Shetty v Al Rushaid Petroleum Investment Company & Ors [2011] EWHC 1460 (Ch)

[2011] EWHC 1460 (Ch)Claim No. HC10C01303 (Formerly HQ09X04839), HC10C00774
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London WC2A 2LLDate 9 June 2011
Before
Mr Christopher Pymont QC(sitting as a Deputy Judge of the High Court)
Between
SHEKHAR DOOMA SHETTYClaimant(1) AL RUSHAID PETROLEUM INVESTMENT COMPANY (a company incorporated under the laws of the kingdom of Saudi Arabia)Defendants(2) CLEVELAND BRIDGE DORMAN LONG ENGINEERING LIMITED (a company incorporated under the laws of Jersey)Defendant(3) AL RUSHAID PARKER DRILLING LIMITED (a company incorporated under the laws of the Kingdom of Saudi Arabia)DefendantTHOMAS ANTHONY CAPLISThird PartyAL-RUSHAID PARKER DRILLING LIMITEDClaimant(1) SHEKHAR DOOMA SHETTY [Defendants(2) THOMAS ANTHONY CAPLIS] [(3) JAMES MACDONALD WIGHT]Defendant
B E T W E E N:
Mr Charles Samek QC and Mrs Joanne Sefton instructed by Speechly Bircham LLP for Mr ShettyMr James Evans instructed by Geldards LLP for Mr Caplis and Mr WightMr Andrew Moran and Mr James Mather instructed by Kingsley Napley LLP for ARPIC, Cleveland Bridge and ARPDHearing Hearing dates: 17, 18, 22 March and 4 April
APPROVED JUDGMENT

Mr Christopher Pymont QC:

[1]I have before me three applications in two actions. Two of the applications arise from the order of Master Bowles made on 18 November 2010 in one of the actions, whereby the Master joined an additional Defendant and allowed it to make additional claims against two new parties in the circumstances I describe below; these two applications are for the Master’s order to be set aside. The third application is for security for the costs of the Defendant in the other action.

