ABCI v Banque Franco-Tunisienne & Ors

This is the judgment of the Court, which all its members have played a part in preparing. This appeal relates to judgments given by His Honour Judge Chambers QC, sitting as a deputy Commercial Court judge, on 7^th December 2001 and 19^th March 2002. We shall call the appellants ABCI. They were the claimants below. The respondents are (1) Banque Franco Tunisienne (“BFT”), (2) Société Tunisienne de Banque (“STB”), (3) Banque Centrale de Tunis (“BCT”) and (4) Le Directeur Générale du Contentieux de l’Etat Tunisienne (sued as legal representative of the Ministry of Planning and Finance). We shall for simplicity refer to the fourth respondent as the MOF. The MOF is an emanation of the State of Tunisia. BCT is the state-owned central bank. It owns shares in and controls STB, which controls some 78% of the shares in BFT. HHJ Chambers determined that the court had no jurisdiction over the respondents in actions 1995 Folio No. 838 (the Settlement Agreements action) and 1994 Folio No. 1527 (the Conspiracy action), and set aside the proceedings on that ground and, as against the MOF, on the further ground that service had not been effected in accordance with the State Immunity Act 1978. By his second judgment, HHJ Chambers ordered indemnity costs against ABCI in actions Folio Nos. 838 and 1527. He also rejected a submission by ABCI in these and a third action (1993 Folio No. 933, the Enforcement action) that special orders should be made limiting the costs recoverable by the respondents on the ground that they should not have had separate representation, although he left it to the Costs Judge to consider whether there had been any unreasonable “duplication of costs”. Finally, he ordered that the respondents should recover interest at the judgment rate of 8% per annum on the totality of their costs (whenever incurred) in these actions from 7^th December 2000. That was a date just before the argument commenced before him on the applications on which he gave his first judgment a year later. Against all these decisions, appeals are now brought by leave of this court. Respondents’ notices have been served seeking, if necessary, to uphold the Judge’s decisions on grounds other than those on which he relied.

The history is long and complex, but we can at this point limit ourselves. ABCI was formed as a company on 18^th May 1982, for the purpose of investing in BFT. It had as major shareholders Prince Bandar Ben Khaled Ben Abdel Aziz Al Saud, eldest son of the late King Khaled of Saudi Arabia, and Dr Majid Bouden (a French national and a member of the French and Tunisian Bars), who served as its president from incorporation until 4^th November 1992. Discussions regarding the proposed investment had already commenced with BFT’s chairman and chief executive, Mr Riahi, in late 1981. ABCI’s case is that agreement was reached in 1982 for it to subscribe for 500,000 shares at a price in Tunisian dinars of TD5.00 per share. It is not in issue that US$4,139,000 was remitted by ABCI to BFT on 27^th July 1982. BFT’s case is, however, that this remittance was made by ABCI in order to add impetus to its attempt to persuade the Tunisian side to accept it as an investor. BFT refused to issue any shares to ABCI, but instead allocated a further 500,000 shares to STB, which was already its majority shareholder, and froze ABCI’s payment, after converting it into Tunisian dinars. Two years later, on or about 29^th July 1984, ABCI acquired the same number of shares from STB and/or on the stock market, at the somewhat reduced price of TD 4.25 per share, and on terms (as ABCI maintains) that, since the Tunisian dinar had fallen in value against the dollar since 1982, ABCI would have returned to it the balance of its original dollar payment, less the current dollar sum needed to pay the price of TD 4.25 per share. No such payment was however made.

The acquisition gave ABCI 53.6% of the voting rights in BFT, but it contends that in practice it had difficulty in exercising control, or in getting a full complement of directors onto the board. It is ABCI’s case that the underlying reason for this was that STB knew that false financial information had been presented to ABCI in 1982 to interest it in investing. Eventually, at a general meeting on 19^th February 1987 ABCI was able to obtain two out of a total of four places on a new board, and to pass resolutions recognising it as having rights in relation to its frozen assets since 1982 and requiring the board to determine BFT’s liability and settle the matter.

The board of BFT thus agreed to an ICC arbitration with ABCI, which took place on 23^rd July 1987 and led to an award in ABCI’s favour in the sum of US$1,366,110 with interest of $1,088,606 from 29^th July 1982 to 27^th July 1984 and of $750,000 in respect of the subsequent period. This award was not paid by BFT. It was registered as a judgment by the Court of First Instance of Paris, and the registration has been upheld in the Court of Appeal and Cour de Cassation. ABCI was able to seize some $60,000 of BFT’s assets in 2000. Action 1993 Folio No. 933 was and is brought in order to enforce the award as a judgment in England.

ABCI maintains that from October 1988 onwards, Dr Bouden was subjected to intense pressure and intimidation by Tunisian State authorities. It alleges that this included the Tunisian judiciary acting on the instructions of the Tunisian Government. STB succeeded in obtaining the appointment of a judicial administrator, Mr Belhadj, to take over BFT’s affairs, and he commenced criminal proceedings against Dr Bouden. According to Dr Bouden, during a short retirement in the course of one hearing, the door to the judge’s chambers was not shut properly and re-opened, and all in court could hear the judge reporting to the Minister of Justice, and saying that Dr Bouden would be condemned. When the judge returned, Dr Bouden protested, but to no avail. On 22^nd March 1989 Dr Bouden was sentenced to 6 years immediate imprisonment and fined TD 30 million for allegedly obtaining the ICC award in misuse of the assets of BFT, STB and the MOF and in breach of BCT’s exchange control rules. The sentence was suspended pending his appeal. Under this pressure and in order to obtain the cancellation of the sentence, Dr Bouden on 7^th and 12^th June and 3^rd July 1989 signed on behalf of ABCI, first, a “Protocol of Agreement” containing a purported settlement agreement, second a “Supplementary Elucidatory Annex” and, finally, a Record of Composition. These agreements have been called compendiously “the Settlement Agreements”. The first two agreements were expressed to be made with STB, while the third was with the MOF. Their effect was that ABCI agreed to sell its 500,000 shares to STB for TD2,125,000 (transfer being effected on or about 13^th June 1989), to pay compensation to BFT for alleged mismanagement in the sum of TD 2,125,000, to abandon the ICC arbitration award and to abandon all claims against BFT and its shareholders, including STB, in return for payment by BFT (guaranteed by STB) of TD1,000,000. The MOF agreed to a “composition”, whereby the fine imposed on Dr Bouden would be reduced to a symbolic sum (nothing express being said about what was to happen on the outstanding appeal against sentence).

The sentence passed on Dr Bouden was in fact (and, on ABCI’s case, as a result) quashed on 8^th July 1989, when the Tunisian Court of Appeal substituted a sentence of one year’s imprisonment suspended and a TD120 [sic] fine. However, BFT then obtained new orders against Dr Bouden, freezing his assets, and Mr Belhadj began another prosecution against him for stealing public monies, relating to BFT’s debts. Dr Bouden’s wife suffered a (second) miscarriage under the pressure, and Dr Bouden says that he was asked to meet a partner in the Minister of Justice’s law firm and the judge who was handling the criminal prosecution against him, and at this meeting was shown two draft judgments, one acquitting him, the other sending him for trial with an expected sentence of 20 years. The partner later asked him to pay US$1 million. Under this and other threats, Dr Bouden and his wife then decided to disappear and were able secretly to escape from Tunisia and make their way to Paris in August 1992.

On 3^rd June 1993 ABCI brought action 1993 Folio No. 933 to enforce in England the ICC arbitration award which it had obtained against BFT. On 12^th January 1994 ABCI began an action (1994 Folio No. 36 – “the Fraud action”) claiming damages against BFT for fraudulent misrepresentation allegedly inducing it to subscribe for BFT’s shares in 1982, and obtained leave to serve out of the jurisdiction. This leave was set aside and the action dismissed by decision of Waller J on 14^th December 1995 [1996] 1 Ll.R. 485, upheld by the Court of Appeal on 11^th July 1996 [1997] 1 Ll.R. 531, in each case on the ground inter alia that the facts had not been brought within the then RSC O.11 r.1(1)(f), governing leave to serve tortious claims out of the jurisdiction. Meanwhile on 12^th September 1994 ABCI had begun action 1994 Folio No. 1527, against STB, BCT and the MOF, alleging conspiracy with BFT to make the fraudulent misrepresentations inducing investment by ABCI in BFT in 1982. Finally, on 18^th May 1995 ABCI began action 1995 Folio No. 838 against BFT, STB, BCT and the MOF. It will be necessary to examine the nature of the claim in this last action in detail, but it has as a central aim, on any view, the setting aside of the Settlement Agreements on the ground of duress.

Against this background, we turn to consider the position in actions 1995 Folio No. 838 and 1994 Folio No. 1527, which it is convenient to take in that order.

The Judge considered that ABCI had failed to show a good arguable case that the claim fell within RSC O.11 r.1(1)(d) as a claim “brought to … affect a contract …. being a contract which was made within the jurisdiction or contains a term to the effect that the High Court shall have jurisdiction to hear and determine an action in respect of the contract”. ABCI did not suggest that the Settlement Agreements themselves constituted a contract so made or containing such a term. Leave to serve out of the jurisdiction was sought and obtained on the sole basis that the Settlement Agreements action was “brought to affect” the (alleged) Share Subscription Agreement, and that the latter agreement was made within the jurisdiction. Since the only defendant party to the Share Subscription Agreement was BFT, this ground cannot on any view have been good as against STB, BCT or the MOF. That is now accepted. ABCI invokes the court’s “curative” power to permit it to argue that STB, BCT and the MOF are necessary or proper parties to a claim brought against a person duly served, namely BFT, within the meaning of O.11 r.1(1)(c). The Judge referred to The Goldean Mariner [1990] 2 Ll.R. 215, Kuwait Oil Tanker S.A.R. v. Al Bader [1997] 1 WLR 1410 and Youell v. Kara Mara Shipping [2000] 2 Ll.R. 102 as instancing the scope of the curative power in the present context. He concluded that, where there had been a “purely mechanistic” or “minor and technical” default, the court might simply be prepared to overlook it; but where there had been a failure in a matter of real substance any relief, if granted, was likely to require re-service (with a consequent fresh opportunity for the defendants to resist jurisdiction).

“Claim brought to affect a contract”

The essential pre-condition to jurisdiction against all four respondents is thus that the Settlement Agreements action should be capable of being regarded as “brought to affect” the Share Subscription Agreement. The starting point is the generally endorsed writ, which was all that accompanied the affidavit of 2^nd August 1995, sworn by Mr Hallonen (Dr Bouden’s successor as chairman of ABCI) in order to obtain leave to serve out. The writ claims declarations that the first two Settlement Agreements were null and void, that the third was “procured by duress” and null and void, and that the transfer of shares to STB in or about June 1989 was procured by duress. It then claims an order that STB, BCT and the MOF return and/or procure the return of such shares to ABCI forthwith. Finally, it claims:

“Further or alternatively, damages together with interest due under Section 35A of the Supreme Court Act 1981 and/or under the inherent jurisdiction of the Court at such rate and for such period as the Court thinks fit.”

Mr Hallonen’s affidavit explained in paragraph 20 that the Settlement Agreements action:

“…. seeks simply to have the 1989 Agreements declared null and void for duress and to have the 500,000 shares acquired under the 1989 agreement restored to ABCI.”

The affidavit explained the joinder of BCT and the MOF as “necessary and proper …. because the 1989 agreements could not have been made without their participation in the duress inflicted upon Dr. Bouden”. However, this was by way of general explanation, rather than invocation of O.11 r.1(1)(c), and did not embrace STB. As to jurisdiction, the affidavit in paragraph 28 merely submitted that the claim “affects” the Share Subscription Agreement

“because it is seeking to restore the position to that which it should rightfully be under the 1982 Share Subscription Agreement, i.e. with ABCI owning the shares that it purchased under that contract.”

