B e f o r e :
LORD JUSTICE THORPE
LORD JUSTICE POTTER
LORD JUSTICE TUCKEY
|| MOTOROLA CREDIT CORPORATION
||- and -
||CEM CENGIZ UZAN
MURAT HAKAN UZAN
(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
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Mr George Leggatt QC, Mr Michael Bools and Mr Alan Maclean (instructed by Messrs Steptoe & Johnson) for the respondent
Mr Nicholas Strauss QC, Mr Richard Gordon QC and Mr Alain Choo Choy (instructed by Messrs Weil Gotshal & Manges) for the appellants
Mr Kenneth MacLean QC (instructed by Messrs Weil Gotshal & Manges) for the fourth appellant
HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Potter:
- This is the judgment of the Court to which all members have contributed.
- The appeals and applications for permission to appeal before the court have their origins in worldwide freezing orders and orders for cross-examination made against each of the first to fourth defendants (to whom for purposes of brevity, we will refer as D1, D2, D3 and D4) in exercise of the powers of the English Court under s.25 of the Civil Jurisdiction and Judgments Act 1982 ("the CJJA") to grant interim relief in support of substantive proceedings abroad, in this case proceedings in the US District Court for the Southern District of New York before the Honourable Judge Rakoff ("the US action"). The point of principle which lies at the heart of the appeals is whether a world-wide freezing order should be made under s.25 of the CJJA in support of an action in another jurisdiction in circumstances where the defendant in question is neither domiciled nor resident within the jurisdiction and there is no substantial connection between the relief sought and the territorial jurisdiction of the English Court.
The Factual Background
- The claimant is a large multinational company involved, together with its affiliates, inter alia in the sale of cellular telephone equipment. The defendants are members of a wealthy and powerful Turkish family who (among other business interests) own a telecommunications company, Telsim Mobil Telekomunikayson Hizmetleri A.S. ("Telsim"), which is the second largest supplier of mobile telephone services in Turkey. D1 and D3 are the sons, and D4 the daughter, of D2.
- The US action commenced on 28 January 2002. It arose out of the commercial relationship between the claimant and Nokia (another international telecommunications company) on the one hand and Telsim on the other. Telsim is almost wholly owned by companies in the ownership or control of the defendants. In the US Action, the claimant's case is that each of D1-D4 fraudulently induced it to enter into various financing agreements with Telsim, whereby the claimant advanced very large sums in order to enable Telsim to purchase cellular infrastructure telephone equipment from companies within the Motorola group of companies and to acquire a licence for the operation of Telsim's cellular telephone system in Turkey. The claimant alleges that each of the defendants acted without any intention that the money should be repaid and the proceedings allege that each is personally liable for the whole amount outstanding. In addition to the allegation of fraudulent procurement of the loans made to Telsim, the claimant alleges that, in the light of their actions taken at Telsim shareholder meetings on 24 April 2001 and 4 January 2002, the defendants conspired to do and dishonestly did the following things:
i) By means of Telsim shareholder actions issued to Standart Telekom Unikasyon Bilgisayar Hizmetleri A.S. ("Standart Telekom"), a company also controlled by the defendants, new shares in Telsim, thus reducing from 66% to 22% the percentage of the share capital of Telsim previously pledged to the claimant as security for its loans to Telsim by Rumeli Telefon Systemleri A.S. ("Rumeli Telefon"), which company was the majority shareholder in Telsim and was in turn controlled by D1-D3.
ii) By means of Telsim shareholder actions on 4 January 2002, relegated the shares covered by the pledge to a new and subordinate class, whereby Telsim were permitted to participate in and potentially transfer its assets to a "foundation" which is not subject to Turkish company law; and
iii) Diverted monies loaned to Telsim by the claimant for the specific purpose of purchasing equipment.
- The claimant's claims alleged common law fraud and civil conspiracy under Illinois law (Counts V - VII) for which ordinary compensatory damages were claimed. They were also put (Counts I IV) on the basis of violations under the Racketeer Influenced and Corrupt Organizations Act 18 USC ("RICO").
- On the day the US Action commenced, the claimant obtained a temporary restraining order from the New York Court to prohibit D1D4 from taking any further steps to prejudice the security for Telsim's loans, and to secure the attachment of various apartments and funds in New York until further order. Such relief was granted pending the full hearing of the claimant's motion for a preliminary injunction.
- On 30 January 2002 Cresswell J, on the ex parte application of the claimant, granted a freezing injunction against D1 in respect of D1's house in London and any other of his assets situated in England up to the value of US$50 million ("the domestic injunction"). On the hearing of that application, counsel for the claimant recognised during the hearing that the US Court could not make a worldwide freezing order but stated that the claimant reserved the right to apply to the English Court for such an order against D1 in due course. On 15 February 2002 Cresswell J continued the domestic injunction pending the hearing of an application by D1 for its discharge.
- During March 2002 D1-D4 applied in the US Action to dismiss the US proceedings for failure to join indispensable parties, insufficient service of process, lack of personal jurisdiction and forum non conveniens. They also filed motions to compel arbitration, and to dismiss for lack of subject matter jurisdiction and failure to state a claim. These applications/motions were eventually dismissed by Judge Rakoff on 30 September 2002.
- On 1st April 2002, Judge Rakoff denied the defendants' request for a protective order to block service of process by the claimant on them whilst in New York to give evidence on the claimant's motion for preliminary injunctive relief.
- On 9-18 April 2002, Judge Rakoff conducted a 6-day inter partes hearing involving oral testimony (though not from the defendants personally) upon the claimant's and Nokia's application in the US Action for a preliminary injunction and attachment order. That relief was granted on 9 May 2002. In his Opinion handed down on 21 May 2002 Judge Rakoff stated:
here we have the unusual case where every preliminary indication is that the defendants, behind a faηade of legitimacy, engaged in repeated acts of fraud and chicanery, and thereby perpetrated and continue to perpetrate a rather massive swindle."
- He found that:
"At least $1billion of the $2.7billion loaned to Telsim by plaintiffs is unaccounted for, with some of it admittedly used for purposes other than those specified in the loan documents
and much of it seemingly diverted by defendants to the benefit of Uzan Association Enterprise."
- He further stated that:
"The plaintiffs have clearly demonstrated that they are substantially likely to succeed on the merits of their claims, and have further demonstrated that very serious damage is likely to result if the requested relief is not granted."
- He stated generally, in relation to each of the main heads of complaint under RICO that:
"At the hearing on the instant motion the plaintiff established, virtually without contradiction, that this Uzan controlled business empire [functions as an] ongoing enterprise with its own structures and hierarchy antedating and independent of the racketeering activities here alleged.
Each Sunday night, key members of the Uzan family would sit down to a dinner meeting at which the key business decisions were made with respect to the entire enterprise, with individual members of the family, including the individual defendants here, then delegated to carry out the decisions
At the same time, even those individual members of the family who functioned as chief executive officers of particular business entities within the enterprise could not make major decisions without checking, not with their respective boards of directors (although those were also Uzan-controlled), but with the family hierarchy.
Each of the defendants here is associated with the enterprise, and in the case of the individual defendants played a dominant role; but the enterprise itself was considerably greater than, and distinct from, any or all of the defendants. By virtue of their respective roles, however, the defendants were in a position to conduct the affairs of the enterprise, as the evidence here showed, that conduct sometimes consisted of racketeering activities."
- The relief granted by Judge Rakoff included a direction to the defendants in the US action to deposit into the registry of the New York court, by no later than 24 May 2002, the shares of Telsim held by Standart Telekom issued to it during the meeting of Telsim shareholders on 24 April 2001 and a prohibition upon the defendants from taking any step directly or indirectly to affect in any way the value, status or availability to the New York court of the Telsim shares.
- As found by Judge Rakoff in a later opinion dated 22 August 2002, on 10 May 2002 D3, in defiance of the order of 9 May and in contravention of his prior promise to the US court that he would hold the Telsim shareholder resolutions in suspense, applied to the Turkish authorities for registration of the resolutions so as to give them legal effect, which registration was accomplished on 19 July 2002. Judge Rakoff found that D1, D2 and D4 were all in a position to prevent registration of the resolutions and were also in contempt for failing to do so.
- Further, as Judge Rakoff found, the defendants concealed from the New York court that on 19, 29 and 30 April 2002 three distributors of Telsim products, by separate law suits in three different Turkish courts, applied for and obtained ex parte injunctions to prevent the transfer of Telsim shares out of Turkey. The defendants thereafter failed to comply with the order of 9 May 2002 requiring them to deposit the Telsim shares as collateral by 24 May 2002 on the grounds that they were prevented from doing so by those injunctions. The judge found that (until 28 May when the defendants gave notice of the injunction) the defendants had purposely kept the injunctions secret from the court, expressly instructing their counsel not to reveal them and he held the defendants in contempt in that respect also.
- On 30 May 2002, Moore-Bick J, having granted permission for the joinder of D2-D4 in the English proceedings, granted freezing injunctions against each of D1-D4 in respect of their worldwide assets up to US$200 million ("the worldwide injunctions"). His injunctions contained the usual ancillary provisions requiring the defendants to provide information about their assets.
- At that hearing, Moore-Bick J, prior to making his order, expressed concern that, in relation to D2 and D3, there was no evidence to suggest that they had assets within, or any connection with, this jurisdiction; and that, unlike the precedent afforded by Republic of Haiti v Duvalier  1 QB 202, there was no person present within the jurisdiction against whom the order for disclosure sought could be enforced. He nonetheless was persuaded to make his order in respect of all defendants.
- On 13 June 2002, Steel J refused an application by D1 to stay the order requiring him to provide information about his assets until an application to discharge the worldwide injunction against him had been heard. Directions were given for the hearing of his application to discharge the worldwide injunction on 17 July 2002. On 17 June 2002 a similar application by D4 was dismissed by Toulson J. Appeals by D1 and D4 against those orders were dismissed by the Court of Appeal (Lord Woolf CJ, Waller and Sedley LJJ) on 26 June 2002.
- On 14 June D4, and on 21 June D2 and D3, applied to have the worldwide orders made against them set aside.
- On 1 July 2002 D1, and on 4 July 2002 D4, supplied witness statements which purported to give details of their assets. Affidavits as to their assets were provided on 29 July 2002.
- On 8 July 2002 D2 and D3 supplied witness statements in which they stated that they had no association with England, visiting it only occasionally and owning no assets here, asserting that they were Turkish citizens. They said they accepted the jurisdiction of the Turkish courts but did not accept that the English courts had jurisdiction over them. They made no disclosure of their assets worldwide as ordered.
- On 22 July 2002, Steel J dismissed the applications of all defendants to discharge the domestic and worldwide freezing injunctions.
- On 12 August 2002 Steel J ordered that D1 and D4 submit themselves to cross-examination on their assets and on 11 September 2002 Andrew Smith J ordered that they attend court to be cross-examined on 19 and 20 November 2002 respectively.
- In the course of his judgment on 12 August 2002, Steel J stated that there was a wealth of material which viewed in isolation and in the round suggested that D1 and D4 had failed to make any real attempt to make full and frank disclosure of their asset position, in particular as to the extent of their share holdings and the state of their bank accounts. D4 maintained the surprising position that she had no bank account in any jurisdiction.
