Terre Neuve SARL & Ors v Yewdale Ltd & Ors (14) Driss Mriouah

Defendant (HSBC Private Bank SA (“HSBCPB”)), which the Claimants allege the Eleventh Defendant (“Judah El Maleh”) knew or should have known about, as a manager of the relevant department. The Claimants also allege that (amongst others) the Fourth, Sixth, Seventh and Tenth Defendants are implicated in and/or benefitted from the misappropriation.

(“the Applications”) made by GPF (the Third Defendant), the Fourth, Sixth, Seventh and Tenth Defendants and Judah El Maleh (the Eleventh Defendant).

(“the 2003 Oral Agreement” and “the 2008 Oral Agreement” collectively “the GPF Agreements”). The arrangement (as from 2008) was said to be as follows:

The Sixth Defendant (Mrs. Sasson) and the Seventh Defendant (Mrs. Sasson-El Maleh) are the wife and daughter of Mr. Sasson, and heirs to his estate. Mr. Sasson worked with the Fourth Defendant (Meyer El Maleh), the husband of Mrs. Sasson-El Maleh. The Tenth Defendant (Mr. Naggar) was a director of Yewdale and, I am informed, a close friend of Mrs. Sasson, her daughter, and her son-inlaw. These are collectively known as “the Campbell Co-Defendants”, after their common legal representation by Campbell & Co Solicitors. All the Campbell CoDefendants are domiciled in Switzerland.

It was previously assumed that the Fifth Defendant (“Mr. Morali”) was the executor of Mr. Sasson’s estate. I understand from the Claimants’ skeleton argument that Mr. Morali has now indicated in correspondence that he has not been appointed executor of Mr. Sasson’s estate. I note that the Claimants do not allege that Mr. Morali was implicated in the misappropriation.

The Eighth and Ninth Defendants (“Ms. Vasarino” and “Ms Josek”) are former employees of GPF. Both have been convicted by French Courts of money laundering.

Meyer El Maleh’s brothers (Judah and Nessim), the Eleventh and Twelfth Defendants respectively, were employees of HSBCPB (the Thirteenth Defendant).

HSBCPB has been found by the Swiss Financial Market Supervisory Authority

The Fourteenth Defendant (Mr Mriouah) is a businessman who had bank accounts including with HSBCPB, into which he received payments of at least €4.5million from Yewdale. He is believed to be resident in France and/or Morocco.

A 1996 Asset Management Agreement was entered into by GPF and Mr Zahut. Pursuant to that agreement, Mr Zahut assigned to GPF responsibility for the management of his bank account at the Discount Bank & Trust Company and granted to GPF all powers to represent him with that bank in accordance with the terms therein.

A 2003 Management Contract between GPF and Largely.

A 2012 Asset Management Agreement between GPF and Largely.

A 2003 Fiduciary Agreement entered into by GPF and Mr. Zahut relating to GPF’s trusteeship of the shares in Largely.

Largely. The Claimants’ case is that this money was misappropriated with the involvement of, and/or to the benefit of, the various Defendants.

Although there were Swiss law jurisdiction clauses in the Written Agreements, those agreements were not themselves the basis or subject-matter of the

The Claimants’ claims against Judah El Maleh and the other Non-European Defendants depended upon the same investigation as the claims against Yewdale, because the common thread was an investigation into what happened to the monies paid by Terre Neuve to Yewdale, how and to whom those monies were transferred, and whom they ultimately benefitted. Therefore, the evidence in all the claims would be similar and interlinked, and there was an obvious risk of irreconcilable judgments (at [46]).

There was a serious issue to be tried as against Judah El Maleh for the purposes of CPR r.6.37(1)(b), though the Claimants’ case against him was “more difficult” than against the other defendants before him (at [57]). In particular, Christopher

The claim against Yewdale was not brought for the sole object of establishing jurisdiction over the other Defendants, because Yewdale is at the centre of whatever happened to the misappropriated funds: it received from Terre Neuve all the money to which this claim relates (at [62]. Christopher Hancock QC therefore distinguished PJSC Commercial Bank Privatbank v Kolomoisky [2018] EWHC 3308 (Ch), which was subsequently overturned by the Court of Appeal).

Cour de Justice (Chambre Civil) (“the Appeal Court Decision”) by its judgment dated 22 November 2019.

Yewdale had submitted to the English Court’s jurisdiction by filing a substantive defence. In addition, he found that it was not appropriate to grant Yewdale relief from sanctions (as would be required to make its jurisdiction challenge application out of time). He nevertheless went on to consider Yewdale’s grounds for challenging jurisdiction.

The English Court had jurisdiction over Yewdale pursuant to Article 4 of the Brussels I Regulation Recast, as Yewdale had its registered office in the United Kingdom.

The suit brought against Yewdale was not an abuse of the Article 4 jurisdictional provisions. The law on abuse of Article 4 was set out in the headnote to Lungowe and ors v Vedanta Resources Plc [2019] UKSC 20 (“Vedanta”). The claim against Yewdale was a bona fides one, and not brought solely for the purpose of bringing other Defendants within the jurisdiction. Further, there was no collusive behaviour between the Claimants and Yewdale. The case was far removed from the circumstances of the High Court decision in PJSC Commercial Bank Privatbank v Kolomoisky and ors [2018] EWHC 3308 (Ch).

Yewdale was properly regarded as an “anchor defendant”. The proceedings against Yewdale did not constitute an abuse of the European jurisdictional provisions, and the fact that Yewdale was not party to any agreement with an English jurisdiction clause did not mean that the claim was without merit.

The alleged issue of whether Switzerland was the most convenient forum for the trial of the dispute did not arise, and was irrelevant, as this was a case involving the Brussels I Regulation, and as such issues of forum non conveniens did not arise: Owusu v Jackson (Case C-281/02) [2005] QB 801 (“Owusu”).

Article 7 of the Brussels I Regulation gave the Claimants a right to sue in a jurisdiction other than that which would otherwise be mandated by Article 4. Article 25 of the Brussels I Regulation did not assist Yewdale, because there was no evidence of an exclusive jurisdiction agreement in favour of Switzerland to be implied from course of dealing.

REDS has not yet been served.

Mr. Morali has indicated in correspondence that he does not consider himself a proper party because he has not been appointed executor of Ernest Sasson’s estate.

Mr. Mriouah has submitted to the English Court’s jurisdiction.

HSBCPB have submitted to the Court’s jurisdiction, and that both have filed Acknowledgments of Service. I understand that Ms. Vasarino (as well as Ms. Josek, who is domiciled in France) have been served, but have not responded to the claim and not made any application to challenge jurisdiction within time, and so are deemed to have submitted.

A declaration that the court has no jurisdiction in respect of claims brought by Largely and Mr. Zahut and an order setting aside service of the claim form in respect of those claims; or

To the extent that Largely and Mr Zahut bring claims against GPF in reliance on the four Written Agreements containing Swiss jurisdiction agreements, an order (i) seeking a declaration that the court has no jurisdiction in respect of such claims

(“the CJEU”) applicable to that provision of the Brussels Regulation apply equally to Article 23 of the Lugano Convention.

The first issue is whether the present dispute (or any part of it) falls within the scope of one or more of the jurisdiction clauses as a matter of construction. This is to be determined as a matter of English law. Article 23 of the Lugano Convention prorogates jurisdiction in circumstances where the parties have “agreed” that the courts have jurisdiction: in Powell Duffryn C-214/89, the CJEU held that whether an agreement confers jurisdiction is to be regarded as an independent concept. The court will determine whether parties have so “agreed” as an exercise of construction governed by the contract’s substantive law: British Sugar Plc v Fratelli Babbini di Lionello Babbini [2004] EWHC 2560 (TCC), [2005] 1 Lloyd’s Rep. 332. In this case, the relevant agreements are governed by Swiss law, but neither GPF nor the Claimants have suggested that (or adduced Swiss law evidence to the effect that) the principles of contractual construction are different as between Swiss and English law; as such, the clauses are to be construed by reference to English legal principles.

If the dispute is within the scope of the jurisdiction clauses, there is a further issue as to whether the jurisdiction agreements satisfy the requirements of Article 23 of the Lugano Convention. This requires the dispute to be in connection with the legal relationship with which the agreement containing the jurisdiction clause is concerned: see for example Etihad Airways PJSC v Prof. Dr Lucas Flother [2019] EWHC 3107 (Comm) (“Etihad”) per Jacobs J at [123] ff.

Fiona Trust concerned the scope and effect of arbitration clauses in eight charter parties on the Shelltime 4 Form: “(b) Any dispute arising under this charter shall be decided by the English courts to whose jurisdiction the parties hereby agree.” Owners alleged that the charters were procured by bribery, and purported to rescind the charters on this ground. The issue was whether the rescission issue should be determined by arbitration (as argued by Charterers) or by a court (as argued by the Owners, on the ground that rescission concerned the validity of the contracts, rather than the interpretation of their terms): Fiona Trust at [1].

