COUNSEL: Stuart Bevan K.C. and August Cohn for the appellants.

Wilfrid Greene K.C., D. B. Somervell K.C. and F. J. Tucker for the respondents.

 

SOLICITORS: For appellants: Linklaters & Paines.

For respondents: Coward, Chance & Co.

 

JUDGES: Lord Buckmaster, Lord Blanesburgh, Lord Warrington Of Clyffe, Lord Russell Of Killowen, and Lord Wright.

 

DATES: 1932 Oct. 20, 21, 24, 25, 27; Nov. 28.

 

 

Banker – Russian Bank – Nationalization – Russian Decree – Foreign Law – Practice – Writ against Bank – Notice of Writ – Service of Notice – Rules of Supreme Court, Order IX., r. 2; Order XI., r. 8.

 

A question of foreign law is matter of fact to be decided by a judge, not by a jury, upon the evidence given at the trial in each case. Former decisions upon similar questions, but upon other evidence, are not binding.

 

Before the Bolshevik Revolution of October, 1917, in Russia the M. Bank in London owed a Russian Bank a large sum of money. At the same time the Russian Bank was largely indebted to L. Brothers, also bankers in London. Between October, 1917, and August 3, 1921, numerous decrees of the Government of Russia and orders of various Departments thereof were made and published purporting to nationalize or liquidate all banking corporations in Russia, including the Russian Bank above mentioned.

 

In October, 1930, L. Brothers, having filed an affidavit stating that the Russian Bank was a company registered and domiciled in Russia, obtained leave under Order IX., r. 2, of the Rules of the Supreme Court, to issue a writ against the Russian Bank and to serve notice of the writ by sending it by registered post to the former address of the Bank in Moscow. Having then signed judgment in default of appearance against the Russian Bank, L. Brothers obtained a garnishee order nisi against the M. Bank attaching all debts due from the M. Bank to the Russian Bank, and an issue was subsequently directed to be tried, whether the M. Bank was indebted to the Russian Bank to any and what extent.

 

On the evidence of Russian lawyers who had practised in Russia since the Revolution:–

 

Held, that the Russian Bank had ceased to exist in and before October, 1930, and that consequently the writ, the judgment and the garnishee proceedings were null and void and must be set aside.

 

Judgment of the Court of Appeal [1932] 1 K. B. 617 affirmed.

 

Russian Commercial and Industrial Bank v. Comptoir d’Escompte de Mulhouse [1925] A. C. 112, and Employers’ Liability Assurance Corporation v. Sedgwick, Collins & Co. [1927] A. C. 95 distinguished.

 

Held also, that the procedure under Order IX., r. 2, was not in October, 1930, open to L. Brothers, inasmuch as at that date they had no option [*290] but to proceed under Order XI., r. 8. Decision of the Court of Appeal affirmed on this point also.

 

Semble, the Court may in its discretion set aside an order made ex parte on an application supported by an affidavit which is in fact, though not intentionally, misleading.

 

APPEAL from the decision of the Court of Appeal (1) reversing the decision of Roche J. upon a garnishee issue in the following circumstances:–

 

Before the Bolshevik Revolution in Russia in October, 1917, the Banque Industrielle de Moscou (hereinafter called “the Moscow Bank”), a banking concern having branches at Petrograd and Moscow, kept current accounts with the Midland Bank, Ld., in the names of those branches, and at the end of 1917 those accounts were together in credit to an amount exceeding 300,000l. At the same time the Moscow Bank had accounts with Lazard Brothers & Co., bankers in London, and on these accounts they were indebted to Lazard Brothers & Co. in a sum which, though large, was less than that owed by the Midland Bank to the Moscow Bank.

 

In these circumstances Lazard Brothers & Co. applied under Order IX., r. 2, of the Rules of the Supreme Court (2) for leave to serve notice of a writ on the Moscow Bank by sending it by registered post to that Bank at Moscow, and supported their application by an affidavit sworn on October 24, 1930, by a member of Lazard Brothers & Co. This affidavit, after stating that the Moscow Bank was indebted to Lazard Brothers & Co. in a sum of 362,396l. 15s. payable in London, went on to allege as follows: (paragraph 6) “The intended defendants” – the Moscow Bank – “are a company registered in Russia and so far as I am aware have no address in this country where service of the writ can be effected. The intended defendants are domiciled in Russia and I am

 

(1) [1932] 1 K. B. 617.

