Posts Tagged abuse of process
I reported earlier on complex enforcement issues concerning SAS Institute v World Programming. In  EWCA Civ 599 SAS Institute Inc v World Programming Ltd Flaux J gives an overview of the various proceedings at 4:
The dispute between the parties has a long history. It includes an action brought by SAS against WPL in this country in which SAS’s claims were dismissed; a decision by WPL, following an unsuccessful challenge on forum non conveniens grounds, to submit to the jurisdiction of the North Carolina court and to fight the action there on the merits; a judgment in favour of SAS from the North Carolina court for some US $79 million; an attempt by SAS to enforce the North Carolina judgment in this jurisdiction which failed on the grounds that enforcement here would be (a) an abuse of process, (b) contrary to public policy and (c) prohibited by section 5 of the Protection of Trading Interests Act 1980 (“the PTIA”); and a judgment from the English court in favour of WPL for over US $5.4 million, which SAS has chosen to ignore.’
A good case to use therefore at the start of a conflicts course to show students the spaghetti bowl of litigation that may occur in civil litigation. There are in essence English liability proceedings, decided in the end following referral to the CJEU (Case C-406/10); North Carolina liability proceedings, in which WPL submitted to jurisdiction after an earlier win on forum non grounds was reversed on appeal and the NC courts came to the same conclusions as the English ones despite a finding they were not (clearly) under an obligation to apply EU law; next, an SAS enforcement attempt in England which failed (with permission to appeal refused): my earlier post reviews it; next, enforcement proceedings of the NC judgment in California. That CAL procedure includes an assignment order and WPL sought an anti-suit injunction to restrain SAS from seeking assignment orders as regards “customers, licensees, bank accounts, financial information, receivables and dealings in England”: it was not given the injunction for there was at the time no CAL assignment order pending which could be covered by anti-suit. Currently, it seems, there is, and it is an anti-suit against these new assignment orders which is the object of the current proceedings.
At 59 ff follows a discussion of the situs of a debt; at 64 ff the same for jurisdiction re enforcement judgments, holding at 72
Applying these internationally recognised principles to the present case, the North Carolina and California courts have personal jurisdiction over WPL but do not have subject matter jurisdiction over debts owed to WPL which are situated in England. That is so notwithstanding that the losses for which the North Carolina court has given judgment were incurred by SAS in the United States. Nevertheless the effect of the proposed Assignment Order would be to require WPL to assign debts situated in England to SAS which would at least purport to discharge its customers from any obligation owed to WPL, while the effect of the proposed Turnover Order would be to require WPL to give instructions to its banks in England which would discharge the debts situated in England currently owed by the banks to WPL. In substance, therefore, the proposed orders are exorbitant in that they affect property situated in this country over which the California court does not have subject matter jurisdiction, thereby infringing the sovereignty of the United Kingdom.
Which is later confirmed at 83. Consequently the earlier order is overturned: at 89: ‘it follows also that the judge’s conclusion that the Assignment and Turnover Orders were not “markedly exorbitant” was based upon a mistaken premise.’
The anti-suit and anti-enforcement applications are dealt with in particular with reference to comity, and largely granted with some collateral notices of intention by SAS not to seek a particular kind of enforcement.
Someone somewhere must have made partner on this litigation.
LIC Telecommunications et al v VTB Capital et al. High Court suggests autonomous EU approach to asymmetric choice of court. Also discusses contract and tort distinction, and abuse of process.
In  EWHC 1747 (Comm) LIC Telecommunications et al v VTB Capital et al Moulder J suggests an unorthodox interpretations of Article 25 of the Brussels Ia Regulation. (Note also her very critical view at 22 of one of the experts, whom she found having confused his role as expert with a role as advocate). Much of the lengthy judgment is devoted to intricate discussions of Luxembourgish corporate law (hence the need for expert evidence) and the jurisdictional issues are, somewhat illogically, discussed towards the end of the judgment, at 245 ff.
Maze, one of the defendants, acts as a manager of V2 pursuant to a directorship agreement dated 26 May 2015 (the “Directorship Agreement”). It relies on the effect of clause 19 of the Directorship Agreement and submitted that claims against it are subject to the exclusive jurisdiction of the courts of Luxembourg pursuant to Article 25 Brussels Ia. Clause 19 provides:
“for the benefit of the Manager, the Shareholder and the Company hereby irrevocably, specially and expressly agree that the courts of Luxembourg city have jurisdiction to settle any disputes in connection with this Agreement and accordingly submits to the jurisdiction of the courts of Luxembourg city. Nothing in this clause limits however the rights of the Manager to bring proceedings against the Company in connection with this Agreement in any other court of competent jurisdiction or concurrently in more than one jurisdiction.”
The clause is asymmetric aka hybrid aka unilateral. (See e.g. my discussion of Rothschild etc.). These clauses as I have noted elsewhere highlight the clear insufficiency of Brussels Ia’s new lex fori prorogati (including renvoi) rule for choice of court. Which court has been prorogated, hence also lex fori prorogati, is not clear when the clause is asymmetric.
