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Jurisdiction ruling has implications for claims against foreign nationals

A foreign national with no assets in his name in England may find he is domiciled here for jurisdiction purposes when served with a claim form while visiting his family in London.

A Russian businessman who had no business interests or assets in England but regularly, for short periods of time, visited his wife and children living in London was held to be domiciled in England for jurisdictional purposes (Bestolov v Povarenkin [2017] EWHC 1968 (Comm), 28 July 2017)

Mr Povarenkin was personally served with a claim form while travelling through Heathrow airport in February 2017 while on a visit to London to celebrate the birthday of his son and wife who were living there during school term times. Mr Povarenkin applied for a stay of the English proceedings on the grounds of that Russia was the more appropriate forum to hear the claim. The Claimant argued that Mr Povarenkin was domiciled in England and therefore the court had no discretion (under Article 4(1) of the Brussels Regulations Recast No 1215/2012) to grant a stay.

The general principle of English law is that in England service of process is the foundation of the Court’s jurisdiction to entertain a claim in personam.[i] Therefore when someone, regardless of his nationality, is personally served with a claim form when he is physically present in England, the English court assumes jurisdiction. However, if the only basis of the jurisdiction is service whilst a person is merely present in the jurisdiction, then it is open to him to challenge jurisdiction on the basis of forum non conveniens and file an application under the Civil Procedure Rules Part 11 to dispute the Court’s jurisdiction.

Both Mr Bestolov (Claimant) and Mr Povarenkin (Defendant) were Russian citizens with business interests in Russia (the Claimant’s exclusively and the Defendant’s substantially) and lived in Russia. Neither had business interests or business assets in England. The claim was for a debt repayment under agreements relating to the exploitation of various mining projects in the Yakutia region of Russia and there was no clear express choice of law in the agreements. All meetings between the parties took place in Russia; the agreements were negotiated and executed in Russia and drafted in the Russian language; and the performance under the agreements was intended to and did take place in Russia.

Nonetheless, the Commercial Court dismissed Mr Povarenkin’s application and held that the English courts had jurisdiction to hear the claim against him because he was domiciled in England at the date of issue of the claim form and that therefore the Court had no discretion to decline jurisdiction on forum non conveniens grounds and was obliged to accept jurisdiction pursuant to Article 4(1) of the Brussels Regulations Recast No 1215/2012.

The Court also considered the alternative bases of jurisdiction advanced by the Claimant, namely that (a) there was a jurisdiction agreement between the parties in favour of the English courts, and (b) the agreements were governed by English law, and also the forum non conveniens point as they were all fully argued before the Court.

It was held that the Claimant had not established that the parties had entered into an agreement on jurisdiction and that there was no genuine and real choice of English law to govern the agreements, and that they were to be regarded as governed by Russian law, which would apply in the circumstances where both parties were resident in Russia and the agreements were closely connected with Russia.

In relation to forum non conveniens, the Court considered what would the position be if the Court’s jurisdiction had been founded only on Mr Povarenkin’s presence in England (but not his domicile here) or on the English law being the applicable law of contract. In both cases the jurisdiction would have been subject to forum convenience discretion and the question for the Court was would it have agreed not to exercise its discretion on the grounds of forum non conveniens.

On the facts, the Court was satisfied that Russia would have been an available and appropriate forum and said that on the hypothesis that Mr Povarenkin was not domiciled in England, he would have discharged the burden of demonstrating that Russia was a clearly or distinctly more appropriate forum. In addition, although it was not suggested that the claim cannot be heard fairly in the Russian court (e.g. on the grounds raised in Cherney v Deripaska), the Court nonetheless looked into this issue as well and said that it did not consider that the matters raised would have led to it being unjust to prevent the Claimant suing in England.

Against this background, the Court found that it had jurisdiction because Mr Povarenkin was domiciled in England.

Domicile is governed by Articles 4(1) and 62(1) of the Brussels Regulations Recast which provide that persons domiciled in a Member State shall be sued in the courts of that Member State, regardless of their nationality (A.4(1)), and that the court shall apply its internal law to determine domicile (A.62(1)).

In the UK, individual’s domicile is determined under paragraph 9 of Schedule 1 of the Civil Jurisdiction and Judgment Order 2001 (the “CJJO”) which provides that an individual is domiciled in the UK, or in a particular part of it if (a) he is resident in the UK, or in a particular part of it, and (b) the nature and circumstances of his residence indicate that he has a substantial connection with the UK, or a particular part of it, which is presumed (unless the contrary is proved) if the individual has been so resident for the last three months.

In the judgment, the Court reviewed principles of residence and domicile for the purpose of jurisdiction and the relevant case law which it distilled into the following propositions:

“(1) It  is  possible  for a defendant  to  reside  in  more  than  one jurisdiction  at the  same time.