The authorities under the old Rules made clear “the primacy of the writ” in relation to any application for leave to serve out. In the words of Neill LJ in Excess Insurance Co. Ltd. v. Astra S.A. Insurance and Reinsurance Co. [1996] LRLR 380, 386, cited with approval by Hobhouse LJ in Schiffahrtges. Detlev Von Appen GmbH v. Voest Alpine Intertrading GmBH [1997] 2 Ll.R. 279, 289-290:

“The cause or causes of action to which the Court and the defendant are to have regard are those set out in the writ. It is the writ for which leave to serve is sought and granted. The affidavit in support and any exhibits may have to be looked at to see the foundation of the claim but the relevant cause of action is in the writ. Moreover it is the writ and not the affidavit that is served on the defendant.”

Contrary to the analysis which Mr Milligan suggested to us, the Court of Appeal held in that case that the necessary allegations to support the plaintiffs’ claim for an anti-suit injunction to enforce the arbitration agreement in the sub-charter against the sub-charterer’s insurers as assignees of the sub-charterer’s rights under the sub-charter had been sufficiently included in the writ: see pp.289-290 per Hobhouse LJ. They had also been, much more clearly, relied upon in the affidavit by which leave to serve out was obtained on the ground that the claim was to enforce or otherwise affect a contract, namely the sub-charter. Hobhouse LJ also cited and said nothing to qualify the following passage from the previous Court of Appeal authority of Metall und Rohstoff AG v. Donaldson Lufkin & Jenrette Inc. [1990] 1 QB 391, 436-7:

“…. if the draftsman of a pleading intended to be served out of the jurisdiction [under any sub-paragraph of O.11] can be reasonably understood as presenting a particular head of claim on one specific legal basis only, the plaintiff cannot thereafter, for the purpose of justifying his application …. be permitted to contend that that head of claim can also be justified on another legal basis (unless perhaps the alternative basis has been specifically referred to in his affidavit evidence ….)”

Mr Milligan put his submissions before us on two bases. First he sought to support as against BFT the ground on which leave was sought, namely that the claim to set aside the Settlement Agreements affects the Share Subscription Agreement. Second, he submitted that the proceedings could be viewed as including, or amended to include, a claim against BFT for damages for breach of the Share Subscription Agreement. In each case, he argued that, once it was shown that the proceedings had been properly brought against and served on BFT, the other respondents, STB, BCT and the MOF, were necessary or proper parties, and that the court should exercise its curative power to allow them to proceed accordingly.

In relation to the first basis, Mr Milligan referred us to E. F. Hutton & Co. (London) Ltd. v. Mofarrij [1989] 1 WLR 488. In that case, proceedings were orginally commenced for a debt allegedly due on an English brokerage contract made in April 1986, but later the plaintiff applied to re-amend and to re-serve out of the jurisdiction so as to include a claim on a Greek cheque for $300,000 which it was said had been given pursuant to the contract as security for any deficit. This Court upheld the leave given to serve out, on the ground that the claim on the Greek cheque affected the English contract. Kerr LJ said that it was clearly a term of the contract that the cheque would not be presented unless there was a deficit exceeding $300,000. Both Kerr LJ and Ewbank J observed that any recovery on the cheque would reduce the claim on the brokerage contract, and considered that it was an implied term of the brokerage contract that the cheque would be honoured when properly presented. The phrase “otherwise affect a contract” had previously been described by Kerr LJ, in words approved by this Court in B.P. Exploration Co. (Libya) Ltd. v. Hunt [1976] 1 WLR 788, 795, as very wide. However, Kerr LJ went on in Hutton to underline that in a case where the claim was not brought on the contract said to be affected, the mere fact that the claim had some consequence for, or repercussion on, a contract on which proceedings could be brought within the jurisdiction would not mean that the claim “affected” that contract. He gave as one example a foreign contract for the supply of prefabricated materials, without which the buyer could not perform an English construction contract with the supplier. Leave to serve out a claim for breach of the foreign contract could not in his view be obtained. Likewise, if a proposed defendant had committed a tort against the plaintiff abroad which had consequences upon an English contract between the same persons. In Co. Nav. Continental de Peru v. Evelpis Shipping Corp. (The Agia Skepi) [1992] 2 Ll.R. 467, Saville J held that a claim by plaintiff goods owners against shipowner bailees said to have carried the goods on the terms of bills of lading could not be said to “affect” the contracts contained in the bills of lading. On the hypothesis on which the point arose, the plaintiffs were not parties to the bills, so the case is as regards BFT distinguishable. But Saville J also distinguished Hutton as concerned with “obligations which directly, and not merely consequentially” affect a contract.

Mr Milligan submits that the purpose of the Settlement Agreements action was to nullify the Settlement Agreements, so as to resurrect the Share Subscription Agreement, and thus in turn to enable ABCI to get the shares back and to get damages. That does not reflect any allegation in the writ or affidavit. The inclusion, in this submission, of the words “to resurrect the Share Subscription Agreement, and thus in turn” is artificial. The obvious purpose of the Settlement Agreements action was (according to Mr Hallonen’s affidavit “simply”) to get the shares back. To do that it was not necessary to rely on the Share Subscription Agreement at all. Indeed, ABCI’s case as it emerged before us is now that that it only ever acquired the 500,000 shares on the market, to mitigate the fact that it had not been given them under the Share Subscription Agreement. But, however that may be, ABCI was unquestionably the registered shareholder of the 500,000 shares prior to the Settlement Agreements. If the Settlement Agreements were to be set aside, an order for the return of its shares would follow automatically, without any reference to the Share Subscription Agreement.

The writ contains a claim for damages on an unspecified basis. Although the claim to set aside the Settlement Agreements and the transfer of shares mentioned duress, those issuing the proceedings cannot have had in mind a claim for damages in tort, e.g. for intimidation. No such claim was mentioned, still less supported in the affidavit seeking leave. It seems probable that what was in mind was the possibility that the court might conclude that the appropriate course was to award equitable damages in lieu of rescission of the Settlement Agreements for duress. The writ cannot be read as claiming damages for breach of the Share Subscription Agreement which it nowhere even mentions. If the Settlement Agreements were not set aside, but equitable damages in lieu were awarded, their measure would be the loss of the value of the shares which ABCI had until 1989, and would have continued to have but for the Settlement Agreements. Reference back to the Share Subscription Agreement would be equally irrelevant or tangential.

The present circumstances are far away from those in Hutton. There the cheque was given at the time of and to secure obligations arising under the brokerage agreement. The obligations under the cheque and the agreement marched in parallel. It would be natural to litigate any issues arising under the agreement and the cheque at one and the same time. Here, the Settlement Agreements were made long after the Share Subscription Agreement. Their origin is said to lie in major acts of duress committed in Tunisia against Dr Bouden. Their dominant effect was to obtain from ABCI shares which it undoubtedly had, however it may have acquired them. They were also aimed at obtaining an abandonment of the ICC award which ABCI had won for breaches of the Share Subscription Agreement. It is true that the Settlement Agreements contained further provisions by which ABCI abandoned all claims against BFT and its shareholders, including STB, in return for payment by BFT (guaranteed by STB) of TD1,000,000 (allegedly never paid). However, there was no reference to any such claims when leave to serve out was sought; indeed there is nothing to suggest what they may have been or that any were being pursued or were identified at the time of the Settlement Agreements. Further, if the Settlement Agreements were set aside, ABCI would (subject to other defences) be able to pursue any such claims. The possibility that the Settlement Agreements would not be set aside and that equitable damages would be awarded for loss of such claims must be viewed, above all, in the light of the absence of any reference to such claims when leave to serve out was obtained; even putting that on one side, however, we do not consider that O.11 r.1(1)(d) could extend to bringing within the jurisdiction of the English courts an action primarily directed to the Settlement Agreements on the basis that this aspect of their terms covered possible claims under the Share Subscription Agreement. The Settlement Agreements were not made under or to give effect to the Share Subscription Agreement (as the cheque was in relation to the brokerage agreement in Hutton). They were made years later, as a result of a long course of dealings and alleged duress in Tunisia, and the action involving them is concerned first and foremost with setting them aside. They were Tunisian contracts, made in Tunisia, not containing any provision for English jurisdiction. It would in all these circumstances be wrong, in our judgment, to treat O.11 r.1(1)(d) as enabling the English court to assume jurisdiction over the Settlement Agreements, merely because there was a good arguable case for saying that the Share Subscription Agreement was made here or subject to English jurisdiction.

Mr Milligan referred us to the points of claim and also produced an amended version for which he sought leave. The points of claim were only served on 2^nd November 1998 – over three years after leave was obtained to serve out on 11^th August 1995 and service was effected on BFT on 15^th September 1995. In them appears, under the heading “Background – Share Purchase Contract and Arbitration Award”, this paragraph:

“4.

Wrongfully, BFT and/or STB and/or BCT and/or the MOF failed and refused to transfer and/or were instrumental in delaying the transfer of the 500,000 shares which were the subject of the Share Purchase Contract until on or about 22 June 1984 because they did not want ABCI to gain control of BFT.”

The pleading went on to recite the agreement to ICC arbitration in respect of the Share Subscription Agreement “and in particular the delayed transfer of the shares”, and the award in ABCI’s favour. It then recited the duress allegedly applied to Dr Bouden and the making of the Settlement Agreements, whereunder, inter alia, the shares were transferred to STB and the award and all claims and causes of action of ABCI against BFT were abandoned. After asserting that the effect of the 1989 Agreements was unlawfully to purport in effect entirely to annul the 1982 Share Subscription Agreement and ABCI’s accrued rights thereunder and to deprive ABCI of its shares in BFT, and seeking declarations and orders to obtain the annulment of the Settlement Agreements, the points of claim continue:

“17.

Further or alternatively, and without prejudice to the foregoing, ABCI claims damages from the Defendants and/or each of them by reason of having been unlawfully deprived of its shares in BFT and/or claims and/or causes of action against BFT as aforesaid (to be particularised)”.

The proposed amendments for which Mr Milligan sought leave include the deletion in paragraph 4 of the words “until on or about 22 June 1984” and the following addition:

“(For the avoidance of doubt, BFT’s wrong consisted of breaches of the Share Purchase Contract). In partial mitigation of its loss ABCI purchased 500,000 shares from STB on the Stock Exchange on or about 22 June 1984”.

In addition to annulment and the return of its shares, ABCI now wishes “to pursue its causes of action under the Share Subscription Agreement” and to insert in paragraph 17 after the phrase “by reason of” the additional words: “the wrongful conduct in paragraph 4 above and/or by reason of”.

Mr Milligan invoked the principles that, firstly a defective writ could be cured by service of points of claim (see e.g. Pontin v. Wood [1962] 1 QB 594 and note 6/2/3 in the Supreme Court Practice 1999, Part 1) and, secondly, the amendment of a claim that has been served out of the jurisdiction is permissible so long as it does not introduce a new cause of action, not covered by the leave to serve out (see e.g. Metall und Rohstoff, above, and Grupo Torras S.A. v. Al-Sabah [1995] 1 Ll.R. 374, 392-5 and the authorities I there cited).

The former principle allows the curing of defects. It cannot be used to justify the introduction of a claim or cause of action which was never contemplated. This is of particular importance in circumstances where the appellants are limited to whatever cause(s) of action they asserted in their writ in respect of which they sought and obtained leave to serve out. In our opinion, the unamended points of claim are not to be read as making any claim on the Share Subscription Agreement. The breach of that Agreement was, as we see it, recited as history, and as leading merely to a two year delay in the issue of shares, which led to the arbitration. The damages now sought are (presumably in tort) for unlawful deprivation of shares (i.e. from 1989 onwards) “and/or [for] claims and/or causes of action against BFT as aforesaid (to be particularised)”. Even if this last, defectively pleaded passage could be regarded as “curing” any previous defect, we would not regard it as attempting to preserve anything more than possible claims arising from the circumstances leading to or making of the Settlement Agreements. The ingeniously drafted amendments now proposed in our view clearly seek to introduce for the first time new causes of action that were not even in the original points of claim. More importantly, the writ, which is the document on which we have to focus, in our opinion never included any claim affecting the Share Subscription Agreement, and it is not open to the appellants by either the original or amended points of claim to seek to introduce any such claim. Neither the cases to which Mr Milligan referred nor the court’s “curative” jurisdiction can assist ABCI in this situation.

