Shulman v Kolomoisky & Anor, Court of Appeal - Chancery Division, February 02, 2018, [2018] EWHC 160 (Ch)

Resolution Date:February 02, 2018
Issuing Organization:Chancery Division
Actores:Shulman v Kolomoisky & Anor
 
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Neutral Citation Number: [2018] EWHC 160 (Ch)

Case No: HC-2017-001383

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

BUSINESS LIST (Ch Div)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 02/02/2018

Before :

THE HONOURABLE MR JUSTICE BARLING

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Between :

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Mr Jonathan Crow QC & Mr Gregory Denton-Cox (instructed by Hogan Lovells International LLP) for the Claimant

Mr Ali Malek QC, Mr Conall Patton and Ms Pia Dutton (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the Second Defendant

Hearing dates: 18 and 19 December 2017

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GLOSSARY OF DEFINED TERMS

MR JUSTICE BARLING:

Introduction

  1. By this application, issued on 3 July 2017 by the second defendant, Mr Gennadiy Bogolyubov (``D2''), a declaration is sought that the court has no jurisdiction to try the underlying claim. The first defendant, Mr Igor Kolomoisky (``D1''), is not a party to the application.

  2. The claim, brought by the claimant, Mr Vadim Shulman (``C''), was issued on 12 May 2017. The substantive allegations are not of direct relevance to the application. In brief, they arise out of a business partnership or joint venture carried on between C, D1, and D2 from 1999/2000, investing in and managing assets associated with the metallurgical and mining industries in the Ukraine, Russia and the United States. The parties made a number of such investments, and apparently developed a close business and personal relationship so that they and their families became close friends. The relationship broke down when C alleged that the defendants had failed to account to him for his share of the profits and/or proceeds of sale of various of the joint investments. In this claim, C seeks an account of the defendants' dealings with partnership property and their proceeds, and an order for payment to him of all sums found due on the taking of such account, together with damages or equitable compensation for breach of duty, and other related relief.

  3. It is common ground that on 15 May 2017 the claim form (with the Particulars of Claim) was delivered by courier to 31 Belgrave Square, a substantial property in London which had admittedly been the family home of D2, his wife, and their four children since August 2010. The delivery was addressed to D2 and marked "private and confidential." It was accepted and signed for by a member of household staff. In addition, the claim form and Particulars of Claim were sent by first class post on 15 May 2017 to the same address.

  4. It was common ground before me that the claim has no connection with this jurisdiction and that none of the events pleaded in the Particulars of Claim took place in England. The only basis on which this court is alleged to have jurisdiction is that at the date the claim form was issued, namely 12 May 2017, D2 was domiciled here, so that this court is bound, as a matter of EU law, to entertain the litigation. There is one other possibility, which was described in argument by Mr Ali Malek QC, who appeared for D2, as a ``theoretical lacuna'' which could arise if I found that D2 was not resident here and was not domiciled in Switzerland at the material time. I will refer to this point again in due course.

  5. For the sake of completeness, I record that C contends that at the beginning of the parties' relationship an oral agreement was made between C and D1 to the effect that any disputes should be resolved by the English courts applying English law. However, I was told that C accepts that this alleged agreement is ineffective for the purpose of Article 23 of the Lugano Convention. In this application Mr Jonathan Crow QC, who appeared for C, placed no reliance upon any such agreement. I therefore say no more about it.

    The parties' respective positions and the main issue

  6. D2's position in relation to jurisdiction is as follows: He accepts that from about 2010 he became resident and domiciled in England, but he contends that in April 2016 he had reached a settled decision to leave England and move to Switzerland. His evidence is that this decision was prompted in part because he had on two occasions been targeted as an anchor defendant for litigation that otherwise had nothing to do with England, and in part for tax reasons. Pursuant to his decision, D2 states that in the course of late 2016 and early 2017, he changed his official tax residence from England to Switzerland, moved out of the family home in Belgrave Square, London, loosened the ties with his life in the UK, obtained a Swiss residence permit, leased an apartment in Geneva, arranged for his personal assistant, Mr Vyacheslav Anishchenko, to move his own family home to Geneva, bought a car, joined a gym and engaged a personal trainer there, and joined the local synagogue. In addition, in February 2017 he entered into a formal separation agreement with his wife, Sofia. According to D2's evidence, their marriage had broken down as a result of Mrs Bogolyubova's reluctance to leave London.

