< Back to Blogs Index

27: Dipping a toe in the water – Can you have it both ways?

News and ViewsBlogsFamily Law27: Dipping a toe in the water – Can you have it both ways?
27: Dipping a toe in the water – Can you have it both ways?
Leave your thoughts John Darnton

By John Darnton

England is rightly proud of its judicial history. For many, it is a wonderful place to litigate, but for others this is not the case.

A question that often arises, especially for offshore trustees, is whether or not to ‘submit to the jurisdiction’. But what amounts to a submission to the court’s jurisdiction? This is a question recently considered by Registrar Briggs in Dennis v TAG Group Limited and Others [2017] EWHC 919 (CH). Sitting in the Companies Court Registrar Briggs considered what might constitute a submission to the court’s jurisdiction and concluded that two of the respondents, who were resident outside the jurisdiction, had submitted to the court’s jurisdiction by participating in and resisting an injunction application made by the claimant.

As will be apparent from the title to this case it was not a matrimonial dispute. The circumstances are rather more complicated than this article can do justice to but, in brief, the claimant was a 25% shareholder, director and employee in a company incorporated in England and Wales, and was until November 2016 the Chief Executive Officer and Chairman. The other 75% of the issued share capital was held jointly by one company incorporated in Jersey and another incorporated in the Kingdom of Bahrain.

Notice was given of a board meeting of the company to consider resolutions placing the claimant on garden leave for 12 months and giving an interim executive committee delegated authority to manage the company. The claimant claimed that he had suffered unfair prejudice as a result of those resolutions.

The claimant’s solicitors sought undertakings from the two offshore companies that they would not pass the resolutions and then applied for an injunction to prevent that happening. The application for an injunction was refused but the question which arose was whether by taking part in the injunction proceedings the two defendants had submitted to the jurisdiction of the court. They contended that their solicitors had reserved their position as to jurisdiction throughout the correspondence leading up to the injunction hearing. It was said that there had been no submission to the jurisdiction and that the defendants had had no real option but to defend the injunction application otherwise they could have faced an order being made against them. They argued that an inference of submission to the jurisdiction could not be drawn where a party was simply defending an injunction application.

In his judgment Registrar Briggs set out a useful summary of guidance to be drawn from the authorities as follows:

  • a person submits to the jurisdiction if they voluntarily recognise that the court has jurisdiction;
  • they do not submit if they play no part in the proceedings;
  • they may submit if they take a step in the proceedings without making it clear that they wish to dispute jurisdiction as a preliminary issue;
  • the court may infer voluntary submission from the circumstances using the ‘objective disinterested bystander’ test;
  • when making an inference, the court will have regard to whether the step or act said to create an effective waiver of the right to contest jurisdiction was unequivocal and cannot be explained, except on the assumption that the party in question accepts the court’s jurisdiction;
  • if a party states in correspondence that he is not going to submit to the jurisdiction but that statement conflicts with their conduct, such as to leave an objective observer in doubt of waiver or submission, the prior statement is unlikely to prevail; and
  • once submission has been made, it cannot be revoked.

The court held that the objective test applied to any situation where jurisdiction is challenged and that there is no special carve-out for injunction applications.  The voluntary submission, or waiver of right to contest jurisdiction, must be unequivocal. Having considered the facts in this particular case, the only possible explanation for the actions (and inactions of the respondents in this case) was an intention to have their cases tried in England.

Often, solicitors will state in correspondence that their client’s rights are reserved on the issue of jurisdiction. This decision suggests that using such words may not be sufficient and that seeking to oppose an application for an interim injunction may amount to a voluntary submission to the jurisdiction.

The recent trend in matrimonial cases seems to be towards encouraging offshore trustees to take part in English family proceedings on the basis that such involvement will enable the court to make better informed decisions. Many trustees remain hesitant about taking up an invitation to be joined or take part in proceedings unless, for example, there are assets within England which could be at risk. A number of jurisdictions have firewall legislation designed to protect the trust by conferring exclusive jurisdiction on the local court over matters concerning their trust. In a recent Guernsey case a trustee applied to the Royal Court of Guernsey for directions as to whether or not it should submit to the jurisdiction of a foreign court. This was a case involving a funded unapproved retirement benefit scheme and the Royal Court directed the trustee to submit to the jurisdiction of the Family Division of the High Court of England for the purposes of taking part in the ongoing matrimonial proceedings in order to provide disclosure and assistance within those proceedings. This was not withstanding the Guernsey firewall provisions. It will be interesting to see whether this decision which, in effect, involved a work place pension scheme over which the trustee had very little discretion will be extended towards family trusts where greater discretion exists.

The important message is that companies, trusts and individuals who wish to be able to maintain their stance that they have not submitted to the jurisdiction of the English court need to tread carefully. This is especially so when threatened with an injunction application. The language used may be crucial and it may not be sufficient just to say that the position or jurisdiction is reserved. A more positive statement objecting to jurisdiction may be advisable.

21 July 2017

Leave a Reply

Your email address will not be published. Required fields are marked *