 

(2) Rules of the Supreme Court, Order XI., r. 2: “When service is required the writ shall, wherever it is practicable, be served in the manner in which personal service is now made, but if it be made to appear to the Court or a Judge that the plaintiff is from any cause unable to effect prompt personal service, the Court or Judge may make such order for substituted or other service, or for the substitution for service of notice, by advertisement or otherwise, as may be just.” [*291]

 

advised and believe that there is no way of effecting personal service in Russia.”

 

Upon this affidavit Branson J. in Chambers on October 27, 1930, made an order that Lazard Brothers & Co. should be at liberty to issue a writ of summons against the Moscow Bank, and to serve notice of the writ at Moscow by sending it by registered post to the Moscow Industrial Bank at Moscow in the Republic of Russia [sic] with an intimation that the time for appearance to the writ by the Moscow Bank should be twenty days after service of the writ.

 

In pursuance of this order Lazard Brothers & Co. on October 29, 1930, issued a writ against the Moscow Bank claiming 362,396l. 15s., and addressed a letter to “The Banque Industrielle de Moscou, Moscow, Russia,” informing the Bank that they had issued a writ against them and inclosing a notice stating the amount of the claim and requiring them within twenty days to defend the action by causing an appearance to be entered thereto on their behalf, and warning them that in default of their so doing they, Lazard Brothers & Co., might proceed in the action and judgment might be given in their absence.

 

On November 24, 1930, judgment in default of appearance was given for Lazard Brothers & Co. against the Moscow Bank for 364,471l. 17s. 2d. and costs to be taxed.

 

On November 28, 1930, Lazard Brothers & Co. received a letter from the Soviet Embassy dated November 27 returning two notices of the writ and stating that they could not be delivered because the Moscow Bank had gone out of existence during the Revolution of October, 1917.

 

On December 12, 1930, Lazard Brothers & Co. obtained a garnishee order nisi against the Midland Bank attaching all debts owing or accruing due from the Midland Bank, the garnishees, to the Moscow Bank, the judgment debtors, to answer the judgment of November 24. On the same day, December 12, a copy of this order was sent by registered envelope to Banque Industrielle de Moscou, Russia, but the envelope containing the copy of the order was returned by post marked “Unknown.” [*292]

 

On January 20, 1931, a garnishee issue was directed between Lazard Brothers & Co. as judgment creditors and the Midland Bank as garnishees, the issue being whether the garnishees were indebted to the judgment debtors, the Moscow Bank, to any and what extent at the time when the order nisi was served.

 

The issue was tried before Roche J. without a jury. The judgment creditors contended, among other arguments, that the judgment debtors, notwithstanding numerous decrees of the Russian Government and orders of various Departments thereof, still existed as a legal entity. The garnishees adduced evidence to the contrary, including that of two Russian lawyers who had practised in Russia under the Soviet regime, and in whose opinion the Moscow Bank had ceased to exist in and before 1930. The garnishees argued that the writ and the judgment were therefore null and void and that the garnishee proceedings must fall with them. They also contended that the procedure under Order IX., r. 2, was not open to the judgment creditors, and that their only course was to apply under Order XI., r. 8 (1); and that for this reason the [*293] garnishee order nisi was a nullity and could not be made absolute.

 

(1) Rules of the Supreme Court Order XI., r. 8: “Where leave is given to serve a writ of summons or a notice of a writ of summons in any foreign country to which this Rule may by order of the Lord Chancellor from time to time be applied, the following procedure may” [until February 19, 1932, “shall”] “be adopted:

 

(1.) “The document to be served shall be sealed with the seal of the Supreme Court for use out of the jurisdiction, and shall be transmitted to His Majesty’s Principal Secretary of State for Foreign Affairs by the President of the Division, together with a copy thereof translated into the language of the country in which service is to be effected, and with a request for the further transmission of the same to the Government of the country in which leave to serve the document has been given”….

 

(3.) “An official certificate, or declaration upon oath, or otherwise, transmitted through the diplomatic channel by the government or court of a foreign country to which this Rule applies, to the English court, shall, provided that it certifies or declares the document to have been personally served, or to have been duly served upon the defendant in accordance with the law of such foreign country, or words to that effect, be deemed to be sufficient proof of such service, and shall be filed of record as, and be equivalent to, an affidavit of service within the requirements of these Rules in that behalf.

 

(4.) “Where an official certificate or declaration, transmitted to the English court in manner provided in the last preceding section of this Rule, [*293]

 

The garnishees appealed.

 

Oct. 20, 21, 24, 25, 27. Stuart Bevan K.C. and August Cohn for the appellants.

 

Wilfrid Greene K.C., D. B. Somervell K.C. and F. J. Tuckerfor the respondents.

 

The arguments of counsel sufficiently appear from the opinion of Lord Wright.

