The Libyan Investment Authority v J.P. Morgan Markets Ltd & Ors (Rev 1) [2019] EWHC 1452 (Comm)

“Mr Boyle drew my attention, with appropriate diffidence, to a decision of his own, sitting as a Deputy Judge of the Chancery Division, as to the approach to be taken by the Court in the event that there is culpable non-disclosure. In The Arena Corporation Limited -v- Schroeder [2003] All ER (D) 199 (May) at paragraph 213, he summarised the main principles which should guide the Court in the exercise of its discretion as follows: (1) If the Court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial. (2) Notwithstanding the general rule, the court has jurisdiction to continue or re-grant the order. (3) That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure. (4) The Court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction. (5) The Court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the Judge might have made the order anyway is of little if any importance. (6) The Court can weigh the merits of the plaintiff’s claim but should not conduct a simple balancing exercise of which the strength of the plaintiff’s case is allowed to undermine the policy objective of the principle. (7) The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice. (8) The jurisdiction is penal in nature and the courts should have regard to the proportionality between the punishment and the offence. (9) There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.”

“65. The leading cases remain Brink's Mat Ltd v. Elcombe [1988] 1 WLR 1350 and Behbehani v. Salem [1989] 1 WLR 723. Those authorities in this court bring their reminder of the essential principles: that there is a “golden rule” that an applicant for relief without notice must disclose to the court all matters relevant to the exercise of the court's discretion; that failure to observe this rule entitles the court to discharge the order obtained even if the circumstances would otherwise justify the grant of such relief; that a due sense of proportion must be maintained between the desiderata of marking the court's displeasure at the non-disclosure and doing justice between the litigants; that for these purposes the degree of any culpability on the part of the applicant or of any prejudice on the part of the respondent are relevant to the reviewing court's discretion; and that a balance must be maintained between undermining “the heavy duty of candour and care” which falls on applicants and promoting a “tabula in naufragio” to save respondents who lack substantial merits.”

“On an application without notice the duty of the applicant is to make a full and fair disclosure of all the material facts, i.e. those which it is material (in the objective sense) for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers; the duty is a strict one and includes not merely material facts known to the applicant but also additional facts which he would have known if he had made proper enquiries: Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350, 1356–1357. But an applicant does not have a duty to disclose points against him which have not been raised by the other side and in respect of which there is no reason to anticipate that the other side would raise such points if it were present. These principles have long been applied to applications for permission to serve out of the jurisdiction: see e g The Hagen [1908] P 189, 201. In that context it has been held that it would not be reasonable to expect an applicant for permission to serve out to anticipate all the arguments or points which might be raised against his case: see Electric Furnace Co v Selas Corpn of America [1987] RPC 23, 29. A failure to refer to arguments on the merits which the defendant might raise at trial should not generally be characterised as a “failure to make full and fair disclosure”, unless they are of such weight that their omission may mislead the court in exercising its jurisdiction under the rule and its discretion whether or not to grant permission: BP Exploration Co (Libya) Ltd v Hunt [1976] 1 WLR 788, 788–789, approved in the Electric Furnace case [1987] RPC 23, 29.”

“The importance of the duty of disclosure has often been emphasised. It is the necessary corollary of the court being prepared to depart from the principle that it will hear both sides before reaching a decision, which is a basic principle of fairness. Derogation from that basic principle is an exceptional course adopted in cases of extreme urgency or the need for secrecy. If the court is to adopt that procedure where justice so requires, it must be able to rely on the party who appears alone to present the evidence and argument in a way which is not merely designed to promote its own interests, but in a fair and even- handed manner, drawing attention to evidence and arguments which it can reasonably anticipate the absent party would wish to make. It is a duty owed to the court which exists in order to ensure the integrity of the court’s process. The sanction available to the court to preserve that integrity is not only to deprive the applicant of any advantage gained by the order but also to refuse to renew it. In that respect it is penal, and applies notwithstanding that even had full and fair disclosure been made the court would have made the order. The sanction operates not only to punish the applicant for the abuse of process, but also, as Christopher Clarke J observed in [Yugraneft], to ensure that others are deterred from such conduct in the future. Such is the importance of the duty that in the event of any substantial breach the court inclines strongly towards setting aside the order and not renewing it, even where the breach is innocent. Where the breach is deliberate, the conscious abuse of the court’s process will almost always make it appropriate to impose the sanction.”