- On 14 August 2002, D2 and D3 supplied affidavits as to their assets. The relevant order had provided that each should disclose his assets worldwide exceeding £10,000 in value, whether solely or jointly and whether held in his own name or not, giving the value, location and details of such assets. The affidavits supplied failed to comply with those requirements. D2 referred to his business interests and shareholdings in Turkey and disclosed real estate interests in New York, but on the grounds that he was a wealthy businessman with a wide range of commercial enterprises and possessed of assets which it would take three or four people many months to list accurately, he limited disclosure of his business and other assets to a shareholding of 14.2% in a Turkish company called Cukurova Electrik said to be valued at "well above £200,000,000", which was the maximum threshold imposed by the freezing order against him. D3 for his part disclosed a list of his shareholdings in various companies within the family group and property and assets in New York, but disclosed only the par or nominal value (as opposed to the true value) of the shares and otherwise identified no assets of value in excess of £10,000. He also simply stated that he had no 'relevant' bank accounts.
- On 18 October 2002, Steel J ordered that D2 and D3 attend court to be cross-examined on their assets on 20 and 21 January 2003 respectively. In the course of his judgment he criticised the lack of frankness of D2 and D3 as persons who were leading members of a family listed as one of the 'Fortune 500' and reported to be worth more than a billion dollars. On the basis of material shown to him, he also concluded that D3 had lied in respect of the state of his New York bank account at the Chase bank and had failed to identify all the Turkish companies in which he had an interest.
- D1 and D4 did not appear for cross-examination on 19 and 20 November.
- On 27 November 2002 the defendants, Telsim and others successfully applied to the Turkish court for an injunction purporting to stay the US action and all other ancillary proceedings including the English proceedings.
- On 28 and 29 November 2002, Gross J heard applications for contempt of court in respect of the non-appearance of D1 and D4 in the course of which he was informed of the 27 November order of the Turkish court. He found contempt proved but deferred consideration of the appropriate penalty to 20 December 2002, meanwhile making a further order that D1 and D4 attend for cross-examination on 16 and 17 December or, failing that, to attend in Turkey on those days to be cross-examined by video link. The latter provision was included in response to a specific assurance that D1 and D4 were willing to give evidence by that method.
- Again those orders were disobeyed and, on 20 December 2002, Gross J held D1 and D4 to be in further contempt of court for failure to comply with his order of 29 November and ordered that they be committed to prison for contempt for respectively 15 and 6 months.
- D2 and D3 also failed to appear for cross-examination on 20 January 2003 pursuant to the order of Steel J on 18 October 2002 and, on 20 January 2003 Cooke J refused their application for a stay of the order requiring them to attend pending the hearing of their appeal to this court. He gave directions for the hearing of the claimant's application to commit them for contempt in respect of their non-appearance.
- On 31 January 2003 Gross J held D2 and D3 to be in contempt of court for failure to attend for cross-examination and ordered that they each be committed to prison for 15 months.
- All the defendants are currently believed to be in Turkey.
- In parallel to the English proceedings, and following the 27 November order of the Turkish court, the following further proceedings took place prior to the hearing before this court.
- On 6 December 2002 the claimant applied to the Turkish court to have the judge who granted the 27 November order removed on grounds of bias and on 10 December 2002 filed a motion before Judge Rakoff requiring the defendants to withdraw or stay the action before the Turkish court and cause the 27 November Turkish order to be dissolved.
- On 27 December 2002 the claimant filed its response in the Turkish court, seeking to discharge the 27 November order. However the judge who granted the order decided to withdraw from the matter pending the resolution of the claimant's application to have him removed, transferring the application to another court.
- On 6 January 2003 Judge Rakoff ruled on the claimant's motion of 10 December 2002 and ordered the defendants to take all necessary steps to withdraw and cause to be dissolved the 27 November Turkish order. He further enjoined the defendants from initiating similar proceedings.
- On 17 January 2003, a second Turkish anti-suit injunction was obtained by 36 Telsim employees against the claimant and the defendants to stay proceedings in New York, England and other jurisdictions in which Motorola had started court proceedings against the defendants (Germany, France, Bermuda and the Channel Islands), the claimant and the defendants being prohibited from taking part in all such court proceedings. On the same date, the claimant's application to have the judge who made the 27 November Turkish order removed was dismissed and fines imposed on the claimant for requesting such removal.
- On 31 January 2003, at a hearing before Judge Rakoff, the defendants made clear that they did not intend to appear at the substantive trial before the New York court either in person or through counsel and the judge decided to hold a bench trial without the jury, giving directions for receipt of written and live evidence from the claimant and Nokia.
- The bench trial has since taken place and judgment has been reserved.
- Since reserving our judgment, we have been informed that on 7 March 2003 the US Court of Appeals allowed an appeal from Judge Rakoff's decision granting the preliminary injunction in May 2002, but only in so far as his decision related to claims under RICO, on grounds that the RICO claims were "unripe" (i.e. premature). The RICO claims were dismissed "without prejudice to reinstatement once the ripeness difficulty is resolved" and the Court stated that "This dismissal in no way alters the effect or scope of the preliminary injunction which remains in place."
- The following appeals and applications for permission to appeal are now before us.
i) Appeals by the D1-D3 (2002/1648) and by D4 (2002/1647) against the refusal of Steel J on 22 July 2002 to discharge the worldwide freezing orders granted by Moore-Bick J on 30 May 2002 pursuant to permission to appeal given by Rix LJ on 22 December 2002 ("the worldwide appeals").
ii) An appeal (2002/2346) by D2 and D3 against the order of Steel J dated 18 October 2002 that they attend court to be cross-examined pursuant to permission given by Rix LJ on 22 December 2002.
iii) An application for permission to appeal (2002/1824) by D1 and D4 against the order of Steel J that they attend to be cross-examined, those applications having been adjourned by this court on 27 January 2003 to be heard by this court.
iv) An application by D1 and D4 for permission to appeal (2003/0077) against the order of Gross J dated 29 November 2002 refusing to vary or set aside the orders of Steel J requiring them to attend for cross-examination.
v) An appeal (2003/0076) by D1 and D4 against their committal for contempt of court, for which permission to appeal is not required: see s.13(1) and (2) of the Administration of Justice Act 1960 ("the 1960 Act").
vi) An appeal (2003/0307) by D2 and D3 against their committal for contempt of court.
- In addition, a preliminary issue arises as to whether this court should hear any of the defendants' appeals in circumstances where they are all in contempt of court and have made it clear that they will continue to flout the orders of the court whatever the outcome of their appeals. It is both logical and constructive to turn to this issue first.
Should the defendants' appeals/applications be heard?
- Mr Leggatt QC for the claimant has submitted that it is clear from the conduct of the defendants in these proceedings that, while they wish to enjoy the benefit of appealing to this court against the orders of which they have been held in contempt, they have no intention of obeying those orders if they lose their appeal. Regrettably, that appears to be the case. The defendants have stated in evidence that they will obey the orders of the Turkish courts which they have obtained and/or in which they have colluded in preference to the orders of the English court and have made clear that they consider (on the advice of Turkish lawyers) that the Turkish orders of 27 November 2002 and 17 January 2003 prevent them from submitting to cross-examination in these proceedings. It was also made clear on behalf of D2 and D3 at the hearing before Cooke J on 20 January 2003 that they were not willing to comply with the orders for their attendance and/or cross-examination as they did not consider it appropriate that they should be compelled by the English court to submit to cross-examination, they being citizens and residents of Turkey and having no assets within, nor any connection with, this jurisdiction.
- On 27 January 2003, upon the application of D1 and D4 to this court (Rix and Scott-Baker LJJ) for oral reconsideration of Rix LJ's earlier refusal to grant permission to appeal against the order for their cross-examination, the claimant submitted that, in view of their contempt of court, the defendants should not be heard on any of the impending appeals or applications. In the light of the arguments raised, there was insufficient time for the court to deal with that submission. However, in adjourning the application to be heard together with the matters in respect of which permission to appeal had already been granted, Rix LJ indicated (a) that, but for the contempt point he would as single judge have granted permission to appeal (having already done so in respect of D2 and D3) and (b) that, if the attitude of D1-D4 was that, whatever the outcome of their appeals, they would flout the orders of the English court, it might be a serious impediment to their being heard. He told counsel to obtain instructions as to what the attitude of the defendants was for the purposes of the instant hearing. It has been made clear to us on this appeal that none of the defendants intends to comply with the orders of this court, the gravamen of their case being and remaining that the original worldwide freezing orders should not have been made and that Steel J was in error in refusing to discharge them.
- The law and the nature of the court's discretion in this respect have not been in issue before us. The starting point is that to refuse to hear a party, even a contemnor, is
a strong thing
only to be justified by grave considerations of public policy. It is a step which a court will only take when the contempt itself impedes the course of justice and there is no other effective means of securing his compliance."
see per Denning LJ in Hadkinson v Hadkinson  p.285 at 298 as approved by Lord Bridge of Harwich in X Ltd v Morgan Grampian  AC 1 at 46, Lord Bridge adding by way of clarification that:
"Certainly in a case where a contemnor not only fails wilfully and contumaciously to comply with an order of the court but makes it clear that he will continue to defy the court's authority if the order should be affirmed on appeal, the court must, in my opinion, have a discretion to decline to entertain his appeal against the order."
- In Arab Monetary Fund v Hashim and others (CA) 21 March 1994, Lord Bingham CJ, having referred to the position as stated in the Morgan Grampian case by Lord Bridge and, in particular, by Lord Oliver at 50G, observed:
"From those speeches it is, I think, clear that it is wrong to take as a starting point the proposition that the court will not hear a party in contempt but then to ask if the instant case falls within an exception to that general rule. It is preferable to ask whether, in the circumstances of an individual case, the interests of justice are best served by hearing a party in contempt or by refusing to do so, always bearing in mind the paramount importance which the court must attach to the prompt and unquestioning observance of court orders."
- The "general rule/exception" approach which Lord Bingham had in mind was that articulated by Brandon LJ in The "Messiniaki Tolmi"  2 Lloyds Rep 595 at 60 namely:
that, while the general rule is that a Court will not hear an application for his own benefit by a person in contempt unless and until he has first purged his contempt, there is an established exception to that general rule where the purpose of the application is to appeal against, or have set aside, on whatever ground or grounds, the very order disobedience of which has put the person concerned in contempt."
- Although more modern authority has made clear that the discretion of the court is free from the constraints of such a categorised approach, the proposition that the court will hear a person in contempt when the purpose of his application is to appeal against the order disobedience to which has put him in contempt, has the merit not only of good sense; it seems to us necessary to satisfy considerations of fairness. Whether or not a party is in contempt of court by refusing to obey an order irregularly made, or one consequent upon and/or ancillary to an order so made, the circumstances will be rare indeed where it can be right to shut him out from arguing an appeal or application to appeal against that order made in due time.
- In appealing the findings of contempt, and in applying for relief from the penalties imposed for such contempts (neither of which requires permission to appeal), the defendants cannot be prevented from putting forward all relevant circumstances, arguments and considerations which have governed or are relevant to their contempt. In this case, where the burden of the argument is that the orders in respect of which the defendants are in contempt were made consequent upon an earlier order irregularly made, it seems to us neither logical nor appropriate to shut out argument directed to reversal of the original order; c.f. the approach of the court in Atlantic Capital Corporation v Burney (CA) 15 September 1994, unreported, a case in which the person in contempt had failed to comply with a series of asset-tracing orders which "depended critically" upon the rightfulness of a default judgment earlier obtained against him.
