Abbar and Another v Saudi Economic & Development Company Real Estate Ltd and Others

JurisdictionEngland & Wales
Judgment Date05 August 2010
Neutral Citation[2010] EWHC 2132 (Ch)
Docket NumberHC09C04321
CourtChancery Division
Date05 August 2010

[2010] EWHC 2132 (Ch)

In the High Court of Justice

Chancery Division

Before N. Strauss Q.C. (Sitting as a Deputy Judge)

HC09C04321

Between
(1) Dr. Abdelrahman Abdullah Abbar
(2) Abdulkarim Abbar
Claimants
and
(1) Saudi Economic & Development Company (SEDCO) Real Estate Limited (a Company Incorporated in Anguilla)
(2) Saudi Economic & Development Company (SEDCO) Limited (a Company Incorporated in Saudi Arabia)
(3) The Pinnacle Holdings Limited (a Company Incorporated in Anguilla)
(4) The Pinnacle Limited (a Company Incorporated in Anguilla)
(5) The Pinnacle No.1 Limited (a Company Incorporated in Anguilla)
(6) Arab Investments Limited
Defendants

Mr. Rupert Reed, instructed by Messrs Davies Arnold Cooper, appeared for the 6 th defendant.

Mr. Stuart Cakebread and Ms. Juliette Levy, instructed by Messrs Newtons, appeared for the claimants.

Approved judgment

Introduction and summary

1

This is an application by the 6 th defendant (“AIL”) for orders:

(1) Under CPR 3.4, striking out the Claim Form and Particulars of Claim on the grounds that:

(a) they disclose no reasonable ground for bringing the claim;

(b) they are an abuse of the Court's process; and/or

(c) the claimants failed to comply with the Practice Direction to CPR Part 16.

(At the hearing, Mr. Reed said that an order was sought, in the alternative, in respect of particular allegations in the Particulars of Claim, if the application did not succeed as a whole).

(2) Under CPR 24.2, giving summary judgment against the claimants on their claim on the ground that the claimants have no reasonable prospect of succeeding on their claims or any of them.

2

I was referred to well-known passages from the judgment of Millett L.J. in Armitage v. Nurse [1998] Ch. 241 at 256–7, and from the speech of Lord Millett in Three Rivers District Council v. Bank of England (No.3) [2001] UKHL 16, [2003] 2 A.C. 1, at §183–6. It is unnecessary to reproduce the whole of these passages, but I should set out the last paragraph of the passage from the second of these authorities:—

“186. The second principle, which is quite distinct, is that an allegation of fraud or dishonesty must be sufficiently particularised, and that particulars of facts which are consistent with honesty are not sufficient. This is only partly a matter of pleading. It is also a matter of substance. As I have said, the defendant is entitled to know the case he has to meet. But since dishonesty is usually a matter of inference from primary facts, this involves knowing not only that he is alleged to have acted dishonestly, but also the primary facts which will be relied upon at trial to justify the inference. At trial the court will not normally allow proof of primary facts which have not been pleaded, and will not do so in a case of fraud. It is not open to the court to infer dishonesty from facts which have not been pleaded, or from facts which have been pleaded but are consistent with honesty. These must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved.”

3

In the present case, the claimants have alleged fraud and, in the alternative, negligence. Mr. Reed submitted that this, by itself, must mean that the primary facts were consistent with honesty, and that fraud therefore could not be pleaded. This, if correct, would apply to all cases, and it would never be open to a claimant to plead alternative claims for fraud and negligence. Such alternative claims are of course commonplace, and this submission is wrong. If there are facts which “tilt the balance” and justify an inference of dishonesty, then dishonesty may be alleged. Alleging negligence in the alternative involves no inconsistency: it simply recognises that the court may find that the defendant was not dishonest but merely negligent.

4

It was made clear in the witness statement of Mr. Bramhall, a partner in AIL's solicitors, that AIL intended to seek orders that the claimant's solicitors and counsel show cause why they should not be personally liable for the costs of defending these proceedings, and AIL's skeleton argument refers me to §2.9 of the Chancery Guide, which provides that allegations of fraud should not be made “unless there is credible material to support the contentions made”, to the Bar Code of Conduct §704(c) and to the Solicitors' Code of Conduct §11.01(3)(b), both containing passages to similar effect.

