Moloobhoy & Anor v Kanani

This is a case about the interplay between CPR 11 and CPR 24. CPR 11, relevantly, provides:

“(1)

A defendant who wishes to –

(a)

dispute the court’s jurisdiction to try the claim; or

(b)

argue that the court should not exercise its jurisdiction

may apply to the court for an order declaring that it has no such jurisdiction or should not exercise any jurisdiction which it may have.

[…]

(6)

An order containing a declaration that the court has no jurisdiction or will not exercise its jurisdiction may also make further provision including –

(a)

setting aside the claim form;

(b)

setting aside service of the claim form;

(c)

discharging any order made before the claim was commenced or before the claim form was served; and

(d)

stayingthe proceedings.

(7)

If on an application under this rule the court does not make a declaration –

(a)

the acknowledgment of service shall cease to have effect;

(b)

the defendant may file a further acknowledgment of service within 14 days or such other period as the court may direct; and

(c)

the court shall give directions as to the filing and service of the defence in a claim under Part 7 or the filing of evidence in a claim under Part 8 in the event that a further acknowledgment of service is filed.

(8)

If the defendant files a further acknowledgment of service in accordance with paragraph (7)(b) he shall be treated as having accepted that the court has jurisdiction to try the claim.”

Part 24, relevantly, provides:

“(1)

A claimant may not apply for summary judgment until the defendant against whom the application is made has filed –

(a)

an acknowledgement of service; or

(b)

a defence,

unless –

(i)

the court gives permission; or

(ii)

a practice direction provides otherwise.

(2)

If a claimant applies for summary judgment before a defendant against whom the application is made has filed a defence, that defendant need not file a defence before the hearing.”

The facts of this case are that the claimants are husband and wife, and both are British citizens. The first claimant, Mr Rishad Moloobhoy, is a trader in steels and bitumen, in which business he has been involved for much of his life. Until late 2005, the claimants’ permanent residence was at an address in Northwood. Since late 2005, when they moved to Dubai, they have divided their time between Dubai and London, and when in London live at an address in Cambridge Square. The defendant was aged 62 in December 2011 and is an accountant and businessman of Kenyan nationality with rights of residence in the United Arab Emirates and the United Kingdom. He is distantly related to the second claimant, Mrs Moloobhoy. At one time the defendant had his principal home in this country, but he has at least since June 2001 had his primary residence in Dubai, living at a rented apartment with his wife and his wife’s elderly mother. However, it is common ground that the defendant and his wife also own a substantial house in Pinner in North London, at which they spend at least some time each year. The deputy judge held that this was a “usual residence” for the purposes of service pursuant to CPR Part 6.2.

In outline, the claimants’ claim in this action is for an account, together with associated relief, so as to enable them to recover, pursuant to an oral partnership agreement, what is said to be their share of the proceeds of the sale of property in Dubai, the sale of which was handled by the defendant. In November 2002 the second claimant purchased a plot of land at Emirates Hills in Dubai, known as plot E146. The land was purchased in the second claimant’s name for tax reasons, but the first claimant acted for her in connection with the purchase and in the subsequent transactions referred to below. At that time the claimants contemplated building a home on this land, although in the event this did not happen and they treated the land as an investment. At about the same time the defendant and his wife purchased a second plot of land known as plot E148. It was decided that plot E146 would be transferred into the ownership of a British Virgin Island company. Apparently, for tax reasons, it could be beneficial for a purchaser then to acquire the company rather than the land itself. Accordingly the claimants incorporated a BVI company called Jackinson Equities Limited (“Jackinson”), of which the second claimant became the sole shareholder. The second claimant and the defendant became the directors of the company. Plot E146 was then transferred to the ownership of Jackinson. A similar structure was also adopted for plot E148.

According to the claimants, there was a meeting between the first claimant, acting on behalf of his wife and himself, and the defendant in London in about early 2005, at which an oral partnership agreement was concluded for the exploitation of the two plots in Dubai, the key terms of which were as follows: (1) the two plots would be sold, either before or after development; (2) the net proceeds after deduction of any development costs, conveyancing and legal fees, and other expenses would be shared equally between the claimants on the one hand and the defendant and his wife, on the other; (3) the defendant (who spent a lot of time in Dubai and who had already found a potential purchaser for plot E146, a Mr Jajodia) would handle the development, if applicable, and the sale of both plots; (4) the defendant would keep the claimants fully informed and would not make any significant decision about the development and sale of the plots without consulting them.

