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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Adeem Investment Holding Company KSCH v Al-Humaidi and Ors [2021] JRC 224 (31 August 2021) URL: http://www.bailii.org/je/cases/UR/2021/2021_224.html Cite as: [2021] JRC 224 |
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Companies - reasons for refusing to extend time for the filing of an answer
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Before : |
Advocate Matthew John Thompson, Master of the Royal Court |
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Between |
Adeem Investment Holding Company KSCH |
Plaintiff |
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And |
Najeeb Al-Humaidi |
First Defendant |
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Catalonia Investments Limited |
Second Defendant |
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And |
Nama Investments Limited |
Third Defendant |
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Primewagon Holdings Limited |
Fourth Defendant |
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Primewagon (Jersey) Limited |
Fifth Defendant |
Advocate E. B. Drummond for the Plaintiff.
Advocate J. P. Speck for the Defendants.
CONTENTS
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Paras |
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1. |
Introduction |
1 |
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2. |
Background |
2-12 |
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3. |
Submissions |
13-44 |
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4. |
Decision |
45-58 |
judgment
the MASTER:
1. This judgment contains my detailed written reasons for refusing to extend time for the filing of an answer by the second to fifth defendants until 21 days after determination of their summons seeking, amongst other things, a stay on the basis that Jersey is not an appropriate forum for resolution of the plaintiff's claims.
2. The present proceedings were commenced by an order of justice signed by Advocate Edward Drummond for the plaintiff on 23rd June 2021. While the order of justice is detailed, because it pleads various changes to complex structures involving Jersey and Kuwait companies, at its heart is an allegation that the first defendant signed a unilateral declaration in Arabic in favour of the plaintiff no later than 29th July 2012 ("the Declaration"). A translation of the Declaration was pleaded at paragraph 15 of the order of justice as follows: -
""I, the undersigned [Najeeb], declare that my contribution to [Al Offok] is fictitious upon request of [Adeem]. I declare that the shares registered in my name amount to (99 shares) with their material and moral elements are owned by [Adeem], and that such shares are registered in my name only to ensure conformity with the relevant conditions and laws of the Ministry of Commerce on the establishment of limited liability companies. Furthermore, I declare that all rights and revenues of these shares belong to [Adeem]; and that [Adeem] is entitled to dispose of the shares as being the owner thereof and is entitled to use all rights of such shares with respect to receiving the dividends, attending the general assemblies, and contributing in the capital increase, etc.""
3. The plaintiff alleges the Declaration was governed by Kuwait Law and led to an assertion that pursuant to the Declaration the first defendant owed the plaintiff various duties under Kuwait Law as an agent and as a fiduciary with various provisions of the Kuwait Civil Code being pleaded which had been breached.
4. The first main allegation of breach is that a significant holding in the Aston Martin car company has been wrongfully diverted away from the plaintiff for the benefit of the first defendant and/or his family.
5. The second part of the allegations of breach relate to various payments made by Jersey companies to other Jersey companies said to be owned beneficially by the first defendant and/or his family or to the first defendant and/or his family. The plaintiff seeks to have these payments (which are very significant) set aside. In the alternative damages are sought against all the defendants.
6. The present proceedings followed on from earlier proceedings issued against the first and third defendants as defendants and the fourth and fifth defendants in the present proceedings as parties cited. The other party cited was JTC (Jersey) Limited ("JTC"). Injunctions were initially granted by the Deputy Bailiff signing the order of justice on 15th April 2021, ("the April Order of Justice") granting an immediate freezing order over certain shares in Aston Martin and ancillary disclosure to police the injunction. The April Order of Justice also sought information pursuant to the Royal Court's "Norwich Pharmacal" jurisdiction from the fourth and fifth defendants to the present proceedings and from JTC about any breaches of the Declaration by the first defendant on the basis that the plaintiff was a victim of wrongdoing in which they were mixed up.
7. The relevance of JTC is that they provided directors to the second to fifth defendants until September 2020. After September 2020 the directors to the second to fifth defendants were the first defendant and/or members of the first defendant's family.
8. In relation to the Norwich Pharmacal relief Advocate Speck asserted that significant material had been provided by JTC which was not challenged by Advocate Drummond for the plaintiff.