  7. In these circumstances D2 contends that well before the issue of the claim, he had effected a ``distinct break'' with, and ceased to be resident and domiciled in, England, and had become domiciled in Switzerland. He submits that in consequence, by virtue of Article 2 of the Lugano Convention 2007 (see footnote 1), he is entitled to insist on being sued in the Swiss Courts.

  8. C does not dispute that D2 may have intended to achieve a ``distinct break'' with England, but contends that this aim had not in fact been achieved by the time the claim form was issued on 12 May 2017. C's case is that as of that date D2 was still resident in the jurisdiction, and was validly served at his "usual or last known residence". In this respect C refers to CPR 6.9(2) and CPR 6.3(1)(c), the latter providing that service may be effected by leaving the claim form at a place specified in CPR 6.9.

  9. C also submits that D2 was still domiciled in this jurisdiction as at the relevant date. There is no dispute that if D2 was domiciled here at that time, the court has no discretion to decline jurisdiction. Article 4(1) of the Brussels I Regulation (recast) (Reg (EU) No 1215/2012) ("the Brussels I Regulation Recast") provides: Article 2 of the Lugano Convention 2007 is to the same effect. That Convention applies as between the EU and Denmark, on the one hand, and each of Norway, Switzerland and Iceland on the other. It is relevant here because of D2's contention that he became domiciled in Switzerland.

    ``Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.'' See Owusu v Jackson [2005] Q.B. 801; see also Lungowe v Vedanta Resources Plc [2017] EWCA Civ 1528, per Simon LJ at [32-37].

    Article 62(1) provides: An identical rule applies under the Lugano Convention by virtue of Article 59.

    ``In order to determine whether a party is domiciled in the Member State whose courts are seised of a matter, the court shall apply its internal law.''

  10. Domicile is to be assessed, not by reference to the common law test, but by specific rules. By virtue of the applicable UK rules, Paragraph 9 of Schedule 1 to the Civil Jurisdiction and Judgments Order 2001 and CPR 6.31(i)(ii). a person will be domiciled in the UK if (i) he is resident in the UK or a part of the UK (eg. in England); and (ii) the nature and circumstances of his residence indicate that he has a substantial connection with the UK or that part of the UK. Subject to proof to the contrary, the latter requirement is presumed to be fulfilled in the case of an individual who is resident in the UK or a particular part of the UK, and has been so resident for the last three months or more.

  11. D2 accepts that if he was resident in this jurisdiction on 12 May 2017, then he would not be in a position to contest that he was also domiciled here then, as the requirement of ``substantial connection'' would be satisfied by virtue of the presumption.

  12. Therefore, both parties accept that the key question on this application is whether D2 had ceased to be resident and domiciled in England and had become domiciled in Switzerland as at the date the claim form was issued. It is common ground that if the answer is in the affirmative, then this court lacks jurisdiction to hear the claim.

    The applicable test and burden of proof

  13. As seen, specific rules of English law are to be applied to determine whether D2 was domiciled in England on 12 May 2017. If he was not domiciled in England, then in order to determine whether he was domiciled in Switzerland, Swiss law is to be applied. I will refer to the applicable Swiss law later in this judgment.

    Burden and standard of proof

  14. The onus is on the claimant to show a good arguable case if he wishes to establish that a defendant is domiciled in a particular state or territory: Chellaram v Chellaram (No. 2) [2002] EWHC 632 (Ch), [2002] 3 All ER 17 at §23 (Lawrence Collins J). A good arguable case in this context has been said to mean showing that the claimant has a "much better argument on the material available": Canada Trust v Stolzenberg (No. 2) [1998] 1 WLR 547 (CA) at 555 (per Waller LJ).

  15. Waller LJ's gloss on the "good arguable case" test has very recently been discussed by the Supreme Court in Four Seasons Holdings Incorporated v Brownlie [2018] 1 WLR 192, in which judgment was handed down on the second day of the hearing in the present application. Referring to Waller LJ's test, Lord Sumption said this, at paragraph 7:

    ``In my opinion it is a serviceable test, provided that it is correctly understood. The reference to ``a much better argument on the material available'' is not a reversion to the civil burden of proof which the House of Lords had rejected in Vitkovice. What is meant is (i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional...

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