Iranian Offshore Engineering And Construction Company v Dean Investment Holdings SA & Ors [2018] EWHC 2759 (Comm)

[2018] EWHC 2759 (Comm)

Case No CL-2016-000153

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London EC4A 1NL

Date 22 October 2018

Before

MR JUSTICE ANDREW BAKER

Between

IRANIAN OFFSHORE ENGINEERING AND CONSTRUCTION COMPANYClaimant

DEAN INVESTMENT HOLDINGS S.A.Defendants

and eight othersDefendant

Graham Dunning QC, Jern-Fei Ng QC and Adam Woolnough (instructed by Eversheds Sutherland LLP for Claimant

Clara Johnson (instructed directly) for Fifth & Sixth Defendants

(Sepanta International FZE and Reza Mostafavi Tabatabaei)

for The other Defendants did not appear and were not represented

Hearing Hearing date: 15 October 2018

Judgment Approved

Mr Justice Andrew Baker :

[1]The trial of this action is listed for three Commercial Court weeks (12 days) commencing on 3 December 2018, with two days of pre-reading for the trial judge in the previous week. This judgment sets out my reasons for a ruling given at a pre-trial review hearing on 15 October 2018 concerning the import for the trial of the well-known rule, sometimes referred to as a ‘presumption’ or ‘evidential assumption’ of English law, stated, for example, as Rule 25(2) in Dicey, Morris & Collins, “The Conflict of Laws” (15th Ed.) and to which I shall therefore refer, for convenience, as ‘Rule 25(2)’.

[2]Dicey Rule 25 is in the following, familiar terms:(1) In any case to which foreign law applies, that law must be pleaded and proved as a fact to the satisfaction of the judge by expert evidence or sometimes by certain other means.

(2) In the absence of satisfactory evidence of foreign law, the court will apply English law to such a case. The footnote to Rule 25(2) reads as follows:

“This Rule was explicitly approved in Bumper Development Corp. v Commissioner of Police of the Metropolis [1991] 1 W.L.R. 1362, 1369 (CA). However, for qualifications to the absolute form of the Rule, see further below, para.9-026.”

[3]Dicey para.9-025 states correctly that the burden of proving foreign law lies on the party who bases a claim or defence upon it and expresses the view that “… it is better to abandon the terminology of presumption, and simply to say that where foreign law is not proved, the court applies English law.” A little care therefore must be taken when reading Dicey Rule 25(1), lest it be thought to suggest that whenever a claim is governed by foreign law, it is necessary for the claimant to plead and prove the material content of that law (or indeed, as a logically prior matter, to plead a case as to governing law at all). I am quite clear that is not the law.

[4]The explanation of Rule 25(2) as simply a default rule, that where foreign law is not proved the court applies English law, is then the immediate context for the opening statement in para.9-026 that, “Even so, there will still be cases in which the application of English law … will be just too strained or artificial to be appropriate.” A discussion follows of some examples taken from decided cases, the views being expressed that they “do not yet offer precise guidance as to when this point will be reached” (para.9-026) and that “… there are cases in which the default application of a rule of English law is simply too problematic to be appropriate, but that apart from the fact that the court should not ‘invent’ a rule of English law to be applied in default of proof of foreign law, no sharp line exists to define the limits of the principal that in default of sufficient proof, foreign law will be taken to be the same as English law” (para.9-029).

[5]The discussion of Rule 25 concludes at para.9-030 with a suggestion that “in cases where it would be wholly artificial to apply rules of English law to a claim governed by foreign law, a court may simply regard a party who has pleaded but failed to prove foreign law as having failed to establish his case without regard to the corresponding principle of English domestic law.”