Lord Hoffman held that the wording of jurisdiction clauses should be given a broad or generous interpretation, based on the presumption that rational businessmen are likely to have intended that all the questions which arise out of the relationship which they have entered into or purported to enter into, are to be submitted to the same forum (Fiona Trust at [7] and [13]). Lord Hope similarly stated that “if the parties have confidence in their chosen jurisdiction for one purpose, why should they not have confidence in it for the other?” (Fiona Trust at [28]).

The “relationship” between the parties is the relationship which arises from the contract entered into by them containing the jurisdiction clause. This is clear from the context of Fiona Trust: the parties are not linked by any other “relationship”. This is further supported by the Court’s reference to the 1970 Federal Republic of

Therefore, the Court’s generous approach to the interpretation of arbitration clauses must be read in light of the fact that the relationship between the parties arose out of the same contract. If the parties have confidence in their chosen jurisdiction “for one purpose”, they should have confidence in it for other purposes, where those purposes arise from the same contractual relationship.

[2017] EWHC 871 (Comm), Emmott v Michael Wilson [2009] 1 Lloyd’s Rep 233 and Etihad Airways v Flother [2019] EWHC 3107 (Comm). Reference was also made to UBS v HSH Nordbank [2009] 1 CLC 934 [82] and Deutsche Bank v Sebastian [2011] 2 All ER

(Comm) 245 [39]. For shorthand I will refer to the applicable principle as the “Extended Fiona Trust Principle”. This has been referred to as a principle that applies where both contracts are part of an “overall package” of agreements: UBS v Nordbank [2009] 1 CLC 934 at 956; Etihad at [69], [72]-[74] and [102]; Am Trust Europe Ltd v Trust Risk Group at [45], and Sapinda at [20].

The principle is based on the construction of the relevant jurisdiction clause (which I will refer to as being contained in “Contract A”): it is not based on an implication or implied incorporation of the jurisdiction clause from Contract A into a related contract (henceforth known as “Contract B”).

As a matter of contractual construction, the wording of the clause in Contract A must be fairly capable of applying to disputes in Contract B. For example, a clause which stated that “any dispute under this contract shall be referred to arbitration” may not apply to disputes arising out of a (related) Contract B.

It is not legally or commercially odd or improbable that an agreement should have no jurisdiction clause. Equally an agreement may have no jurisdiction clause and not be covered by a jurisdiction clause in a different agreement. This was confirmed in Am Trust Europe Ltd v Trust Risk Group at [46] (albeit in reference to competing jurisdiction agreements):

“There is no presumption that a jurisdiction (or arbitration) agreement in contract A, even if expressed in wide language, was intended to capture disputes under contract B; the question is entirely one of construction”.

This principle normally applies where the parties to Contract A and Contract B are the same. This arises from the fact that the Extended Fiona Trust Principle ultimately involves an exercise in contractual construction. One would normally expect the parties to Contract A to intend that their dispute resolution mechanism be binding upon the parties to Contract A rather than also applying to persons who were not party to that contract at all. Where the principle is applied to a situation in which the parties to Contract A and Contract B are different, then it is possible that the court may conclude that it was the Contract A parties’ intention that third parties should be able to rely on Contract A (for example in a Himalaya clause situation), or the court might conclude that only the common parties between Contract A and Contract B are bound by the jurisdiction clause in Contract A. However, the latter is an inherently unattractive prospect, as it involves the fragmentation of disputes pursuant to the same agreement (Contract B) – possibly even disputes concerning the very same obligations. This is the very menace which it was assumed in Fiona Trust rational businessmen want to avoid (of course agreements which appear to have been deliberately and professionally drafted are to be given effect, even where this may result in a degree of fragmentation in the resolution of disputes: see Dicey, 15th Edition at 12-110).

The Extended Fiona Trust Principle normally applies where Contract A and Contract B are interdependent (Point (5a)), or have been concluded at the same time as part of a single package or transaction (Point (5b)), or (if concluded at different times) dealt with the same subject-matter (Point (5c)).

A jurisdiction agreement in Contract A will generally apply to Contract B where that contract was entered into at the same or a similar time as Contract A. In this regard:

In Sapinda, Altera exercised an option requiring Sapinda to buy back shares in RNTS (“the First Option Agreement” which contained an English jurisdiction clause). However, in breach of the First Option Agreement, Sapinda failed to buy the shares. The parties then entered into negotiations: On 26 August Sapinda agreed to buy some shares from Altera in an oral agreement (“the Sale Agreement”). As to the remaining shares, a written agreement on 31 August was entered into: Altera had the option to sell to Sapinda those remaining shares at a specific price (“the Second Option Agreement”). The latter contained a jurisdiction clause in favour of England. A jurisdiction challenge was brought in respect of the Sale Agreement.

The jurisdiction clause stated that: "The parties irrevocably agree that the courts of England have non- exclusive jurisdiction to settle any dispute or claim that arises out of or in connection with this agreement or its subject matter or formation (including non-contractual disputes or claims)." (Sapinda at [4]). Sir Michael Burton, sitting as a Deputy Judge of the High Court, concluded that the dispute concerning the Sale Agreement did fall within the scope of the written jurisdiction clause in the Second Option Agreement, at [20] and [22]:

“It seems to me clear that the contractual claims for breach of the 26th August Agreement can be said to fall within the jurisdiction clause in 31st August

Claimants’ agreement to the Second Option was conditional on the Defendants’ purchase of the 1 million shares.

In Emmott, the Defendant (“MWP”) provided legal services in Kazakhstan, and Michael Wilson was its director and shareholder. By an agreement in 2001, the

As to Point (4): again, although this was not referred to by Teare J, it appears that the parties to the 2001 and 2005 Agreements were both the same (Emmott at [42]).

As to Point (5): the two agreements were not discussed at the same time (Point (5b)). However, the 2005 Agreement was, in reality, a variation of the 2001

In Etihad, Air Berlin claimed against Etihad in Germany for breach of a Comfort

Jacobs J reached the conclusion that the jurisdiction clause in the Facility Agreement should apply to claims brought pursuant to the Comfort Letter, setting out his conclusions at [69] and [102]:

“[69] Drawing these threads together, I consider that the position is as follows:

a)

There is no reason in principle why the jurisdiction clause in the Facility Agreement should not extend to disputes arising in relation to the Comfort Letter.

b)

The Fiona Trust starting assumption is potentially applicable if it can properly be said (applying the good arguable case standard) that the Comfort Letter was part of a package of agreements which contained no competing jurisdiction clause.

c)

Ultimately, the question is whether (again applying the good arguable case standard), looking at the overall scheme of the agreements, the parties' intention, as revealed by the agreements reached between them, was that a dispute under the Comfort Letter falls within the jurisdiction clause in the Facility Agreement […]

d)

In ascertaining the parties' intention, it is relevant to consider the closeness of the connection between the Comfort Letter and the Facility Agreement. […]

[102] I consider that these matters – (i) the width of the jurisdiction clause in the Facility Agreement, (ii) the fact that the Comfort Letter was part of the overall support package where all relevant agreements between Etihad and Air Berlin were governed by English law with English jurisdiction clauses, (iii) the close connection between the Comfort Letter and the Facility Agreement in terms of the genesis of the Comfort Letter, (iv) Etihad's good arguable case that the Comfort Letter did not create contractually binding obligations and was ancillary to the Facility Agreement, (v) the absence of any competing jurisdiction clause in any of the agreements within the support package, and the existence of English law and jurisdiction clauses in the relevant agreements as part of that package, and (vi) the reasonable foreseeability of disputes which required consideration of the Comfort Letter in conjunction with the Facility Agreement – all lead to the conclusion that the parties intended disputes arising in relation to the Comfort Letter to fall within the jurisdiction clause of the Facility Agreement. I reach that conclusion whether or not the Fiona Trust starting point is applied. Since I consider that it should, in the present circumstances, be applied, that reinforces the conclusion which I have reached.”

Point (2) applied: Jacobs J considered the wording of the jurisdiction clause in the Facility Agreement to be particularly wide: [71].

Point (3) applied, in that a relevant consideration was the fact that the “package” of contracts did not contain any “competing jurisdiction” clauses. However, this (a) presumes the existence of a package of agreements which were agreed at the same time and for the same purpose, and (b) was likely a means of distinguishing the case from the decision in BNP Paribas v Trattamento Rifiuti Metropolitani

Point (4) applied: the parties to the Facility Agreement and the Comfort Letter were the same (although this was not mentioned by Jacobs J at [69] or [102]).

