Royal Westminster Investments Sa and Others v Manmohan Varma
| Jurisdiction | England & Wales |
| Judge | Mr Justice Newey |
| Judgment Date | 30 November 2012 |
| Neutral Citation | [2012] EWHC 3439 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC12E02487 |
| Date | 30 November 2012 |
[2012] EWHC 3439 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building, Royal Courts of Justice,
7 Rolls Buildings, Fetter Lane,
London EC4A 1NL
Mr Justice Newey
Case No: HC12E02487
Mr Philip Marshall QC and Mr James Mather (instructed by Peters & Peters Solicitors LLP) for the Applicants
Mr Stuart Ritchie QC (instructed by PCB Litigation LLP) for the Respondent
Hearing dates: 10 and 11 October 2012
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.
In this case, the applicants seek relief under section 25 of the Civil Jurisdiction and Judgments Act 1982 ("the CJJA") in connection with proceedings they have brought in the British Virgin Islands ("the BVI"). The defendants to those proceedings are (a) the respondent to the present application, Mr Manmohan Varma, and (b) Nilon Limited ("Nilon"), a company incorporated in the BVI of which Mr Varma is the sole director and also, as things stand, the only registered shareholder. The applicants allege that Mr Varma has been wrongfully causing Nilon to incur substantial expenditure on the BVI proceedings and that, if no injunction is granted, he is likely to continue to do so. On that basis, they have applied for orders:
i) Restraining Mr Varma, except to a very limited extent, from procuring or permitting expenditure by Nilon in connection with legal or other costs of the BVI proceedings;
ii) Requiring Mr Varma to disclose information as to the quantum of expenditure by Nilon to date on the BVI proceedings; and
iii) Ordering Mr Varma to repay to Nilon any sums that may have been wrongfully expended.
For his part, however, Mr Varma resists any suggestion that he has acted wrongfully and denies that any order should be made in the applicants' favour.
The background
The second applicant, Mr Bhagwan Mahtani, has a substantial beneficial interest in the first applicant, Royal Westminster Investments SA. He is also a son-in-law of the third applicant, Mr Sunder Dalamal, who is himself a brother of the fourth applicant, Mr Nari Dalamal.
The BVI proceedings concern a rice venture which the applicants and Mr Varma agreed to pursue together in Nigeria. In its present form, the Statement of Claim includes the following allegations:
i) It was orally agreed between Mr Varma and the second, third and fourth applicants at a meeting on 25 October 2002 that 57.5% of the issued shares in Nilon, which was to be formed for the purposes of the venture, would be issued to the applicants;
ii) When Nilon was incorporated a couple of weeks later, a collateral agreement arose between the second, third and fourth applicants, Mr Varma and Nilon for the issue of shares by Nilon to the applicants in accordance with the terms of the joint venture agreement allegedly entered into on 25 October;
iii) In breach of both alleged agreements, no shares in Nilon have ever been issued to the applicants;
iv) The applicants are therefore entitled to, among other things, specific performance of the agreements, rectification of Nilon's register of members and damages.
On 5 May 2010, the applicants applied to the BVI Commercial Court for permission to serve proceedings on Mr Varma in England, where he lives. At that stage, no collateral agreement was alleged; the proposed proceedings primarily sought rectification of Nilon's register of members and relief relating to Mr Varma's alleged breach of the joint venture agreement. The application was refused by the Judge, Bannister J, on the basis that there was no real issue to be tried as between the applicants and Nilon. Bannister J indicated, however, that he would consider the matter again if the applicants re-formulated their pleaded case so that it included a viable claim against Nilon to which Mr Varma was a necessary and proper party.
On 10 May 2012, the applicants renewed their application for permission to serve out of the jurisdiction. By now, a claim that Nilon was in breach of a collateral agreement had been added to the draft proceedings. In the light of this change, Bannister J granted permission to serve Mr Varma in England.
The applicants issued proceedings in the BVI on 11 May 2010. Thereafter, the proceedings were served on both Nilon and Mr Varma.
On 5 July 2010, Nilon filed an application in the BVI asking for a declaration that the Court should not exercise its jurisdiction in respect of the claim against it or, alternatively, for the proceedings to be stayed on the ground of forum non conveniens.
