Xenfin Fund 1 Trading Ltd ((in Liquidation)) v GFG Ltd

Approved Judgment

This judgment was handed down remotely at 10.30am on Friday 31 st January 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Joanne Wicks KC sitting as a Deputy Judge of the High Court:

Introduction

This is my judgment on a number of applications concerned with issues of service and jurisdiction, namely:

i) an application by the Second Defendant (“ Mr Hofgren”) for a declaration that the Claimant failed to serve the claim form on him in accordance with CPR Part 6 within the period required by CPR 7.5 and therefore that the court has no jurisdiction to try the claim against him;

ii) an application by the Fourth Defendant (“ Mr Ahmad”) seeking to set aside an order of Master Pester dated 11 October 2023 giving permission for service on Mr Ahmad out of the jurisdiction and by alternative means, on the grounds (a) that the claim against him does not have a reasonable prospect of success; (b) that England and Wales is not the proper place in which to bring the claim; (c) that there were neither exceptional circumstances nor good reason to grant permission for service by alternative means; and (d) the Claimant failed to make full and frank disclosure to Master Pester;

iii) an application by Mr Hofgren, Mr Ahmad and the Third Defendant (“ Mr Cheek”) (to whom I shall refer together as “ the Individual Defendants”) pursuant to CPR 11(1)(b) for an order that the court should not exercise its jurisdiction and for a stay of the claim against them on the grounds that the courts of the Bailiwick of Guernsey are a more appropriate forum (“ the Appropriate Forum Application”); and

iv) an application by the First Defendant (“ D1”) that, in the event that the court decides that it should not exercise jurisdiction against the Individual Defendants, the court should also grant a stay pursuant to CPR 11(1)(b) in respect of the claims against D1 (“ D1's Application”).

The Claimant is a Guernsey non-cellular company incorporated on 10 March 2017. It is beneficially owned by GFG Funds PCC Limited (“ GFG PCC”), a Guernsey protected cell company which was authorised by the Guernsey Financial Services Commission (“ GFSC”) as an open-ended collective investment scheme. Under Guernsey law, a protected cell company is a single legal entity, comprising a core with core assets and cells with cell assets, such assets being ring-fenced both within the protected cell company and as against third party creditors of that company. The Claimant was the special purpose vehicle through which one of GFG PCC's cells, Xenfin Securities Debt Fund 1 Cell (“ Xenfin Cell”), made investments.

D1 is a Guernsey non-cellular company licensed and regulated by the Guernsey Financial Services Commission (“ GFSC”). The Claimant contends that D1 acted as the Claimant's investment manager.

The Claimant, D1 and GFG PCC are all now in liquidation.

Mr Hofgren and Mr Cheek were directors of the Claimant and GFG PCC and the ultimate beneficial owners of D1. Mr Hofgren was also a director of D1.

The Claimant alleges that Mr Ahmad was a de facto director of the Claimant.

The Claimant's case is that D1 owed it contractual duties to act in the Claimant's best interest and with reasonable care, skill and diligence in managing the Claimant's investments; that the relationship between the Claimant and D1 was one of trust and confidence such that D1 owed the Claimant a fiduciary duty to avoid conflicts of interest and that D1 owed the Claimant a duty in tort to exercise reasonable care, skill and diligence in managing the Claimant's investments. There is a potential dispute as to whether the relationship between the Claimant and D1 is governed by English or Guernsey law, as I shall explain in more detail below.

The Claimant's pleaded case is that Mr Hofgren and Mr Cheek, as directors of the Claimant, and Mr Ahmad as a de facto director of the Claimant, owed it duties under Guernsey law to act in what they honestly believed to be in the Claimant's best interests, to avoid conflicts of interest and to exercise reasonable care, diligence and skill.

The Claimant contends that the Defendants acted in breach of these obligations (a) in causing the Claimant to enter into a loan of £9.55m to Dolphin Capital 158 Projekt GmbH & Co KG on 11 May 2017 (“ the DC158 Loan”); (b) in causing the Claimant to enter into a loan of £3.2m to 7.EP Projekt GmbH Co. KG on 10 May 2018 (“ the 7EP Loan”) (the DC158 and 7EP Loans being together “ the Loans”); (c) in the conversion of the Claimant's security under the Loans into shares in Vordere Limited (“ Vordere”) in June 2019 (“ the Vordere Transaction”); and (d) in causing payments to be made to two companies associated with Mr Ahmad, Aurora Capital Limited and Core Properties Limited.