- In the Morgan Grampian case Lord Oliver observed at 50h-51b:
"One can, of course, envisage, as he [Denning LJ] did in that case [Hadkinson v Hadkinson], circumstances in which the court would be unlikely to exercise its discretion in favour of hearing a contemnor he instanced the case of an abuse of the process or of disobedience to the order impeding the course of justice but I would not be in favour of laying down rules for the exercise of discretion, though it can do no harm to give examples which may serve as guidelines. For instance, where the appeal is grounded on an alleged lack of jurisdiction to make the order at all, it seemed, in general, right that the contemnor should be heard."
- We respectfully agree. Although this is not a case where it can be argued that the freezing orders made were made without jurisdiction (see further below), they were orders which, as stated by Rix LJ in granting permission to appeal, lay "at the creative edge of a divide between comity and exorbitancy".
- In our view, the arguments in this case as to comity, exorbitancy and expediency raised in relation to relief granted under s.25 of the CJJA are arguments the resolution of which are likely to have effects wider than the case itself and, if and in so far as the court considers that the defendants are right in their arguments, it would be wrong that the freezing orders should stand.
- In addition to that general consideration, and whilst wholly deprecating the defiant attitude of the defendants which has, as appears from the evidence before us, been part and parcel of a series of tactical delays and regrettable lack of frankness in two jurisdictions, we bear in mind that the defendants' appeals are essentially defensive in nature. Their stance in this jurisdiction has been one of resistance to a series of restrictive and intrusive orders sought by the claimant in foreign proceedings, rather than a voluntary invocation of the powers of the English court for their own benefit. This seems to us to bear on the proportionality of precluding them, as parties in contempt, from what would otherwise be their right of appeal against the freezing orders to which the orders for cross-examination were ancillary. In all the circumstances, we take the view that the defendants should be heard upon, and their arguments treated as addressed to, all of their appeals and applications now before us.
- We would add that, in this connection, we do not find it necessary to resolve the arguments raised by the defendants upon this aspect of the case that to refuse to hear the defendants upon their appeals against the making of a freezing order would involve breach of their rights under Article 6 of the European Convention of Human Rights. In that respect reliance has been placed upon the judgment of Laddie J in Re: Swaptronics Ltd, 24 July 1998 unreported, in which he stated at paragraph 20 of his judgment:
"The courts need powers of punishment with which to enforce their orders. The ones they have at present are adequate. They do not need a power which deprives the litigant of his right to litigate. Indeed it seems to me that were the courts to refuse to allow those in contempt access to the courts simply on the grounds that they are in contempt, they could well be acting in breach of the provisions of Article 6.1 of the European Convention on Human Rights which entitles everyone to the determination of his civil rights by means of a fair and public hearing before an independent and impartial tribunal. The "everyone" in that Article is not subject to an exception in respect of people who are guilty of serious offences or contempt of court."
- We have also had cited to us a number of decisions of the European Court of Human Rights in different contexts which go to support the proposition that to refuse a contemnor the right to be heard in court simply upon the ground that he is in contempt would be a breach of Article 6: see for instance Poitrimol v France (1993) 18 EHRR 130 at paras 35-39 and Krombach v France (ECtHR, unpublished, no.29731/96 at paras 87-91, 96-100).
- On that aspect, we content ourselves with the following observations. First, it is not clear to what extent the proposition was the subject of argument before Laddie J or to what European authority he was referred. Second, it is clear to us that the defendants should not be denied the right to be heard in respect of their alleged contempt and to address the issue as to jurisdiction in that context. Third, as Mr Leggatt has pointed out, the claimant does not in any event contend that the court should decline to hear the defendants' appeals simply on the grounds that they are in contempt, but rather that they are abusing the process of the court by seeking to prosecute their appeal against the first order of Steel J, at the same time making it clear that they have no intention of complying with the orders of the court whatever the outcome of their appeals. It is clear that the right of access to the court which is implied in Article 6 is not an absolute right but one that is open to restriction provided that the restriction has a legitimate aim in the public interest and the means employed to realise that aim are proportionate: see Brown v Stott  2 WLR 817 per Lord Bingham at 836B-D and Lord Hope at 851H- 852A. The test of proportionality is to be applied on a case by case basis: per Lord Bingham at 836C. As it seems to us, this is reflected in the approach of the House of Lords in the Morgan Grampian case, the width of the discretion there recognised being apt to allow issues of proportionality to be properly considered and applied by the court in coming to its decision whether or not to hear a contemnor.
The Worldwide Freezing Orders
- The applications before Steel J fell into three categories:
i) an application by D1 to discharge the domestic injunction granted against him by Cresswell J, on the grounds that risk of dissipation had not been demonstrated.
ii) an application by D1-D3 to discharge the worldwide injunctions granted against them by Moore-Bick J, on the grounds that it was inexpedient for the court to exercise its jurisdiction under s.25 of the CJJA.
iii) an application by D4 to discharge the worldwide injunction against her, principally upon the ground that the claimant had failed to show a good arguable case against her.
- The application under (i) was unsuccessful and is not the subject of appeal. However permission to appeal was granted by Rix LJ in respect of (ii) and (iii).
The Law as to Jurisdiction
- The statutory provisions governing the exercise of the court's jurisdiction are s.37(1) of the Supreme Court Act 1981 which empowers the court to "grant an injunction
in all cases in which it appears to be just and convenient to do so", and s.25 of the CJJA, which was originally applicable only in cases when substantive proceedings were pending in a Brussels or Lugano contracting state and the subject matter of the proceedings was within the scope of the Brussels or Lugano conventions. However s.25 was extended by S.I. 1997 No. 302 (which came into force on 1 April 1997) to non-convention countries and to proceedings outside the scope of the conventions. S.25 now empowers the court to grant all forms of interim relief in aid of foreign courts, unless "in the opinion of the court, the fact that the court has no jurisdiction apart from this section in relation to the subject matter of the proceedings in question makes it inexpedient for the court to grant it". CPR 6.20 permits a claim to be served out of the jurisdiction with the permission of the court "if
(4) a claim is made for an interim remedy under s.25(1) of the 1982 Act".
- On the face of these statutory provisions, no criterion or guide line is provided as to the test to be applied by the court in considering whether it is inexpedient to grant an order. In this connection
"It is the ancillary or subordinate nature of the jurisdiction rather than its source which is material, and the test is one of expediency. The structure of sub-sections (1) and (2) and the way in which their scope has been progressively widened indicate
an intention on the part of Parliament that the English courts should in principle be willing to grant appropriate interim relief in support of substantive proceedings taking place elsewhere, and that it should not be deterred from doing so by the fact that its role is only an ancillary one unless the circumstances of the particular case make the grant of such relief inexpedient.": per Millett LJ in Credit Suisse Trust v Cuoghi  QB 818 at 826 A-C.
- There are three reported cases in the Court of Appeal in which the exercise of the English court's powers under s.25 has been considered in detail, namely Republic of Haiti v Duvalier  1 QB 202, the case of Cuoghi last referred to, and Refco Inc v Eastern Trading Co  1 Lloyds Rep 159.
- The underlying facts in the case of Duvalier are notorious. The defendant, the former head of state, fled from Haiti having looted a large part of that country's assets while in power. Proceedings were pending in France in which there was no jurisdiction to grant a worldwide freezing order or, more importantly, a disclosure order. However, the defendant had used a firm of English solicitors as his agents in a scheme to conceal the assets which he had stolen and the court made an order requiring the firm to give information about what had happened to the funds, granting world wide relief meanwhile under s.25. The following points are worthy of note in the context of this case. First, the decision was a Convention case in respect of which Staughton LJ (in a judgment with which the other members of the court agreed) observed:
"It seems to me that the Convention requires each contracting state to make available, in aid of the court of another contracting state, such provisional and protective measures as its own domestic law would afford if its courts were trying the substantive action. That would be harmonisation of jurisdiction, although not of remedies." (212E)
- On that basis, the argument that an English court should not make a worldwide order freezing order which a French court could not make was rejected. The fact that it was a Convention case is noteworthy because, as Mr Strauss QC, for D1-D3 submits, the position in a case such as the present, in which the substantive court is not a party to either of the Conventions, is different to the extent that the question of what is or is not expedient is not governed or informed by the content of the treaty obligations which s.25 was originally drafted to cover, but by normal considerations of comity and the principles ordinarily going to the Court's discretion to grant injunctions. In this respect, Mr Strauss relies upon dicta of Millett LJ in the Refco case: see further below.
- Second, it is clear that the principal basis of the decision was the fact that England was the only place which had any known connection with the asset concealment scheme and was therefore the place where information was most likely to be obtainable, the court having earlier ordered the solicitors to provide information, an application to set aside which had failed. In this respect, at the beginning of his judgment, Staughton LJ described the asset concealment scheme and the employment of English solicitors as the agents of the defendant in its implementation as the two "striking features" of the evidence (see 206G 208B). Further, having referred to the judgment of the European Court in Denilauler v S.n.c. Couchet Frθres  ECR 1553, 1570 to the effect that it is the courts of the contracting state where the assets subject to the measures sought are located which are the best able to assess whether to grant or refuse the measures sought, in which point he saw "considerable force", Staughton LJ stated:
"But the [Republic], when it launched the English proceedings did not know where the assets were located. One of its objects was to find out. The proceedings were started here because it was here that the information was available."
- Finally, Staughton LJ stated:
"It is beyond question that the injunction granted by Knox J, and upheld by Leggatt J, was a most unusual measure, such as should very rarely be granted. But this case is most unusual. It is not the nature or strength of the republic's cause of action which puts it in that category. What to my mind is determinative is the plain and admitted intention of the defendants to move their assets out of the reach of the courts of law, coupled with the resources they have obtained and the skill they have hitherto shown in doing that, and the vast amount of money involved. This case demands international co-operation between all nations. As the judge said, 'If ever there was a case for the exercise of the court's powers, this must be it'."
- In an article written in Essays on International Litigation and the Conflict of Laws in 1994, referred to by Millett LJ in Cuoghi, Lawrence Collins J (as he now is) commented as follows:
"For an English court to enjoin a person properly subject to its jurisdiction from disposing of assets abroad cannot in this sense be regarded as exorbitant. Perhaps Republic of Haiti v Duvalier goes to the very edge of what is permissible. For the sole connection of England with that case was the presence in England of solicitors with access to the foreign assets. The exercise of jurisdiction can be justified on the basis that the solicitors could be treated as agents of the defendants and the relevant information was located in England."
- The same view of the ratio of Duvalier is expressed in Dicey and Morris: The Conflict of Laws (13th ed, 2000) vol 1 at 192-3 where it is stated that "the relief was effective because the defendants had solicitors in England who held assets for them abroad and
therefore the fact that the court had no jurisdiction apart from section 25
did not make it "inexpedient for the courts to grant" the relief within the meaning of section 25(2)".
- In the case of Cuoghi, the claimant brought proceedings in Switzerland (which is a party to the Lugano Convention) against the defendant who was domiciled in England, alleging that he had conspired with one of the claimant's employees, Mr Voellmin, to misappropriate some US$ 21 million. It was conceded that there was a good arguable case against Mr Cuoghi, which would have justified worldwide Mareva relief if the action had been brought in England. Mr Cuoghi relied on earlier decisions in support of his argument that Mareva relief should be confined to his assets in England and Wales, which arguments were rejected by the Court of Appeal which stated the law in terms encapsulated in the passage of the judgment of Millett LJ already quoted at paragraph 62 above. While the Swiss court had power to grant worldwide relief against a person resident in Switzerland, it lacked the power to do so in respect of Mr Cuoghi as a person domiciled in England. The court held that there was no reason in such a case why an English court should not restrain a person properly before it from disposing of assets abroad and that an assertion of the jurisdiction of the English court in personam against Mr Cuoghi did not involve unacceptable intrusion into the sovereignty of another country.
