reason, and that the Hague Convention context and accrual of a time bar defence did not affect the relevant principles to be applied.
- I was referred to a number of authorities and have had regard in particular to Battersby v Anglo-American Oil Co Ltd  KB 23; Dagnell v J L Freedman & Co  1 WLR 388; Vinos v Marks & Spencer plc  3 All ER 784 Knauf UK GmbH v British Gypsum Ltd  1 WLR 907; Godwin v Swindon Borough Council  1 WLR 997; Anderton v Clwyd County Council (No 2)  1 WLR 3174; Shiblaq v Sadikoglu  2 All ER (Comm) 596; Hashtroodi v Hancock  1 WLR 3206; Kuenyehia v International Hospitals Group Ltd  EWCA Civ 21; Aktas v Adepta  QB 894; Cecil v Bayat  1 WLR 3086; Abela v Baadarani  1 WLR 2043; Bank St Petersburg OJSC v Arkhangelsky  1 WLR 4360; and Barton v Wright Hassall LLP  EWCA Civ 177.
- I would endeavour to summarise the relevant principles as follows:
(1) As the wording of Rule 6.16 makes clear, the Court will only dispense with service in exceptional circumstances.
(2) In deciding whether to authorise service by an alternative method under CPR Rule 6.15, whether prospectively or retrospectively, the Court should simply ask itself whether there is "a good reason": Abela at . This is the same test as whether there is good reason (without the indefinite article): Barton at [19(i)]. The Court must consider all the relevant circumstances in determining whether there is a good reason for granting the relief; it is not enough to identify a single circumstance which taken in isolation would be a good reason for granting relief (e.g. allowing the claimant to pursue a meritorious claim) if it is outweighed by other circumstances which are reasons not to grant the relief. I do not read Aikens LJ as saying anything different in Kaki at  when emphasising the existence of the indefinite article "a good reason"; he did so in order to make the point that although all the relevant factors for and against granting relief inform the conclusion as to whether there is a good reason (see his paragraph ), no subsequent and separate discretion falls to be exercised if there is a good reason for granting relief.
(3) A critical factor is whether the defendant has learned of the existence and content of the claim form: Abela at , Barton at [19(ii) and (iii)]. If one party or the other is playing technical games, this will count against him: Abela at ; Barton at [19(vii)]. This is because the most important function of service is to ensure that the content of the document served is brought to the attention of the defendant: Abela at ). The strength of this factor will depend upon the circumstances in which such knowledge is gained. It will be strongest where it has occurred through what the defendant knows to be an attempt at formal service. It may be weaker or even non-existent where the contents of the claim form become known through other means. It is well known that sometimes issued claim forms are sent to a defendant "for information only" because the claimant does not want for the time being to trigger the next steps. Sometimes a claim form may be sent in circumstances which although less explicit do not suggest that the sending is intended to amount to service. The defendant may happen to learn of the claim form and its contents from a third party, or a search, in circumstances which might not suggest an intention by the claimant to serve it or to pursue the proceedings, or might positively suggest the reverse.
(4) However the mere fact that a defendant learned of the existence and content of the claim form cannot of itself constitute a good reason; something more is required: Abela at , Barton at [19(ii)];
(5) There will be a focus on whether the claimant could have effected proper service within the period of its validity, and if so why he did not, although this is by no means the only area of inquiry: Abela at , Kaki at , Barton at [19(iv)]; generally it is not necessary for the claimant to show that he has taken all the steps he could reasonably have taken to effect service by the proper method: Barton at [19(v)]; however negligence or incompetence on the part of the claimant's legal advisers is not a good reason; on the contrary, it is a bad reason, a reason for declining relief: Hashtroodi at , Aktas at .
(6) Delay may be an important consideration. It is relevant whether the application for relief has been made promptly and, if not, the reasons for the delay and any prejudicial effect: Anderton at . It is relevant if the delay is such as to preclude any application for extension of the validity of the claim form because the conditions laid down in 7.6(3)(b) and/or (c) cannot be fulfilled, i.e. if the claimant has not taken reasonable steps to serve within the period of validity of the claim form and/or has not made the application promptly: Godwin at , Aktas at . The culpability of the claimant for any delay may be an important factor. Particular considerations arise where the delay is abusive (see (7) below) or may have given rise to a limitation defence (see (8) below).
(a) It is relevant whether any conduct of the claimant has been an abuse of process of the proceedings.