Background

[2]The background to the two actions in which these applications arise can be summarised as follows. The Al Rushaid group of companies is a long established group providing equipment and services to the oil industry in Saudi Arabia. It was founded by Sheikh Abdullah Al-Rushaid and is now owned and controlled by him and members of his family. An important employee of the group was Mr Shekhar Dooma Shetty. He was formally employed under two separate contracts of employment by companies within the Al Rushaid group, namely Al Rushaid Petroleum Investment Company (“ARPIC”) and Cleveland Bridge Dorman Long Engineering Ltd (“Cleveland Bridge”) but his responsibilities related to the group as a whole. He was also a director of ARPIC and other group companies. By the time of his dismissal in September 2009, Mr Shetty was the Chief Financial Officer of the Al Rushaid group and, as he puts it, the most senior officer of the group save for Sheikh Al Rushaid and his son Rasheed.[3]In September 2009, Mr Shetty was dismissed from his employment within the Al Rushaid group. The precise circumstances are in dispute but he claims that he was wrongfully dismissed and, in the process, detained against his will at the group’s London office. Consequently, Mr Shetty commenced proceedings against ARPIC and Cleveland Bridge and served Particulars of Claim dated 30 October 2009 (amended in draft in June 2010) claiming damages for wrongful dismissal and false imprisonment, along with payment of a bonus, arrears of salary and expenses said to be due but unpaid under his contracts of employment. I will call this action “the Employment Action”. England was the appropriate jurisdiction for these claims because, by a letter of agreement around 1 October 2009, the parties had agreed that England should have exclusive jurisdiction for civil proceedings between them.[4]ARPIC and Cleveland Bridge duly served a Defence (dated 9 March 2010) in the Employment Action. This alleged that Mr Shetty had been guilty of fraud and had breached his fiduciary and contractual duties to the companies within the Al-Rushaid group, including the Defendants. The details of the alleged misconduct (such as were known at the time) were set out in a separate action commenced in the High Court by another company in the Al-Rushaid group, Al-Rushaid Parker Drilling Ltd (“ARPD”), against Mr Shetty and two other employees of the group, Mr Thomas Caplis and Mr James Wight. I will call this action “the Fraud Action”. The allegations are, in summary, that Mr Shetty and Mr Caplis were both directors of ARPD (as well as, in Mr Shetty’s case, other companies in the Al-Rushaid group) and Mr Wight was a manager of ARPD (said to have a status equivalent to that of a director under Saudi Arabian law); all three owed duties to ARPD akin to the fiduciary duties which would be owed under English law by persons holding such positions; they breached those duties by taking secret commissions from ARPD’s suppliers, using a British Virgin Island company, TSJ Engineering Company Ltd (“TSJ”), in their joint ownership to receive and disburse the relevant funds. The allegations in the Fraud Action were specifically incorporated by reference into the Defence in the Employment Action (para 6) as part of the substantive allegations said to have justified Mr Shetty’s dismissal by ARPIC and Cleveland Bridge.[5]When the Fraud Action was commenced, Mr Caplis and Mr Wight were domiciled in Spain and Scotland respectively. ARPD did not, however, envisage any problems in establishing that the English courts had jurisdiction over the claims against them. This was not because of the agreement between Mr Shetty and the Al-Rushaid Group on or around 1 October 2009: Mr Caplis and Mr Wight were not parties to that agreement or otherwise bound by it. Rather, it was because ARPD believed that Mr Shetty was domiciled in England. If that were so, ARPD could rely upon(a) in the case of Mr Caplis, Article 6(1) of Council Regulation (EC) No 44/2001 (“the Judgments Regulation”) which provides that a person domiciled in a Member State may, where he is one of a number of defendants, be sued in the courts for the place where any one of them is domiciled and(b) in the case of Mr Wight, the equivalent provision for jurisdiction within the United Kingdom at para 5(a) of Sch 4 to the Civil Jurisdiction and Judgments Act 1982 (as amended by the Civil Jurisdiction and Judgments Order 2001). ARPD’s belief as to Mr Shetty’s domicile stemmed from Mr Shetty’s own statement that he was domiciled in England at para 4 of the Particulars of Claim in the Employment Action (verified on his behalf by a statement of truth by his solicitor in October 2009). The Fraud Action was therefore duly served on Mr Wight in Scotland and Mr Caplis in Spain.[6]However, following service, Mr Caplis and Mr Wight by separate applications challenged the jurisdiction of the English courts in the Fraud Action on the grounds that Mr Shetty was no longer domiciled in England at the time the claim form was issued and that neither Mr Caplis nor Mr Wight had ever consented to the jurisdiction of the English court. Their applications were supported by a witness statement from Mr Shetty explaining that he was not domiciled in England when the Fraud Action was commenced (9 March 2010), having returned to India, his country of origin, in December 2009. In the light of that evidence, though without accepting it, ARPD consented to an order, made on 10 November 2010 on Mr Caplis’s and Mr Wight’s applications, by which(i) service on Mr Caplis and Mr Wight was set aside and(ii) it was declared that “the English court has no jurisdiction over those two Defendants on the basis that at the time the Claim Form was issued, the Defendants were not domiciled in England.”[7]ARPIC, Cleveland Bridge and ARPD immediately thereafter pursued a different course, with the continuing intention of having Mr Caplis and Mr Wight, as well as Mr Shetty, answer the allegations which had been made in the Fraud Action at a trial in England. On 18 November 2010, those companies applied to Master Bowles, without notice, and persuaded him to make an order which(i) joined ARPD as the Third Defendant to the Employment Action(ii) permitted the Defendants to make a counterclaim against Mr Shetty pursuant to CPR r 17.1(2)(b) and CPR r 20.4(2)(b) and (iii) permitted ARPIC and ARPD to issue an additional claim against Mr Caplis and Mr Wight pursuant to CPR r 20.7. The counterclaim and the additional claim together substantially replicated what had been alleged in the Fraud Action against Mr Shetty, Mr Caplis and Mr Wight. The Fraud Action continued in relation to Mr Shetty but was not, however, in issue before the Master.[8]The application to Master Bowles was without notice, at least in part because the Applicants, ARPIC and ARPD and Cleveland Bridge, feared that, if Mr Caplis and Mr Wight were put on notice of the application, they would seek to frustrate it by commencing proceedings in their own country of domicile, which would then be seised of the relevant issues to the exclusion of the jurisdiction of the English courts. The fear was greater with regard to Mr Caplis (in Spain) than Mr Wight (in Scotland). All of this was explained in the witness statement of Mr Gerard Cukier, the Applicants’ solicitor, made on 10 November 2010 which was put before the Master. The Master accepted that it was proper for the application to be made and heard without notice and his order recorded his permission for the Applicants to proceed on that basis.[9]On service of the order, first Mr Shetty and subsequently Mr Caplis and Mr Wight applied for an order that Master Bowles’s order of 18 November 2010 be set aside or not continued. Those are two of the applications now before me.[10]The other application before me is Mr Shetty’s application for security for costs in the Fraud Action against ARPD. That was first heard on 25 November 2010 when Master Bowles adjourned it to come on with the application in the Employment Action. A. The Application to set aside Master Bowles’s order[11]On these applications, I have read and heard submissions from Mr Charles Samek QC, leading Mrs Joanne Sefton, for Mr Shetty, from Mr James Evans for Mr Caplis and Mr Wight and from Mr Andrew Moran, leading Mr James Mather, for ARPIC, Cleveland Bridge and ARPD. I am grateful to all Counsel for the care and clarity with which they have presented their arguments.[12]The issues which arise on the two applications to set aside Master Bowles’s order can be formulated as follows:(a) Did the Court have power to join ARPD as the Third Defendant in the Employment Action and, if so, should it have exercised that power and on what terms?(b) Did the Court have power to permit ARPIC and (if joined) ARPD to make additional claims against Mr Caplis and Mr Wight and, if so, should it have exercised that power?(c) Should Master Bowles’s order be set aside on the grounds that the application should not have been made without notice or that the Applicants were guilty of material non-disclosure or that the Applicants’ application was an abuse of process?[13]This formulation is much the same as that given in the skeleton argument of Mr Samek QC and Mrs Sefton but combining their issues 1 and 2 into issue (a) above. I will deal with each in turn.

