Marex Financial Ltd v Garcia

On a jurisdiction challenge, a court will ordinarily decide a legal question going to the existence of jurisdiction. It may defer final determination of an exceptionally difficult and doubtful issue and ask whether the claimant has a good arguable case. A judgment debt creates a legal obligation to pay. The tort of inducing or procuring breach can extend to inducing non-payment of a judgment debt where the defendant joins with the debtor to dissipate assets for that purpose. Asset-stripping may constitute unlawful means in the tort of intentionally causing loss by unlawful means when it removes a company’s freedom to meet its obligation. The rule against reflective loss does not bar direct claims against the wrongdoer for these torts.

Marex obtained judgment against two British Virgin Islands companies for sums arising from foreign exchange trading. It alleged that Carlos Sevilleja Garcia dishonestly removed the companies’ assets after circulation of the draft judgment, leaving them unable to satisfy the judgment debt.

Marex brought claims against him for inducing or procuring violation of its rights under the judgment and for intentionally causing loss by unlawful means. Garcia, who was not resident in England, challenged jurisdiction and alternative service. The issues included whether the alleged causes of action existed, whether reflective loss barred the claims, whether England and Wales was the proper forum, and whether the alternative service orders were justified.

1. The applications challenging jurisdiction and service were dismissed. On service out, a legal question going to the existence of jurisdiction will normally be decided by the court, following VTB Capital plc v Nutriek International Corp [2012] EWCA Civ 808. An exception applies to an exceptionally difficult and doubtful point of law, particularly where final resolution should rest on actual rather than hypothetical facts, as explained in Altimo Holdings and Investment Ltd and Others v Kyrgyz Mobil Tel Ltd and Others [2011] UKPC 7. The judge found that Marex had the better argument, or good arguable case, on each legal issue, but considered final determination unsuitable at the jurisdiction hearing.

2. Non-payment of a judgment debt is an actionable wrong. Once a competent court has adjudicated a sum to be due, a legal obligation to pay arises and an action of debt may enforce the judgment. The reasoning in Law Debenture Trust Corporation v Ural Caspian Oil Corporation Ltd [1995] Ch 152 was distinguished because that case concerned dissipation before the claimant had an accrued right to payment, whereas Marex had contractual rights before judgment and judgment rights afterwards.

3. The distinction between inducing and preventing a breach did not defeat Marex’s claim. Applying the distinction discussed in OBG and Another v Allan and Others; Douglas and Others v Hello! Ltd and Others (No 3); Mainstream Properties Ltd v Young [2007] UKHL 21, the alleged relationship, power and control over the companies could support the conclusion that Garcia actively joined with them to procure non-payment through dissipation.

4. For the unlawful-means tort, the alleged breaches of fiduciary duty and of the British Virgin Islands Business Companies Act 2004 were capable of constituting relevant unlawful means. Asset-stripping interfered with the companies’ freedom to meet their obligation to Marex. The reference to theft was conceded to be deletable and was immaterial to the result.

5. The rule against reflective loss remained important, but did not bar a direct claim against a defendant for knowingly inducing a third party’s wrongful violation of the claimant’s rights or intentionally causing loss by unlawful means. The broader approach in Gardner v Parker [2004] EWCA Civ 781 was not applied to these direct tort claims. The exception discussed in Giles v Rhind [2003] Ch 618 therefore did not need to be invoked.

6. England and Wales was clearly the proper place under Civil Procedure Rules 1998, rule 6.37(3). Marex’s claims were against Garcia and his assets, and lodging proofs in the companies’ BVI liquidations did not submit Marex to the BVI jurisdiction for those claims. The evidence justified service at his email address and on the English brokerage company. His alleged removal of assets increased the possibility that service at the Dubai address would be ineffective.

7. The court observed that the draft judgment wording concerning confidentiality and contempt exposed weaknesses, but took no steps of its own motion because confidentiality had not been breached and Marex had not asked the court to address contempt.