MRG (Japan) Ltd v Engelhard Metals japan Ltd
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Toulson,Mr Justice Toulson |
| Judgment Date | 18 December 2003 |
| Neutral Citation | [2003] EWHC 3418 (Comm) |
| Docket Number | Case No: 2003 Folio 551 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 18 December 2003 |
[2003] EWHC 3418 (Comm)
The Honourable Mr Justice Toulson
Case No: 2003 Folio 551
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr JOE SMOUHA QC and Mr VERNON FLYNN (instructed by Mischon de Reya) for the Claimant
Mr JEFFREY GRUDER QC (instructed by Richards Butler) for the Defendant
Hearing dates: 21 November 2003
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an application by the defendant, Engelhard, to set aside an order of David Steel J, dated 24 June 2003, giving permission under CPR rule 6.20 (5) (c) and (d) for service of proceedings on Engelhard in Japan. Under those provisions the court may permit a claim form to be served out of the jurisdiction if the claim is in respect of a contract which is governed by English law or it contains a term that the court shall have jurisdiction to determine a claim in respect of it.
In this case there are separate claims in respect of four contracts. The parties are both dealers in metals and the contracts were for the sale of cobalt by Engelhard to MRG.
Each contract contained a term stating:
This contract will be governed and construed in accordance with the laws of England and the parties to this contract hereby submit to the exclusive jurisdiction of the English courts.
The contracts are referred to in the particulars of claim as contracts 1, 2, 3 and The earliest was contract 4, dated 9 July 1997. The contract was performed, but MRG has a small quality claim. Contract 2, dated 14 November 1997, was for the supply of 300 MT of cobalt. Contract 3, dated 26 December 1997, was for a similar amount. Contract 4, also dated 26 December 1997, was for the supply of 20 MT. MRG's claims under contracts 1,2 and 3 are for damages for their total non-performance.
The rules
Rule 6.21(1) provides that an application for permission to serve a claim form out of the jurisdiction must be supported by written evidence stating:
(a) the grounds on which the application is made and the paragraph or paragraphs of rule 6.20 relied on; and
(b) that the claimant believes that his claim has a reasonable prospect of success.
Rule 6.21(2A) further provides that the court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.
Although there are textual differences between rules 6.20 and 6.21 and the former provisions of RSC Order 11, the differences are not intended to reflect any change in the underlying principles to be found in the decisions of the House of Lords in Seaconsar Far East Limited v Bank Markazi Jomhouri Islam Iran [1994] 1 AC 438 and Spiliada Maritime Corp v Consulex Limited (The Spiliada) [1987] AC 460.
An applicant for permission to serve out of the jurisdiction has to establish three matters.
First, the applicant must show in respect of each claim that he has a "good arguable case" that it falls within a relevant sub-paragraph of rule 6.20: Seaconsar. This is a less stringent test than requiring proof on the balance of probabilities.
Secondly, the applicant must show that there is a serious issue to be tried in respect of each claim which he is seeking to make. The "merits threshold" under this test is the same as if the claimant were resisting an application by the defendant for summary judgment under rule 24.2: De Molestina v Ponton [2002] 1 Lloyd's Rep 271. This is reflected in the requirement, by rule 6.21(b), for the applicant to provide evidence that he believes that his claim has "a reasonable prospect of success" – the antithesis of a claim which has "no real prospect of succeeding" and is therefore liable to summary dismissal under rule 24.2. The underlying rationale is that the court should not subject a foreign litigant to proceedings which the defendant would be entitled to have summarily dismissed.
Thirdly, the applicant must persuade the court that England is clearly the appropriate forum.
The Admiralty and Commercial Courts Guide
Appendix 15 to the guide gives the following guidance on the written evidence which should support an application for permission to serve out of the jurisdiction:
On applications for permission under rule 6.20 the written evidence must, amongst other things:
(i) identify the paragraph or paragraphs of rule 6.20 relied on as giving the court jurisdiction to order service out, together with a summary of the facts relied on as bringing the case within each such paragraph;
(ii) state the belief of the deponent that there is a good claim and state in what place or country the defendant is or probably may be found;
(iii) summarise 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;
(iv) draw attention to any features which might reasonably be thought to weigh against the making of the order sought;
(v) state the deponent's grounds of belief and sources of information;
(vi) exhibit copies of the documents referred to and any other significant documents.
The affidavit in support of MRG's application for permission for service out of the jurisdiction
The affidavit in support of MRG's application was quite short. It was sworn by an assistant solicitor employed by MRG's solicitors. She referred to the particulars of claim (to which the four contracts were annexed), drawing attention to the governing law and jurisdiction clause, and continued:
10 – All the claims are in respect of contracts, each of which contracts contains an English jurisdiction clause. The intended claimant has a good cause of action against the intended defendant in respect of each of the claims. The claimant believes that it has a reasonable prospect of success in respect of each of the claims. There is between the intended claimant and the intended defendant a real issue which the intended claimant may reasonably ask the court to try for the reasons indicated above.
11 – In the circumstances, I believe that the intended claimant has a reasonable prospect of success.
12 – Further, I believe that the English courts are clearly the proper place for this application [presumably a misprint for action] to be heard, in the light of the provisions made at clause 4 of the special conditions of contract 1 and 2 and the quality claim contract, and clause 3 of the special conditions of contract 3. [This was a reference to the governing law and jurisdiction clause.]
The affidavit was silent about the background to the dispute or any potential defences which Engelhard might have. In my experience it was not unusual in that regard.
The application to set aside
In Engelhard's written application to set aside the order of David Steel J, the grounds were stated to be that:
i) There was substantial non-disclosure by the claimant to the court of facts relating to the background to the contracts between the claimant and the defendant, and such non-disclosure is sufficiently serious for such relief to be granted;
ii) The claimant has provided no explanation as to why it has taken over five years to bring these proceedings and the delay is seriously prejudicial to the defendant;
iii) Japan is the appropriate forum for the resolution of this dispute.
With realistic judgment, Mr Gruder QC on behalf of Engelhard did not pursue the third ground, nor did he pursue the second ground as a matter independent of the first. His argument in relation to the second ground was that MRG should have explained to the court not only what the dispute was all about but also why it had taken so long to issue proceedings.
It is not disputed that MRG has a good arguable case that the claims fall within rule 6.20(5) (c) and (d), and that they raise serious issues to be tried.
The application to set aside is therefore based squarely on the allegation of non-disclosure. Mr Gruder fairly acknowledged that if all the matters which Engelhard says ought to have disclosed to David Steel J had been disclosed, the judge would probably have felt that he had to give the permission which he gave, but Mr Gruder submitted that this was not to the point. The obligations on a party making a without notice application are strict and to be strictly enforced. (If anyone wondered why the point is being argued in circumstances where MRG could make a fresh application to serve proceedings out of the jurisdiction, the explanation is that both sides foresee that MRG could have difficulties because of the limitation period and potential problems of service.)
The matters which Engelhard say ought to have been disclosed
The application to set aside was supported by a witness statement of Mr Michael Hassett, an associate general counsel with Engelhard's parent company. He was involved in investigating losses of around US$60 million suffered by Engelhard from dealings with a company, Kanto, and related parties in Japan in the years leading up to 1998. His witness statement tells a complicated story of fraud. Kanto inflated its turnover by a series of fictitious paper transactions purporting to be sales and purchases of valuable metals. Engelhard was one of the companies involved in the chain. It is alleged that Engelhard's managing director, Mr Saito, had a corrupt relationship with Kanto. It is alleged that contracts 1,2 and 3 can only be properly understood against the background of fraudulent dealings between Kanto and Engelhard,...
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