[6]The question that arose at the pre-trial review in this case was whether, on the statements of case and given the case management history in the proceedings, it was open to the fifth and sixth defendants to contend at trial that English law should not be applied by default under Rule 25(2). The purpose of the contention would be to defeat the claimant’s claims against the fifth and sixth defendants. The argument, that is to say the proposed defence to the claims, would be that: i) by English conflict of laws rules (viz. under the Rome II Regulation), the claimant’s claims are governed by Iranian law; ii) it is inappropriate to apply English law by default under Rule 25(2); iii) it is therefore for the claimant to (plead and) prove the principles of Iranian law that govern its claims; iv) the claimant has not sought to do that, so its claims fail.

[7]If that argument were available to the fifth and sixth defendants at trial, it would or might equally apply to others of the defendants (most of whom, or possibly all of whom, it is anticipated, will neither appear nor be represented at trial). The claimant’s application, seeking essentially a ruling as to where it stands in respect of the availability of that argument, therefore extended to all defendants.

[8]The argument arises in that stark form, extending the suggestion in Dicey para.9-030 from a case of pleading but failing to prove foreign law to a case of failing for not pleading foreign law, because: i) the claimant’s claims arise out of what it says was a fraud under which payments were made totalling US$87 million, supposedly for the purchase of a mobile offshore drilling rig; ii) the claims pleaded against the fifth and sixth defendants allege that they (a) knowingly received sums that were caused by the seventh and eighth defendants to be paid away, in breach of fiduciary duties owed by those defendants to the claimant, (b) dishonestly assisted in breaches by the seventh and eighth defendants of fiduciary duties owed by them to the claimant, by causing, directing, procuring or participating in the division of the proceeds of the fraud, and/or (c) conspired with the other defendants to injure the claimant by unlawful means. The unlawful means said to have been involved in the alleged conspiracy are breaches of contract by the first defendant, inducement thereof by the fourth defendant, deceit by the fourth defendant and/or breaches of fiduciary duty by the seventh and eighth defendants (and associated knowing receipt or dishonest assistance by other defendants); iii) those claims are pleaded by the claimant without any reference to Iranian law, or any plea as to applicable law; iv) the fifth and sixth defendants’ defence at para.1(d)(ii) complained that there had been no attempt to comply with any pre-action protocol and so “reserve[d] the right to amend generally upon … [r]eceipt of appropriate advice regarding Iranian law”, and at para.5(a) averred that the claims, as alleged against the fifth and sixth defendants, arose from acts committed in Iran and the UAE, causing damage in Iran, so that the law applicable to those claims (and, it was said, to the claims against the seventh and eighth defendants) is Iranian law; v) no consequence was pleaded to flow from the plea that the claims are governed by Iranian law; vi) the fifth and sixth defendants did not plead a case as to the content of Iranian law nor (to date) have they sought to amend to add one; vii) formally, the plea that the claimant’s claims against the fifth and sixth defendants are governed by Iranian law was put in issue by the general joinder of issue in the claimant’s reply, but since the first CMC in the case in June 2017 the claimant has made clear that (a) in fact, it would not dispute that in principle those claims are governed by Iranian law, but (b) it will say that is irrelevant, given Rule 25(2), since neither side pleads any Iranian law; viii) none of the parties has to date sought permission for expert evidence as to Iranian law, and the case is prepared and ready for trial without any such evidence (subject to a few other case management matters, not touching the present issue, that were on the agenda for the pre-trial review).

[9]In those circumstances, the claimant sought an order in substance confirming that Rule 25(2) would apply at trial, either as a case management ruling pursuant to the court’s power inter alia to identify what issues need to be determined at trial and/or to exclude issues from consideration, or on the basis of a determinative ruling that whatever the precise scope of any exception or qualification to the Rule, it (the exception or qualification) was not engaged in the present case. As I explain below, I concluded that it was appropriate to grant the claimant relief broadly as sought, for reasons that are perhaps a blend of those two (case management and determinative ruling), subject to a proviso.

