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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> The Libyan Investment Authority v J.P. Morgan Markets Ltd & Ors (Rev 1) [2019] EWHC 1452 (Comm) (10 June 2019)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2019/1452.html
Cite as: [2019] EWHC 1452 (Comm)
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Neutral Citation Number: [2019] EWHC 1452 (Comm)
Claim No CL-2018-000228
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane
London, EC4A 1NL
Date: 10/06/2019
Before :
THE HONOURABLE MR JUSTICE BRYAN
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Between :
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THE LIBYAN INVESTMENT AUTHORITY |
Claimant |
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-and- |
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(2) J.P. MORGAN MARKETS LIMITED (3) WALID MOHAMED ALI AL-GIAHMI (4) LANDS COMPANY LIMITED |
Defendants |
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Roger Masefield QC , Craig Morrison and Samuel Ritchie
(instructed by Enyo Law LLP ) for the Claimant
Alan Gourgey QC , Adam Kramer and Anna Littler
(instructed by PCB Litigation LLP ) for the Third Defendant
Michael Holmes (instructed by Stewarts Law LLP)
for the Fourth Defendant
Hearing dates: 7, 8 and 9 May 2019
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Judgment Approved
MR JUSTICE BRYAN:
A. INTRODUCTION
A.1. The parties and their applications
3. Mr Giahmi also alleges that the claims against him are an abuse of process on the basis that such claims ought to have been brought at the same time as those in an earlier action of the LIA against him (the SocGen Proceedings as defined below) engaging the principle in Henderson v. Henderson or otherwise amounting to an abuse of process , and/or that they arise out of the same facts as the claims against him that were discontinued in the SocGen Proceedings, so as to require permission of the court under CPR 38.7 with the result that the proceedings stand no real prospect of success on the jurisdictional challenge and/or should in any event be struck out.
A.2. Overview of the LIA’s claims in the Proceedings and LIA’s associated knowledge
(1) There is a considerable similarity with what is pleaded against Mr Giahmi and Lands in the JP Morgan Proceedings and against Mr Giahmi and Leinada in the SocGen Proceedings, which it is common ground is of relevance when considering what the LIA considered it needed to know so as properly to be able to plead a claim in fraud.
(2) The SocGen Proceedings were fully pleaded out, with disclosure, witness statements and experts’ reports - those proceedings settling only on what would have been day two of a 13 week trial starting in May 2017 (that, coincidentally, would have been heard by Teare J). The issues arising in the JP Morgan Proceedings are accordingly to be set against the backdrop of the fact of, and what was known in, or by reason of, the SocGen Proceedings, as is the knowledge of those acting on behalf of the LIA.
(3) In this regard the LIA is represented by the same firm of solicitors (Enyo Law LLP), and counsel common to both the SocGen Proceedings and the JP Morgan proceedings.
(4) The relevant dates for the SocGen trades were 28 November 2007 (the “Permal Transaction”), 17 March 2008, 29 May 2008, 13 October 2008 and 9 July 2009. The Bear Stearns Trade was, in fact, earlier - 15 November 2007.
(5) The SocGen Proceedings Claim Form was issued on 7 March 2014 (more than 6 years after the Permal Transaction). The SocGen Proceedings claims were advanced by the LIA under English law although Mr Giahmi alleged that the law applicable to the claims against him was Libyan law (which was denied by the LIA). Mr Giahmi alleged that the claims were time-barred under Libyan law (under which claims are time-barred three years after the LIA was first aware of the claims) (paragraph 50 of his Defence) i.e. the applicable Libyan law provision related to the LIA’s actual knowledge. However, Mr Giahmi pleaded at paragraph 51 of his Defence, “Further or alternatively, and to the extent that the law of England and Wales applies (as is…alleged), the LIA’s claims insofar as they concern the premium paid for the Permal transaction are time-barred by the Limitation Act 1980 or the doctrine of laches”. It is clear, and was accordingly clear since the SocGen Proceedings were pleaded out, that Mr Giahmi was asserting that a claim in respect of a transaction on 28 November 2007 was time-barred as a matter of English law which would amount to a complete defence, subject to the application of s.32 of the Limitation Act 1980.
(6) In the SocGen Proceedings the LIA expressly addressed Section 32 of the Limitation Act 1980 in Schedule 8 paragraph 210 and following of LIA’s Skeleton for trial. As appears below, Section 32 of the Limitation Act 1980 postpones the period of limitation until the claimant has discovered the fraud, concealment or mistake or could with reasonable diligence have discovered it. It is clear, and was accordingly clear since the SocGen Proceedings were pleaded, that the LIA would need to rely upon Section 32 of the Limitation Act 1980 in relation to any claim concerning a note issued more than 6 years before the commencement of the proceedings, otherwise any claim would be time barred (Sections 2 and 5 of the Limitation Act 1980).
(7) The claims brought in the current proceedings (i.e. the JP Morgan Proceedings) against Mr Giahmi and Lands are again advanced (solely, at the present time) under English law. The date of the Bear Stearns Note was 15 November 2007. The Claim Form in the JP Morgan Proceedings was issued on 6 April 2018. Those claims are accordingly time barred, the proceedings having been commenced more than 6 years after 15 November 2007 (Sections 2 and 5 of the Limitation Act 1980), unless the LIA can bring itself within Section 32 of the Limitation Act 1980 (on which it bears the burden of proof).
“44. Both the application for service out of the jurisdiction and for alternative service have been made on an ex parte basis, subjecting the Claimant to the duty to make full and frank disclosure.
45. Mr Allen has dealt fully with those points that he considers may be taken against the Claimant by Mr Giahmi and Lands…in relation to service out at paragraph [83] and by Mr Giahmi in relation to alternative service at [92]. Further, this duty has informed Mr Allen’s presentation of the evidence throughout his statement, and the (extensive) presentation of the relevant law in Parts I and II above.
46. At the time of filing this skeleton, the Claimant is not aware of any other facts or matters that it should draw to the court’s attention”.
(1) At paragraph 66:
“The JP Morgan Proceedings were issued on 6 April 2018, in order to protect the LIA’s position in relation to the expiry of a Libyan limitation period which it was apprehended might be argued as being applicable by Mr Giahmi. In particular, in the SocGen Proceedings, Mr Giahmi contended that the claims against him were matters of Libyan law (which was denied by the LIA) and subject to a three-year limitation period (which, in any event, the LIA contended had not expired by the time that the SocGen Proceedings were issued - as to which, see further below).” (emphasis added)
The entire focus of this paragraph is Libyan law, nothing is said about English law or the fact that Mr Giahmi argued in the SocGen Proceedings that the Permal transaction was time barred under English law, or that the LIA relied, in response on Section 32 of the Limitation Act 1980.
(2) At paragraph 83, as the last of 9 points:-
“83. So far as the claims against Mr Giahmi and Lands Company are concerned, I remain sure of my belief that the claim has a reasonable prospect of success, even though I have considered the following matters which the Defendants may raise in their defences:
…
(i) The fact that the Disputed Trade was executed back in 2007, giving rise to possible limitation defences (whether under English law, or Libyan law). I do not believe that any credible limitation argument will be available to Mr Giahmi or Lands Company . In the SocGen Proceedings Mr Giahmi relied upon the Libyan law of limitation. Although I understand that the prima facie limitation period under Libyan law is 3 years, I also understand that this does not start to run until a party is aware of the identity of the actual wrongdoer. The LIA was not aware of Mr Giahmi’s position behind Lands…or the true nature of the ‘services’ provided until after the issue of the SocGen Proceedings”. (emphasis added)
The first sentence does not address the prima facie time bar under English law and the need for the LIA to rely on Section 32 of the Limitation Act 1980. The second sentence is simply wrong and is said by Mr Giahmi and Lands to be positively misleading, and the final two sentences relate to Libyan law and actual knowledge, and not English law and what could have been discovered with reasonable diligence and when.
A. Real prospect of success
“ 3.1 The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where - ...
(3) A claim is made against a person (‘the defendant’) on whom the claim form has been or will be served (otherwise than in reliance on this paragraph) and -
(a) there is between the claimant and the defendant a real issue which it is reasonable for the court to try; and
(b) the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim .”