(b) At one extreme, there will rarely if ever be "good reason" where the claimant has engaged in abusive delay or abusive conduct of the proceedings which would justify striking them out if effective service had been made when attempted under the principles established in Grovit v Doctor  1 WLR 640 and Habib Bank v Jaffer  CPLR 438.
(c) However even where the abuse is not of that character, any abuse of process will weigh against the grant of relief.
(a) Where relief under Rule 6.15 would, or might, deprive the defendant of an accrued limitation defence, the test remains whether there is a good reason to grant relief: Abela.
(b) However save in exceptional circumstances the good reason must impact on the expiry of the limitation period, for instance where the claimant can show that he is not culpable for the delay leading to it or was unaware of the claim until close to its expiry: Cecil at  and see Godwin at .
(c) It is not ordinarily a good reason if the claimant is simply desirous of holding up proceedings while litigation is pursued elsewhere or to await some future development; the convenience for a claimant of having collateral proceedings determined first is not a good reason for impinging on the right of a defendant to be served within the limitation period plus the period of validity of the writ: Battersby per Lord Goddard at p.32; Dagnell per Lord Browne-Wilkinson at p. 393C. Cecil at -.
(d) Absent some good reason for the delay which has led to expiry of the limitation period, it is only in exceptional cases that relief should be granted under Rule 6.15 or 6.16; there is a distinction between cases in which there has been no attempt at service and those in which defective service has brought the claim form to the defendant's attention (Anderton at -, Abela ), with relief being less readily granted in the former case, but even in the latter case exceptional circumstances are required: Kuenyehia at ;
(e) Absent some good reason for the delay which has led to expiry of the limitation period, it is never a good reason that the claimant will be deprived of the opportunity to pursue its claim if relief is not granted; that is a barren factor which is outweighed by the deprivation of the defendant's accrued limitation defence if relief is granted; that is so however meritorious the claim: the stronger the claim, the greater the weight to be attached to not depriving the defendant of his limitation defence: Cecil at , Aktas at .
(9) Cases involving service abroad under the Hague Convention or a bilateral treaty:
(a) Where service abroad is the subject matter of the Hague Convention or a bilateral treaty, it will not normally be a good reason for relief under CPR 6.15 or 6.16 that complying with the formalities of service so required will take additional time and cost: Knauf at , Cecil at , .
(b) It remains relevant whether the method of service which the Court is being asked to sanction under CPR 6.15 is one which is not permitted by the terms of the Hague Convention or the bilateral treaty in question. For example, where the country in which service is to be effected has stated its objections under Article 10 of the Hague Convention to service otherwise than through its designated authority, as part of the reciprocal arrangements for mutual assistance on service with this country, comity requires the English Court to take account of and give weight to those objections: see Shiblaq at . In such cases relief should only be granted under Rule 6.15 in exceptional circumstances. I would regard the statement of Stanley Burnton LJ in Cecil at  to that effect, with which Wilson and Rix LJJ agreed, as remaining good law; it accords with the earlier judgment of the Court in Knauf at -; Lord Clarke at paragraphs  and  of Abela was careful to except such cases from his analysis of when only a good reason was required, and to express no view on them (at ); and although Stanley Burnton LJ's reasoning that service abroad is an exercise of sovereignty cannot survive what was said by Lord Sumption (with unanimous support) at  of Abela, there is nothing in that analysis which undermines the rationale that as a matter of comity the English Court should not lightly treat service by a method to which the foreign country has objected under mutual assistance treaty arrangements as sufficient. That is not to say, however, that there can never be a good reason for ordering service by an alternative method in a Hague Convention case: Bank St Petersburg at .
(10) The mere fact that a party is a litigant in person cannot on its own amount to a good reason, although it may have some relevance at the margins: Barton at [19(vi)].
Application of the principles
- In my judgement the circumstances of this case point strongly towards there being no good reason for granting relief under Rule 6.15. Still less are they exceptional circumstances justifying dispensing with service under Rule 6.16.
- The starting point is that the Goldas Defendants had notice of the claim forms and their content and the Turkish Defendants also knew that SocGen had purported to effect service. That is an important factor, but it is not itself sufficient to amount to a good reason for granting relief. Service in Turkey was required to take place in accordance with the Hague Convention, as the Defendants correctly told SocGen at the time. Service in Dubai was required to be in accordance with the Dubai Bilateral Treaty, as SocGen correctly appreciated at the time. Goldas was entitled to insist on such service.
