B e f o r e :
LORD JUSTICE PETER GIBSON
LORD JUSTICE LAWS
and
LORD JUSTICE LONGMORE
____________________
| |
KUWAIT OIL TANKER COMPANY S.A.K
SITKA SHIPPING INCORPORATED
| Appellants
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| | - and -
|
|
| | HASSAN ALI HASSAN QABAZARD
| Judgment Debtor
|
| | - and -
|
|
| | UBS AG.
| Respondent
|
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
____________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
____________________
HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
____________________
Crown Copyright ©
Lord Justice Longmore:
Facts
- In November 1998 after a six week trial in the Commercial Court Mr Justice Moore-Bick held that Mr Al-Bader and Mr Qabazard had systematically defrauded Kuwait Oil Tanker Co SAK (“KOTC”) of which they were respectively Managing Director and Head of Finance. Mr Qabazard had appeared in person before the judge but did not give evidence. His defence, that what he had done was in the best interests of the state of Kuwait, was comprehensively rejected and judgment for about $130 million was entered against him. Part of the evidence at the trial related to a sum of $34 million which was paid into an account at the London branch of the Swiss bank UBS A.G. (“UBS”) and transferred out of the London branch on 15th November 1990 to an account at the Geneva branch of UBS. UBS has its Head Office in Zurich, and branches all over the world. Both the London and the Geneva accounts appeared to be controlled by Mr Qabazard who had no explanation for the transaction revealed by the movement of the sum from one account to the other. Shortly after the trial, Moore-Bick J granted KOTC a world-wide freezing injunction.
- Mr Qabazard has no plans to discharge the judgment given against him. Both he and Mr Al-Bader appealed to this Court; Mr Al-Bader appeared by leading counsel. Mr Qabazard did not instruct solicitors or counsel nor did he appear in person but, the appeal having been launched, this Court had to consider his appeal along with that of Mr Al-Bader. After a hearing of many days, the Court dismissed both appeals on 18th May 2000 with consequential orders as to costs. Mr Qabazard has not been heard of since; KOTC has found a modest amount of property belonging to Mr Qabazard which has realised about £140,000, but the judgment against him is, in substance, still unsatisfied.
- Not unnaturally the Claimants wondered what had happened to the $34 million sum and they accordingly started garnishee proceedings in the English High Court. As any reader of this judgment will know, garnishee proceedings are a form of execution whereby a judgment creditor can obtain an order that any person (“the garnishee”) who owes money to a judgment debtor pay such money to the judgment creditor, instead of to the judgment debtor, so far as may be necessary to satisfy the judgment. The procedure was introduced in English law by the Common Law Procedure Act 1854 and, according to the law of England, payment by the garnishee will discharge the debt which the garnishee owes the judgment debtor. There are two parts to the procedure. First the judgment creditor obtains a garnishee order nisi against the garnishee; this has the effect of freezing any sum due to the judgment debtor and requiring the garnishee not to pay him pending the garnishee’s attendance at court on a particular day to show cause why the order nisi to pay the judgment creditor should not be made absolute or final. If the garnishee does not attend or makes no objection, the order nisi will be made absolute and the garnishee is under an obligation to pay over any sum he owes the judgment debtor to the judgment creditor.
- The application for a garnishee order nisi is usually made on paper to a Master of the Supreme Court. Since the trial had been in the Commercial Court it was sent as a paper application to the Commercial Court and dealt with by Tomlinson J who (being a judge of that Court) decided to retain the matter in the Commercial Court. He made the order as asked on 21st December 2000 but at the same time wrote to the applicants to inform them that he was soon to deliver a judgment in which he would be addressing the legal difficulties in the way of an applicant who sought to garnish a debt owed by a foreign bank. That judgment was delivered on 23rd January 2001 in relation to a debt owed to an account-holder by Hong Kong and Shanghai Banking Corporation (“HSBC”) in Hong Kong. The matter was rightly before the court because HSBC had a branch in England and was registered as an overseas company in England with the result that proceedings could be brought against it in England. UBS is in an identical position in that it also has a branch in the City of London and is registered as an overseas company. It is accordingly amenable to the jurisdiction of the English court.
