Lazard Bros & Co v Midland Bank Ltd

Lorp BLanessBurGH. 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.

Lorp WARRINGTON OF CLyFFE. My Lords, I also have
had the same advantage, and I concur.

Lorp RussEett or Kittowren. 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 be at liberty to bespeak or request
serve a document have been without for substituted service of such
effect, the Court or a Judge may, document"....

upon the ex parte application of (1) [1932] 1 K. B. 617.

the plaintiff, order that the plaintiff

293

Ay Li(B.)
1932

a
LAZARD
BROTHERS
& Co.

v.
MIDLAND
BANK.

294

H. L. (E.)
1932

ed,
LaAzAaRD
BROTHERS
& Co.
v.
Mipianp
BANK.

HOUSE OF LORDS [1933]

Lorp Wricut. 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 542,7301. 14s. 7d., and ordered that the
respondents should pay to the appellants 335,230]. 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

A. C. AND PRIVY COUNCIL.

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 362,396]. 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, judg-
ment was entered for the appellants against the Industrial
Bank for 364,4711. 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

295

H. L. (E.)
1932

a
LAZARD
BROTHERS
& Co.

v.
MIDLAND
BANnk.

Lord Wright.

296

H. L. (E.)
1932

—~
LAZARD
BROTHERS
& Co.

%
MIDLAND
Bank.

Lord Wright.

HOUSE OF LORDS [1933]

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 alterna-
tively 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] 2A. C. 307, 337.

A. C. AND PRIVY COUNCIL.

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 recog-
nized 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 State
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 Aksionair-
noye 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.
A.C. 1933. 3 x

297

H. L. (E.)
1932

a5
LAZARD
BROTHERS
& Co.
v.
MIDLAND
BANK.

Lord Wright.

298

H. L. (E.)
1932

an
LAZARD
BROTHERS
& Co.
v.
MipLAND
Bank.

Lord Wright.

HOUSE OF LORDS [1933]

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 adjudi-
cation : 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.

.

A. ¢, "AND PRIVY COUNCIL.

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 appli-
cation 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.
3 X 2

299

H fe)
1932

"~
LAZARD
BROTHERS
& Ca.

v
MIDLAND
BANK.

Lord Wright.

300

H. L. (E.)
1932

{Be
LAZARD
BrRotTHERS
& Co.
vw.
MIDLAND
Bank.

Lord Wright.

HOUSE OF LORDS [1933]

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—Hmployers' Inability
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.

A. C. AND PRIVY COUNCIL.

(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 ?

(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 2

(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

301

H. L. (E.)
1932

—w~
LAZARD
BrotTHERS
& Go.

v.
MipiLaNnpD
BANK.

Lord Wright.

302

H. L. (E.)
1932
LazARD
BROTHEI S
& Co.
MipLAND
Bank.
Lord Wright.

HOUSE OF LORDS [19383]

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 terri-
torial 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.

A. C. AND PRIVY COUNCIL.

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 " nationali-
zation ''—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.

303

H. L. (E.)
1932

ee
LAZARD
BROTHERS
& Co.
v.
MIDLAND
BANK.

Lord Wright.

304

H. L. (E.)

1932
"—
LAZARD
BROTHERS
& Co.

Vv.
MiIpLAND
BANK.

Lord Wright.

HOUSE OF LORDS [1933]

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.

A. C. AND PRIVY COUNCIL.

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.

30

H. L. (E.)
1932

"~~
LAZARD
BROTHERS
& Co.

Vv.
MiIpLAND
BANK.

Lord Wright.

~

o

306

H. L. (E.)
1932

"~~
LAZARD
BROTHERS
& Co.

v.
MIDLAND
BAnkK.

Lord Wright.

HOUSE OF LORDS [1983}

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 defend-
ants 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

A. C. AND PRIVY COUNCIL.

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 X1., 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.

307

H. L. (E.)
1932

==
LAZARD
BROTHERS
& Co.
v.
MIDLAND
Bank.

Lord Wright.

308

H. L. (E.)
1932

=
LAZARD
BROTHERS
& Co.
v.
MIDLAND
BANE.

Lord Wright.

HOUSE OF LORDS [1933]

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 con-
currence 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 x1., 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 x1., 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 x1., 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.

A. C. AND PRIVY COUNOIL. 309

In my judgment the appeal should be dismissed with H. L. (E.)
costs. 1932

=
LAZARD

Order of the Court of Appeal affirmed and appeal gerne

dismissed with costs. v.
MIDLAND

Lords' Journals, November 28, 1932. BANK.