For these reasons, in our judgment, the Judge was correct in his conclusion on the “short point”. The claim against BFT cannot be regarded as being brought to “affect” the Share Subscription Agreement. The leave given to serve BFT out of the jurisdiction must be set aside. That removes the basis of ABCI’s submission that the leave which was actually given to serve STB, BCT and the MOF out of the jurisdiction under O.11 r.1(1)(d) should be upheld under O.11 r.1(1)(c), because they were necessary or proper parties to the proceedings against BFT. That submission would have faced the difficulty that it would involve asking the court to uphold service out on a basis which was neither addressed nor considered on the original application.

Contract made in England

We turn to the position as it would be if we had reached an opposite conclusion on the threshold question whether the claim affected the Share Subscription Agreement. The next question on this hypothesis would be whether ABCI had shown a good arguable case that the Share Subscription Agreement was made in England. In Canada Trust v. Stolzenberg (No. 2) [1998] 1 WLR 547, 555H-556A Waller LJ observed that the concept of good arguable case had a certain flexibility, so that:

“It is natural, for example, in a case concerned with a contract where the jurisdiction depends on whether the breach took place within the jurisdiction, but where the issue to be tried will be whether there was a contract at all, not to wish to give even the appearance of pre-trying the central issue, even though the concept of being satisfied must apply both to the existence of the contract and the place of the breach. It is equally natural for the court in the process of being satisfied to scrutinise most jealously that factor which actually provides jurisdiction.”

This was said in the course of a passage, the whole of which was referred to with approval in the House of Lords: [2002] 1 A.C. 1, 13H per Lord Steyn, with whose speech the four other members of the House agreed.

In Mr Hallonen’s affidavit sworn on 2^nd August 1995, the Share Subscription agreement was said to be “made in London on 2^nd April 1982 or adopted and/or made upon the incorporation and/or on 19^th July 1982”. It is now accepted that no binding contract can have been concluded on 2^nd April 1982, since ABCI was not then in existence. However, it is common ground that under Cayman Islands law a company can, once incorporated, ratify a contract purportedly made on its behalf prior to its incorporation. The primary case is thus now that there was ratification at a shareholders’ meeting of ABCI on 19^th July 1982 and that, thereafter, a letter dated 19^th July 1982 was sent by Dr Bouden in the name of ABCI, that it purported to accept the terms of a prior offer by BFT, that it was posted in London (so that the purported contract was made here) and that its sending was ratified by ABCI by or after its incorporation. At this stage I leave on one side the issues which arise regarding the authenticity of the letter. The letter is in French covering three pages of very detailed provisions, affecting not only BFT, but also the other respondents. It repeatedly describes itself as an acceptance of a prior offer. Dr Bouden in his third witness statement dated 21^st July 2000 also says that “the issues addressed in that letter had all been discussed previously between myself, Mr Riahi and representatives of the other defendants”, and refers to the “the terms negotiated by ABCI as reflected in” the letter. However, the Judge did not consider that there was a good arguable case that there had been a previous offer in terms set out in the letter. Mr Milligan submits that this conclusion goes to what would be a central issue in any litigation, so that the court should be careful not to prejudge it. The issue whether the Share Subscription Agreement was made only arises at all on an assumption (contrary to our actual conclusion) that the Settlement Agreements action “affects” the Share Subscription Agreement. But even making that assumption, it is not presently clear where if at all there would ever be any other proceedings on the Share Subscription Agreement, if leave to serve the present action out of the jurisdiction is refused.

We will however assume that Mr Milligan is correct and that the level of satisfaction required regarding the existence of a good arguable case requires to be tempered to avoid too radical a pre-judgment of issues that might arise elsewhere. Even so, reading the letter of 2^nd April 1982 as a whole, we share the Judge’s scepticism about the idea that all these (extremely wide-ranging and in some respects highly obscure) terms could possibly have been the subject of a prior oral offer matching them and capable of immediate acceptance. The Judge focused on the provisions relating to jurisdiction, and we will therefore do so also. The letter provided inter alia as follows:

“It is clearly understood that one of the integral components of our acceptance and of this agreement is the settlement of any disputes through international arbitration by the ICC in Paris, the CIRDI in Washington and the London and Paris courts, the competence of which is said to be acceptable to all the parties who recognise that the value and evaluation of BFT is the responsibility of BFT, STB, BCT, the Ministry of Finance, and the State of Tunisia alone. All the Tunisian parties are jointly and severally responsible for this transfer of ownership by subscription or otherwise and for the settlement of any problems which directly or indirectly result from it. Therefore, any dispute or dissention between ABCI and all the Tunisian parties (BFT, STB, BCT, Ministry of Finance, State, or other parties involved, such as accountants, auditors, official bodies, etc.) or any one of these, will be subjected to international arbitration by the ICC in Paris, or ICSID in Washington, or to the judicial authorities in London or Paris. Application to these courts and jurisdictions or to any one of them will be made by the party which takes the initiative, acting freely, without the need to seek the agreement of the other party which is considered to have agreed. The defending party or parties cannot object this and will be considered to have renounced their right to object and must comply and undertake to put in a defence, this in no way prejudging the substance of the case. It is clearly understood that the Tunisian courts and jurisdictions are not, and will never be, competent to rule on disputes and complaints arising directly or indirectly from this investment in view of the position of the State of Tunisia in this affair as owner and public authority, including responsibility for the courts. The same applies to the courts and jurisdictions of the Cayman Islands. The completion of this investment by way of subscription or by transfer or otherwise and the granting of the Government’s approval and the authorisations represent acquiescence to and agreement with this condition as to the competence of jurisdictions by BFT, STB, BCT, Ministry of Finance, State of Tunisia, etc., it being an inseparable and constituent part of the formation of the contract and of this agreement between ABCI and all the Tunisian parties concerned which undertake to guarantee it on their own joint and several responsibilities.”

In a later passage it continued:

“These factors and conditions are integral to the acceptance of your offer by ABCI and this letter is a fundamental and incontrovertible component part of the file which contains our acceptance of your offer on the basis of which and in view of which the Tunisian authorities will officially give their agreement and authorisation and you the completion of the transaction which you propose with the agreement and by decision of your directors and owner, the State. None of the Tunisian parties concerned and mentioned may claim to be unaware of these conditions and hence the implicit acceptance, as a determinant of this agreement, of recourse in the event of a dispute to international arbitration by CIRDI, ICC, to the jurisdictions of London and Paris, to the European Court of Human Rights, to the European Court of Justice, to the Court of the Hague, which are therefore recognised as being competent. The completion of the investment, in whatsoever form it may take, implies acceptance of these conditions and the competence of the jurisdictions referred to. This definitive, contractual and irrevocable acceptance of your offer is made by a decision of the General Meeting of ABCI, which alone has the power, and which delegated its Chairman to communicate this decision to you and to bring it into effect in the name of ABCI.”

The provisions regarding jurisdiction are mutually inconsistent. International arbitration and the jurisdiction of the London and Paris courts are said to be acceptable to all the parties. However, Mr Milligan can point to the general acceptability of international arbitration as a means of dispute resolution, under contracts involving foreign state bodies. In a letter dated 20^th October 1981 to BFT Dr Bouden had in fact referred to a prior request “to have recourse to international means of handling any disputes and dissensions”. Mr Riahi, under examination in Tunisia in relation to the affairs of ABCI in 1990, also made a reference to minutes dating from 1982, in which it was evidently noted that “it was up to ABCI to take legal action for international arbitration”, although that does not to our minds carry matters very far. What was in the Judge’s view more significant was the later reference in the letter dated 2^nd April 1982 introducing the European Court of Human Rights, the European Court of Justice and the Hague Court, and referring to “the implicit acceptance …. of recourse” to these courts (as well as to international arbitration before the ICC and CIRDI and the courts of London and Paris) “as a determinant of this agreement”, and to completion of the investment, in whatsoever form, as implying “acceptance of these conditions and the competence of the jurisdictions referred to”. Although Dr Bouden, when drafting his letter, evidently thought them appropriate, it is difficult to believe that BFT would have been prepared to accept the European Court of Human Rights, the European Court of Justice and the Hague Court as competent (even if these courts could have had jurisdiction), and the language used in this part of the letter is anyway the language of offer not of acceptance. It is not without interest that in the later letter dated 19^th July 1982, although there is general reference to the letter dated 2^nd April, the only express reference to dispute resolution is to the courts of London and Paris and to ICC and CIRDI arbitration.

As to ratification, Mr Milligan relied upon the purported resolution of ABCI’s shareholders (Prince Bandar, Dr Bouden, Arab Business and Commerce International and, at least as an attendee, Mr Hallonen, who later succeeded Dr Bouden as chairman) on 19^th July 1982 and the payment of US $4,139,000 by ABCI to BFT on 27^th July 1982. As to ABCI’s alternative case, supported by detailed though contested evidence, based on the alleged posting of the letter dated 19^th July 1982 in London, Mr Milligan accepted that the letter purports on its face to record a prior telephone conversation. If there was any acceptance of any offer by ABCI on 19^th July 1982, it must accordingly have occurred in Tunisia, when communicated there in the course of the telephone conversation.

Contract containing agreement to submit to English jurisdiction

If there is no good arguable case that any contract was made in England, Mr Milligan sought to argue that the leave granted for service out should be upheld on the alternative basis that there is a good arguable case of agreement to submit to the jurisdiction of the English courts, by virtue of the references to the London courts in the letters dated 2^nd April and/or 19^th July 1982. The Judge did not decide whether he would have been prepared to permit this. For our part, it seems to us that it would be wrong to do so. The original application was presented exclusively on the basis of a contract made allegedly within the jurisdiction. Even in the skeleton used before the judge, there was no reference to any other basis. The submission that ABCI can invoke a non-exclusive jurisdiction clause, after commencing ICC arbitration and obtaining a purported award on at least some aspects of its alleged loss arising from breach of the Share Subscription Agreement opens up considerable further potential issues, which would have merited examination in some detail.

MOF – service within State Immunity Act 1978

The Judge also set aside the service on the MOF on the grounds that it did not comply with the State Immunity Act 1978. S.12(1) of that Act provides for service of a writ to be effected by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the foreign State. It is common ground that service was not effected by that route. But s.12(6) provides:

“Subsection (1) does not prevent the service of a writ or other document in any manner to which the State has agreed ….”.

The Judge accepted that, although assumptions against the interests of a State were not to be made lightly, a State could if it wished proclaim to the world that it could be served in a particular way, and, if it did so, this would constitute an “agreement” within s.12(6). The MOF was in fact served in purported compliance with clause 11 of the Tunisian Code of Civil and Commercial Procedure, which provides:

“Claim forms and notices concerning the State shall, on pain of being declared invalid, be served at the office of the Head of State’s Litigation Service at the State’s Department for the Plan and Finance.

However, in cases concerning tax assessment and the recovery of taxes and similar duties, the writs and notices shall be served on the appropriate financial administration.

Service on any other legal person shall be effected at its principal place of business or the place of the subsidiary, branch or section concerned.”

The Judge said that nothing in clause 11 suggested that the Tunisian State was agreeing to accept service of foreign proceedings in the manner there set out. S.12 of the Act had not therefore been complied with, and the service on the MOF would if necessary have been set aside on this ground alone.

The suggested ground dealt with by the Judge was advanced by Dr Bouden in an affidavit sworn 11^th February 2000, in which he said that: “The method of service was the only valid method of service expressly provided for under Tunisian civil and commercial procedural rules”. It has been previously suggested by an affidavit of Arwen Handley of Linklaters & Paines sworn 15^th April 1999, which stated that she was informed by Dr Bouden and believed that the method of service made by a bailiff-notary public “is valid under Tunisian law”. It had met the response in a witness statement from Mr Zhiou of the Tunisian State’s Disputes Department dated 5^th October 2000 that he was advised by Baker & McKenzie, the MOF’s English solicitors, “that Tunisian law has no relevance to the question of …. the State Immunity Act 1978”.