The defendant appears to deny that this meeting took place in London and that any such agreement was reached with the first claimant, but his witness statement also refers to “the agreement between the parties” and he therefore appears to accept at any rate that some such agreement was reached at or about this time. The defendant suggests also that the claimants’ evidence about this meeting is “extremely vague”, in particular because the claimants are unable to be more precise about the date of the meeting. But it is perhaps not completely surprising that the claimants cannot pinpoint the exact date when it took place.

In or about April 2005 the first claimant fell seriously ill. He only returned to relatively good health in about March 2006. Because he was unable to deal with business matters during this period of illness, it was agreed that the second claimant would give the defendant a power of attorney and a stock transfer form signed in blank to enable him to deal with her shareholding in Jackinson in order to complete a proposed sale of plot E146 (or, if appropriate, of her shares in Jackinson) to Mr Jajodia.

In the event, however, the sale to Mr Jajodia did not go ahead. However, plot E148 was sold, or strictly the shares in the company which owned plot E148 were sold, without being developed. The claimants say that they were given very little information about the sale, but they acknowledge and indeed rely upon the fact, as confirming the existence of the agreement which they say was reached, that the defendant paid them 4 million dirhams, which represented their share of the net proceeds of sale.

Towards the end of 2006, or possibly in early 2007, the defendant informed the first claimant that, although he did not have a buyer for plot E146, he had decided to develop the land and had entered into a joint venture with a property developer. The claimants were content with this arrangement at this stage despite the lack of detail provided. On 7 February 2007 the defendants sent an email to the first claimant, which was sent in response to a request for a written record of the agreement reached between the parties. So far as plot E146 was concerned, it read relevantly as follows:

“3.

The beneficial ownership of freehold plot E146 at Emirates Hills, Dubai, owned by Jackinson Equities Limited is owned by Rishad Moloobhoy and myself jointly and equally.

4.

Jackinson Equities Limited has entered into a joint venture agreement with a Mr. Ahmed Jahuber Kamal, an Indian citizen and a resident of the UAE, to develop and build a substantial residence on the plot E146 to be completed by 31 October 2007. The profits on the joint venture are to be divided equally between Jackinson Equities Limited and Mr. A J Kamal. The profits earned by Jackinson Equities Limited will be shared equally between Rishad Moloobhoy and myself.”

It also referred to a similar arrangement concerning plot E148. Although the claimants say that this document contained a number of errors, they rely upon it as confirming, as it clearly does, the parties’ agreement that the net proceeds of sale of the two properties should be shared equally between the claimants on the one hand and the defendant and his wife on the other.

In early 2008 the defendant informed the first claimant that he had found a potential buyer for plot E146, a Pakistani national later identified as a Mr Mumtaz Ahmed Muslim, who had purchased the property for a price of 40 million dirhams, of which the second claimant’s share would be 10 million dirhams. Subsequently the defendant advised that the correct calculation of the second claimant’s share would be 9 million dirhams rather than 10 million.

There followed protracted negotiations with Mr Muslim, resulting, so it is said, in a reduced purchase price of 34 million dirhams and resulting in payment to the defendant of the price in about July 2011. The claimants say that the defendant initially paid them 2 million dirhams in July 2008, but nothing more has been forthcoming despite many promises to pay the balance due.

The claim form in this action was issued on 25 October 2011. The principal relief sought was an account of all sums received and expenses incurred by the defendant in relation to the sale and development of plot E146, together with an order for payment to the second claimant of all sums found to be due on the taking of such an account. The claimants calculate there is likely to be a balance of 7.5 million dirhams, approximately equal to £1.2 million, due to the second claimant, but acknowledged the possibility that the balance may be less if the defendant could show that he incurred greater expenses or was required to pay more to the developer than the claimants have allowed. Service of the claim form was held by the deputy judge to have been duly effected on the next day at the defendant’s home in Pinner. The defendant acknowledged service on 8 November 2011 without then intimating any intention to defend, but on 21 November issued an application challenging that service as having been effected at an address which was not his usual residence pursuant to CPR 6.9(2) and also applying for a stay on the basis that Dubai rather than England was the appropriate forum for the dispute.

On 2 December the claimants issued an application for summary judgment. On 21 December Gloster J, having received written submissions from both sides, directed that the applications be listed for hearing together and said that the parties should prepare their evidence for that purpose. She observed, however, that it would be for the judge at the hearing to proceed to determine whether the application for summary judgment should go ahead before, or at the same time as, or after, determination of what I may call “the jurisdiction application”.