Point (5) applied:

As to Point (6), reference has already been made to Etihad at [104]. The Comfort Letter was discussed and entered into at a similar time to the Facility Agreement.

Claimants’ pleaded case on the Oral Agreements which formed the Tax Optimisation scheme, followed by my reasons for the conclusion I have reached.

The 1996 Asset Management Agreement between GPF and Mr. Zahut provided, amongst other matters, as follows:-

“Clause 1: An asset management and administration agreement is hereby established between [Mr. Zahut and GPF].

Clause 2: On the basis of this agreement, the Principal assigns to GPF responsibility for the management of the above-indicated account(s) and grants GPF all powers to represent him with the designated bank(s) within the limits of the provisions of the ad hoc form(s)…

Clause 8: This asset management agreement is subject to Swiss law. Jurisdiction is assigned to the courts of Geneva, and the parties elect domicile for that purpose and effect”.

The 2003 Fiduciary Agreement between GPF and Mr. Zahut provided, amongst other matters, as follows:

“ARTICLE 1: The Mandatory holds the certificate of shares of said corporation in a fiduciary capacity on behalf of and for the account of the Mandator. The Mandatory will upon written request deliver said certificate of shares to the Mandator or to a person or persons designated by him.

ARTICLE 2: The Mandatory shall exercise his best efforts to safeguard the interests of the Mandator and to exercise the various formalities necessary for the duration and good functioning of the corporation. The Mandator will contribute to this good functioning by communicating all information requested by the Mandatory

ARTICLE 7: The present Fiduciary Agreement shall be governed by the Swiss law…parties agree all disputes which may arise between them concerning its [the 2003 Fiduciary Agreement's] interpretation, its execution or its inexecution will be submitted to the ordinary courts of the Canton of Geneva, subject to appeal to the Swiss Federal Court in Lausanne as provided by law”.

The 2003 Management Contract between GPF and Largely provided, amongst other matters, as follows:

“Clause 1: By means of this document, a management and administration contract has been entered into between [Largely as Principal and GPF as Agent].

Clause 2: By virtue of this contract, the Principal assigns to GPF management of the account (s) indicated above, and for these purposes gives it all authority to represent it vis a vis the designated banks, within the limits of the provisions of the ad hoc forms…

Clause 9: This management contract is subject to Swiss law. The court forum with jurisdiction is assigned to Geneva, and to that end the parties elect domicile thereat under reserve of appeal to the Federal Court; the agent [GPF] however, has the latitude to enforce its rights before the natural court of the principal or before any other competent court”.

The 2012 Asset Management Contract between GPF and Largely provided, amongst other matters, as follows:

“Clause 1: The undersigned [Largely as Principal and GPF as the other party, acting as authorised management agent] have agreed to the following.

Clause 2 Purpose of the Agreement: On the basis of this agreement, the Principal grants GPF discretionary management agency to manage in its best interest, but at its risk and peril, the assets deposited in the account (s) at the bank(s) designated hereinabove, without the right of substitution, within the limits of the Directives on Asset Management Agreements of the Swiss Banking Association, and pursuant to the investment objectives defined and described …

Clause 10: This agreement is subject to Swiss law. Any dispute between the parties shall be subject to the sole and exclusive jurisdiction of the Courts of the Geneva Canton without prejudice to any possible appeal to the Federal Court; the Agent [i.e. GPF] nevertheless has the latitude to enforce its rights in the Principal's [i.e. Largely’s] normal jurisdiction or before any other court with jurisdiction”.

Meyer El Maleh in his interests. These constitute “the 2003 Arrangements” (set out at [31] DAPOC).

Largely (“the 2008 Arrangements”). The 2008 Arrangements were allegedly implemented via the following Agreements (“the 2008 Agreements”): -

The parties to the Written Agreements are different from the parties to the Oral Agreements (in relation to Point (4) of the Extended Fiona Trust Principle).

The Written Agreements did not form part of the same package as the tax optimisation scheme, the subject-matter is not similar, and there is little interdependency between them (in relation to Point (5) of the Extended Fiona Trust Principle).

There are difficulties in construing the 2012 Written Agreement as containing a jurisdiction clause that applies to the earlier oral agreements, and the 2003 Fiduciary Agreement does not contain obligations with a sufficiently broad scope to be relevant to issues arising under the Written Agreements.

The fact that the Claimants rely on the Swiss law clauses in the Written Agreements in order to establish that Swiss law governs the Oral Agreements does not mean that the jurisdiction clauses in the Written Agreements also apply to the Oral Agreements.

Different Parties to the Written Agreements, and the Oral Agreements

The purported Oral Agreements are between a variety of parties:

Each of the 2003 and 2008 Oral Agreements involve one or more parties additional to Mr. Zahut and GPF, or Mr. Zahut and Largely. Further, in some cases, neither Mr. Zahut, nor Terre Neuve, nor Largely are parties to the alleged agreements (though they claim to be entitled to enforce those agreements by virtue of being third party beneficiaries under Swiss Law) – e.g.: the 2003 REDS Agency Agreement, the 2008 REDS Agency Agreement, and the Yewdale Agency Agreement.

I do not consider that the jurisdiction clauses located in the Written Agreements (to which only Mr. Zahut/Largely and GPF are parties) extend to cover disputes which arise from the Oral Agreements and which contain additional parties:

Further, the Claimants bring some of their claims not as direct parties to the Oral Agreements, but as third-party beneficiaries under Swiss law:

None of the Extended Fiona Trust Principle cases concerned disputes in which the parties to Contract A (which contained the jurisdiction agreement) were different from the parties to Contract B (a point which was accepted by GPF in oral submissions). As already identified, whilst it is conceptually possible for parties to agree that a jurisdiction clause extends to disputes between them under a separate agreement to which others are also party, clear words would need to be used (not least due to the potential fragmentation of disputes that such a construction could result in).

The Written Agreements are all concerned with the management of Largely’s assets and/or shares: the 1996 Asset Management Agreement concerned the management by GPF of a bank account held by Mr. Zahut. The 2003 Fiduciary

The cornerstone of the tax optimisation scheme was the establishment of the flow of money from Terre Neuve to Yewdale to REDS and to Largely, in such a way that minimised Mr. Zahut’s tax liability. The management of Largely’s assets and/or shares was not necessary or integral to securing a tax advantage. By contrast, Sapinda was concerned with two agreements which covered the same subject-matter (the sale of certain shares in order to remedy Sapinda’s earlier breach of an option agreement). Etihad was concerned with a Comfort Letter and a Facility Agreement, both of which related to Etihad’s purported commitment to provide financial support to allow Air Berlin to meet certain financial obligations).

The 2003 GPF Agreement allegedly provides for GPF to undertake to set up, manage and control in the interest of Mr. Zahut, a company that would receive the monies transferred by REDS, which would be beneficially owned by Mr. Zahut as a shareholder: this company became Largely. This may have some cross-over in terms of subject matter with the Written Agreements: specifically, the 2003

I agree with the fundamental characterisation of the Claimants’ claims as set out by Christopher Hancock QC in the May 2019 Judgment at [12]:

“The claim therefore relates to the €10,627,669 paid by Terre Neuve to Yewdale between 2009 and 2012. That money, less the 3% commission, should have been transferred from Yewdale to REDS and on to Largely. Of that money, US$137,288.80 was transferred from Yewdale to Largely; no money was transferred by REDS to Largely after April 2008. The Claimants’ case is that this money was misappropriated with the involvement of and/or to the benefit of the various Defendants.”

By contrast, the Written Agreements (as set out above) all concern what happened to the monies after they had been transferred by Yewdale for the benefit of Mr. Zahut. This distinguishes the present case from Emmott. In that case, the counterclaim in question arose out of the relationship between Mr. Emmott and MWP, into which they entered by reason of the 2001 Agreement (at [38]). The counterclaim was for Mr. Emmott to recover 27% of the Steppe Shares. The reason that Mr. Wilson was willing to agree that Mr. Emmott should have 27% of the Steppe Shares is because Mr. Emmott was entitled to a 33% profit sharing interest in MWP under the 2001 Agreement. Therefore, Mr. Emmott’s claim arose substantially out of the 2001 Agreement: the 2005 Agreement was analogous to a variation of the relevant term of the 2001 Agreement. By contrast, the Written Agreements do not deal with the transfer of monies to Yewdale at all, but only with the management of monies in Largely.

For the reasons set out above, the subject-matter of the Written Agreements and the Oral Agreements is very different, and as such it would be inappropriate to characterise them as part of the same “package” of measures.