[10]The claimant also suggested that the fifth and sixth defendants were precluded by an estoppel from disputing at trial the applicability of Rule 25(2). But this was said to arise out of the same considerations as were relied on for the requested case management ruling. I was unable to discern, at all events in the circumstances of this case, how there might be an estoppel if it were not appropriate, by reference to those considerations, to give the case management ruling sought, so the estoppel argument will not feature again in this judgment.

[11]I was referred to a substantial number of authorities concerningRule 25(2), but none decides what was to my mind the decisive point in the present case. My analysis is as follows: i) It is not necessary for a claimant to plead the existence of, or an intention to rely at trial upon, Rule 25(2). It goes without saying that it will apply – otherwise it would not be the default rule that it is – unless reason not to apply it be demonstrated. ii) It follows that even a plea as to applicable law, let alone a plea as to the content of some possibly applicable foreign law, is not a material averment a claimant is required to make if the matters, as pleaded, that it says create liability do not involve or imply the advancing by it of any case as to the content of some foreign law. iii) A claimant might of necessity plead some matter of foreign law, but for which it would fail to disclose any cause of action (imagine, for example, a negligence claim for bad advice about possible US tax liabilities); or a claimant might choose, whether or not it would have a claim by reference to English law, to base its claim upon a system of foreign law it said was applicable. In either type of case, different considerations would arise. iv) Where, however, as in this case, a claimant neither needs nor chooses to plead foreign law, in order to plead what would be a complete and viable cause of action if the claim be determined under English law, as by default it will be, a contention that it is inappropriate to determine the claim by reference to English law, so that it should fail come what may, is a reasoned denial of liability. Since determination of the claim under English law is the default rule in English proceedings, even where (in principle) the law governing a claim is or might be a foreign law, any contention that it is inappropriate to apply that rule must necessarily be founded upon matters particular to the claim in question. v) In principle, therefore, and in line with CPR 16.5(2)(a), it is for a defendant, if it wishes to raise any such contention at trial, to plead it as a reasoned denial of liability, setting out the matters particular to the claim said to render it inappropriate to judge it by reference to English law. If it does not do so, then no such contention will be open to it at trial, subject to (vi) below. The particular matters said to render the default application of English law inappropriate might well include, and perhaps often will include, relevant propositions of foreign law, but not necessarily. vi) There is no absolute rule precluding the possibility of relying at trial on a contention that ought to have been pleaded, whether in support of or in defence of a claim. There could be a late amendment, or the grant of indulgence at trial to rely on an unpleaded case, or perhaps even the raising of the point of the court’s own motion at trial. Of course, it will be a rare case where it will be fair for that to occur only at (or on the eve of) trial, assuming proper pre-trial case management. But the existence of those procedural possibilities means, as I say, that there is no absolute rule of preclusion.

[12]That analysis is supported by the judgments of Arden LJ, as she was then, in OPO v MLA

[2014] EWCA Civ 1277

at [95]-[111] and Brownlie v Four Seasons Holdings Inc

[2015] EWCA Civ 665

[2016] 1 WLR 1814

at [88]-[90]. Each passage was obiter, as Arden LJ held in each case that the claimant had a sufficiently arguable case for the purpose of the decision then being taken that English law was the applicable law anyway, that decision being (respectively) to grant an interim injunction and to uphold (in part) permission to serve proceedings out of the jurisdiction. Further, each decision was reversed by reference to other points in the Supreme Court (

;

), so that even if those passages had been part of the ratio in the Court of Appeal they would not strictly now bind me. However, with respect, I find Arden LJ’s analysis compelling.

[13]For their part, the fifth and sixth defendants relied on Belhaj et al. v Straw et al.

[2013] EWHC 4111 (QB)

[2014] EWCA Civ 1394

[2015] 2 WLR 1105

(on this point not touched by the Supreme Court decision,

[2017] UKSC 3

[2017] AC 964

), and Global Multimedia International Ltd v Ara Media Services et al.