- Millett LJ stated:
"It is a strong thing to restrain a defendant who is not resident within the jurisdiction from disposing of assets outside the jurisdiction. But where the defendant is domiciled within the jurisdiction such an order cannot be regarded as exorbitant or as going beyond what is internationally acceptable. To treat it as such merely because the substantive proceedings are pending in another country would be contrary to the policy which informs both Article 24 and section 25.
Where a defendant and his assets are located outside the jurisdiction of the court seized of the substantive proceedings, it is in my opinion most appropriate that protective measures should be granted by those courts best able to make their orders effective. In relation to orders taking direct effect against the assets, this means the courts of the state where the assets are located; and in relation to orders in personam, including orders for disclosure, this means the courts of the state where the person enjoined resides."
- He continued, in a passage which we quote in full because reliance was placed upon it by the judge, as follows:
"I recognise that an ancillary jurisdiction ought to be exercised with caution, and that care should be taken not to make orders which conflict with those of the court seized with substantive proceedings. But I do not accept that interim relief should be limited to that which would be available in the court trying the substantive dispute; or that by going further we would be seeking to remedy defects in the laws of other countries. The principle which underlies Article 24 is that each contracting state should be willing to assist the courts of another contracting state by providing such interim relief as would be available if its own courts were seized of the substantive proceedings; see Alltrans Inc v Interdom Holdings Ltd  4 All ER 458, 468 per Leggatt LJ. By going further than the Swiss courts were prepared to go in relation to a defendant resident outside Switzerland, we would not be seeking to remedy any perceived deficiency in Swiss law, but rather to supplement the jurisdiction of the Swiss courts in accordance with Article 24 and principles which are internationally accepted.
In other areas of law such as cross-border insolvency, commercial necessity has encouraged national courts to provide assistance to each other without waiting for such co-operation to be sanctioned by international convention. International fraud requires a similar response. It is becoming widely accepted that comity between the courts of different countries requires mutual respect for the territorial integrity of each other's jurisdiction, but that this should not inhibit a court in one jurisdiction from rendering whatever assistance it properly can to a court in another in respect of assets located or persons resident within the territory of the former."
- Nonetheless Millett LJ emphasised two considerations as highly material to be considered on the question of expediency and 'proper' assistance, namely the place where the person sought to be enjoined is resident or domiciled and the likely reaction of the court seized of the substantive dispute. In those respects he held that it could not be said to be inexpedient to grant worldwide relief against Mr Cuoghi because he was resident in England, carried on business here and was alleged to have committed acts in England which were part of the fraud. Further, there was no danger of conflicting jurisdictions and there was no reason to believe that the Swiss court would not welcome assistance from the courts of England as the country where he was resident (829D-G). Millett LJ added however that it would be "a very different matter" if the court were being asked to make a worldwide order against Mr Voellmin. Again, in the light of a passage in the judgment of Steel J, it is to be noted that this observation was made despite the fact that Mr Voellmin was alleged to have conspired with the defendant (resident here) to misappropriate large sums from the claimants.
- Lord Bingham CJ, who agreed with Millett LJ, added (at 832C-E) that, although the order was one the Swiss court could not have made:
"It did not conflict with any order the Swiss court had made. It was made on terms which obviated any risk of conflict with any order made by any other court. It was made in personam against a defendant domiciled and resident here, and amenable to the enforcement of the order. It did not seek to assert jurisdiction over any person or any asset outside the territorial jurisdiction of the court. It gave rise to no jurisdictional disharmony or confusion. It promoted an object which might reasonably be assumed to find favour with the Swiss court by seeking to preserve funds which, if C.F.S.T.'s claim is well founded, Mr Cuoghi had dishonestly misappropriated and which would be needed to satisfy the judgment of the Swiss court."
- He also added in respect of the decision in Rosseel N.V. v Oriental Commercial Shipping Company (UK) Ltd  1 WLR 1387 that, although the application in that case was not made under s.25 and to that extent the case was not strictly in point,
in so far as the court discouraged the grant of ancillary relief where such grant would obstruct or hamper the management of the case by the primary court or give rise to a risk of conflicting, inconsistent or overlapping orders in other courts, I have no doubt that it was right to do so."
- In the Refco case, this court was concerned with an application for Mareva relief granted under s.25 where proceedings were pending in the US Federal Court of Illinois against Lebanese defendants in an action arising out of futures and foreign exchange transactions. The order sought was in respect of assets in England. On the defendants' application to discharge the order, Rix J held that, in the particular circumstances of the case including the risk of asset dissipation, the merits of the application for interim relief should be considered by the US court and granted a holding injunction pending an application for that purpose. Thereafter the plaintiffs were advised that an application to prevent dissipation of assets made in the US would be bound to fail and accordingly the plaintiffs did not proceed with it, and sought declaratory relief instead. Rix J held that the forensic activity in Illinois should be regarded as if it were an application made and lost on the merits and discharged the injunction. The Court of Appeal upheld his decision on the ground that there was insufficient evidence of a real risk of dissipation of assets and that by the time the matter was before them the plaintiffs had effective security over substantial assets.
- The court formulated the two-stage approach which it said should be adopted on an application for interim relief under s.25 namely: (a) whether the facts would warrant the relief sought if the substantive proceedings were brought in England; (b) if yes, whether in the terms of s.25(2) the fact that the court has no jurisdiction apart from that section makes it inexpedient to grant the interim relief sought. As the remedy would not have been granted had the substantive proceedings been brought in England, the second question did not arise for decision. However, the court proceeded obiter to consider the question of expediency in relation to the willingness/ability of the Illinois court to grant Mareva-type relief. In adopting and expanding on the observations of the court in Cuoghi, Morritt LJ expressed the view that, in the light of the observations of the US judge when refusing declaratory relief that "she deferred to the courts of England as to the preservation of assets of the defendants in England", if he had thought that Mareva relief would have been justified if the substantive proceedings had been brought in England, he would not have thought it inexpedient to grant the relief sought.
- Agreeing with Morritt LJ, Potter LJ stated:
"I accept entirely that, as stated by the Lord Chief Justice in Cuoghi, at p.882 D, it would obviously weigh heavily and probably conclusively against the grant of interim relief if such grant would obstruct or hamper the management of the case by the primary court or give rise to a risk of conflicting, inconsistent or overlapping orders in other courts. However, in this case there is the unusual circumstance that Her Honour Judge Conlon in proceedings before her in Illinois clearly demonstrated lack of any concern that the exercise of the English courts' powers to grant interim relief would impinge in any way upon the Illinois proceedings. In such a case, that is to say one where there is positive reason for the English court to proceed on the basis that the primary Court is well content that the application for ancillary relief should proceed in England and be determined by the English Court according to English principles, it does not seem to me that the consideration highlighted by the Lord Chief Justice need inhibit the English Court from granting relief if satisfied that it is otherwise appropriate and expedient to make an order."
- Millett LJ, however, stated that he would have upheld the judge's decision that it was inexpedient to exercise the jurisdiction conferred by s.25. He stated that in Cuoghi
"The English Court was not asked to exercise a long-arm jurisdiction but to grant relief against a defendant resident in England. Moreover, it was asked to grant relief which the court seized of the main proceedings had no jurisdiction to grant against non-residents but would have granted if the defendant had been resident within its jurisdiction. In the present case this court is asked to grant relief which the court seized of the substantive proceedings would have refused to grant even if the defendants were resident within its jurisdiction and had assets located there. To my mind this latter feature is a very significant factor
On any application under s.25 this court must recognise that its role is subordinate to and must be supportive of that of the primary Court. For my part, I cannot see any significance in the distinction between a case where application has been made to the primary Court and has been refused and a case where this Court is satisfied that application to the primary Court would be pointless because it would inevitably be refused. That was not in my opinion the distinction intended to be drawn in Cuoghi. It is the ground on which the application, whether actual or contemplated, would be refused which is relevant.
The jurisdiction of national courts is primarily territorial, being ordinarily dependent on the presence of persons or assets within their jurisdiction. Commercial necessity resulting from the increasing globalisation of trade has encouraged the adoption of measures to enable national Courts to provide assistance to one another, thereby overcoming difficulties occasioned by the territorial limits of their respective jurisdictions. But judicial comity requires restraint, based on mutual respect not only for the integrity of one another's process, but also for one another's procedural and substantive laws. The test is an objective one. It does not depend upon the personal attitude of the Judge of the foreign Court or on whether the individual Judge would find our assistance objectionable. Comity involves respect for the foreign courts' jurisdiction and process, not respect for the foreign Judges' feelings. A court which is invited to exercise its ancillary jurisdiction to provide assistance to the court seized of the substantive proceedings need feel no reluctance in supplying a want of territorial jurisdiction but for which the other court would have acted. But it should be very slow to grant relief which the primary Court would not have granted even against persons present within its own jurisdiction and having assets there. Assisting a foreign Court by supplying a want of territorial jurisdiction is plainly within the policy of the Act; assisting plaintiffs by offering them a lower standard of proof is not obviously within the legislative policy. I recognise, however, that the dividing line may sometimes be hard to draw, and that the distinction is not by any means necessarily decisive. I do not wish to be understood to be circumscribing a valuable jurisdiction, but rather to be indicating matters relevant to be taken into account when the court is invited to exercise it."
- It is worthy of note in relation to the question of comity, as explored in Refco, that a year after that decision, in Grupo Mexicano de Desarrollo S.A. v Alliance Bond Fund Inc 527 US 308 (1999) the US Supreme Court decided that the general equitable powers of the Federal Court did not include the right to grant pre-judgment Mareva-type relief, as granted and developed in the United Kingdom since 1975. However, under the rules governing federal courts, FRCP 64 permits a federal court to attach or seize specific property prior to judgment where such actions are permitted under the law of the state where the federal court sits. New York state law does permit temporary restraining orders of a kind approximately equivalent to freezing orders in this country in respect of assets within the jurisdiction of the New York court, but not in respect of assets outside its jurisdiction.
The decision of Mr Justice Steel
- The judge dealt first with the application of D4. Since she was a resident in England and had assets here, her case did not raise issues as to territorial connection or jurisdiction. However, it was argued on her behalf that no good arguable case was established against her, nor had the claimant established risk of dissipation, because there was no material available to Judge Rakoff which justified his treating her as a knowing participant in the defendants' alleged fraud or that she had diluted the claimant's collateral security with knowledge of the claimant's rights.
- The judge approached that submission in the light of the remarks of Lord Bingham of Cornhill in Johnson v Gore Wood & Co (a firm)  2AC 1 at 31A-F concerning the nature of Henderson v Henderson abuse of process in cases where a party seeks to raise an issue in later proceedings which should properly have been raised and dealt with in earlier proceedings. He observed that the issue of whether or not the claimant had a good arguable case for injunctive relief had already been decided by Judge Rakoff at a hearing occupying six days in which D4 was represented and relied on the evidence of witnesses called on the defendants' behalf, and that her case that she was not properly impleaded and was as a matter of fact simply a housewife who was the unwitting tool of her brothers had not been argued in the New York proceedings. That being so he considered that for the English court to reconsider the evidence before the New York court without seeing the witnesses or hearing the argument for the purposes of coming to a different conclusion, would bring the administration of justice into disrepute and/or be inconsistent with principles of comity. Nonetheless, having reviewed the evidence available to Judge Rakoff and observed that D4 had not herself given any evidence in New York or any statement to the English court explaining or exculpating her from her apparent participation in the particular matters relied on by the claimant, the judge stated that in his own view there was ample evidence to justify Judge Rakoff's finding of D4's material participation in the fraudulent activities of her father and two brothers. While finding that the decision of Judge Rakoff was not challengeable by the defendant in the proceedings before him, Steel J stated that "even if it was [it] is fully made out for the purposes of the freezing order".