(a) Joinder of ARPD

[14]The power to join additional parties is contained in CPR r 19.2. Sub-rule 19.2(2) provides as follows:
“(2) The Court may order a person to be added as a new party if – (a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or (b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.” (a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or (b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.”
[15]Mr Moran does not rely on sub-para (a) but on sub-para (b). He submits first that the issue of whether Mr Shetty was in breach of his duties to ARPD is an issue which is obviously “connected to the matters in dispute” in the proceedings between Mr Shetty and the original Defendants, ARPIC and Cleveland Bridge. I accept this (as did Mr Samek QC and Mr Evans). A substantial part of the Defence of the original Defendants (ARPIC and Cleveland Bridge) was that Mr Shetty was in breach of his duties to their associated company, ARPD, the breach being his part in the formation and use of TSJ to receive and distribute secret commissions for the benefit of Mr Shetty, Mr Caplis and Mr Wight. That breach is said to have justified the termination of Mr Shetty’s employment by ARPIC and Cleveland Bridge. The issue between Mr Shetty and the new party, ARPD, is therefore so closely connected to the matters in dispute between Mr Shetty and the existing Defendants as to be likely to be at centre stage at the trial of the Employment Action.[16]It falls to be considered, therefore, whether “it is desirable to add the new party [ARPD] so that the court can resolve that issue” as provided by CPR r 19.2(2)(b). Mr Samek QC (whose submissions were generally adopted by Mr Evans with some supplementary submissions of his own) had two principal submissions in that respect. First, he pointed out that under CPR r 2.3 a “defendant” is defined to mean “a person against whom a claim is made”. On that definition, ARPD could not apply to be joined as a defendant because Mr Shetty’s claim was against only ARPIC and Cleveland Bridge, whatever ARPD’s position. Secondly, Mr Samek QC contended that it cannot be “desirable” to add ARPD “so that the court can resolve” the relevant issue between Mr Shetty and ARPD because the court will be able to resolve that issue in the Fraud Action, which has not been abandoned.[17]On the first submission, Mr Samek QC cited the decisions of David Steel J in Knauf UK GmbH v British Gypsum [2002] 2 Lloyd’s Rep 416 and HHJ Havelock Allan QC in Dollfus Mieg & Cie v CDW International Ltd [2004] I.L. Pr 12. Knauf was a case in which a contribution notice had been served under CPR 20.6 by one defendant on another but the latter had subsequently successfully applied to have service of the proceedings upon it set aside with the consequence that it ceased to be (and should never have been) a defendant. The issue was whether the claim in the contribution proceedings could survive the setting aside of service; the decision was that it could not. That provides no assistance as to the right approach to the joinder of a new party under CPR Pt 19.2. In Dollfus Mieg, one joint venturer (DMC) brought proceedings against another (CDW) in England for breach of the joint venture agreement. DMC threatened to bring separate proceedings in France against a number of companies in the same group as CDW, including LBJR. These separate proceedings were for “abusive termination of negotiations”, a cause of action unknown to English law but actionable in France. The negotiations in question were unrelated to the joint venture agreement. LBJR then sought to bring a Part 20 claim in the English proceedings for a declaration that it was not liable to DMC for abusive termination of negotiations. The judge rejected LBJR’s attempt to do so, one reason being that LBJR could not, under CPR 19.2, be joined as a defendant to DMC’s claim in England, which was entirely unrelated to the issue between DMC and LBJR (para 44 of the judgment). Again, however, the decision does not seem to me to provide much assistance: ARPD’s position here is rather different from LBJR’s in the Dollfus Mieg case in that the issue of whether or not Mr Shetty was in breach of his duty to ARPD is already central to the issue of whether or not he was wrongfully dismissed by ARPIC and Cleveland Bridge.[18]More pertinently, Mr Moran referred me to the case of Dunlop Haywards (DHL) Ltd v Erinaceous Insurance Services Ltd [2008] EWHC 520 (Field J) and [2009] EWCA Civ 354 (CA). There, the claimants (D) had instructed an insurance broker (H) to renew their professional indemnity insurance; H engaged a Lloyd’s broker (F) to place the cover; F placed primary and excess layers of cover but the latter was subject to a condition which the excess insurers (M) invoked when claims were made against D. D sued H, who claimed a contribution or indemnity from F. H as part of its defence claimed that the excess policy should be construed or rectified so as to nullify the effect of the condition. H applied to join M as defendant to the proceedings even though no claim was made against it by H or anyone else and no party was in a position to make such a claim. Field J expressly decided that the court had jurisdiction to make an order in such circumstances:
“In my opinion, the court has jurisdiction to make the order sought by [H] under CPR 19.2(2) notwithstanding that neither [H] nor any other party to the proceedings is in a position to assert a claim against the Excess Insurers [M]. As Mr Fenton submitted, if it were a requirement that an existing party must be able to bring a claim against the party sought to be joined there would be little if any need for Rule 19.2(2), since the party seeking joinder could always issue a Part 20 claim” (para 44). In the event, however, Field J refused the application to join M both in relation to the contention that the excess policy could be rectified (para 54) and in relation to the contention as to its construction (para 56). The Court of Appeal reversed that decision, Rix LJ (with whom Wilson LJ and Sir Peter Gibson agreed) concluding (para 89): “In my judgment therefore it is desirable for the excess insurers to be joined to these proceedings so that the issues of rectification and of construction can be fully litigated between all the parties concerned in them, and so that all the parties can be bound.”
It does not appear from the judgment there was any argument as to the ambit of CPR r 19.2(2) but Mr Moran submits that the Court of Appeal must have implicitly accepted Field J’s observation at para 44 of his judgment as to the scope of CPR r 19.2(2) for the Court of Appeal to have joined M as a defendant. Mr Samek QC submits that the absence of discussion in the Court of Appeal does not make this a Court of Appeal decision on the point and that, anyway, Field J had not been referred to the definition of Defendant at CPR r 2.3.[19]In my judgment, the power of the Court to add a new party is not limited (in the case of defendants) to the addition only of a defendant against whom the claimant would want to make a claim or whose joinder is needed to complete the claimant’s cause of action. The language of CPR 19.2(2)(b) itself is wider than that. All that is required for the rule to be engaged is that there is an “issue” to be determined, which is “closely connected to the matters in dispute in the proceedings”, not that that issue forms part of a claim for relief against the new party. There is equally no suggestion in CPR r 19.2 that the definition of “defendant” was intended to restrict the issues which would make it desirable to join a defendant to those issues which arise as part of a claim against him. Once a new party has been joined to be able to argue and to be bound by an issue in the claim, he becomes a defendant within the meaning of the definition. Field J’s decision supports this conclusion and I agree with Mr Moran that that decision has the additional weight of the implicit approval of the Court of Appeal. I therefore reject the first submission.