Facts
Valid service
Forum non conveniens
Application for summary judgment
A "very rare case"?
Comment
Moloobhoy v Kanani(1) concerned a dispute over a property development in Dubai in which the defendant argued that he had not been validly served and that, in any event, Dubai was the appropriate forum for the claim to be bought. At the same time, the claimants sought summary judgment.
The claimants - both British citizens - were two distantly related family members who had purchased a plot of land in Dubai. The defendant and his wife purchased the adjoining plot and the parties entered into an agreement that the net proceeds of sale of the two plots be shared equally between the claimants on the one hand and the defendant and his wife on the other. The defendant's primary residence was in Dubai.
The defendant managed the sale of both plots of land, but failed to account to the claimants for all profits. The claimants issued a claim in England seeking an account of all sums received and expenses incurred by the defendant in relation to the sale and development, and payment of all sums found due on the taking of the account.
The defendant's evidence in response to the summary judgment application did not assert a defence to the claim, but challenged the court's jurisdiction on two grounds: that the proceedings were not properly served and that England was forum non conveniens (ie, not the appropriate forum for the litigation).
The court had to consider the following issues:
- Had there been valid service of the proceedings on the defendant?
- Should the proceedings be stayed on forum non conveniens grounds?
- If not, should the court proceed immediately to determine the claimant's application for summary judgment?
- If so, was the claimant entitled to such judgment?
In respect of the first two issues, the court applied well-established principles. However, in considering the third and fourth questions, the court provided useful guidance on the "very rare" circumstances in which a claimant can obtain summary judgment at the same time as contesting a challenge to jurisdiction.
The defendant contended that the claim form had not been validly served, as the address served was not his usual residence. Applying Varsani,(2) the court held that it was his usual residence on the basis that the quality of the defendant's use and occupation met the required threshold, as there was a "substantial degree of continuity and permanence" in his occupation.
In accordance with the principles set down by the Court of Appeal in Spiliada,(3) the burden was on the defendant, as the applicant, to show that another available forum was clearly more appropriate for the trial of the action. The defendant argued that the more appropriate forum would be Dubai.
In considering the merits of this argument, the court acted on the assumption that the judicial system in Dubai could deal with the dispute. However, the court considered the following factors:
- It was reasonable to presume that the proceedings would be in Arabic, whereas all communications between the parties had been concluded in English. There was no suggestion that any of the parties spoke or understood Arabic. Accordingly, all relevant materials would have to be translated.
- The parties had substantial connections with England.
- There was a good, arguable case that the agreement had been made in England.
- Although the subject matter of the parties' agreement was in Dubai, this was an action for an account of the proceeds of sale. It makes no real difference to the proceedings that the land in question was in Dubai, rather than elsewhere.
- There was no suggestion that the defendant had a defence to the claim on the merits. In order for the court to determine where an action could most appropriately be tried, it needed to be given some idea of the nature of any issues that would arise. The court accepted that its task, on an application for a stay on forum non conveniens grounds, is not to determine the merits of the claim. However, the applicant for a stay bears the burden of identifying the issues which will arise in the action. In this case the defendant had deliberately decided not to indicate what his defence was likely to be.
- Relevant witnesses might be resident in Dubai. However, the defendant was unable say to what issues this evidence might apply. The defendant indicated that these witnesses held documents governed by Dubai law and subject to Dubai arbitration or litigation in the event of a dispute, but was unable to identify an issue arising under any of these agreements which might need to be decided in this action.
- Evidence or documents relating to moneys received and expenses incurred by the defendant might be located in Dubai. However, in circumstances where the defendant had not adduced evidence to this effect, the court saw no reason to speculate about this in his favour.
For all these reasons the court was not satisfied that Dubai would be the more appropriate forum for determination of the claim. It also gave weight to the fact that the defendant had a substantial asset in England, against which an English judgment could readily be enforced. Conversely, the court saw no evidence of assets owned by the defendant in Dubai and saw no need to put the claimants to the trouble of enforcing a Dubai judgment in England.
