Formal Holdings Ltd v Frankland Assets Inc.
| Jurisdiction | England & Wales |
| Judge | Klein |
| Judgment Date | 02 June 2021 |
| Neutral Citation | [2021] EWHC 1415 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Claim No: E40LS341 |
| Date | 02 June 2021 |
[2021] EWHC 1415 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
CIRCUIT COMMERCIAL COURT (QBD)
Leeds Combined Court Centre,
The Courthouse,
1 Oxford Row,
Leeds, LS1 3BG.
HH JUDGE Klein SITTING AS A HIGH COURT JUDGE
Claim No: E40LS341
Alan Gourgey QC and Bobby Friedman (instructed by DLA Piper UK LLP) for the Claimants
Neil Kitchener QC and Rachel Oakeshott (instructed by Pinsent Masons LLP) for the Defendants
Hearing dates: 24 March, 10 May 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HH JUDGE Klein
The Claimants began a debt claim (“the claim”) against the Defendants for the principal sum of £25 million on 17 May 2018. The Defendants are, in the case of the First, Second and Thirteenth Defendants, incorporated in the British Virgin Islands (“the BVI”) and, in the case of the other Defendants, incorporated in Liberia. The initial six-month period for service on the Defendants of the claim form out of the jurisdiction ended on 17 November 2018. By an application notice dated 4 September 2018 the Claimants applied to extend the validity of the claim form until 17 February 2019 (“the Extension Application”). I extended the validity of the claim form until 31 December 2018 at a without notice hearing on 13 September 2018 (“the September hearing”). My order also provided that the Defendants could apply within seven days after service of the order on them to have it set aside or varied. The Claimants served the claim form and Particulars of Claim on the Liberian-incorporated Defendants on 19 December 2018 and on the BVI-incorporated Defendants on 21 December 2018. The Defendants did not respond by filing an acknowledgment of service or defence, but the Claimants did not apply for a default or summary judgment. In consequence, the claim was stayed automatically, under CPR 15.11, in July 2019. Following a without notice hearing on the Claimants' application on 25 September 2020, I lifted the stay and extended the time for the Defendants to acknowledge service to 4 December 2020. The Defendants acknowledged service on 13 November 2020 indicating an intention to contest jurisdiction. Following an on-notice hearing, on 26 November 2020 I extended the time for the Defendants to apply to contest jurisdiction under CPR Part 11 until 11 December 2020. The Defendants made an application on 11 December. By their application notice, they sought (amongst other remedies) an order:
i) setting aside my order, made at the September hearing, extending the validity of the claim form (“the September order”). (It has not been argued that the Defendants' application for this order cannot be made under CPR Part 11 or that it is out of time (because the September order gave the Defendants only seven days, from its service, to apply to have it set aside));
ii) setting aside the December 2018 service of the claim form in Liberia and the BVI.
Although the application notice was framed more broadly and the evidence filed in support of the application (and, to a lesser extent, in opposition to the application) was extensive, with the main hearing bundle running to in excess of 3,800 pages, the issues for determination on the application (“the present application”) are these:
i) Did the Claimants fail to fairly present the Extension Application at the September hearing (or, to put it another way, did they fail to make full and frank disclosure at the hearing), as it is accepted they were required to do? (To be clear, the Defendants do not argue that, in the way the Extension Application was presented to me, I made the wrong decision. Nor do they invite me to rehear the Extension Application and on the material now available then set aside the September order);
ii) If the Claimants failed to fairly present the Extension Application, should I nevertheless not discharge the September order as a matter of discretion?
