Stephenson Harwood LLP v Medien Patentverwaltung AG & Ors

A stakeholder application under Civil Procedure Rules 1998 Part 86 is an in personam claim affecting the respondents’ rights. A respondent who wishes to dispute the court’s jurisdiction to determine the stakeholder application must use Part 11 within the prescribed period. The respondent cannot separate the stakeholder’s claim for directions from a competing respondent’s claim to the asset. Failure to make a Part 11 application results in acceptance of jurisdiction over the stakeholder application and issues arising within it. Independently, a respondent submits to the jurisdiction by invoking the court’s powers to obtain payment of the asset while challenging the court’s jurisdiction to determine the competing claim. The appeal was dismissed.

Stephenson Harwood held settlement monies claimed by Medien Patentverwaltung AG and Irving Kagan. It issued a Part 8 stakeholder claim under Civil Procedure Rules 1998 Part 86 seeking directions for payment of the monies.

Medien acknowledged service and contested the claim, seeking payment to itself, but did not make an application under Part 11 disputing jurisdiction. It later argued that the English court lacked jurisdiction to determine Mr Kagan’s underlying claim, which it said should be determined in Switzerland. The Deputy Master held that Medien had accepted the court’s jurisdiction under CPR r 11(5). The appeal concerned whether Part 11 applied, whether Medien had submitted by its conduct, whether jurisdiction existed independently, and whether the directions should be disturbed.

1. Appeal dismissed. The stakeholder application was a claim for the purposes of Civil Procedure Rules 1998 Part 11. Although the stakeholder sought procedural directions rather than substantive relief, the application affected the respondents’ rights and could result in the asset being transferred to one of them.
2. Under the 2007 Lugano Convention, a stakeholder suing a respondent domiciled in another Convention State may need to establish an applicable jurisdictional gateway. The stakeholder application was therefore capable of being challenged for want of jurisdiction.
3. Mr Kagan’s claim was part and parcel of the stakeholder application, rather than a separate action for jurisdictional purposes. Medien could not accept jurisdiction over the stakeholder application while reserving a jurisdictional objection to the issues raised by Mr Kagan. Its failure to make a Part 11 application within 14 days meant that, under CPR r 11(5), it was treated as having accepted jurisdiction over the application, including directions and determination of entitlement to the monies.
4. Alternatively, Medien had submitted to the jurisdiction by conduct. It sought an order for payment of the monies, served evidence addressing the merits, and continued to pursue that position on appeal. It could not invoke the court’s jurisdiction for its own claim while denying jurisdiction over the competing claim in the same proceedings.
5. It was unnecessary to decide whether jurisdiction existed independently under the Convention’s gateways. The jurisdictional issue had not been properly explored on the evidence. The Deputy Master’s directions for trial disclosed no ground for appellate interference.

• High Court (Chancery Division): The Deputy Master held on 6 June 2019 that failure to make a Part 11 application meant that Medien had accepted jurisdiction over the stakeholder application. The proceedings were stayed pending appeal.
• High Court (Chancery Division, appellate jurisdiction): The appeal was dismissed, and the directions for trial were left undisturbed.