At least prior to the hearing before the Judge, the appellants were also seeking to uphold the service on the MOF on a variety of other bases - that the procedure for service prescribed by s.12 did not apply when (so ABCI maintains) the MOF will not be entitled to sovereign immunity; that the MOF had agreed to such service, by virtue of having accepted it in relation to action 1994 Folio No. 1527 (the Conspiracy action) a year before; and that the MOF had waived any objection to the service as and when effected. None of these points proved ultimately sustainable.

The only point now relied upon derives from a further paragraph in Dr Bouden’s affidavit of 11^th February 2000, which states:

“Article 9 (CPCC) provides that, where the subject does not reside in Tunisia and has a known address abroad, a copy of the document should be sent to him by registered post (page 9 of “MB 4”). Thus where a party who resides outside Tunisia is required to appear before a Tunisian court, it is sufficient for a document to be served on him by registered post. By way of reciprocity, Tunisian law recognises that service of a summons to appear before a foreign court made on any Tunisian entity, including a state entity, by way of a simple registered letter served by a Tunisian bailiff-notary public is valid and is binding on any Tunisian party.”

Mr Milligan submits that this shows that Tunisian law accepts that the Tunisian State or its emanations may, by way of reciprocity, be served with foreign proceedings in the same manner as with domestic proceedings.

In contrast with paragraph 17 where Dr Bouden cited and produced a specific authority of the Tunisian Cour de Cassation for the proposition that the Director-General of the MOF represents the State in litigation and in receiving and accepting service, Dr Bouden’s affidavit does not support the statement in the last sentence of paragraph 19 with any source in practice or authority. Further, we were told, without contradiction, that the point now relied upon, based on supposed reciprocity, was never adverted to below either prior to or during the hearing before the Judge. Had it been, we can feel reasonably sure that it would have received greater attention, and very probably elucidation. Even the skeleton prepared for this appeal did no more than assert that the Judge wrongly held that clause 11 “did not constitute such an agreement”, before making a general reference to paragraphs 11 to 28 of Dr Bouden’s affidavit as “describ[ing] the position under Tunisian law as to service on the MOF” and concluding by saying that, in the absence of any evidence on Tunisian law or in respect of the effect of clause 11 or otherwise, the Judge “should have placed significantly more weight on the evidence that was before him” and “erred in applying his own interpretation to Clause 11 in the face of the evidence from a qualified Tunisian lawyer”. In these circumstances, it seems apparent that the Judge dealt with the only point that was identified and argued before him, and that the only point argued before us, based on the very brief passage regarding reciprocity, is in reality an afterthought. It would be wrong to allow such an afterthought to dictate the outcome of this appeal, and, if the point had been critical, we would have refused to allow it to be relied upon. We would thus have decided the issue regarding service in the same way as the Judge did, and for the same reasons. As it is, the point is not critical, since the proceedings against the MOF will anyway be set aside in their entirety.

The Judge also held that, even if the documents dated 2^nd April and 19^th July 1982 provided on their face any formal basis for jurisdiction under O.11 r1(1)(d), there was no good arguable case for regarding them as authentic. We will return to that issue, determination of which is not as it happens, critical to the outcome of this appeal, at a later stage.

Reference has already been made to the short history of action 1994 Folio No. 36 (the Fraud action) against BFT. The writ in that action originally asserted that fraudulent misrepresentations in annual accounts for 1981, 1982 and 1983 had induced the appellants on or about 2^nd April 1982 to enter into a contract contained in or evidenced by the letter of that date, or alternatively a contract made on or about 29^th or 27^th to 31^st July 1982 evidenced by that letter and letters of 30^th and 31^st July 1982. The writ was amended on 28^th June 1982 to substitute for the reference to the 1981, 1982 and 1983 accounts a reference to the 1980 accounts and to delete the reference to any contract other than that allegedly made on or about 2^nd April 1982. The application to serve the writ in the Fraud action out of the jurisdiction was supported by an affidavit of Mr Hallonen sworn 27^th June 1994, invoking as the sole presently relevant head of jurisdiction O.11 r.1(1)(f). Mr Hallonen asserted in this connection that ABCI had suffered damage which resulted from a “substantial and efficacious” act in the commission of the tort which act took place in England. He then said that

“That act was the making of the misrepresentation to ABCI who acted upon it in London by being induced in London by the misrepresentation made by BFT to act as it did and by accepting in London BFT’s contractual offer”.

What precisely the act was that was being relied upon was obscure on this formulation. When Mr Hallonen came a few months later, on 28^th September 1994, to swear an affidavit to support the application for leave to serve the Conspiracy action out of the jurisdiction, he referred back to his affidavit in the Fraud action, and explained that ABCI’s claim was

“founded on a tort and the damages resulting therefrom, namely ABCI’s entry into the contract of 2^nd April 1982 and its payment of [some $4.14 million] thereunder, which in turn resulted from a ‘substantive [sic] and efficacious act’ …. in the commission of the tort which act took place in England, namely the accepting of BFT’s offer which took place in England”.

It is now accepted that this formulation could not justify leave to serve out. The act must be one committed within the jurisdiction by the alleged tortfeasor, not the victim. Dr Bouden also swore an affidavit on 28^th September 1994 dealing with the alleged misrepresentations. He said inter alia that on Mr Riahi’s invitation, “I visited Tunisia from 10^th to 16^th November 1981 and met a number of people inlcuding Mr Belkhodja the Chairman of the STB”, and that on 17^th November 1981 Mr Riahi sent him a copy of BFT’s 1980 balance sheet. ABCI’s application for leave to serve out was lodged on 3^rd October 1994.

On 4^th October 1994 Miss Christiansen of Herbert Smith swore an affidavit in the Fraud action in support of an application by BFT for an order setting aside the service of the writ and all proceedings in that action. She pointed out that ABCI had not been incorporated until 18^th May 1982. She also observed that there was “no suggestion that the alleged misrepresentation was made by a person, or to any person in England”. On 13^th October 1994, the court in the Conspiracy action required to hear oral submissions from counsel for ABCI to enable it to consider whether to grant leave to serve that action out, and counsel for ABCI accordingly appeared before Potter J. on 14^th October 1994, and addressed the issue of sovereign immunity. During this hearing (which took place, of course, without notice to the respondents), no attention was drawn to the problem regarding ABCI’s lack of incorporation on the date identified in the writ as the date when the contract was made. HHJ Chambers said correctly that full disclosure was not therefore made. However, he did not find it necessary to deal with any possible consequences, since he set aside the leave to serve out on other grounds.

Accounts sent to England

Dr Bouden in an affidavit sworn 3^rd May 1995 in response to Miss Christiansen said that “On the invitation of Mr Riahi I visited Tunisia during the 10^th and 16^th November 1981 and met a number of people including Mr Hassan Belkhodja.” Dr Bouden went on to attest to speaking to Mr Riahi on 17^th November 1981 and to being then sent a copy of the 1980 accounts. But, in noticeable contrast to the approach taken in other areas, he still did not make any express assertion that the accounts had been sent to him in London. Miss Christiansen swore a further affidavit on 26^th June 1995 attesting to information from Mr Riahi to the effect that, if he did send the accounts, he was certain that it was not to London. ABCI now says that Mr Riahi was in no position to give any such instructions in 1995, as a result of suffering from Alzheimer’s. However that may be, the fact is that Dr Bouden did not in his reply affidavit of 9^th October 1995 take issue with the point made by Miss Christiansen. The only reference to accounts being received in London related to the 1981 accounts. The skeleton used before Waller J did not suggest that the 1980 accounts had been received in London. In these circumstances, Waller J and the Court of Appeal held that ABCI had shown no good arguable case of any act by BFT within the jurisdiction, which might justify leave to serve out. They accepted, in Waller J’s words, that, if the accounts had been sent to the appellants in London for the purpose of making representations seeking to induce ABCI (not in existence in November 1981) to enter into a contract, that “might” have amounted to conduct “as it were aimed” at ABCI within the jurisdiction inflicting damage on it here. However, having regard to their conclusions regarding the factual case made, they did not, and did not have to, consider the precise scope of the concept of “damage …..result[ing] from an act committed within the jurisdiction”. As to damage, Waller J and the Court of Appeal summarised the evidence as showing no more than that ABCI had paid money from Switzerland to Tunisia. There was little if any evidence of where ABCI’s commercial heart was, and no evidence of any loss within the jurisdiction.

The present action is now pursued on the basis that it was “unfortunate” that not all the relevant evidence was before Waller J in the Fraud action against BFT, but that this can now be repaired, at least against BFT’s alleged co-conspirators, STB, BCT and the MOF, in the present action. On 15^th March and 11^th July 1995 two brothers, Armand and Marios Araktingi had sworn on affidavit that they had sublet a flat and office at 60 Park Lane to Dr Bouden from 1980. Shortly after the Court of Appeal gave its judgment of 11^th July 1996 in the Fraud action, both brothers swore further affidavits in very detailed terms, attesting (with on the face of it remarkably clear memories after 16 years) to their common recollection of Dr Bouden in later 1980 “getting out from an envelope” or having “received” a copy of BFTs’ 1980 accounts. Dr Bouden also set about filling gaps identified by Waller J and the Court of Appeal in his statement of 21^st July 2000 (cf paragraphs 12, 13 and 30). He says there that throughout 1981 and 1982 he lived, and operated his business affairs, including ABCI’s, from 60 Park Lane. In paragraph 13.5 he asserts that he made “a very short visit to Tunisia during a short stop-over from the Middle East to London on 11 November 1981”. I interpose that that does not seem to match very easily with his previous references to a visit to Tunisia at Mr Riahi’s invitation from 10^th to 16^th November 1981 or “during the 10^th and 16^th November 1981”, in the course of which he met a number of people. However that may be, Dr Bouden now states that Mr Riahi’s call on 17^th November 1981 was to him in Park Lane, where Mr Riahi’s letter was also sent. He also attests to the sending to him in Park Lane on about 18^th June 1982 of BFTs’ 1981 accounts. He then relies on the alleged general meeting of ABCI and letter to BFT of 19^th July 1982, and, as regards payment, says that this was arranged by ABCI with the chairman of BCCI at BCCI’s London Head Office, by way of a financing facility providing for the transfer of the sums through BCCI’s Swiss subsidiary. We will return in due course to such documentation as he produces in this regard.

The case now therefore sought to be pursued differs in a number of respects from that in respect of which leave to serve out was obtained. The contract relied upon is no longer said to have been made in early April 1982. It is made at best by later ratification - although as we have observed the letter dated 2^nd April 1982 does not in our view constitute, even on its face, an acceptance, and on that basis the only possible case must be that a contract was made in July 1982. The case now relies not just on the 1981, but also on the 1982 accounts. In the skeleton prepared for the hearing before the Judge, the argument was simply that the damage had been sustained within the jurisdiction, as a result of receiving and acting on these accounts here. Now ABCI’s first submission is that the respondents, through BFT, can be regarded as having committed an act here, resulting in damage to ABCI (wherever such damage occurred).

Had the present case come forward at an early stage or had there been a satisfactory explanation for the way it proceeded before Waller J and the Court of Appeal and for the failure at an earlier stage to produce the material now relied upon, we would have been more sympathetic to the submission that the Court should be prepared to overlook the changes which it has undergone. The Judge refused to exercise the curative jurisdiction, as would be required if the leave given was to stand (judgment paras. 201-2), and there does not seem to us to be any good reason for interfering with his exercise of his discretion in that regard.