- SocGen's failure to effect valid service within the period of validity of the claim form was culpable. If failure to do so in Turkey was the result of negligent Turkish law advice, that does not absolve SocGen of culpability for the failure. It is not a good reason for granting relief but rather a reason for not doing so. As to Dubai, SocGen did invoke the bilateral treaty procedure but had no reason to believe service was validly effected by that route. It simply ignored the response that service had not been effected and let the period of validity for service of the claim form in Dubai expire without making any effort to extend its validity under Rule 7.6 as it should have done. The Court could then have been asked, if necessary, to authorise service under the treaty by an alternative method as permitted by Article 10(2). The reason SocGen failed to do so was that it had decided to warehouse the proceedings in favour of pursuing its claims in Turkey through insolvency proceedings, which provides no excuse for such failure. In short, SocGen deliberately allowed the validity of the claim forms to expire when it knew that service in Turkey was disputed and had no reason to believe that it had been validly effected in Dubai.
- This is especially culpable in circumstances where what occurred amounted to a breach of undertakings given to the Court to secure the freezing orders that the claim forms would be served as soon as practicable. So far as Dubai was concerned this was simply ignored. So far as Turkey was concerned, this placed a heavy onus on SocGen to investigate and resolve the known dispute about service. SocGen is not absolved from blame for the breach of the undertaking by the erroneous advice from its Turkish lawyers.
- SocGen then took a conscious decision to try to recover what it claimed was due not in England, but in Turkey by means of insolvency proceedings, again in the knowledge that Turkish service was disputed and Dubai service had not been effected. That involved a delay of some 8 years which was only brought to an end by the defendant's applications. That decision and the consequent delay had two relevant consequences. First SocGen disqualified itself from being able to seek an extension to the validity of the writ. The Rule 7.6 application has been abandoned because it is hopeless: SocGen could not fulfil the requirements of Rule 7.6(3)(b) (taking all reasonable steps to serve within the period of validity) or Rule 7.6(3)(c) (making an application promptly). Secondly the decision and subsequently delay continued beyond the expiry of the limitation period so as to give Goldas an accrued limitation defence.
- There is no good reason for SocGen allowing a time bar defence to accrue. It made a conscious decision to delay progressing proceedings in the belief that there had been no effective service in Dubai and in the knowledge that effective service in Turkey was disputed. Even were it entitled to invoke the erroneous advice of its Turkish lawyers, it clearly took the risk of the claim becoming time barred if the dispute were not resolved in its favour. This is therefore a case in which a claimant cannot show some good reason for the delay which has led to expiry of the limitation period, such that it would require exceptional circumstances to deprive a defendant of its accrued limitation defence. There are no such exceptional circumstances.
- Moreover SocGen's conduct of the proceedings has amounted to an abuse in three separate respects.
- First, where a party obtains the draconian remedy of a freezing order, it is incumbent upon it to progress the proceedings expeditiously, unless the Court sanctions delay. A failure to do so is an abuse of process. This is well established: see Lloyds Bowmaker v Brittania Holdings PLC  1 WLR 1337 per Glidewell LJ at p. 1347 and Dillon LJ at 1349-1350; Daisy Star Ltd v Town and Country Building Society & others  WL 6497 per Farquharson LJ; Annodeus Entertainment Ltd v Gibson (2000 unreported,  EWHC 1569 (Ch)) per Neuberger J as he then was, quoted by Jonathan Parker LJ in Audergon v La Baguette Ltd  CP Rep 27; Walsh v Deloitte & Touche Inc.  UKPC 58 per Lord Hofmann at ; and see the discussion at Gee on Commercial Injunctions 6th Edn paragraphs 24-028 to 24-03.
- SocGen failed to comply with this important requirement. It took advantage of the continued effect of the freezing orders without progressing proceedings and with the intention that if the Turkish insolvency proceedings were successful the English proceedings would never be revived or resolved. It did not seek the sanction of the Court for the freezing orders to be used in this way. They were granted on a very different basis, which was not that they should be ancillary to SocGen's substantive claims advanced in Turkish insolvency proceedings, but rather that they were in support of and ancillary to the exercise of the English Court's jurisdiction to determine the merits of SocGen's claim. Paragraph 46(4) of the skeleton argument put before Kitchin J stated that SocGen did not intend to commence proceedings in Turkey other than ancillary proceedings such as for the obtaining of local freezing orders.