 

Nov. 28. LORD BLANESBURGH. My Lords, my noble and learned friend, Lord Buckmaster, who is not at the moment present, has authorized me to say that he agrees with the opinion in this case which is about to be delivered by my noble and learned friend Lord Wright. I also have had the advantage of reading that opinion, and I concur in it.

 

LORD WARRINGTON OF CLYFFE.My Lords, I also have had the same advantage, and I concur.

 

LORD RUSSELL OF KILLOWEN.My Lords, I also have had the advantage of reading the opinion of my noble and learned friend, and I agree with it, both in its conclusions and its reasons.

 

certifies or declares that efforts to serve a document have been without effect, the Court or a Judge may, upon the ex parte application of the plaintiff, order that the plaintiff be at liberty to bespeak or request for substituted service of such document” ….

 

(1) [1932] 1 K. B. 617. [*294]

 

LORD WRIGHT.My Lords, the present appeal is from an order of the Court of Appeal reversing an order of Roche J., who had made absolute a garnishee order nisi against the respondents, and had held that the respondents were indebted to the judgment debtors, Banque Industrielle de Moscou, to the extent of 542,730l. 14s. 7d., and ordered that the respondents should pay to the appellants 335,230l. 14s. 7d. in part satisfaction of their judgment debt and costs. The Court of Appeal decided that the appeal should be allowed and that the judgment and order, together with the order nisi and the judgment signed in default of appearance, should be set aside, with costs; they also dismissed a cross-appeal by the present appellants.

 

The Banque Industrielle de Moscou (hereinafter called “the Industrial Bank”) was at the time of the second or Bolshevist Revolution in Russia indebted to the appellants in large sums; it was at the same time also a creditor of the respondents in sums exceeding their debts to the appellants. Both these debts were English debts, payable in England and governed by English law. The Industrial Bank was a corporation carrying on business at Moscow as its domicil and head office, with branches at Petrograd and other places in Russia; it had no branches or shareholders outside Russia. The evidence in the action as to its formation was somewhat deficient, but it is clear that in 1916, having then assumed the name of the Moscow Industrial Bank in place of its previous name of J. W. Junker & Co., it was formed under articles, of which extracts were produced, by a law or statute of the Tsarist government. The Bolshevist Revolution took place in October, 1917; on December 27, 1917, following the decree of December 14, 1917, to be more fully referred to later, possession was taken of the Industrial Bank’s Moscow office, its cash, securities and books, by a representative of the Government, accompanied by soldiers. The directors fled to the south of Russia, then outside the limits of Soviet domination, and in April, 1919, four directors were at Rostof on Don, which was not occupied by the Bolshevists till December, 1919. Before that happened, and before the four [*295] directors left Rostof on Don, they gave a power of attorney dated December 16, 1919, to one of their number named Alexander Chambers. In 1920 and 1921 letters were addressed to the respondents, signed by Chambers and one or more of his colleagues on the Board, with reference to the debts of the respondents to the Industrial Bank; on July 30, 1924, a letter was sent to the respondents on behalf of the Soviet Government stating that the Soviet Government claimed all sums standing in the respondents’ books to the credit of former Russian banking and other nationalized companies – a claim which the respondents declined to admit.

 

On October 29, 1930, a writ was issued in the High Court of Justice, King’s Bench Division, by the appellants against the Industrial Bank, claiming a sum of 362,396l. 15s. as debt and interest; an affidavit was sworn on behalf of the appellants, the terms of which will need consideration later. On that affidavit an order was made to serve notice of the writ by registered post to the Industrial Bank at Moscow. The notice of writ was accordingly sent by registered post addressed simply to the Banque Industrielle de Moscou at Moscow, on October 29, 1930. On November 24, 1930, judgment was entered for the appellants against the Industrial Bank for 364,471l. 17s. 2d. and costs in default of appearance. On November 28, 1930, the appellants received a letter from the Soviet Embassy dated November 27, 1930, returning the notices of the writ and stating that they could not be delivered in view of the fact that the Banque Industrielle de Moscou went out of existence during the 1917 October Revolution, and that the document had been delivered by mistake at the office of the Commercial and Industrial Bank of the Soviet Republic, which bank had only been formed in 1924 and had no connection with the former bank. On December 12, 1930, the appellants obtained a garnishee order nisi against the respondents; a copy of this was sent by the appellants to the Industrial Bank on the same date, but was returned by post marked “unknown.” By an order of January 20, 1931, an issue was directed between the appellants as creditors and the respondents as garnishees. The issue came [*296] on for hearing before Roche J. in April, 1931. The learned judge dealt with three main questions:–

 

(1.) Whether the respondents’ liability was barred by the Statute of Limitations, since more than six years before the garnishee order nisi demands had been made for payment by or on behalf of Industrial Bank. The respondents in support of this plea relied on the letters of 1920 and 1921 referred to above as being valid demands made on behalf of the Industrial Bank by its directors; alternatively they relied on the notice from the Soviet Government of 1924 as a valid demand if it should be held that that Government had before that date succeeded to the rights of the Industrial Bank. Roche J. decided against that contention; the matter was not the subject of decision in the Court of Appeal, it has not been argued before this House, and I express no opinion about it.