“23. The starting point is that an applicant for an order on a without notice application must make full and frank disclosure of all material facts, that is, facts known to the applicant which might reasonably be taken into account by the judge in deciding whether to grant the application: R v Kensington Income Tax Commissioners ex parte Princess Edmund De Polignac [1917] 1 KB 486 , 514 (Scrutton LJ); Siporex Trade SA v Comdel Commodities Limited [1986] 2 Lloyd's Rep 428 , 437 (Bingham J); Brink's Mat Limited v Elcombe [1988] 1 WLR 1350 , 1356 (Ralph Gibson LJ). 24. It is for the court to determine what is material according to its own judgment and not the assessment of the applicant: Brink's Mat Limited v Elcombe. This means that if the court considers there to have been material non-disclosure, it is not an answer that the applicant in good faith took a different view, although that may affect the court's exercise of its discretion in deciding what to do in the light of the non-disclosure. It does not mean that an applicant is under a duty to disclose facts which could not reasonably have a bearing on the decision which the judge has to make. 25. Materiality therefore depends in every case on the nature of the application and the matters relevant to be known by the judge when hearing it. I was referred to a number of statements on the duty of disclosure in the context of applications for freezing injunctions. In such cases the court is being asked to make an order of an exceptional kind, prohibiting or restricting a defendant's use of its own assets before any adjudication has been made against it. Because of its draconian nature, it is a jurisdiction which requires great caution and a wide range of factors may have a bearing on the court's decision. 26. An application for permission to serve out of the jurisdiction is of a very different nature. The general principles about disclosure on without notice applications still apply, but the context is different. The focus of the inquiry is on whether the court should assume jurisdiction over a dispute. The court needs to be satisfied that there is a dispute properly to be heard (i.e. that there is a serious issue to be tried); that there is a good arguable case that the court has jurisdiction to hear it; and thatEngland is clearly the appropriate forum. Beyond that, the court is not concerned with the merits of the case. 27. Authority supports this approach. In BP Exploration Co (Libya) Limited v Hunt [1976] 3 AER 879 (which concerned an application for leave to serve out of the jurisdiction) Kerr J said at 893: In my view, a failure to refer to arguments on the merits which the defendant may seek to raise in answer to the plaintiff's claim at the trial should not generally be characterised as a failure to make a full and fair disclosure, unless they are of such weight that their omission may mislead the court in exercising its jurisdiction under the rule and its discretion whether or not to grant leave. … 29. If MRG was aware of matters which might reasonably have caused the judge to have any doubt whether he should grant permission to serve out of the jurisdiction, those would have been relevant matters and therefore ought to have been disclosed. This must be so in principle, and it is implicit in the authorities to which I have referred. Mr Gruder's answer was that: i) it is for the court and not for the applicant to decide what is material and ii) anything which is relevant to the merits of the claim is potentially relevant to the matters which the judge has to consider. I do not accept that submission. The first proposition is correct, but Mr Gruder seeks to apply it in such a way as to enlarge the test of materiality. It is for the court to determine what is material, but the test of materiality is that to which I have referred: whether the matter might reasonably be taken into account by the judge in deciding whether to grant the application. The second proposition goes too far. There may be many points which would be relevant to the ultimate merits of an action, but which could not on any reasonable view affect the judge in deciding the “merits threshold” question (or the ultimate question whether to grant the application). 31. Mr Gruder submitted that if the applicant is not required to disclose all matters which go to the merits of the action, but only those matters which go to the questions whether there is a serious issue to be tried, whether the court has jurisdiction to hear it and whether England is clearly the appropriate forum, the result will be to reduce the judge's role on such an application to a “rubber stamping” exercise. I would not agree with that description, although I do agree that the issues which the judge is required to consider are limited. This is because the judge is at this stage concerned with the question whether the court should assume jurisdiction, rather than with the question who is likely to win. … 36. Appendix 15 to the Admiralty and Commercial Courts Guide gives good guidance about the evidence which should support an application for permission to serve out of the jurisdiction. The guidance focuses on the matters which the judge will need to take into account in deciding whether it is a proper case in which to give permission.”

“The claimant should also present evidence of the considerations relied upon as showing that the case is a proper one in which to subject a party outside the jurisdiction to proceedings within it (stating the grounds of belief and sources of information); exhibit copies of the documents referred to and any other significant documents; draw attention to any features which might reasonably be thought to weigh against the making of the order sought; and otherwise comply with the duty of full and frank disclosure to the Court. Where convenient the written evidence should be included in the form of application notice, rather than in a separate witness statement. The form of application notice may be extended for this purpose.”