9. Although the defendants issued an application to challenge the freezing orders obtained, this challenge was resolved by agreement leading to an escrow arrangement between the parties. I was informed that one of the conditions of the escrow agreement was that the plaintiff would issue substantive proceedings within short order which led to the order of justice in the present proceedings referred to above being signed on 23rd June 2021.
10. Service was then effected on the second to fifth defendants as of right as they are all Jersey companies. In respect of the first defendant, I gave permission to serve the first defendant out of the jurisdiction as set out in an Act of Court dated 30th June 2021. In giving permission to serve the first defendant out of the jurisdiction I was informed that the plaintiff had issued proceedings against the first defendant in Kuwait seeking the return of certain shares forming part of the structure in dispute described as the Offok shares. One of the issues in these proceedings in Kuwait is to determine the validity of the Declaration.
11. When I considered the application for service out, I raised concerns about whether the Jersey proceedings should be stayed until the Kuwait Court had determined the validity of the Declaration. Ultimately, I was persuaded by Advocate Drummond for the plaintiff to wait and see what approach the second to fifth defendants might take to the proceedings and whether or not they might seek any stay.
12. Ultimately, a challenge to Jersey being an appropriate forum was sought by the second to fifth defendants which challenge is for the Royal Court to determine. Pending such determination, in addition to seeking an extension of time for the filing of an answer until after the Royal Court hearing, the present summons also sought an extension of time until determination of the present application which I granted on the papers. The summons also sought as an alternative an extension of time until 24th September 2021 if I was not prepared to extend time until after the second to fifth defendants' challenge to Jersey as an appropriate forum. An extension for this period of time was agreed subject to the determination of whether time should be extended to file an answer until after determination of the second to fifth defendants' challenge to forum. That application is due to be heard in January 2022.
13. Both parties filed extensive skeleton arguments supported by affidavit evidence all of which I have considered.
14. The principal submissions made by Advocate Speck who represents all the defendants were as follows.
15. The first defendant was excused from having to file an answer because he had issued a jurisdiction challenge which he was entitled to do. Under Rule 6/7(7) of the Royal Court Rules 2004, as amended, where a challenge is made under Rule 6/7 the time limit for the filing of pleadings does not begin to run until the application has been dismissed by the court or abandoned as the case may be. However, the same Rules do not apply to a challenge to stay proceedings on the ground that another country is a more appropriate forum. For a jurisdiction challenge, the burden was on the plaintiff to show why Jersey is the appropriate forum for its claims against the first defendant. For a Forum Challenge Hearing, it was common ground that the burden of proof was on the second to fifth defendants to show that there was a more appropriate forum than Jersey for resolution of the present proceedings.
16. In this case Advocate Speck contended that the application for an extension of time had to be looked at in the context of the order of justice as a whole. The claim against the first defendant was at the heart of the allegations made by the plaintiff. The plaintiff's case was summarised at paragraph 36 of the order of justice as follows: -
"36. By at least 25 June 2018, Najeeb formed a plan ("the Plan") whereby he would:
36.1 Take steps and/or cause others to take steps to transfer assets which were beneficially owned directly or indirectly by Adeem into structures that were instead beneficially owned directly or indirectly by himself and/or members of his immediate family;
36.2 Do so in a way which would make it difficult for the plan to be discovered by the beneficial owners of Adeem other than himself and, if discovered, difficult to reverse."
17. In respect of the claims to set aside the transactions or steps entered into by the second to fifth defendants, the allegation was that each of the transactions now challenged was made at the instigation and direction of the first defendant and pursuant to the Plan defined in paragraph 36 of the order of justice.
18. Whether there would be any proceedings in Jersey depended on what happened in Kuwait. It was the second to fifth defendants' position firstly that the proceedings in Kuwait would determine whether or not the Declaration was a valid document or not. If it was not that was the end of the matter.
19. Secondly, proceedings in Kuwait would determine whether the first defendant had acted in breach of any obligations under the Declaration if that document was found to be valid. Given the allegations in the order of justice that steps taken in Jersey were all taken at the instigation and direction of the first defendant, the allegations against the defendants therefore all appeared to hinge on what the first defendant did. Any findings by the Kuwait Court of breach by the first defendant based on the plaintiff's case would lead to the plaintiffs arguing in Jersey that the second to fifth defendants had acted in breach of the Declaration. This was because the plaintiff was seeking to look through the corporate personality of the second to fifth defendants. I should make it clear for the avoidance of doubt that Advocate Speck carefully reserved his position as to whether the plaintiff could look through the second to fifth defendants as the plaintiff claimed and whether they were bound by the actions of the first defendant or any findings made in Kuwait.