- Such abuse is all the more serious in this case because the potentially devastating effect of the freezing orders was recognised when they were first sought. Kitchin J was told that the effect might well be to substantially shut down the Defendants' business. Goldas' evidence on this application is that that is exactly what happened over the course of 2008. That must have been appreciated as the potential effect of the freezing orders when the decision was taken in April 2008 not to progress the English proceedings, and, it is to be inferred, the decision nevertheless to keep the freezing orders in place indefinitely in support of the Turkish insolvency proceedings.
- The second abuse lies in the decision to put the proceedings on hold. I reject Mr Moverley Smith's submission that SocGen had decided to abandon the proceedings. None of the documents he referred to cast any serious doubt on what Mr Surgeoner said was the nature of the decision made. Nevertheless that decision was abusive.
- Even before the introduction of the CPR and the overriding objective, a party was not allowed simply to put proceedings on hold to await the outcome of developments or litigation abroad without the sanction of the Court. In Battersby v Anglo-American Oil Co Ltd  KB 23 Lord Goddard giving the judgment of the Court of Appeal said at p. 32 "It is for the court and not for one of the litigants to decide whether there should be a stay." In Arbuthnot Latham Bank Ltd v Trafalgar Holdings  1 WLR 1426 Lord Woolf MR stated at p. 1437
"Whereas hitherto it may have been arguable that for a party on its own initiative to, in effect, "warehouse" proceedings until it is convenient to pursue them does not constitute an abuse of process, when hereafter this happens this will no longer be the practice. It leads to stale proceedings which bring the litigation process into disrespect. As case flow management is introduced, it will involve the courts becoming involved in order to find out why the action is not being progressed. If the claimant has for the time being no intention to pursue the action this will be a wasted effort. Finding out the reasons for the lack of activity in proceedings will unnecessarily take up the time of the court. If, subject to any directions of the court, proceedings are not intended to be pursued in accordance with the rules they should not be brought. If they are brought and they are not to be advanced, consideration should be given to their discontinuance or authority of the court obtained for their being adjourned, generally. The courts exist to assist parties to resolve disputes and they should not be used by litigants for other purposes."
- The introduction of the CPR marked a change of emphasis in favour of attaching more importance to compliance with the rules, and furthering the overriding objective, with the impact on the court system and other court users in mind as well as that on the parties. Under CPR Rule 1.1(2)(d) and Rule 1.3 SocGen was under an obligation to help the Court to ensure that the claim was dealt with expeditiously. This it singularly failed to do.
- For a claimant unilaterally to warehouse proceedings is therefore an abuse of process, and may be a sufficiently serious abuse to warrant striking out the claim in appropriate cases under the line of authority from Grovit v Doctor  1 WLR 640; see Solland International Ltd v Clifford Harris & Co  EWHC 3295 (Ch) at . It is not necessary to decide in this case whether if Goldas had been validly served, the warehousing of the proceedings was an abuse of sufficient gravity to warrant striking out the claim. What is clear is that the decision to put the proceedings on hold for such a long period was an abuse, and a serious abuse, which militates against there being a good reason for granting the relief sought on this application.
- The third abuse is the breach of the undertakings given to Kitchin J and Burton J to issue and serve the claim forms as soon as practicable. So far as service in Dubai is concerned, no explanation has been offered for breach of the undertaking: when SocGen learned in September 2008 that service had not been effected, it appears that nothing was done to attempt further service because of the decision to warehouse the proceedings. That provides no excuse for breach of the undertaking, which continued in effect. In relation to service in Turkey, the erroneous advice of Pekin provides an explanation but not an excuse, and does not in any event explain the apparent failure to attempt service until 24 March, 9 days after the undertaking was given. No explanation for the delay in issuing either claim form has been offered. Although it was only a day in each case, it reveals a casual attitude to the undertakings given to the Court which was evident in the more serious breaches in relation to service.
- A yet further reason for not granting relief is that it would circumvent the treaty arrangements for service in Turkey and Dubai. Turkey has objected to service in accordance with Article 10 of the Hague Convention. Comity requires that the Court should be reluctant to sanction such service. The same applies in relation to service in Dubai under the Dubai Bilateral Treaty.
- In summary, therefore, SocGen chose to pursue proceedings in Turkey to recover the price or value of the gold in place of pursuit of the claim in these proceedings which were put on hold for about 8 years until after the validity of the claim forms had expired and after the limitation period had expired, abusively warehousing the English proceedings and improperly maintaining freezing orders in place, in circumstances where it knew that the validity of service in Turkey was disputed, ought to have known that the claim forms had not been served in Turkey and did not believe that the claim form had been served in Dubai. None of those features suggest there is good reason for validating defective service, still less by a method which was contrary to the Hague Convention and Dubai Bilateral Treaty, nor exceptional circumstances justifying dispensing with service. On the contrary they provide good reasons for not doing so.