“45. The importance of the duty of disclosure has often been emphasised. It is the necessary corollary of the court being prepared to depart from the principle that it will hear both sides before reaching a decision, which is a basic principle of fairness. Derogation from that basic principle is an exceptional course adopted in cases of extreme urgency or the need for secrecy. If the court is to adopt that procedure where justice so requires, it must be able to rely on the party who appears alone to present the evidence and argument in a way which is not merely designed to promote its own interests, but in a fair and even-handed manner, drawing attention to evidence and arguments which it can reasonably anticipate the absent party would wish to make. It is a duty owed to the court which exists in order to ensure the integrity of the court’s process. The sanction available to the court to preserve that integrity is not only to deprive the applicant of any advantage gained by the order, but also to refuse to renew it. In that respect it is penal, and applies notwithstanding that even had full and fair disclosure been made the court would have made the order. The sanction operates not only to punish the applicant for the abuse of process, but also, as Christopher Clarke J observed in Re OJSC ANK Yugraneft v Sibir Energy PLC [2010] BCCC 475 at [104], to ensure that others are deterred from such conduct in the future. Such is the importance of the duty that in the event of any substantial breach the court inclines strongly towards setting aside the order and not renewing it, even where the breach is innocent. Where the breach is deliberate, the conscious abuse of the court’s process will almost always make it appropriate to impose the sanction.”

“(1) for money had and received under which he can recover the amount of the bribe as money had and received or, (2) for damages for fraud, under which he can recover the amount of the actual loss sustained in consequence of his entering into the transaction in respect of which the bribe was given, but he cannot recover both.”

“Thus English law will permit a claimant employer or principal whose employee or agent has been bribed to recover: i) the amount of the bribe from both the person bribed and the briber, regardless of the question whether any loss has been suffered by the claimant; ii) the amount of any loss following the bribe, it being (probably) presumed both that loss has occurred in at least the amount of the bribe and that any subsequent transaction created by the employee or agent was caused by the bribe...”

“all or any part of the premium and/or their traceable substitutes received... and to recover the same and/or their traceable substitutes, either as monies had and received to the LIA’s use... alternative by way of damages for fraud (the damage being irrebuttably presumed as being equivalent to the Lands Company Payments)”

“Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.”

“29. I also wish to add a word as to the approach that should be adopted if a similar problem arises in the future. In circumstances such as those that arose in this case, the proper course is to raise the issue with the court. Aldi did write to the court, as I have set out at para 2(xiii), but not in terms that made it clear what the court was being invited to do. WSP and Aspinwall knew of Aldi’s position and were before the court on numerous occasions; they did nothing to raise it. 31. However, for the future, if a similar issue arises in complex commercial multi-party litigation, it must be referred to the court seised of the proceedings. It is plainly not only in the interest of the parties, but also in the public interest and in the interest of the efficient use of court resources that this is done. There can be no excuse for failure to do so in the future.”

“as Aldi again makes clear and as the Master of the Rolls stresses, a claimant who keeps a second claim against the same defendant up his sleeve while prosecuting the first is at high risk of being held to have abused the court’s process. Moreover, putting his cards on the table does not simply mean warning the defendant that another action is or may be in the pipeline. It means making it possible for the court to manage the issues so as to be fair to both sides.”

“96 For my part, I do not think that parties should keep future claims secret merely because a second claim might involve other issues. The proper course is for parties to put their cards on the table so that no one is taken by surprise and the appropriate course in case management terms can be considered by the judge. In particular parties should not keep quiet in the hope of improving their position in respect of a claim arising out of similar facts or evidence in the future. Nor should they do so simply because a second claim may involve other complex issues. On the contrary they should come clean so that the court can decide whether one or more trials is required and when. The time for such a decision to be taken is before there is a trial of any of the issues. In this way the underlying approach of the CPR, namely that of co-operation between the parties, robust case management and disposing of cases, including particular issues, justly can be forwarded and not frustrated.”

“Whether the claim appears to be weak or strong, it is the fact of it being brought as a second claim, where the issue could have been raised as part of or together with the first claim, that may constitute the abuse.”

“There are, to my mind, striking similarities between these claims and the claim in Gladman. Just as in that case, the consequence of permitting the Pont Street Claim and the Oriel Claim to continue would be that the very same issues would fall to be litigated again in two successive trials involving a very great deal of court time and huge expense in terms of both management time and litigation costs.”

“The claim made by the Debtor concerns the same factual matrix as the original claim before Roth J. There would be extensive overlap of witnesses, issues and evidence between the original action and the claim now issued but not served. The claim should have been pleaded as a counter-claim but was not. Even if it is argued that a separate claim should have been issued, no reason has been advanced as to why the Aldi requirement was not met. If the Aldi requirement had been met the judge at the case management stage would have ordered the matters be tried together as they arise out of the same factual matrix, there would be less risk of inconsistent findings of fact (a public policy issue), it would have been more efficient to hear the claims together in terms of Court time and the cost of witness attendance, and such a case management decision would have been consistent with the principle that the court requires the parties to litigation to bring forward their whole case.”