20. The effect however of requiring the second to fifth defendants to file an answer was to undermine the position of the first defendant because, in effect, the first defendant's position would be set out in the answer of the second to fifth defendants.
21. In terms of the Royal Court's approach to the forum challenge, the Royal Court had everything it needed to know because the plaintiff's case had been clearly set out. If the jurisdiction challenge of the first defendant prevailed, then there was no need for the Royal Court to be concerned about whether or not Jersey was an appropriate forum, because the proceedings would be heard in Kuwait. If the Royal Court had to consider a forum challenge, all factors were in any event clear in terms of where witnesses were located, what governing law applied and where documents were located.
22. In relation to the plaintiff's challenge to the positions taken by Jersey companies, what mattered was whether or not the first defendant breached any duties because of the extensive allegations in the order of justice that the companies acted at the first defendant's instigation and direction.
23. Advocate Speck accepted there was an issue for the Royal Court to determine on the Forum Challenge Hearing application whether any decision made in Kuwait would resolve all matters raised in the order of justice.
24. Advocate Speck was also not in a position to say whether or not what the first defendant did was valid. He accepted that the second to fifth defendants might have additional defences but, because of the way the case was pleaded, there could not be any finding of liability against the second to fifth defendants if no breach was established against the first defendant.
25. This exchange led to me enquiring whether Advocate Speck was in a position of conflict of interest. He assured the court he felt that there was no conflict.
26. Advocate Speck also argued that there was a risk of further criminal proceedings being filed in Kuwait. While previous complaints filed had been either withdrawn or determined, if an answer was filed, there was a danger that any such answer could be used against the first defendant because the answer would plead to knowledge of the first defendant given the way the plaintiff's allegations were pleaded.
27. While the applicable legal test had been determined by the Royal Court in Crociani v Crociani & Ors [2013] JRC 080 at paragraph 20, that case was distinguishable in a number of key respects; in particular there was no jurisdiction challenge.
28. Advocate Speck also emphasised that the plaintiff had received significant material from the Norwich Pharmacal application. The plaintiff therefore knew the position of the second to fifth defendants.
29. There was also no prejudice to the plaintiff by answers not being filed at this stage because of the injunctions and undertakings previously provided.
30. Finally, Advocate Speck submitted that the delay in the filing of an answer was not significant in terms of how long these proceedings has already taken and how long it took the plaintiff to issue proceedings.
31. Advocate Drummond for the plaintiff argued that the position taken by the second to fifth defendants was the same argument that was run in Crociani and which was rejected in that case.
32. While the plaintiff had made allegations about the first defendant pulling the strings, why the second to fifth defendants took the decisions they did was known to those companies. They had their own legal status. Advocate Drummond was therefore critical of Advocate Speck saying he would consider whether the second to fifth defendants were bound by the actions of the first defendant with real care, because the second and fifth defendants were not making their position clear. He asked rhetorically how the Royal Court should proceed when determining the Forum Challenge and whether the Royal Court should assume that all matters were denied. The plaintiff could not work out what the position of the second to fifth defendants was and it was not for the plaintiff to do so.
33. The plaintiff had also asked the second to fifth defendants what they considered the legal effect of the Declaration to be about various steps taken in respect of transfers of funds. Bedell Cristin in their letter of 18th May 2021 sought an explanation about these payments, Mourant Ozanne by their reply of 19th May 2021 stated that "the plaintiff had no right to the information requested".
34. In relation to delay, the involvement of the second defendant (Catalonia Investments Limited) was not known about until documents were provided pursuant to the April Order of Justice
35. Notwithstanding the various procedural steps taken by the plaintiff both in Jersey and elsewhere, it was still not clear to the plaintiff what was accepted by the second to fifth defendants and what was in dispute. Neither the plaintiff nor the Royal Court should be left to work things out.
36. In relation to the case of Crociani, the Court did not consider how forum cases should be approached where no answer or defence was filed because Commissioner Clyde-Smith concluded that the potential prejudice to the defendants in that case was outweighed by the plaintiffs having their claim very substantially delayed for the reasons set out at paragraph 24 of his judgment. The Commissioner therefore decided at paragraph 25 that there should be no interruption of the progress of the substantive case to trial. However, he also stated that the answer would "incidentally be of benefit to the court dealing with the forum challenge hearing". Commissioner Clyde-Smith also made it clear that "the on-going progress of this case will not prejudice the position of the defendants in the Forum Challenge Hearing...".