- Against that background the inability to pursue the claim in English proceedings if relief is not granted is a factor of little weight and provides no good reason for granting relief. I accept Mr Gunning's submission that apart from a time bar defence, Goldas has not demonstrated any arguable defence to a claim for the price or value of the gold, although that is not the claim in the Folio 267 claim form in respect of 11.3 m.t. of the gold, and there is in my view an arguable case that SocGen was not entitled to delivery up of that gold but only to a money sum for its price or value. The claim is a large one. However where, as here, there is no good reason for having allowed the limitation period to expire, loss of a meritorious claim if relief is refused is a barren factor which is outweighed by the deprivation of the defendant's time bar defence if relief is granted. The strength and size of the claim gives as much weight to the prejudice to Goldas in being deprived of an accrued limitation defence as it does to the prejudice to SocGen in being unable to pursue the claim.
- Moreover there is in my view no injustice to SocGen in being left to pursue its claims through the insolvency proceedings in Turkey, which are not yet exhausted. That was its preferred course and one which it took on advice as best suiting its commercial interests. The English proceedings were, from April 2008 onwards, intended merely as a fallback which SocGen wished to keep in reserve; but as I have explained warehousing the proceedings in that way was an abuse. What is now desired is to pursue the proceedings on the merits in parallel both in Turkey and in England. The loss of the ability to pursue what would now be parallel proceedings in England, as a result of a considered choice to pursue the claims for 8 years only in Turkey, is not an injustice; on the contrary to grant the relief would be to enable SocGen to take advantage of its abuse.
- On behalf of SocGen, Mr Gunning advanced ten factors as amounting to good reason for relief under Rule 6.15 and exceptional circumstances justifying relief under Rule 6.16:
(1) the claim forms were brought to the attention of Goldas;
(2) the method of service on Kuyumculuk and Kiymetli was by a method they had requested;
(3) if SocGen had applied for service by an alternative method in March 2008 it would have been granted;
(4) it was reasonable for SocGen to rely on the advice of Pekin that service had validly been effected;
(5) Goldas Dubai refused to accept service and it is reasonable to assume that the Turkish companies would have done the same if service in accordance with the Hague Convention had been attempted;
(6) refusal of relief will deprive SocGen of a straightforward and unanswerable contractual claim;
(7) in the Turkish insolvency proceedings the Turkish courts have approached the matter on the basis that the dispute needs to be resolved in London;
(8) if the Dubai proceedings were validly served, then the issues which are raised by the Goldas companies as to the course of dealing will need to be resolved anyway;
(9) in relation to service on Goldas Dubai, if service was ineffective, it was nevertheless as requested and deliberately avoided by Goldas Dubai; and Goldas Dubai approached proceedings in Dubai in 2008, in which SocGen unsuccessfully sought a preliminary attachment order, on the basis that the London proceedings were on foot;
(10) Goldas' application for an inquiry as to damages under the cross undertaking invites a consideration of the same issues as it says arise in its defence to SocGen's claims.
- These are not in my judgement sufficient to justify granting the relief sought in the light of the other circumstances to which I have drawn attention. Dealing with each in turn:
(1) The fact that the claim forms were brought to the attention of Goldas is an important factor but is not sufficient in itself to amount to a good reason or to establish exceptional circumstances.
(2) There is no weight to be attached to the alleged invitation to Ms Dirican by Ms Bayram on the phone on 24 March 2008 to serve on the Neighbourhood Executive Officer. This only applies to Kuyumculuk and Kiymetli, not Meydan, Goldart or Goldas Dubai. Ms Dirican's account is challenged in the Goldas evidence and I cannot resolve the dispute on this application. Even if taken at face value it carries little weight. On her account it was an invitation to serve on the Neighbourhood Officer "if she wished", and was swiftly followed by correspondence requiring service in accordance with the Hague Convention. SocGen and its advisers cannot properly have thought that anything said to Ms Dirican by Ms Bayram on 24 March could validate service if otherwise ineffective, and indeed there is nothing in SocGen's evidence to suggest that they did.
