James Bickford Smith discusses the decision of the Commercial Court in Société Générale v Goldas Kuyumculuk Sanayi and others [2017] EWHC 667 (Comm) to strike out a claim of approximately £500 million for abuse of process.
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The words “high value international commercial litigation” are perhaps most often seen as a tag line in conference brochures and on website profiles. However, hype aside, truly international cases carry the attendant hazard of needing to progress cases in multiple jurisdictions simultaneously. Understandably enough, clients can be resistant to “ticking all boxes” in all jurisdictions at the same time. Nor are all lawyers as adept as they would like to believe in following the intricacies of procedural narratives emerging in the feedback loops of long trans-jurisdictional conference calls. An ensuing occupational hazard is the seemingly expedient or cost-saving shortcut that leaves at least one local court distinctly unimpressed.
In Société Générale v Goldas Kuyumculuk Sanayi and others [2017] EWHC 667 (Comm) the Commercial Court has shown that it can take a hard line on ensuing procedural defaults, and specifically that it is unwilling to allow them to be explained away on grounds of negligent advice as to foreign law or procedure, or on grounds of expediency. In the process, it has provided a salutary reminder to all litigators of the dangers of failing to progress claims after issue of proceedings and, particularly, after obtaining injunctive relief.
The facts and procedural history: summary
Popplewell J’s judgment runs to some 29 pages in transcript, but the salient facts to emerge from it are that:
Popplewell J dismissed all of Société Générale’s applications and acceded to the Goldas defendants’ core applications. He also ordered an inquiry into damages on the cross-undertaking. Given that the effect of the WFOs is alleged to have been to shut down Goldas’ business, this may itself be of some financial significance.
Abuse of process
This is a column that aims to be of interest to as many civil litigators as possible. Much of Popplewell J’s decision concerns detailed discussion of whether good service was effected in Turkey and Dubai. That is a question fundamentally of the local law of the two jurisdictions and, as such, is of little interest to a wider audience. Nevertheless, some of Popplewell J’s findings as to abuse of process are bound up with that analysis. As abuse needs to be considered “in the round”, and as some of the defaults analysed would likely not have triggered judicial criticism individually, one notes each of the following findings:
These findings combined to convey a general impression of “a casual attitude to the undertakings given to the Court” (paragraph 64), never a good place to begin an attempt to persuade the court to make an exceptional order retrospectively validating steps taken in the proceedings. Ultimately, however, what seems to have been fatal to Société Generale’s application was the following sequence of events:
Paragraphs 24, 32 Société Générale v Goldas Kuyumculuk Sanayi and others [2017] EWHC 667 (Comm).
The key problem with the tactical decision outlined above was that the English court was never told that it had been made. A secondary problem was that it was one taken against the background of freezing order relief remaining in place. A third problem, more technical, was that from the moment that the intention was to focus on Turkish proceedings and not progress the English ones, the only sound basis for freezing order relief would be under section 25 of the Civil Jurisdiction and Judgments Act 1982 (CJJA). That was not the basis on which the freezing order applications had been made: they had been presented as applications in support of English claims, not Turkish proceedings.
In the face of this situation Popplewell J did not shy away from making strong findings:
Paragraphs 24, 32 Société Générale v Goldas Kuyumculuk Sanayi and others [2017] EWHC 667 (Comm).
Further, Popplewell J made positive findings of abuse of process in respect of:
Warehousing
Running through the judgment is heavy criticism of the decision to “warehouse” the English proceedings without informing the court of this. This takes clearest form in the finding, at paragraph 63, that:
The significance of this finding extends beyond the instant case. There is increasingly robust jurisprudence in support of striking out claims where there has been “extraordinary and inexcusable delay” in progressing them: see the cases summarised in Wearn t/a Jonathan Wearn Productions v HNH International Holdings Limited [2014] EWHC 3542 (Ch). What Société Générale suggests, however, is that, even if that threshold is not crossed (a question Popplewell J chose not to answer in the paragraph cited above), a decision to warehouse without informing the court of this is in and of itself abusive. While that finding has support in the judgment of Lord Woolf MR in Arbuthnot Latham Bank Ltd v Trafalgar Holdings [1998] 1 WLR 1426, there have been relatively few cases in which such a view has been followed as far as strike out. As such, the warning signal for the future is clear: even in cases where one is not dealing with eight or twelve year delays (as in The Auk [2013] EWHC 4076, warehoused claims may be vulnerable to strike out on grounds of abuse.
Practical lessons
The most surprising aspect of Société Générale v Goldas Kuyumculuk Sanayi and others [2017] EWHC 667 (Comm) is that the solution to the difficulties in which Societe Generale found themselves would – at least from what can be seen in the Judgment – appear fairly simple. They should have informed the Court of developments many years before Goldas applied for strike out. Whether further steps should have been taken is a more nuanced question. An application for a general stay with freezing order relief remaining in place might have proved involved given the need to recast the grounds for relief under section 25 of the CJJA. A further or related application in relation to service prior to the expiry of the validity of claim forms would seem to have been required as well.
In any event, the arguments for bringing an application oneself, rather than responding to one from the Defendants, seem overwhelming. That is not least because such an application would have placed the Defendants in the difficult position of having to decide whether to acknowledge receipt, engage, and potentially submit to the jurisdiction, or leave the application undefended.
It will be noted that the observations made above do not include ones as to when any application should have been made. The reason for that is that the overall assessment must be that even bringing an application when there was a risk of juridical criticism would seem preferable simply to lying low. The least compelling parts of what is otherwise a closely reasoned judgment lie in Popplewell J’s findings as to what the Court would have done had Societe Generale brought applications before it between April 2008 and March 2016. As valid as the criticisms of Societe Generale’s stance may be, the realistic position may have been more straightforward: even if such an application had been brought late in the day the likely course of events at court would have involved a judicial dressing-down, an inquisition into what had happened and was happening elsewhere, followed by an order likely rectifying the position and in any event preserving the causes of action. There are, after all, only a handful of judges who would contemplate the court striking out of its own motion a claim for $483m plus interest. Furthermore, had Goldas appeared at all it would have had significant explaining to do. The Commercial Court is not generally charitable to parties who have no particularly clear explanation for using several metric tonnes of a bank’s gold without paying for them.
Furthermore, while judicial criticism of Societe Generale’s conduct seems justified, it must be said that the wider stance of staying the English proceedings would seem readily justifiable as a matter of principle. If companies from three jurisdictions are litigating in several jurisdictions, and if one of the sets of foreign proceedings is the current focus of their endeavours, the case management arguments for a stay in England are very strong. Moreover, the arguments for a stay before close of pleadings rather than after a trial timetable is set are also strong. It would be unfortunate if Société Générale v Goldas Kuyumculuk Sanayi and others [2017] EWHC 667 (Comm) was taken as authority for the proposition that where a freezing order was in place English proceedings had axiomatically to be progressed. The better explanation for the decision lies in strong judicial disdain for “a casual approach” and a failure to keep the Court informed of developments over many years. As such, the value of the proverbial brief letter to the Court has clearly appreciated rather more since 2008 than the price of gold bullion.
