(1) Trans-World Metals SA (Bahamas) (2) Lev Chernoy (3) David Reuben (4) Simon Reuben Claimants v (1) Bluzwed Metals Ltd (BVI) (2) Oleg Deripaska (3) Joseph Karam (4) Alexander Boulygine (5) Alucor Trading SA (BVI) (6) Sayana-Foil SA (BVI) Defendants
| Jurisdiction | British Virgin Islands |
| Judgment Date | 22 March 2005 |
| Judgment citation (vLex) | [2005] ECSC J0322-1 |
| Date | 22 March 2005 |
| Docket Number | CLAM NO. BVIHCV2003/0179 |
| Court | High Court (British Virgin Islands) |
IN THE HIGH COURT OF JUSTICE
(CIVIL)
CLAM NO. BVIHCV2003/0179
Mr. Mark Howard QC, Mr. Roger Masefield, Mr. Phillip Kite and Mr. Stephen Midwinter for the claimants.
Mr. Stephen Moverley Smith QC and Mr. Michael Fay for the defendants.
Barrow J (Ag.): On 30 th March 2004 this court granted an order, on a without notice application, for permission to serve the second, third and fourth defendants out of the jurisdiction. The order specified the methods of service. The second defendant was to be served by post in care of a company in Moscow, Russla and also by post upon solicitors in London, England. The third defendant was to be served by post at his official residence in Lully, Switzerland and by courter upon two different lawyers in Switzerland. The fourth defendant was to be served in the same manner as the second defendant. There was service as of right within the jurisdiction upon the other three defendants who were all British Virgin Island companies.
Substituted service of a claim form out of the jurisdiction is not permitted by The Civil Procedure Rules 20001, say the defendants. They therefore apply for an order that the permission given to the claimants to serve the claim form and statement of claim upon the second, third and fourth named defendants be set aside. They also seek a declaration that the purported service upon these defendants was of no effect. 2 They further seek an order that to the extent that the purported service was valid that such service be set aside. A separate limb of the defendants' application is for a stay of proceedings on the ground of forum non conveniens.
The claim arises out of an alleged joint venture agreement to which the claimants and the first and second defendants were parties. The primary claim is for damages for repudiatory breach of contract by the defendants' termination of the joint venture agreement without notice. The claimants also claim for breach of fiduciary duty as result of the attempts by those defendants to siphon joint venture assets off to shadow BVI companies (the fifth and sixth defendants) and for remedies in contract, tort and equity.
The joint venture was set up in late 1994 and in 1996 in various meetings between representatives of the claimants and the defendants that took place at Transworld's London offices. The joint venture related to the sourcing of alumina and other raw materials from the international markets, brokered through London; the supply of those raw materials to plants in Russia; the processing of the material; and the sale of the processed material on the international markets, again brokered through London. The accounting and banking functions of the joint venture were conducted in London and Geneva.
The essence of the alleged joint venture agreement was that all business done with the Sayansk Aluminium Plant in Russia would be done exclusively for the benefit of the joint venture save where otherwise agreed between the parties.
A number of offshore 4 companies were incorporated to serve as jointly owned vehicles for the conduct of the joint venture activities. Transworld contributed investments and the supply of raw materials and undertook the international metal sales through its London offices. The first and second defendants contributed the operations of Russian smelting plants and helped to obtain the necessary licences from the Russian authorities.
The joint venture was extremely profitable for a number of years and net income of around US$120 million was reported for an 11 month period in 1997-1998. Then came the secret termination of the joint venture when the defendants set up shadow BVI companies to pass off as the jointly owned companies. This was followed by a letter in January 1998 from the first defendant purporting to terminate the joint venture forthwith.
To relieve the one-sided picture presented by this summary it should be mentioned that the position of the defendants is that there was no agreement that the parties would be bound generally or for an indefinite period to conduct joint venture operations. It was never agreed that all business done by any of the parties with the Sayansk Plant would be done for the benefit of the joint venture. Rather, the defendants say there were an arrangement and a structure established to enable the parties to enter into individual joint venture agreements on a case by case basis and from time to time. The defendants therefore deny the existence of the contract that the claimants say was breached.