[2006] EWHC 3107 (Ch)

[14]In Global Multimedia, the defendant had made a Part 20 claim against several parties and Sir Andrew Morritt, C, dismissed a challenge to jurisdiction under CPR Part 11 made by one of those additional parties, because he (the additional party) had submitted to the jurisdiction and England was the forum conveniens come what may. At [37]-[39], the defendant was criticised, obiter, for failing to plead any case as to Saudi law, in terms suggesting that it was required to plead such a case even though it did not seek to displace the default rule (i.e. Rule 25(2)). The criticism was on the basis (at [38]) that “it would be inconsistent with … CPR 16.4(1)(a) and the overriding objective deliberately to omit an allegation of some material facts, namely relevant principles of foreign law.” But with respect, that begs the issue whether relevant principles of foreign law were material facts required to be alleged; and to my mind there is confusion throughout between (a) the need to plead (and prove) propositions of foreign law, if relied on, and (b) whether there is a need to rely on (and therefore to plead (and prove)) foreign law.

[15]In my judgment, with respect, similar confusion affects Belhaj, per Simon J, as he was then,

[2013] EWHC 4111 (QB)

, obiter at [140(c)], criticised by Arden LJ in OPO v MLA at [109]-[111], unless the very particular circumstances of Belhaj are kept in mind.

[16]Belhaj was a striking and very unusual case. Mr Belhaj and his wife asserted causes of action against a former Foreign Secretary and other ministers, officials, departments and agencies of Her Majesty’s Government in respect of the defendants’ participation, as the claimants alleged, in what they said had been their unlawful rendition from China to Libya, via Malaysia and Thailand. Two preliminary issues were ordered: firstly, whether the claims were non-justiciable (because of state immunity or as acts of states); secondly, what was the governing law of any justiciable claim.

[17]Particular, and unusual, features of the case as regards the second preliminary issue were that: i) the claimants had raised the appropriateness or inappropriateness of judging their claims by reference to English law, by pleading in their reply that reliance on foreign law was “inappropriate and otiose” because it was to be presumed (so they averred) that the law of all relevant countries will provide a remedy to victims of serious human rights violations, alternatively because it was substantially more appropriate to apply English law to the determination of their claims (per Simon J at [120]-[121]); ii) the claimants’ claims, by their very nature, raised the question whether their detentions in China, Malaysia, Thailand and Libya, and their successive removals from each of those to the next, had been unlawful under local law (see the Court of Appeal judgment at [76], [154]), rendering the idea of determining the claims at trial by reference to English law (by default) “unreal” (per Simon J at [142]), or “wholly artificial and unrealistic” (Court of Appeal at [153]); iii) although the claimants placed reliance on Rule 25(2), in effect they conceded that that would not be their position for trial, so the argument proceeded on the basis that both parties would be pleading, and seeking to prove, cases as to any foreign law determined to be applicable (per Simon J at [124]; and see the Court of Appeal judgment at [149], [153]); iv) the question, therefore, became one of case management in a rather unique case, namely who should plead first their case as to the content of applicable foreign law (ibid).

[18]The case management decision, in the specific circumstances of Belhaj, that the claimants would be required to go first in the pleading out of the parties’ respective cases as to the relevant content of foreign law, does not tell against the analysis I set out above, or otherwise assist the fifth and sixth defendants. In fact, it sits readily within that analysis (see paragraphs 11(iii) and/or 11(vi) above).

[19]That case management decision in the particular circumstances of the Belhaj case is also the context for the Court of Appeal’s comment at [158], that:

“The inevitable result of all this is that the claimants will have to plead their grounds for asserting that the conduct alleged is unlawful in accordance with the judge’s order; and if they do not do so, or fail to prove their case on the point, their pleading will be deficient and their claims will fail … . This is no more and no less than is appropriate in our view in accordance with the ordinary rules of pleading which require litigants to set out the material facts which they must prove in order to make good their claim: see CPR 16.4(1)(a).”