- In his judgment Tomlinson J held that the debt owed by HSBC to the judgment debtor in the case before him was a foreign debt whose lex situs was Hong Kong. That law would not recognise the effect of an English garnishee order and payment by HSBC as garnishee would not, therefore, automatically discharge HSBC; there was thus a substantial risk that HSBC might have to pay the amount of the debt a second time in Hong Kong. He declined in his discretion to make the order absolute, saying that garnishee relief should not usually be available in respect of a foreign debt unless it brings about “a virtually automatic discharge of liability as between garnishee and judgment debtor”. His decision was reversed by this court on 7th August 2001; this court held that there was no presumption that, merely because a debt was a foreign debt, garnishee relief should be refused. The fact that Hong Kong law would not recognise the effect of an English garnishee order was not decisive of the question whether garnishee relief should be granted; the true question was whether the garnishee would be at risk of paying twice over. In the absence of evidence to the contrary, English law that any person compelled to discharge a third party’s liability has a claim in restitution to be reimbursed by that third party would be applied. The availability of this restitutionary remedy which would pro tanto discharge any liability on the judgment debtor’s bank account meant that the bank would not be liable to pay twice and a garnishee order absolute was, therefore, made. The decision of the Court of Appeal is now reported as Société Eram Shipping Co Ltd v Compagnie Internationale de Navigation [2001] All ER (Comm) 721. I will call it the Eram case.
- Meanwhile KOTC’s application to make absolute their garnishee order nisi had come before Langley J on 23rd March 2001. He followed the decision of Tomlinson J, no submission having been made that it was wrong. He considered that the bank’s evidence of Swiss law, put before him, showed that there was a real risk of exposure to Mr Qabazard if the bank were required to pay KOTC and also a risk of exposure to sanctions from the Swiss state. He noted that the Bank’s evidence was in conflict with the evidence put before him by KOTC. He said that he was in no position to resolve that conflict but that he was able to say that risks faced by the bank were real and not fanciful. He therefore decided as a matter of his discretion to refuse to make the order absolute. KOTC now appeal to this court.
The Arguments
- UBS took a preliminary point on Article 16(5) of the Lugano Convention. Both Switzerland and the United Kingdom are parties to this Convention, which for present purposes could be said to be equivalent to the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters. Normally a defendant must be sued in the courts of his domicile but Article 16 provides for exclusive jurisdiction in some cases, thus departing from that normal rule. Article 16 relevantly provides:-
“The following courts shall have exclusive jurisdiction regardless of domicile
...................
5 In proceedings concerned with the enforcement of judgments, the courts of the Contracting State in which the judgment has been or is to be enforced. . .”
UBS say that the judgment of Moore-Bick J and the Court of Appeal is to be enforced in Switzerland and the courts of Switzerland have exclusive jurisdiction. Conversely KOTC say that the judgment has been and is to be enforced in England whose courts, therefore, have exclusive jurisdiction. Langley J decided against UBS on this point but it is logically the first matter to be decided.
- Apart from their contentions on this point, KOTC submitted:
(1) that in exercising its discretion whether to make a garnishee order absolute, there is no presumption that the court should refrain from making the order absolute in the case of a foreign debt;
(2) the fact that the lex situs of any particular debt would not recognise the order of an English court garnishing a debt due to the judgment debtor as discharging the garnishee’s obligation to the judgment debtor is not determinative of the question how the court should exercise its discretion; the question for the court is whether there is a real risk of the garnishee having to pay twice over (the risk of double jeopardy);
(3) if any considerations apart from the risk of having to pay twice are relevant, they have to be assessed as real and pressing;
(4) there was no risk of double jeopardy or other action at the suit of the state because the English court was the court with exclusive jurisdiction under Article 16(5) and the Swiss courts and the Swiss state would recognise the order of the English court under Articles 23-25 of the Lugano Convention;
(5) if there was any relevant issue of Swiss law, it could not be decided merely by noting the conflict of evidence but the conflict should be properly resolved.