[20]As to the second submission, it is true that the Fraud Action was commenced and is still being pursued and that therefore there already exists a procedural context in which all issues as between ARPD and Mr Shetty can be determined. It does not necessarily follow that it would not be “desirable” to join ARPD as a Defendant to the Employment Action “so that the Court can resolve” the issue as to Mr Shetty’s alleged breach of duty to ARPD. That issue raises a number of factual questions as to the acts and intentions of all the participants in TSJ which would inform the court’s consideration of the issue raised against Mr Shetty. I have been taken by Mr Moran through the evidence which has been put together so far as to the alleged wrongdoing. Important parts of the evidence have been obtained via a Norwich Pharmacal order in the BVI in respect of the formation of TSJ and from Swiss prosecutors investigating the payment of the commissions (which were paid into a Swiss bank account). Having seen that evidence, I take the firm view that it would be highly desirable for all relevant parties, including Mr Caplis and Mr Wight, to be before the court when the court is called upon to resolve the issue against Mr Shetty at trial. Without the participation at trial of Mr Caplis and Mr Wight, alternatively without the inferences which may be drawn from their failure to provide cogent answers to the allegations against them when given the opportunity to do so, it may be difficult for the court fully and satisfactorily to resolve the issue as to Mr Shetty’s alleged breach of duty to ARPD.[21]I note, for example, that Mr Shetty claims to have had a falling-out with Mr Wight and to have told Mr Caplis and Mr Wight that he wanted to end his involvement with TSJ, as a result of which he understood that he had ceased to be a shareholder and director of TSJ from about the last quarter of 2008 (para 10.5.3 of Mr Shetty’s defence in the Fraud Action). Allegations such as this, which create or may create (as Mr Caplis and Mr Wight have yet to explain their actions) issues among the participants in TSJ, will need to be heard at a trial involving all of them so that the court has all the material information when it considers Mr Shetty’s alleged breach of duty to ARPD. That is only possible if ARPD is joined as a Defendant and brings the additional claims (as intended) against Mr Caplis and Mr Wight.[22]If, of course, the Fraud Action had been a suitable vehicle by which to bring Mr Caplis and Mr Wight before the court as well as Mr Shetty, there would be no purpose in joining ARPD as a Defendant to the Employment Action and in allowing it to bring a counterclaim for equivalent relief. In those circumstances, joinder of ARPD would merely duplicate proceedings, which would not be desirable. But the Fraud Action has proved not to be a suitable vehicle for that purpose as it does not bring Mr Caplis and Mr Wight before the court to enable the court fully to resolve the issue against Mr Shetty. ARPD (and ARPIC and Cleveland Bridge) have therefore had to find a different vehicle for that purpose and in my judgment it is desirable in the circumstances of this case for the procedure to be used.[23]Mr Samek QC contended that the resort to CPR r 19.2(2)(b) was all rather artificial, as the real purpose of joinder was to enable ARPD to make claims against Mr Caplis and Mr Wight, not to enable the court to resolve the issue against Mr Shetty. I entirely accept that under CPR r 19(2)(2)(b) it is the resolution of the issue between ARPD and Mr Shetty which is the focus of attention, not the more general advantages which may result from having all related claims before the court. But I do not accept that the application to join ARPD is an artificial or misconceived approach. If (as I have decided) the joinder of ARPD is desirable to enable the court to resolve the issue in the Employment Action against Mr Shetty, the fact that joinder will also enable ARPD to bring claims against Mr Caplis and Mr Wight cannot make joinder undesirable or otherwise disentitle the Applicants from having recourse to CPR r 19.2(2)(b).[24]Mr Samek QC also contended that because ARPD had chosen to commence the Fraud Action it was too late for the applicants to go back and seek to start again under CPR r 19.2(2)(b). I do not accept this. ARPD in the Fraud Action, and ARPIC and Cleveland Bridge in their defence to the Employment Action, took a particular procedural course on the strength of a statement by Mr Shetty as to his domicile in England which they had no reason to believe had changed since he made it. That has proved to be of limited procedural value because Mr Caplis and Mr Wight refused to accept the English court’s jurisdiction in the Fraud Action. On Mr Shetty’s evidence, that was their right. But the Fraud Action is still at an early stage and I do not regard its existence as any bar to ARPD, ARPIC and Cleveland Bridge applying under CPR 19.2(2)(b) to achieve a plainly desirable objective by a different route. None of the individuals will suffer any material prejudice if the matter proceeds in this way. The Fraud Action has been resolved completely as against Mr Caplis and Mr Wight by the consent order of 10 November 2010, which also granted them their costs of the action. As for Mr Shetty, he has served a Request for Further Information of the Particulars of Claim and a Defence. Mr Shetty has doubtless incurred costs in having those documents drafted which may be wasted if the Fraud Action is to be overtaken by a counterclaim in the Employment Action. If so, he may be protected by an order for wasted costs. But the substantive issues will remain the same under the counterclaim as they are in the Fraud Action (subject to amendment to take account of further information) and in so far as he has incurred costs in instructing solicitors and Counsel in relation to them, he will be able to re-use that work in answering the counterclaim.[25]I accept that, in the interests of good case management, it will be appropriate for directions to be given in due course to deal with the Fraud Action. The two main options would seem to be consolidation with the counterclaim or a stay of further proceedings, with provision in either case for the costs incurred to date to be determined at a later date. There is no application before me in that connection and I have not heard the parties on the best way forward. So, unless the parties want me to, I will not make any order now. What is before me is Mr Samek QC’s submission that, if I am minded not to set aside the joinder of ARPD, I should impose a condition that the Fraud Action be struck out, with an immediate detailed assessment, and payment, of Mr Shetty’s costs. I reject that course as disproportionate, given the limited costs which could be regarded as wasted if the Fraud Action is overtaken by the counterclaim. I also reject Mr Samek QC’s further submission that the continued existence of the Fraud Action is an abuse of process, once the counterclaim is permitted. In my judgment its continued existence merely raises the question of how it should be dealt with in the interests of good case management.[26]I therefore regard the joinder of ARPD as desirable so that the Court can resolve the issue of Mr Shetty’s alleged breach of duty to ARPD at a trial involving Mr Caplis and Mr Wight. In reaching that conclusion, I am implicitly accepting that it would also be appropriate to allow ARPD (and ARPIC) to bring additional claims against Mr Caplis and Mr Wight under CPR r 20.7: if that were not the case, there would be no point in joining ARPD as a Defendant to the Employment Action. I explain my reasoning on CPR r 20.7 in section (b) below.[27]For these reasons, I would not set aside Master Bowles’s order joining ARPD as a Defendant to the Employment Action.