On 6 August 2010, Mr Varma filed an application in the BVI for service of the applicants' proceedings on him to be set aside on the footing that there was no serious issue to be tried as between the applicants and Nilon to which he could be a necessary and proper party.
By a judgment delivered on 21 October 2010, Bannister J rejected Nilon's application but concluded that the claim as pleaded did not show there to be a real issue which it was reasonable for the Court to try as between the applicants and Nilon. Bannister J did not accept that there was a sufficient basis for the collateral agreement alleged by the applicants. He also took the view that there was no necessary connection between the claim for breach of the collateral agreement and the applicants' allegation that Mr Varma had breached a joint venture agreement.
Following Bannister J's decision, Nilon applied for the claims against it to be struck out or, alternatively, for summary judgment in its favour. The application was heard on 14 December 2010, and Bannister J gave judgment in Nilon's favour on 21 December.
The applicants appealed both Bannister J's judgment of 21 October 2010 and that of 21 December.
The appeal was heard by the BVI Court of Appeal on 3 and 4 May 2011. Nilon appeared by local counsel, Mr Scott M. Cruickshank of Lennox Paton. Mr Varma was represented both by local counsel, Mr Ray Ng of Ogier, and by Mr Richard Snowden QC.
By a judgment of 16 January 2012, the BVI Court of Appeal allowed the applicants' appeals and ordered Nilon and Mr Varma to pay the applicants' costs. The Court took the view (see paragraph 51 of the judgment) that:
"there is between the appellants and Nilon a real issue which it is reasonable for the court to try, that issue being the appellants' claim against Nilon for rectification of its register of members".
The Court further considered that Mr Varma "is a necessary and proper party to the claim brought by the appellants against Nilon for rectification of its register" (paragraph 52 of the judgment).
On 16 April 2012, the BVI Court of Appeal refused applications by Nilon and Mr Varma for permission to appeal to the Privy Council. An application for permission to appeal has since been made direct to the Privy Council, but its outcome is not yet known.
Nilon and Mr Varma each served a Defence in the BVI proceedings on 15 June 2012. I shall refer to Nilon's Defence later in this judgment. So far as Mr Varma's is concerned, among other things he (a) denies that there was any agreement for the applicants to acquire any shares in Nilon and (b) alleges that any agreement would anyway have been repudiated by the issue of proceedings in Nigeria by companies owned by the second applicant and his brother in which they dispute Nilon's ownership of a Nigerian company, Veetee Rice Nigeria Limited.
The application now before me was issued on 22 June 2012.
Section 25 of the CJJA, pursuant to which the application is made, empowers the Court to grant interim relief where proceedings have been brought in another jurisdiction. Sub-section (7) explains that such relief can be interim relief of any kind that the Court has power to grant in proceedings relating to matters within its jurisdiction, other than:
"(a) a warrant for the arrest of property; or
(b) provision for obtaining evidence".
The Court may, however, refuse to grant relief "if, in the opinion of the court, the fact that the court has no jurisdiction apart from [section 25] in relation to the subject-matter of the proceedings in question makes it inexpedient for the court to grant it" (sub-section (2)).
Section 25 was enacted to give effect to article 24 of the 1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, but it has since been enlarged in scope. The power to grant interim relief that it confers is nowadays exercisable in relation to proceedings anywhere in the world.
The Court adopts a two-stage approach when considering whether to grant relief under section 25. In Refco Inc. v Eastern Trading Co. [1999] 1 Lloyd's Rep. 159, Morritt LJ explained (at 170–171):
"The scope and effect of s. 25 of the Civil Jurisdiction and Judgments Act, 1982 has recently been considered by this Court in Crédit Suisse Fides Trust S.A. v. Cuoghi, [1997] 3 W.L.R. 871…. [I]t was implicit in all the judgments that the approach of the Court in this country to an application for interim relief under s. 25 is to consider first if the facts would warrant the relief sought if the substantive proceedings were brought in England. If the answer to that question is in the affirmative then the second question arises, whether, in the terms of s. 25(2), the fact that the Court has no jurisdiction apart from the section makes it inexpedient to grant the interim relief sought."
The parties' cases in brief outline
The application with which I am concerned is rooted in the general principle that a...
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