21. Where this provision of the Practice Direction is relied upon to serve a defendant outside of the jurisdiction, the question for the court becomes does the claim against the foreign defendant have a real prospect of success. The test to be applied is well known, namely whether there is a serious issue to be tried, akin to the test for summary judgment under CPR Part 24.
22. In Altimo Holdings v Kyrgyz Mobil Tel [2012] 1 WLR 1804 (PC) Lord Collins held at [71] that:
“the claimant must satisfy the court that in relation to the foreign defendant there is a serious issue to be tried on the merits, i.e. a substantial question of fact or law, or both. The current practice in England is that this is the same test as for summary judgment, namely whether there is a real (as opposed to a fanciful) prospect of success”.
23. With respect to the way in which the test for summary judgment should be applied, the guidance of Floyd LJ in TFL Management Services Ltd v Lloyds Bank Plc [2013] EWCA Civ 1415 at paragraph [26] should be followed, where he cites with approval the words of Lewison J (as he then was) in Easy Air Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch):
“26. The judge referred to Easy Air Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) as setting out the approach under CPR 3.4(2)(a) and 24.2. In that case Lewison J (as he was then) said:
“… the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 1 All ER 91 ;
ii) A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];
iii) In reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman;
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10];
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550 ;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725 .
27. Neither side sought to challenge these principles. I would add that the court should still consider very carefully before accepting an invitation to deal with single issues in cases where there will need to be a full trial on liability involving evidence and cross examination in any event, or where summary disposal of the single issue may well delay, because of appeals, the ultimate trial of the action: see Potter LJ in Partco v Wragg [2002] EWCA Civ 594; [2002] 2 Lloyds Rep 343 at 27(3) and cases there cited. Removing road blocks to compromise is of course one consideration, but no more than that. Moreover, it does not follow from Lewison J's seventh principle that difficult points of law, particularly those in developing areas, should be grappled with on summary applications; see Partco at 28(7). Such questions are better decided against actual rather than assumed facts. On the other hand it may be possible to say that the trajectory of the law will never on any view afford a remedy: see for example Hudson and others and HM Treasury and another [2003] EWCA Civ 1612 .”
B. Limitation
B.1 Applicable Legal Principles
27. Section 32 of the Limitation Act 1980 provides that:
“(1) Subject to subsections (3) and (4A) below, where in the case of any action for which a period of limitation is prescribed by this Act, either-
(a) the action is based upon the fraud of the defendant; or
(b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or
(c) the action is for relief from the consequences of a mistake; the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.”
28. A claimant wishing to avail itself of the extension of the limitation period under s.32 bears the burden of proving that it could not with reasonable diligence have discovered the concealed fraud more than 6 years before issuing its claim ( Paragon v Thakerar [1999] 1 All ER 400 (CA) per Millett LJ at 418).
29. The test of reasonable diligence was considered by the Court of Appeal in Gresport Finance Ltd v Carlo Battalagia [2018] EWCA Civ 540. In that case Henderson LJ endorsed at [41] the well-known dicta of Millett LJ in Paragon Finance where Millett LJ held at p. 418 that:
“The question is not whether the plaintiffs should have discovered the fraud sooner, but whether they could with reasonable diligence have done so. The burden of proof is on them. They must establish that they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take. In this context the length of the applicable limitation period is irrelevant. In the course of argument May LJ observed that reasonable diligence must be measured against some standard, but that the six-year limitation period did not provide the relevant standard. He suggested that the test was how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency. I respectfully agree.”
30. Henderson LJ acknowledged the point made by Neuberger LJ (as he then was) in Law Society v Sephton [2004] EWCA Civ 1627 at [116] that it is inherent in Section 32 that there must be an assumption that the claimant desires to discover whether or not fraud has been committed. It was held by Henderson LJ that the concept of “reasonable diligence” only makes sense if there is something to put the claimant on notice of the need to investigate whether there has been a fraud, concealment or mistake, and that the naiveté and inexperience of a claimant are not factors which can properly influence whether they could with reasonable diligence have discovered the fraud ( Hussain v Mukhtar [2016] EWHC 424 (QB) at [43]).
“...it is impossible to devise a meaning to put on those words [reasonable diligence] which can be generally applied in all contexts because, as it seems to me, the precise meaning to be given to them must vary with the particular context in which they are to be applied. In the context to which I have to apply them, in my judgment, I conclude that reasonable diligence means not the doing of everything possible, not necessarily the using of any means at the plaintiff’s disposal, not even necessarily the doing of anything at all, but that it means the doing of that which an ordinarily prudent buyer and possessor of a valuable work of art would do having regard to all the circumstances, including the circumstances of the purchase”.
32. The exercise of “reasonable diligence” may require investigatory measures to be taken by a claimant/applicant (including instituting legal proceedings to obtain disclosure). For example, in Chodiev v Stein [2015] EWHC 1428 (Comm) at [49] Burton J held that a claimant should have sought an order for disclosure out of the jurisdiction as part of its investigation.
33. For the fraud to be known or discoverable by a claimant under s.32 (such that time will start running against them), it is not necessary that the claimant knows or could have discovered each and every piece of evidence which it later decides to plead. See Sir Terence Etherton in Arcadia Group Brands v Visa [2015] EWCA Civ 883 at [49]:
“ Johnson , the Mirror Group Newspaper case and The Kriti Palm are clear authority, binding on this court, for the following principles applicable to section 32(1)(b) of the 1980 Act: (1) a “fact relevant to the plaintiff's right of action” within section 32(1)(b) is a fact without which the cause of action is incomplete; (2) facts which merely improve prospects of success are not facts relevant to the claimant's right of action; (3) facts bearing on a matter which is not a necessary ingredient of the cause of action but which may provide a defence are not facts relevant to the claimant's right of action.”
34. Therefore, the court must “ look for the gist of the cause of action that is asserted, to see if that was available to the claimant without knowledge of the concealed material” ( AIC Ltd v ITS Testing Services (UK) Ltd (The Kriti Palm) [2007] 1 All ER (Comm) 667 per Buxton LJ at [453], quoted in Arcadia at [48]). At the point at which the claimant can plead the complete cause of action, however weak or strong, time starts to run. Not every detail needs to be known and a realistic view must be taken by the court.
35. For limitation purposes, a person is treated as always knowing something even though he or she has subsequently forgotten it ( Ezekiel v Lehrer [2002] EWCA Civ 16 at [2]). For the purposes of Section 32, the necessary knowledge is knowledge of the fraud being alleged. It is not sufficient that the claimant knows of some unspecified deception or dishonesty ( Barnstaple Boat Club v Jones [2007] EWCA 727, per Waller LJ at [34]).
36. In Julien v Evolving Tecknologies [2018] UKPC 2, the Privy Council recently considered the question of whose knowledge is to be attributed to a company in the context of a case concerning s. 14 of the Limitation Act 1997 of Trinidad and Tobago, which is materially identical to s. 32 of the English Limitation Act 1980. The Privy Council observed that there was a powerful argument to be made that time should not commence for limitation purposes as long as the wrongdoers remained in control of the corporate claimant. As the Privy Council put it at [61]-[62]:
“Finally, there remains the large policy objection noted by the trial judge, namely that there is no obvious reason why time should run in favour of directors of a company who have committed a deliberate breach of duty, or deliberately concealed a breach of duty, for as long as they choose to retain control of the company as its Board. There is much to be said for adhering to the simple rule, based upon the separate personality of the company from even a sole shareholder, that shareholder knowledge of a breach of duty owed to the company by its directors, or the ability to discover the facts, is simply not to be attributed to the company at all, at least for as long as the allegedly delinquent directors retain control of it.
The Board would have found it difficult to reach a clear determination of this important question, even if it had been necessary to do so...It is unnecessary for the attribution question to be finally decided. It would be better to leave that question to a case in which it would be determinative, and where it had been fully argued in the courts below.”
37. The importance of establishing a solid foundation in evidence before pleading fraud was recently emphasised by the Court of Appeal in Playboy Club v Banca Nazionale Del Lavoro [2018] EWCA Civ 2025, at [46], where the Court of Appeal held:
“The pleading of fraud or deceit is a serious step, with significance and reputational ramifications going well beyond the pleading of a claim in negligence. Courts regard it as improper, and can react very adversely, where speculative claims in fraud are bandied about by a party to litigation without a solid foundation in the evidence. A party risks the loss of its fund of goodwill and confidence on the part of the court if it makes an allegation of fraud which the court regards as unjustified, and this may affect the court’s reaction to other parts of its case. Moreover, as Birss J observed in Property Alliance Group v Royal Bank of Scotland [2015] EWHC 3272 (Ch) at [40], allegations of fraud ‘can cause a major increase in the cost, complexity and temperature of an action’. For these reasons parties are well-advised, and indeed enjoined according to usual pleading principles, to be reticent before pleading fraud or deceit.”