- The judge went on to find that, in common with the other defendants, the risk of dissipation of D4's assets had been made out.
- No appeal is pursued by any of the defendants in respect of the risk of dissipation.
- The judge then turned to consider the question whether or not it was inexpedient for the court to grant relief under s.25 in respect of D1-D3, approaching the matter on the basis of the two-stage test indicated as appropriate by Morritt LJ in the Refco case.
- At this stage, it is to be noted that the state of the evidence before him as to the connection of D1-D3 within this jurisdiction was as follows. All were Turkish residents and only D1 had assets situated in England. They were principally a valuable London property, Halkin Gate House, originally bought because D1 intended to develop business interests in London under a scheme which fell through, which property had been on the market for over a year. The plaintiff had continued to visit the United Kingdom intermittently for leisure purposes, usually staying in hotels because the property was for sale. The house had a value of some £6 million, together with contents left in it to create the effect of a home in order to assist obtaining a buyer. He also had a Rolls Royce car and shares in a service company in the United Kingdom, but otherwise his substantial assets were in other jurisdictions, in particular Turkey and America. D2 spent most of his time in Turkey making occasional visits to the United Kingdom (some 12 times in two years) for social reasons and he had no assets here of any kind. D3 rarely visited, and had no assets in, the United Kingdom.
- Three principal points were advanced before Steel J and have been repeated before this court as to why it was inexpedient for the court to make a worldwide freezing order in respect of D1-D3. The first point raised was that since, as was not in dispute, there was no power to grant worldwide relief in the substantive court, namely New York, it was not expedient to do so in the English court exercising ancillary jurisdiction. The judge rejected that submission on the grounds that it had been expressly rejected by this court in Cuoghi.
- Second, it was submitted that, because each of D1-D3 was resident in Turkey and their assets principally lay within that jurisdiction, the matter should properly be left to the jurisdiction of the Turkish courts. The judge accepted that if such relief was available in the courts of Turkey that was a relevant though not a determinative factor. However, he regarded it as of modest significance given that criminal proceedings had been instituted by D1 and D3 against the claimant's executives which would inhibit any resort to Turkish jurisdiction by the claimants. He accepted the evidence of the claimant's expert that a worldwide order would in any event not be granted by the courts of Turkey and rejected the suggestion that the fact that such relief was not available in Turkey was an important consideration, observing that such a submission was inconsistent with the decision of Republic of Haiti v Duvalier  1 QB 202.
- The third and principal submission was that in the case of D2 and D3 there was no connection, and in the case of D1 no sufficient connection, with the English jurisdiction to justify the relief sought and that the absence of such a connection rendered it inexpedient to grant the relief on the basis that there was no practicable means of enforcing the orders of the court in the event of their breach by defendants who had already made clear their rejection of the jurisdiction of the court. It was also put on the basis that any other approach would result in the English jurisdiction becoming the juridical police authority in international fraud cases in circumstances where there would be no or no real prospect of enforcing its orders.
- The judge stated that he accepted the proposition that where defendants were not resident in the jurisdiction and/or had no assets here it would be a rare case in which it would not be inexpedient to grant leave. He acknowledged that, in Cuoghi, the court was considering the position of a defendant to foreign proceedings who was resident and domiciled in England, that the observations of Millett LJ were made in that context, and that Millett LJ had stated that it would be "a very different matter" if the court were asked to make a worldwide order against the co-conspirator of Mr Cuoghi. He also referred to the observation of Lord Bingham CJ, in Cuoghi at 832A that:
it may be thought to weigh in favour of granting such relief that a defendant is present in this country and so liable to effective enforcement of an order made in personam, always provided that by granting such relief this court does not tread on the toes of the primary court or any other court involved in the case."
- Nonetheless, the judge stated that despite the rarity of cases in which it would be expedient to grant worldwide relief against defendants who were not resident in the jurisdiction and had no assets here, such cases could arise, citing Haiti v Duvalier and relying on the passage from the judgment of Staughton LJ at 216 which we have quoted at paragraph 67 above. He held that the decision in Duvalier demonstrated that the fact that the relevant defendant was not resident and had no known assets here was not as such determinative; observing that it could be sufficient that within the jurisdiction there was a firm of English solicitors with knowledge of the whereabouts of the defendants' assets, in a context where the defendants were showing a determination to keep their assets out of reach of the claimants.
- He concluded as follows:
"What then are the considerations here? Firstly, one defendant (D4) is resident within the jurisdiction with a substantial property here. The second defendant also has substantial property within the jurisdiction. More importantly, perhaps, all four were involved in fraudulent business together. All were directors. All were shareholders. All were engaged in the family meetings held on Sundays. I accept the submission made by Mr Leggatt that it is artificial to treat them other than as a unit.
Taken together, these establish, in my judgment, significant connecting factors with the jurisdiction and certainly there is no other jurisdiction having significant connecting factors, at least on the information presently available other than the United States and Turkey. Furthermore, as I have already sought to elaborate, these defendants have jointly demonstrated a tenacious determination to keep their assets, including the Telsim shares from Motorola and/or the grasp of the New York courts. In addition, the New York judge has made a very strong finding on the strength of the claimant's case on dishonesty.
Viewed as a whole, it seems to me that the facts of this case are even stronger than Duvalier in crying out for some form of international co-operation. It is not even suggested, either by the defendants or, for what it is worth, the United States court, that the relief that has been sought and obtained in this jurisdiction in some way cuts across the US court. On the face of it, it is clearly and usefully supplementary.
Accordingly, for all those reasons, I dismiss these applications."
The appellants' arguments
- So far as the substance of the judgment below is concerned, it is not disputed by D1-D3 that a good arguable case of fraud is established. The arguments of D1-D3 on these appeals rest principally upon the question of expediency in the light of the absence of any (or in the case of D1 any substantial) connection with England. That argument is not available to D4 in the light of her English residence. The principal argument advanced on her behalf has been that the judge was wrong to hold that a good arguable case had been established against her for the purposes of injunctive relief. We pause to observe that, before this court, two additional points have been taken on behalf of all the defendants which were not taken before the judge to which we will turn separately below. However we propose first to turn to the question of 'good arguable case' so far as D4 is concerned, and then to the question of expediency raised by D1-D3.
Good arguable case against D4
- As already made clear, in stating that it would be an abuse of process for D4 to raise questions as to whether or not there was a good arguable case Steel J adopted the approach laid down in Johnson v Gore-Wood in which, at  2 AC 31, Lord Bingham stated that in relation to the question whether or not a plea raised or an issue challenged amounted to an abuse of process required:
a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not
It is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances."
- The judge gave five reasons for the view which he expressed.
i) The US court was the natural forum for determining the strength of the case against the defendants as the substantive proceedings were taking place in the US and the case against them was based on US law.
ii) The US court had made its findings following an inter partes hearing lasting six days in which each party had had an opportunity to adduce such oral and written evidence as it saw fit.
iii) The proposition advanced by D4 before him that she was not properly impleaded at all in the US action or, in the alternative, that she was as a matter of fact simply a housewife who was the unwitting tool of her brothers, was open but had not been argued in the US court.
iv) If her suggestion were true that some of the evidence adduced by the plaintiffs at the preliminary injunction hearing in New York took her by surprise, it was open to her under US law to file a motion to reconsider; no such motion had been filed.
v) The whole purpose of attempting to relitigate the 'no arguable case' issue in England was to establish and maintain inconsistent decisions between the English court and the US court. This was evident because in the defendants' appeal lodged from Judge Rakoff's decision to the US Second Circuit Court of Appeals, the case which D4 was seeking to make in the English court had not been raised on the appeal.
- It is not in dispute between the parties that the principle of abuse of process is capable of applying where the relevant earlier proceedings have taken place before a foreign court: see House of Spring Gardens v Waite  1 QB 241 at 251 and Owens Bank v Etoile Commerciale  1 WLR 44 at 51. D4 has advanced three reasons why the doctrine of abuse of process was inapplicable in this case. First, it is said that under English common law rules the US court was not a court of competent jurisdiction. Second, it is said that the US court's decision was not a 'final' decision on the merits. Third, it is said that D4 did not have a proper opportunity to dispute the case against her at the preliminary injunction hearing before the US court.
- The first two points taken are based upon the proposition that Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action and issue estoppel, has much in common with them: see Johnson v Gore-Wood at 31A-B and, that being so, by analogy with those types of estoppel, the Henderson v Henderson principle should only be applied where it is clear (i) that the decision or determination relied on was made by a foreign court of competent jurisdiction and (ii) the decision upon the issue later sought to be raised is a final and binding decision on the merits: see The Sennar (No.2)  1 WLR 490 at 499B per Lord Brandon. In relation to (i), the complaint is made that the claimant failed to show, and the judge to consider, whether the New York court was a court of competent jurisdiction. Suffice it to say at this point that such complaint was never raised nor challenge made before the judge in the face of the apparent regularity of the New York proceedings, the history and nature of which were before Steel J and which were expressly or impliedly relied on as the proceedings of a competent court. The argument now made is that, although D4 was not resident or present in New York when the proceedings were served, the claimant produced no evidence to show that she had voluntarily submitted to the jurisdiction of the New York court. That argument is dealt with and rejected at paragraphs 129 to 133 below.
- As to (ii), in the light of the observations of the House of Lords in Johnson v Gore-Wood, we reject any general proposition that the scope and ingredients of the doctrine of abuse of process are trammelled by the technicalities of issue estoppel: see also Hunter v Chief Constable of the West Midlands Police  AC 527 per Lord Diplock at 536 and House of Spring Gardens Ltd v Waite  1 QB 241 at 254E- 255D. However, we doubt that it is in principle appropriate to invoke the doctrine of abuse of process in relation to arguments advanced by a defendant by way of challenge to the matters necessary to be established by the claimant as a pre-condition of Mareva-type relief on an application for discharge of the ex parte order originally granted. In the leading authorities to which we have been referred, considerations governing abuse of process, while not expressly so limited, have been articulated in situations where the prior proceedings have involved a final disposition of the litigation or issue arising between the parties. Indeed the doctrine (which precludes a defendant from raising an issue which might have been but was not raised, and therefore adjudicated upon) in earlier proceedings is, like issue estoppel strictly so called, principally based upon the consideration that there ought to be finality to litigation and on the idea that a party who has litigated a matter to a conclusion ought not to be oppressed by the renewal of a dispute which he had cause to believe had been finally disposed of: see Johnson v Gore-Wood at 31A. That is very far from this position when, in New York, matters are still at the interlocutory stage with appeals pending. In this case it is of course a defendant against whom the plea of estoppel/abuse of process is raised. It is clear that the doctrine applies also to matters raised by way of defence: see for instance the House of Spring Gardens case (above). However, as observed by Lord Bingham in Johnson v Gore-Wood in a passage of his speech immediately before that relied on by the judge:
there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive."