- Apart from the Article 16(5) argument, UBS submitted:-
(1) that, while the UBS branch in London was entitled, under Swiss law, to confirm (and did confirm) that Mr Qabazard now had no account at the London branch, Swiss law, supported by state sanctions,
(a) prevented UBS from revealing the existence of any account held by Mr Qabazard with UBS;
(b) prevented UBS from making any payment without Mr Qabazard’s express authority;
(c) prevented UBS from honouring any order of the English court ordering payment to KOTC by UBS of their debt to Mr Qabazard;
(2) that Swiss law would not regard any debt to Mr Qabazard as discharged by virtue of compliance with a garnishee order made absolute by the English court;
(3) that a Swiss court would not recognise the order of the English court because:
(a) the order did not fall within the category of judgments set out in Article 23;
(b) a Swiss court would regard the question arising before the English court as being within the exclusive jurisdiction of the Swiss courts under Article 16(5);
(4) that there was thus a real risk both of double jeopardy and sanctions of the Swiss state if UBS made payment pursuant to a garnishee order absolute;
(5) that Langley J was right to conclude that the fact that UBS had produced a reasoned and professional statement as to Swiss law was sufficient to raise a real risk of double jeopardy and exposure to sanctions and there was no need for any conflict of evidence to be resolved.
- Before dealing with the detail of these submissions, it is necessary to say a little more about the English law of garnishment.
Development of the garnishee jurisdiction
- The current source of law is the old R.S.C. Order 49 which became part of Schedule 1 to the new Civil Procedure Rules by virtue of C.P.R. 50.1. Order 49, relevantly for present purposes, provides, in wording which still echoes the terms of the Common Law Procedure Act 1854:-
“1. (1) Where a person (in this order referred to as ‘the judgment creditor’) has obtained a judgment or order for the payment by some other person (in this order referred to as ‘the judgment debtor’) of a sum of money amounting in value to at least £50, not being a judgment or order for the payment of money into court, and any other person within the jurisdiction (in this order referred to as ‘the garnishee’) is indebted to the judgment debtor, the court may, subject to the provisions of this order and of any enactment, order the garnishee to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor from the garnishee, or so much thereof as is sufficient to satisfy that judgment or order and the costs of the garnishee proceedings.
(2) An order under this rule shall in the first instance be an order to show cause, specifying the time and place for further consideration of the matter, and in the meantime attaching such debt as is mentioned in paragraph (1) or so much thereof as may be specified in the order, to answer the judgment or order mentioned in that paragraph and the costs of the garnishee proceedings . . .
8. Any payment made by a garnishee in compliance with an order absolute under this order, and any execution levied against him in pursuance of such an order, shall be a valid discharge of his liability to the judgment debtor to the extent of the amount paid or levied notwithstanding that the garnishee proceedings are subsequently set aside or the judgment or order from which they arose reversed.”
The significant words of Order 49 r.1(1) are that the court may order the garnishee to pay the judgment creditor “the amount of any debt due or accruing due to the judgment debtor from the garnishee”.
- The order nisi is a prescribed form (No 72) and the garnishee order nisi made by Tomlinson J dated 21st December 2000 and sealed on 2nd January 2001 followed that prescribed form in the following terms:-
“1 All debts due or accruing from the garnishee (UBS A.G.) to the judgment debtor, Hassan Ali Hassan Qabazard, whether in his own name or in the name of Esculape Foundation, be attached to answer Judgments recovered against the judgment debtor by the judgment creditors in the High Court of Justice on 15 December 1998 for sums in excess of US$ 130 million (together with the costs of the garnishee proceedings) on which judgments only approximately £140,000 has been repaid, the rest remaining due and unpaid.
2 The garnishee do attend Master sitting in Room No , Royal Courts of Justice, Stand, London WC2A 2LL on 2001 at o’clock on an application by the judgment creditors that the garnishee do pay to the said judgment creditors the sums due from the garnishee to the judgment debtor, or so much of them as may be sufficient to satisfy the said Judgments together with the costs of the garnishee proceedings.”
The only material difference between the Prescribed Form and the order as made is that in the prescribed form there is an additional square bracketed paragraph, prefaced by an italicised rubric
“[Add where appropriate: The name and address of the branch of the garnishee institution at which the debtor’s account is believed to be held is . . . . . . The number of that account is believed to be . . . . . .]”