For the purposes of these applications, it was common ground between the Claimant and the Individual Defendants that the relevant Guernsey limitation periods (applicable to the claims by virtue of the Foreign Limitation Periods Act 1984) should be taken to be six years. This is on the basis that, in the absence of evidence to the contrary, foreign law should be presumed to be the same as English law: Brownlie v FS Cairo (Nile Plaza) LLC [2021] UKSC 45, [2022] AC 995 and that, under English law, the limitation period for claims of breach of duty against directors, except in cases involving a misapplication of pre-existing corporate assets or fraud, is six years: Davies v Ford [2020] EWHC 686 (Ch) at [319]. Consequently, I approach these applications on the basis that the limitation period for the claims against the Individual Defendants in respect of the DC158 Loan and 7EP Loan expired on 11 May 2023 and 10 February 2024 respectively.

Mr Hofgren's service application

The claim form in these proceedings was issued on 5 May 2023, shortly before the expiry of the limitation periods referred to above. Under CPR 7.5, it was valid for service until 5 September 2023. The claim form was amended on 29 August 2023.

Under CPR 6.9(2), the claim form was required to be served on Mr Hofgren at his “usual or last known residence”. “Last known” refers to the serving party's actual knowledge, or knowledge that he could have acquired exercising reasonable diligence: Collier v Williams [2006] EWCA Civ 20, [2006] 1 WLR 1945 at [71]. By CPR 6.9(3), if the Claimant had reason to believe that the address was one at which Mr Hofgren no longer resided, it was obliged to take reasonable steps to ascertain the address of his current residence. By CPR 6.9(6), a claimant may serve the claim form on a defendant's usual or last known residence where it cannot ascertain the defendant's current residence and cannot ascertain an alternative place or alternative method by which service may be effected.

The Claimant contends that service was effected upon Mr Hofgren, in accordance with CPR 6.9, by sending the amended claim form by first class post on 30 August 2023 to Flat 4, 28 Cleveland Square, London W2 6DD, that being Mr Hofgren's “last known residence”. Mr Hofgren disputes that as good service, on the basis that (a) the letter sending the Claim Form was not “properly addressed” within the meaning of section 7 of the Interpretation Act 1978, because the address contained a mistake: the package was addressed to “Flat 4, 28 Cleveland Square, Thomas More Street, London W2 6DD”. Thomas More Street is a road in East London, rather than Paddington, which is where 28 Cleveland Square is; and (b) 28 Cleveland Square was not Mr Hofgren's “last known residence” because the Claimant could, with reasonable diligence, have found a more recent residence, namely 42 Kyrle Road, London SW11 8BA. It is not suggested that there was any alternative method by which Mr Hofgren could have been served, he having chosen (in response to the Claimant's request) not to instruct his solicitors to accept service on his behalf.

Mr Hofgren's evidence as to where he in fact lived from time to time is set out at paragraphs 7–10 of his witness statement dated 27 September 2023. He had lived with his ex-wife at 28 Cleveland Square until February 2020, following which it had been rented out. The Kyrle Road address was the house of a friend for whom Mr Hofgren had been house-sitting between 15 November 2022 and 27 July 2023. At the time of his witness statement (and when the claim form was served), Mr Hofgren says he had no permanent residence.

The Claimant's evidence as to what steps it took to ascertain Mr Hofgren's address for service is set out in paragraphs 12–18 of the second witness statement of Thomas Edward Clark dated 1 May 2024 (“ Clark 2”).

Mr Phillips, for Mr Hofgren, took me to authorities warning claimants of the dangers of waiting until the last moment to serve proceedings: Anderton v Clwyd Council Council (No 2) [2002] EWCA Civ 933, [2002] 1 WLR 3174 at [2], [3]; Barton v Wright Hassall LLP [2020] UKSC 12, [2020] 1 WLR 1119 at [22], [23]; R (Good Law Project) v Secretary of State for Health and Social Care [2022] EWCA Civ 355, [2022] 1 WLR 2339 at [41], [83]. He also relied on White v Weston [1968] 2 QB 647 at 661–662 for the proposition that a prospective defendant is under no obligation to inform the prospective claimant...