Commercial Court orders foreign non-resident company officer to be examined under CPR 71 based on temporary presence in jurisdiction

The Commercial Court has refused to set aside an order under CPR 71 requiring a foreign non-resident director to attend court to provide information about the company's assets for the purpose of aiding enforcement of a judgment against the company: Deutsche Bank AG v (1) Sebastian Holdings Inc (2) Alexander Vik [2015] EWHC 2773 (QB).

The House of Lords has previously held that the court’s power under CPR 71 did not have extra-territorial effect and so did not apply to an officer of a corporate judgment debtor who habitually resided in Greece (Masri v Consolidated Contractors International (UK) Ltd and others (No 4) [2009] UKHL 43). However, the court in the present case pointed out that here, unlike in Masri, the relevant officer was physically present within the jurisdiction at the time of both the application for the order and the order itself. Masri did not prevent the court taking jurisdiction in those circumstances, as it said nothing about the situation where a non-resident was served within the jurisdiction. In the present case, the court held that even a fleeting presence within the jurisdiction at the time of the application and the making of the order meant that the court had jurisdiction over the relevant officer.

The court accepted that care must be taken in making an order of this kind, particularly if there are alternative means available to a judgment creditor to obtain the relief sought, but it did not accept that there was a threshold requirement of “exceptional circumstances”. In any event, the circumstances here were exceptional due to the officer's very close connection to the judgment debtor and his procurement of various substantial payments by the judgment debtor.

The decision removes one potential hurdle for claimants seeking to enforce judgments against corporate judgment debtors who are determined to resist enforcement - though it may simply mean that foreign non-resident officers of corporates in that position will think twice before they enter the jurisdiction of the English court.

Background

CPR 71.2 provides that a judgment creditor may apply for an order requiring an officer of a corporation which is a judgment debtor to attend court to provide information about the judgment debtor's means, or any other matter about which information is needed to enforce a judgment or order.

In this case, the defendant (SHI) was found liable for $243 million, together with the claimant's costs on an indemnity basis. The court also made a non-party costs order against SHI's sole shareholder and director, Mr Vik. 

The court found that Mr Vik had arranged for nearly $1 billion of assets to be transferred out of SHI to Mr Vik or to companies associated with him or his family, that there was no bona fide commercial reason for the transfers, and that their purpose was to make it more difficult for the claimant to recover any judgment.

Following judgment, the court ordered Mr Vik to attend court to be examined and to produce documentation pursuant to CPR 71.2. Mr Vik was not resident or domiciled in England and Wales; when the application was issued and the order served, he was in the country for a limited time to attend the offices of the claimant's solicitors to provide a deposition for the purposes of related Connecticut proceedings. Mr Vik applied for the order to be set aside or varied, including on the basis that there was either no jurisdiction to make such an order against an individual who was only fleetingly present in the jurisdiction when served or that such jurisdiction should only be exercised exceptionally. 

In addition, Mr Vik submitted that because he had resigned his position as director and disposed of his shareholding following service of the order, SHI's documents were no longer in his control.

Decision

The court (Cooke J) refused to set aside or vary the order. The whole history of the proceedings revealed attempts by Mr Vik to avoid liability, to deceive the court and to conceal the true state of SHI's financial affairs. There was a basis for saying that SHI had assets available which could be used to satisfy the judgment against it, though the location of such assets was unknown. Those were the very circumstances for which CPR 71.2 was designed.

The judge accepted that the nationality and residence of the company and officer were relevant to the exercise of the court's discretion under CPR 71.2. However, he did not find anything in the authorities which justified the submission that such an order could not be made against a non-resident foreigner or that it could only be made in exceptional circumstances. 

Although Masri established that CPR 71 did not have extra-territorial effect, and so did not apply to company officers outside the jurisdiction, it said nothing at all about the situation where a non-resident was served within the jurisdiction.

Although the court did not accept that there was any threshold requirement of "exceptional circumstances", the situation in the present case was sufficiently exceptional to satisfy any such requirement. There were strong reasons for exercising the jurisdiction, including because Mr Vik controlled the company which failed to give proper disclosure of its assets, he told lies to the court about its financial affairs (and other matters), and he treated its assets as its own. The court should aid enforcement of its orders if it could properly do so.

The court was also not impressed by the submission that Mr Vik did not have control of SHI's documents, as he was no longer a director or shareholder of the company. Given the history of the matter and Mr Vik's obvious attempts to evade compliance with orders for disclosure, it was hard to credit any suggestion that he could not obtain access to any documents he wished belonging to SHI. Resignation as director and disposal of his shareholding following service of the CPR Part 71 order represented a poor excuse for non-compliance in circumstances where Mr Vik had attempted to put it out of his power to comply with the order.