However, we will consider the position on an opposite basis. If one assumes that there is a good arguable case for saying that the accounts were received here, the question arises whether that is sufficient. We have already observed that, when presenting its case in its skeleton before the Judge, ABCI does not appear to have considered that it was (since it relied only on damage suffered here). But it now relies on the receipt of the accounts here as a sufficient “substantial and efficacious” act. O.11 r.1(1)(f) was formulated as it stood in 1995, in order to be consistent with and give effect to article 5(3) of the then Brussels Convention. The fact that the present case is not within the scope of the Brussels Convention is by the way. The significance of O.11 r.1(1)(f) was considered in the light of authorities in the European Court of Justice by Rix J. in Domicrest Ltd. v. Swiss Bank Corporation [1999] QB 548. He concluded that the mere receipt here of negligent assurances conveyed by telephone from abroad, on which the recipient acted by releasing goods abroad, did not constitute the commission by the person giving the assurances of an act here which could ground jurisdiction in respect of the damage suffered abroad. Article 5(3) is one of a number of special jurisdictions, which, as exceptions to the general European rule that suit must be brought in the country of the defendant’s domicile, are not to be given too expansive a scope. The alternative possibility of founding jurisdiction in the place where damage is sustained anyway alleviates the position from a claimant’s viewpoint. Rix J. thus disagreed with the approach of asking where “in substance the cause of action arises, or what place the tort is most closely connected with”, which had been adopted by Steyn J in the earlier authority on article 5(3) of Minster Investments Ltd. v. Hyundai Precision & Industry Co. Ltd. [1988] 2 Ll.R. 621, prior to three of the European Court authorities on which Rix J relied. We favour Rix J’s reasoning and conclusion. But, even assuming that the right question is where in substance did this cause of action arise or was this tort committed, we take the view that the answer would be Tunisia, where the fraudulent conspiracy between BFT, STB, BCT and the MOF is said to have been hatched, the fraudulent accounts were prepared and from where they were sent with a view to inducing an investment in the Tunisian company to which they related.

Damage sustained within the jurisdiction

That brings us to the head of O.11 r.1(1)(f) on which leave was sought and granted, namely damage sustained within the jurisdiction. The case is put two ways: ABCI committed itself to investing here; and ABCI arranged payment here or from here. The pleaded commitment consisted, as we have pointed out, in the making of a contract on 2^nd April 1982 or the making of the investment. The proposed amended case, which we are presently considering, is that it was made by ratification at the shareholders’ meeting on 19^th July 1982 or by entirely separate contract on that date. The meeting allegedly occurred in London. The letter of 19^th July 1982 purported to record a prior conversation, and would not suffice, if one applies the normal rule that an oral acceptance takes effect where received (i.e. in Tunisia).

Mr Milligan submitted that an acceptance here or the ratification here of a prior purported acceptance here would constitute in domestic law the date when a claimant suffered sufficient loss to acquire a cause of action in tort: cf e.g D.W. Moore & Co. Ltd. v. Ferrier [1988] 1 WLR 267. But the Court of Appeal held in the Fraud action that this domestic rule is not imported into the concept of damage sustained under O.11 r.1(1)(f): see [1997] 1 Ll.R. at p.536. Again this reasoning is underpinned by the consideration that, although the present is not in fact a European case, clause (f) was introduced in 1987 in order to ensure that English law was consistent with article 5(3) of the Brussels Convention. Mr Milligan submits that damage could be sustained in the sense of clause (f) in two different places, and clearly that can be so in some cases, e.g. pollution from one source affecting different places (cf Handelswekerij G.J. Bier BV v. Mines de Potasse d’Alsace SA [1978] QB 708). But the proposition that the appellants could be regarded as having sustained damage within clause (f) both in the place where they purported to make or hold a board meeting ratifying the Share Subscription contract and in the place where they made their investment, allegedly under it, is less easy to digest.

In our judgment clause (f) is looking to the direct damage sounding in monetary terms which the wrongful act produced upon the claimant: see Dumez France v. Hessische Landesbank (Helaba) (Case C-220/88 [1990] ECR I-49, cited by Rix J in Domicrest at p.377C-378A) and Rix J’s own analysis at p.381C of the outcome in the Minster Investments case. In the present case that means the loss sustained by actually investing in an (allegedly worthless) company, not the entry into of any prior contractual commitment which might or might not have been followed by the making of such an investment before discovery of the inaccuracy of the accounts.

It is necessary therefore to examine ABCI’s case that they suffered loss in London. It remains clear that its payment to invest in BFT was made out of an account in the name of ABCI with Swiss Bank Corporation in Geneva to Tunisia. A debit advice produced by Dr Bouden dated 11^th June 1982 shows that US$5 million had been remitted to that account by Banque de Commerce et de Placements SA (“BCP”) of Geneva/Zurich “on your instructions”. The debit advice is addressed to “Compte XXXXX” – the word “Compte” being typed, but the name and address being deleted by persons unknown in circumstances not, we think, explained by Dr Bouden. On the face of it an addressee beginning with “Compte” will be located in a francophone country. Dr Bouden also produces two prior documents, being he says the only documents relating to the alleged BCCI facilities found on ABCI’s files. Both are dated 8^th June 1982 and are sent from BCP’s Geneva manager, Mr Auch, to Dr Bouden at a telex number in France. In the two telexes sent at 0903 and 0907 Mr Auch says that he is awaiting London’s response in two days or shortly. In a third telex sent at 1833 on 9^th June 1982 to Dr Bouden at the same French telex address, BFT gives instructions for passing to ABCI regarding the payment of monies to BCT. No documents have ever been produced to show any banking relationship or account in London, from which any payment was made or through which any payment passed. The fact that BCP consulted BCCI (its then parent) in London in relation to a transaction about which it was corresponding with Dr Bouden does not go any way to prove any such relationship. Even if any aspect of this transaction was at some point discussed in London as Dr Bouden suggests, there is nothing to show that it involved a borrowing in London. On the contrary, any such discussion would be quite consistent with any actual lending being effected by BCP in Geneva to ABCI in Geneva or France – as on the face of it occurred under BCP’s debit note to Compte XXX. Further, it is clear that the monies remained in ABCI’s account, even at Swiss Bank Corporation, until remitted to BCT for BFT. On this basis there is no good arguable case that ABCI sustained damage within the jurisdiction. It sustained it in Switzerland. Even if that were wrong, and one should look at the place where its account was debited, there is no good arguable case for locating that in London. It was on the face of it either in Switzerland or in France.

For these reasons, we would uphold the Judge’s order setting aside the leave to serve out in the Conspiracy action.

Determination of this issue is, for reasons we have already given, not critical to the outcome of any part of this appeal. Nevertheless, it occupied a good part of the Judge’s judgment, and of the argument before us. In those circumstances, we address it as follows. The Judge’s judgment at paragraphs 133-176 provides a clear statement of the issues and of his views, with which in the event we find ourselves very much in agreement. The starting point is that, despite numerous and obvious occasions for referring to them, a number of, on their face, vital documents were not produced or referred to until dates in 1993 and 1995. The documents not produced until 1993 are the letter dated 2^nd April 1982, together with a “subscription application form” with a footnote recording that it “is attached to our letter of 2.4.82 from London in which ABCI accepted your offer to invest in BFT”; the text of ABCI’s version of a shareholder subscription form “made in London” dated 2^nd April 1982; a version or versions of a letter from ABCI to BFT dated 30^th July 1982 containing handwritten postscripts; letters from ABCI to BFT dated 8^th February and 3^rd May 1984; and letters from BFT to ABCI dated 9^th May, 9^th November and 26^th December 1988. The documents not produced until 1995 are minutes of shareholders’ meetings of ABCI dated 19^th and 28^th July 1982; a letter from ABCI to BFT dated 19^th July 1982 (accompanied by a further “subscription application” with a footnote referring to the letter dated 19^th July and purporting to confirm the application of 2^nd April 1982 and/or to constitute acceptance of BFT’s 1981 offer); and a letter from ABCI to BFT dated 5^th November 1988. Further, as emerged before us, while the minutes of 19^th July 1982 were produced exhibited to an affidavit sworn 3^rd May 1995, the minutes of 28^th July 1982 were only produced in October 1995 – a matter of some interest when one sees the observation made by Miss Christiansen in an affidavit sworn 26^th June 1995 about oddities in the earlier minutes, which the later produced minutes purport to correct.

There is a notable absence of any mention of all or some of the documents dated 2^nd April and 19^th July 1982 at various times and in various documents and connections, and no satisfactory explanation for failure to mention them, if they then existed. Above all, no mention of them was made in the ICC arbitration between ABCI and BFT in 1987. ABCI was claiming declarations that the transfer which it had made in 1982 was made exclusively to subscribe in an increase in BFT’s capital, that BFT was solely responsible for the failure to complete the transfer, that ABCI was entitled to recover the sum transferred in the currency (dollars) in which it had been transferred, plus capitalised interest, and orders accordingly. The parties’ request for arbitration dated Tunis 4^th May and Paris 6^th May 1987 and the “mission statement” of 28^th May 1987, which was also signed by ABCI and BFT and which established the role of the arbitrators, explained the genesis of ABCI’s alleged investment in BFT. The contractual sequence according to these documents consisted in BFT’s invitation to subscribe by public notice dated 24^th November 1981, the MOF’s authorisation dated 23^rd April 1982 giving permission for ABCI as a non-resident company to subscribe and ABCI’s signature and submission of a subscription application of that date, which is accepted on all sides as genuine and which contains no reference to any document dated 2^nd April 1982. I note in parenthesis that this also matches the sequence set out in minutes dated 7^th June 1984 which the MOF sent to BFT on 24^th August 1984, recording the MOF’s examination of the ABCI’s applications to invest in BFT. The next and final steps according to the arbitration request and mission statement were a guarantee from BCT received 2^nd July 1982, followed by ABCI’s transfer of the $4.14 million by the end of July 1982. Neither arbitration request nor mission statement made any reference, or in reality left any room in their accounts, for what are now said to have been the critical events and documents of 2^nd April and 19^th July 1982. Yet such documents would have been the most obvious proof of negotiations for a 50% share in BFT’s capital and of ABCI’s intention to take up such a share, and on ABCI’s case of the actual contract to that effect. Bearing in mind the jurisdiction provisions which such documents contained, it is doubly remarkable that they were not relied upon as a basis for the ICC arbitration. The request for arbitration is on its face an ad hoc agreement to submit to arbitration.

Dr Bouden’s explanation for the existence of the first two “subscription applications”, one dated 2^nd and the other (admittedly genuine) dated 23^rd April 1982, is that he was invited to Tunisia in the second half of April as a result of “concerns that the terms negotiated by ABCI as reflected in the 2^nd April 1982 letter were too generous to ABCI, and BFT and the Tunisian authorities wanted to renegotiate”. He says that, after long discussion, “the Minister [of Finance] finally agreed to the commercial terms of the investment”, including a new term (which was recorded in the MOF’s letter dated 23^rd April 1982) whereby ABCI agreed to reduce its 50% participation if the Tunisian State decided in the future to restrict foreign shareholdings. Dr Bouden says that, in order to register the MOF authorisation, the MOF then tried to obtain ABCI’s subscription of 2^nd April 1982 from BFT’s offices, but these were by then closed, so he prepared (and signed) “another identical version of the subscription application …. made originally on 2^nd April 1982”. This application (which BFT says was the only application ever submitted) bears a BFT stamp with signature and a date-stamp of 23^rd April 1982, though no sign of any MOF stamp. Unlike the alleged prior application dated 2^nd April 1982 (and unlike the alleged third application dated 19^th July 1982, produced in 1995) the application dated 23^rd April 1982 contains no footnote referring to any letter of 2^nd April 1982. Nor does it refer to any prior application of 2^nd April 1982, as might have been expected if it was being made because it had not proved possible to obtain access to that application.