(3) If SocGen had applied for an order for service by an alternative method in March 2008, it is far from clear that such relief would have been granted. If the Court had been properly apprised of the position, it would have learnt that service under the Hague Convention was required in Turkey and that no attempt had been made to do so. In those circumstances it would most likely have required such service. In any event, SocGen chose not to make any such application in March 2008 and subsequently delayed making any such application until after expiry of the limitation period, whilst engaging in abusive delay and warehousing of the proceedings; it cannot therefore assist SocGen if the Court might have granted relief in different circumstances.
(4) The incompetence of legal advisers is a reason against granting relief, not one in its favour. Mr Moverley Smith QC argued that in any event, in the light of the repeated assertion by Goldas that service in accordance with the Hague Convention was required, Clifford Chance could reasonably have been expected to research the position and in particular whether Turkey had objected to Article 10 service; and that available research sources in London, including Shiblaq, would quickly have revealed the true position. Mr Gunning submitted in response, correctly in my view, that because service would be effective under Rule 6.40(3) if permitted by Turkish law, irrespective of whether there were compliance with the Hague Convention, reliance on Turkish law advice was necessary and reasonable. Nevertheless the incompetence of SocGen's Turkish legal advisers can provide no support for the relief sought on this application. Moreover it cannot excuse the subsequent delay and conduct which was abusive, nor the decision to allow the period of the validity of the writ and the limitation period to expire in the knowledge that the validity of service was disputed.
(5) There is no warrant for assuming that Goldas would have frustrated Hague Convention service in Turkey, which was what they were inviting. The refusal to accept documents by an employee in Dubai is entirely consistent with his having no authority to accept them, and the evidence suggests that those responsible for conducting Goldas Dubai's affairs were unaware of the attempted service.
(6) The inability to pursue the claim in English proceedings if relief is not granted provides no good reason for granting relief for the reasons I have explained above. The loss of a meritorious claim if relief is refused is a barren factor which is outweighed by the deprivation of Goldas' time bar defence if relief is granted. Moreover there is no injustice in SocGen being left to pursue its claims through the insolvency proceedings in Turkey, which are not yet exhausted. That was its preferred course and one which it took on advice in relation to enforcement as best suiting its commercial interests.
(7) The submission that in the Turkish insolvency proceedings the Turkish courts have approached the matter on the basis that the dispute needs to be resolved in London was founded on a pair of judgments in the Meydan insolvency proceedings said to be representative of a broader set involving all defendants. They were (i) the decision of the Civil Court of Appeals of 14 November 2013 by which it reversed the first instance decision of 14 May 2012 declaring Meydan bankrupt, and (ii) the application of the Court of Appeal decision by the court of first instance on 12 February 2014 to reverse its previous decision. Those decisions can be of little assistance to SocGen on the current application because they came after a lengthy period of culpable and abusive delay by SocGen and they did not prompt any change of approach in Turkey or England: the decision was appealed and no steps were taken to progress the English proceedings. In any event, it appears that the substance of the decisions was that the contracts in question contained English jurisdiction clauses and so any resolution of the disputed debt had to be resolved in England. All this amounts to is a Turkish court saying that the pursuit of Turkish insolvency proceedings was impermissible without first establishing the debt in English proceedings which it understood to be pending. SocGen took the decision that it would nevertheless seek to pursue that course in Turkey both before and after the Turkish court decisions. The judgments cannot justify a failure to progress the English proceedings until after expiry of the limitation period or provide a good reason to relieve SocGen from the consequences of its decision.
(8) I have held that the claim form has not been validly served in Dubai so that the point does not arise. But in any event I would not have treated service on Goldas Dubai as supportive of a good reason to deprive the other Defendants, who face much larger claims, of a limitation defence.
(9) The ineffective service on Goldas Dubai was not the result of any improper evasion: see (5) above. The point made by Goldas in the Dubai proceedings was that SocGen has already obtained an English freezing order; whether the proceedings had by that point been validly served was not material to the argument before the Dubai court.
(10) Goldas' application for an inquiry as to damages under the cross undertaking does not invite a consideration of the same issues as it says arise in its defence to SocGen's claims.
- For all these reasons SocGen's applications for service by an alternative method under Rule 6.15 and to dispense with service under Rule 6.16 are dismissed.
- I should record that Mr Moverley Smith also argued that relief should not be granted because service by the methods adopted in Turkey was contrary to the law of Turkey and so could not be authorised by virtue of Rule 6.40(4). He submitted that this was the effect of Turkey's objection to Article 10 of the Hague Convention. However the point cannot be made good in the face of the agreed statement of the parties' Turkish law experts, which states in terms that the attempted service was not positively prohibited under Turkish law but simply not a step which constituted valid service.