(b) Additional claims against Mr Caplis and Mr Wight

[28]Mr Samek QC submitted that additional claims could not be brought against Mr Caplis and Mr Wight in the Employment Action because this would infringe their right under Article 2 of the Judgments Regulation to insist that such claims be brought in their country of domicile (or at least, having regard to Article 6(1), the country of domicile of one of them). The argument before me was whether, notwithstanding Article 2, Article 6(2) applied in the circumstances of this case so as to enable Mr Caplis and Mr Wight to be sued in England.[29]Article 6(2) is an exception to the general rule set out in Article 2. It provides that a person domiciled in a Member State may also be sued:
“as a third party in an action on a warranty or guarantee or in any other third party proceedings, in the court seised of the original proceedings, unless these were instituted solely with the object of removing him from the jurisdiction of the court which would be competent in his case.”
[30]The general purpose of Article 6(2) is not in doubt. In Barton v Golden Sun Holidays [2007] I.L. Pr. 57, Wyn Williams J reviewed the earlier authorities and expressed the position thus: “I agree with the learned Deputy Judge [Mr Charles Aldous QC in Waterford Wedgwood plc v David Nagli Ltd [1998] FSR 92] that the purpose behind the special jurisdiction conferred by Art. 6(2) is to secure the rational and efficient disposal of trials and in particular to avoid the risk of irreconcilable judgments” (para 44). Wyn Williams J thought this “abundantly clear” both from the preamble to the Judgments Regulation and from the earlier decisions to which he referred. Having been taken through the relevant materials and authorities by Mr Samek QC and Mr Moran, I entirely accept Wyn Williams J’s conclusion in this respect.[31]The Judgments Regulation does not define what kinds of proceedings are to be considered “third party proceedings” under Article 6(2). This point is, however, the subject of authority which, again, has been reviewed and summarised by Wyn Williams J in Barton. One condition which needs to be satisfied is that the third party proceedings can be brought within the national procedural rules of the country being asked to accept this exceptional jurisdiction. That is not, however, the sole test. Article 6(2) can only apply where there is a close connection between the original proceedings and the third party proceedings sufficient to fulfil the objective of Article 6(2) of securing the rational and efficient disposal of trials and the avoidance of the risk of irreconcilable judgments: third party proceedings which merely happen to satisfy the national procedural rules will not be regarded as “third party proceedings” under Article 6(2) unless it is shown to be expedient in the interest of justice and good administration that the two actions be heard by the same court (see per Mr Charles Aldous QC in Waterford Wedgwood, above, cited at para 43 of Barton). As to the nature and strength of the connection which needs to be shown, Wyn Williams concluded as follows: “It is not possible to define the nature of that connection notwithstanding the understandable desire that Art. 6(2) is understood and applied by all contracting states in the same way. It seems clear, however, that the connecting factor must be a close one – see [11] in Hagen – and there must be good reason to conclude that the efficacious conduct of proceedings is best promoted by both the claim between claimant and defendant and [the] claim between defendant and Part 20 defendant being considered by one court” (para 46). (The reference to Hagen is to the decision in Kongress Agentur Hagen GmbH v Zeehaghe BV (365/88) [1991] I.L. Pr. 3). I accept this as a correct statement of the test.[32]Applying these considerations to the matter before me, I first consider the English procedural rules. I have already explained why it was appropriate for ARPD to be joined as a defendant to the Employment Action. It is, in my judgment, equally clear that this is a case in which additional claims should be allowed against Mr Caplis and Mr Wight under CPR r 20.7. When considering whether to permit an additional claim to be made, CPR r 20.9(2) indicates certain matters to which the court may have regard. These include:
“(a) the connection between the additional claim and the claim made by the claimant against the defendant; ... (c) whether the additional claimant wants the court to decide any question connected with the subject-matter of the proceedings – (i) not only between existing parties but also between existing parties and a person not already a party; ...”
These considerations are highly material here. There is clearly a connection between the additional claim and the claim made by Mr Shetty against the original Defendants and, after joinder, ARPD: Mr Shetty’s claim for wrongful dismissal can only succeed if the court rejects the Defendants’ contention that he was in breach of his duty to ARPD. (Neither Mr Samek QC nor Mr Evans has sought to argue that this allegation is not an arguable defence to Mr Shetty’s claim). The breach in question consists of Mr Shetty’s participation in, and failure to inform the Defendants of, the use of TSJ to receive and distribute secret commissions from ARPD’s suppliers. TSJ was allegedly formed and thereafter used for this purpose by Mr Shetty, Mr Caplis and Wight as equal or joint participants. Mr Caplis and Mr Wight allegedly owed the same fiduciary duties as Mr Shetty and breached them in the same respects. Whether Mr Caplis and Mr Wight were in fact in breach of duty is directly relevant to Mr Shetty’s alleged failure to report the fact to ARPD, which is one of the issues in Mr Shetty’s claim. Similarly, one of the issues in the additional claim is whether Mr Shetty was in breach of his fiduciary duties so that Mr Caplis and Mr Wight breached theirs in failing to report it to ARPD. Moreover, the use of TSJ is said to have constituted a conspiracy between Mr Shetty, Mr Caplis and Mr Wight to injure ARPD by unlawful means. Without enumerating all the connections and common issues in this judgment, I am satisfied that, under English procedure, this is a proper case for the additional claims to be allowed. (i) not only between existing parties but also between existing parties and a person not already a party; ...”[33]I turn therefore to consider the effect of Article 6(2). For the reasons I have given, I have no doubt that the additional claim is sufficiently closely connected to the original proceedings to fall within its terms. A trial in England of all these related and overlapping issues would in my judgment fulfil the purpose of Article 6(2) to secure the rational and efficient disposal of trials and in particular to avoid the risk of irreconcilable judgments. To put it another way, I cannot see how anything is to be gained or in what respects the interests of justice and good administration are to be served by having a trial in England of all issues affecting Mr Shetty and a different trial in Spain or Scotland of all issues affecting Mr Caplis and Mr Wight, with all the risks that that will involve of irreconcilable judgments. If Mr Caplis and Mr Wight are not present or compellable at the trial involving Mr Shetty and Mr Shetty is not present or compellable at the trial involving Mr Caplis and Mr Wight, the risk of irreconcilable judgments is all the greater because the courts could be acting on different evidence. The only expedient course in this case is to ensure that all parties are brought before the same court, in England.[34]Mr Samek QC and Mr Evans both urged me to accept that the only “third party proceedings” to which Article 6(2) related were claims over against a third party, reflecting or passing on any liability for claims made by the original proceedings (in effect, onward claims which would arise if the original claim was made out). At any rate, they submitted, the phrase “third party proceedings”, was not apt to include an additional claim by a defendant (ARPD) against whom the Claimant (Mr Shetty) was not seeking any relief. My attention was drawn in particular to the judgment in Kinnear v Falconfilms NV [1996] 1 WLR 920 where, at p 926B to C and p 926F, Phillips J twice referred to the connection required for Article 6(2) to apply as the “nexus between the plaintiff’s claim against the defendant and the defendant’s claim against the third party.” (See also p 927C where Phillips J considered the issues in the respective claims). I do not, however, read Phillips J’s judgment as intended to provide an exhaustive definition of “third party proceedings”, especially where no such definition had been provided by Article 6(2) itself, nor by the commentaries of Mr Jenard and Professor Schlosser to which Phillips J referred, nor by any other authority. If the purpose of Article 6(2) is, as it is, to secure the rational and efficient disposal of trials, and to avoid the risk of irreconcilable judgments, I would read “third party proceedings” as simply meaning any proceedings involving a third party which are allowed to be brought as additional claims under national rules and which have a sufficient connection with the original proceedings to justify a single trial in the interests of justice and good administration. That reading gives effect to the objective of Article 6(2) and is sufficiently precise to withstand Mr Samek QC’s objection that it opens up too many possible exceptions to a person’s right under Article 2 to be sued in his country of domicile.[35]I also reject the submission that Article 6(2) cannot apply where the original claimant (here Mr Shetty) seeks no specific relief against the defendant seeking to make the additional claims (here ARPD). Once ARPD has been added as a defendant, it will be bound by the court’s determination of any issues of law or fact arising in the claim as between ARPD and Mr Shetty, even if Mr Shetty seeks no relief against it. That, indeed, is one reason why ARPD applied to be joined as a defendant. Once ARPD is joined , the claim (at least in respect of those issues) is just as much between Mr Shetty and ARPD as it is between Mr Shetty and either of the other Defendants. If consequential claims are available to ARPD of the sort asserted here against Mr Caplis and Mr Wight, it is entirely consistent with the intention of Article 6(2) that it be allowed to raise them in the same procedural context. Placing a more restrictive interpretation on “third party proceedings” in Article 6(2) would tend to defeat, not to fulfil, the purpose of this exception to the general rule.[36]As a final consideration, I am satisfied that the additional claims are not being advanced “solely with the object of removing [Mr Caplis or Mr Wight] from the jurisdiction of the court which would be competent in his case”. The object is to achieve a single trial involving all relevant parties, including Mr Shetty, in the interests of justice and good administration.[37]I therefore refuse to set aside the order of Master Bowles allowing additional claims to be brought against Mr Caplis and Mr Wight.