iii) If the September order is not discharged, is it sufficiently arguable that, at the time the claim was begun (or at any later relevant date), the First Claimant (“Formal”) was entitled to rely on an exclusive jurisdiction clause in the loan agreement on which the Claimants have sued, so allowing it to serve the claim form out of the jurisdiction without the court's permission? Whether or not it is sufficiently arguable that Formal was entitled to rely on the exclusive jurisdiction clause depends on whether or not it is sufficiently arguable that the benefit of the loan agreement was assigned by the Second Claimant (“Fihag”) to Formal. As I shall explain, the parties to the loan agreement were Fihag and the Defendants. Formal claims to be the assignee of the benefit of the loan agreement and thereby to be entitled to the benefit of the exclusive jurisdiction clause. The Defendants contend that (i) whether Formal can rely on the exclusive jurisdiction clause as the basis for its service of the claim form out of the jurisdiction without the court's permission depends on whether the agreement on which Formal relied in the Particulars of Claim as an assignment is actually an assignment, (ii) it is sufficiently established that that agreement is not an assignment and (iii) therefore, the basis on which Formal contends that it was permitted to serve out of the jurisdiction without the court's permission cannot be established.
iv) If the September order is not discharged, but Formal was not entitled to serve the claim form out of the jurisdiction without the court's permission as the Defendants contend, has Fihag brought an alternative claim (as the Claimants contend) or is Fihag only a party to the claim as the assignor of the benefit of the loan agreement (as the Defendants contend)? In the latter case, the Defendants contend, the claim should not be permitted to proceed because, in this scenario, although one claimant (Fihag) has legitimately served the claim form on them, that claimant has brought no claim against them.
This is the judgment on the present application and, in particular, on these four issues.
The Claimants were represented by Alan Gourgey QC and Bobby Friedman at the hearing and the Defendants were represented by Neil Kitchener QC and Rachel Oakeshott. I am grateful to them for all their assistance, including in the preparation of an agreed case memorandum and chronology. The broader dispute between the parties and those connected with them is complicated. The case memorandum in particular has brought real clarity to that dispute and, because it is agreed, I adopt it (and refer to parts of it verbatim) in the next section of the judgment.
Background
In this section of the judgment, I set out the relevant factual background to the present application. In doing so, I mention (sometimes in more detail) some of the events to which I have already referred.
Formal and Fihag entered into a loan agreement on 1 December 2016. By that agreement Formal is recorded as lending Fihag £25 million. The agreement also recorded that Fihag was liable to repay that loan by 31 December 2018.
Fihag and the Defendants entered into a loan agreement (“the loan agreement”) the next day, 2 December 2016, by which Fihag agreed to lend the Defendants £25 million, repayable primarily on 2 December 2019. As I shall explain, and as the Claimants plead in the Particulars of Claim, the loan agreement contains interest payment obligations and an accelerated payment obligation in the event that the Defendants defaulted in any of their payment obligations under the loan agreement. Clause 19 of the loan agreement (“the exclusive jurisdiction clause”) provides:
“19.1 This Agreement shall be governed by the laws of England.
19.2 The Parties do hereby irrevocably agree and undertake that the courts of England shall have exclusive jurisdiction to determine any matter which may arise out of or in connection with this Agreement and to enforce the provisions thereof and to issue any process or enforce any judgment against any of the Parties.”
Clause 20 of the loan agreement provides:
“20.1 The Parties choose as their domicilia citandi et executandi for all purposes under this Agreement, whether in respect of payments, court process, notices or other documents or communications of whatsoever nature the following addresses:
…the Borrowers c/o Applegate FS SA [(“Applegate”)]
6 Avenue de Frontenex
PO Box 3036
1211 Geneva 3
Switzerland
Telefax No: +41 22 849 09 99
20.2 Any notice or communication required or permitted to be given in terms of this Agreement shall be valid and effective only if given in writing but it shall be competent to give notice by telefax, provided receipt is received confirming due completion of transmission.”
About a year later Formal and Fihag made an agreement, described as a “Settlement Agreement” (“the settlement agreement”). It is dated “31 Dezember 2017” and is likely to have been prepared by someone for whom English is a second language. The settlement agreement provides:
“FIHAG has a receivable including...
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