Striking out the claims and discharging the freezing orders
- It follows that the validity of the claim forms having expired without service, and lack of service not being curable, the claims should be struck out, and consequently the freezing orders discharged.
Inquiry under the cross-undertaking
- The cross undertaking in damages is given to the Court, not the opposing party, and the Court has an unfettered discretion whether to enforce the undertaking, to be exercised on ordinary equitable principles taking into account all the circumstances of the case: Cheltenham & Gloucester Building Society v Ricketts  1 WLR 1545.
- Where it is subsequently determined that the interim order ought not to have been granted or maintained, the Court will ordinarily enforce the undertaking save in special circumstances: Graham v Campbell (1877) 7 Ch. D. 490, 494, Cheltenham & Gloucester v Ricketts at 1556F-1557E; Dadourian Group International Inc v Simms  EWCA Civ 169 at . Thus prima facie a person who has suffered loss as a result of an interim order being wrongly made or maintained against him is entitled to be compensated for his loss (Fiona Trust v Privalov  EWHC 3102 (Comm) at ). In Lunn Poly Ltd v Liverpool & Lancashire Properties Ltd  EWCA Civ 430 Neuberger LJ said at  that he can normally expect an inquiry as to damages "virtually as of right".
- The Court will however decline to enforce the cross undertaking where the conduct of the defendant in relation to the obtaining of the undertaking or enforcement of the undertaking makes it inequitable to enforce it: F. Hoffman-La Roche & Co AG v Secretary of State for Trade & Industry  AC 295, 361). One example of such conduct which has been held to justify refusing an inquiry is delay on the part of the defendant. In this respect guidance as to the relevant principles is to be found in the judgment of Millet LJ in Barratt Manchester Ltd. v. Bolton Metropolitan Borough Council  1 WLR 1003 at p. 1009E-G:
"Since there is no cause of action there is no period of limitation either; but the cross-undertaking cannot be enforced without the leave of the court, which may be withheld if not applied for promptly: see Smith v. Day (1882) 21 Ch. D. 421 and Ex parte Hall; In re Wood (1883) 23 Ch D 644. As those cases show, the court does not inquire whether the other party has been prejudiced by the delay. The only question is whether the applicant has behaved with reasonable despatch."
and at p. 1012C-F:
"The enforcement of the cross-undertaking should be regarded as being conditional on the inquiry being applied for promptly and prosecuted with reasonable diligence…...Where the delay has occasioned significant prejudice, it will almost always be right to dismiss the inquiry and discharge the cross-undertaking. But the greater the delay, the less the need to establish prejudice; and the court should not hesitate to discharge the cross-undertaking and dismiss the inquiry where there has been excessive and prolonged delay even though it cannot be shown to have occasioned any prejudice to the other party."
- In that case the absence of any prejudice to the claimant arising from the defendants delay in prosecuting the inquiry, although not determinative, was nevertheless treated as a "highly material" factor (at p.1012E) in support of the Court's decision to uphold the continued enforcement of the cross undertaking.
- Mr Moverley Smith argued that the freezing orders ought not to have been granted because they were procured by misrepresentations or a failure to make full and frank disclosure. The submission was essentially that SocGen's claim, and its assertion of the risk of dissipation, was put on the basis that SocGen was entitled under the BCA terms to delivery up of the bullion which Goldas had "stolen"; that it was never agreed that the gold could be used in manufacture prior to payment; and that Mr Teboul only found out that that was happening for the first time on 18 February 2008; whereas the true position, so it was argued, was that SocGen always knew that the BCAs did not represent the terms on which the parties had dealt; always knew that the bullion would be used in manufacture before payment; and that SocGen's claim could not be for anything more than a money sum as the price or value of the gold supplied.
- I reject that submission. Goldas' case that the terms of dealing were not those set out in the BCAs is no more than arguable, and Kitchin J was referred to the possibility that the Defendants might advance such argument, which was referred to in Mr Teboul's first affidavit. The contemporaneous reaction by Goldas to SocGen's claim for delivery up of the gold, expressed in communications between the parties when the dispute arose, was fully and fairly put before Kitchin J. He was told that there was an issue as to whether the retention of title clause in the BCAs was effective as a matter of Turkish law in respect of the priced gold, but that was not determinative because the conflicts position was unclear and in any event there was the delivery up claim, and the allegation of theft, relating to the unpriced gold.
