William Day and Anca Bunda defeat jurisdiction challenge in cross-border fraud claim
William Day and Anca Bunda instructed by Ian Gatt KC, Lorraine Lanceley and Jack Barlow of Stewarts, successfully defeated a jurisdiction challenge in the Commercial Court brought by two defendants to a cross-border fraud claim.
The underlying claim relates to the Xio Fund, which held itself out as an orthodox fund but went into liquidation after allegations that it was a front for anonymous investment for a single Chinese billionaire. The relevant defendants – the Group CEO (D3) and the Head of Europe (D2) – are alleged the Claimant to have made statements that Xio was an orthodox private equity fund with a diversified investor base and committed capital of $3bn when they knew that was not true.
D2 and D3 were served in and out of the jurisdiction. D2 disputed the validity of service in the jurisdiction at his last known residence. The Judge (Peter MacDonald-Eggers KC sitting as a Deputy High Court Judge) dismissed that application, and helpfully clarified the relevant principles: as a person could have more than one residence at a time, the Claimant was not put on notice that D2 had vacated a flat in London as a residence even though he had taken up residence in Switzerland. The Claimant’s solicitors were informed (albeit in error) by the porters for the flat in London that D2 was still in residence, and D2 refused to respond to emails asking for confirmation as to the correct address for service.
D2 and D3 sought a stay of proceedings commenced by service in the jurisdiction on forum conveniens grounds. That stay was rejected. Although alleged misrepresentations were received in Germany, that did not make Germany more connected with the dispute than England. The representations were all made on behalf of Xio, whose European headquarters were in London, and their purpose was to induce the Claimant into working for Xio in London. D2 and D3 both had a presence in London at the relevant time. The questions of falsity were not connected with Germany. The claim was likely not governed by German law, but rather by English law, applying Rome II. A stay would also lead to fragmentation, with the claims against the other Defendants continuing in England.
D2 and D3 also sought to set aside service out. That was again dismissed. A German law limitation defence was rejected on the basis that there was a good arguable case that English law applied under Rome II. The challenges to the tort and ‘necessary and proper party’ gateways were rejected, as was the forum non conveniens challenge (for similar reasons to the forum conveniens challenge). Further, two alleged breaches of full and frank disclosure on the ex parte application for service out were dismissed, with the Judge citing Sir Michael Burton’s recent observations that “in the ordinary case a judge on the return day … must really have his timbers shivered by something serious that has gone wrong, rather than a litany of matters that could have been put differently or could have been expanded”.
The link to the Judgment ( EWHC 801 (Comm) is here.