The failure to refer to the documents dated 2^nd April and 19^th July 1982, if they existed, is the more surprising when one looks at other letters produced in 1993 and 1995. The handwritten postscripts added to ABCI’s letter dated 30^th July 1982 refer to the letter dated 2^nd April 1982 as the acceptance forming the contract (but made no reference to the documents dated 19^th July 1982). The first postscript reminds BFT of its obligations under the terms of that letter, and proceeds: “Clearly we shall not fail to initiate proceedings, law suits and actions under international arbitration and through the courts in London and Paris”. That is a clear reference to the jurisdiction provisions of the letter of 2^nd April 1982. This makes it the more strange that the letter of 2^nd April 1982 was never mentioned in the ICC reference.

The postscripts on ABCI’s version of the letter dated 30^th July 1982 appear on a signed version of the letter after BFT’s “received” stamp dated 30^th July 1982. The copy of the same signed version which was put before the ICC arbitrators by BFT by letter dated 22^nd May 1987 contained the same received stamp, but no postscripts. Dr Bouden in his witness statement dated 21^st July 2000 explains that the letter was composed during a visit to Tunis and typed by Mr Riahi’s secretary, but that, during discussions, it seemed that a dispute about the freezing of ABCI’s assets was likely to arise, so that he decided to re-write the letter. The secretary had left the office, so he added his additional points as the discussion was developing. ABCI has in fact produced two versions of the letter, with the postcripts differently written on each. Dr Bouden says that these were for different interested parties. The postscripts are addressed to BFT, yet ABCI did not point out to the ICC arbitrators that BFT had not produced the full letter. The first postscript starts

“In delivering this letter to you in your own hands, it is the first time that, to my regret, I must require you to have the BFT stamp affixed by your services by way of acknowledgement of receipt/letter/arrival”.

This postscript is however written underneath the stamp, in a position and manner which on both letters suggests that the stamp was already there – as it also is on BFT’s version of the letter which contains no postscripts. These points combine to create a curious picture. We are conscious that they may be said to involve over-detailed analysis of matters which could only be properly investigated at a trial. However they do not stand alone. It will be necessary in due course to stand back and to look at the whole picture, to see whether ABCI has shown a good arguable case as the genuineness of the central documents on which it relies.

Two further letters produced in 1993 are those dated 8^th February and 3^rd May 1984. Each again contains explicit references to the letter dated 2^nd April 1982 as ABCI’s acceptance of BFT’s offer (but no reference to any documents of 19^th July 1982). If these existed, they underline the strangeness of ABCI’s failure to rely on the letter of 2^nd April 1982 in the ICC arbitration.

Three further letters produced in 1993 are dated 9^th May, 9^th November and 26^th December 1988. They are all from BFT, signed by Mr Greche. The first (bearing a fax transmission date of 24^th May 1993) starts by referring to “the contract between the BFT and ABCI, formed by our offer and your acceptance dated 2^nd April 1982”. The second dated 9^th November 1988 (also bearing the fax transmission date of 24th May 1993) refers to a letter from ABCI dated 5^th November 1988 (a letter of that date being later produced in 1995, bearing a fax transmission date of 1^st August 1995). The third says that, recourse to arbitration having “proved ineffectual, it appears to BFT that the London jurisdictions are the more appropriate in the first place”, and that “The choice of jurisdiction rests of course with the plaintiff. BFT SA (PLC) will defend its own interests”. An affirmation dated 25^th October 1994 from Mr Belhadj, BFT’s then judicial administrator, says that Mr Greche has affirmed that he never signed such letters, but remembers only giving Dr Bouden a number of sheets of paper signed in blank for personal reasons in March 1993. Dr Bouden’s response to this was that Mr Greche “was given a 15-year sentence and has been in jail since 1994 and is not in a position to say anything else”. Mr Greche’s sentence was imposed in December 1994, but Mr Milligan submits that he was even more likely to co-operate in a false accusation against Dr Bouden if he was about to be sentenced. Viewed in isolation, that is not therefore a point on which it could be said that ABCI does not have a good arguable case.

The Judge was however justified in our view in drawing particular attention to the contents of the letters dated 9^th November and 26^th December 1988 said to have been sent by Mr Greche, at a time when ABCI and Dr Bouden were, according to Dr Bouden (cf his statement dated 21^st July 2000, paragraphs 25.1 on), under intense and illegitimate oppression to surrender ABCI’s rights and shares. Yet despite such oppression, such letters were, if genuine, as the Judge observed, strongly supportive of ABCI’s position, in the case of the letter dated 26^th December extraordinarily so. A reading of the letter bears out this comment, and the unlikelihood of anyone being prepared to write such letters on BFT’s behalf. The letter dated 9^th November 1988 is in terms which in fact mirror, precisely and unusually, assurances sought by Dr Bouden in the letter dated 5^th November 1988 (produced by ABCI in 1995 as the letter to which it was replying). The letter dated 9^th May 1988 was written before any oppression. Its terms are remarkable for their consistency with ABCI’s case as presented during the years 1993-95 – containing references to “the contract between the BFT and ABCI, formed by our offer and your acceptance dated 2 April, 1982” as well as a detailed “confirmation” of BFT’s agreement to submit any dispute “which might arise, simultaneously or at different times, to the London jurisdictions, being the place where the contract governing this investment was entered into, English law being applicable, and/or those in Paris, the place where the arbitration award was rendered”, at the plaintiff’s “free choice”, with the additional remark that “aspects of the dispute which the plaintiff cannot, or does not wish to have dealt with by one jurisdiction may be dealt with by another”. Even making due allowance for the fact that ABCI was at that date in full control of BFT, this letter strikes a strange note. It contrasts with the apparently ad hoc nature of the submission to ICC arbitration, and indeed with the position put before the English courts when leave to serve out came to be sought.

The letter dated 5^th May 1988 contrasts still more extraordinarily with an unquestionably genuine document dated 11^th March 1988 – only two months earlier. This is the invitation to a general meeting signed by Dr Bouden as chairman of the board of BFT to shareholders, together with a report and accounts. The report confirms clearly enough that Dr Bouden was under no constraint then to prevent him writing anything he wanted or felt relevant. It contains a lengthy, full-blooded attack on BFTs’ old management and auditor. It includes an extensive chronology of ABCI’s investment. This consisted of descriptions of the 18^th June 1981 offer, the 23^rd April MOF authorisation and ABCI’s subscription agreement, the further BCT and MOF authorisation on 2^nd July, the payment of 27^th July, BFT’s refusal on 28^th July to hand over shares and its freezing of the sums paid, and subsequent events up to 1987. There is no hint of any relevant documents or events on either 2^nd April or 19^th July 1982.

In a lengthy letter dated 19^th May 1989 from Mr Kefi, acting for ABCI, and in the even lengthier letter dated 25^th December 1990, of another lawyer, Mr Houcine, acting for ABCI, there are again no references to the letters of 2^nd April and 19^th July 1982, although it is right to say that the origin of ABCI’s shareholding is only briefly summarised.

In the series of English proceedings begun by ABCI in and since 1993, ABCI has from the outset relied upon the documents dated 2^nd April 1982 as the acceptance of an offer by BFT. So in the Enforcement action begun on 3^rd June 1993 the points of claim on the writ pleaded and Mr Hallonen’s affidavit attested to and produced those as the contractual documents. Mr Belhadj in an affirmation in response dated 1^st December 1993, after saying that this was not the place to refute Mr Hallonen’s statement of facts, summarised the history as being that, after ABCI had indicated its wish to subscribe and the MOF had approved this in principle on 23^rd April 1982:

“Negotiations were still continuing on 21^st July 1982 when a meeting was held at [BCT]. However, no agreement was reached due to, inter alia, [ABCI’s] objection to payment of a premium for the shares”.

To this Mr Hallonen responded that “it is necessary for me to set out a full account”. His full account reiterates the case made regarding the 2^nd April 1982 documents. It moves simply and directly from the unconditional agreement allegedly reached in April, to the MOF guarantee dated 2^nd July, and then to the transfer of monies in late July 1982. It fails noticeably to make any reference to any events or documents of 19^th July 1982, despite what Mr Belhadj’s had said about events in July 1982. As to that, all Mr Hallonen says is that:

“Mr Belhadj refers to a meeting on 21^st July 1982 at [BCT]. ABCI were not invited, did not attend and know nothing of this meeting or of what was discussed at it. The suggestion is however given …. that ABCI was present or that it formed part of the negotiations between ABCI and BFT. This is false.”

On 4^th October 1994 Miss Christiansen of Herbert Smith swore her affidavit in the Fraud action attesting to the fact that ABCI had not been incorporated on 2^nd April 1982 and to the absence of any evidence of ratification. By letter dated 14^th March 1995 Messrs Finers, ABCI’s then solicitors, enclosed a copy of minutes of a general meeting of ABCI in Jeddah dated 20^th December 1982 “which adopts the contract”. The minutes, the authenticity of which there is no reason to doubt, are signed by Prince Bandar, Dr Bouden and Arab Business and Commerce International as shareholders and are of considerable interest. According to them the general meeting ratified the investment operation and

“all procedures and decisions taken by the Company’s Chairman, who is solely responsible for it, as the subscription operation was made totally legally and with the permission of the Tunisian Government and the Tunisian monetary authorities and in particular the letter of the [MOF] dated 23/4/1982; the letter of [BCT] No. 62871 dated 2/7/1982 and the consent of [BFT].”

There is no reference to any documents of 2^nd April or 19^th July 1982. There is no reference to any previous board meeting, or to the previous ratification which the minutes of the alleged shareholders’ meeting dated 19^th July 1982 purport to record. No subsequent reliance has been placed by ABCI on the minutes of 20^th December 1982. No explanation has ever been provided as to any of these matters – or, above all, as to why, if there had already been ratification by the shareholders on 19^th July 1982, this (further) ratification took place on 20^th December 1982, and why it made no reference to any earlier ratification on 19^th July 1982.

ABCI’s present case, based on the combination of events and documents of 2^nd April and 19^th July 1982, first emerged about a month and a half later, in Dr Bouden’s affidavit sworn 3^rd May 1995 in the Enforcement and Fraud actions, producing draft amended points of claim to support “ABCI’s case that it ratified, accepted and adopted the contract [dated 2^nd April 1982] after its incorporation”. The draft referred to the contract as “adopted and/or made upon incorporation and/or by the decision and letter of 19^th July 1982” (the first uncontentious reference to either) “and/or by payment ….”. Miss Christiansen in her affidavit in reply sworn 26^th June 1995 pointed to the unspecific nature of the allegation, and went on to submit that there were oddities about the purported minutes dated 19^th July 1982 which Dr Bouden had exhibited – in particular the oddity that they suggested that accounts approved on 18^th July had been sent to ABCI on 27^th June 1982. Before us some criticism was addressed by Mr Milligan to Miss Christiansen’s failure to take issue with the letter dated 19^th July 1982, but, since it (as distinct from the minutes) was not exhibited until later in 1995, there is nothing in this.

It is easy to accept that the answer to the oddity regarding the month that Miss Christiansen spotted is that whoever composed the minutes wrote 18^th July by mistake for 18^th June 1982. What does no more than add to a sense of unreality as one looks at the position overall is that, no sooner had Miss Christiansen drawn attention to this oddity, than ABCI was able to produce from its files in October 1995 the antidote, in the form of further minutes of another hitherto unmentioned shareholders’ meeting on 28^th July 1982 reading as follows:

“It was resolved by way of ordinary resolution that our Company has transferred, from its funds by virtue of its instructions and order as stated in its resolution of 19.07.1982 and as transmitted the same day by our chairman to our bank, holder of our US Dollar account, the sum of U.S.D four million one hundred thirty nine thousand zero seventy two dollars and eighty five cents (USD 4,139,072.85), in payment of the countervalue of five hundred thousand (500,000) shares of BFT, which enforced on the 19.7.82, irrevocably, the contract formed by our acceptance, of the 19.7.82, transmitted by our letter of the same day to BFT, of the offer of BFT, made to us, on the 18.06.82, following the approval of its balance sheets by its (BFT) General Meeting of 18^th June 1982 (and not of 18^th July as mentioned by a typing mistake in the minutes of our General Meeting of Shareholders of 19.07.82). Our acceptance of 19.7.82 of the offer of BFT is also a confirmation of our earlier acceptance of the 02.04.1982.”