(c) Other grounds

[38]Mr Samek QC advances a number of other bases upon which, he says, the Master’s order should be set aside. I will take them in turn.

(i) Application should not have been without notice

[39]An application can be made without notice in the circumstances set out in CPR r 23.4(2) and CPR 23 APD.3. They include the circumstance that applying without notice is permitted by court order. ARPD, ARPIC and Cleveland Bridge therefore asked the court specifically to allow the application to proceed without notice and the Master approved that course. The reasons why it was thought appropriate to proceed in that way were set out in Mr Cukier’s witness statement to which I have referred above. The fear was that, while the application was awaiting a hearing, Mr Shetty would tell Mr Caplis and Mr Wight about it and one or both of them would commence proceedings in another jurisdiction. That would have frustrated the purpose of the application.[40]The fear was a genuine one. Mr Shetty (or his lawyers) must have been in touch with Mr Caplis and Mr Wight (or their lawyers) for Mr Shetty to have given them a witness statement concerning his domicile. The tactic of a foreign domiciled defendant commencing proceedings in a local court to delay the hearing of an allegation is a familiar one. Moreover, the background to the application was that ARPD, ARPIC and Cleveland Bridge had a firm evidential basis for suspecting that Mr Shetty, Mr Caplis and Mr Wight were engaged in a conspiracy to procure the payment of secret commissions to themselves through TSJ. If those claims were to be made out, that would be dishonest conduct. In these circumstances, it is, to my mind, hardly surprising that the Applicants asked the court to proceed without notice and, on the evidence before him, Master Bowles was fully justified in proceeding in this way.[41]Mr Samek QC submits that this course was inappropriate. But there is no evidence before me that Mr Shetty was not in contact with Mr Caplis and Mr Wight or would not have told them about the application if it had been served on him. There is also no evidence before me on behalf of Mr Caplis and Mr Wight that they would or could not have issued separate proceedings. Accordingly I see no reason to interfere with the Master’s decision to proceed without notice. (ii). Material non-disclosure[42]Mr Samek QC submits that the Applicants before Master Bowles, proceeding as they were without notice to Mr Shetty, were required to make full fair and accurate disclosure of all material facts (Brink’s Mat v Elcombe [1988] 1 WLR 1350 at 1556 per Ralph Gibson LJ). This principle applies to all applications without notice and is of wide import. Thus, relevant authorities, statutory provisions and practice directions must also be laid before the court (Memory Corporation v Sidhu (No 2) [2001] 1 WLR 1443 at p 1454 per Robert Walker LJ). The advocate must draw the court’s attention to unusual features of the evidence, to the applicable law and to the formalities and procedure to be observed (ibid at p 1460 per Mummery LJ, approved in Fourie v Le Roux [2007] 1 WLR 320 at para 34 per Lord Scott of Foscote). If a party fails to abide by this duty of disclosure, the court will be astute to ensure that he is deprived of any advantage he may have derived from the breach of duty (Bank Mellat v Nikpour [1985] FSR 87 at p 91) though the court has a discretion to continue an order, or make a new order, notwithstanding a breach (Brink’s Mat, p 1357E per Ralph Gibson LJ). If the court is asked to exercise that discretion, it is not sufficient to show that the court which made the original order would have made it even if there had been no material non-disclosure: the court is concerned to police applications without notice (Sal Oppenheim JR v Rotherwood (UK) Ltd (CA, unrep, 19 April 1996) per Leggatt LJ).[43]On the basis of these well established principles, Mr Samek QC identified a number of alleged shortcomings in the application before Master Bowles on 18 November 2010. Mr Moran was then the advocate. A transcript of the hearing is available (39 pages long) and I have also read Mr Moran’s written Outline Submissions (10 pages) which he had lodged for the hearing. The Master said he had read those submissions and Mr Cukier’s witness statement in support of the application so I can assume that he had all that in mind.[44]Having considered this material, I reject Mr Samek QC’s submission that there was any material non-disclosure at the hearing. As to his specific criticisms:(i) I do not believe there was any need to take a Master as experienced as Master Bowles to the specific terms of CPR r 19.2(2) (the basis for joinder of parties) or CPR r 20.9 (considerations in permitting an additional claim to be made) which he could be expected to have well in mind.(ii) Still less was there any need to refer to the definition of “defendant” in CPR 2.3 which, as I have explained, does not have the effect submitted by Mr Samek QC.(iii) Similarly, for the reasons I have given, there is little if anything relevant to be gained from the Dollfus Mieg or Knauf cases and therefore there was no need to cite them.(iv) I do not accept that Mr Moran gave an “unbalanced presentation” of the effect of Articles 2 and 6(2), failing to make clear that the jurisdiction under Article 6(2) was exceptional. Mr Moran took the Master in detail through the Barton case, which included a quotation from para 8 of the judgment in Kalfelis v Bankhaus Schröder, Munchmeyer, Hengst & Co (189/87) [1988] ECR 5565, [1989] ECC 407 as follows: “8. The principle laid down in the Convention is that jurisdiction is vested in the courts of the State of the defendant’s domicile and that jurisdiction provided for in Art. 6(1) is an exception to that jurisdiction” (para 34 of Barton, p 18 of the transcript of the hearing before Master Bowles). In any case, Mr Samek QC’s point as to the “overriding principle” of Article 2 does not obviate the need to understand and apply Article 6(2) correctly nor does it assist in understanding when that exception applies.(v) Mr Samek QC criticises Mr Moran for failing to draw to the Master’s attention that, as he submitted, Article 6(2) was concerned with connection between claims not between issues arising within claims. But Mr Samek QC can cite no authority or commentary which establishes this: at most, it is an argument which he derives from cases such as Kinnear. What is more, it is an argument I have rejected so that, in all the circumstances, it is impossible to sustain any criticism of Mr Moran in this respect.