[20]Given its context, I do not read that paragraph as laying down a rule of general application that where a claim is governed by foreign law, the claimant must plead a case as to the content of that foreign law. If I am wrong in that, and the Court of Appeal did intend to state such a general rule, then: it was not necessary to the decision in Belhaj; it is inconsistent with Arden LJ’s analysis in OPO v MLA and Brownlie that I have said I find compelling; I would therefore decline to follow it. (OPO v MLA was not cited to or referred to by the Court of Appeal in Belhaj (which was argued in the Court of Appeal a few weeks before, but decided a few weeks after, OPO v MLA). In turn, Belhaj was neither cited to nor referred to in Brownlie.)

[21]Finally as to Belhaj, I also regard as unnecessary to the decision in that case and inconsistent with Arden LJ’s more telling analysis, and so I would not follow, the statement at [155] that: “… we do not accept that section 14(3)(b) of the 1995 Act [i.e.the Private International Law (Miscellaneous Provisions) Act] (which provides a saving for “any rules of evidence, pleading or practice”) affects the position … . The issue of applicable law is one of substantive law, not procedure.”; if, that is to say, that statement were intended as some general rule rather than an observation applicable in the particular circumstances of the Belhaj case. The application of Rule 25(2), a matter of procedural law in English courts, and its impact on questions of who must plead what, does not touch the substantive question of applicable law, but it does affect the relevance of that substantive question to the determination of the private law claims brought in ordinary civil litigation. In our adversarial system, it is primarily for the parties, through their pleadings, to decide for themselves and define for the court (and each other) what is or is not to be relevant for the resolution of their dispute. My analysis recognises and allows for the possibility of the court of its own motion insisting that an issue not raised by the parties be considered.

[22]Applying my analysis to the present case, then, firstly, none of the matters, as pleaded, that the claimant says created liability, involve or imply the advancing by the claimant of any case as to the content of Iranian law (or any other foreign law). Therefore, neither a plea as to the content of foreign law, nor a plea as to applicable law, is a material averment the claimant was required to make.

[23]Secondly, the fifth and sixth defendants did not plead in response any case denying the appropriateness of applying Rule 25(2) at trial. That is so notwithstanding that the fifth and sixth defendants pleaded that Iranian law is the applicable law. That the law applicable to a claim is, in principle, a foreign law self-evidently does not disapply Rule 25(2); it does not, without more, render it too strained or artificial to judge the claim at trial by reference to English law in the absence of any case pleaded and proved as to the content of that foreign law. Indeed, the fifth and sixth defendants did not even assert (in the defence) that Rule 25(2) was disapplied by reason that Iranian law (as they said) governs the claimant’s claims.

[24]Thirdly, what is more, the fifth and sixth defendants’ defence set the relevance of their applicable law plea, by the purported reservation of a ‘right to amend generally’ having taken advice as to Iranian law. The clear message conveyed was that, though the fifth and sixth defendants would say that the claimants’ claims were governed by Iranian law, that was an immaterial point unless and until some case as to the content of Iranian law was pleaded. None has been or is proposed even now.

[25]Fourthly, that is the basis upon which case management has in consequence proceeded, namely that though the defendants have said (and the claimant may not dispute, although this is not formally admitted in its reply) that Iranian law is the applicable law, that is not relevant for trial absent any pleading as to the content of that law. There were three case management conferences, all conducted by Knowles J; and at the first (main) CMC in June 2017, and again at the third CMC in May 2018, where the principal item was security for costs, what I have just said was explicitly the basis upon which the court proceeded. The approved List of Issues for case management correctly did not identify any issue as to the applicability to the case of Rule 25(2). That accurately reflected the pleadings – it was not an issue. In that regard, I do not think it significant that the applicability of Rule 25(2) was not identified in the List of Issues as a matter of common ground derived from the pleadings. As I said in my primary analysis, its applicability (unless some issue in that regard is raised) goes without saying – it is a default rule for trial. Similarly, therefore, I do not regard it as significant that the defendants do not appear, during case management, expressly to have assented to the proposition that the default rule would apply. It was made plain on behalf of the claimant, expressly, that it would be relying on that rule. Given its nature as the default rule for trial, what is significant, then, is that no objection was raised or challenge suggested to the proposition that it would apply – its applicability was not an issue unless a defendant made it an issue (or the court took the point of its own motion).

