Summary judgment application does not amount to submission to English jurisdiction
This recent interlocutory decision in The Deposit Guarantee Fund for Individuals (" the DGF") v Bank Frick & Co AG ("Bank Frick") & Anor deals another blow to the DGF in its recent attempts to pursue claims in England which allegedly arise following the 2014-15 banking crisis in Ukraine.
The underlying proceedings between the DGF, which is acting as liquidator of the PJSC National Credit Bank (the "Bank") and Liechtenstein-based Bank Frick arise from six pledge agreements entered into between Bank Frick and the Bank between 2013 and 2014, pursuant to which the Bank pledged funds as security for various loans made under agreements with several entities incorporated in the UK, including the second defendant.
The DGF alleges that the debtor entities did not carry on any legitimate business and that the loan proceeds which it transferred to them were dissipated shortly afterwards. The debtors subsequently failed to repay the loans and, shortly thereafter, Bank Frick enforced the pledge agreements in order to obtain US$25.8 million held by the Bank in an escrow account. The DGF is pursuing these monies via a claim under sections 423 – 425 of the Insolvency Act 1986, alleging that they constitute a transaction defrauding creditors.
Bank Frick acknowledged service of the DGF's claims in late June 2021, stating its intention to contest jurisdiction, and shortly afterwards issued an application which sought orders (i) staying the claim in favour of arbitration pursuant to section 9 of the Arbitration Act 1996 (the "1996 Act") and, alternatively and only in the event that the first application was unsuccessful, (ii) striking out the claim or granting summary judgment on the basis that the DGF had shown no reasonable grounds to bring it.
Bank Frick's first application sought to make clear its view that the summary judgment application should not be construed as a substantive step in the proceedings (which would have voided its attempt to seek a stay on the basis of section 9(3) of the 1996 Act) as it was "made solely in the alternative" to the stay application. The Bank was initially invited to agree to this assertion, and also to consent to the summary judgment application being heard before the stay application on that basis, but declined. Bank Frick therefore issued a second application seeking a declaration in relation to both requests.
The issues for the Court to consider were therefore:
- Whether Bank Frick's attempt to pursue the determination of the summary judgment application first could be considered a step in the proceedings to answer the substantive claim; and
- If not, whether the summary judgment application should be listed to be heard before the stay application.
Conditional summary judgment application not a "step in the proceedings"
Somewhat unusually, both the applicant and the respondent relied upon Capital Trust Investments Ltd v Radio Design TJ AB  EWCA Civ 135in support of their positions. It was common ground between the parties that neither (i) an application for strike out or summary judgment which is made expressly conditionally on the failure of a stay application or (ii) seeking a hearing and making submissions at the hearing of such an application, would amount to a step in proceedings. However the DGF submitted that Bank Frick's attempt to have the summary judgment application determined first was a waiver of its objection to the jurisdiction.
Having considered these arguments, Master Clark found that Bank Frick's application for summary judgment was expressly conditional on the outcome of the stay application (in the same way as the equivalent application was in Capital Trust) regardless of the order in which it sought the applications to be heard. It could therefore not result in a submission to the jurisdiction, nor was it a step in the proceedings for the purposes of the 1996 Act.
Stay application to be heard first
Having regard to both the risk of unnecessary costs and the complexity and length of the respective applications, the correct order of proceedings was for the stay application to be heard first. In Master Clarke's view, this was clearly also the logical approach given that the summary judgment application was expressly predicated on the outcome of the application for a stay. It was also noted that, unlike in Capital Trust, there was no common issue which would favour both applications being heard together.
The High Court's decision to grant Bank Frick's first declaration, but refuse the request to list the summary judgment application ahead of the stay application, is perhaps not a surprising one. The Court has rightly followed the logic of Capital Trust to preserve a defendant's right to make an application which is expressly conditional on the outcome of their attempt to seek a stay, without causing undue prejudice to a legitimate jurisdiction challenge. However, the case is perhaps most interesting as another example of recent attempts by the DGF to place its claims in the English courts, despite the real issues of forum non conveniens arising from the underlying contracts. The outcome of the stay application will be watched with interest by those who have recently been threatened with similar proceedings.