The applications then came before Mr Stephen Males QC on 13 June 2012, sitting as a Deputy Judge of the Commercial Court. Mr Males held that the service had been properly effected and that the proceedings should not be stayed on forum non conveniens grounds. He then held that, as he thought was common ground, he had power to determine the claimant’s summary judgment application at that stage if the case was “very rare” or exceptional. He derived that test from Speed Investments Limited v Formula One Holdings Ltd [2005] 1 WLR 1233. He then concluded that this case was that “very rare” case and gave summary judgment for the claimants.

The defendant applied for permission to appeal on the service and forum non conveniens grounds, but has been refused permission to do that. He was, however, granted permission to appeal against the summary judgment. Ms Sleeman for the defendant submits that it was not open to the judge to proceed immediately to determine the summary judgment application, because, having determined that the challenge to the jurisdiction had failed (by holding that the claim form had been duly served) he was first required by CPR Rule 11.1(7) to permit the defendant to file a further Acknowledgment of Service within 14 days. The purpose of this further period of time is to give a defendant the option of either fighting the case or allowing the claimant to enter a default judgment. A defendant with substantial assets abroad might well prefer, even if he has some assets in this country, that a default judgment be entered which would probably not be enforceable abroad rather than to fight and lose, in which case the judgment probably would be enforceable abroad. Secondly, she submits that the court is bound to give directions for the filing and service of a defence pursuant to CPR 11.1(7)(c) and that the defendant is therefore entitled to file such defence, which the judge did not permit him to do.

She relies for the purpose of the first submission mainly on the unreported judgment of Rix J in European Capital Trade Finance Limited v Antenna Hungaria RT (27 March 1995) in which that learned judge expounded the then new procedure under the old RSC whereby Order 12 Rule 8(6) permitted a defendant to lodge a second Acknowledgment of Service in the event that his challenge to the court’s jurisdiction was rejected. Before this new procedure, a defendant lodged a conditional appearance but, if the challenge to the jurisdiction was rejected, that appearance became an unconditional appearance and was treated as a submission to the jurisdiction (see Somportex v Philadelphia Chewing Gum Corporation [1968] 2 All ER 26). Rix J said this:

“For these reasons, the philosophy and the language of the new post-1979 Order 12 are at one. Judgment cannot be obtained against a defendant who has unsuccessfully challenged jurisdiction under Order 12, Rule 8 until that defendant has been given a further opportunity to decide whether he wishes to submit to the jurisdiction by lodging a further acknowledgment of service, and that is equally so of summary judgment as of default judgment. Indeed, if it were otherwise, the defendant who was challenging the jurisdiction of the court would be compelled to prepare not only submissions but also evidence to meet a claim for summary judgment at a time when he was saying that the court had no jurisdiction over him. That might not be unacceptable where the challenge to jurisdiction fails, but it is plainly contrary to principle where the challenge is a valid one and, at the time when preparations would have to be put in hand, it would not be known whether the challenge would succeed or fail.It may seem unfortunate to a plaintiff with an unanswerable claim that a foreign defendant may hold up summary judgment first by a challenge to the jurisdiction, and then by insisting on a further period to lodge his second acknowledgment of service. That, however, is the price such a plaintiff must pay out of regard for all those foreign defendants who, for reasons of comity, are to be allowed to challenge the jurisdiction of these courts without prejudicing or pre-empting their defence on the merits or their decision as to whether, if their jurisdictional challenge fails, they wish nevertheless to submit to the jurisdiction of the English courts."

Rix J’s judgment was given against the background of the old RSC Order 14, which only allowed an application for summary judgment to be made after a defendant had given notice of intention to defend, which he would not do in his Acknowledgment of Service challenging the jurisdiction but would do, if he wished, in the second Acknowledgment of Service be filed once the jurisdiction challenge had failed.

The new CPR have made a departure from this latter requirement, while substantially preserving the prior practice in relation to challenges to the jurisdiction. Part 24.4(1) provides, as I have already said, that a claimant can launch an application for summary judgment once an Acknowledgment of Service has been filed or before that if the court gives permission. It is therefore open to a court to give permission to a claimant to apply for summary judgment at any time. In Speed Investments v Formula One Holdings, in the High Court, Lewison J qualified the approach of Rix J and contemplated that it might be possible, where a challenge to the jurisdiction is made, to permit an application for summary judgment and, by implication, to require a defendant to respond to an application for summary judgment. He said in paragraph 18:

“Although, therefore, I accept that the court does have the power to permit an application for summary judgment to be made before an outstanding challenge to the jurisdiction has been determined, it seems to me that it will be a very rare case in which the court exercises that power. In general terms, as Mr Justice Rix says, the price that a claimant must pay for being able to bring foreign defendants before the court is that they have a real opportunity to decide whether or not to submit to its jurisdiction.”