B.2 Limitation on the Facts
“(1) The opaque and inconsistent description of the services provided by Leinada, and the scale of its supposed remuneration.
(2) The fact that Leinada was a Panamanian company, without an established pedigree, and with no discernible expertise in advising on or structuring financial derivative transaction and that all of its directors, save for Mr Giahmi, were nominees.
(3) The fact that there is no evidence of which the LIA is aware of Leinada providing any legitimate services in relation to any of the Disputed Trades.
(4) The fact that the SocGen Defendants had no need of the services allegedly provided by Leinada, but could themselves have structured and devised an appropriate investment solution for the LIA without the involvement of Leinada.
(5) The fact that Leinada was ultimately owned and controlled by Mr Giahmi, an individual who:
(i) had no discernible expertise in advising or structuring financial derivative transactions; and/or
(ii) had connections both with the Gaddafi family and with representatives of the LIA, which he was in a position to exploit.
(6) The fact that the Leinada Payments were only to be paid on a “success fee” basis, with success defined as the LIA’s purported execution of each of the Disputed Trades.
(7) The notorious fact that corruption pervaded both government and business activities in Libya, both prior to and throughout the period of time when the Disputed Trades were being executed.”
“23.1 The lack of information about the “structuring” services (and/or any other services) allegedly provided by Lands/Mr Giahmi;
23.2 The lack of evidence that Lands or Mr Giahmi provided legitimate services;
23.3 The fact that Lands is a “shell company” incorporated in the Cayman Islands “a low disclosure jurisdiction” with no known employees on its payroll and no known business premises;
23.4 The fact that Bear Stearns had no need of the “structuring” services allegedly provided;
23.5 The lack of disclosure as to the scale of fees paid to Lands;
23.6 The fact that Lands was ultimately owned and/or controlled by Mr Giahmi who (a) did not have expertise in advising on or structuring financial derivative transactions and/or (b) had connections with the Gaddafi family, regime and LIA representatives which he was in a position to exploit;
23.7 The failure to disclose that Mr Giahmi was involved in the transaction;
23.8 The fact that Mr Giahmi had already taken steps to corrupt LIA officers and/or employees by the payment of bribes (specifying the two alleged bribes in relation to payments made to Mr Gheriani’s father and Person Z); and
23.9 The fact that Mr Giahmi was in a position to make credible threats to representatives of the LIA (referring specifically to the two alleged incidents of intimidation of (1) Mr Gheriani and (2) Mr Zarti).
48. In late 2007 and early 2008, the LIA’s Board of Directors was concerned that the use of intermediaries in transactions entered into by the LIA could give rise to corruption or bribery, and in June 2008 Mr Baruni, who had been hired as a consultant for the LIA and became a member of its Advisory Board in 2008, and who gave evidence for the LIA in the SocGen Proceedings, voiced his concerns about intermediaries being used in LIA deals. Mr Baruni was of the view that the use of third parties in LIA transactions was unnecessary and gave rise to concerns with respect to corruption.
(1) The lack of information about “structuring” services (the term used in the Bear Stearns term sheet for the services being provided by Lands) provided to Bear Stearns;
(2) The fact that there is no evidence of which the LIA is aware that Lands or Mr Giahmi provided any legitimate service in relation to the Bear Stearns Notes;
(3) The fact that Lands is a shell company incorporated in the Cayman Islands with no known employees and no business premises;
(4) The fact that as a well-known investment bank, Bear Stearns had no need for “structuring” services in relation to the Bear Stearns Notes, but could themselves have structured an appropriate investment for the LIA;
(5) The failure to disclose to the LIA the scale of the fees which were paid to Lands;
(6) The fact that Lands was ultimately owned and/or controlled by Mr Giahmi who (a) had no expertise in advising on or structuring financial derivative transactions; and (b) had connections with the Gaddafi regime;
(7) The failure to disclose the involvement of Mr Giahmi;
(8) The fact that Mr Giahmi had already taken steps to bribe the officers of the LIA prior to the conclusion of the Bear Stearns Notes; and
(9) Mr Giahmi’s connections with the Gaddafi family and regime, meant that he was in a credible position to make threats.
(1) The fact that the Leinada payments were only to be paid on the successful completion of the transaction (paragraph 38(6)); and
(1) The notorious fact that corruption pervaded both government and business activities in Libya, both prior to and throughout the period of time when the SocGen transactions were being executed (paragraph 38(7)).
65. I address below each of the “building-blocks” , and whether they were either known to the LIA, or could have been known to the LIA had it used reasonable diligence to discover the same, on or before 6 April 2012. In this regard the LIA produced a table addressing actual knowledge that it had (the “LIA Table”), whilst Mr Giahmi and Lands produced a document as to the knowledge they said that the LIA could have acquired had it used reasonable diligence (the “Reasonable Diligence Document”).
Fees having been paid to Lands in connection with the Bear Stearns Transaction (see para 25(1) of Mr Giahmi’s skeleton, SocGen POC para 38(1), JPM POC para 27(5)).
Lands not being an established provider of services in the banking and finance industry with particular experience or expertise (see para 25(2) of Mr Giahmi’s skeleton, SocGen POC para 38(2), cf JP Morgan POC para 27(3).
A lack of evidence of legitimate services provided to Bear Stearns by Lands (para 25(3) of Mr Giahmi’s skeleton, SocGen POC para 38(3), JP Morgan POC para 27(2)).
Bear Stearns having no apparent need to engage Lands to provide structuring services (para 25(4) of Mr Giahmi’s skeleton, SocGen POC para 38(4) and JP Morgan POC para 27(4).
The involvement of Mr Giahmi in the Bear Stearns Transaction (see para 25(5) of Mr Giahmi’s skeleton, SocGen POC para 38(5) and JP Morgan POC para 27(6)).
74. In any event the suggestion that JP Morgan would not have cooperated and provided information (including as to the involvement of Mr Giahmi) is just not credible. After Bear Stearns was taken over, JP Morgan became an obvious source of information with respect to accessing material which went to prove Mr Giahmi’s involvement with the Bear Stearns Trade. It was submitted by counsel for the LIA that requesting information from JP Morgan would have been futile for three reasons: (1) that Mr Giahmi imposed confidentiality obligations on Bear Stearns / JP Morgan in order to conceal his involvement in the Bear Stearns Trade from the LIA; (2) that JP Morgan would have stone-walled the LIA as it allegedly had in the past; and (3) that individuals who were suspected of being co-conspirators in the Bear Sterns Trade would have prevented JP Morgan/Bear Stearns from releasing this information, and/or that these individuals had left and therefore JP Morgan would be unable to source the relevant information. These points were comprehensively rebutted by counsel for Mr Giahmi in reply.
79. In arguing that Bear Stearns / JP Morgan would not have responded to a request for information, reference was made to a US Department of Justice letter to the Swiss authorities which references an internal Be ar Stearns note in which it was recorded that Bear Stearns executives were not to reveal Mr Giahmi's involvement in the transaction during meetings with the LIA unless LIA o fficials raised the matter first . However I consider that this point illustrates that Bear Stearns would have responded to such a request if the matter was directly raised, which the LIA was invited to do by the terms of the Bear Stearns Transaction Term Sheet.
80. It was also submitted that certain individuals who were alleged co-conspirators in the Bear Stearns Trade would have prevented information being given. In particular, the LIA submitted that it was unrealistic to expect information to have been provided by alleged "co-conspirators", which included Bear Stearns / JP Morgan . However, this overlooks the fact that Nadim Shabsogh (the Bear Steams employee named by the LIA in its Particulars of Claim as having "marketed" the B ear S tearns Notes to the LIA) lef t Bear Stearns/JP Morgan in 2008 before the investigations in 2010 into the LIA's transactions by Mr Baruni and Mr Rais. The only other employees of Bear Stearns who were involved in the marketing of the B ear S tearns Trade were Bruno Pannetier and Vincent Van Pelt who also left Bear Stearns/JP M organ in 2008 .