- I also reject Mr Moverley Smith's submission that the freezing orders should be treated as wrongly granted when made on the grounds that SocGen never intended to pursue the proceedings here. I see no reason to doubt Mr Surgeoner's evidence as to SocGen's change of approach following the initiation of the claim; SocGen did indeed seek to effect service and I accept that its intention when the orders were obtained was to pursue the proceedings here.
- Nevertheless the freezing orders were wrongly maintained in place by SocGen from the time it took the decision to put the proceedings on hold to await the outcome of the pursuit of the claims through insolvency proceedings in Turkey. That took place, as I have inferred, in mid-April 2008. At that stage the basis on which the freezing orders had been sought and granted had changed significantly. They were no longer being maintained in support of an English claim, but rather in support of a Turkish claim which it was hoped would render any further pursuit of the English proceedings unnecessary. SocGen should then have applied to the Court to discharge the freezing orders or seek to persuade the Court to continue them on that very different basis.
- Mr Gunning argued that if SocGen had done so the Court would have authorised the course SocGen subsequently took. That would not excuse SocGen's failure to put the matter in the hands of the Court. But in any event I regard it as unlikely that the Court would have sanctioned what SocGen has done had it been asked to do so prospectively. It would have amounted to putting the English proceedings on hold indefinitely, for 8 years or more, and until after the expiry of the limitation period, so as to enable SocGen to use them as a fall back should it be unsuccessful in pursuing its claims in its preferred jurisdiction, which it would have been contending was the more appropriate jurisdiction in which to pursue them. The Court is likely to have regarded that as an abuse of the English process. Moreover it would have involved maintaining the freezing orders, at least primarily, in support of those foreign proceedings, presumably in exercise of the powers conferred by s. 25 of the Civil Jurisdiction and Judgments Act 1982. SocGen would have had to show exceptional circumstances justifying the grant of a freezing order over foreign assets of defendants who were not resident here and owed no allegiance to the Court by being susceptible to in personam jurisdiction: see ICICI Bank Uk plc v Diminco NV  EWHC 3124 (Comm),  2 CLC 647 at -. It seems to me unlikely that it would have been able to meet that threshold.
- Accordingly subject to the question of delay, it is right that SocGen should pay Goldas for any damages suffered by reason of the freezing orders remaining in place beyond mid-April 2008. There is evidence before the Court that Goldas suffered more than minimal loss thereafter, as a result of the freezing orders, so as to justify an inquiry as to damages. Indeed the evidence suggests that Goldas would have a very substantial claim.
- Although the delay by Goldas in applying to discharge the freezing orders and seeking to enforce the cross undertaking is lengthy, I have concluded that it does not render such enforcement inequitable for the following reasons. Goldas has a prima facie claim for very substantial loss caused by SocGen's abusive maintenance of the freezing orders. Goldas being put out of business was a consequence which SocGen expressly recognised as a serious possibility when it sought the orders, and must have realised might result from the maintenance of the freezing regimen when it decided to pursue its claims in Turkey rather than England. Goldas' explanation for the delay, namely that the Defendants were concentrating on the proceedings in Turkey, is a credible and understandable one. It is not to be inferred that Goldas was merely waiting for the limitation period to expire before "putting its head above the parapet in England" as Mr Gunning put it: the applications were not made for another two years after that. For the entire period of delay of which SocGen now complains, SocGen was itself delaying the progress of the proceedings, which it treated as being on hold; in those circumstances it can hardly assert that it was inequitable of Goldas to treat them as having been put on hold. Although Goldas could have applied to discharge the freezing orders following the expiry of the validity of claim forms (in July to September 2008) on the basis that service had not been effected, such an application would not necessarily have justified enforcement of the cross undertaking simply on those grounds. What justifies enforcing the cross undertaking with effect from mid-April 2008 is the abusive stance taken by SocGen to the pursuit of the proceedings, which was not known to Goldas prior to service of Mr Surgeoner's evidence in these applications. Although Goldas might properly have concluded after a time, at least after a few years, that SocGen did not intend to progress the proceedings in England whilst insolvency proceedings were being pursued in Turkey, that was after the damage caused by the freezing orders had allegedly been done, or at least predominantly so. Finally, and importantly, SocGen has not identified any prejudice it claims to have suffered by reason of the delay.
- I will hear the parties on appropriate directions for the inquiry.
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