Cecil & others v Ehsanollah Bayat & others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Stanley-Burnton |
| Judgment Date | 11 May 2011 |
| Neutral Citation | [2011] EWCA Civ 523,[2011] EWCA Civ 135 |
| Docket Number | Case Nos: A3/2010/0919 & A3/2010/0926,Case Nos: A3/2010/0919 & 2010/0926 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 May 2011 |
[2011] EWCA Civ 135
Mr Justice Hamblen
Before: Lord Justice Rix
Lord Justice Wilson
and
Andlord Justice Stanley Burnton
Case Nos: A3/2010/0919 & 2010/0926
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Robert Miles QC, Richard Hill and Gregory Denton-Cox (instructed by Paul, Hastings, Janofsky and Walker (Europe) LLP) for the First, Second and Third Appellants
Gregory Denton-Cox (instructed by Paul, Hastings, Janofsky and Walker (Europe) LLP) for the Fourth Appellant
Robert Miles QC and Richard Hill (instructed by Stephenson Harwood) for the Fourth Appellant
Nicholas Strauss QC and Michelle Menashy (instructed by McGuire Woods London LLP) for the Respondents
Hearing dates: 6 and 7 December 2010
Lord Justice Stanley Burnton:
Introduction
This is the Defendant Appellants' appeal against orders made by Hamblen J on 29 March 2010:
(a) dismissing their application to set aside the order made by Field J dated 19 September 2008 extending the Claimant Respondents' time to serve their claim form on the Appellants;
(b) dismissing their application to set aside the order made by Tomlinson J dated 18 March 2009 granting the Respondents an extension of time to serve their claim form on the Defendants; and
(c) dismissing their application to set aside the order dated 8 April 2009 made by Steel J in so far as it gave the Respondents, pursuant to CPR 6.15, permission to serve the Appellants by alternative means.
Hamblen J's judgment also addressed applications made by the Appellants to set aside the order made for their service out of the jurisdiction. The order he made dismissing those applications is not the subject of appeal.
I have been able to take my account of the background to these applications from Hamblen J's careful judgment, for which I express my appreciation. It will, I think, be clearer if I refer to the Appellants as the Defendants and to the Respondents as the Claimants.
The claim
The Claimants allege that by an oral agreement made on 19 September 1998 in London the First and Second Defendants ("Bayat" and "TSI Inc.") promised the First and Second Claimants ("Cecil" and "Bentham") a 45 per cent interest in the shares in TSI Inc., and/or in any other corporate vehicle used to carry out a project to set up a telecommunications network in Afghanistan ("the Afghan Project"). This promise was allegedly made in return for Cecil and Bentham taking responsibility for the business, technical and development aspects of the Afghan Project. It is alleged that the initial agreement was that the Fourth Defendant ("Warner") was to have 11.25 per cent of the promised 45 per cent, subsequently amended to 49 per cent, of which Warner was to have 9 per cent. Later, by further alleged oral agreements between (among others) Bayat, TSI Inc. and the Third and Fourth Claimants ("Grinling" and "Lehmkuhl"), it was agreed that Lehmkuhl and Grinling should, in consideration of their respective services, have respectively 5 per cent and 1 per cent of the equity out of the 49 per cent minority interest. It is alleged that there were agreed adjustments to these promised shareholdings, the details of which are irrelevant to the issues on this appeal.
None of the Claimants has received any shareholding in TSI Inc. or in any other corporate vehicle for the Afghan Project, despite allegedly providing the services which they had agreed to provide. In consequence, the Claimants claim damages for breach of contract, remedies for breach of constructive trust, alternatively a quantum meruit for their services. They also claim damages for fraudulent misrepresentation and damages for conspiracy.
The claim is very substantial indeed. In their Particulars of Claim, the Claimants allege that their loss in connection with the shares alone was in the region of US$400 million, plus interest and costs.
As I read the Particulars of Claim, the earliest cause of action pleaded accrued in June 1999, when the fraudulent misrepresentations alleged in paragraphs 119 to 124 and paragraphs 125 to 128 were made and relied upon. The dates of the alleged breaches of contract, in so far as they are alleged to be a failure to allot or to transfer shares, are unclear, but in or about November 2002 Bayat commenced the proceedings in New York to which I refer below, denying that Cecil and Bentham had any interest in TSI Inc.. Breach of fiduciary duty is alleged to have occurred from about January 2002.