81. It was no doubt in recognition of this that the LIA’s emphasis shifted, to suggest that the LIA would be unable to source the relevant information on account of the individuals who had knowledge of the Bear Stearns Trade having left. However the Bear Stearns Trade was for a significant sum of money and a large amount of paper work would have been generated as a result. There is nothing to suggest that the underlying documentation and email correspondence would not have been retained when JP Morgan took over Bear Stearns. It is not credible to suggest that, because certain individuals who may have had direct knowledge of Mr Giahmi’s involvement had left, that JP Morgan would have been unable to supply information to the LIA about the involvement of Mr Giahmi.
82. N either the Bear Stearns Transaction Term Sheet nor JP M organ were asked by the LIA to provide information regarding the involvement of Lands in the B ear S tearns Trade . This is notwithstanding the invitation to do so on the B ear S tearns Trade term sheet which reads "further information is available on request". It is not realistic to suggest that JP Morgan would not have complied with any request by its customer, the LIA, for information as to who the natural person working on behalf of Lands was, and how much he or she was paid, still less that JP Morgan would in any way conspire to prevent information being disclosed in the event of a request on behalf of the LIA in 2010.
The “notorious” prevalence of corruption in Libyan business at the time (see para 25(6) of Mr Giahmi’s skeleton and SocGen POC para 38(7)).
Other matters
(1) The LIA’s concern from late 2007/early 2008 onwards of the risk of corruption (and specifically the risk of officials having received illegitimate payments) arising from payments made to unknown third parties in LIA transactions (evidence summarised in Riem 1 at paragraph 51 to 54 with reference to evidence from the LIA’s witnesses);
(2) The LIA’s concern as to corruption and the use of intermediaries in its transactions during and before the 2010 investigations headed by LIA CEO Mr Rais (engaging Mr Baruni and Dr Khan to investigate) (evidence summarised in Riem 1 at paragraphs 55 to 66), including the concerns regarding the use of the term “structuring” in relation to services provided by unknown third parties to entities that allegedly had no need of such services.
C. Full and Frank Disclosure
C.1. Applicable Legal Principles
92. The principles to be applied to breaches of full and frank disclosure were summarised in OJSC ANK Yugraneft v Sibir Energy plc [2008] EWHC 2614 (Ch), in which Christopher Clarke J. approved the following guidance at [102]:
“ Mr Boyle drew my attention, with appropriate diffidence, to a decision of his own, sitting as a Deputy Judge of the Chancery Division, as to the approach to be taken by the Court in the event that there is culpable non-disclosure. In The Arena Corporation Limited -v- Schroeder [2003] All ER (D) 199 (May) at paragraph 213, he summarised the main principles which should guide the Court in the exercise of its discretion as follows:
(1) If the Court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.
(2) Notwithstanding the general rule, the court has jurisdiction to continue or re-grant the order.
(3) That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.
(4) The Court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.
(5) The Court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the Judge might have made the order anyway is of little if any importance.
(6) The Court can weigh the merits of the plaintiff’s claim but should not conduct a simple balancing exercise of which the strength of the plaintiff’s case is allowed to undermine the policy objective of the principle.
(7) The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.
(8) The jurisdiction is penal in nature and the courts should have regard to the proportionality between the punishment and the offence.
(9) There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.”
93. In Knauf UK GmbH v British Gypsum Ltd [2001] EWCA Civ 1570 the Court at [65] explained the “golden rule” which must be followed with respect to full and frank disclosure:
“65. The leading cases remain Brink's Mat Ltd v. Elcombe [1988] 1 WLR 1350 and Behbehani v. Salem [1989] 1 WLR 723 . Those authorities in this court bring their reminder of the essential principles: that there is a “golden rule” that an applicant for relief without notice must disclose to the court all matters relevant to the exercise of the court's discretion; that failure to observe this rule entitles the court to discharge the order obtained even if the circumstances would otherwise justify the grant of such relief; that a due sense of proportion must be maintained between the desiderata of marking the court's displeasure at the non-disclosure and doing justice between the litigants; that for these purposes the degree of any culpability on the part of the applicant or of any prejudice on the part of the respondent are relevant to the reviewing court's discretion; and that a balance must be maintained between undermining “the heavy duty of candour and care” which falls on applicants and promoting a “tabula in naufragio” to save respondents who lack substantial merits.”
94. The duty of full and frank disclosure only extends to those issues which can be said to be material to the decision which the judge had to make on the application. This was made clear by Lawrence Collins J in Konamaneni & Ors v. Rolls Royce Industrial Power (India) Ltd [2002] 1 WLR 1269, where his Lordship stated at [180]:
“On an application without notice the duty of the applicant is to make a full and fair disclosure of all the material facts, i.e. those which it is material (in the objective sense) for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers; the duty is a strict one and includes not merely material facts known to the applicant but also additional facts which he would have known if he had made proper enquiries : Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350, 1356-1357. But an applicant does not have a duty to disclose points against him which have not been raised by the other side and in respect of which there is no reason to anticipate that the other side would raise such points if it were present.
These principles have long been applied to applications for permission to serve out of the jurisdiction: see e g The Hagen [1908] P 189, 201. In that context it has been held that it would not be reasonable to expect an applicant for permission to serve out to anticipate all the arguments or points which might be raised against his case: see Electric Furnace Co v Selas Corpn of America [1987] RPC 23, 29. A failure to refer to arguments on the merits which the defendant might raise at trial should not generally be characterised as a “failure to make full and fair disclosure”, unless they are of such weight that their omission may mislead the court in exercising its jurisdiction under the rule and its discretion whether or not to grant permission: BP Exploration Co (Libya) Ltd v Hunt [1976] 1 WLR 788, 788-789, approved in the Electric Furnace case [1987] RPC 23, 29.”
95. Males J in National Bank Trust v Yurov [2016] EWHC 1913 (Comm) at [19], made clear the importance of “not to allow a dispute about full and frank disclosure to turn into what is euphemistically described as a“mini” trial of the merits”.
96. In Banca Turco Romana S.A. (in liquidation) v Cortuk [2018] EWHC 662 (Comm), Popplewell J gave the following further guidance at [45]:
“The importance of the duty of disclosure has often been emphasised. It is the necessary corollary of the court being prepared to depart from the principle that it will hear both sides before reaching a decision, which is a basic principle of fairness. Derogation from that basic principle is an exceptional course adopted in cases of extreme urgency or the need for secrecy. If the court is to adopt that procedure where justice so requires, it must be able to rely on the party who appears alone to present the evidence and argument in a way which is not merely designed to promote its own interests, but in a fair and even- handed manner, drawing attention to evidence and arguments which it can reasonably anticipate the absent party would wish to make. It is a duty owed to the court which exists in order to ensure the integrity of the court’s process. The sanction available to the court to preserve that integrity is not only to deprive the applicant of any advantage gained by the order but also to refuse to renew it. In that respect it is penal, and applies notwithstanding that even had full and fair disclosure been made the court would have made the order. The sanction operates not only to punish the applicant for the abuse of process, but also, as Christopher Clarke J observed in [Yugraneft], to ensure that others are deterred from such conduct in the future. Such is the importance of the duty that in the event of any substantial breach the court inclines strongly towards setting aside the order and not renewing it, even where the breach is innocent. Where the breach is deliberate, the conscious abuse of the court’s process will almost always make it appropriate to impose the sanction.”
97. In MRG (Japan) Ltd v Engelhard Metals Japan Ltd [2003] EWHC 3418 (Comm) Toulson J set out the following guidance to be adopted, at [23]-[32]:
“23. The starting point is that an applicant for an order on a without notice application must make full and frank disclosure of all material facts, that is, facts known to the applicant which might reasonably be taken into account by the judge in deciding whether to grant the application: R v Kensington Income Tax Commissioners ex parte Princess Edmund De Polignac [1917] 1 KB 486, 514 (Scrutton LJ); Siporex Trade SA v Comdel Commodities Limited [1986] 2 Lloyd's Rep 428, 437 (Bingham J); Brink's Mat Limited v Elcombe [1988] 1 WLR 1350, 1356 (Ralph Gibson LJ).