Mr. Moverley Smith QC, leading counsel for the defendants, submits that CPR 2000 deals with service in a comprehensive code which is divided into three distinct parts. 5
| Part 5 | Service of Claim Form within Jurisdiction |
| Part 6 | Service of other Documents |
| Part 7 | Service of Court Process out of jurisdiction. |
Rule 5.4 expressly states that a claim form may be served out of the jurisdiction only if permitted by Part 7. Counsel is accurate in his observation that nowhere in Part 7 appears any provision that permits the court to order alternative service. In contrast Part 5 provides a very flexible regime for service within the jurisdiction, as counsel described it, which enables a claimant to choose his own alternative method of service and thereafter satisfy the court that such service was effective ( r 5.13). Provision is additionally made for the court to specify the method of service of a claim form ( r 5.14). There is nothing that imports those Part 5 methods of service into Part 7, counsel submitted.
That the three parts are discrete is also shown by the provision that enables the court to dispense with service of documents, submitted counsel. That provision appears in Part 6 which deals with service of documents other than the claim form but it does not appear in either Part 5 or Part 7. Again, Submitted counsel, there is nothing that imports that provision into the other parts.
No assistance is to be gained from the comparable provisions in the English Civil Procedure Rules 1998, counsel submitted, because that code deals with service of all documents in a single part (Part 6) which is divided into three sections. Part 6 commences
with Section I which is entitled 'General Rules about Service'. It is in Section 1, and therefore as a general rule, that one finds rule 6.8 which enables the court to direct service by an alternative method and rule 6.9 which enables the court to dispense with service. In Knauf UK GmbH v British Gypsum Ltd6 at first instance David Steel J indicated the way to read Part 6. He said that rule 6.1 makes it clear that the rules in Section I apply to the whole Part.The structure of our rules on service is significantly dissimilar to the structure of the English rules. I am struck in this regard by their scheme of making general rules that apply to the whole of Part 6 and then making special rules to apply to particular matters when this is desired. An example of this is their rule 6.12 which provides that the general rules about service of documents are subject to the special rules about service of claim forms. I keep open the question whether the difference in structure is a matter of drafting style rather than of substence.
Mr. Howard QC, leading counsel for the claimants, argued that it could not have been the intention of the new rules to abolish alternative methods of service out of the jurisdiction, which existed under the old rules. The BVI is now a corporate centre and the need to permit substituted service abroad is now greater not less than it was before. He submitted that the English Court of Appeal went out of its way in Knauf UK GmbH v British Gypsum Ltd7 to endorse the sentiment of the first Instance judge 8 who said that he was not to be taken as concurring with the view of counsel on both sides that amendments to the English CPR regime had, perhaps inadvertently, eliminated the provision permitting an order for alternative service out of the jurisdiction.
It is clear from the discussion about service of process that appears in Knauf 9 as well as in Dicey & Morris on The Conflict of Laws 10, beginning at 8-035, that special considerations attend the matter of providing for alternative methods of service of process out of the jurisdiction as distinct from within the Jurisdiction. Two significant factors make special considerations necessary. First service of court process is an act of sovereignty. Second, the civil law tradition regards the service of process on a different footing from the common law tradition. 11
A claim form is the originating process by which a claimant invokes the paremptory jurisdiction of the state's courts over a defendant. Its precursor was the writ of summons which expressed what remains implicit in the claim form; the defendant is commanded by sovereign power to participate in the proceeding that the court will conduct. The defendant is not asked to consent to the court's power over him; It is a mandatory power that is exercised over persons within the territorial reach of the court as an incident of the sovereignty of the state over such persons. Hence the reason that a writ (defined as a form of written command in the name of a sovereign, State, court, etc in The Concise Oxford Dictionary) was not served outside of the realm of the sovereign. The sovereign's command did not extend to the realm of...
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