The judge did not make any clear finding as to when the various causes of action alleged by the Claimants accrued, but this appeal has been argued on the basis that the extension of time for service of the claim form ordered by Field J on 19 September 2008 arguably took that time beyond the expiry of the 6 year limitation period, and that the order made by Tomlinson J on 18 March 2009 took it arguably beyond the period of 6 years and 6 months from its expiry. This basis would seem, if anything, to be favourable to the Claimants. In fact, the Defendants say that limitation would have come into play by October or November 2008, and perhaps earlier, and that relevant limitation periods expired at the end of November 2008.
The procedural history
On 21 November 2002, TSI Inc. and the Third Defendant, ("AWCC") commenced proceedings in the court of the Southern District New York ("SDNY") against Cecil, Bentham and NetMobile S.A., a company managed by Cecil and Bentham, claiming damages for conspiracy to defraud, breach of fiduciary duty and conversion of their property. Cecil, Bentham and NetMobile counterclaimed, and added Bayat as a counterclaim defendant, alleging that the defendants to their counterclaim had refused to recognise Bentham and Cecil's interests in the entity holding the licence for and operating the Afghan Project. In their Reply, the claimants in that action contended that Bentham and Cecil had no interest in TSI Inc or the Afghan Project.
On 30 November 2004, without hearing any evidence, the SDNY dismissed the claim and counterclaim, and ordered that the file, and nearly all documents relating to the action, be sealed.
Cecil and Bentham (but not the claimants in the action, TSI Inc and AWCC) appealed against the decision dismissing the proceedings (including the counterclaim) to the Second Circuit Appeal Court, which in January 2006 affirmed the lower court's decision. In addition, in January 2008 that Court made a Protective Order. Cecil and Bentham then sought to appeal to the Supreme Court, which in January 2007 declined to hear the appeal. The information and documents relating to these appeals are also sealed. No reasons for these decisions were given by the US courts.
According to the Claimants, at the end of April 2006, i.e., after the decision of the Second Circuit Appeal Court but before the decision of the US Supreme Court, they decided to bring these proceedings in England.
The claim form in these proceedings was issued on 19 May 2008. It was marked "Not for service out of the jurisdiction". On 10 September 2008, the Claimants applied for an extension of time for the service of their claim form of 6 months, to 20 March 2009. Permission to serve out had not yet been obtained and was not sought. The application was supported by the witness statement of Adam Greaves, a partner in the Claimants' then solicitors Steptoe & Johnson. He said that it was thought that the limitation period for the claims would expire some time after (sic) 29 November 2008. He referred to the US proceedings, and to the fact that Cecil and Bentham had committed substantial funds to them. He stated:
11. In April 2006, Lord Cecil and Mr Bentham sought to commence proceedings in England against Mr Bayat and the various companies and individuals. However, having exhausted their funds in the SDNY proceedings, it was necessary for them first to obtain third party funding for their claim.
12. Over the course of the next 2 years, Lord Cecil and Mr Bentham approached various potential funders including: Barclays Bank; Coutts Bank; Allianz; IMF (an Australian listed company involved in litigation funding); Insolvency Management, Consillium Capital, Arlington Group, Justice Capital, Trafalgar and Elliott (investment funds involved in litigation funding); and, various wealthy individuals with histories of funding litigation.
13. Unfortunately, negotiations with each of these potential funders were unsuccessful for reasons including, but not limited to: the scale of the claim (and the consequent cost implications); the cross-border nature of the claim; and, the fact that any subsequent enforcement of a judgment or award in the Claimants' favour would need to take place across various jurisdictions.
14. On or about 25 April 2008 I met Therium Capital (a newly established company specialising in litigation funding and whose principals include solicitors and barristers experienced in large scale litigation) who subsequently expressed interest in funding the Claimants' claim subject to securing funding themselves. Subsequently, on or about 11 August 2008 Therium provided a draft funding agreement for consideration.
15. On or about 3 September 2008, the...
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