(vi) It is not a fair criticism for Mr Samek QC to say that Mr Moran did not mention the consent order of 10 November 2010 (this was the order whereby it was declared that the court had no jurisdiction over Mr Caplis and Mr Wight in the Fraud Action). The whole basis for the application was that ARPD could not sustain a claim to the court’s jurisdiction over Mr Caplis and Mr Wight in the Fraud Action: see para 2 of Mr Moran’s Outline Submissions. The consent order added nothing to that explanation (and its meaning I deal with below).(vii) It was clear from Mr Cukier’s witness statement that the Fraud Action was continuing, at least against Mr Shetty. What the Master should do about it if he acceded to the application was not a matter he needed to address at that stage, any more than it is a matter now before me (though I have made some observations about it, above) The thrust of Mr Moran’s submissions was that, if permitted, the counterclaim and additional claim in the Employment Action would now be the vehicle for ARPD (and ARPIC) to pursue the claims against Mr Shetty, Mr Caplis and Mr Wight, and Mr Moran (rightly in my view) was not seeking to pre-empt what would be the right order to make with respect to the Fraud Action if that course were permitted, which could be left to an application on notice.(viii) I do not accept that Mr Moran can be criticised for failing to draw the Master’s attention to outstanding issues in the Swiss (criminal) proceedings. The Master was aware of the Swiss investigation because Mr Cukier referred to it in his witness statement. It was and is a criminal investigation and not apparently a means by which ARPD (or ARPIC) can obtain a civil judgment against Mr Shetty, Mr Caplis and Mr Wight for an account of the secret commissions or for any other relief. It would appear from the evidence that Swiss criminal procedures allow the prosecutor to apply for some far-reaching asset-freezing orders in appropriate circumstances and that the Al Rushaid group has been active in inviting the prosecutor to pursue that course. But Swiss criminal procedures can have no impact upon the questions of joinder, additional claims and jurisdiction which were before Master Bowles and were irrelevant to the exercise of any discretion he had. He was not considering the grant of a freezing injunction or similar, to which the Swiss sequestration might arguably have been relevant.(ix) Mr Samek QC suggested that the Master should have been told that Mr Wight had indicated that he wanted proceedings to be dealt with in Scotland. But even assuming that were a reliable statement, Mr Moran’s application was already based on the assumption that, unless Article 6(2) applied, it was Mr Wight’s right to insist on the proceedings being in his country of domicile. That was why ARPD had had to abandon the attempt to assert jurisdiction in the Fraud Action. Mr Wight’s personal views to the same effect adds nothing.(x) Mr Samek QC also suggested that it should have been made clear that the English court only had jurisdiction over Mr Shetty because he and the Al Rushaid group had agreed that England would be the jurisdiction for civil proceedings between them. It was the agreement not the Judgments Regulation which prevented ARPD from pursuing a single claim against Mr Shetty, Mr Caplis and Mr Wight in a single jurisdiction, be it Spain or Scotland, using Article 6(1). I confess I do not understand how this point could have been relevant to the application before the Master. He was faced with the choice of whether to permit a single action in relation to all claims to be heard in England or to allow some claims to be heard elsewhere, subject to the legal question of whether he could make that choice under Article 6(2). It was immaterial to his decision how England came to have jurisdiction over Mr Shetty.[45]The applicants did make one mistake in submitting that, if the relief sought was not granted, they would have to conduct three separate sets of proceedings in England, Spain and Scotland. In fact it was two, England and either Spain or Scotland (using Article 6(1) to join either Mr Wight or Mr Caplis). However, that mistake (which was clearly down to the lawyers rather than ARPD or ARPIC) is not one which would cause me to set aside Master Bowles’s order.[46]I therefore reject the contention both that there was material non-disclosure at the hearing before Master Bowles and that I should exercise my discretion to set aside his order on this basis. (iii). Abuse of process[47]Mr Samek QC’s submission is that the consent order already resolves the issue of the court’s jurisdiction over Mr Caplis and Mr Wight, and in their favour. The relevant terms of the order were:
“(1) that in the Claimant’s action in this claim as against the Second and Third Defendants it is declared that the English Court has no jurisdiction over those two Defendants on the basis that at the time the Claim Form was issued, the Defendants were not domiciled in England and it is ordered that the service of the Claim Form on the Second and Third Defendants be set aside”
. Mr Samek QC invited me to construe this as meaning that the English court had declared that it had no jurisdiction at all over Mr Caplis and Mr Wight in relation to the claims which were the subject-matter of the Fraud Action. In my view, the order clearly says no such thing. The declaration was that the English court had no jurisdiction “in the Claimant’s action in this Claim as against the Second and Third Defendants” not that the English court has no jurisdiction “in respect of any claims made by the Claimant’s action [etc]” (or similar). There may be some tautology or repetition in the phrase “in the Claimant’s action in this claim” but the meaning is plain: it is the court’s jurisdiction in that action which is being dealt with, not the court’s jurisdiction in any other action (or in any other respect). Moreover the declared ground upon which the English court has no jurisdiction is that “at the time the Claim Form was issued, the Defendants were not domiciled in England” – i.e. Article 6(1) could not apply. The declaration says nothing about any other basis upon which the Court’s jurisdiction could be asserted in any other action.[48]In those circumstances, the question of what other steps ARPD could take to bring its claims against Mr Caplis and Mr Wight in this jurisdiction was left entirely at large by the consent order. If therefore ARPD (and ARPIC, which was not a party to the consent order) can establish jurisdiction in England in some other way in a different action, the consent order does not preclude it nor can the principle of Johnson v Gore Wood [2002] 2 AC 1 be prayed in aid. The exceptions to Article 2 are free-standing and a concession that one does not apply cannot (without more) preclude a party from invoking another.