37. In respect of the question of prejudice to the first defendant, if the second to fifth defendants filed an answer, Advocate Drummond argued there was no prejudice to him as he was not bound by their answer.
38. Advocate Drummond also accepted that the second to fifth defendants could take a neutral position on the first defendant's case. Any pleading from the second to fifth defendants might simply not admit what the plaintiff was asserting against the first defendant. Advocate Drummond however argued that any difficulty the second to fifth defendants faced in filing an answer was because the first defendant and the second to fifth defendants had joint representation. The second to fifth defendants' concerns would not arise if they had engaged separate legal counsel.
39. Advocate Drummond reminded me that the second to fifth defendants were Jersey companies being pursued in Jersey as of right where what was being challenged were either transfers of shares or payments or receipts of monies by those Jersey companies.
40. Those companies were not parties to the current proceedings in Kuwait; the proceedings in Kuwait related to the validity of the Declaration not the actions of the Jersey companies. Even if the jurisdiction challenge by the first defendant succeeded in respect of the Declaration the plaintiff would still carry on against the second to fifth defendants; the first defendant was clearly a necessary and proper party to the allegations made against the second to fifth defendants.
41. He emphasised there would be prejudice to the plaintiff because of the delay in the filing of an answer, for proceedings served at the end of June 2021. The plaintiff would not have an answer filed, if the second to fifth defendants' current application was granted, until at least seven months after service.
42. I was also invited to consider the fact that the first defendant was not engaging in Kuwait. There was therefore game playing by the defendants both in Kuwait and in Jersey by not wanting to file an answer.
43. The filing an answer in Jersey according to the plaintiff would also not prejudice the position in Kuwait because the first defendant was entitled to have the original of the Declaration produced at court to review the same and such a right did not prejudice the first defendant's position to challenge the accuracy or validity of the Declaration.
44. Advocate Speck in reply emphasised that the plaintiff's agenda was clear which was to compel the first defendant to state his position notwithstanding the fact that the first defendant was not required to file an answer. He also denied that his clients were game playing.
45. The parties were agreed in respect of the approach I should take in relation to the Forum Challenge Hearing applications which was set out at paragraph 20 of Crociani as follows: -
46. This is the test I have applied because I am bound by Crociani.
47. In respect of these proceedings, they are on any view complex. This can be seen both procedurally because injunctive relief was sought in Jersey and in London and because there are also substantive proceedings in Kuwait as well as in Jersey which may overlap.
48. In relation to the order of justice itself, alterations to the structures pleaded in the order of justice are not easy to follow. It was for this reason during the course of argument I indicated to the parties that appropriate diagrams recording the structure and where changes were made and their relevance to the factual matrix will be of assistance to the Royal Court. That request however also shows the complexity of these proceedings. The complexity is also apparent because a number of different transactions which either involved transfers of shares or payments of money are under challenge. All these matters make the matter complicated.
49. The complication does not end there. The Forum Challenge Hearing itself is also complicated because the first defendant is challenging proceedings as of right and the second to fifth defendants are bringing an application that Jersey is not an appropriate forum to resolve the claims against them even though they are sued as of right. While the validity of the Declaration appears to be a Kuwait Law issue, given it is before the Kuwait Courts, its validity is also a springboard to the relief sought against the second to fifth defendants. The Royal Court may therefore well have to consider whether and if so to what extent it should await some form of determination about the validity of the Declaration by the Kuwait Courts. While I can see that question of whether the original Declaration exists and arguments about its validity may be purely Kuwait matters, whether that Declaration, assuming it is a valid document, has been breached is much more complex. There appear to be allegations of breach both in Jersey and Kuwait which overlap. The question arises which is the most appropriate court to consider such breaches and can a line be drawn between steps taken in Jersey and steps taken in Kuwait (or indeed elsewhere) to determine which court should adjudicate on such breaches. An answer will therefore assist the Royal Court to evaluate where any overlap between proceedings in Kuwait and proceedings in Jersey lies.