Application for summary judgment
In Speed Investments Ltd(4) the court considered the approach to be taken when a defendant challenges the jurisdiction and the claimant seeks summary judgment under English civil procedure rules. It was decided that only in "very rare" cases will the court allow an application for summary judgment to be made before a challenge to the jurisdiction has been determined. The English rules allow a defendant that has failed in a jurisdictional challenge a further 14 days to decide whether to submit to the jurisdiction or allow the action to proceed by default.(5) Accordingly, a defendant should be permitted to challenge the jurisdiction of the English courts without prejudicing or pre-empting its defence on the merits or its decision as to whether, if the jurisdictional challenge fails, it nevertheless wishes to submit to the jurisdiction of the English courts.
The defendant in this case argued that he should be allowed this extra time, and that accordingly the court should not determine the claimant's application for summary judgment.
The court considered the question of whether the current case merited a summary judgment decision at this juncture. It concluded that the case was one of the "very rare cases" to which Speed Investments Ltd referred, in which it was appropriate for the court to determine an application for summary judgment before the jurisdictional challenge had concluded. The reasons for doing so were as follows:
- The direction that permitted the hearing expressly provided that the parties should prepare for an effective hearing of both applications, including the claimants' summary judgment application. The defendant's suggestion that he had failed to identify the nature of his defence (which he would have been expected to do in order to pursue his application for a stay on forum non conveniens grounds) because he did not wish to be taken to have submitted to the court's jurisdiction was without substance. Rather, the defendant appeared to have adopted a deliberate tactical decision with full knowledge - so the court assumed - of the possible consequences. The court strongly suspected that the reason behind this failure was that the defendant did not have a defence that stood a prospect of success.
- The claim was for an account of the proceeds of sale, not for a specific sum. The court considered that it was clear that the defendant had no defence to the claim for an account. He had also made repeated admissions that he was obliged to account for the proceeds of sale to the claimants. This could be distinguished from a typical summary judgment application, where the defendant at least maintains that it has a defence of some sort.
- It would have been open to the defendant to put forward whatever case he had as to the net proceeds of sale in order to show that the true extent of his liability was less than the amount calculated by the claimants.
- In light of the defendant's failure to comply with his own promises to make payments to the claimants, but also his failure to indicate the nature of any defence, the court was satisfied that the defendant's stance was solely motivated by the desire to delay payment to the claimants of their entitlement.
- The reasoning cited in Speed Investments Ltd and European Capital Trade Finance could be distinguished from this case, as the defendant in this case was resident within the jurisdiction and had assets there against which any judgment could be enforced, regardless of whether it was a default judgment. The defendant was not, therefore, a typical foreign defendant, even though he was resident abroad as well as in England. Accordingly, the benefit to a typical foreign defendant of allowing proceedings to go by default, and then being able to resist enforcement of an English judgment in their own jurisdiction, would not avail the defendant in this case.
The decisions on service of claim and forum non conveniens follow previously established principles. However, it is useful to note the application of these principles.
The key point of interest is the decision to allow an application for summary judgment to be heard at the same time as the defendant's jurisdictional challenge. The court found that it was hard to envisage a case that would better fulfil the relevant requirements of the "very rare case" that will merit such a decision.
The repeated criticism of the defendant's failure to set out even the briefest details of a defence also emphasises the need for defendants to provide details of their intended argument when responding to such a summary judgment application, particularly if the claim in question appears to be a factually straightforward claim with strong prospects of success.
In distinguishing this case (on the grounds that the defendant would obtain no benefit from allowing judgment to be obtained by default and then resisting enforcement), the court has also raised the question of whether the same argument could be applied where enforcement would take place in an EU member state, where there should similarly be no ability for defendants to resist enforcement.
For further information on this topic please contact Laura Martin at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected]).
Endnotes
(2) Varsani v Relfo Ltd [2010] EWCA Civ 560.
(3) Spiliada Maritime Corporation v Cansulex Ltd [1987] 1 AC 460.
(4) Speed Investments Ltd v Formula One Holdings Ltd [2004] EWHC 1772 (Ch), [2005] 1 WLR 1233.
(5) European Capital Trade Finance Ltd v Antenna Hungria RT, (unreported, March 27 1995).
