Legal briefing | 01 Sep 2022 |

The Court of Appeal confirms a single correct test for granting a case management stay

Athena Capital Fund SICAV-FIS S.C.A. v Secretariat of the State for the Holy See [2022] EWCA Civ 1051

In a case involving an exclusive jurisdiction clause for the English courts and parallel criminal proceedings in the Vatican, the Court of Appeal has confirmed that there is a single correct test for granting a case management stay. The relevant question for the Court is "whether in the particular circumstances it is in the interests of justice for a case management stay to be granted". While there is no separate test for cases involving foreign parallel proceedings, an exclusive jurisdiction clause in favour of the English courts will be a "weighty factor" pointing to where the interests of justice lie.

The facts

Mr Mincione (the fourth appellant) is a British and Swiss national and a defendant in criminal proceedings brought by the Office of the Promoter of Justice (the "OPJ") in the Vatican City Court. The first to third appellants are companies/sub-funds controlled by Mr Mincione.

In the proceedings in the Vatican City Court, Mr Mincione is accused of having misused his position as a financial adviser to the respondent, the Secretariat of State for the Holy See (the "Secretariat") to defraud it and embezzle money since at least 2014. The Secretariat is a "parte civile" to the criminal proceedings in the Vatican for the purpose of claiming an indemnity in relation to the damage incurred as a result of the criminal conduct alleged in the indictment.

The proceedings in the English courts relate to the acquisition of a 100% indirect interest by the Secretariat in a property in Sloane Square pursuant to a framework agreement and a share purchase agreement (the "Transaction"), both of which contain exclusive jurisdiction clauses for the English courts. Although the allegations faced by Mr Mincione in the Vatican criminal proceedings range more widely, one of the allegations in those proceedings is that the Secretariat paid an inflated price for the property, with the surplus monies being diverted to the personal use of Mr Mincione and his associates. That allegation is the subject of proceedings in England whereby Mr Mincione and the other appellants seek (in effect) negative declaratory relief as regards their liability to the Secretariat in respect of the Transaction.

The Secretariat sought a stay of the English proceedings until the conclusion of the criminal investigation being conducted by the OPJ.

The reason for a stay at first instance

At first instance, the judge granted a stay of the proceedings, principally on the basis that the Secretariat had adopted a "neutral position" in the criminal proceedings in the Vatican by virtue of its role as a parte civile. The judge found that it would be "neither just nor fair" to require the Secretariat to answer these claims (at this stage) in circumstances where it was "hamstrung from participating fully by its proper role as a neutral party awaiting the outcome of a criminal investigation of alleged crimes in relation to which it would be the alleged victim, but of which it has no actual direct knowledge". The judge also noted that the party who is actually in opposition to Mr Mincione in respect of the issues raised in the English proceedings was the OPJ.

The judge's assessment of the Secretariat's neutral stance in the criminal proceedings was based on his understanding of the relevant documents relating to the Secretariat's registration as a parte civile. The judge had understood those documents to mean that the Secretariat had asserted a right to compensation in the event the criminal charges were proven, but had not taken a position that the charges were true. The judge reasoned that because of the Secretariat's neutral stance in the criminal proceedings, the declarations sought by Mr Mincione (and the other appellants) would serve no useful purpose. However, the judge did not dismiss the claims on the basis that the relevant circumstances may change by the time of trial, including, if the Secretariat ceased to maintain a position of neutrality in the course of its parte civile action (or in some other way). The judge therefore stayed the proceedings until such time as there was a material change of circumstances, with materiality to be judged by reference to the reasons given in the judgment.

The decision of the Court of Appeal

The Court of Appeal noted at the outset of its reasoning that the court has power to stay proceedings "where it thinks fit to do so" which is part of its inherent jurisdiction recognised by section 49(3) of the Senior Courts Act 1981.

A number of authorities cited by the Court of Appeal referred to the fact that (i) a case management stay should only be granted in "rare and compelling circumstances"; and (ii) there must be "exceptionally strong grounds" for granting a case management stay in circumstances where there is an exclusive jurisdiction clause in favour of the English courts.

As regards these authorities, the Court of Appeal said at [59]:

There is, as it seems to me, no reason to doubt that it is only in rare and compelling cases that it will be in the interests of justice to grant a stay on case management grounds in order to await the outcome of proceedings abroad. After all, the usual function of a court is to decide cases and not to decline to do so, and access to justice is a fundamental principle under both the common law and Article 6 ECHR. The court will therefore need a powerful reason to depart from its usual course and such cases will by their nature be exceptional. In my judgment all of the guidance in the cases which I have cited is valuable and instructive, but the single test remains whether in the particular circumstances it is in the interests of justice for a case management stay to be granted. There is not a separate test in "parallel proceedings" cases. Rather, considerations such as the existence of an exclusive English jurisdiction clause and the danger of circumventing a statutory scheme for the allocation of jurisdiction (such as the Judgments Regulation) will be weighty and often decisive factors pointing to where the interests of justice lie.

After summarising the relevant legal authorities, the Court of Appeal said that the critical question in the appeal was whether the judge's conclusion that the Secretariat had adopted a position of neutrality was tenable. As the judge at first instance had not received any expert evidence on Italian or Vatican State law, the Court of Appeal was in the same position as the judge at first instance for the purposes of reading and understanding the relevant parte civil documents. Based on an assessment of those documents and the procedure by which the Secretariat became a parte civile, the Court of Appeal found that there was "nothing contingent or precautionary" about the documents and that the Secretariat was not "passively awaiting the outcome of the criminal proceedings". Rather, by joining the proceedings as a parte civile, the Secretariat had asserted positively that it was a victim of Mr Mincione's criminal conduct and advanced a claim to be quantified in due course, while urging that the criminal proceedings be pursued. The Court of Appeal also did not accept that the Secretariat would be "hamstrung" in answering Mr Mincione's claim in the English courts, noting that it has access to a substantial volume of documents gathered by the OPJ.

As the Court of Appeal had found that the Secretariat was not a neutral party, it necessarily followed that the basis on which the judge had concluded that granting the negative declarations sought by the appellants would serve no useful purpose (at this stage) was "fundamentally flawed".

In circumstances where the judge had found that (i) the claim was justiciable; (ii) the English court had exclusive jurisdiction in accordance with the Brussels Recast Regulation; and (iii) the civil proceedings in England would not interfere with the criminal proceedings in the Vatican, the Court of Appeal was of the view that "there is every reason why it should be permitted to proceed [in the English Courts]".

The full decision can be found here.

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