(B) Security for costs

[49]Mr Shetty has applied in the Fraud Action for security for costs against ARPD. The application was made well before 18 November 2010 when the counterclaim in the Employment Action became the main procedural vehicle for ARPD’s claims to be heard. I will treat the application as being made by Mr Shetty in the counterclaim as well as the Fraud Action.[50]Mr Shetty applies under CPR 25.13(2)(a) and (c), that is on the grounds that ARPD is resident out of the jurisdiction and a company as to which there is reason to believe that it will be unable to pay Mr Shetty’s costs if ordered to do so. Both grounds are made out: ARPD is a Saudi Arabian company with no apparent presence in this jurisdiction (other than to pursue these claims) and has wholly inadequate assets to pay any costs awarded against it. I therefore have a discretion as to whether or not to order security.[51]The factors to be borne in mind on the exercise of the discretion include those set out in Sir Lindsay Parkinson & Co v Triplan Ltd [1973] QB 609. On these considerations, I would observe that the application has been made promptly and is not being used oppressively or to stifle a genuine claim, ARPD’s lack of means is not due to Mr Shetty, there are no payments into court, open offers of settlement or, indeed, admissions of liability, and ARPD’s claim is plainly bona fide.[52]The argument before me has primarily centred on the strength of ARPD’s claim. I accept Mr Moran’s submission that Mr Shetty’s knowledge of and participation in TSJ and the use made of it is well established on the evidence before me. I also accept that Mr Shetty has shown, at the least, a certain lack of candour in explaining his role in these matters. On the other hand, an important line of defence which Mr Shetty wants to pursue is that, under Saudi Arabian law (which is the law applicable to the duties he is alleged to have had as director of ARPD), he owed no fiduciary duties of the sort relied upon and is not liable to account for any benefits he may have received through TSJ. That issue is not the subject of any evidence before me and I do not, in any event, think it appropriate to consider its merits on an application of this kind. By the same token, I do not think I should enter into any detailed discussion of the general merits of ARPD’s claim. On the material before me, I would therefore make an order for security.[53]Mr Shetty’s application is for security in the sum of £800,000 for the costs down to the end of trial. This is put forward in the context of Mr Shetty’s existing defence to the Fraud Action by which no admissions were made on any important issues and which was Mr Shetty’s answer to a claim which was at that time some way short of full particularity. Now that ARPD’s claim is more fully particularised and supported by cogent evidence (not least as to TSJ’s formation and activities and the operation of its Swiss bank account), it seems to me to be right to approach the question of quantum on the basis that Mr Shetty will not (or should not) continue to make no admissions about matters of which he is well aware, so that security is ordered only in respect of issues (such as the issue as to Saudi Arabian law) where there is genuine dispute. I proceed on the assumption that the trial will or should be focused on those issues. I do not think it right to allow Mr Shetty security in relation to issues of fact which he is able to resolve himself by making appropriate admissions and offering cogent explanation. I would not make any reduction in relation to the fact that some issues arise as much in defence of Mr Shetty’s claim as they do in the Fraud Action or on the counterclaim.[54]In all the circumstances I would order security down to the end of the trial in the sum of £300,000. Security may be given by a payment into court or a joint account in the names of the parties’ solicitors or a suitable bank guarantee payable in England. I will grant permission for either party to apply in relation to any issue which arises as to the form of security. Security should be given within 28 days.

Cited in 4 later judgments