24. It is for the court to determine what is material according to its own judgment and not the assessment of the applicant: Brink's Mat Limited v Elcombe . This means that if the court considers there to have been material non-disclosure, it is not an answer that the applicant in good faith took a different view, although that may affect the court's exercise of its discretion in deciding what to do in the light of the non-disclosure. It does not mean that an applicant is under a duty to disclose facts which could not reasonably have a bearing on the decision which the judge has to make.
25. Materiality therefore depends in every case on the nature of the application and the matters relevant to be known by the judge when hearing it. I was referred to a number of statements on the duty of disclosure in the context of applications for freezing injunctions. In such cases the court is being asked to make an order of an exceptional kind, prohibiting or restricting a defendant's use of its own assets before any adjudication has been made against it. Because of its draconian nature, it is a jurisdiction which requires great caution and a wide range of factors may have a bearing on the court's decision.
26. An application for permission to serve out of the jurisdiction is of a very different nature. The general principles about disclosure on without notice applications still apply, but the context is different. The focus of the inquiry is on whether the court should assume jurisdiction over a dispute. The court needs to be satisfied that there is a dispute properly to be heard (i.e. that there is a serious issue to be tried); that there is a good arguable case that the court has jurisdiction to hear it; and that England is clearly the appropriate forum. Beyond that, the court is not concerned with the merits of the case.
27. Authority supports this approach. In BP Exploration Co (Libya) Limited v Hunt [1976] 3 AER 879 (which concerned an application for leave to serve out of the jurisdiction) Kerr J said at 893:
In my view, a failure to refer to arguments on the merits which the defendant may seek to raise in answer to the plaintiff's claim at the trial should not generally be characterised as a failure to make a full and fair disclosure, unless they are of such weight that their omission may mislead the court in exercising its jurisdiction under the rule and its discretion whether or not to grant leave. …
29. If MRG was aware of matters which might reasonably have caused the judge to have any doubt whether he should grant permission to serve out of the jurisdiction, those would have been relevant matters and therefore ought to have been disclosed. This must be so in principle, and it is implicit in the authorities to which I have referred.
Mr Gruder's answer was that:
i) it is for the court and not for the applicant to decide what is material and
ii) anything which is relevant to the merits of the claim is potentially relevant to the matters which the judge has to consider.
I do not accept that submission. The first proposition is correct, but Mr Gruder seeks to apply it in such a way as to enlarge the test of materiality. It is for the court to determine what is material, but the test of materiality is that to which I have referred: whether the matter might reasonably be taken into account by the judge in deciding whether to grant the application. The second proposition goes too far. There may be many points which would be relevant to the ultimate merits of an action, but which could not on any reasonable view affect the judge in deciding the “merits threshold” question (or the ultimate question whether to grant the application).
31. Mr Gruder submitted that if the applicant is not required to disclose all matters which go to the merits of the action, but only those matters which go to the questions whether there is a serious issue to be tried, whether the court has jurisdiction to hear it and whether England is clearly the appropriate forum, the result will be to reduce the judge's role on such an application to a “rubber stamping” exercise. I would not agree with that description, although I do agree that the issues which the judge is required to consider are limited. This is because the judge is at this stage concerned with the question whether the court should assume jurisdiction, rather than with the question who is likely to win. …
36. Appendix 15 to the Admiralty and Commercial Courts Guide gives good guidance about the evidence which should support an application for permission to serve out of the jurisdiction. The guidance focuses on the matters which the judge will need to take into account in deciding whether it is a proper case in which to give permission.”
“The claimant should also present evidence of the considerations relied upon as showing that the case is a proper one in which to subject a party outside the jurisdiction to proceedings within it (stating the grounds of belief and sources of information); exhibit copies of the documents referred to and any other significant documents; draw attention to any features which might reasonably be thought to weigh against the making of the order sought; and otherwise comply with the duty of full and frank disclosure to the Court. Where convenient the written evidence should be included in the form of application notice, rather than in a separate witness statement. The form of application notice may be extended for this purpose.”
C.2. Full and Frank Disclosure and Limitation
100. As is expressly required by Appendix 9 paragraph 2(c) of the Commercial Court Guide, a claimant when seeking permission to serve a claim form out of the jurisdiction in the Commercial Court must “draw attention to any features which might reasonably be thought to weigh against the making of the order sought; and otherwise comply with the duty of full and frank disclosure to the Court”.
106. The LIA, by way of witness evidence from Mr Allen, advances the argument that in the original application it was highlighted that there had been a pattern of concealment on behalf of Mr Giahmi such that the relevant facts had been concealed from the LIA. However, this argument does nothing to justify the LIA’s breach of full and frank disclosure, and does not grapple with what was either known or could with reasonable diligence have been known. Similarly, the LIA submits that it was highlighted in the original application that the fraud was only discovered after issuing the SocGen Proceedings. However, the LIA’s own assertion as to when it alleges it acquired sufficient knowledge to bring a claim is not the benchmark against which limitation is to be judged and the LIA did not address the operation of section 32, and arguments as to what could have been discovered with the exercise of reasonable diligence. I t is also submitted on behalf of the LIA that the LIA reached the conclusion that there was no credible limitation defence available to Mr Giahmi. It does not fall to a claimant to determine which defences are credible and to put only those before the court. The purpose of full and frank disclosure is to ensure that the claimant will put before the court all facts and arguments material to the court’s decision.
“44. Both the application for service out of the jurisdiction and for alternative service have been made on an ex parte basis, subjecting the Claimant to the duty to make full and frank disclosure.
45. Mr Allen has dealt fully with those points that he considers may be taken against the Claimant by Mr Giahmi and Lands…in relation to service out at paragraph [83] and by Mr Giahmi in relation to alternative service at [92]. Further, this duty has informed Mr Allen’s presentation of the evidence throughout his statement, and the (extensive) presentation of the relevant law in Parts I and II above.
46. At the time of filing this skeleton, the Claimant is not aware of any other facts or matters that it should draw to the court’s attention”.
114. At paragraph 66 of his witness statement Mr Allen stated:-
“The JP Morgan Proceedings were issued on 6 April 2018, in order to protect the LIA’s position in relation to the expiry of a Libyan limitation period which it was apprehended might be argued as being applicable by Mr Giahmi. In particular, in the SocGen Proceedings, Mr Giahmi contended that the claims against him were matters of Libyan law (which was denied by the LIA) and subject to a three-year limitation period (which, in any event, the LIA contended had not expired by the time that the SocGen Proceedings were issued - as to which, see further below).” (emphasis added)
116. At paragraph 83 of his witness statement, Mr Allen stated that so f ar as the claims against Mr Giahmi and Lands are concerned, he remained sure of his belief that the LIA’s claim had a reasonable prospect of success, even though he had considered 9 points that the Defendants might raise in their defences. The last at (i) was as follows:-
“(i) The fact that the Disputed Trade was executed back in 2007, giving rise to possible limitation defences (whether under English law, or Libyan law). I do not believe that any credible limitation argument will be available to Mr Giahmi or Lands Company . In the SocGen Proceedings Mr Giahmi relied upon the Libyan law of limitation. Although I understand that the prima facie limitation period under Libyan law is 3 years, I also understand that this does not start to run until a party is aware of the identity of the actual wrongdoer. The LIA was not aware of Mr Giahmi’s position behind Lands…or the true nature of the ‘services’ provided until after the issue of the SocGen Proceedings”. (emphasis added)
119. In the above circumstances, and for the reasons I have identified, the LIA’s breach of the duty of full and frank disclosure was both conscious, and therefore deliberate, and was, in my view a substantial, indeed an egregious, breach of duty in relation to a matter, limitation, which, on any view, went to the heart of the merits of the application for permission to serve out against Mr Giahmi and Lands. I address in due course below the other allegations of failure to give frank disclosure. However, I consider that the breach under consideration in itself justifies, and indeed necessitates, that permission to serve out be set aside.