- As it seems to us, in a situation when an application for Mareva-type relief is made under s.25 against an unwilling defendant in support of contested proceedings in a foreign jurisdiction, it is difficult to see that it can be regarded as an 'unjust harassment' of the claimant to permit the defendant to raise any point before the court which is relevant to its consideration of the claimant's entitlement to the ancillary relief sought.
- There is of course a further (subsidiary) element in the court's consideration of abuse of process argument.
"This public interest [that there should be finality in litigation] is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole." (per Lord Bingham at 31B.)
- However, it does not seem to us that that is a matter of weight in a case which involves interlocutory skirmishing on both sides of the Atlantic and the issue at stake is the right of the claimant to freeze the worldwide assets of the defendants.
- We do not go so far as to say, and it is not necessary to decide, that there are no circumstances in which the doctrine of abuse of process could be invoked in relation to points omitted to be taken in prior interlocutory proceedings, whether here or abroad. Mr Leggatt argues that, in the context of proceedings under s.25 of the CJJA, where (as here) the foreign court in interlocutory proceedings has itself determined that a good arguable case exists against the defendants, that is, or falls to be treated as, a final decision upon that issue for the purposes of the s.25 jurisdiction of this court. We do not think that is correct. The requirement that the claimant must establish that Mareva-type relief would be granted if the substantive proceedings were brought in England requires a decision of the judge based on English procedures and the approach of the English court to the nature and sufficiency of the evidence in a situation where the claimant has come to England to obtain a remedy unavailable to him in the substantive foreign proceedings. It is frequently, indeed usually, the position that s.25 proceedings are brought following issue and service of the foreign proceedings but before there has been any decision of the foreign court which examines the strength or arguability of the claimant's substantive case. However, whether or not that is the position, in our view the English court is required, once issue is joined in the s.25 proceedings, to make a separate exercise of judgment rather than a simple acceptance of the decision of the foreign court in interlocutory proceedings decided on the principles applicable, the evidence then available, and the levels of proof required in that jurisdiction.
- Furthermore we do not think that it should be regarded as per se abusive of the English court's process that points are raised and arguments advanced in the English court which were not deployed before the foreign court. There may be a variety of reasons why that is so, whether because of deliberate omission, accidental oversight, non-availability of evidence, legal advice or tactical decision, none of which in itself involves abuse of this court's process.
- We have been informed that the abuse of process point was one raised by the judge rather than the claimant who, not surprisingly, adopted it for the purposes of final submissions. We readily understand the view of the judge that the five points which he raised were available to be raised in the New York proceedings. It seems to us that all those points were of force and relevance so far as his own decision was concerned. However, they did not in our view amount to good reason to apply the doctrine of abuse of process to the issue whether a good arguable case had been raised for the purposes of relief granted within this jurisdiction.
- All that said, it is quite clear that the judge went on to consider the merits of the arguments raised by D4 in relation to which he was entitled (as he clearly did) to take the five points which he had identified into account when assessing the strength and credibility of D4's assertions. Where there is available to the judge on an application under s.25 a reasoned judgment of a foreign court at an interlocutory stage upon the merits or arguability of the defendant's claim, that judgment will inevitably form the judge's starting-point in relation to the question of 'good arguable case' and, depending upon the apparent cogency of the reasoning and the force of any arguments raised by the defendant, is likely to prove conclusive. In this case it is apparent that the judge, having first expressed a view that D4's stance amounted to an abuse of process, nonetheless went on to consider and exercise his own judgment in respect of the points raised before him. A number of arguments have been urged upon us to show that he reached the wrong conclusion, but no error in reasoning has been demonstrated and we see no reason to disturb his decision in respect of D4.
- Whilst acknowledging that the decision of the judge upon an application under s.25 of the CJJA and the considerations of expediency arising under s.25(2) were ultimately matters for the judge's discretion, Mr Strauss attacks its exercise on the basis that the judge's reasoning and reading of the authorities was flawed in certain respects.
- First, Mr Strauss submits that the worldwide freezing orders were contrary to the policy of the primary U.S. jurisdiction, as made clear in the Grupo Mexicano case, to the effect that the US court has no jurisdiction to grant pre-judgment Mareva-type relief. He also submits that the judge was wrong when he said that in Cuoghi Millet LJ had expressly rejected the submission that, if relief is not available in the substantive court, it should equally be unavailable in the ancillary court. Mr Strauss submits that the decision in Cuoghi went no wider than to hold that, where the primary court lacked jurisdiction to make a worldwide order against the defendant only because the defendant was not resident there, it was not inexpedient to make an order against a defendant resident in England. Alternatively, even if Cuoghi went wider than that, the court nonetheless stressed the subordinate nature of the court's role under s.25 and that for reasons of comity it would be inexpedient for the court to make an order which would be (i) inconsistent with the policy of the primary jurisdiction (in this case the U.S.) and/or (ii) would give rise to jurisdictional disharmony or confusion in other courts and, in particular, the courts of the jurisdiction in which the defendant is resident (Turkey).
- Second, the judge failed to acknowledge and/or to attach any weight to the fact that (a) the order made would encroach upon the jurisdiction of Turkey and its right and interest in controlling the conduct of its own citizens and corporations, because of the effect it would have on the defendants as Turkish domiciliaries and on their extensive shareholdings and other assets within that jurisdiction; (b) the freezing orders involved a substantial risk of creating disharmony and confusion through conflicting, inconsistent or overlapping orders in the Turkish court, given the resistance of the defendants to the jurisdiction of the English court and the fact that litigation already existed in Turkey, in a situation where the defendants were making clear their rejection of English jurisdiction and their intention to recognise only the jurisdiction of the Turkish courts in relation to their persons and assets.
- Third the orders made infringed the general principle of the law as to injunctions that the court should not put itself in the position of making orders which it cannot enforce against the person or assets of a defendant: see per Mustill LJ in Locabail International Finance Ltd v Agroexport  1 WLR 657 at 665A-B. In the case of D2 and D3 there was certainly no room for the operation of the assumption upon which courts usually act, namely that those subject to its jurisdiction will obey its orders, given the stance adopted by them that they rejected the jurisdiction of the English courts. As recognised in Derby & Co Ltd v Weldon (Nos 3 and 4) (C.A.)  1 Ch 65:
"Only if there is doubt about whether the order will be obeyed and if, should that occur, no real sanction would exist
the court should refrain from making an order which the justice of the case requires." (per Lord Donaldson MR at 81B-C)
- Fourth, the judge was wrong to treat the position of the defendants collectively on the basis that all were provisionally established in the substantive proceedings to have been co-conspirators. Not only did the case for ancillary relief have to be made out against each defendant, involving as it did the making of orders freezing their individual assets and fortunes; the close connection between the defendants alleged as the basis of the case against them in the primary court did not establish a connecting link between each defendant and the jurisdiction in which ancillary relief was sought under s.25. The former concerned and helped to establish the substantive cause of action before the New York court, while the latter governed the expediency or efficacy of interim ancillary relief in the English court. Having rightly accepted (a) that it would normally be inexpedient to grant relief under s.25 of the CJJA in circumstances in which neither the defendants nor their assets were within the jurisdiction and (b) that there was no other connecting link between the subject matter of the relief sought and this jurisdiction, the judge was wrong to hold (as in effect he did) that the existence of connecting factors with the jurisdiction in the case of D4 (residence and assets) and D1 (assets) meant that it was not inexpedient to grant relief against D2 and D3.
- Fifth, the judge was wrong to hold that the facts of the case were "even stronger than Duvalier in crying out for some form of international co-operation". Mr Strauss submits that the judge appears to have misunderstood the reasons which led Staughton LJ to use the words he did in Duvalier, which were based on the particular facts in which the claimants were a sovereign state seeking to recover assets looted by a dictator who had held an iron grip on his country for a number of years and had operated a sophisticated scheme to conceal assets and move them about in advance of steps taken in legal proceedings (incidentally using the English solicitors as agents for that purpose). He also submits that the judge failed to give any weight to the fact that the decision in Duvalier rested also upon the fact that there were present within the jurisdiction the defendants' English solicitors who were known to possess information as to where the defendants' worldwide assets were located and thus were amenable to sanctions if the disclosure order made was disobeyed.
- Finally, he submits that the judge was in error when he stated that the defendants' argument that it would be contrary to the principles of comity for an English court to grant an injunction against persons resident or domiciled in Turkey in circumstances in which the Turkish courts had not been applied to, was inconsistent with the Duvalier decision. In Duvalier the principal defendant had been domiciled in Haiti until he fled the country shortly before the action was commenced and it was the Republic of Haiti which made the application. Further the defendant was now resident in France, a Convention country in support of whose courts the s.25 relief was sought: see the observation of Staughton LJ quoted at paragraph 64 above. Thus no question as to comity arose in Duvalier.
- Mr Leggatt QC for the claimant has stressed the very wide discretion available to the court under s.25 and has argued in support of the reasons given by the judge.
- The issue in this case arises because, on the face of it, the only fetter placed upon the otherwise apparently unlimited powers which the court has as a result of the combination of s.37 of the Supreme Court Act, s.25 of the CJJA, and Rule 6.20 of the CPR is its power to refuse to grant relief if its absence of jurisdiction apart from s.25 makes such grant 'inexpedient'. It is plain that, in relation to the grant of worldwide relief, the jurisdiction is based on assumed personal jurisdiction; as such it has the potential for extra-territorial effect in the case of non-residents with assets abroad. Thus it is likely that the jurisdiction will prove extremely popular with claimants anxious to obtain security against defendants in disputes yet to be decided where they cannot obtain it in the court of primary jurisdiction or the court of the defendants' residence or domicile, which courts are the natural fora in which to make such applications. There is thus an inherent likelihood of resort to the English jurisdiction as an 'international policeman', to use the phrase employed by Moore-Bick J, in cases of international fraud. We would do nothing to gainsay, and indeed would endorse, the observations of Millett LJ in Cuoghi to the effect that international fraud requires courts, within the limits of comity, to render whatever assistance they properly can without the need for express provision by an international convention requiring it. However, even in the case of Article 24 of the Brussels Convention it has been made clear that:
the granting of provisional or protective measures on the basis of Article 24 is conditional on, inter alia, the existence of a real connecting link between the subject matter of the measures sought and the territorial jurisdiction of the contracting state of the court before which those measures are sought." see (Van Uden Maritime B.V. v Kommanditgesellschaft In Firma Deco-Line  2 WLR 1181 at 1210 para 40).
Further, in so far as 'police' action is concerned, policing is only practicable and therefore expedient if the court acting in that role has power to enforce its powers if disobeyed. In that respect the principle in Derby v Weldon already quoted plainly has application and is apt to be applied in cases of this kind.
- As the authorities show, there are five particular considerations which the court should bear in mind, when considering the question whether it is inexpedient to make an order. First, whether the making of the order will interfere with the management of the case in the primary court e.g. where the order is inconsistent with an order in the primary court or overlaps with it. That consideration does not arise in the present case. Second, whether it is the policy in the primary jurisdiction not itself to make worldwide freezing/disclosure orders. Third, whether there is a danger that the orders made will give rise to disharmony or confusion and/or risk of conflicting inconsistent or overlapping orders in other jurisdictions, in particular the courts of the state where the person enjoined resides or where the assets affected are located. If so, then respect for the territorial jurisdiction of that state should discourage the English court from using its unusually wide powers against a foreign defendant. Fourth, whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction rendering it inappropriate and inexpedient to make a worldwide order. Fifth, whether, in a case where jurisdiction is resisted and disobedience to be expected, the court will be making an order which it cannot enforce.