The Written Agreements and Oral Agreements were not (on the evidence before me) all “discussed simultaneously”. The 2003 Oral Agreements were alleged to have been concluded in the first quarter of 2003. The 2003 Fiduciary Agreement and 2003 Management Contract were not concluded until 16 and 21 July 2003 respectively. There is no evidence before me that the Fiduciary Agreement, Asset Management Contracts, and the Oral Agreements were at any point discussed together in the same negotiation. Moreover, the 2012 Asset Management Agreement was concluded long after the 2008 Oral Agreements were entered into. This distinguishes the present case from Sapinda and Etihad, in which the two contracts were discussed in negotiations at the same time: in both of those cases, this fact was treated as an important indication in favour of the two contracts being part of the “same package” (Sapinda at [20] and Etihad at [75]-[83] and [102]).

There is no reference in the Written Agreements themselves to tax or tax optimisation, or to any of the processes by which the money would be transferred.

the Written Agreements are intended to extend to the subject matter of the Oral Agreements. In this regard:

This agreement relates to the trusteeship of the shares in Largely, which GPF was to hold in a fiduciary capacity on behalf of and for the account of Mr Zahut. The Claimants’ claims have nothing to do with the shares in Largely, so do not fall within the scope of the jurisdiction clause, which only concerns the “interpretation… execution… or inexecution” of the 2003 Fiduciary Agreement.

GPF argued that the 2003 Fiduciary Agreement ought to be given a broad scope by virtue of Article 3, which provides that “The Mandatory [GPF] shall exercise his best efforts to safeguard the interests of the Mandator [Mr. Zahut] and to exercise the various formalities necessary for the duration and good functioning of the corporation”. However, this obligation is clearly directed at, and restricted to, the scope of the Agreement. In this regard: -

Use of Written Agreements in pleadings to establish Swiss Law

The Claimants contend in their Particulars of Claim that Swiss Law governs the

However, the fact that the Claimants rely on the Written Agreements in the context of identifying the law applicable to other agreements, does not mean that disputes arising out of those other agreements are governed by jurisdiction clauses in the Written Agreements. The Claimants argue that those oral contracts are closely connected to Switzerland, by virtue of the existence of the Written Agreements (Article 4 Rome Convention). In this regard every contract must have a governing/applicable law. In contrast (and as already noted) there is no necessity for a jurisdiction clause; jurisdiction clauses are often not provided for, and it does not follow from the fact that a particular law is applicable (or is set out in the Written Agreements) that the jurisdiction clause in such agreements applies to disputes under the Oral Agreements. Further, the “closeness of connection” test in Article 4 is not a matter of contractual construction, it is an application of the conflict of laws rules in the Rome Convention. This does not mean that the Written Agreements are part of the same transaction or package as the Oral Agreements, still less that disputes arising under the Oral Agreements fall within the jurisdiction clauses in the Written Agreements simply by virtue of the fact that both are governed by Swiss law, and the Swiss law provisions of the Written Agreements are prayed in aid when addressing the law applicable to the Oral Agreements. I have already noted that it is not alleged by GPF that the jurisdiction provisions in the Written Agreements are to be implied into the Oral Agreements (not least, no doubt, because the requirements for the implication of such terms are not met, there being no necessity for any such term).

Ultimately, and in any event, GPF’s point is in reality no more than a forensic one. It is for the Court to determine whether or not the Oral Agreements are governed by Swiss law, and whether these claims fall within the jurisdiction clauses in the Written Agreements. How the Claimants have advanced matters, and what they chose to rely upon, is not determinative in that regard. I am satisfied that the claims do not fall within the jurisdiction clauses.

Tortious/Restitutionary/Breach of Fiduciary Duty Claims

the written agreements. I am equally satisfied that the tortious claims advanced are also not subject to the jurisdiction clauses. In this regard: -

Exceptions to Article 2 are to be construed restrictively (see Melzer v MF Global UK Ltd (C-228/11), in the context of the Brussels I Regulation).

In order for a foreign defendant to be brought in under Article 6(1), there must be: (a) a claim against an anchor defendant over which the English Court has jurisdiction due to its domicile; (b) which is so closely connected to the claim(s) against the foreign defendant and (c) it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.

Previously there was arguably inconsistent CJEU jurisprudence as to whether Article 6(1) can be utilised to bring in further defendants where an action against the anchor defendant was brought solely with the object of ousting the jurisdiction of the courts of the State in which the defendant was domiciled: Kalfelis v Schröder and Freeport Plc v Arnoldsson Case C–98/06 [2007] E.C.R. I–839. However, more recently, a majority in the Court of Appeal in PJSC Commercial

Nothing short of fraud or collusion between the claimant and the anchor defendant improperly to subvert Article 2 (or another principle of the Brussels I Regulation) would be sufficient to engage the abuse of law principle in relation to Article 6(1) (PJSC at [94], quoting Lord Briggs in Vedanta): -

“[94] Having referred to Freeport and Cartel Damage and to the Opinion of the Advocate General in the latter case where he stated the sole object test, Lord Briggs said at [34]:

"In its judgment, the Court of Justice [in Cartel Damage] expressly affirmed that opinion in para 27, adding at para 33 that in the context of cartel cases nothing short of collusion between the claimant and the anchor defendant would be sufficient to engage the abuse of law principle…

[108] Fifth, we regard the CJEU's decision in Cartel Damage as rejecting a general sole object test but subjecting reliance on article 6(1) to the principle of abuse of law in cases of artificial fulfilment of the close connection condition. In general, all rights under EU law are subject to this principle and there is no reason to exclude article 6(1). It is noteworthy that the example given by the Court is a collusive arrangement between the claimant and the anchor defendant to conceal a settlement of the claim until the proceedings have been issued and served on the foreign defendants. As earlier mentioned, other examples might be naming a fictitious person as the anchor defendant (Freeport) and commencing proceedings against an anchor defendant knowing that it was an inadmissible claim (Reisch Montage). “

“Irreconcilable” means a ‘divergence in the outcome of the dispute [which arises] in the context of the same situation of law and fact’: Freeport plc v. Arnoldsson [39]-[40] (emphasis added). The two claims do not need to have identical legal bases: this is only one relevant factor amongst others.

Regulation, but the “necessary or proper parties” are not domiciled in a Member State (so claims must be brought against them under the “necessary or proper party” gateway under PD6B), the forum conveniens consideration that hearing all the cases in England avoids the risk of irreconcilable judgments should not always be considered a decisive factor:

Vedanta at [75].

The claim against Yewdale (relating to the Claimants’ money which was transferred to Yewdale’s bank account in England) is going to proceed, following the July 2019 Judgment.

There is a real issue to be tried between the Claimants and Yewdale (May 2019 Judgment at [39]-[43]).

The claim against Yewdale is not being brought for the sole purpose of bringing others to the jurisdiction, and there was no abuse in bringing the claim against Yewdale in England (May 2019 Judgment at [62]-[64]; July 2019 Judgment at [41]-[42]). Yewdale is properly to be regarded as an anchor defendant (July 2019 Judgment at [43].

I am in agreement with, and adopt, the reasons given by Christopher Hancock QC in the May 2019 Judgment and July 2019 Judgment.

The Claimants’ case, at its most basic, consists of an investigation into what happened to the monies paid by Terre Neuve to Yewdale, how and to whom those monies were transferred, and who they ultimately benefited (as rightly accepted by Christopher Hancock QC in the May 2019 Judgment at [46], in the context of determining necessary or proper parties pursuant to PD 6B 3.1).

The claims against Meyer El Maleh, Carole Sasson-El Maleh, Sara Sasson, and Mr Naggar have the same common thread, and are intertwined with the substance of the claims brought against Yewdale. In this regard:-

Meyer El Maleh and Carole Sasson El Maleh are alleged to have received misappropriated funds. Further, at least €5 million was purportedly transferred to a Panamanian company said to be created by Mr. Sasson and Meyer El Maleh, in an account allegedly held in HSBCPB. It is not clear if the accounts of Meyer El Maleh and Carole Sasson El Maleh were at HSBCPB.

Further, there is significant overlap between the legal causes of action brought against Yewdale and the Campbell Co-Defendants. The Claimants allege that each is liable for unlawful damage caused by money laundering (POC, [130.4]), albeit that these claims as made against Carole Sasson El Maleh and Sara Sasson are based on their purported liability in respect of Mr. Sasson’s acts as his heirs. The 2008 Oral Agreements are ones to which none of the Campbell Co-Defendants are parties. There is no overlap with regards to breach of contract, but there is substantial overlap with regards to the torts and restitutionary liability in respect of the Campbell Co-Defendants and other defendants.

Some reference was made by the Campbell Co-Defendants as to the family background of the Campbell Co-Defendants. However, the criterion of connection is the existence of such close legal or factual connections between the two sets of claims that are the subject of Article 6, which I am satisfied there are.