50. The Jersey companies are of course sued as of right. It is therefore for the second to fifth defendants to persuade the Royal Court to stay proceedings brought against them as of right and to instead ask the Courts of Kuwait to consider the claims against them. This is not the usual or typical forum challenge. Normally, such challenges are brought by persons or legal entities from outside Jersey who have been joined to Jersey proceedings who wish for another court to determine those proceedings, because that other court is said to be a more appropriate forum. The present challenge is therefore an unusual one.
51. Yet the Royal Court is asked to grapple with these substantive and procedural complexities without the benefit of knowing the position of the second to fifth defendants. It is not known what their position is in respect of each of the transactions under challenge. The Court at present does not therefore know the extent of the issues in dispute. Without knowing what is in dispute, it is difficult for the Court to evaluate what evidence may be required and where that evidence is located in assessing where is the most appropriate forum. This case is therefore more complex than Crociani. In Crociani the argument was more straightforward in the sense that the fundamental question was whether or not Mauritius was a more appropriate jurisdiction to resolve the plaintiffs' claims in that case given that only one of the defendants was Jersey based.
52. The suggestion that the Court, based on the disclosure that has been provided, should (presumably with the assistance of the plaintiff) work out what the second to fifth defendants' defence might be is neither attractive nor appropriate. Such an approach also does not save costs.
53. In deciding to refuse an extension I also took into account the factor that if an extension was granted this would lead to delay in the second to fifth defendants' position becoming clear until at least next January. As they are all Jersey companies sued as of right, I concluded it was not appropriate from a case management perspective to allow such a period of delay for a case of this complexity.
54. In relation to the effect on the first defendant, the fact that such a difficulty may arise is because the first defendant since September 2020 has been a director of the second to fifth defendants. This state of affairs, however, is not down to the plaintiff. It is the first defendant who has created a position where he wears two different hats. Presumably he has agreed to joint representation with the second to fifth defendants despite their separate legal personalities. Where the second to fifth defendants are sued as of right, given the complexities of this case, the benefit an answer would provide also outweighed any prejudice that the first defendant might suffer if an answer filed by the second to fifth defendants pleaded to the actions or knowledge of the first defendant. However, it may be that the second to fifth defendants do not plead any positive case in respect of allegations against the first defendant beyond not admitting the same. If such an approach was adopted, which is not uncommon in cases of multiple defendants, the risk of prejudice to the first defendant would not appear to arise or at least arise to a material degree. The conclusion I therefore reached was that this situation and any difficulties that arise as a consequence should not prevent the second to fifth defendants making their position clear in respect of the transactions and payments that are under challenge for the reasons already given.
55. In this case there were also certain transactions or payments that are challenged where the first defendant or his relatives were not directors. Rather, the directors were provided by JTC or another associated part of the JTC Group. The JTC Group is of course regulated by the Jersey Financial Services Commission. Both Jersey Law company obligations and the regulatory requirements applicable in this jurisdiction mean that each of the second to fifth defendants should be able to explain why they took the particular steps now challenged where the steps were taken by regulated professionals. There may therefore be a distinction between whether the first defendant has breached the Declaration (assuming it is valid) and an explanation as to why the second to fifth defendants entered into the various transactions now under challenge. An answer addressing the latter issues will again assist the Court in determining what is the appropriate forum in this complex case.
56. Insofar as the production of an answer will lead to wasted costs, if the Royal Court concludes that it has no jurisdiction over the first defendant, in this case given the costs that are likely to have been incurred already in three jurisdictions and the costs to be incurred in respect of this Forum Challenge, I concluded that any risk of any wasted costs (and I accept there would be some) was outweighed by the total amount of costs likely to have been or to be incurred in any event in relation to the forum challenge. The risk of wasted costs was also outweighed by the assistance an answer would provide in this complex case for the reasons already given.
57. To the extent that the first defendant might suffer prejudice because an answer filed by the second to fifth defendants could lead to further criminal proceedings in Kuwait, were such a scenario to arise, the first defendant is of course entitled to come back to this court and ask for a stay of any Jersey proceedings in existence following the filing of a further criminal complaint on the basis of the well-known maxim "le criminel tient le civil en état'. The possibility of such a situation arising is not however a reason not to require an answer to be filed at this stage.
58. For all these reasons the second to fifth defendants' application to extend time for the filing of an answer until after their forum challenge application was determined was therefore refused.