“45. The importance of the duty of disclosure has often been emphasised. It is the necessary corollary of the court being prepared to depart from the principle that it will hear both sides before reaching a decision, which is a basic principle of fairness. Derogation from that basic principle is an exceptional course adopted in cases of extreme urgency or the need for secrecy. If the court is to adopt that procedure where justice so requires, it must be able to rely on the party who appears alone to present the evidence and argument in a way which is not merely designed to promote its own interests, but in a fair and even-handed manner, drawing attention to evidence and arguments which it can reasonably anticipate the absent party would wish to make. It is a duty owed to the court which exists in order to ensure the integrity of the court’s process. The sanction available to the court to preserve that integrity is not only to deprive the applicant of any advantage gained by the order, but also to refuse to renew it. In that respect it is penal, and applies notwithstanding that even had full and fair disclosure been made the court would have made the order. The sanction operates not only to punish the applicant for the abuse of process, but also, as Christopher Clarke J observed in Re OJSC ANK Yugraneft v Sibir Energy PLC [2010] BCCC 475 at [104], to ensure that others are deterred from such conduct in the future. Such is the importance of the duty that in the event of any substantial breach the court inclines strongly towards setting aside the order and not renewing it, even where the breach is innocent. Where the breach is deliberate, the conscious abuse of the court’s process will almost always make it appropriate to impose the sanction.”
D. Money Had and Received and the Fraud Claim
“(1) for money had and received under which he can recover the amount of the bribe as money had and received or, (2) for damages for fraud, under which he can recover the amount of the actual loss sustained in consequence of his entering into the transaction in respect of which the bribe was given, but he cannot recover both.”
126. Similar remarks were made by Longmore LJ in Fiona Trust & Holding Corp v Skarga [2013] EWCA Civ 275 at para [1]:
“Thus English law will permit a claimant employer or principal whose employee or agent has been bribed to recover: i) the amount of the bribe from both the person bribed and the briber, regardless of the question whether any loss has been suffered by the claimant; ii) the amount of any loss following the bribe, it being (probably) presumed both that loss has occurred in at least the amount of the bribe and that any subsequent transaction created by the employee or agent was caused by the bribe...”
“all or any part of the premium and/or their traceable substitutes received... and to recover the same and/or their traceable substitutes, either as monies had and received to the LIA’s use... alternative by way of damages for fraud (the damage being irrebuttably presumed as being equivalent to the Lands Company Payments)”
(1) Smith LJ at 849-850: “It seems to me clear from the judgments in Salford Corpn v Lever and in Grant v Gold Exploration and Development Syndicate Ltd that, inasmuch as the amount of the bribes has been quantified, it can be recovered as money had and received” and “in this case, the purchase money was 28,000 pounds, in which was included the 700 pounds given to the purchaser’s agent. Of course the vendor would have sold the goods for 28,000 pounds less 700 pounds; therefore, he has in his pocket 700 pounds, money of the purchasers. That 700 pounds he must disgorge. That is the cause of action here. When a purchaser finds out this state of things, he may call on his agent or the vendor to disgorge” and “the direction to the jury ought to have been that the amount which could be recovered as money had and received was the amount of the bribes”.
(2) Vaughan Williams LJ at 850: “This is an action against a briber in which the plaintiffs seek to recover from him the amount of the bribe” and “whatever the amount of the bribes is proved to be, that amount can be recovered from the agent” and “I used to think that the action against the briber was an action of fraud sound in damages; but the judges in Salford Corp v Lever did not hold out much encouragement to me in that view”.
(3) Romer LJ at 851: “if the agent be a confidential buyer of goods for his principal from the briber, the court will assume as against the briber that the true price of the goods as between him and the purchaser must be taken to be less than the price paid to, or charged by, the vendor by, at any rate, the amount of value of the bribe”.
131. On the basis of the law as it currently stands, the LIA can claim for the sum of the bribes but if it wishes to claim for sums over and above those of the bribes then any loss alleged must be pleaded and proved. The LIA has advanced no claim for loss with respect to this point. Any claim for loss would require an investigation of the transaction, and what the LIA would have done with its money but for the transaction. Nor does the LIA claim that, but for the alleged bribe that it would have entered into the Bear Stearns Trade at a lower premium. The LIA acknowledged this in the SocGen Proceedings where in the LIA’s SocGen skeleton argument at Schedule 6 paragraph 153(1) it was stated that “ if the principal seeks to recover damages for more than the amount of the bribe, he must prove the actual loss he has sustained, by way of a claim in fraud ”. In the present proceedings, the LIA claims a sum other, and of an amount greater, than the amount of the alleged bribes but does not allege that it has sustained loss in this amount.
134. Mr Riem submits that in complying with the duty of full and frank disclosure, the LIA should have put before the court that: (i) the claim for money had and received only enables a claim for the amount of the bribes ; and (ii) the claim under the tort of fraud only enables a claim for the loss caused (which the LIA has not sought to prove) or a presumption of the amount of the bribes.
E. Abuse of process
E.1. Applicable legal principles
137. The general principle of abuse by which a claim can be struck out under CPR Part 3.4(2)(b) where a claimant seeks to advance a claim which should have been advanced in earlier proceedings is set out in Johnson v Gore Wood & Co [2002] 2 AC 1 per Lord Bingham at 31:
“Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.”
“29. I also wish to add a word as to the approach that should be adopted if a similar problem arises in the future. In circumstances such as those that arose in this case, the proper course is to raise the issue with the court. Aldi did write to the court, as I have set out at para 2(xiii), but not in terms that made it clear what the court was being invited to do. WSP and Aspinwall knew of Aldi’s position and were before the court on numerous occasions; they did nothing to raise it.
31. However, for the future, if a similar issue arises in complex commercial multi-party litigation, it must be referred to the court seised of the proceedings. It is plainly not only in the interest of the parties, but also in the public interest and in the interest of the efficient use of court resources that this is done. There can be no excuse for failure to do so in the future.”
139. In Stuart v Goldberg Linde [2008] 1 WLR 823 Sedley LJ held the following at [77]:
“as Aldi again makes clear and as the Master of the Rolls stresses, a claimant who keeps a second claim against the same defendant up his sleeve while prosecuting the first is at high risk of being held to have abused the court’s process. Moreover, putting his cards on the table does not simply mean warning the defendant that another action is or may be in the pipeline. It means making it possible for the court to manage the issues so as to be fair to both sides.”
140. Similar guidance was given by Lord Clarke MR at [96]:
“96 For my part, I do not think that parties should keep future claims secret merely because a second claim might involve other issues. The proper course is for parties to put their cards on the table so that no one is taken by surprise and the appropriate course in case management terms can be considered by the judge. In particular parties should not keep quiet in the hope of improving their position in respect of a claim arising out of similar facts or evidence in the future. Nor should they do so simply because a second claim may involve other complex issues. On the contrary they should come clean so that the court can decide whether one or more trials is required and when. The time for such a decision to be taken is before there is a trial of any of the issues. In this way the underlying approach of the CPR , namely that of co-operation between the parties, robust case management and disposing of cases, including particular issues, justly can be forwarded and not frustrated.”
“Whether the claim appears to be weak or strong, it is the fact of it being brought as a second claim, where the issue could have been raised as part of or together with the first claim, that may constitute the abuse.”
142. In Clutterbuck v Cleghorn [2017] EWCA Civ 137 Kitchin LJ gave the following guidance at [91]:
“There are, to my mind, striking similarities between these claims and the claim in Gladman. Just as in that case, the consequence of permitting the Pont Street Claim and the Oriel Claim to continue would be that the very same issues would fall to be litigated again in two successive trials involving a very great deal of court time and huge expense in terms of both management time and litigation costs.”
143. In Barker v Baxendale-Walker [2018] EWHC 1681 (Ch), Briggs LJ at [22] stated as follows:
“The claim made by the Debtor concerns the same factual matrix as the original claim before Roth J. There would be extensive overlap of witnesses, issues and evidence between the original action and the claim now issued but not served. The claim should have been pleaded as a counter-claim but was not. Even if it is argued that a separate claim should have been issued, no reason has been advanced as to why the Aldi requirement was not met. If the Aldi requirement had been met the judge at the case management stage would have ordered the matters be tried together as they arise out of the same factual matrix, there would be less risk of inconsistent findings of fact (a public policy issue), it would have been more efficient to hear the claims together in terms of Court time and the cost of witness attendance, and such a case management decision would have been consistent with the principle that the court requires the parties to litigation to bring forward their whole case.”
144. Turning to consider CPR Part 38.7, no permission is required to discontinue proceedings in a typical case. Instead, CPR Part 38.7 requires permission to be sought at the time when the second claim is brought:
“Discontinuance and subsequent proceedings
38.7 A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if -
(a) he discontinued the claim after the defendant filed a defence; and
(b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim.”