[26]Fifthly, not only (as I have said) is the default rule self-evidently not displaced merely if Iranian law governs the claimant’s claims, but also it is not arguably displaced by the facts relied on by the fifth and sixth defendants to found that plea (paragraph 8(iv) above). Nor in my judgment, for completeness, would it be displaced, without more, by the fact (that I apprehend the fifth and sixth defendants could plead and might not be contentious) that Iranian law is not a common law system of law, but a civil law system involving also elements of Sharia law. In theory, it could be that specific detail as to the resulting content of Iranian law might create a case for disapplyingRule 25(2); but no such detail is pleaded or proposed to be pleaded.

[27]Sixthly, it follows that I can and do say, with the case ready for trial on the existing pleadings (subject to certain re-amendments not touching the present point for which I gave permission), that there is no reason for the court of its own motion at trial to consider disapplying the default rule.

[28]I have focused on the fifth and sixth defendants’ pleaded case (and lack of pleaded case) since they were the ones now suggesting that an argument for disapplying Rule 25(2) was open on the pleadings and they were the only defendants making any appearance at the pre-trial review. In summary, the positions of the other defendants is as follows: i) The first defendant initially had common representation with the fifth and sixth defendants in the litigation. Its defence mirrored that of the fifth and sixth defendants on the present issue. It is no longer represented and latterly has not been participating. ii) The fourth defendant acts in person. He has never served a defence, but did serve a witness statement that set out a factual case cross-referenced to the particulars of claim. That statement has been treated as his defence. It does not raise any case as to applicable law or the application of Rule 25(2). iii) None of the other defendants has served any defence or participated in the proceedings. The claimant has not sought judgment in default against any of them and will seek to prove its claims against them at trial on the merits. In effect, therefore, the case for each of those defendants at trial is simply that the claimant is required to prove its claims. iv) Thus the other defendants’ cases provide no reason to alter the conclusions I reached about Rule 25(2) for the claims against the fifth and sixth defendants; and there is no reason to reach any different conclusion for the claims against any of those other defendants.

[29]The claimant’s application therefore substantially succeeded. On the case as it stands, ready for trial, no issue over the applicability of Rule 25(2) arises and there is no basis for the court of its own motion to disapply it. On that last, this aspect of the case having been ventilated with the court at a pre-trial review specifically so the parties may know where they stand, and the position being in my judgment clear, it is only fair – a simple matter of proper case management – now to rule out the disapplication of the default rule of the court’s own motion.

[30]The high water mark of the claimant’s submissions was to invite me to say that it is not possible to conceive of a successful application now, by any of the defendants, to change that status quo. The declaration sought, to the effect that Rule 25(2) would apply at trial, was therefore in entirely unqualified terms. As to that, I find it straightforward to imagine that it is very unlikely that any such application made now might succeed. Specifically, I find it easy to imagine that the claimant may be able to show that unfairness would result were such an application to be allowed at this late stage. That said, however, the claimant did not have any developed evidence as to that (unsurprisingly, since no relevant application has been made); and whilst this judgment will hardly be an encouragement to any of the defendants to make any such application, it would be an extreme step that I did not think would be justified to preclude them from doing so.

[31]For all those reasons, the direction and declaration I made on this aspect of the case was to the effect thatRule 25(2) would apply at trial, the defendants could not contend otherwise at trial, and the trial would not involve any consideration of Iranian law, but in each case subject always to any application (if made and successful) to amend the pleadings for trial.

Cited in 13 later judgments

and 4 more of the most senior