Moulder J discusses  EWHC 161 (Comm) Commerzbank v Liquimar Tankers as precedent: I reviewed it here and signalled at the time that it would not be the last we would hear of the issue. In that case Cranston J held ‘There is nothing in Article 25 that a valid jurisdiction agreement has to exclude any courts, in particular non EU Courts. Article 17, penultimate paragraph, of the Brussels Convention recognised asymmetric jurisdiction clauses. To my mind it would need a strong indication that Brussels 1 Recast somehow renders what is a regular feature of financial documentation in the EU ineffective.‘ I was never taken by that conclusion viz the Brussels Convention: its Article 17 reference to a party having ‘benefit’ from choice of court does not relate entirely to the same discussion on asymmetric clauses (Peralla v Codere  EWHC 1182 (Comm) which I discussed here illustrates that difference).
At any rate I disagree with Moulder J’s statement at 254 that
It is now common ground that it is a question of autonomous EU law and not a question of national law. (It was I believe accepted that the proviso “unless the agreement is null and void as to its substantive validity” refers to issues such as capacity, fraud and mistake, not whether particular kinds of “choice of court” agreements are permitted under the Regulation).
Asymmetric clauses are the first example often given when highlighting the limited cover of Article 25 Brussels I a (and the need for certainty on the lex causae for choice of court). There is no autonomous interpretation there at all. I do agree however with the conclusion at 261: that Luxembourg courts, applying EU law, would not uphold such clauses was not made out on the evidence. Luxembourgish courts at least when they apply Luxembourgish law, generally uphold the validity of asymmetric choice of court.
At 263 ff then follows discussion of Article 7(1) and 7(2). Much of the authority discussed has been reviewed on this blog. (Including Bosworth (Arcadia) which in the meantime has been held by the CJEU but without the contract /tort element – the CJEU found against a contract of employment). Moulder J holds that Article 7(2) is engaged, not 7(1), and on the former discusses locus delicti commissi with reference to JSC BTA Bank v Khrapunov. At 295: it is not sufficient that there are meetings in England to implement the conspiracy, it is the making of the agreement in England which is to be regarded as the harmful event. Claimants have not supplied a plausible evidential basis that the agreement was made in England. Their evidence is consistent with a case that the conspiracy was implemented in England but that is not sufficient.
As for locus damni, at 298: Even though the share purchase agreement was under English law, it is the loss of the shares in the Luxembourg company which is the pleaded damage not the agreement to sell or the auction. The Vivacom group consists of Bulgarian telecommunications companies which were held by InterV through Viva Luxembourg Bulgaria EOOD (paragraph 3 of the Agreed List of Agreed Issues). Locus damni is Bulgaria, perhaps Luxembourg. But not England.
Finally, abuse of process considerations are linked to English procedural law (whether claims should have been brought sooner).
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9, Heading 184.108.40.206, Heading 220.127.116.11 .
SAS Institute v World Programming. Ordre Public, res judicata, fraus and (European) statute conspire against enforcement.
SAS Institute Inc v World Programming Limited  EWHC 3452 (Comm) is a rare example of refusal by an English court of enforcement of a US judgment. 20 Essex Street have excellent analysis here and I am happy generally to refer.
The outcome of English Proceedings was that WPL defeated SAS’ claims regarding software licence and copyright infringements, with an important role played by the European software Directive as applied by the CJEU in Case C-406/10 upon preliminary reference in the very case.
Meanwhile SAS had commenced concurrent proceedings in the US. WPL initially objected to the US Proceedings on forum non conveniens and other jurisdictional grounds. These objections were later withdrawn and WPL submitted to the jurisdiction of the US District Court and participated in the process before it. Judgment was awarded against it. SAS curtailed its claim of enforcement to as to increase chances of success: it only seeks to enforce the US Judgment in England insofar as it is for compensatory damages based on WPL’s fraud (an issue which was litigated in the US but not in the UK); it does not seek to enforce the breach of contract claim or that part of the US Judgment which awarded multiple damages.
At 35-36 Cockerill J summarises the law: ‘There are three strands of potential preclusion: cause of action estoppel (not live here) issue estoppel and Henderson v Henderson abuse of process. As Lord Sumption observed in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd  UKSC 46,  AC 160 at p.180H at :
“…the policy underlying all of the…[res judicata] principles…” is “…the more general procedural rule against abusive proceedings…”.
The different doctrines therefore have different requirements, but they shoot at the same target – that of ensuring that nobody should be vexed twice in respect of one and the same cause: “nemo debet bis vexari pro una et eadem causa“: as it was put by Lord Diplock in Vervaeke v Smith  AC 145 at p.160A-B, G. A more modern version was given by Lord Bingham in Johnson v Gore Wood  2 AC 1 at p.31A-B in the context of the Henderson doctrine:
“Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest 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.” ‘
Issue estoppel per Dicey (referred to by Cockerill J) at paragraph 14-156 means that a “foreign judgment will not be recognised if it is inconsistent with a previous decision of a competent English court in proceedings between the same parties“. Akin therefore in residual English private international law (EU law is not engaged, the judgment having been issued ex-EU) to Brussels I Recast’s Article 45(1)c ‘s rule.