So it was that, not only had ABCI itself observed and corrected the very mistake 13 years before Miss Christiansen drew attention to it, but it was now able in October 1995 to identify and produce a further significant document dated 28^th July 1982 not only correcting the mistake but also referring to “the contract as formed by our acceptance on the 19.7.82” and to that acceptance being “also a confirmation of our earlier acceptance of 02.04.1982”.

ABCI submits that the respondents have not themselves laid any proper basis for challenging the genuineness of any of the documents they impugn. They submit that the respondents do no more, whenever an apparently unhelpful document emerges, than simply to add it to the list of suspect documents. If that were all that was happening, the point would be powerful. But the contents of the documents combine in this case with the timing and context of their production and with the case being run before they were produced, to create a picture which tests credulity too far. ABCI also submits that we should view with suspicion BFT’s case that it knows nothing about the documents now relied upon. Contrary to Mr Milligan’s initial submission, BFT has clearly put the authenticity of all such documents in issue (see in particular Miss Riches’ affidavit of 21^st October 1999, paras. 32 and 41.5). But ABCI questions the development and basis of this denial. Mr Belhadj, who also disputed authenticity in his second affirmation sworn 25^th October 1994, was appointed during the course of the oppression of which Dr Bouden was subjected, and has thereafter brought several sets of proceedings against Dr Bouden personally. He only appears to have asked Mr Riahi about the postcripts to the 30^th July 1982 letters. Miss Christiansen in her affidavit of 26^th June 1995 also only attests to asking Mr Riahi about different matters, and there is evidence that by at least 1994 Mr Riahi was suffering from Alzheimers, which Dr Bouden attests was by then severe. If the problems about the authenticity of the documents involved no more than a conflict between the two sides’ witnesses, it would no doubt be impossible to conclude that ABCI does not have a good arguable case. But the fundamental problems derive from ABCI’s own conduct and the documents themselves.

Mr Milligan also drew attention to the strongly arguable (and as yet unanswered) case that ABCI is able to make that BFT’s original accounts, on the basis of which ABCI says that it invested, were false; and that Dr Bouden was put under duress. He also submits that there is strong evidence that Tunisian lawyers instructed by ABCI have been pressurised and forced to withdraw. According to Dr Bouden, in the course of the Fraud action, one such lawyer, Maitre Selmi, told him of duress being applied to him, but Maitre Selmi then denied saying any such thing, and gave a different reason for withdrawing. ABCI was, however, able to produce an affidavit dated 20^th December 1994 from another lawyer, Maitre Jaidi, attesting to the duress inflicted on Maitre Selmi. But Maitre Jaidi then himself gave an affirmation to the respondents, withdrawing that affidavit. Criminal proceedings were begun against Maitre Jaidi in France for perjury, and on 22^nd March 2001, he pleaded guilty to having perjured himself by the affirmation which he said that he had given under pressure withdrawing his affidavit of 20^th December 1994. Clearly, there are some murky aspects of the picture and there is a good arguable case for asserting involvement on the part of some or all of the respondents in some of them. But it remains incumbent on ABCI to establish a good arguable case justifying leave to serve out.

ABCI submits that the Judge failed to have proper regard to the existence of confirmatory evidence, going to support its case on the events and documentation of 2^nd April and 19^th July 1982. It refers to the evidence of Armand and Marios Araktingi, now resident in Paris. In their second 1996 affidavits, both these deponents attested to a recollection that on 2^nd April 1982 Dr Bouden sent a letter accepting BFT’s offer to invest, and M. Armand Araktingi added that “As a matter of fact we [Dr Bouden and he] went together to the post office two blocks away from our premises at 60 Park Lane, and he posted the mail of acceptance that he had earlier given me to read”. Both also said that they recalled that Dr Bouden later received BFT’s 1981 accounts, that a general meeting was held at 60 Park Lane on 19^th (or in the case of Marios Araktingi “around mid-July”) 1982, and that Dr Bouden informed them thereafter that he had accepted the offer to invest in BFT in its final form. In a third affidavit sworn 2^nd February 2000, M. Armand Araktingi reaffirms what is said about 2^nd April 1982, but now says not only that Dr Bouden on 19^th July 1982 announced that the deal for acquiring shares in BFT was concluded after the meeting, but also that he went with Dr Bouden to the post office on that day also and “he mailed, then and in my presence, the letter of acceptance to ABCI to BFT in Tunisia, as we did earlier and in the same manner on the 2^nd April that same year”. Not only does this evidence require one to believe in the deponents’ astonishing, if varying memory of events, of between 14 and 18 years previously, but, if all was as recounted, then, as the Judge remarked, the relevance of the events and documents of 2^nd April and 19^th July 1982 can never have been forgotten or underestimated by ABCI and Dr Bouden. That only makes ABCI’s omission to mention and rely on them and its subsequent production of them in stages the more extraordinary.

There is also an affidavit sworn 24^th June 1999 from a barrister practising in Paris, Mr Christopher Mitchell-Heggs. Without producing any file or documents, he recalls receiving instructions relating to ABCI’s proposed investment, which however proved to be restricted to company formalities. He knew that the incorporation of ABCI was delayed several times, due, he was told, to requests being made from the Tunisian side. He “was not involved in the letter of acceptance of 2^nd April 1982 because I had not been asked to assist further ….” But:

“On an informal discussion, around mid 1982, Mr Bouden informed me that probably his company was not going to carry out its investment despite its acceptance, and showed me the letter of acceptance, 2^nd April 1982. I remember having told him, that he should have done it in a more precise way, but at least, it established that the investment contract would be governed by and under the Jurisdiction of the English courts, which gave him and his company a minimum protection.

A short time later, around the end of July 1982 he informed me that finally he had got the guarantee from the Central Bank and the Ministry of Finance, and that he had just sent the final letter of acceptance to the Tunisian abovementioned parties to proceed with this investment.”

Even viewed in isolation, we do not think that that evidence of what occurred 17 years ago, without any apparent documentary basis, can carry much weight. If, as appears, Mr Mitchell-Heggs was aware of the delay in incorporation, it seems remarkable that he did not comment on the potential problems of a company “under formation” purporting to make such a contract.

More importantly, no individual piece of evidence can be viewed in isolation. There must overall be a good arguable case. ABCI submits that the Judge wrongly reversed the burden of proof, and that he should have proceeded on the basis that the documentation was genuine, unless and until the respondents made good the contrary proposition. Instead, all that they invited him to do was to refrain, as he did, from making any finding of forgery, but nonetheless to conclude that no good arguable case had been shown of authenticity. Since that was the test that the Judge was obliged to apply, we do not however consider that he can be faulted for his approach – even though it is implicit in it that he must have concluded (as we do) that there are very strong positive reasons to doubt the genuineness of the critical documentation on which ABCI relies. Our attention has, since the hearing, been drawn to the fact that a French investigating judge has, on 31^st January 2003, decided not to put Dr Bouden en examen with regard to the authenticity of the documents and not to set aside an order for his discharge, but to return the matter to the Chambre d’Instruction (though we are told that this may not exclude further review of the matter there). The investigating judge’s reasoning is not available due to the secrecy of the process of instruction. That process was on any view different in nature and content to the present, which we can also only undertake on the evidence before us.

Further, ABCI submits that the authenticity of the contractual documentation of 1982 would be a subject-matter of any trial, certainly in the Conspiracy action, but also, it submits, in the Settlement Agreements action. The submission with regard to the latter action is only good on the hypothesis that, contrary to our previous conclusions, that action raises questions under the alleged Share Subscription Agreement. It is also the case that, if leave to serve out is set aside in the Conspiracy and Settlement Agreements actions, there would be no trials of the claims involved in this country and it appears unlikely that there would ever be trials now of such claims anywhere. Be that as it may, even approaching the matter with the reserve necessary when an issue is involved that could well arise in a trial of the relevant or some other action in this country, we share the Judge’s conclusion that no good arguable case has been made on the authenticity of the documents of 2^nd April and 19^th July 1982. If the adjective “good’ was meant to add something to the simple word “arguable”, as we think that it was, then, although there may be plenty to argue about, we cannot regard the appellants as having shown a good arguable case which could, even subject to the court’s discretion, enable the exercise of jurisdiction over the foreign respondents.

As we have already said in actions 1995 Folio Nos. 838 and 1527 the judge awarded the respondents indemnity costs and in action 1993 Folio No. 933 standard costs. In each case he awarded interest on the whole amount of these costs at 8% from 7^th December 2000. ABCI appeals the Judge’s orders of indemnity costs and interest. BFT, STB and BCT/MOF were separately represented. ABCI objected to paying three sets of costs but the judge rejected this objection. ABCI says that he was wrong to do so.

Indemnity Costs

In his extemporary judgment on costs the Judge referred to the relevant rules in CPR 44 and the cases of Reid Minty v Gordon Taylor (2002) EWCA CIV 1723, Kiam v MGN Ltd. (no.2) 2002 EWCA CIV 66 and Amoco v British American Offshore Ltd. (2002) BLR 135. Mr Milligan submits that these cases show that a judge should only make an order for indemnity costs where the paying party’s conduct is wholly unreasonable. This was not the test which the Judge applied. Then Mr Milligan submits that the Judge failed to appreciate the extent to which indemnity costs may differ from standard costs as this court made clear in Lownds v Home Office 2002 EWCA CIV 365. In any event Mr Milligan says the Judge should not have ordered indemnity costs in this case and that his reasons for doing so were unsound.

CPR Part 44.3 contains the general rule that in deciding what order for costs to make the court should have regard to all the circumstances including the conduct of the parties. That, as paragraph (5) provides, includes (a) conduct before as well as during the proceedings, (b) whether it was reasonable to raise, pursue or contest a particular allegation or issue and (c) the manner in which a party has pursued his case or a particular allegation or issue. Rules 44.4 and 44.5 make it clear that an important difference between standard and indemnity costs is that the court must now consider proportionality when assessing standard costs but is not required to do so when assessing indemnity costs. The other well known difference is that doubts are resolved in favour of the paying party on a standard costs assessment and in favour of the receiving party on an indemnity costs assessment.

There is nothing in the rules which says expressly that the court should not make an order for indemnity costs unless it finds the paying party’s conduct unreasonable, let alone wholly unreasonable. Decisions by this Court in particular cases should be read with this very much in mind. The thinking behind the CPR was that they would speak for themselves and that courts would not have to refer to an ever increasing body of authority in order to apply them. For this reason we do not propose to embark upon an exhaustive analysis of the cases.

However in Reid Minty May L.J. (with whom the other members of the court agreed) said at paras. 27 and 28:

“Under the CPR it is not, in my view, correct that costs are only awarded on an indemnity basis if there has been some sort of moral lack of probity or conduct deserving moral condemnation on the part of the paying party. The court has a wide discretion under rule 44.3 …. As the very word “standard” implies this will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. If costs are awarded on an indemnity basis, in many cases there will be some implicit expression of disapproval of the way in which the litigation has been conducted. But I do not think that this will necessarily be so in every case.”

These passages were considered in Kiam in the context of a defendant’s refusal to accept an offer in settlement of a libel appeal. Simon Brown L.J. said at para. 12:

“I for my part understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight. An indemnity costs order made under Part 44 (unlike one made under Part 36) does, I think, carry at least some stigma. It is of its nature penal rather than exhortatory.”

We should add however that indemnity costs are only compensatory. They enable the receiving party to recover more of the costs which he has incurred than standard costs but never more and usually less than his actual costs. One reason for awarding indemnity costs is that if the receiving party’s costs have been increased because his opponent has behaved unreasonably it is fair that he should recover an enhanced amount of his costs.

