UK: Standard Bank PLC v Just Group LLC And Others [2014] EWHC 2687 (Comm)

Last Updated: 26 November 2014
Article by Anna Myrvang

The court granted an application made by UBR to set aside the service of a claim form out of the jurisdiction and for a declaration that the English court had no jurisdiction, even though Standard Bank was able to show that there was a serious issue to be tried.

Standard Bank's claims arose in relation to monies owed to it by the first defendant (D1) under an English law governed agreement, and by the second to sixth defendants (D2-D6) in their role as guarantors. D1-D6 did not dispute jurisdiction or liability. The ninth defendant (D9), who controlled D1-D6, also did not dispute jurisdiction or liability – in fact he admitted responsibility for defrauding the bank.

The claim against UBR was brought on the basis that it owed money to D1, which debts had been assigned to Standard Bank. UBR disputed jurisdiction.

Mr Justice Walker considered Standard Bank's claim against UBR and found that it gave rise to a serious issue to be tried on the merits. However, he still allowed UBR's application: (i) on an analysis of 'necessary and proper party' under gateway 3 of CPR 6.36 and paragraph 3.1 of PD6B; (ii) as England and Wales was not the 'proper place' to bring the claim; and (iii) further to nondisclosure by Standard Bank in its application for permission to serve out of the existence of an exclusive (Mongolian) jurisdiction clause.

CPR Rule 6.36 Gateway (3)

The judge considered whether UBR was a necessary and proper party to Standard Bank's claims against each of D1-D6; and D9.

In this context, he relied on the application of this test in AK Investments CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC7. In that judgment Lord Collins cited cases warning that caution should be exercised in bringing foreign defendants within the jurisdiction on this test. He further cited cases for the premise that a person would only be a proper party if the claims against him and the other involve one investigation, are closely bound up or have a common thread.

Having reviewed the substance of the claims against D1-D6 and UBR, Mr Justice Walker decided that the claims fell into different categories as: they concerned entirely different contractual allegations; Mongolian law applied to the contractual questions in relation to UBR whilst the contracts with D1-D6 were English law governed; factual issues arose in the claim against UBR that were irrelevant to the claims against D1-D6; and there was not a substantial common element as to quantum between the claims.

On this basis he considered that the statements of case in the two categories of claims would have to deal with different things and the expert and witness evidence for each category would not be the same. As the two categories of claim did not involve one investigation, were not closely bound up and did not have a common thread, dealing with them together would be inefficient and the necessary and proper party test was not satisfied.

In relation to the argument that D9 should be treated as an anchor defendant, Mr Justice Walker noted that the order for permission to serve D9 had been based on an application under various gateways, including gateway 3. He commented, in reliance on the AK Investments case, that the 'necessary and proper party' gateway would only be available if no reliance had been placed on it in order to serve the anchor defendant.

CPR Rule 6.37(3) Proper place

Though the question of proper place did not arise further to the judge's findings on gateway (3), he considered the issue in full in any event.

He concluded that England was not the proper place and that the factors pointing to Mongolia as the proper forum were overwhelming because: (i) the claim fell within an exclusive Mongolian jurisdiction clause; (ii) the defendants had no links with England; (iii) the bulk of the evidence was in Mongolia; (iv) investigations into the claim against UBR would be irrelevant to the claims against D1-D6; (v) there was no real risk that a judgment in Mongolia in relation to the claim against UBR would have any bearing on or be inconsistent with an English judgment in relation to D1-D6; and (6) he was not persuaded that there was a serious risk of injustice to Standard Bank based on Mongolian court procedure.

Non-disclosure

Mr Justice Walker noted the "golden rule" that if a person seeks relief from the court without notice he must give disclosure of all matters relevant to the exercise by the court of its jurisdiction, and cited Knauf UK GmbH v British Gypsum Ltd [2001] EWCA Civ 1570.

In its application for permission to serve out of the jurisdiction Standard Bank had not drawn to the court's attention the fact of an exclusive Mongolian jurisdiction clause. Standard Bank's position was that this clause did not bite on the claim. It also argued that the clause had not been raised by UBR in pre-action correspondence.

However, Mr Justice Walker considered that Standard Bank had been 'overconfident' and taken a 'nonchalant approach' to this issue. Though the bank had not considered the clause to be relevant, it was the bank's task in its application to consider what objections might be advanced by UBR in opposition to service. It was absolutely necessary to bring to the court's attention the possible existence of a possible jurisdiction clause in favour of a foreign jurisdiction and nothing else would vindicate the heavy duty of candour and care.

Standard Bank had not lodged evidence to explain how the non-disclosure had come about and the judge therefore inferred that the non-disclosure was deliberate.

In light of the very serious breach of the "golden rule", justice required that Standard Bank should be deprived of the benefit it had obtained. Therefore, even if the judge had found in Standard Bank's favour on the other arguments, he would have allowed the set aside application on this ground alone.

Comment

This case provides a useful discussion of the application of the 'necessary and proper party' test for the purposes of CPR Rule 6.36 and paragraph 3.1 of Practice Direction 6B; and of the 'proper place' test for the purposes of Rule 6.37(3). It further highlights the serious consequences that can follow from a non-disclosure in the context of without notice applications, including applications for permission to serve a defendant out of the jurisdiction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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