“Discontinuance and subsequent proceedings 38.7 A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if – (a) he discontinued the claim after the defendant filed a defence; and (b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim.”

“45 Counsel for Friends Provident submitted, and I accept, that the principles identified by the maxims nemo debet bis vexari pro una et eadem causa (no-one should be vexed twice in respect of one and the same cause) and interest reipublicae ut sit finis litium (it is in the public interest that there be an end to litigation) should inform the court’s approach to CPR r. 38.7. In my judgment it follows that there is an analogy between the principles to be applied to an application under r. 38.7 and those applied by the courts under CPR r. 3.4(2)(b) with respect to Henderson v Henderson abuse of process. The main difference I perceive is that under r. 38.7 the onus lies upon the applicant to show that it should be given permission to bring the new claim, whereas under r. 3.4(2)(b) the onus lies upon the defendant to show that the new claim is an abuse of process.”

“60 In my judgment there is indeed an analogy between the re-introduction of a claim previously abandoned in the same proceedings and the making of a fresh claim after discontinuance of a similar claim based on the same or substantially the same facts, as is controlled by Part 38.7 . Both types of conduct, unless closely controlled by the court, tend to undermine the public interest in finality in litigation. But Part 38.7 imposes that control not in terms by the requirement to show special circumstances, but rather by the requirement that such fresh proceedings may only be brought with the Court’s permission. In that respect they equate the bringing of fresh proceedings with the re-introduction of an abandoned claim by amendment, since amendment itself requires the court’s permission. Beyond that, it seems to me that the rule leaves it to the court to decide whether to grant or refuse permission having regard, as I have said, to the public interest in finality.”

“In one respect, however, the principle [of abuse of process] goes further than the strict doctrine of res judicata or the formulation adopted by Sir James Wigram V-C, for I agree that it is capable of applying even where the first action concluded in a settlement. Here it is necessary to protect the integrity of the settlement and to prevent the defendant from being misled into believing that he was achieving a complete settlement of the matter in dispute when an unsuspected part remained outstanding.”

“11. Mr Thomas QC also contended that as a matter of law, a distinction had to be drawn between previous litigation where the case was settled and previous litigation where the case proceeded to judgment. The submission was based on a passage in the speech of Lord Millett in Johnson v Gore-Wood at page 59. However, Lord Bingham made clear at page 32–33: “An important purpose of the rule is to protect a defendant against the harassment necessarily involved in repeated actions concerning the same subject matter. A second action is not the less harassing because the defendant has been driven or thought it prudent to settle the first; often, indeed, that outcome would make a second action the more harassing.” “An important purpose of the rule is to protect a defendant against the harassment necessarily involved in repeated actions concerning the same subject matter. A second action is not the less harassing because the defendant has been driven or thought it prudent to settle the first; often, indeed, that outcome would make a second action the more harassing.”

“there is substantial overlap between the Compromised Proceedings [the Soc Gen Proceedings] and any potential claim(s) regarding the Questionable LIA Trades [which include the Bear Stearns Trade]. It is likely that–apart from the SocGen Defendants–the other defendants to the Compromised Proceedings would be parties to any fresh proceedings... The causes of action that would be pursued in any fresh proceedings would likely be the same: namely setting aside transactions as being procured by bribery and corruption. The issues engaged by any fresh proceedings would also be similar to those engaged by the Compromised Proceedings”

“Much of the information relied upon by the LIA in the JP Morgan Proceedings is derived from information obtained during the course of the SocGen Proceedings. The LIA’s claim in the JP Morgan Proceedings is based on similar, if not near-identical, fraudulent and corrupt scheme identified in the SocGen Proceedings. ...The factual basis for the LIA’s fraud and bribery claims in the SocGen Proceedings demonstrate a strikingly similar modus operandi as the JP Morgan Proceedings”

“23. Orders under rule 6.15(1) and, by implication, also rule 6.15(2) can be made only if there is a “good reason” to do so. The question, therefore, is whether there was a good reason to order that the steps taken on 22 October 2009 in Beirut to bring the claim form to the attention of the respondent constituted good service of the claim form upon him. The judge held that there was. In doing so, he was not exercising a discretion but was reaching a value judgment based on the evaluation of a number of different factors. 24. It is important to note that rule 6.15 applies to authorise service “by a method or at a place not otherwise permitted” by CPR Part 6. The starting point is thus that the defendant has not been served by a method or at such a place otherwise so permitted…”