The claims all depend on a single investigation into a network of connected parties. The Claimants ultimately seek the recovery of monies paid by Terre

This was rightly recognised by Christopher Hancock QC in the May 2019 Judgment at [46]: “[t]he evidence in all the claims will be similar and

The contention that the Campbell Co-Defendants are “isolated by the veil of incorporation” from the claims against Yewdale makes little sense: the determination of each of these claims on the facts requires consideration of the same material and the actions of the same persons. Claims which are closely connected do not need to have an identical legal basis (see Freeport v Arnoldsson, above).

If proceedings against the Campbell Co-Defendants were conducted in parallel to proceedings against Yewdale, there is an obvious risk of irreconcilable judgments. Even if a Swiss judge considered identical disclosure, witness statements and expert evidence in a case against only the Campbell Co-Defendants the judge might well come to a different conclusion on the facts from an English judge in the Yewdale claim. This is not “mere speculation” as claimed by the Campbell Co-Defendants – it is a common pitfall of parallel proceedings, and the very mischief which the Lugano Convention was designed to prevent. The reality is that the danger of irreconcilable judgments is present whatever disclosure regimes/witness evidence is before the court, as long as the causes of action are sufficiently closely related. In any event the Campbell Co-Defendants cannot possibly guarantee that the “disclosure and factual background and… witnesses remain the same irrespective of jurisdiction”. Even if the same witnesses are summoned, they may give different evidence in different proceedings, and the Swiss First Instance Court and Appeal Court Decisions in this very case demonstrate that disclosure regimes can affect the information that is before a tribunal (e.g. where claimants present evidence at a time which is regarded as too late to be admitted).

Irreconcilable judgments would be particularly problematic in a case such as this where the allegation is that multiple defendants have participated together in a dishonest fraudulent exercise.

The Campbell Co-Defendants made submissions as the meaning of the word

“expedient” which was directed at, or came very close to relying upon, forum non conveniens considerations. Such submissions were misguided. In the context of Article 6 of the Lugano Convention, expedient means “appropriate” (i.e. there is such a risk of irreconcilable judgments that it is appropriate to hear the claims together). This is clear from the language used and the purpose of the Convention in facilitating the recognition of judgments.

Regulation with respect to Yewdale and the subsequent reliance on Article 6(1) of the Lugano Convention, as argued by the Campbell Co-Defendants, for the following reasons.

Christopher Hancock QC found (rightly in my view) that Yewdale is a bona fides target for the Claimants’ claims (at [37]-[44], July 2019 Judgment), which was not brought solely for the purpose of bringing other Defendants into the jurisdiction.

He also found (again rightly in my view) that there had been “no collusive behaviour” between the Claimants and Yewdale in bringing the claim against Yewdale in England pursuant to Article 4 Brussels I Regulation improperly to subvert another EU law principle.

The Campbell Co-Defendants attempt to distinguish the Deputy Judge’s conclusions by arguing that though there may not have been abuse in bringing a claim against Yewdale in this court, “it may well be an abuse to remove us from our home jurisdiction” (at [18] of the Campbell Co-Defendants’ skeleton) so that there is an “abuse of Article 6(1) of the Lugano Convention”. However, the purported “abuse” is that the Claimants are relying on the fact that Yewdale is domiciled in England (so can be sued here under Article 4) to justify jurisdiction in this country against Lugano Convention defendants under Article 6(1). This alleged abuse is the same alleged abuse as was considered, and rightly rejected, by the Deputy Judge. There is no separate abuse in using Article 6(1), from a supposed abuse of Article 2; it is part of the same purported abusive scheme. The main thrust of the Campbell Co-Defendants’ submission goes to whether the Claimants’ sole purpose in suing Yewdale is to bring other defendants within the jurisdiction; this was substantially the same submission as made by Yewdale (see the July 2019 Judgment at [38]). Yewdale argued that in this case the sole purpose of suing it in England was to enable proceedings to be brought against other defendants in states other than those of their domicile. Such argument was rightly rejected by the Deputy Judge and the point is no better when made by the Campbell Co-Defendants.

Defendants in this jurisdiction. In this regard: -

Courts’ jurisdiction. The main contentions of the Campbell Co-Defendants regarding the abuse of EU law would apply equally to these other Swiss-domiciled defendants.

The “Agency Agreement” was entered into in 1998. It was signed by Mr. Zahut representing Terre Neuve, and Mr. Rousso, representing REDS LLC. It provided that Terre Neuve (as the Principal) was to be represented by REDS (as the agent)

The Campbell Co-Defendants contest the jurisdiction of the English Court

Claimants’ claims or the jurisdictional challenge that is brought.

Maleh is domiciled in Israel. He applies to challenge the Court’s jurisdiction to hear the claims made against him on the grounds:-

That claims against Judah El Maleh fail to meet the relevant evidential standard under CPR r.6.37(1)(b).

That he is neither a necessary nor a proper party within the meaning of para.

The claims must fall within one of the jurisdictional gateways set out in paragraph 3.1 of Practice Direction 6B. In this case, the relevant gateway is contained within Paragraph 3.1(3):

“The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where –

[…]

(3)

A claim is made against a person (‘the defendant’) on whom the claim form has been or will be served (otherwise than in reliance on this paragraph) and –

(a)

there is between the claimant and [that] defendant a real issue which it is reasonable for the court to try; and

(b)

the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.”

The claims must have a reasonable prospect of success/there must be a serious issue to be tried between the Claimant and the defendant that they seek to join (i.e.

England and Wales must be the proper place to bring the claims (see e.g. Brownlie v Four Seasons Holdings Inc [2017] UKSC 80; [2018] 1 WLR 192 at [3]).

The evidential standard applicable to the merits of the relevant claim against the NPP Defendant under CPR r.6.37(1)(b) is whether the relevant claim has a reasonable prospect of success: there should be a “serious issue to be tried”, which corresponds to a “real, as opposed to fanciful” prospect of success. This is the same test as is applied when resisting an application for summary judgment: Altimo Holdings and Investments Ltd v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 at [71].

The test for summary judgment is whether there is a realistic (as opposed to fanciful) prospect of success (Altimo Holdings at [71]). The principles applicable to determining whether a party has a real prospect of success were summarised for the purpose of summary judgment in JSC VTB Bank v Skurikhin [2014] EWHC 271 (Comm) at [15]:

“(1)

The Court must consider whether the defendant has a 'realistic' as opposed to a 'fanciful' prospect of success, see Swain v Hillman [2001] 2 All ER 91, 92. A claim is 'fanciful' if it is entirely without substance, see Lord Hope in Three Rivers District Council v Bank of England [2001] UKHL 16 at [95].

(2)

A 'realistic' prospect of success is one that carries some degree of conviction and not one that is merely arguable, see ED & F Man Liquid Products v. Patel [2003] EWCA Civ 472.

(3)

The court must avoid conducting a 'mini-trial' without disclosure and oral evidence: Swain v Hillman (above) at p.95. As Lord Hope observed in the Three Rivers case, the object of the rule is to deal with cases that are not fit for trial at all.

(4)

This does not mean that the Court must take everything that a party says in his witness statement at face value and without analysis. In some cases, it may be clear that there is no real substance in factual assertions which are made, particularly if they are contradicted by contemporaneous documents, see ED & F Man Liquid Products v. Patel (above) at [10]. Contemporary activity or lack of activity may similarly cast doubt on the substance of factual assertions.

(5)

However, the Court should avoid being drawn into an attempt to resolve those conflicts of fact which are normally resolved by a trial process, see Doncaster Pharmaceuticals Group Ltd v. Bolton Pharmaceutical Co 100 Ltd [2006] EWCA Civ 661, Mummery LJ at [17].

(6)

In reaching its conclusion, the court must take into account not only the evidence actually placed before it on the application for summary judgment, but the evidence that can reasonably be expected to be available at trial:

Royal Brompton Hospital NHS Trust v Hammond (No. 5) [2001] EWCA Civ 550, [19].

(7)

Allegations of fraud may pose particular problems in summary disposal, since they often depend, not simply on facts, but inferences which can properly drawn from the relevant facts, the surrounding circumstances and a view of the state of mind of the participants, see for example JD

Wetherspoon v Harris [2013] EWHC 1088, Sir Terence Etherton Ch at [14].

(8)

Some disputes on the law or the construction of a document are suitable for summary determination, since (if it is bad in law) the sooner it is determined the better, see the Easyair case. On the other hand the Court should heed the warning of Lord Collins in AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 at [84] that it may not be appropriate to decide difficult questions of law on an interlocutory application where the facts may determine how those legal issues will present themselves for determination and/or the legal issues are in an area that requires detailed argument and mature consideration, see also at [116].

(9)

The overall burden of proof remains on the claimant,... to establish, if it can, the negative proposition that the defendant has no real prospect of success (in the sense mentioned above) and that there is no other reason for a trial, see Henderson J in Apovodedo v Collins [2008] EWHC 775 (Ch), at [32].