 

(2.) Whether the order nisi should not be set aside on the ground that the judgment was a nullity, having been signed against a non-existent defendant, since the Industrial Bank had ceased to exist as a juristic person before the date of the writ.

 

(3.) Whether the order nisi should not further or alternatively be set aside on the ground that there was no proper service on the defendants, even if existent.

 

Roche J. decided questions 2 and 3 in favour of the appellants, the Court of Appeal decided both points against them, hence this appeal.

 

I shall deal first with question (2.), which is most important and is decisive, since it is clear law, scarcely needing any express authority, that a judgment must be set aside and declared a nullity by the Court in the exercise of its inherent jurisdiction if and as soon as it appears to the Court that the person named as the judgment debtor was at all material times at the date of writ and subsequently non-existent: such a case is a fortiori than the case which Lord Parker referred to in Daimler Co. v. Continental Tyre, &c., Co. (1) There the directors, being all alien enemies, could not give a retainer. Lord Parker said: “But when the Court in the course of an

 

(1) [1916] 2 A. C. 307, 337. [*297]

 

action becomes aware that the plaintiff is incapable of giving any retainer at all, it ought not to allow the action to proceed.” In such a case the plaintiff cannot be before the Court. In the present case if the defendants cannot be before the Court, because there is in law no such person, I think by parity of reasoning the Court must refuse to treat these proceedings as other than a nullity. English Courts have long since recognized as juristic persons corporations established by foreign law in virtue of the fact of their creation and continuance under and by that law. Such recognition is said to be by the comity of nations. Thus in Henriques v. Dutch West India Co. (1) the Dutch company were permitted to sue in the King’s Bench on evidence being given “of the proper instruments whereby by the law of Holland they were effectually created a corporation there.” But as the creation depends on the act of the foreign state which created them, the annulment of the act of creation by the same power will involve the dissolution and non-existence of the corporation in the eyes of English law. The will of the sovereign authority which created it can also destroy it. English law will equally recognize the one, as the other, fact.

 

The Industrial Bank was a corporation established by an Act of the Tsar; but the governing authority in Russia, as recognized in the English Courts, is now and has been since October, 1917, the Soviet State. Soviet law is accordingly the governing law from the same date in virtue of the recognition de facto in 1921 and de jure in 1924 by this country of the Soviet Stats as the sovereign power in Russia. The effect of such recognition is retroactive and dates back to the original establishment of Soviet rule which was in the 1917 October Revolution, as was held by the Court of Appeal in Aksionairnoye Obschestvo A. M. Luther v. James Sagor & Co. (2) The question, therefore, is whether by Soviet law the Industrial Bank was at the date of the issue of the writ in this action, that is on October 27, 1930, an existing juristic person. What the Russian Soviet law is in that respect is a question of fact, of which the English Court cannot take judicial cognizance,

 

(1) (1728) 2 Ld. Raym. 1532, 1535.

 

(2) [1921] 3 K. B. 532. [*298

 

A.C.

        

 

LAZARD BROTHERS & CO. v. MIDLAND BANK. (H.L.(E.))

        

 

Lord Wright.

 

even though the foreign law has already been proved before it in another case. The Court must act upon the evidence before it in the actual case. The recent enactment, s. 102 of the Supreme Court of Judicature (Consolidation) Act, 1925, which provides that this question of fact must be decided by the judge alone instead of by the jury, if there be a jury, expressly treats the question as depending on the evidence given with respect to the foreign law. No earlier decision of the Court can relieve the judge of the duty of deciding the question on the actual evidence given in the particular case. On what evidence of the foreign law a Court can act has been often discussed. The evidence it is clear must be that of qualified experts in the foreign law. If the law is contained in a code or written form, the question is not as to the language of the written law, but what the law is as shown by its exposition, interpretation and adjudication: so in effect it was laid down by Coleridge J. in Baron De Bode’s case (1); in the Sussex Peerage case (2), Lord Denman stated his opinion to the same effect as he had done in Baron De Bode’s case. (1) He said that if there be a conflict of evidence of the experts, “you (the judge) must decide as well as you can on the conflicting testimony, but you must take the evidence from the witnesses.” Hence the Court is not entitled to construe a foreign code itself: it has not “organs to know and to deal with the text of that law” (as was said by Lord Brougham in the Sussex Peerage case (3)). The text of the foreign law if put in evidence by the experts may be considered, if at all, only as part of the evidence and as a help to decide between conflicting expert testimony.