“49. I would endeavour to summarise the relevant principles as follows: … (9) Cases involving service abroad under the Hague Convention or a bilateral treaty: (a) Where service abroad is the subject matter of the Hague Convention or a bilateral treaty, it will not normally be a good reason for relief under CPR 6.15 or 6.16 that complying with the formalities of service so required will take additional time and cost: Knauf at [47], Cecil at [66], [113]. (b) It remains relevant whether the method of service which the Court is being asked to sanction under CPR 6.15 is one which is not permitted by the terms of the Hague Convention or the bilateral treaty in question. For example, where the country in which service is to be effected has stated its objections under Article 10 of the Hague Convention to service otherwise than through its designated authority, as part of the reciprocal arrangements for mutual assistance on service with this country, comity requires the English Court to take account of and give weight to those objections: see Shiblaq at [57]. In such cases relief should only be granted under Rule 6.15 in exceptional circumstances. I would regard the statement of Stanley Burnton LJ in Cecil at [65] to that effect, with which Wilson and Rix LJJ agreed, as remaining good law; it accords with the earlier judgment of the Court in Knauf at [58]-[59]; Lord Clarke at paragraphs [33] and [45] of Abela was careful to except such cases from his analysis of when only a good reason was required, and to express no view on them (at [34]); and although Stanley Burnton LJ's reasoning that service abroad is an exercise of sovereignty cannot survive what was said by Lord Sumption (with unanimous support) at [53] of Abela , there is nothing in that analysis which undermines the rationale that as a matter of comity the English Court should not lightly treat service by a method to which the foreign country has objected under mutual assistance treaty arrangements as sufficient. That is not to say, however, that there can never be a good reason for ordering service by an alternative method in a Hague Conventions case: Bank St Petersburg at [26].”

“57 In my judgment, the current state of the law is as set out in the decisions of Mr Justice Cooke in Deutsche Bank AG v. Sebastian Holdings Inc. and Mr Justice Popplewell in Société Générale v. Goldas Kuyumculuk Sanayi andothers [2017] EWHC 667 (Comm) , and that in HSC cases, or cases in which there is a bilateral service treaty which is exclusive in its application: i) "exceptional circumstances", rather than merely good reason, must be shown before an order for alternative service other than in accordance with the terms of the treaty can be used; and ii) mere delay or expense in serving in accordance with the treaty cannot, without more, constitute such "exceptional circumstances". I say "without more" because delay might be the cause of some other form of litigation prejudice, or be of such exceptional length as to be incompatible with the due administration of justice. 58. As I have set out above, the Supreme Court in Abela took care to make it clear that it was not addressing the use of CPR 6.15 in a service treaty context. There is nothing in that decision which calls into question what I regard as the key reason why an "exceptional circumstances" test is appropriate, viz the need to ensure that the provisions of the treaty are not circumvented. While it is true that Stanley Burnton LJ's characterisation of the service of legal proceedings abroad as constituting interference with the sovereignty of another state now falls to be qualified, I do not regard that as an essential part of his reasoning when identifying the approach to be adopted in service treaty cases. 59. In this regard, it is significant that one of the reasons which Lord Sumption JSC gave in Abela as to why the " muscular presumptions against service out which are implicit in adjectives likes `exorbitant' were no longer appropriate " was the accession by the United Kingdom to a number of conventions, and the greater measure of practical reciprocity which now exists. While Lord Sumption JSC was referring to jurisdiction conventions, service conventions themselves reflect the new reality to which Lord Sumption JSC was referring, and provide a formal reciprocity on service issues. In these circumstances, I see nothing in Lord Sumption JSC's observations which would justify a court in being more ready to subvert or by-pass a service treaty now than was the case before Abela.”

“David Foxton QC sitting as a Deputy Judge of the High Court in Marashen Ltd v Kenvett Ltd [2017] EWHC 1706 (Ch) held that permission to permit service by alternative means in a Hague Convention case should only be permitted if exceptional circumstances existed. In reaching that conclusion, after a full review of the authorities, Mr Foxton followed the two first instance decisions to which he refers in paragraph [57] of his judgment. 98 The difference between there being a good reason and a good reason based upon exceptional circumstances will lead to a different result in some cases. It seems to me that the conclusion reached by Mr Foxton is to be preferred for two reasons. First, the court should be careful to avoid watering down a treaty obligation by the application of domestic service rules. Secondly, I consider that a threshold test of "good reasons" sets the bar much too low. The application of such a test risks losing sight of the exceptional nature of service by alternative means regardless of whether service is to be effected abroad. 99 I consider, however, on the facts of this case the difference between the two tests is immaterial.”