The fundamental point is that issue estoppel bars relitigation not of all issues, but only of issues determined as an essential part of the cause of action (at 40). The Henderson principle is concerned with protecting the integrity of the cause of action and issue estoppel defences and preventing them from being deliberately or inadvertently circumvented by a party which did not advance an argument in England which would otherwise have created such an estoppel (at 47).
This is the core of the abuse investigation and this formulated one can see why it is a difficult test to apply.
At 55: ‘There are two issues: was the Fraud claim “parasitic” on the breach of contract claim and the related question of whether the Fraud claim was a separate, distinct and independent cause of action. Both of these really go to the question of whether there is sufficient identity of issue.’ At 73 Cockerill J concludes that there was such abuse: ‘Ultimately, I have come to the conclusion that the existence of the terms of the contract was a fundamental building block for the Fraud Claim and that without it that claim – as it was formulated in the US – could not have been run. The essence of the case in the US Proceedings related to alleged fraudulent representations concerning its “present intention to comply with those terms”. It was fundamental to the claim that WPL “had no intention of abiding by those terms“. It was inherent in that case that those terms did exist; and yet the courts of this country had already held that those terms did not exist.’
Obiter, at 156 ff, Cockerill J adds that enforcement would also have been refused for reasons of the public policy embodied in the Software Directive. Authority in the arbitration context was referred to to pro inspiratio, including CJEU authority C-168/05 Mostaza Claro and C-126/97 Eco Swiss (at 163). At 179: ‘The fundamental problem for SAS is that the Directive plainly envisages the rendering null and void of provisions such as those on which SAS wants to rely, indeed that is explicitly the policy enunciated in the case-law and yet SAS’s fraud case is dependent upon those terms’ existence. The effect of the Directive is, as I have indicated above, to make SAS’s fraud claim (as formulated) impossible to express. It is therefore unrealistic to analyse the matter as the Directive “authorising frauds“.’ And at 184: ‘It is clear that the Software Directive gives expression to two important public policy objectives of preventing the monopolisation of ideas and promoting competition and consumer welfare.’
A very lengthy judgment which merits full reading.
Caribonum Pension Trustee v Pelikan. Ability of foreign defendant to satisfy a judgement is not a pre-requisite to a claimant obtaining a judgement.
Facts in  EWHC 2321 (Ch.) Caribonum Pension Trustee v Pelikan are summarised by Anthony Garon here. A suggestion of abuse of process /Fraus was rejected by Clark M. Of interest to the blog is the suggested reason for abuse: Pelikan AG argued that the claim was an abuse of process because a relevant guarantee would not be enforceable in Switzerland and that there were insufficient non-Swiss assets to satisfy the claim.
At 40 however Master Clark holds that the ability of a defendant to satisfy a judgement is not a pre-requisite to a claimant obtaining a judgement. Claimant’s counsel convincingly submitted that it was pursuing the claim for the simple and appropriate purpose of securing payment of the sums due under a holding structure-related Guarantee; and that that was not an abuse of process.
When is a court ‘seized’ under EU civil procedure /private international law? The question is highly relevant in light of the application of the lis alibi pendens principle: the court seized second in principle has to cede to the court seized first. Williams J in  EWHC 2035 (Fam) MB v TB notes the limited attempt at harmonisation under EU law and hence the need for the lex fori to complete the procedural jigsaw.
On 8 July 2016 MB (the wife) issued a divorce petition seeking a divorce from TB (the husband). On 16 August 2016 the husband issued a divorce petition against the wife out of the Munich Family Court. On the 22 August 2016 the husband filed an acknowledgement of service to the wife’s petition asserting that the German court was first seized because it was ‘not accepted England is first seized, owing to failures to comply with art. 16 and 19 of Council Regulation (EC 2201/2003) and relevant articles of the EC Service Regulation (EC 1393/2007).
At issue were two considerations: whether seizure of the English courts had been effected; and whether the wife’s issuing of the petition on 8 July 2016 is an abuse of process on the basis that the wife did not at that time consider the marriage to have irretrievably broken down but was issuing a petition simply to secure the English jurisdiction in the event that a divorce was needed? This latter element amounts to disciplining a form of fraus, on which I have reported before – eg here that there is very little EU law.
In Regulation ‘Brussels IIa’ (2201/2003) – concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, as in the other Regulations, ‘seising of a Court’ is defined as:
- A court shall be deemed to be seised:
(a) at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the applicant has not subsequently failed to take the steps he was required to take to have service effected on the respondent;
(b) if the document has to be served before being lodged with the court, at the time when it is received by the authority responsible for service, provided that the applicant has not subsequently failed to take the steps he was required to take to have the document lodged with the court.
These ‘steps required’ are not further defined under EU law and hence rest with national law. Under relevant English law, Williams J held that the husband was aware of the wife’s petition before it was validly served on him, and that this was enough for the English courts to have been validly seized.