(2) It  is possible  for England to be a jurisdiction in which a defendant resides  even if it is not his principal place of residence  (i.e. even if he spends most of the year in another jurisdiction).

(3) A person will be resident  in  England if England  is for him a settled or usual place of abode.  A settled or usual place of abode connotes some degree of permanence or continuity.

( 4) Residence is not to be judged  according to a  numbers game” and it is appropriate to address  the quality and nature of a defendant’s visits to the jurisdiction.

(5)  Whether a defendant’s use of a property characterises it  as his or her “residence”, that  is  to say  the defendant  can fairly  be described as residing  there,  is  a question of fact and degree.

(6)  In deciding whether a defendant  is  resident  here,  regard  should  be  had to any settled pattern of a defendant’s life   in  terms  of his  presence   in  England   and  the reasons for the same.

(7) If a defendant visits a property in England on a regular basis for not inconsiderable periods of time, where his wife and children live, in order to see his  wife and children (including where the centre of the defendant’s relationship with his children is England), such property has the potential to be regarded as the family home or his home when in England, which itself is evidence which may go towards supporting the conclusion that England is for him a settled or usual place of abode, and that he is resident in England, albeit that ultimately it is a question of fact and degree whether he is resident here or not, having regard to all the facts of the case including any discernible settled pattern of the defendant’s life or as it has also been put according to the way in which a man’s life is usually ordered.”

Applying these principles to the facts of the case, the Court held that whilst it is clear that Mr Povarenkin was resident and tax domiciled in Russia at all material times, he was also at the same time resident in England (even though England was not his principal place of residence) given the following facts:

  • His wife and children have, since 2013 (i.e. for some 4 years), resided in a substantial property in Belgravia, London, for the majority of the year.
  • Mr Povarenkin and his wife had made a decision and life style choice for her and the children to live in England during the school year whilst the children are educated in England.
  • The Belgravia flat should be characterised as a family home in England. It is not used by Mr Povarenkin as a private hotel, but very much as a home, not only for his wife and children, but also for him whilst he is in England. His use of the flat is not infrequent, intermittent or fleeting, as was the case with Mr Deripaska (High Tech International v Deripaska [2006] EWHC 3276 (QB) and Cherney v Deripaska [2007] EWHC 965 (Comm)), but regular, frequent and of substance.
  • Mr Povarenkin has been spending substantial and increasing periods of time in England since 2014 rising from 60 days to 79 days a year and the reason for his regular visits is to spend time with his wife and children in the Belgravia flat. Therefore the centre of his relationship with his children is England.
  • Mr Povarenkin’s visits to England follow a regular pattern of life with him coming to London twice every month to see his family, which shows a regular and distinct pattern of family life in England on a regular, substantial and ongoing basis.
  • Mr Povarenkin and his wife spent very substantial sums of monies to satisfy the UK Tier 1 Investor Visa requirements for Mrs Povarenkina (Mr Povarenkin and the children are her dependants) leading to temporary residence in England, with the potential to apply for permanent residency in the future. This investment in English property and assets, and relocation of Mrs Povarenkina and the children to London, can only have been a lifestyle choice, at the very least, to establish a home in England.

In relation to the second limb of the domicile test, i.e. a substantial connection with England, the Court held that not only the presumption of substantial connection apply, but that the nature and circumstances of Mr Povarenkin’s residence indicate, overwhelmingly, that he has a substantial connection with England having regard to the facts set out above. The Court placed particular emphasis on (1) the Belgravia flat which it described as a substantial and permanent asset in England purchased out of joint matrimonial assets, regardless of who owned the flat in law (it was registered in Mrs Povarenkina’s name only), which formed a family home in England; (2) the frequency and regularity of Mr Povarenkin’s stay in the home in England; and (3) the substantial investment he and his wife made in UK property and UK shares out of joint matrimonial assets in the context of the Tier 1 Investment Visa and their entitlements thereunder.

As both limbs of the domicile test set out in paragraph 9 of the CJJO were satisfied on the facts, the Court found that Mr Povarenkin was domiciled in England and that therefore the Court was obliged under Article 4(1) of the Brussels Regulations Recast to accept jurisdiction and to dismiss Mr Povarenkin’s challenge to jurisdiction there being no discretion to decline jurisdiction on forum non conveniens grounds in such circumstances.

The decision in this case has practical and important consequences not only for Russian nationals but any foreign nationals who may be held domiciled in England for jurisdiction purposes even if they are resident and tax domiciled in another country.

[i] Dicey, Morris & Collins on The Conflict of Laws, 2012, 15th Edition, V.1, 11R-001 and 11-003

This briefing note has been written by Victoria Novikova and Charles Spragge. If you have any questions or require advice please contact Victoria and Charles who will be able to assist

 

This briefing was posted on 16 October 2017