 

Hence in the present case it is necessary to consider the testimony of the two principal legal witnesses in the matter in order to ascertain the Soviet law. The one is Mr. Samuel Dobrin, who had been a member of the Russian Bar in Tsarist days, but remained in Russia till 1925, practising as a lawyer in Soviet Russia, and since then acting in this

 

(1) (1845) 8 Q. B. 208, 266.

 

(2) (1844) 11 Cl. & F. 85, 116.

 

(3) Ibid. 115. [*299]

 

country as legal adviser on Soviet law to various Soviet institutions; he was called by the respondents. The other is Mr. S. L. Konkevitch, called by the appellants, who also had practised as a barrister in the Tsarist Courts, but had remained in Russia till 1919 practising in Soviet law, and as legal adviser to Soviet institutions. The respondents also called Mr. Alexander Hoelfern, who had practised as a lawyer in Russia in Tsarist times, but had left Russia in December, 1918. I do not attach the same weight to his evidence, because, though his qualifications and standing as a Tsarist lawyer are very high, he has not had, in my judgment, the same practical experience in regard to Soviet law.

 

Before I examine the evidence of Mr. Dobrin and Mr. Konkevitch in detail I wish to advert to two matters taken by the appellants by way of objection. One was that the question of the existence or non-existence of the Industrial Bank was not raised specifically either on what corresponded in the case to pleadings or before Roche J. Roche J. did, however, consider it, and in any case the question was put in the forefront in the Court of Appeal, without any application being made by the appellants for an amended pleading or for an adjournment to call further evidence. I am satisfied that each of these two witnesses gave full evidence on the question. The appellants further relied on a decision of this House in the case of the Russian Commercial and Industrial Bank v. Comptoir d’Escompte de Mulhouse (1) (hereafter called the Mulhouse case), in which it was decided that a Russian bank had not been dissolved by the Soviet legislation; but the question in that case was whether the dissolution of the bank had taken place at the date of the writ in that action, which was January 23, 1920. Apart, therefore, from the consideration that the question was one of fact to be decided by each Court on the evidence before it, the question in that case was quite different, since the issue in the present case is whether the Industrial Bank had been dissolved by October 29, 1930. The world has not stood still between 1920 and 1930, least of all in the revolutionary ferment of Soviet Russia.

 

(1) [1925] A. C. 112. [*300]

 

It is true that with certain exceptions the same decrees were put in evidence in the Mulhouse case (1) as in the present case, though these additional decrees put in before your Lordships were not unimportant; but the evidence of the experts was different in most essential respects: the eminent Tsarist lawyers who gave evidence in the Mulhouse case (1) spoke from the standpoint of the law which they knew rather than of the Soviet law of which they had not experience; indeed, Soviet law had not then developed as it has now. Hence the whole matter has now to be reconsidered in the light of new evidence and of the historical evolution of ten years.

 

I think the same observations may be applied in connection with a further decision of this House – Employers’ Liability Assurance Corporation v. Sedgwick, Collins & Co. (2) – which dealt with Russian insurance companies as in 1923, and decided that such companies were not dissolved by Soviet legislation. In the same way certain other decisions of the High Court to the same effect in relation to Russian shipping and industrial companies may have to be reconsidered if similar questions again come for decision.

 

In the present case Mr. Dobrin and Mr. Konkevitch, in giving evidence as to what Soviet law is, are, in my judgment, agreed on the essential fact that in October, 1930, the Industrial Bank had ceased to exist in Russia by Soviet law. I shall quote a few short answers from each witness. I have carefully considered their evidence as a whole and find it in harmony with these brief extracts.

 

Mr. Dobrin, giving evidence on behalf of the respondents, was asked in re-examination and answered as follows:–

 

“(Q.) Can you as a Soviet lawyer conceive of the existence of any of these private banks now?

 

(A.) In so far as they have no branches abroad, no, I cannot.

 

(Q.) In Russia would they admit the existence of any of the private banks?

 

(A.) I do not think so.

 

(1) [1925] A. C. 112.

 

(2) [1927] A. C. 95. [*301]

 

(Q.) Since when has that been the case: when was the latest date, in your view, that Russia would have admitted the existence of the private banks?

