Examination in England of a Non-Resident Foreign Officer of a Judgment Debtor

by Dechert LLP

Obtaining a judgment is one thing, enforcing it is another. The location of a judgment debtor’s assets can be unknown or deliberately hidden. A judgment creditor may therefore wish to obtain information from a judgment debtor as to the whereabouts of assets, to enable it to make decisions as to how and where to enforce. Part 71 of the English Civil Procedures Rules enables a judgment creditor to do just that.

Examination of Judgment Debtors – CPR Part 71

Under Part 71, a judgment creditor can obtain a court order requiring a judgment debtor to provide information about his or her means and any other matter about which information is needed to enforce a judgment. A party served with such an order has to attend court to be examined on oath and, as necessary, to produce documents. This is a powerful tool as any failure to comply with the order can ultimately lead to committal to prison for contempt of Court.

In the case of a company, the order is made against an officer of the company and it is the officer who is examined and is at risk of committal proceedings if he or she fails to comply. I t is not possible to make such an order against officers if they are outside the jurisdiction when the application and order are made. However, in a recent case, it was held that a non resident foreign citizen who was served on a brief visit to England was subject to Part 71.

The Deutsche Bank Case

Deutsche Bank had obtained a US$243m judgment against a Turks and Caicos registered company, Sebastian Holdings Inc (SHI). The Court found that Mr Vik, who was at one time the sole owner and director of SHI, had transferred close to US$900m of assets out of SHI to hinder Deutsche Bank’s enforcement efforts. The Bank therefore had grounds to argue that SHI still had substantial assets but it did not know where those assets were. This was a paradigm case of when a creditor would want to make use of Part 71 and the Bank applied for, obtained and served an order for Mr Vik’s examination while he was briefly in the country.

Mr Vik, who is not resident or domiciled in the UK, applied to set aside the order on a number of grounds, all of which were unsuccessful. One of his arguments was that there was no jurisdiction to make an order against a non resident foreigner based simply on service on him of the order while on a fleeting visit to England or, alternatively, if there was it should only be exercised in exceptional circumstances. Both contentions were rejected. While the Court accepted that care needed to be taken in making such an order, particularly where the judgment creditor had other means to obtain the information, it had the ability to make such orders and it did not require exceptional circumstances. In any event, this was an exceptional case where Mr Vik, the officer of the company, in fact controlled the company which had failed to give proper disclosure of its assets, had told lies to the Court and had treated the company’s assets as his own. He was no stranger to the English litigation.

Nor was it any bar to the order that all the documents sought would be held outside the jurisdiction.

Judgment creditors will welcome this confirmation of the possibility of using Part 71 against non resident or domiciled officers even where the facts are less exceptional than they were in Deutsche Bank.

Deutsche Bank AG V Sebastian Holdings Inc and another [2015] EWHC 2773 (QB)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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