145. In Westbrook Dolphin Square Ltd v Friends Provident Life and Pensions Ltd [2011] EWHC 2302 (Ch) Arnold J held the following at [45]:
“45 Counsel for Friends Provident submitted, and I accept, that the principles identified by the maxims nemo debet bis vexari pro una et eadem causa (no-one should be vexed twice in respect of one and the same cause) and interest reipublicae ut sit finis litium (it is in the public interest that there be an end to litigation) should inform the court’s approach to CPR r. 38.7 . In my judgment it follows that there is an analogy between the principles to be applied to an application under r. 38.7 and those applied by the courts under CPR r. 3.4(2)(b) with respect to Henderson v Henderson abuse of process. The main difference I perceive is that under r. 38.7 the onus lies upon the applicant to show that it should be given permission to bring the new claim, whereas under r. 3.4(2)(b) the onus lies upon the defendant to show that the new claim is an abuse of process.”
146. In Hague Plant Ltd v Hague [2014] EWCA Civ 1609 Briggs LJ held as follows at [60]:
“60 In my judgment there is indeed an analogy between the re-introduction of a claim previously abandoned in the same proceedings and the making of a fresh claim after discontinuance of a similar claim based on the same or substantially the same facts, as is controlled by Part 38.7 . Both types of conduct, unless closely controlled by the court, tend to undermine the public interest in finality in litigation. But Part 38.7 imposes that control not in terms by the requirement to show special circumstances, but rather by the requirement that such fresh proceedings may only be brought with the Court’s permission. In that respect they equate the bringing of fresh proceedings with the re-introduction of an abandoned claim by amendment, since amendment itself requires the court’s permission. Beyond that, it seems to me that the rule leaves it to the court to decide whether to grant or refuse permission having regard, as I have said, to the public interest in finality.”
147. With respect to whether abuse of process can apply where earlier proceedings have been settled, see Lord Millett at 59 in Johnson v Gore Wood & Co [2002] 2 AC 1 where he held:
“In one respect, however, the principle [of abuse of process] goes further than the strict doctrine of res judicata or the formulation adopted by Sir James Wigram V-C, for I agree that it is capable of applying even where the first action concluded in a settlement. Here it is necessary to protect the integrity of the settlement and to prevent the defendant from being misled into believing that he was achieving a complete settlement of the matter in dispute when an unsuspected part remained outstanding.”
148. This was confirmed in Aldi Stores Ltd v WSP Group Plc [2008] 1 WLR 748 by Thomas LJ at [11]:
“11. Mr Thomas QC also contended that as a matter of law, a distinction had to be drawn between previous litigation where the case was settled and previous litigation where the case proceeded to judgment. The submission was based on a passage in the speech of Lord Millett in Johnson v Gore-Wood at page 59. However, Lord Bingham made clear at page 32-33:
“An important purpose of the rule is to protect a defendant against the harassment necessarily involved in repeated actions concerning the same subject matter. A second action is not the less harassing because the defendant has been driven or thought it prudent to settle the first; often, indeed, that outcome would make a second action the more harassing.”
E.2. Application to the facts
(1) The SocGen and Bear Sterns claims concern precisely the same alleged bribes;
(2) As a result, the alleged bribes were paid to the same persons related the LIA’s employees (Mr Gheriani’s father and Person Z) in both instances;
(3) These matters occurred at exactly the same time for the purposes of both proceedings as distinct bribes are not alleged;
(4) The same alleged incidents of intimidation are made with respect to the same individuals (Mr Gheriani and Mr Zarti);
(5) The transactions said to have been induced (the SocGen and Bear Stearns Trade(s)) were entered into by the same LIA individuals (Mr Gheriani, Mr Zarti and Mr Layas) during the same month, November 2007;
(6) Both alleged breaches of the same fiduciary duties owed to the LIA;
(7) In both instances the transactions are impugned on the same grounds;
(8) The causes of action claimed against Mr Giahmi are the same in both proceedings;
(9) Mr Giahmi was not a party to the SocGen or Bear Sterns transactions and his liability therefore arises solely from his alleged acts of bribery and intimidation, those alleged acts are said to have been made for the purposes of inducing both the SocGen and Bear Stern Trade(s).
153. It is noteworthy that t he LIA has on previous occasions accepted the overlap between the current proceedings and the SocGen Proceedings .
154. In the LIA’s skeleton argument submitted in support of the collateral u se application , the LIA contended that:
“there is substantial overlap between the Compromised Proceedings [the Soc Gen Proceedings] and any potential claim(s) regarding the Questionable LIA Trades [which include the Bear Stearns Trade]. It is likely that-apart from the SocGen Defendants-the other defendants to the Compromised Proceedings would be parties to any fresh proceedings... The causes of action that would be pursued in any fresh proceedings would likely be the same: namely setting aside transactions as being procured by bribery and corruption. The issues engaged by any fresh proceedings would also be similar to those engaged by the Compromised Proceedings”
“Much of the information relied upon by the LIA in the JP Morgan Proceedings is derived from information obtained during the course of the SocGen Proceedings. The LIA’s claim in the JP Morgan Proceedings is based on similar, if not near-identical, fraudulent and corrupt scheme identified in the SocGen Proceedings. ...The factual basis for the LIA’s fraud and bribery claims in the SocGen Proceedings demonstrate a strikingly similar modus operandi as the JP Morgan Proceedings”
E.3. Full and frank disclosure with respect to the abuse of process argument
158. The possibility of an abuse of process argument should, however, have been apparent to the LIA given its own recognition of the similarity of the issues arising and I consider it should have been addressed given that it would go to the merits of the claims if they were potentially liable to be struck out. That said I do not consider such failure to give full and frank disclosure would, in and of itself, have led to service being set aside, but it is a further non-disclosure compounding the central non-disclosure in relation to limitation.
F. Alternative service
F.1. Applicable legal principles
160. In Abela v Baadarani [2013] UKSC 44 Lord Clarke set out the following guidance at [23], [24] and [33]:
“23. Orders under rule 6.15(1) and, by implication, also rule 6.15(2) can be made only if there is a “good reason” to do so. The question, therefore, is whether there was a good reason to order that the steps taken on 22 October 2009 in Beirut to bring the claim form to the attention of the respondent constituted good service of the claim form upon him. The judge held that there was. In doing so, he was not exercising a discretion but was reaching a value judgment based on the evaluation of a number of different factors.
24. It is important to note that rule 6.15 applies to authorise service “by a method or at a place not otherwise permitted” by CPR Part 6. The starting point is thus that the defendant has not been served by a method or at such a place otherwise so permitted…”
I do not think that it is appropriate to add a gloss to the test by saying that there will only be a good reason in exceptional circumstances. Under CPR 6.16, the court can only dispense with service of the claim form “in exceptional circumstances”. CPR 6.15(1) and, by implication, also 6.15(2) require only a “good reason”. It seems to me that in the future, under rule 6.15(2), in a case not involving the Hague Service Convention or a bilateral service treaty, the court should simply ask whether, in all the circumstances, there is good reason to order that steps taken to bring the claim form to the attention of the defendant is good service.
161. In Société Générale v Goldas Kuyumculuk Sanayi Ithalat Ihracat AS [2017] EWHC 667 (Comm), Popplewell J gave the following guidance at [49]:
“49. I would endeavour to summarise the relevant principles as follows:
…
(9) Cases involving service abroad under the Hague Convention or a bilateral treaty:
(a) Where service abroad is the subject matter of the Hague Convention or a bilateral treaty, it will not normally be a good reason for relief under CPR 6.15 or 6.16 that complying with the formalities of service so required will take additional time and cost: Knauf at [47], Cecil at [66], [113].