- Soon after the provisions of the Common Law Procedure Act were incorporated into the original Rules of Court by the Supreme Court of Judicature Act 1875, the question arose: what should be the court’s approach to a garnishee who attended on the application to make absolute the order nisi but refused to state the amount he owed to the judgment debtor or, indeed, whether he owed the judgment debtor anything at all? It was first of all held in Lucy v Wood [1884] W.N. 58 that it was proper to make a garnishee order on the application of the judgment creditor even if he did not or could not specify the amount of the garnishee’s debt which he wanted to attach.
- This was followed by the case of Vinall v De Pass [1892] AC 90 in which De Pass had obtained judgment against Capital and Industries Corporation for £148; he was able to swear that the company’s managing director had said to him that the company was owed at least £100 for calls due on shares in the company. In reply Vinall swore he had paid the company all the sums which were payable in respect of the shares. He declined to swear that he owed nothing to the company. The Divisional Court set aside a garnishee order absolute made by Vaughan Williams J; the Court of Appeal [1891] 1 QB 216 restored the judge’s order but held that it was right for Vinall to have a further opportunity to depose that he did not owe any debt to the company; when he declined to do so, the court inferred that there was a debt outstanding and decided that an order absolute, requiring Vinall to pay the amount of the judgment, should be made. Vinall appealed to the House of Lords submitting that it was for the judgment creditor to allege what debt was due from the garnishee to the judgment debtor and that it was sufficient for the garnishee to deny he owed that debt. There was then no evidence of any other debt and the garnishee order should be set aside. His appeal was dismissed. Lord Halsbury LC pointed out that the order attached all debts due and said (page 95):-
“It is clear that . . . if there were other debts, out of which this execution could be satisfied due from the same person, those debts ought to be made the subject of the execution.”
He considered that Vinall, having been given every opportunity to deny that he was indebted to De Pass and having refused, there was an inevitable inference that he was indebted and the order nisi should be made absolute. Lord MacNaghten said (page 97):-
“[Vinall] says that he does not owe anything to the judgment debtor on one particular account. More than that he will not say”
and concluded that it was right to have made a garnishee order absolute. Lord Hannen considered the wording of the rule and said (p 99) that the judgment creditor’s affidavit
“is to lay a foundation for calling the debtor, the garnishee, before the tribunal in order to ascertain whether he can deny what is alleged against him, simply that he is indebted . . . [T]he statute here only requires that the affidavit shall state that he is indebted to such debtor. . . [I]t need not state in what respect he is indebted.”
- This remained the position until 31st March 1976. Order 49 r. 2 then provided:
“An Application for an order under Rule 1 must be made ex parte supported by an affidavit –
(a) identifying the judgment or order to be enforced and stating the amount remaining unpaid under it at the time of the application, and
(b) stating that to the best of the information or belief of the deponent the garnishee (naming him) is within the jurisdiction and is indebted to the judgment debtor and stating the source of the deponent’s information and the grounds of his belief.”
This state of law may well have caused difficulty for banks since, if all the judgment creditor could say, on information and belief, was that there was a debt, banks would, no doubt, have to do a certain amount of research before they could definitively state whether they were indebted to a particular customer and, if so, in what amount. That research would take time and cost money.
- On 1st April 1976 Order 49 rule 2 was amended by adding a third requirement (see SI 1976 No 337, paras 9 and 22):-
“(c) stating, where the garnishee is a bank [now a deposit-taking institution] having more than one place of business, the name and address of the branch at which the judgment debtor’s account is believed to be held [and the number of that account] or, if it be the case, that [all or part of] this information is not known to the deponent.”
The square bracketed words were added by later amendment to the Rules in 1981. The prescribed form was also amended in 1976 and 1981 to include the substance of the paragraph in square brackets identified in paragraph 12 above.