5

I was also referred to the decision of the House of Lords in Medicalf v. Weatherill [2003] 1 A.C. 120, in which Lord Bingham said at §22:—

“22. Paragraph 606(c) (of the Bar Code of Conduct) lays down an important and salutary principle. The parties to contested actions are often at daggers drawn, and the litigious process serves to exacerbate the hostility between them. Such clients are only too ready to make allegations of the most damaging kind against each other. While counsel should never lend his name to such allegations unless instructed to do so, the receipt of instructions is not of itself enough. Counsel is bound to exercise an objective professional judgment whether it is in all the circumstances proper to lend his name to the allegation. As the rule recognises, counsel could not properly judge it proper to make such an allegation unless he had material before him which the judged to be reasonably credible and which appeared to justify the allegation. At the hearing stage, counsel cannot properly make or persist in an allegation which is unsupported by admissible evidence, since if there is not admissible evidence to support the allegation the court cannot be invited to find that it has been proved, and if the court cannot be invited to find that the allegation has been proved the allegation should not be made or should be withdrawn. I would however agree with Wilson J. that at the preparatory stage the requirement is not that counsel should necessarily have before him evidence in admissible form but that he should have material of such a character as to lead responsible counsel to conclude that serious allegations could properly be based upon it.”

6

I should however also refer to what Lord Steyn said at §35:—

“35. This particular professional duty sometimes poses difficult problems for practitioners. Making allegations of dishonesty without adequate grounds for doing so may be improper conduct. Not making allegation of dishonesty where it is proper to make such allegations may amount to dereliction of duty. The barrister must promote and protect fearlessly and by all proper and lawful means his lay clients interests: paragraph 203 of the Code of Conduct. Often the decision will depend on circumstantial evidence. It may sometimes be finely balanced. What the decision should be may be a difficult matter of judgment on which reasonable minds may differ.”

Cases of this kind require a potential claimant's lawyers to make value judgments as to what is or is not reasonably credible. In borderline cases, they cannot just play safe, from the point of view of their professional position, and refuse to proceed. They have to decide one way or the other where their duty lies.

7

I am not concerned with a wasted costs application, but with the question whether (assuming that the pleading discloses a cause of action) it is one which has a reasonable prospect of success in the sense in which that term is used in summary judgment applications. However, this raises a not dissimilar issue. It is not enough for the defendant to show that the claim is weak or unlikely to succeed. The criterion, as Lord Hobhouse put it in Three Rivers at §158(1), is whether there is “an absence of reality”. If not, the claim must proceed (and it is the duty of the claimant's lawyers, if so instructed, to advance it).

8

Put shortly at this stage, this action relates to an investment of £500,000 by the claimants in shares in the 3 rd defendant (“Pinnacle Holdings”), a company incorporated in Anguilla, which was interested in the development of a site in the City of London, near the Gherkin. This site was to be developed by the construction of a tower known by various names including the Pinnacle Tower and the Helter Skelter.

9

The claimants' main case is that they were induced to buy shares in Pinnacle Holdings by a fraudulent representation, for which all the defendants were responsible, that it was a short term investment for a period of between 12 and 18 months and that the intention of those controlling Pinnacle Holdings was that it would sell the site on to another developer within that period and before the construction stage. The claimants allege that the representation was fraudulent because that was not the intention at the time; on the contrary, it was intended that the site would be retained until construction was complete in or about 2012, a period of some 5 years. They allege that, whilst these representations were not made directly by AIL to the claimant, AIL was party to a common design that fraudulent misrepresentations to this effect should be made, principally in an Information Memorandum which was sent to potential Saudi Arabian investors including the claimants.

10

AIL accepts that this central allegation is sufficiently pleaded in the Particulars of Claim, but contends that the claimants have no proper basis for making it, and no reasonable prospect of success in establishing either (a) that AIL was responsible for the contents of the Information Memorandum or for certain oral representations made by or on behalf of other defendants or (b) that the statements undoubtedly made in the Information Memorandum to the effect that this was intended to be a short term investment were fraudulent representations, and not, as AIL contends, representations which were true when made, but which it later transpired could not be fulfilled because of changes in the property market following the collapse...

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2 cases
  • JSC Bank of Moscow (A company incorporated in Russia) v Vladimir Abramovich Kekhman and Others
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 29 October 2015
    ...speech at [55]–[56] which I quoted above. 21 This approach has also been adopted by other first instance judges. In Abbar v Saudi Economic & Development Company Real Estate [2010] EWHC 2132 (Ch), Nicholas Strauss QC, sitting as a Deputy High Court Judge of the Chancery Division, rejected wh......
  • Christian Bittar v Financial Conduct Authority
    • United Kingdom
    • Upper Tribunal (Tax and Chancery Chamber)
    • 20 February 2017
    ...judgment of Nicholas Strauss QC, sitting as a Deputy High Court Judge, in Abbar v Saudi Economic & Development Company Real Estate [2010) EWHC 2132 (Ch) at “In the present case, the claimants have alleged fraud and, in the alternative, negligence. Mr Reed submitted that this, by itself, mus......

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