 

(A.) Perhaps I am myself a good example of this. Until 1925 when I came to this country the question never occurred to me whether the banks existed.

 

(Q.) You mean that it did not occur to you that they could exist: is that what you mean?

 

(A.) There was no occasion after the actual liquidation in 1921 when all traces disappeared of the Bank in Russia. What could remain of the Bank after that?”

 

Mr. Konkevitch, called by the appellants, in cross-examination gave the following answers:–

 

“(Q.) Then I want to know this. Did the Bank continue to exist in Russia?

 

(A.) In what sense?

 

(Q.) In the sense as a legal entity?

 

(A.) I think I answered that question that in Russia a Court would not sustain an action by a bank. Did not I make that clear? If not, I shall be very glad to make myself more clear than I was.

 

(Q.) You mean that in other words the banks in Russia would not be held to have a legal existence?

 

(A.) Yes, that is my view.

 

(Q.) And you know that has been the view put forward in the letters which I have read to-day from the Soviet authorities?

 

(A.) Yes. ….

 

(Q.) Would you hold the view as a Soviet lawyer that the Bank has been nationalized and has been non-existent both de jure and de facto since 1917?

 

(A.) In Russia?

 

(Q.) Yes, that is what I am asking.

 

(A.) That is the interpretation of the Russian decrees as adopted by the Russian Courts.”

 

Somewhat later the same witness said: “The company does not exist according to Russian law. I speak as a Russian lawyer.” He adds when asked: “(Q.) The company [*302] does not exist? – (A.) As interpreted by Soviet Courts. That is always the qualification I make.” I understand the witness to be making some reservation as to what the English law might be in view of the decision of the Mulhouse case. (1) But that does not affect his evidence, since the question is what is the Soviet law.

 

I think this testimony, given from the witnesses on both sides, compels the conclusion of fact that the Industrial Bank was by Soviet law, which is the material law, non-existent in Russia in 1930. Mr. Dobrin reserves the question in respect of Tsarist banks which had branches or shareholders or assets outside Russia; but, as Mr. Konkevitch points out, what is there involved is a question of conflict of laws, not of Russian law; it is, however, not easy to see how a non-existent person (since if a corporation exists at all it must be by the law of the country of its incorporation) can have anywhere a branch or assets or shareholders; no question is here involved of the extra-territorial effect of legislation, confiscatory or otherwise, since the dominant fact is the dissolution of the corporation, which depends on territorial enactments of the country of incorporation according to which either the existence or the non-existence of the corporation is recognized by the law of other countries. It is not, however, here necessary further to pursue these questions; they do not arise in regard to the Industrial Bank, which never had branches abroad, nor, so far as evidence goes, any shareholders outside Russia; nor do I think it necessary to express any opinion about the status of assets in England, a matter not in these proceedings, but which no doubt will need full consideration in the future.

 

I ought, however, very briefly to state what I apprehend to be the evidence of these two witnesses as to the written law, that is, the Soviet legislation dealing with the Tsarist banks. Before Roche J. there were in evidence the various decrees or orders which were in evidence in the Mulhouse case (1), and are printed in the report of that case in the Court of Appeal. (2) Both witnesses agree that the initial

 

(1) [1925] A. C. 112.

 

(2) [1923] 2 K. B. 630, 674. [*303]

 

decree of December 17, 1917 (which is clearly in their opinion to be recognized as a legislative act though a decree of the Central Executive Committee), was more than a declaration of policy; they differ, however, in that Mr. Konkevitch regards it as a decree there and then dissolving the Tsarist banks de facto and de jure, whereas Mr. Dobrin states his opinion to be that it was an order for the executive to begin the destruction of the old banks “by that national rule which was called nationalization”; his opinion is that it was not until nationalization was complete that the banks ceased to exist, and he finds in a circular of August 3, 1921, issued by the department of the Ministry of Finance official confirmation that the nationalization of the old banks was then complete; hence, he says, there was then an end of the banks. This circular, which was not before this House in the Mulhouse case (1), referred to a date subsequent to the issue of the writ in that case. Mr. Dobrin draws a distinction in Soviet law between “nationalization” and “liquidation.” The latter term is technically used, according to his testimony, not as English lawyers use it or as Tsarist lawyers used it, that is, as meaning a process of winding-up; it means, he says, destruction or dissolution, and, indeed, in that sense is applied not only to corporations and institutions, but even to individuals: thus a man or class obnoxious to the Government is said to be liquidated. Nationalization, on the other hand, means the reduction of the affairs of the company into the possession of the Soviet State, a process involving, until it is completed, according to Mr. Dobrin, the prolongation of the company’s existence. Mr. Konkevitch, while agreeing on the meaning of the words in Soviet law, puts the “liquidation” as complete on December 17, 1917, and treats the “nationalization” – which he agrees went on till April, 1921 – as an operation subsequent to the dissolution of the company, as an administrative management and reorganization of the assets and businesses which had belonged to liquidated companies all over Russia, but had been brought within the State domain; this process, according to his evidence, did,

 

(1) [1925] A. C. 112. [*304]

 

indeed, as was natural, take some years, but was a practical matter not relevant to the legal questions of the date when dissolution took place.