- When KOTC’s solicitor, Mr Aspinall, in the present case came to make his witness statement in support of the application for a garnishee order nisi on 19th December 2000 he exhibited a payment order of 15th November 1990 showing a transfer of $34.5 million from Mr Qabazard’s Account No 210927 at UBS in London to Mr Qabazard’s account No 362870 XL 60 at UBS in Geneva. On the basis of a letter of 3rd May 2000 from UBS Geneva to Geneva’s Debt Collection Office, stating that an attachment existed on the sums then in Mr Qabazard’s Geneva account totalling $1,333,174.78, he then said he believed that Mr Qabazard had since transferred the original sum out of Geneva to other branches of UBS. It was not suggested by UBS that Mr Aspinall’s witness statement was not a sufficient compliance with the requirements of Order 49 rule 2 in its current form. The evidence also explains why the deponent did not think it appropriate to include the square bracketed part of the Prescribed Form when he submitted a draft form of order to the Judge and, again no point was taken as to that.
- It may have been regarded as doubtful in 1976 whether Order 49 enabled a judgment creditor to garnish a foreign debt viz a debt whose lex situs (or, perhaps, whose proper law) was a foreign law. Any such doubts have now been laid to rest by SCF Finance Co v Masri (No 3) [1987] QB 1028, 1043-44, Interpool Ltd v Galani [1988] QB 738, Deutsche Schachtbau v. Shell International Trading Co [1990] 1 AC 295 and the Eram case [2001] All ER Comm, 721, paras 14-24. But the fact that a debt sought to be attached is a foreign debt will always be relevant when, in a contested case, the court has to decide whether to make a garnishee order absolute. Before any such consideration arises, however, the court must be made aware that a foreign debt is, indeed, sought to be attached. In the present case, when it was argued before us, all that UBS said was that there was no debt due from their London branch; they did not say that there is no debt due from any other branch. On Vinall v De Pass that would not be enough for a proposed garnishee of an English debt to avoid the making of a garnishee order absolute against him. The question arises whether it is enough in the case of a proposed garnishee of a foreign debt.
- A solution to this question has to be found in the context of a bank (such as UBS) which has branches in many leading countries in the world. This is an important consideration since the situs of a debt is where it is expressly or impliedly payable or, failing any such place, where it would be paid in the ordinary course of business. For this reason, the debt constituted by a bank account and thus due to a bank’s customer is located in whatever country the account is kept, see Dicey & Morris Conflict of Laws 13th ed., paras 22-029 and 33-296; Eram para 32. Even if, therefore, the Bank owes no English debt to Mr Qabazard, it may owe a Swiss debt or any number of foreign debts, if any transfers have been made out of his Geneva account to other accounts.
Article 16(5) of the Lugano Convention
- It is at this stage that it is convenient to consider the interpretation of Article 16(5), since UBS submit that this Article precludes the English court from making a garnishee order and thus from considering the question of the existence of or the amount of any foreign debt. Garnishment being a form of attachment, must be “a proceeding concerned with the enforcement of judgments”. It, therefore, follows that the court which has exclusive jurisdiction is to be the court “of the Contracting State in which the judgment [has been or] is to be enforced”. I exclude from consideration the words “has been or” since the judgment has not yet been substantially enforced. Where is the judgment to be enforced?
- The only feasible answer to that question on the evidence before the court is that the judgment is to be enforced in England. It is the English court that is being asked to make the garnishee order into an order absolute. There can, of course, be no question of enforcing that order in another Contracting State without an order of a court of that state. In fact Moore-Bick J’s world-wide freezing order of November 1998 contains the usual Babanaft proviso (see [1990] Ch 13) providing that the terms of the freezing order “do not affect or concern anyone outside the jurisdiction of this court until it is declared enforceable or is enforced by a Court in the relevant country”. That makes explicit the fact that, before a foreigner can be affected by an order of an English court, the order of the English court has to be declared enforceable by the court of his country. Not until then will his assets in that country be at risk. UBS’s assets outside the English jurisdiction, wherever they may be, will thus not be available to satisfy any order of the English court without the order of the relevant foreign court.
