What a relief (from sanctions)! Court grants application made 5 years out of time

16 December 2021

In the recent case of Apollo Ventures Co Ltd v Manchanda [2021] EWHC 3210 (Comm) an extension of time of almost five years was granted in the Defendant’s application for a stay under Civil Procedure Rules (“CPR”) Part 11 – disputing the Court’s jurisdiction.

Background

The Claimant is a Thai company in which the Defendant, domiciled in Thailand, is a substantial shareholder. The Claimant alleges that (i) the Defendant caused the Claimant to enter into two loans with a Thai businessman under which the Claimant borrowed £4.4 million and became liable to repay some £5.8 million; (ii) the Defendant purported to enter into the loans on the Claimant's behalf without the knowledge of other officers of the Claimant and by the use of forged documents and (iii) the loans were not obtained for the benefit of the Claimant but for the benefit of the Defendant and members of his family.

The claim was issued on 9 May 2016 against the Defendant and seven other defendants, three of whom were located within the jurisdiction of the English Court and so were, what are known as, “anchor defendants”. On the same day a Worldwide Freezing order (WFO) was granted. There was an application by the Defendant and two other defendants to set aside the order giving permission to serve the proceedings out of the jurisdiction and an application by all defendants to set aside the WFO. Those applications were dismissed on 15 June 2016.

On 20 February 2018 the Claimant served Amended Particulars of Claim and on 19 April 2018 the Defendant served his Defence, thereby submitting to the jurisdiction of the English Court.

A number of similar claims were also issued against the Defendant in Thailand in 2018 and 2019.

The English claims against the other defendants were struck out in January 2021, leaving the Defendant as the sole remaining defendant to this claim. 

In May 2021 the Defendant issued an application for a stay of the English proceedings on the ground that Thailand, not England, was the appropriate jurisdiction to hear the claim - the claims arise from transactions between a Thai company and a Thai businessman, key witnesses are in Thailand, the events involve issues of Thai law and there are connected proceedings progressing in Thailand (the “Stay Application”).

The application for an extension of time

On any view the Stay Application was made late. CPR 11(4) requires an application to challenge the Court’s jurisdiction to be made within 14 days after filing an Acknowledgment of Service. That time limit expired in June 2016. Therefore, the Defendant needed to make an application for a retrospective extension of time (over 5 years) in which to make the Stay Application.

Whether or not it is appropriate to extend time depends upon an application of the Denton test, which is used by Courts when deciding whether relief from sanctions (i.e. exemption from sanctions for failure to comply with court orders or rules) should be granted in certain cases. The test comprises of 3 stages:

1. The seriousness and significance of the breach of the CPR

The first stage is to assess the seriousness and significance of the breach of the CPR.

In the present case there had been a change of circumstances since the Defendant served his Defence in April 2018. First, additional proceedings were commenced in Thailand in 2018 and 2019 and, second, the English claims against the other defendants were struck out in January 2021. As a result the Defendant’s case was that there was no reason why the Court could not now conclude that Thailand is clearly and distinctly the more appropriate forum for determination of the Claimant’s claim against the Defendant.

The Court concluded that there had been no reason for the Defendant to bring the Stay Application until the Court had struck out the Claimant’s claims against the other defendants, which was in January 2021. Nevertheless, the Court found that 4 months from that date to the date of the Stay Application being issued was a serious and significant delay.

 

2. Why did that delay occur?

The second stage is to consider why the 4 month delay occurred.

The Defendant did not put forward any evidence to explain that delay, and the Court was therefore unable to find any good reason for the delay.

 

3. All the circumstances of the case; dealing justly with the extension application

The third stage involves the court evaluating all the circumstances of the case with a view to dealing justly with the application, including the need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with the rules, practice directions and orders, as set out at CPR 3.9(1).

It is in this context that deciding this application raised novel issues, as whilst the Defendant had already submitted to the English jurisdiction, it appeared that the Defendant now had a cogent case that Thailand is clearly and distinctly the more appropriate forum. Dealing with the application for an extension of time justly required that weight be given to that factor, and the Court found it to be a good reason in favour of the grant of an extension of time.

Another factor for the Court to consider was that a stay would inevitably lead to the costs already incurred by the Claimant being “sunk” (i.e. wasted) resulting in serious prejudice to the Claimant. However, as such waste flowed from the striking out of the claim against the other defendants which arose by reason of the Claimant’s failure to provide security for costs as ordered by the Court, the Court found that the Claimant only had itself to blame for the sunk costs.

Weighing up those two factors, one in favour of an extension of time, and the other against an extension of time, the Court considered the case for an extension of time the stronger, and granted the Defendant’s application for an extension of time.

 

The stay application

The reasons why Thailand can be said to be clearly and distinctly the more appropriate forum were summarised by David Foxton QC in an earlier 2016 judgment, namely:

  • The claim arises from transactions entered into by a Thai company with a Thai businessman and involves allegations of unlawful acts under Thai law by a director of the company resident in Thailand;
  • At least four of the key witnesses live in Thailand;
  • The key events concerning the entry into the loans involve issues of Thai company law;
  • There are already proceedings underway in Thailand in relation to the loans;
  • Whilst three out of the seven original defendants are domiciled in England, only a small part of the proceeds of the loans have been traced to this jurisdiction.

The Court found those reasons to remain valid in 2021 and, indeed, stronger in circumstances where yet further proceedings had been brought against the Defendant in Thailand in connection with the loans in 2018 and 2019.

The Court found that because no proceedings against the other defendants arising out of the loans would take place in England, the Defendant could establish that Thailand was clearly and distinctly the more appropriate forum.

Taking all of the above into account, the Court granted the stay application.

This case should serve as a warning to claimants of the risks of discontinuing or allowing the strike-out of claims against some but not all defendants, especially where there are similar claims issued in other jurisdictions. In these circumstances, even where any remaining foreign defendants have initially submitted to the jurisdiction, it would appear that the English Courts are reluctant to allow those claims to be continued absent any other ties to this jurisdiction, no matter how much time has passed. 

 

Further information

If you would like further information on any of the topics raised on this blog, please see our Dispute Resolution webpages, or contact the author. 

 

About the author

Katie Allard is an Associate in the Dispute Resolution team. She has a wide-ranging commercial practice with particular interest and expertise in complex civil fraud and asset tracing investigations, boardroom and shareholder disputes, and breach of contract claims, acting for both claimants and defendants. 

 

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