(10)

So far as Part 24.2(b) is concerned, there will be a compelling reason for trial where 'there are circumstances that ought to be investigated', see Miles v Bull [1969] 1 QB 258 at 266A. In that case Megarry J was satisfied that there were reasons for scrutinising what appeared on its face to be a legitimate transaction; see also Global Marine Drillships Limited v Landmark Solicitors LLP [2011] EWHC 2685 (Ch), Henderson J at [55][56].”

In some cases, the disputed issues are such that their conclusion by settlement or trial largely depends upon the expert evidence relied on by each side. In such cases, an application for summary judgment will usually be inappropriate unless it is made after the exchange of the experts’ reports and, in most cases, after the experts have discussed the case and produced a joint statement (Hewes v West Hertfordshire Hospitals NHS Trust [2018] EWHC 2715 (QB), a clinical negligence claim, at [45]).

The Tort Claim: the Claimants allege that Judah El Maleh unlawfully caused damage to the Claimants under Article 41 SCO. The unlawful element is alleged to be money laundering, contrary to Article 305bis Swiss Penal Code (“SPC”).

The Derivative Claim: the Claimants allege that Judah El Maleh’s actions or omissions/failures placed him in breach of fiduciary duties that he owed to HSBCPB under Articles 716a, 717 and 754 of the SCO, and that such breach is actionable at the suit of the Claimants under Article 754 of the SCO, because they are “creditors” of HSBCPB who suffered direct damage.

The relevant provisions of the SCO and the SPC) are as follows:

“Article 41 SCO

1 Any person who unlawfully causes loss or damage to another, whether wilfully or negligently, is obliged to provide compensation.”

“Article 305bis SPC

1.

Any person who carries out an act that is aimed at frustrating the identification of the origin, the tracing or the forfeiture of assets which he knows or must assume originate from a felony or aggravated tax misdemeanour is liable to a custodial sentence not exceeding three years or to a monetary penalty”

The tort of unlawfully causing damage under Article 41 SCO may involve either wilful conduct or mere “negligence or carelessness”.

A breach of Article 305bis SPC can constitute a basis for liability under Article 41 SCO. A criminal conviction pursuant to Article 305bis SPC is not a necessary precondition: a finding of breach of Article 305bis SPC can be made in the context of civil proceedings alleging tortious liability under Article 41 SCO. To establish a breach of Article 305bis, the Claimants must establish the following:

The commission of money laundering by negligence is not punishable by law, subject to two qualifications: (i) as seen above, a suspicion (i.e. something short of actual knowledge) of the criminal origin of the money can found liability for money laundering; and (ii) money laundering can be committed by omission.

Firstly, the Claimants must show that there is at least a serious issue to be tried in establishing the following facts, as are necessary in order to establish the unlawfulness element of Article 41 SCO (i.e. a breach of Article 305bis):

Secondly, Claimants must establish that there is at least a serious issue to be tried that their claims fall within the scope of Article 41 SCO and Article 305bis SPC. In this context, Judah El Maleh relies on the contents and correctness of the judgment of the Swiss Appeal Court dated 22 November 2019 (“Issue 2”).

Thirdly, Claimants must establish that there is at least a serious issue to be tried that Judah El Maleh caused damage to the Claimants. Judah El Maleh relies on the correctness of the Swiss Appeal Court’s purported finding that the existence of a natural causal link between the alleged damage and the alleged unlawful act was not plausible. (“Issue 3”).

In an Order dated 20 September 2019, Cockerill J gave permission to Judah El Maleh to adduce expert evidence in support of his jurisdiction challenge, and for the Claimants to adduce expert evidence on Swiss law in reply. The Order provides for one expert report per party, and does not provide for supplementary reports. Mr Burrus’ expert report on behalf of Judah El Maleh is dated 24 September 2019 (“Burrus 1”). Mr Hofmann’s expert report on behalf of the Claimants in response is dated 7 November 2019 (“Hofmann 1”).

On 22 November 2019, the Swiss Court of Appeal’s decision was handed down. Judah El Maleh then served a further supplementary expert report from Mr Burrus dated 11 December 2019 (“Burrus 2”), commenting on that decision and on certain matters in Hofmann 1. However, Judah El Maleh did not have permission to serve such supplemental expert evidence. No application was made for permission to adduce this evidence until during the course of oral reply submissions. The consequence is that whilst Mr. Burrus has made certain comments as to Swiss law in this regard, the Claimants have not had the opportunity to provide responsive evidence from Mr Hofmann in relation thereto. Clearly it would be inappropriate to accept the evidence in Burrus 2 at a time when the Claimants have not had the opportunity to serve responsive evidence from their expert (even assuming the Court would otherwise have been willing to give permission for the service of Burrus 2). In such circumstances I do not give permission for the service of Burrus 2.

The Tort Claim: Issue 1.1 Factual Issues relating to Judah El Maleh’s subjective knowledge

the Claimants rely, amongst other matters, on Judah El Maleh’s role in HSBCPB relative to the size of the fraud; recordings of telephone conversations of Judah El Maleh obtained by the French police and other supporting evidence, including a deposition given by Ms. Vasarino (a trusted employee of GPF) during the French criminal proceedings.

Judah El Maleh argues that this evidence is, by itself, insufficient to found a case which passes the relevant evidential threshold; he also relies upon a judgment of the Swiss First Instance Court dated 28 May 2019, in which that court overturned an attachment order for seizure of Judah El Maleh’s property pursuant to the

The MEDIS department is recorded indirectly by FINMA as having managed the majority of the accounts involved in the money laundering at HSBCPB. Further, I am satisfied, to the standard required on an interlocutory basis, that this department was shut down by the HSBCPB in 2013 as a result of the fraud being perpetrated.

Judah El Maleh was head of the MEDIS department, and was on the bank’s Executive Committee. In his capacity as the department’s head, he had overall responsibility for managing the team below him, and overall responsibility for consistent implementation of risk control and management and compliance with money laundering legislation. Judah El Maleh claims that when he became a member of the bank’s Executive committee in 2002, he ceased to be involved in the “day-to-day” business of the MEDIS department. However, he does accept that he had weekly meetings with the head of each department, including the head of the Israel team. During those meetings, he accepts that he discussed problems with clients in some detail (e.g. some discussion of specific clients and transfers of money). Judah El Maleh acknowledges that he was able to look at account information if he needed to do so, but he says that he did not do this on a regular basis. However the issue of whether he was aware of the money laundering or would have had grounds to suspect that there was money laundering taking place is a classic issue for trial rather than for summary determination/strike out, not least in the context of the further evidence I refer to below which supports the conclusion that Mr El Maleh was actually aware of money laundering taking place at an earlier period of time (pre 2009) – the inference being that such awareness also existed as at the later period of time in question.

It is not obviously credible that the overall head of MEDIS had no knowledge, or even a suspicion, that such widespread money laundering was occurring in his department. It is of course possible that Judah El Maleh was not carrying out his supervisory responsibilities for the department at all (i.e. that he was grossly negligent), or that he was carrying out his duties but hired someone incompetent to carry them out after having taken reasonable steps. However, it is not possible to, and would not be appropriate to, carry out a “mini-trial” of such matters at this stage – which are again classically a matter for trial with the benefit of full documentary, and witness, evidence (potentially extending to banking expert evidence). It suffices to conclude that there is at least a serious issue to be tried that Judah El Maleh did know or suspect that money laundering was occurring.

Further, Judah El Maleh had indirect supervisory responsibility over Nessim El Maleh, who was alleged to be involved in the money laundering. Further, it is suggested by the Federal Court in Geneva in its summary of the facts before giving its judgment in the employment proceedings between Judah El Maleh and HSBCPB that Nessim El Maleh was in an earlier period under the direct supervision of his brother. This creates a closer link between Judah El Maleh and the alleged money laundering. I bear in mind Judah El Maleh’s evidence that he could not approve transactions by Nessim El Maleh due to their familial relationship, but it does not follow from this that he was unaware of what was going on, and it raises issues that will need to be explored at trial as to what supervisory role he was required to carry out, and did in fact carry out, and what knowledge he did, or should, have acquired as a result.

The circumstances in which Judah El Maleh was let go from his position at the bank will also need to be explored at trial. Judah El Maleh points out that he was not dismissed with immediate effect for misconduct in relation to the money laundering activities, rather he was given six months’ notice. Equally it was not alleged in the Swiss employment tribunal proceedings which resulted from Judah

It appears from the evidence that Ms Vasarino was a trusted employee of GPF, as the assistant to Mr. Sasson and then to Meyer El Maleh. She stated that Mr. Zahut used to have funds held by International Trading Corporation (ITC) at HSBCPB. I understand from the Claimants’ submissions that ITC was a company into whose HSBCPB account monies from REDS and/or GPF was received from the tax optimisation scheme and the Defendants’ purported money laundering before 2009 (with its account with HSBC being closed in 2008).