- In the present case Mr Rabinowitz for UBS relied on the evidence of UBS’s legal counsel at their London branch, Mr Dealy, that there was no debt due to Mr Qabazard on any account with UBS in London. He had no instructions (and originally there was no evidence) to say whether, apart from in England, Mr Qabazard had any account with UBS in any country at all. The money might still be owing in a Geneva account or elsewhere in Switzerland or in an account in another Contracting State or, indeed, in a country which is not a party to the Lugano Convention at all. In these circumstances it is impossible to say that any state apart from England has exclusive jurisdiction. UBS’s argument that, while they could only say that no debt existed in London, exclusive jurisdiction was vested in the courts of Switzerland where any debt was most likely to exist (although they could not say whether it did or not), must be rejected since it is incumbent on a party who asserts that a particular court has exclusive jurisdiction to assert and prove the grounds of such exclusive jurisdiction. If UBS wish to say that enforcement of a judgment by way of a garnishee order can only take place (under the Lugano Convention) in the place where it is recoverable, they have to state that a debt exists in the place which is asserted to have exclusive jurisdiction viz Switzerland. That is, however, just the matter which they submit Swiss law prohibits them from revealing. They cannot therefore prove the factual foundation for their submission.
- But even if it were clear that the debt sought to be garnished was a Swiss debt, that would not mean, in my judgment, that the Swiss courts would have exclusive jurisdiction under the Convention. The court which has exclusive jurisdiction is the court of the state “in which the judgment has been or is to be enforced”. That does not mean, as UBS contend, the state which is the lex situs of the debt and thus the state in which the debt is properly recoverable but rather the state in which it is proposed to enforce the order for which application is being made. The mere fact that a debt exists within a particular jurisdiction and is properly recoverable there does not mean that an order of the court made as a result of the existence of that debt is only enforceable in that place, if the person against whom the order is made has assets in another jurisdiction in which he is answerable to the order of the court.
- This makes sense once it is appreciated that the garnishee order absolute only operates in England, unless it is sought to enforce it in some other Contracting State. If that happens, that other state will then have exclusive jurisdiction in its own territory in relation to such enforcement. That, in my judgment, is what Article 16(5) means. This is supported by a passage in Eram where Mance LJ distinguished an English garnishee order from an order requiring a bank to produce, in an English action, documents which were abroad; he said in relation to HSBC in Hong Kong:-
“The ultimate aim of garnishee relief is not, however, to require HSBC to do anything in Hong Kong. It is to require HSBC in England to pay the judgment debt, or so much of it as can be met, out of the moneys owed by HSBC to the judgment debtor in Hong Kong.”
So here any order against UBS, if made, would only be an order to do something in England and, as such, the English court has exclusive jurisdiction under the Lugano Convention.
- The only decision of the European Court to which we were referred, Reichart v Dresdner Bank [1992] ECR 1-2149 at 2182 lends slight support to this view, as Langley J indicated, by saying (1) that Article 16 should not be given a wider interpretation than required by its objective and (2) that the essential purpose of the provision is that it is only for the courts of the Member State in whose territory enforcement is sought “to apply the rules concerning the action on that territory of the authorities responsible for enforcement”.
- For these reasons Article 16(1) of the Lugano Convention is no jurisdictional bar preventing the invocation of English garnishee proceedings against UBS in respect of the English judgment debt due from Mr Qabazard. The question remains whether an English court can properly make any order where there is no evidence as to the existence or amount of any debt over and above the sum currently attached in Mr Qabazard’s Geneva account of $1,333,174.78. I return, therefore, to the question whether absence of evidence from the proposed garnishee of a foreign debt as to the existence or extent of his indebtedness means that the English court should make no order.
Consequence of absence of evidence about the extent to which UBS is indebted to Mr Qabazard
- Once it is accepted that the English court has jurisdiction to make a garnishee order in respect of foreign debts, just as much as it has jurisdiction to make such an order in respect of domestic debts, it is difficult to see that the principle laid down in De Pass v Vinall has any the less application. If a debtor of a debt whose situs is in England has to state the extent of his indebtedness and not just accept or deny the particular debt whose existence is asserted in the judgment creditor’s witness statement, there can be no principle that a debtor of a foreign debt (if it exists) need not similarly state the extent of his indebtedness. Indeed, unless he does so, there can be no scope for a focused debate on the vital question whether the garnishee will be exposed to double jeopardy or any sanction of any relevant state where the debt is situated.