- Further, we accept the submission of Mr Strauss that in such cases the position of each defendant falls to be considered separately. There was no evidence before the judge, nor is there now, that the four defendants owned or held assets jointly. In so far as the claimant relies on the fact that the defendants all own shares in many of the same Turkish companies, it is not suggested that any is other than the individual owner of his or her own shareholding and it is accepted that the prospects of enforcement on those shareholdings are remote. Further, D4's admitted residence and D1's valuable house and assets within the jurisdiction, while subject to the powers of enforcement of the court in their own cases, do not render it any more likely that orders against D2 and D3 will be effective or any the more acceptable from the point of view of the U.S. or Turkish courts. We therefore propose to consider the position of D2 and D3 (identical as between themselves), before turning to the position of D1 and D4.
- In the light of our observations we turn briefly to the points made by Mr Strauss at paragraphs 107-112 above.
- First, we do not consider that the judge was wrong to say that in Cuoghi Millett LJ had rejected the notion that the court's power to grant s.25 relief ancillary to a claim in a foreign court was circumscribed by the availability of similar relief in that court. It is plain that he did reject it, from his observations quoted at paragraph 72 above; see also the observations of Morritt LJ in Refco at p.172. While the context in which Millett LJ did so was that of a Convention case, his remarks were not limited to such cases. We accept, however, that the court in Cuoghi stressed the subordinate nature of the English court's role under s.25 and emphasised that those courts best able to make the orders effective were the courts of the defendant's residence or the place where his assets were located. Steel J did not overlook these matters; he simply did not attach decisive weight to them in his eventual decision on expediency.
- In this connection, Mr Strauss has emphasised the observations of Millett LJ in the Refco case, in which he made clear that he regarded it as fatal in that case on grounds of comity that the primary court would have refused to grant the ancillary relief sought. Mr Strauss argued that, now the position has been made clear in the Grupo Mexicano case, and given the absence of power in the New York court to grant Mareva-type relief in the general or worldwide form available in this country, refusal was the appropriate course in this case. We do not think that follows. It seems to us that the position being contemplated by Millett LJ was one where the primary court has the jurisdiction to grant relief but would refuse to exercise it on the merits or for other substantial reasons (which the court appears to have understood to be the position in Refco) and not the position where the foreign court simply lacks the jurisdiction (as now made clear to be the position in the U.S. in the Grupo Mexicano case). In the latter event, the English court may judge it 'not inexpedient', and indeed is likely to regard it as desirable in cases of international fraud, to be supportive of the processes of the primary court.
- Second, we agree that the judge should have attached, but did not attach, weight to the likelihood of conflict, disharmony and confusion developing between the Turkish courts and the English court if the latter made a worldwide freezing order which was likely to inhibit dealings in the shares or other assets of D2 and D3 in Turkey.
- Third, we consider that this was a case where the principle stated in Derby v Weldon required consideration and application in the light of the absence of any connection between D2 and D3 and this jurisdiction.
- Fourth, as we have already indicated at paragraph 116 above, we consider that the judge erred in his collective treatment of the defendants for the purpose of establishing a connection with the jurisdiction in relation to expediency.
- Fifth, albeit the fraud alleged against the defendants was, if correct, fraud on a massive scale, we do not think it stands relevant comparison with the Duvalier case for the reasons advanced by Mr Strauss (see paragraph 111 above). Finally, we also agree that no question of comity arose for consideration in the Duvalier case which rendered it inconsistent with the submissions made for D1 to D3.
- In those circumstances, it is appropriate for us to revisit the exercise of the judge's discretion informed by developments since his decision.
- In this connection, the court is no longer faced simply with the potential for conflict with the courts of the domicile of D2 and D3 in Turkey, but with a situation in which the Turkish court has granted anti-suit injunctions against the claimant pursuing both the primary proceedings in the US and the ancillary proceedings here and the claimant is participating in those proceedings. It also appears that, at the suit of Telsim employees, an injunction has been granted to stay execution of such proceedings, prohibiting both the claimant and the defendants from taking part in those proceedings. Albeit Gross J found, and there is no reason to doubt, that D2 and D3 colluded in those proceedings, they well illustrate the wisdom of the principle that where there is reason in cases of this kind to suppose that the order made against a foreign defendant will be disobeyed and that, if that should occur, no real sanction would exist, then the court should refrain from making an order. In the light of the defendants' behaviour in the US proceedings and the stance taken in their witness statements, there was every reason to suppose that the orders of the English court would be disobeyed and that, if that were so, then no real sanction would exist against D2 and D3. While we well understand the concern of the judge to assist in a case of international fraud, it is above all, as it seems to us, this consideration which he overlooked and which, quite apart from considerations of comity, it is important to bear in mind in a case where the connection of the defendant with this country is tenuous or non-existent. In our view the circumstances before the judge did indeed render it inexpedient to grant the relief claimed against D2 and D3 when no sanction was available against them in the event of their disobedience.
- In the case of D2 and D3 therefore we would allow their appeals against the order of Steel J dated 22 July 2002 by which he refused to discharge the worldwide freezing orders against them.
- Turning to the position of D4 and D1, we see no reason to disturb the decision of the judge. D4 did not, nor could she, dispute the jurisdiction of the court to grant worldwide relief against her. She was resident and had substantial assets here and the principal ground put forward in support of her application for discharge of the order of Moore-Bick J was the failure of the claimant to establish an arguable case against her. That was a submission which, like the judge, we have rejected. It was well within the judge's discretion in the circumstances of the case to make a worldwide order against her and we see no reason to disturb it.
- So far as D1 is concerned, he did not dispute the jurisdiction of the English court to make the order originally made against him for domestic relief in respect of his house and other assets here. His application for discharge of that order rested solely upon the ground that risk of dissipation had not been demonstrated (in respect of which no appeal is pursued). His objection to the grant of worldwide relief against him in respect of his foreign assets was couched in largely similar terms to those of D2 and D3. There was thus reason to suppose in his case that relief in those terms might be disobeyed. However, his was not a case where the court would be devoid of means of enforcement if that were so, by reason of the existence within the jurisdiction of assets worth millions of pounds. The rationale of the principle stated in Derby v Weldon was thus not available to assist D4. In those circumstances, we are not prepared to interfere with the judge's exercise of discretion in an apparently serious case of international fraud.
Two new grounds for discharging the freezing orders
- Two further grounds have been advanced by the defendants for saying that the injunction should be discharged. They were not argued before the judge but we will consider them as far as possible. Both relate to the enforceability of any judgment of the U.S. Court.
- Firstly it is said is that the U.S. Court had no personal jurisdiction over D2, D3 and D4 because they were not present in and had not submitted to its jurisdiction. That court was not therefore competent to assume jurisdiction over them and so its judgment is not enforceable here. It must follow that freezing relief ancillary to and in anticipation of such a judgment should not be granted: it would be inexpedient to do so.
- This point was first raised in D4's notice of appeal but was subsequently adopted by the other defendants. There is no need to consider it in relation to D2 and D3 in view of our earlier conclusions. D1 accepts that he submitted to the jurisdiction of the U.S. Court; so this point does not affect him either. As to D4, the respondents maintain that she has submitted to the jurisdiction of the U.S. Court. In their skeleton argument they rely on a number of steps taken by the defendants (who were not separately represented) before any objection to jurisdiction was raised, steps taken after jurisdiction was challenged which were not necessary or relevant for that purpose, and Judge Rakoff's ruling on the 30th September 2002 that the court did have personal jurisdiction over them and their participation in preparations for trial thereafter. In response to this skeleton argument and what he described as the respondents' "new issue of U.S. law", Mr MacLean QC, for D4, put before us a further skeleton argument to which was attached a memorandum from the defendants' U.S. Attorneys to the effect that as a matter of U.S. procedural law D4 has not submitted to the jurisdiction. In response to this, Mr Leggatt referred us to part of the trial submissions of the claimant's U.S. Attorneys which contend that she has submitted to the jurisdiction.
- Whether the judgment of a foreign court is enforceable has to be determined as a matter of English private international law. The judgment of an otherwise competent court to whose jurisdiction a defendant has submitted is enforceable. By s.33 of the CJJA, a person against whom judgment has been given shall not be regarded as having submitted to the jurisdiction of the foreign court by reason only of the fact that he appeared only to contest the jurisdiction of that court. In this case, it is quite obvious from the history of D4's participation in the U.S. proceedings that her appearance was not confined simply to contesting jurisdiction.
- D4 however, relies on the exception to the general rule, as stated by Scott J. in Adams v Cape Industries (1990) 1 CH 433 at 461, that steps which
would not have been regarded by the domestic law of the foreign court as a submission to the jurisdiction ought not
. to be so regarded here, notwithstanding that if they had been steps taken in an English Court they might have constituted a submission.
This therefore takes us back to the procedural law of the U.S. Court, as to the effect of which there is a clear conflict which it is not possible for this court to resolve. D4 must bear the consequences of this. Mr MacLean submits that there was no argument before Moore-Bick J, or evidence placed before Steel J, to establish that the New York court was a competent forum as a matter of English law. However, as already indicated, no such objection was raised or point taken before Steel J. If the point had been raised, the issue of U.S. law could have been properly defined and resolved if necessary, bearing in mind that the respondents had only to show a good arguable case that D4 had submitted to the jurisdiction of the U.S. Court. On the uncontentious material which is before us we have no doubt that such a case is made out.
- The second new ground relates to the effect of s.5 of the Protection of Trading Interests Act 1980. This makes a judgment for "multiple damages" unenforceable in the U.K. By s.5 (3) such a judgment
"means a judgment for an amount doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained by the person in whose favour the judgment has been given."
- As already indicated, the respondents' claim in New York included a RICO claim for treble and punitive damages (but now see paragraph 42 above). It has been submitted to us that any judgment which included a RICO element would be wholly unenforceable here and that, as the final U.S. judgment is likely to contain such an element, it is inexpedient to grant freezing relief in aid of its enforcement.
- Is it right that if a single judgment for damages contains a compensatory and a RICO element no part of that judgment can be enforced here because of the effect of s.5 of the 1980 Act? There is support for the view that it is in one sentence of Parker J's judgment in British Airways Board v Laker Airways Ltd. (1984) 1 QB 142, 161 E and in Dicey (13th Ed. 2000) at para. 246, but the point has not been considered in any detail by the English Courts. However, it is unnecessary to decide the point in this case because the claimant is pursuing a case for damages for common law fraud and conspiracy and violations of other U.S. statutes for which the only relief sought or available is compensatory damages. Compensatory damages at common law, including interest of more than U.S. $2 billion are claimed. For the purposes of the present proceedings the claimant has shown that it has a good arguable case that it will recover a very substantial amount of compensatory damages. It has not sought to show before this court that it is likely to recover RICO damages. Nor, understandably, have the defendants contended that it will do so. It follows that in the present proceedings this point gets the defendants nowhere.
- For these reasons, the two new grounds advanced do not afford any additional reason for discharging the freezing orders against the defendants.
The Orders for Cross-examination
- Despite the conclusions which we have reached about the freezing orders in respect of D2 and D3 it is still necessary to consider whether the judges were right to make orders for cross-examination of the defendants because, subject to the argument which we deal with in paragraphs below, the freezing orders and the orders made under them remained in force until discharged or set aside by further order of the High Court or this Court.