Ms. Vasarino states that “of course, ITC accounts were initially with HSBC in the JUDAS and NESSIM ELMALEH team. JUDAS personally supervised them to avoid problems”. She continues that, “JUDAS feared that the bank would notice suspicious movements in the name of a nominee. ITC’s account left HSBC in 2009… We fled HSBC at the express request of JUDAS ELMALEH who was in a panic” (emphasis added).

The inference that the Claimants invite the Court to draw is that what Judah feared was that HSBCPB would discover the money laundering being performed using ITC (and of which he was, in the context of such an inference, aware). I consider that this is a possible inference that the Court might well draw at trial – certainly there is a serious issue to be tried in this regard. The Claimants will also invite the Court at trial to draw an inference from this that Judah was aware of the tax optimisation scheme, and associated money laundering that went on after 2009 using the successors to ITC in the scheme.

Judah El Maleh points out that this testimony was given in the context of French proceedings in which he himself was not charged, convicted or questioned: however, it is still testimony that has the potential to fix him with knowledge of the tax optimisation scheme and money laundering, and there is certainly a serious issue in this regard.

I consider that the evidence of Ms. Vasarino adds materially to the Claimants’ case that there is a serious issue to be tried as to Judah El Maleh’s knowledge of the money laundering, not least when also taken in conjunction with the other evidence that I have already referred to including as to his position within HSBCPB. Whilst Ms Vasarino has not (at least to date) given evidence as to any involvement of Judah El Maleh in the period between 2009-2012, her evidence in relation to an earlier period is supportive of an inference that he had knowledge of a similar money laundering scheme, in the same bank department, occurring before 2008. Of course, and assuming that she is called as a witness at trial, she may or may not repeat such evidence, and may or may not come up to proof in relation to the earlier period (or indeed any evidence she may be able to give in respect of the later period) – but this is again a classic matter to be explored at a full trial, and in the meantime the evidence she has given to date bolsters the merits of the Claimants’ claim for present purposes.

El Maleh’s case) be more than one interpretation to what is being said in a particular conversation evidences that such matters will need to be explored in their full context (and with all available documentary and witness evidence) at trial. Whilst the possibility of innocent explanations is to be borne well in mind, this does not mean that what the conversations appear to show on their face, should be ignored when considering the merits to the requisite level, on Judah El Maleh’s application.

The first conversation was on or around 25 August 2012 and between Meyer El Maleh and Judah El Maleh, in the context of Judah warning Meyer not to engage in “compensation transactions”:

“Judah: Be careful with that, the day when it comes crashing down, you won’t be comfortable anywhere: not in Morocco, not anywhere.

Meyer: No no no (…) I’m doing things discreetly (…)

Judah: (…) Meyer, get out of there ok, get out, very quickly, but be careful.

Meyer: But I’m not there, inside.

Judah: Yes, but, but yeah, you told me no no no, but there you go, he delivered the money to Mardoché, you took them. So, you too are being stupid!”

The second conversation was between Judah and Nessim:

“Judah: I don’t understand that Meyer is also agreeing to take Mardoché the money and not Mardoché take the money. So, there are limits to all these screw-ups too.

Nessim: What do you mean? For who?

Judah: Because he agreed to PEREZ giving the money to Mardoché in Paris?

Nessim: My friend, he will tell you who do you want me to give them to?

(Laughs) but he doesn’t want to introduce these guys there in…

Judah: But Meyer only had to say no, I don’t need it. […]

Judah to Nessim: “Listen to me carefully: what you are doing with Meyer in the foreign exchange office, I don’t agree with it, I’m totally against it. (…) I’m going to tell him, don’t count on me introducing a client to you because that would be signing the death warrant for everything, that’s it”

In a third conversation, Judah El Maleh is alleged to mention transferring money to or through a “Simon”, in a conversation recorded on 23 August 2012. The Claimants claim that this is clearly a reference to Simon Perez. Judah El Maleh claims that this is a reference to a different Simon, and further that he did not know of Simon Perez’s involvement in the alleged money laundering. In circumstances where Judah El Maleh refers to “Perez” giving money to Mardoche El Maleh in Paris in the second telephone conversation I consider that there is at least a serious issue to be tried that the Claimants’ interpretation is the correct one. Again, this is a matter for exploration at trial when there is likely to be much more evidence before the Court. I am satisfied, however, that the evidence currently available supports the Claimants’ case.

Judah El Maleh submitted (in reliance on Burrus 1) that the fact that a criminal investigation was conducted in the context of the Claimants’ allegations but did not result in Judah El Maleh being charged or convicted of any criminal offence would carry significant weight in the decision-making process of a civil judge in Switzerland. This was repeated in oral submissions, in the context of the Swiss courts being allegedly deferential to what the criminal authorities had determined. However, Mr. Hofmann did not fully agree with this conclusion, stating that Swiss civil courts will examine “freely” whether the prerequisites of the offence are fulfilled, based on the evidence before them. The degree of deference shown by Swiss courts to the determinations of criminal authorities may well itself be a serious issue to be tried between the parties, but it clearly cannot be assumed that a Swiss court applying Swiss law would always follow the determinations of criminal authorities.

Judah El Maleh further relied on the fact that money laundering is an offence to be prosecuted ex officio in Switzerland. In Burrus 2, it is noted that the criminal justice authorities are obliged to commence and conduct proceedings where they are aware of or have grounds for suspecting that an offence has been committed (Article 7 Swiss Criminal Procedure Code). Again this is not decisive as to the merits of any civil claim. I also do not have before me evidence as to the finer details of Article 7 and how it is applied in practice or as to what the actual reasons were which led the Swiss authorities to conclude that there were no grounds to suspect that Judah El Maleh had committed an offence (assuming they did so conclude) or as to whether they had the same evidence before them, as I have before me (or a judge at trial is likely to have).

Judah El Maleh also relied on the decision by the French authorities not to charge

It is not alleged that this court is bound by the decision of the Swiss First Instance Court or the Appeal Court as a matter of res judicata and/or issue estoppel.

It is an obvious point, but it does not follow that the documentary, factual and expert evidence before this Court will be the same, or that the same decision will be reached in the light of such evidence.

There appears to be a dispute between the parties as to the evidential standard to which the claimants must prove their claim as applied by the Swiss Court. According to Mr Burrus, in his supplemental report, the evidential standard that the Claimants’ claim failed to meet in the Swiss attachment proceedings is a similar standard to that applied by the English court in these proceedings: whether the claimants had a prima facie case, in which the judge acquires “the impression of a certain plausibility of the existence of the alleged facts, without having to exclude that it may be otherwise […] the condition is that there must be some initial evidence”. However, the Claimants submit that the test in fact applied by the Swiss courts was higher, as suggested by the language in the Swiss First

It does not appear that the Swiss First Instance Court’s decision addressed directly the question of whether Judah El Maleh had the relevant knowledge/suspicion of the money laundering going on in HSBCPB, instead their decision was based on several other factors (inter alia, that Judah El Maleh had not been convicted or arrested, and that his dismissal by HSBCPB was pursuant to the contractual notice period).

(e.g. HSBCPB, which was Judah El Maleh’s employer at the time) are under a positive duty pursuant to Articles 3-9 SLML to prevent money laundering (i.e. they are “guarantors” in this context). The required mental element for the reporting obligation under Article 9 SLML is that the financial intermediary “knows or has reasonable grounds to suspect” that the assets involved in the particular business relationship are connected with specific criminal offences, or represent the proceeds of specific crimes, or are subject to the power of disposal of a criminal organisation, or serve to finance terrorism. An individual working within such a financial intermediary may be a “guarantor” in this context, and hence may be himself liable for money laundering by omission, if that individual acts (a) as a governing officer or as a member of a governing body of the relevant institution, (b) as a partner, (c) as an employee with independent decision-making authority in his field, or (d) without being a governing officer, member of a governing body, partner or employee, as a de facto manager. I understand that this exposition of the law is not in dispute.

The question of whether Judah El Maleh is a guarantor depends upon a detailed examination of his duties within the institution, including the bank’s internal guidelines defining processes, responsibilities and distribution of tasks. The question of whether Judah El Maleh is a “guarantor” raises a serious issue to be tried between the parties.

Judah El Maleh relies, in support of these contentions, on the decision of the Swiss Appeal Court that the Claimants could not recover anything as a matter of Swiss law.

Further, he relies on and adopts each of the grounds that the Swiss Appeal Court gave for concluding that the Claimants could not recover anything as a matter of Swiss law, even if Judah El Maleh did act unlawfully within Article 305bis (at [71] ff of his Skeleton Argument).