- UBS seek to rely on evidence of Swiss law from a Swiss Attorney-at-law, Dr Jörg Alain Schwarz, to the effect that Swiss banking secrecy rules do not allow any employee of a Swiss branch of UBS to confirm or deny to any person (including any employee of a branch of UBS located outside Switzerland) the existence of any assets deposited with UBS in Switzerland; Dr Schwarz says nothing about confirming or denying the existence of assets deposited at UBS’s branches outside Switzerland. As I have said Mr Dealy of UBS was able to say that no debt was owed to Mr Qabazard in London. Neither he nor Mr Rabinowitz for UBS could, at the time of oral argument, say anything about the existence or non-existence of any debt anywhere else. Dr Schwarz supported his opinion by referring to Article 47 of the Federal Act on Banks and Savings Banks of 8th November 1934 and Article 43 of the Federal Act on Stock Exchanges and Securities Trading of 24th March 1995 which both impose penalties on employees of banks or securities dealers who divulge confidential information. For this reason he says (para 15):-
“a Swiss branch of UBS will eg not inform the London branch of UBS of the existence or non-existence of any assets of the Judgment Debtor deposited with it.”
He also says in para 17 that any information given by an employee of a Swiss branch of UBS to the Judgment Creditor or to the High Court of Justice as to whether there are (or are not) any assets deposited by the Judgment Debtor with any Swiss branch of UBS would constitute a violation of both Acts and expose the employee to criminal prosecution and punishment. He states further (para 20) that the Federal Banking Commission may withdraw the licence to do business of any bank which manifestly fails to preserve its customers’ secrets and can order the dismissal of employees who violate banking secrecy.
- The question that arises, therefore, is whether this evidence (which is substantially unchallenged) can have any effect on the discretion of an English court to make absolute the garnishee order nisi in this case. There can be no doubt that, if UBS were able to say that they did have an indebtedness to Mr Qabazard and that such indebtedness was solely a Swiss debt, it would be relevant to have in mind the provisions of Swiss law preventing UBS from giving particulars of the indebtedness. Any provisions of Swiss law in relation to the likelihood of the Bank having to pay the debt twice might well also be relevant.
- De Pass v Vinall had not, however, been cited to us and we considered that the parties ought to have the opportunity to make written submissions to us on that case. KOTC submitted that De Pass v Vinall was consistent with their argument but a change of approach occurred on the part of UBS who sought to put in further evidence to show that UBS was not indebted to Mr Qabazard in any place outside Switzerland; they then relied on Dr Schwarz’s evidence to submit that they were unable to say whether Mr Qabazard was indebted in Switzerland and that it was, therefore inappropriate for this court to infer that any debt existed at all over and above the sum of $1.333 million revealed by their letter of 3rd May 2000 to the Geneva Debt Collection Office. As to that sum, UBS could not say whether it was still owing; even if it was right to infer that a debt in at least that sum existed no order in respect of that sum should be made because (1) there was a risk that they might also have to pay it to Mr Qabazard and (2) it was already the subject of a Swiss freezing order.
- KOTC were content to leave it to the court to decide whether UBS’s new evidence should be admitted and what weight should be attached to it. For my own part, reserving all questions of costs, I consider it should be admitted for the simple reason that cases should if possible be decided on the basis of the full facts. It is not evidence that could, in any way, be challenged and, on the basis of that evidence, I would conclude that there is no evidence of any debt due from UBS to Mr Qabazard outside Switzerland. The fact remains, however, that the court still does not have the full picture and still has to decide whether it is right to infer that UBS owes Mr Qabazard any sum in excess of that set out in the 3rd May letter.
- If the situation were that no procedure existed for ascertaining whether there was a debt and the court considered that UBS were taking advantage of that situation to conceal the evidence of any indebtedness of Mr Qabazard, it might well be proper for an English court to infer the existence of a debt owed by UBS in a sum greater than $1.333 million to their customer. But if such a procedure does exist and can be utilised by KOTC, it would be premature to reach any such conclusion. What Dr Schwarz says about this is in paragraph 16 of his expert report:-
“The secrecy obligations of a banker . . . . are not, and never have been, absolute . . . . . These secrecy obligations are, in particular, not intended or operated as an obstacle to the enforcement of any judgment given in civil or commercial matters. However, it has to be emphasised that even in cases where banking secrecy can be set aside, foreign courts cannot issue orders to a bank . . . . in Switzerland directly, but have to pass through Swiss courts or Swiss authorities which will issue the necessary orders to witnesses or persons who have to produce documents.”
