06/10/2017

Merits of claim against anchor defendant matter (probably)

This second post in our “new term catch up series” looks at Sabbagh v Khoury [2017] EWCA Civ 1120, an important case about using an anchor defendant under the Brussels Regulation regime.

The use of anchor defendants in English proceedings is very common. Establishing a claim against an anchor defendant allows co-defendants to be sued in England when jurisdiction could not otherwise be established over them.  In Sabbagh v Khoury, the Court of Appeal considered whether, when the Brussels Regulation (or the Lugano Convention) applied, the claim against the anchor defendant had to be meritorious or whether even a hopeless claim against the anchor defendant would be enough to found jurisdiction.

Interestingly, but unhelpfully for litigants, the Court of Appeal judges disagreed with one another.  Patten and Beatson LJJ held that the claim against the anchor defendant must have a real prospect of success.  Gloster LJ considered that this was unnecessary although did agree that the anchor defendant regime cannot be invoked if the sole object of the claim is to oust the jurisdiction of the courts which would otherwise have jurisdiction over the non-anchor defendants.

There is also considerable scope for the issue to be re-argued because, in fact, the court’s decision on whether the claim against the anchor defendant needed to have a real prospect of success was obiter dictum.

The facts in Sabbagh v Khoury are complicated and centre round allegations that the defendants conspired together to deprive the claimant of her inheritance.  Fortunately the details do not need to be considered to understand the court’s judgment on the jurisdiction point.

20 Essex Street’s Alex Layton QC, Philip Edey QC and Andrew Fulton all appeared in the case.

The relevant provisions – the Regulation

The Court held that the Brussels I Regulation did apply (and rejected the submission that the case concerned succession and therefore fell outside the regulation – contrast this case with Winkler v Shamoon).

Article 6(1) of the Brussels I Regulation (44/2001) was in issue (the same provision is now Article 8(1) of the Recast Regulation (1215/2012)).  In contrast to the equivalent common law regime (CPR 6.37 and PD6B para 3.1(3)) the Regulation does not expressly require the claim against the anchor defendant to have any merit.  It provides (emphasis added):

“A person domiciled in a Member State may also be sued: (1) where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings;”

This Article is one of the limited exceptions to the Brussels Regulation’s general rule (Article 2(1)) that a defendant must be sued in the place of domicile.

The majority held that the claim against the anchor defendant must have a real prospect of success

After a detailed review of the case law, the majority concluded that Article 6(1) could not be engaged if the claim against the anchor defendant was hopeless.

The key principles applied were that:

• Article 6(1) cannot be interpreted to allow a plaintiff “to make a claim against a number of defendants for the sole purpose of removing them from the jurisdiction … [of] domicile.” – Reisch Montage C-103/05; and
• Derogations from the general rule that defendants are sued in the place they are domiciled must be narrowly construed –  AMT Futures v Marzillier [2017] UKSC 13.

The majority thus reasoned that, without a legitimate claim against the anchor defendant, there would be no reason for the co-defendants to be ousted from their jurisdiction of domicile.  Further, where the claim against the anchor defendant was hopeless, there was no likely risk of irreconcilable judgments.  Thus, it could not be expedient to determine the hopeless claim together with the claim against the non-anchor defendants.

The majority held that the situation was different to that in Reisch Montage.  In that case, the CJEU had ruled that claim against an anchor defendant could be used even if it was “inadmissible from the time when it was brought”.  However, the majority held that the decision applied only where that “inadmissibility” was the result of a procedural bar.  They rationalised this on the basis that an unmeritorious claim would fail wherever it was brought whereas a procedural bar might not apply in all jurisdictions and so there could be a risk of irreconcilable judgments.

Gloster LJ’s dissent; no “real prospect of success” test applied

Gloster LJ held that Reisch Montage was not limited in the way the majority suggested.  She held that it applied to preclude any domestic impediment to the autonomous application of the Brussels Regulation, i.e. including a national ruling that a claim was hopeless.  Any other conclusion meant there was a risk of irreconcilable judgments; another country’s court might not reach the same decision on the merits as the English court.

Considering Reisch Montage and later CJEU decisions as a whole, Gloster LJ therefore concluded that Article 6(1) can be used to establish jurisdiction against non-anchor defendants even if the claim against the anchor defendant will not proceed.  The only exception was where the claimant was engaged in a fraudulent abuse of Article 6(1).

Gloster LJ also rejected:

• the submission that a merits test could be incorporated into the assessment of whether the claims were “closely connected”; and
• the submission that bringing a claim against the anchor defendant that was liable to be struck out would amount to a fraudulent abuse in any event.