The relevant grounds of the Swiss Appeal Court are set out as follows:

“In particular, the claimants do not have the status of injured parties, within the meaning of criminal law, of the prior offence whose purpose was to conceal the product, in this case drug trafficking [the First Ground].

Nor were the plaintiffs harmed by the money laundering acts committed; on the contrary, they benefited for several years, directly or even indirectly, from the commission of such acts, which provided them with liquidity without raising suspicions [the Second Ground].

They cannot also complain that their involvement – apparently unintentional – in such money laundering acts ultimately prevented them from exploiting for longer the tax optimisation scheme that they had put in place, which was considered fraudulent. The purpose of repression of money laundering cannot be to allow the commission of other offences, in particular tax offences, provided that the proceeds of such offences are not laundered [the Third Ground].”

Judah El Maleh must logically rely upon the decision and each of the grounds as being a correct exposition and implementation of Swiss law.

In his second witness statement and in his submissions, Judah El Maleh relies on the Swiss Appeal Court as correctly applying Swiss law to the facts of the present case: he refers to this judgment in his skeleton argument at [84] as “inherently convincing” and states that there is “no sensible basis” on which the court should go behind the Swiss Court’s conclusions on Swiss law. Judah El Maleh does not provide an expert report setting out why the Appeal Court’s exposition of the law and its application to the facts is correct: Burrus 1 sets out the legal test at [24] for the scope of Article 305bis, and Burrus 2 sets out in bare terms the conclusions of the Appeal Court. However, as I have already noted, Judah El Maleh does not have the permission of the Court to serve such a further report.

For their part, the Claimants have in their written and oral submissions contended that the Appeal Court’s findings are not a correct application of Swiss law to the factual matters arising in this case, but have yet to produce an expert report in this regard in circumstances where there was no permission granted to the parties to serve a further report (and the Swiss Appeal Court judgment post-dates the experts’ reports for which permission was given).

I consider that there is a serious issue to be tried in relation to the First Ground as to who the “norm” of Article 305bis SCP is intended to protect.

Judah El Maleh alleges that the Claimants did benefit indirectly from the money laundering scheme, because it was an intrinsic part of the tax optimisation scheme. This is based upon the description of the money laundering operation in the French Police Report and the factual findings of the Swiss Appeal Court, and the finding of the Tribunal de Grande Instance de Paris (the Paris first instance criminal court) on 11 June 2019 that Mr. Zahut was guilty of, inter alia, laundering tax fraud proceeds as part of an organised group. The Claimants submit that the money laundering was not an intrinsic part of the tax optimisation scheme, but the reason for and therefore ultimate cause of the misappropriation – see paragraph 78.2 of the DAPOC, in which they plead that “the monies were misappropriated including by being transferred, it is inferred, through HSBCPB accounts, by and/or with the assistance and/or knowledge of and/or for the benefit of the Defendants pursuant to a money laundering scheme”.

I am satisfied that there is a serious issue to be tried between the parties as to which version of events is correct, and it is not a matter that can, or should, be determined on an interlocutory basis. Judah El Maleh has adduced no expert evidence to support a conclusion that Claimants benefitted from the money laundering scheme, and this would be likely to require expert account evidence. The police report does not mention the tax optimisation scheme explicitly; neither does the finding of the Paris First Instance Criminal Court against Mr. Zahut. I note that the Swiss Appeal Court appears to have considered that the money laundering and the tax optimisation were interlinked (as would be necessary for their Second Ground to work) – however the Claimants contend that the Swiss Appeal Court was wrong to reach such a conclusion.

The Swiss Appeal Court firstly upheld the first instance court’s decision on causation, and itself determined that “the existence of a natural causal link between the alleged damage and the alleged unlawful act is not plausible”, because there was no indication that the suggested “impossibility” of the Claimants being able to recover their funds is due to the alleged money laundering, as opposed to other reasons – such as the “tax fraud acts” for which Mr Zahut was convicted.

The Swiss Appeal Court secondly determined that: “the claimants do not indicate that they made any steps that would have been in vain to recover this balance before bringing the company and others before the London courts […]”and “serious doubts remain as to the impossibility of recovering the disputed funds and therefore as to the actual nature of the damage suffered by the claimants”.

The Claimants claim that there is “a wealth of evidence” that monies paid by Terre Neuve to Yewdale were flowing through accounts held at HSBCPB and managed by the MEDIS department during the period from 2009 to 2012, which they allege were operated by Nessim El Maleh. Those transfers are set out (amongst other purported transfers) in their DAPOC at [77.1] – [77.5], and in particular at [77.2]- [77.3]. The existence of this evidence was not substantially challenged by Judah Maleh for the purposes of the jurisdictional challenge.

The Claimants use this evidence to contend that the money laundering was essentially a cause of the misappropriation of funds: the monies were transferred “pursuant to a money laundering scheme”. The Defendants challenge this in that they argue (in relation to legal liability) that the money laundering scheme was part and parcel of the tax optimisation. For the reasons that I have identified above, there is a serious issue to be tried between the parties as to whether the money laundering caused the misappropriation, or was an intrinsic part of the tax optimisation scheme.

The Claimants further contend that there is a link between Judah El Maleh’s involvement in the money laundering and the Claimants’ loss, in that the Claimants would not have lost all the funds paid to Yewdale if Judah El Maleh had blown the whistle on, and/or acted so as to prevent, the MEDIS department’s money laundering activities, particularly Nessim and Meyer El Maleh’s participation in compensation transactions that were likely matched with interbank transfers involving accounts at HSBCPB. Save for claiming that the money laundering activities and the tax optimisation scheme were interlinked, Judah El Maleh does not fully engage with this issue.

The First Instance Court and Appeal Court reached the conclusion that there was no causation because there was no evidence brought by the Claimants that Yewdale regularly transferred funds to the accounts of other entities within HSBCPB. The Appeal Court refused to consider this evidence because the Claimants had failed adequately to explain why they were unable to adduce that evidence before the First Instance Court.

However, that evidence, and the Claimants’ associated allegations, are before me and I consider that they raise a serious issue to be tried, for the reasons I have already identified. For the same reason, I do not find the Swiss Appeal Court’s other conclusions on causation (cited at [72] of Judah El Maleh’s skeleton argument) to be helpful in determining whether there is a serious issue to be tried: they did not have to consider the specific causal scenario which is now before this Court.

Further, the Claimants contend that the Appeal Court’s alternative conclusion on causation was (a) in the nature of an illegality defence and (b) was in any event incorrect ([56.7.2] of their Skeleton Argument). In these circumstances, I cannot determine whether this application of Swiss law is correct on an interlocutory basis.

Judah El Maleh contends that the Claimants cannot complain about the way that the Claimants presented the case to the Swiss Courts, but I consider that to be beside the point. The English Court will have to consider the question of causation on the basis of all the evidence, and the Swiss law expert evidence addressed to that evidence. Once again, this raises serious issues to be tried.

Judah El Maleh contends that the Claimants’ Derivative Claim must fail as a matter of Swiss law for two reasons: firstly, that the Claimants are not creditors in the sense required by the Derivate Claim pursuant to Article 754(1) SCO; and secondly, that the Claimants suffered no direct damage because the company against whom the primary offence was committed (HSBCPB) is solvent.

The Claimants submit that there is a serious issue to be tried as to each of the above points based on the evidence of the parties’ respective Swiss law experts.

The members of the board of directors and all persons engaged in the business management or liquidation of the company are liable both to the company and to the individual shareholders and creditors for any losses or damage arising from any intentional or negligent breach of their duties.

A person who, as authorised, delegates the performance of a task to another governing officer is liable for any losses caused by such officer unless he can prove that he acted with all due diligence when selecting, instructing and supervising him.”

It is common ground that in order to bring a derivative claim for breach of Article

There is a disagreement between the experts as to whether the facts of the present case entitle the Claimants to contend that they have become creditors of HSBCPB. In this regard:

This also raises a serious factual issue for trial. It is not possible to conclude at an interlocutory stage that the Claimants could never be HSBCPB’s creditors by reason of damages claims against it before Judah El Maleh committed his alleged breaches of fiduciary duty. It is not currently possible at this early stage of the proceedings to plead precise dates for HSBCPB’s alleged wrongdoing in failing to prevent the money laundering, versus Judah El Maleh’s breach of his fiduciary duties towards HSBCPB.

It is common ground that the only damage that can be recoverable under Article

There is a disagreement as to whether “direct” damage of the creditor can exist in situations outside the relevant company (HSBCPB) being placed in bankruptcy.

Judah El Maleh is a proper party to the Claimants’ claim;

There is at least a serious issue to be tried on each of the Claimants’ claims (tort and derivative) against Judah El Maleh; and

England and Wales is the proper place to bring the claim against Judah El Maleh.