(b) It remains relevant whether the method of service which the Court is being asked to sanction under CPR 6.15 is one which is not permitted by the terms of the Hague Convention or the bilateral treaty in question. For example, where the country in which service is to be effected has stated its objections under Article 10 of the Hague Convention to service otherwise than through its designated authority, as part of the reciprocal arrangements for mutual assistance on service with this country, comity requires the English Court to take account of and give weight to those objections: see Shiblaq at [57]. In such cases relief should only be granted under Rule 6.15 in exceptional circumstances. I would regard the statement of Stanley Burnton LJ in Cecil at [65] to that effect, with which Wilson and Rix LJJ agreed, as remaining good law; it accords with the earlier judgment of the Court in Knauf at [58]-[59]; Lord Clarke at paragraphs [33] and [45] of Abela was careful to except such cases from his analysis of when only a good reason was required, and to express no view on them (at [34]); and although Stanley Burnton LJ's reasoning that service abroad is an exercise of sovereignty cannot survive what was said by Lord Sumption (with unanimous support) at [53] of Abela , there is nothing in that analysis which undermines the rationale that as a matter of comity the English Court should not lightly treat service by a method to which the foreign country has objected under mutual assistance treaty arrangements as sufficient. That is not to say, however, that there can never be a good reason for ordering service by an alternative method in a Hague Conventions case: Bank St Petersburg at [26].”
162. In Marashen Ltd v Kenvett Ltd [2017] EWHC 1706 (Ch) David Foxton QC, sitting as a Deputy High Court Judge, held the following at [57]-[59]:
“57 In my judgment, the current state of the law is as set out in the decisions of Mr Justice Cooke in Deutsche Bank AG v. Sebastian Holdings Inc. [2014] EWHC 2073 (Comm), and Mr Justice Popplewell in Société Générale v. Goldas Kuyumculuk Sanayi and others [2017] EWHC 667 (Comm) , and that in HSC cases, or cases in which there is a bilateral service treaty which is exclusive in its application:
i) "exceptional circumstances", rather than merely good reason, must be shown before an order for alternative service other than in accordance with the terms of the treaty can be used; and
ii) mere delay or expense in serving in accordance with the treaty cannot, without more, constitute such "exceptional circumstances". I say "without more" because delay might be the cause of some other form of litigation prejudice, or be of such exceptional length as to be incompatible with the due administration of justice.
58. As I have set out above, the Supreme Court in Abela took care to make it clear that it was not addressing the use of CPR 6.15 in a service treaty context. There is nothing in that decision which calls into question what I regard as the key reason why an "exceptional circumstances" test is appropriate, viz the need to ensure that the provisions of the treaty are not circumvented. While it is true that Stanley Burnton LJ's characterisation of the service of legal proceedings abroad as constituting interference with the sovereignty of another state now falls to be qualified, I do not regard that as an essential part of his reasoning when identifying the approach to be adopted in service treaty cases.
59. In this regard, it is significant that one of the reasons which Lord Sumption JSC gave in Abela as to why the " muscular presumptions against service out which are implicit in adjectives likes `exorbitant' were no longer appropriate " was the accession by the United Kingdom to a number of conventions, and the greater measure of practical reciprocity which now exists. While Lord Sumption JSC was referring to jurisdiction conventions, service conventions themselves reflect the new reality to which Lord Sumption JSC was referring, and provide a formal reciprocity on service issues. In these circumstances, I see nothing in Lord Sumption JSC's observations which would justify a court in being more ready to subvert or by-pass a service treaty now than was the case before Abela.”
163. In Punjab National Bank v Srinivasan & Ors [2019] EWHC 89 (Ch) Chief Master Marsh held the following at [97]-[99]:
“David Foxton QC sitting as a Deputy Judge of the High Court in Marashen Ltd v Kenvett Ltd [2017] EWHC 1706 (Ch) held that permission to permit service by alternative means in a Hague Convention case should only be permitted if exceptional circumstances existed. In reaching that conclusion, after a full review of the authorities, Mr Foxton followed the two first instance decisions to which he refers in paragraph [57] of his judgment.
98 The difference between there being a good reason and a good reason based upon exceptional circumstances will lead to a different result in some cases. It seems to me that the conclusion reached by Mr Foxton is to be preferred for two reasons. First, the court should be careful to avoid watering down a treaty obligation by the application of domestic service rules. Secondly, I consider that a threshold test of "good reasons" sets the bar much too low. The application of such a test risks losing sight of the exceptional nature of service by alternative means regardless of whether service is to be effected abroad.
99 I consider, however, on the facts of this case the difference between the two tests is immaterial.”
F.2. Application to the facts
(a) Stage 1 - two identical copies of each document to be served are provided to the Foreign Processing Section, and a fee is paid.
(b) Stage 2 - the Foreign Processing Section supplies the documents to the Foreign & Commonwealth Office.
(c) Stage 3 - the Foreign & Commonwealth Office supplies the documents via diplomatic pouch to the British embassy in Dubai.
(d) Stage 4 - the British embassy in Dubai sends the documents to the UAE Ministry of Foreign Affairs.
(e) Stage 5 - the UAE Ministry of Foreign Affairs directs the documents to its Judicial Cooperation Department.
(f) Stage 6 - the Judicial Cooperation Department forwards the documents to the UAE Ministry of Justice, specifically the International Cooperation Department.
(g) Stage 7 - the UAE Ministry of Justice assesses whether the documents are to be provided to the local Dubai courts (as opposed to one of the other six emirates) and transmits the documents to the Chief Justice’s Office of the Dubai Court, along with a full list of the documents to be served.
(h) Stage 8 - the Chief Justice’s Office then provides the documents to the Head of the Court Bailiff’s Department.
(i) Stage 9 - the Head of the Court Bailiff’s Department then provides the documents to the relevant court bailiff, according to their area of service.
(j) Stage 10 - the court bailiff seeks to effect service.
171. The LIA believed that similar problems would likely be encountered if attempts were made to re-serve the Court Documents by employing the services of another courier company. In light of this, the LIA applied and obtained a variation order to permit service by hand by a member of the LIA’s solicitors who had previously hand-delivered the letter to Mr Giahmi on 9 May 2018.
Delay
174. It was submitted on behalf of the LIA by Mr Allen that there is likely to be significant delay in serving the proceedings on Mr Giahmi using the mechanisms provided for by the UK/UAE Treaty, as set out above. Namely, it was submitted that the approach is likely to take between six to twelve months. Further it was noted that there exists a real possibility that service might not be effective if the court bailiff is refused entry to the gated community in which Mr Giahmi resides. The effect of this would be to require the process to start again from the beginning. Whilst I acknowledge the fact that a six to twelve month delay, or possibly longer depending upon the likelihood of success of service, may not, in itself, constitute a reason for the court to order alternative service, it is nevertheless a factor which the court can take into account when considering whether alternative service should be ordered.
Prejudice caused by delay
Risk of evasion
177. In light of the nature of the serious allegations that have been made against Mr Giahmi in the SocGen Proceedings and in the present proceedings, and in light of Mr Giahmi’s knowledge that the LIA will be seeking to serve the proceedings upon him, the LIA submitted that they were concerned that Mr Giahmi may take steps to evade service. The examples provided to the court were that Mr Giahmi might seek to prevent entrance to his gated community for the court bailiff.
(1) The LIA alleges that Mr Giahmi has paid bribes and made intimidatory threats in order to bring about transactions worth billions of dollars.
(2) The Deferred Prosecution Agreements include serious admissions by SocGen (and another financial entity, Legg Mason) of criminal bribery and acts of intimidation involving Mr Giahmi. The LIA alleges SocGen knew Mr Giahmi was making payments in order to improperly secure influence within the LIA.
(3) As addressed in the limitation section above, the LIA alleges Mr Giahmi has consistently sought to conceal his involvement in the trades involving the LIA.
179.. It is also submitted that Mr Giahmi has shown that he is willing to try and frustrate the court’s process:
(1) Mr Giahmi ignored various attempts to bring the earlier SocGen Proceedings to his attention and on at least one occasion a courier was unable to deliver the documents relevant to those proceedings, because the recipient at the relevant property (a maid or housekeeper) was instructed to refuse to accept them (it is inferred by Mr Giahmi).
(2) The LIA obtained an order for alternative service in the SocGen Proceedings, which was unchallenged by Mr Giahmi.
(3) Mr Giahmi ignored the initial attempts to bring the current proceedings to his attention.
(4) Mr Giahmi resisted the LIA’s Collateral Use Application made so that it could properly investigate his role in the Bear Stearns Trade and other transactions in order to be able to bring these proceedings.
(5) On his own case, Mr Giahmi considers these proceedings to be an abuse that he argues will be discontinued if the Receivership is discharged.
Knowledge of proceedings
G. Stay application
H. Conclusion