In Amoco Langley J. said that to justify an award of indemnity costs there had to be some added factor if the general rule was not to apply. Such a factor existed in that case because the paying party’s case at trial had differed substantially, both legally and factually, from the case made at the time of termination of the contract in question and had been pursued by that party on the basis that its commercial interests took precedence over the rights and wrongs of the situation. The Judge thought that the present case was generally very similar to the position in Amoco.

Lownds was decided 2 days after the Judge gave his costs judgment but in the context of a small personal injury case Lord Woolf commented that indemnity costs were considerably more favourable to the receiving party than standard costs, since the latter had now to be proportionate as well as reasonable.

The Judge gave five reasons for ordering indemnity costs. Firstly, the constantly changing case which was, he said, “of ever changing hue”. Second, the case as developed took it outside the basis upon which leave to serve out was granted and therefore the court’s curative jurisdiction had to be invoked. Third, ABCI was responsible for an unacceptable volume of documentation and the fragmentation of affidavits and exhibits. Fourth, there was non-disclosure in action 1994 Folio No.1527. Finally, ABCI had suffered a resounding defeat. The Judge specifically rejected the argument that his costs order should reflect the fact that his findings about the authenticity of the documents and non-disclosure contained an unacceptable whiff of fraud.

Mr Milligan counters the judge’s five points by saying that ABCI’s case only really changed once in order to beat the point that it had not been in existence in April 1982; that the respondents were largely responsible for the volume of documents by their allegations of forgery, by taking proceedings in France and raising issues of Tunisian law. The need to involve the court’s curative jurisdiction and the non-disclosure alleged did not raise issues of probity and the fact that ABCI lost was only the threshold, so could not be a reason, for an award of indemnity costs.

We remind ourselves that orders for costs are made in the trial judge’s discretion with which we should not interfere unless he has misdirected himself or obviously made the wrong decision. We do not think that the Judge fell into either of these errors in this case.

The Judge was not constrained to make an order for standard costs unless he made a specific finding that ABCI’s conduct was wholly unreasonable. The reasons given by the Judge amply justified his conclusion that there were added factors in this case which meant that the general rule should not apply and an order for indemnity costs should be made. Cumulatively they amount to misconduct or at least a high degree of unreasonable conduct. Such conduct could not be categorised as merely wrong or misguided with the benefit of hindsight. So whatever test one applies it is met in this case. The Judge’s judgment shows that he was well aware that indemnity costs are not limited by the principle of proportionality. He may not have been aware of how that principle might impact on the recoverable costs in this case, but this is not in any way a standard or typical case and so we very much doubt whether anyone could say what that impact might be.

The Judge’s conclusions on the merits, which we have upheld, justify the view that ABCI changed its case to meet the various problems or defences which it faced from time to time. The way it did so necessitated examining how it put its case during the many years that this litigation has dragged on. The fact that it did so by reference to documents of very doubtful authenticity makes things worse. The changing case was obviously a major cause of the voluminous documentation (12 ring files) which the court had to consider until some attempt was made to put ABCI’s case in one document (Dr Bouden’s third witness statement of 20^th July 2000). Until then the respondents had been referred to other affidavits or statements and inundated with documents without any accompanying explanation as to their relevance. ABCI completely failed to disclose the fact that it had not been in existence in April 1982, when obtaining leave to serve out in action 1527 in October 1994 although shortly before obtaining such leave it had been alerted to the point ( see para. 36). In both actions 1994 Folio No.1527 and 1995 Folio No.838 it had to seek to rely on the court’s curative jurisdiction because its case changed.

Separate representation

In considering this part of the appeal it is first necessary to rehearse some of the history of the litigation to which we have already referred. Action 1993 Folio No.933 (the Enforcement action) was started in June 1993 against BFT alone. It instructed Herbert Smith who have continued to act since that time. In January 1994 action 1994 Folio No.36 (the Fraud action) was started, again against BFT alone. Action 1994 Folio No.1527 started in September 1994 against STB, BCT and the MOF, but not BFT. STB, instructed Clifford Chance who have acted for it since that time. BCT and the MOF instructed Baker and Mackenzie. Action 1995 Folio No.838 was started against all four respondents in May 1995, and served out later in the year. After Waller J. struck out action 1994 Folio No.36 at the end of 1995 very little happened in any of the remaining actions until early 1999 when ABCI instructed new solicitors, Linklaters, and all the respondents challenged jurisdiction. In February 1999 after the respondents had applied for security for costs Linklaters, wrote to Herbert Smith and Clifford Chance contending that it would be unreasonable to expect ABCI to provide security for both sets of costs. At the subsequent hearing before Toulson J. in July 1999 he ordered security for separate representation but said he was not pre-judging the issue. He added:

“The courts needed to look carefully at any assumption that because you have got several parties everybody has to be separately represented at each stage on every point.”

We are told by counsel on behalf of BFT and STB that they were conscious of this and that in the preparation and presentation of their cases on these applications they have agreed a division of labour to avoid duplication of costs.

The Judge rejected Mr Milligan’s submission that ABCI should only be liable for one set of costs or at least should not be liable for BFT and STB’s costs because the defendants were not common to the three actions with which he was concerned and it seemed to him appropriate that they should be separately represented. It was open to ABCI to argue on the assessment that there had been duplication.

Mr Milligan submits that the judge was wrong. The respondents were in effect one family: The MOF controlled BCT which controlled STB which controlled BFT. Their interests were the same, at least so far as the jurisdiction issues were concerned. One set of counsel and solicitors could have represented all of them, making it clear which evidence was being put in and which submissions were being made on behalf of which defendant or defendants. This should have happened when action 838 was started or at least when all defendants decided to challenge jurisdiction. At the latest it should have happened after Linklaters’ letter and Toulson J’s warning in July 1999. This court should reduce BFT and STB’s recoverable costs by 50% to reflect this argument. Leaving the issue to the assessment was unsatisfactory. The starting point would be that each respondent had an award of costs in its favour, and it would be difficult to see if there was duplication and if so which party should suffer a reduction as a result.

We can deal shortly with the position of BCT and the MOF. As State entities they were entitled in our view to separate representation in this case. Their interest might well be different from the Tunisian commercial parties involved in this dispute, however closely connected they are to those parties. For example one of the allegations made by ABCI in support of its forum conveniens arguments was that it could not have a fair trial in Tunisia because the judiciary was not independent. BFT however, (but not STB) does not contend that Tunisia is the appropriate forum. The State parties have further points about sovereign immunity and the point about service to which we have referred in paras. 29 - 34 upon which it was appropriate for them to be separately represented. So far as the jurisdiction issues which we have had to decide are concerned they have agreed to be bound by the decisions affecting the other respondents and have made no separate submissions on those issues themselves. Their appearance before the Judge and this Court was limited to arguing the service point. This all supports our conclusion that it was reasonable for BCT and the MOF to be separately represented. Mr Milligan did not strongly argue to the contrary. He concentrated his attack on STB and BFT to which we now turn.

Here we were attracted by Mr Milligan’s submissions when he opened his appeal. The points he makes have obvious force and in an ordinary case would probably have carried the day. But this is not an ordinary case. Mr Milligan described it as “mesmerising”. So it is. It is also extremely complicated. In such litigation it is not possible to see whether each defendant’s interests are the same or will remain the same. For example, if ABCI succeeded in setting aside the 1989 settlement agreements it would regain control of BFT in which case it is likely that there would be an acute conflict of interest between BFT and STB.

The history of the litigation and the involvement of different parties in different actions is also important. Between June 1993 and the end of 1994 only BFT was involved in the English proceedings. When STB first became involved in action 1994 Folio No.1527 at the end of 1994 the allegations against it were not the same as those with which BFT were already concerned and had nothing to do with the Settlement Agreements which had been raised in defence to action 1993 Folio No.933. There was no reason at this stage therefore why STB should have instructed the same solicitors as BFT. It was only when action 1995 Folio No.838 was served in late 1995 that BFT and STB first became defendants to the same action and issues common to both of them arose. There was very little activity between that time and early 1999 when Linklaters came on the scene and the jurisdiction challenge was mounted by all defendants. Should BFT then have instructed Clifford Chance or STB have instructed Herbert Smith? They might have done so but we do not think it was unreasonable for them not to. Although there were common issues there were also issues which concerned only one party, with which their respective solicitors and counsel were already familiar. If only one firm had been instructed at that stage the earlier work of the other would have been largely wasted.

The fact that there has been a division of labour to avoid duplication of cost since early 1999 is evident from the way in which counsel dealt with the issues before us. If this division has not been organised or implemented as efficiently as it should have been this can be dealt with on the assessment. Just because this may not be an easy task does not persuade us to take the arbitrary course advocated by Mr Milligan. Assessments of costs often call for detailed and difficult analysis. The fact that this may be necessary here should not lead us to conclude that in a very complicated and, for the parties, important commercial dispute it was unreasonable for each party to instruct the lawyers of its choice.

In the course of argument it was common ground that on the assessment the costs judge could disallow duplicated costs under CPR 44.4 (1)(b) which says that the court will not allow costs “which have been unreasonably incurred or are unreasonable in amount”. In case there is any doubt about this we are prepared to direct that the costs judge should disallow unreasonably duplicated costs.

Interest

The Judge had to fix both the rate of interest and the period over which it was to run. He was presented with schedules by the respondents showing the costs they were claiming and when they had been paid. Various permutation of rate and period were suggested to him.

So far as the period was concerned, the Judge explained his decision as follows:

“It seems to me that doing the best I can in the situation in which … the applications and the actions started a very long time ago, nevertheless the major amount of costs was incurred towards the end of the period leading down to judgment, it would be right, doing the best I can, simply to push the date earlier by 12 months. Thus instead of it being 7^th December 2001 it should be from 7^th December 2000 but that will apply to the totality of the costs involved.

The crude thinking behind this is that where one starts with a relatively small expenditure which builds up over the latter period, the way of seeking to strike a balance is not to move the date to some central point but, rather, to move it back by a relatively limited period, and that is what I have attempted to do.”

There is no complaint about this part of the judge’s decision.

The Judge then went on to consider rate. What he said about this at the end of his judgment was:

“It was also mentioned that I had power to adjust the rate of interest. The short answer to the point is that I am simply not convinced one way or the other that I do have that discretion. Certainly in the past my understanding was that no such discretion existed. I have not been pointed to anything, and certainly not in subpara. (g) which gave me the impression that I had power to tinker with the rate of interest as opposed to the period of interest, and in awarding the figure from the 7^th December 2000 I should make it clear that I have had in mind that this was an 8% rate which was arguably, I think strongly arguably, somewhat above what one would call an commercial rate.”

The Judge appears to have been under the impression that as he was giving a judgment for costs he was bound to award the Judgments Act rate of 8%. It is common ground that he was wrong about this. CPR 43.3 (6)(g) to which the Judge referred says:

“The orders which the court may make under this rule include an order that a party must pay -…..

(g)

Interest on costs from or until a certain date, including a date before judgment.”

The Judge was making an order for payment of interest on costs from a date before judgment (7^th December 2000) until judgment. There is nothing in the wording of the rule, (which enables the judge to refuse to order any interest at all), which limits his discretion as to rate. The Judgments Act 1838 which does fix the rate of interest only applies to interest on costs after the date of judgment.

Nevertheless the respondents contend that there is no basis for interfering with the Judge’s conclusion because he made it clear that in his broad brush approach to the period he had taken account of the fact that the Judgments Act rate of 8% was somewhat above the commercial rate. If he had awarded a commercial rate, he would have done so over a longer period.

We are not persuaded by these arguments. The way in which the Judge dealt with the matter suggests that his justification for awarding 8% was an afterthought. It does not feature in his reasons for fixing the period as he did and it does appear that he thought he was bound to award 8%. If he was wrong about this, he does not say how he had adjusted the period to reflect the fact that 8% was above the commercial rate. It was well above the commercial rate and we think his order should be varied to provide for payment of interest at 1% over base rate.

ABCI’s appeals are dismissed with the exception of the Judge’s order for interest on costs which we vary to 1% over base rate.