It seems to me, therefore, that this court’s approach should be to make no order on this appeal at present but leave KOTC to take such proceedings in Switzerland as they are advised, presumably by way of registering their English judgment and then applying for production of Mr Qabazard’s statements of account with UBS which will show how much of the $34 million Mr Qabazard deposited in 1990 remains and where any sums transferred out of the account have gone. I assume that the Bank will not oppose such application and it is, in any event, clear in the light of Dr Schwarz’s evidence that the court will make such an order. In this way the English court and the Swiss court can properly cooperate with one another. Once such order is made, it will then be clear whether a Swiss debt, in excess of the sum already attached, exists or not and how much that debt is. An order of the Swiss court will also dispose of the problem of Swiss state sanctions in relation to compliance with any order made by the English court since there will no longer be any confidence to be broken and the problems raised in paragraph 27 of UBS’s supplemental submissions in relation thereto will therefore disappear.
- UBS accept that the letter of 3rd May 2000 may support the inference that there is a debt due from UBS to Mr Qabazard in the sum of $1,333,174.78. I would so hold. This sum is subject to both a civil attachment notified to UBS on 27th August 1999 (I assume this to be notification of the post-judgment freezing order made by Moore-Bick J on 20th November 1998) and a criminal attachment (which I assume has been obtained by the State of Kuwait as set out in paragraph 7 of Mr Aspinall’s witness statement). It may be established in due course that there are further sums due which may or may not be subject to any such attachments. It is, therefore, sensible to consider briefly what the decision of this court is likely to be once the extent of the debt is established, since the question of double jeopardy is still outstanding.
- It is understandable that Langley J did not consider it necessary to resolve the conflicts revealed by the evidence of Swiss law since neither party argued before him that Tomlinson J’s decision in Eram was wrong. It is only subsequent to Langley J’s decision that Eram was overruled. It is now clear that the conflict of evidence has to be resolved. It seems to me that the parties should have the opportunity of revisiting that issue, in the light of the information revealed by any order of the Swiss court. I do not envisage that any further evidence should be produced but either side should have the opportunity, if they require it, of cross-examining its opponents’ Swiss lawyers; the right order for this court to make, once the extent of the debt is revealed in compliance with the order of the Swiss court, will therefore be that the case be remitted to the Commercial Court for Langley J or any other judge of that court to decide the question of double jeopardy in accordance with the principles set out in Eram and in particular the restitutionary rights of the bank there identified.
- The Commercial Judge should also consider the effect of any Swiss attachments there may be. No argument was addressed to us about the effect of the attachments recorded in the 3rd May letter or of any other attachments there might be. In the first place the attachments might be competing attachments although that may not be particularly likely if they have been obtained by KOTC on the one hand and the state of Kuwait on the other. That should be elucidated. Secondly UBS apparently seek to argue that double jeopardy exists, even when the sums have been attached. This is at first sight surprising since one would expect that the sole reason for any attachment is that the relevant sums have been frozen either pending the decision of a relevant court as to Mr Qabazard’s liability or pending satisfaction of any judgment in relation to that liability. That must, however, depend on the terms of the Swiss attachments as to which again there is currently no evidence.
- For the reasons given, however, I would at this stage make no order pending an application by the appellants to the Swiss court for relief save that if no such application is made within 28 days, the appeal will be dismissed with costs; otherwise there will be liberty to both parties to apply.
Lord Justice Laws :
- I agree.
Lord Justice Peter Gibson :
- I also agree.
Order: No order on the appeal save that:
- if the appellant's make no application to the Swiss courts within 28 days, then the appeal should be dismissed with costs;
- further proceedings this jurisdiction, if any, to be remitted to a judge of the Commercial Court; and
- there should be liberty to apply to this court in the event of either side thinking that there are loose ends that need tying up by (1) and (2). Permission to appeal to the House of Lords refused.
(Order not part of approved judgment)