 

It is not necessary to decide between these conflicting views of theory, since, as I have stated, both witnesses are agreed in the view of the Soviet law that long before 1930 all traces of the Tsarist banks had vanished. Indeed, it would have been strange if, after the sweeping declarations, in the decrees and orders of the Soviet Government put in evidence before the Court, of their intention and policy to abolish private banking, there had been a complete failure of that intention and policy. The Soviet Government even went further, and by the decree of January 19, 1920, abolished the People’s Bank (formerly the State Bank) with and in which by the decree of December 17, 1917, the joint stock banks were or were to be amalgamated and merged, and transferred all its assets and liabilities to a State department called the Central Budget and Accounts Administration. Later on it seems that the Soviet Government proceeded to establish national banks, since the writ in the action was delivered by mistake to a bank of the Soviet State called the Commercial and Industrial Bank, which came into existence in 1924. The view that a corporation like the Industrial Bank could only be dissolved by a specific decree (which was the opinion of some witnesses in the Mulhouse case (1)) was rejected both by Mr. Dobrin and Mr. Konkevitch. They pointed to a decree of the All Russian Central Executive Committee of November 30, 1918, forbidding reference in decisions and judgments to laws of overthrown – that is the Tsarist or Kerensky – governments, and also to the terms of the Civil Code of 1923 which forbade the Soviet judicial or other institutions to consider disputes over civil legal relations which arose before November 7, 1917, and which also forbade interpretation of provisions of the Code on the basis of laws of overthrown governments and of practice of pre-revolutionary Courts. Neither of these enactments was before the Court in the Mulhouse case. (1) In the Court of Appeal, but not

 

(1) [1925] A. C. 112. [*305]

 

before Roche J., there were also produced (without objection) further provisions of the Soviet Civil Code of 1923 which showed that juristic persons could only be recognized if their statutes were recognized, confirmed, and in proper cases registered, by the Soviet authorities. In the absence of testimony from Soviet lawyers as to these provisions, their meaning may seem ambiguous; the fair inference may be that they refer to new companies formed under Soviet rule, the Tsarist companies having disappeared from legal ken. But in the absence of expert evidence I do not feel justified in attributing any particular effect to them.

 

I have not thought it necessary to pursue in detail the examination by the legal witnesses of the various decrees, nor to emphasize the various differences between their testimony and that before the Court in the Mulhouse case. (1) I may mention the evidence as to the decree of January 26, 1918, described as “confiscating the share capital of the former Joint Stock Banks.” The evidence now is that the declaration that all bank shares were declared null and void refers to the shares in the sense of “choses in action,” the property of shareholders. But this very summary survey of the evidence in the present case is enough to show how very different that evidence is from that before this House in the Mulhouse case (1), just as the issue to which it is directed, that is the legal position at the dates of the respective writs, is so very different. In my judgment the conclusion is now inevitable that the Soviet Embassy were substantially right in the statement which they made by their letter of November 27, 1930, in returning the writ in this action that it “could not be delivered to the addressee in view of the fact that the Banque Industrielle de Moscou went out of existence during the course of the 1917 October Revolution.” At what precise period of that Revolution the end came is no doubt the subject of diverse views on the part of the two legal witnesses, but that matter, though presumably of great theoretic interest to Soviet lawyers, appears to me to be immaterial for the decision of this case, since I am clearly of

 

(1) [1925] A. C. 112. [*306]

 

opinion that the dissolution or “liquidation” came long before October, 1930.