Although Lewison J uses the words that the court has “power to permit an application for summary judgment to be made before [my emphasis] an outstanding challenge to the jurisdiction has been determined”, it seems to me that the same consideration probably applies to the determination of the question whether the parties must serve any evidence in respect of a summary judgment application at the same time as any challenge to the jurisdiction is heard, so that a judge can later decide whether that summary judgment application should be determined at the same time as, or immediately after, the challenge to the jurisdiction is determined. I say this because the thrust of both the judgment of Rix J and the passage quoted by Lewison J from Briggs and Rees, Civil Jurisdiction of Judgments, Third Edition, 2002, para 5.31, is that a defendant should not normally have to engage with the question whether he has a defence before a challenge to the jurisdiction has been determined.

It therefore could have been submitted to Gloster J (we do not know whether it was because we have not seen the exchange of correspondence which led up to her direction) that it would only be in a rare case that it would be right to order the exchange of evidence on a summary judgment application while a challenge to the jurisdiction was outstanding. But she made the direction she did, and, in the absence of any application to vary or appeal her direction, her direction must stand. It is very easy to see why she did so direct since one of the pending challenges was forum non conveniens, and in order to determine that challenge the court has to have some idea what the likely issues at trial will be. That necessarily means that the court must have some idea what the defence to the claim is.

By the time the matter came before Deputy Judge Males QC there was therefore evidence from the claimants. The defendant decided not to file any evidence. Having rejected the jurisdiction challenge, what then was the Deputy Judge to do? For my part, I cannot accept that the judge was bound to permit the defendant to serve the defence without consideration of the existence of the summary judgment application. CPR 11.1(7)(c) merely says that the court shall give directions as to the filing and serving of the defence. Part 11 and Part 24 of the CPR have to be read together to give consistent results. There is no reason why the court should not stand over any directions for the filing of a defence until after the summary judgment application has been determined. If a previous judge has decided that service of the evidence relating to that application should take place before or at the same time as the challenge to the jurisdiction is heard, the court is intended to be in a position to decide that application (if appropriate), and there was no reason for the Deputy Judge not to do as he did merely by reason of the provisions of CPR 11.1(7)(c). I would, therefore, reject Ms Sleeman’s second submission (as set out in paragraph 14 above).

Her first submission that the defendant should anyway have been given 14 days to serve the second Acknowledgment of Service is at first sight more attractive for the reasons given by Rix J in the European Capital case. But it emerged in argument before us that the defendant did not want and did not need 14 days to decide whether he would submit to the jurisdiction and fight the case or allow judgment in default. He does not want any judgment to go by default and intends to fight the case to the extent that he can. In those circumstances, he has therefore to deal with the application for summary judgment.

Ms Sleeman then complains that the judge gave five reasons for saying that the case was sufficiently rare for him to proceed to determine whether summary judgment should be granted, but none of those reasons supported the notion that this was a rare or a very rare case. But “the rarity constraint”, if I can call it that, did not operate at that stage. It operated, if at all, at the time when the decision was made that evidence relating to the summary judgment application should be served by the time the jurisdiction challenge was argued and determined. Once the evidence was before the court, it was only sensible for the summary judgment application to be disposed of one way or the other. Indeed, it would completely undermine Gloster J’s order if the defendant were now to have further time to serve further evidence and file a defence.

There remains, therefore, the question whether on the material before him, the judge was right, having determined the jurisdiction challenge adversely to the defendant, to give judgment against him. There can only be one answer to that question. The only suggestion is that an agreement may not have been reached, but it is not seriously suggested that there is no liability to account. The judge points out at paragraph 85 of his judgment that the defendant has repeatedly accepted that he is obliged to account for the net proceeds of sale of plot E146, part of the correspondence in relation to which I have already read out. Moreover he has already accounted for the proceeds of plot E148. There is no dispute that plot E146 has been sold and that the defendant has received the proceeds of sale. There have been repeated promises to pay the claimants their “50 per cent share of the net proceeds”, and yet only 2 million dirhams have been paid to date. As the judge said, it is inconceivable that there could be any defence to the claim.

I would therefore dismiss this appeal.

I agree.

I also agree.