- A number of points were originally taken as to why the orders for cross-examination should not have been made. D2 and D3 were refused permission to appeal on all but one of their points (see paragraph 43(ii) above) and made no renewed application in respect of the other points. D1 and D4's application for permission to appeal (see paragraph 43(iii)) was only pursued before us in relation to the point on which D2 and D3 had permission. The point on which permission was granted is called "the U.S. $200m. point". Shortly what is said is that the freezing order in each case is limited to $200m., the defendants each disclosed assets worth at least this amount, and thus it was wrong to order them to be cross-examined.
- The freezing orders were in a standard form. Paragraph 8 (2) of each order said:
"If the total unencumbered value of the defendant's assets in England and Wales does not exceed $200m. the defendant must not remove any of those assets from England and Wales and must not dispose of or deal with any of them. If the defendant has other assets outside England and Wales he may dispose of or deal with those assets outside England and Wales so long as the total unencumbered value of all those assets whether in or outside England and Wales remains above $200m."
Paragraph 10 of the orders required disclosure of all assets worldwide exceeding £10,000 in value.
- We have already referred to Steel J's findings about the inadequacy of the defendants disclosure in response to these orders (see paragraphs 25 and 27 above). The defendants cannot therefore say that cross-examination should not have been ordered because they had complied with the orders for disclosure. Nevertheless, by reference to the inadequate disclosure which they did make and assertions made by the claimant as to the worth of their assets, the defendants say that, before they were ordered to be cross-examined, they had each disclosed assets worth more than $200m.
- The purpose for which disclosure of assets is required and, where disclosure is inadequate, cross-examination is ordered, is to enable the claimant to make the freezing order effective. So in this case Mr Strauss submits, once assets of more than U.S. $200m. had been disclosed, no legitimate purpose was served by ordering cross-examination to discover whether there were further undisclosed assets. As the defendants were free to deal with their assets in excess of $200m., they should not have been required to disclose assets in excess of that value and the disclosure orders should, as the defendants asked, have been varied to reflect this.
- There is no English authority to support this submission. However, Mr Strauss relied on a decision of the Supreme Court of Western Australia in Deputy Commissioner of Taxation v Hickey (1996) 33 ATR 453. In that case the judge refused to order cross-examination of a defendant subject to a worldwide freezing order who had disclosed sufficient assets within the jurisdiction with which to satisfy the claim. These assets had been protected from dissipation by the freezing order. In these circumstances the judge said (456) that "cross-examination of the defendant cannot be said to be necessary for the protection of the plaintiff's rights".
- In Yukong Line Ltd. v Rendsburg Investments Corp. of Liberia (CA 17/10/96) Phillips L.J. said, in considering whether to exercise the discretion to order a defendant to a freezing order to be cross-examined about his assets:
"the test is simply whether in all the circumstances it is just and convenient to make such an order."
There are therefore no hard and fast rules and there is certainly no rule which precludes an order for cross-examination where a defendant discloses assets in excess of the amount frozen by the order. The Australian case does not compel such a conclusion. That decision is readily understandable as an exercise of discretion in circumstances where the defendant had disclosed sufficient verifiable assets within the jurisdiction which had been effectively frozen.
- But that is not this case. For the purposes of the argument the claimant is prepared to accept that the defendants have each disclosed assets worth more than U.S. $200m., but those assets consist largely of shareholdings in a network of family controlled Turkish companies, including those directly involved in this case. However, such assets are anything but effectively frozen and it is most unlikely that the claimant could satisfy any judgment against such assets, as the history of this dispute clearly shows.
- The purpose of disclosure is to make the freezing order effective. In the ordinary way a defendant is required to disclose all his assets above a certain value. This is because, if he can choose which assets to disclose he is likely to choose those which are the least available or accessible to the claimant for the purposes of execution. That is what the claimant says the defendants have done in this case. If there are assets which are more readily available, a claimant is entitled to be told what they are. In such circumstances a freezing order may be varied, so that particular assets are attached and others are released and, in this way, the order may be made more effective.
- In this case we have no doubt that the judges in their discretion were right to order cross-examination of the defendants. The piecemeal, late, untruthful and manifestly incomplete disclosure which the defendants gave amply justified the view that cross-examination was just and convenient because it might reveal assets which would make the freezing order more effective.
The findings of contempt and the committal orders
- As we have upheld the freezing orders and orders for cross-examination made against D1 and D4 it is conceded that the findings of contempt and the committal orders made against them cannot be challenged. However, on behalf of D2 and D3, it is contended that the consequence of our having allowed the appeal and set aside the freezing orders should be that the findings of contempt and the consequent order for their committal to prison must also be set aside, because the English courts had no jurisdiction to make freezing and cross-examination orders against these defendants and/or because the Human Rights Act compels such a conclusion. Alternatively, this court has a discretion to set aside the orders under section 13 (3) of the Administration of Justice Act 1960.
- Mr Strauss accepts that, as a matter of domestic law, a person against whom an order is made must obey it until it is discharged. (see Hadkinson v Hadkinson (1952) P 285 and Wardle Fabrics Ltd. v G. Myristis Ltd .(1984) FSR 263). But he says this principle should not apply to someone over whom the court has no personal jurisdiction at common law and where the court has found that jurisdiction should not have been assumed under s.25 of the CJJA.
- It is not necessary to consider this submission in any detail because there is a simple answer to it. Section 25 (1) of the CJJA gives the High Court jurisdiction to grant interim relief in aid of substantive proceedings of any kind and wherever taking place. CPR. 6.20 (4) allows a claim form to be served out of the jurisdiction when "a claim" is made for an interim remedy under section 25. There is no requirement that the claim should ultimately succeed, and the defendants have not demonstrated that, on the information before Moore-Bick J, permission to serve the claim form on them out of the jurisdiction should have been refused. The English court did have, and still has, jurisdiction over the defendants. It was and is a separate question as to whether it was inexpedient to grant interim relief against them. We have disagreed with the judge below by holding that it was inexpedient in the case of D2 and D3 but that does not mean that we have decided that the English court had no jurisdiction over the defendants.
- Section 13(3) of the 1960 Act gives this court power to "reverse or vary the order or decision of the court below and make such other order as may be just". In so far as Mr Strauss' alternative argument based on section 13 (3) is premised on the assumption that the court below had no jurisdiction to make the freezing and cross examination orders, it fails for the same reasons as his first argument. Nevertheless he submits that because this court has decided that the English court should never have assumed any jurisdiction over these foreign defendants in respect of their worldwide assets it would be just to exercise the court's discretion to set aside the cross-examination orders so as to "wash out" D2 and D3's contempt. We do not think it would be right to do this. D2 and D3 were aware of the orders which required compliance unless and until set aside, but they chose deliberately to disobey them. As Mr Strauss recognised, if the court readily exercises the discretion to set aside findings of contempt, it may encourage defendants to disobey orders of the court in the hope or belief that they would be set aside in future. This would jeopardise the rule that orders have to be obeyed until they are set aside. Section 13(3) does of course also give this court discretion to vary the sentences and we will return to this at the end of this judgment.
- The Human Rights Act argument was advanced by Mr Gordon Q.C. He submits that, as the freezing and cross-examination orders should not have been made, they violated the defendants rights under Article 1 of the First Protocol (peaceful enjoyment of possessions) and Article 8 (respect for private life) and were therefore unlawful. The committal orders therefore violated Article 5 (right to liberty) and are not saved by Article 5 (1) (b) (detention for non-compliance with the lawful order of a court). Further Mr Gordon submits that in any event the contempt and committal findings are a necessary further breach of the Protocol and Article 8 because their effect is to extend and compound the interference caused by the making of the original unlawful orders.
- But the premise for Mr Gordon's first submission is that, in making the orders which we have set aside, the court was acting in excess of jurisdiction. This is the same point which Mr Strauss made which we have already rejected. In order to get round this Mr Gordon submitted that, in this context, excess of jurisdiction has a wider meaning. Section 6 of the Human Rights Act makes it unlawful for a court to act in a way which is incompatible with a Convention right; thus no court can lawfully make an order which has the effect of violating a person's human rights and, if it does so, it is acting in excess of jurisdiction. This is a startling proposition which, if correct, would have far-reaching consequences. It would mean that any order affecting a person's human rights (and in civil litigation most do) which should not have been made is made in excess of jurisdiction and the court which made it was acting in breach of section 6. This may be the consequence (although we do not decide that it is) where a court makes an order which it has no jurisdiction to make, but it cannot be the case where the court simply makes an order which it is decided on appeal should not have been made.
- Mr Gordon relied on Benham v United Kingdom (1996) 22 EHRR 293 where a poll tax defaulter had been wrongly committed to prison by magistrates. The question was whether or not they had acted in excess of jurisdiction. If they had not, the detention was lawful under Article 5 (1) (b). At para. 43 the court said:
"It was agreed by those appearing before the court that the principles of English law which should be taken into account in this case, distinguished between acts of a magistrates court which were within its jurisdiction and those which were in excess of jurisdiction. The former were valid and effective unless or until they were overturned by a superior court, whereas the latter were null and void from the outset.
It was further submitted that the appropriate test under English law for deciding whether or not magistrates acted within their jurisdiction was that laid down by the House of Lords in McC v Mullan. The third limb of that test was relevant to the instant case, namely that magistrates exceeded their jurisdiction when they made an order which had no foundation in law because of a failure to observe a statutory condition precedent."
It should be noted that the court proceeded on the basis that English law was to be applied to decide whether the court was acting in excess of jurisdiction. The first part of the paragraph supports what we have already said. Mr Gordon however submitted, as we understood it, that section 6 was a statutory condition precedent to the exercise of any jurisdiction by the court and so any order which violated a person's human rights which should not have been made was in excess of jurisdiction. We do not agree. The statutory condition precedent in the case of McC v Mullan  AC 528, referred to in Benham above, was one which precluded magistrates from making the order they did unless a juvenile offender who was not legally represented had been refused legal aid, or had been informed of his right to apply for it but had refused or neglected to do so. These conditions had not been met and so the magistrates had no power to make the order. In other words the conditions directly affected the jurisdiction to make the order. We do not consider that section 6 is properly to be characterised as a statutory condition precedent of this kind.
- For these reasons we reject the first of Mr Gordon's arguments. We do not think his alternative argument takes the matter any further. If the freezing and cross-examination orders were not made in excess of jurisdiction and were therefore valid unless or until they were overturned by a superior court, the consequent findings of contempt and committal were likewise valid.
- Thus, we conclude that the various findings of contempt should stand, despite the fact that in the cases of D2 and D3 we have set aside the freezing and cross-examination orders. As to sentence, because we have set aside those orders we do not think that the sentences of imprisonment on D2 and D3 should stand. Nevertheless these were contempts of orders which should have been obeyed unless and until they were set aside, and we will hear counsel on what penalty (if any) we should impose and/or what order for costs we should make in the light of our decision.
i) The appeals of D2 and D3 against the orders of Steel J dated 22 July 2002 (2002/1648) and 18 October 2002 (2002/2346) will be allowed.
ii) The appeals of D2 and D3 (2003/0307) against their committal for contempt will be allowed to the extent that the orders for their imprisonment will be set aside. However the findings of contempt will stand and the question of any penalty to be substituted will be deferred for further submissions.
iii) The appeals of D1 and D4 (2002/1647, 2002/1648, 2003/0076) will be dismissed. Their applications for permission to appeal (2002/1824 and 2003/0077) will be allowed, but their appeals will be dismissed.