 

This conclusion is sufficient without more to carry with it the result that the writ, the judgment and the garnishee proceedings must be held of no effect and be set aside. But I desire to deal with the other question which has reference to the service of the writ. There is perhaps some artificiality in now discussing this question, since to do so it must be assumed that the Industrial Bank had some sort of existence, that it was something which might well be called nominis umbra: it clearly had no address, no shareholders, no directors, no tangible or discernible existence. How such a disembodied spirit could be served might appear to present a serious problem. That problem was however grappled with in an affidavit sworn on behalf of the appellants, dated October 24, 1930, in order to support an application for leave to serve notice of the writ on the Bank “by sending the same by registered post to the intended defendants at Moscow.” The affidavit did not venture to suggest that the intended defendants had any address in Moscow or that there was the slightest probability that such a letter would reach the Bank, which was described as a “Company registered in Russia.” The affidavit did indeed say that the whereabouts of any directors or other persons who in 1917 had been entitled to sign for the Bank were unknown, and that all of them, according to the deponent’s information and belief, “had been deprived of their powers of representing the intended defendants by decrees of the Russian Government.” No doubt the professional advisers who prepared the affidavit were influenced by the decisions of the Courts that Russian banks had not been dissolved and perhaps were following precedents used in other such cases, but even so, in my judgment, the whole position ought to have been more candidly and fully explained; in particular the phrase that the Bank was a company registered in Russia is singularly infelicitous. There is not the slightest suggestion of bad faith made, but I cannot acquit those concerned of falling short in regard to the obligations which rest on [*307] persons seeking the order of the Court for service out of the jurisdiction. That such an order is a serious matter is obvious, and it is one which only a judge of the High Court can make. The Court has discretion to set aside an order made ex parte when the applicant has failed to make sufficient or candid disclosure. I think in this case there was sufficient ground to call in play the discretion of the Court to set aside the order for service and justify the Court in refusing in the exercise of its discretion to treat the judgment as a sufficient foundation for a garnishee order as in the case suggested by Viscount Cave L.C. in the Sedgwick, Collins case. (1) In particular the words “the intended defendants are domiciled in Russia” may be most misleading, even if no intention existed to mislead. What is suggested is a “domicil” – an address where but for other difficulties personal service could be effected, and a suggestion is implied that the method of service might fairly be expected to bring to the proposed defendants the notice of the writ. Even if the Bank existed, it must have been known that it existed as a mere shell, incapable of action or of being affected with notice.

 

But there is an even more serious blot on the affidavit: it states “there is no way of effecting personal service in Russia,” and on that basis asks for leave to serve notice of the writ “by sending the same by registered post to Moscow.” No reference is made to the procedure under Order XI., r. 8, which by order of the Lord Chancellor, dated March 21, 1906, was applied to the “Russian Empire”: that order has never been cancelled: it originally referred to the territorial jurisdiction of what was up to 1917 the Russian Empire but is now the Union of Soviet Republics. This internal change in the system of government, once the new Government is recognized by this country, has no effect in the external status of Russia quoad this country as a personality in International Law. The identity of the State remains the same for international purposes: the change from monarchy to republic does not, in general, abrogate treaties or conventions, any more than loss of or increase in

 

(1) [1927] A. C. 95, 102. [*308]

 

territory. The order of the Lord Chancellor accordingly still applies to Russia and could and should have been invoked for the purpose of effecting service there. The order has in fact been frequently used in recent years, with the full concurrence and co-operation of the Soviet Government, as appears in the evidence given before Roche J. and the Court of Appeal by Mr. Hinton, Official Process Server to the Supreme Court. The only excuse given on behalf of the appellants for the statement in their affidavit is that they did not realize the applicability of Order XI., r. 8; but here again they failed in performing their duty to the Court; they should have inquired more carefully. If the procedure under Order XI., r. 8, had been employed, there would, according to the usual course, have been an official certificate or declaration transmitted through the diplomatic channel by the Soviet Government to the English Court, reporting the impossibility of service much to the same effect as was done in the letter from the Soviet Embassy of November 28, 1930, and if on that a request was made for substituted service under Order XI., r. 8, sub-rr. 4 and 5, the judge would then have had the true position before him to enable him to decide how to act. But on this point the matter does not depend on the discretion of the judge: Order XI., r. 8, where it applies, was at the material time mandatory, not permissive – the words were, before the change since made by the Rules Committee which substituted “may” for “shall” – “the following procedure shall be adopted”: this word “shall” is to be compared with the use of “may” in other parts of the order where a discretion was intended. The result is that, quite apart from the want of accuracy in the affidavit, the order for substituted service was made by an incompetent procedure and was a nullity. Hence the judgment in default of appearance, based on such service, was itself a nullity and with it all the garnishee proceedings fall to the ground. For that reason alone the appeal must fail: indeed, the respondents were not called upon to reply on this part of the case. I have not adverted to some minor irregularities in the proceedings. [*309]

 

In my judgment the appeal should be dismissed with costs.

 

Order of the Court of Appeal affirmed and appeal dismissed with costs.

 

Lords’ Journals, November 28, 1932.