Factual and Procedural Background
This opinion concerns applications related to an order permitting the Claimant, the Libyan Investment Authority (LIA), to serve the Third Defendant, Mr Giahmi, and the Fourth Defendant, Lands Company Limited (Lands), outside the jurisdiction. The Defendants challenged jurisdiction and service on grounds that the claims were time-barred under English law and that the LIA failed to comply with the duty of full and frank disclosure in the without notice application for permission to serve out. The Defendants also sought to strike out certain claims and to stay proceedings pending the outcome of related Receivership discharge applications.
The LIA's claims arise from a US$200 million derivative transaction (the Bear Stearns Trade) entered into in 2007, alleging a fraudulent and corrupt scheme involving Mr Giahmi and Bear Stearns, with payments routed through Lands. These claims are advanced under English law and allege corrupt influence, bribery, and intimidation of LIA officers. The LIA previously brought related claims in the SocGen Proceedings concerning other transactions, which settled without Mr Giahmi's participation.
The LIA's application for permission to serve out was made without notice, relying on a real prospect of success. The Defendants contend the claims are time-barred, that the LIA failed to disclose limitation issues, and that certain claims lack legal foundation. The court also considers the propriety of alternative service methods and a stay application.
Legal Issues Presented
- Whether the claims against Mr Giahmi and Lands are time-barred under English law and if the LIA can rely on Section 32 of the Limitation Act 1980 to extend the limitation period.
- Whether the LIA complied with the duty of full and frank disclosure in its without notice application for permission to serve out of the jurisdiction.
- Whether the claims for money had and received and for fraud disclose a reasonable cause of action under English law.
- Whether the claims against Mr Giahmi constitute an abuse of process due to their similarity to claims in earlier proceedings.
- Whether alternative service on Mr Giahmi was properly granted.
- Whether the proceedings against Mr Giahmi should be stayed pending the outcome of Receivership discharge applications.
Arguments of the Parties
Defendants' Arguments
- The claims against Mr Giahmi and Lands are time-barred as they were commenced more than six years after the relevant transaction dates under English law.
- The LIA failed to make full and frank disclosure on the without notice application by not addressing the limitation issues and Section 32 of the Limitation Act 1980.
- Certain claims, including money had and received and fraud, lack a reasonable legal foundation under English law.
- The claims against Mr Giahmi amount to an abuse of process as they should have been pursued in earlier proceedings involving substantially the same facts.
- Alternative service should not have been granted as service should have been effected via diplomatic channels under the UK/UAE Treaty.
- A stay of proceedings should be granted pending the outcome of the Receivership discharge applications to avoid unnecessary costs and delay.
Claimant's Arguments
- The LIA contends that the claims are not time-barred because it relies on Section 32 of the Limitation Act 1980, which postpones limitation periods where fraud or concealment has occurred and could not have been discovered with reasonable diligence.
- The LIA submits that it complied with the duty of full and frank disclosure and that limitation issues were addressed sufficiently.
- The claims for money had and received and fraud are properly pleaded and supported by evidence of a corrupt and fraudulent scheme.
- The claims against Mr Giahmi are not an abuse of process as they arise from transactions distinct from the earlier proceedings and were not required to be brought together.
- Alternative service was justified due to the risk of evasion and significant delay if service was effected via diplomatic channels.
- The stay application should be refused as there is no real prospect that the Receivership discharge would lead to discontinuance of proceedings.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Henderson v Henderson |
Principle of abuse of process preventing multiple claims on the same matter. |
Applied to assess whether claims against Mr Giahmi should have been brought in earlier proceedings. |
| Altimo Holdings v Kyrgyz Mobil Tel [2012] 1 WLR 1804 |
Test for real prospect of success in jurisdictional challenges and permission to serve out. |
Used to determine if claims had a real prospect of success for permission to serve out. |
| TFL Management Services Ltd v Lloyds Bank Plc [2013] EWCA Civ 1415 |
Guidance on applying summary judgment test for real prospect of success. |
Followed for assessing merits of claims on summary basis. |
| Easy Air Ltd v Opal Telecom Ltd [2009] EWHC 339 |
Approach to summary judgment and realistic prospect of success. |
Applied in evaluating the strength of the LIA's claims. |
| Paragon Finance v Thakerar [1999] 1 All ER 400 |
Burden on claimant to prove inability to discover fraud with reasonable diligence under Section 32 Limitation Act. |
Guided analysis of limitation and discoverability of fraud. |
| Gresport Finance Ltd v Carlo Battalagia [2018] EWCA Civ 540 |
Definition and application of reasonable diligence test under Section 32. |
Applied to assess whether LIA exercised reasonable diligence in discovering fraud. |
| Law Society v Sephton [2004] EWCA Civ 1627 |
Requirement that claimant must be put on notice to investigate fraud for reasonable diligence to apply. |
Considered in evaluating LIA's knowledge and duty to investigate. |
| Peco Arts Inc v Hazlitt Gallery Ltd [1983] 3 All ER 193 |
Context-specific meaning of reasonable diligence. |
Referenced in limitation analysis. |
| Chodiev v Stein [2015] EWHC 1428 |
Claimant should seek disclosure orders as part of reasonable diligence in fraud investigations. |
Supported view that LIA should have sought disclosure earlier. |
| Arcadia Group Brands v Visa [2015] EWCA Civ 883 |
Material facts relevant to cause of action for limitation purposes. |
Applied to determine what facts trigger limitation. |
| AIC Ltd v ITS Testing Services (UK) Ltd (The Kriti Palm) [2007] 1 All ER (Comm) 667 |
Test for when cause of action is complete for limitation. |
Used to assess timing of limitation period commencement. |
| Ezekiel v Lehrer [2002] EWCA Civ 16 |
Knowledge for limitation purposes includes forgotten knowledge. |
Considered in limitation analysis. |
| Barnstaple Boat Club v Jones [2007] EWCA 727 |
Knowledge must be of the fraud alleged, not mere dishonesty. |
Applied in assessing LIA's knowledge of fraud. |
| Julien v Evolving Technologies [2018] UKPC 2 |
Attribution of knowledge to a corporate claimant under limitation law. |
Considered but not decided as determinative. |
| Playboy Club v Banca Nazionale Del Lavoro [2018] EWCA Civ 2025 |
Requirement for solid evidential foundation before pleading fraud. |
Emphasised caution in making fraud allegations. |
| OJSC ANK Yugraneft v Sibir Energy plc [2008] EWHC 2614 |
Principles governing duty of full and frank disclosure on without notice applications. |
Guided the court’s assessment of LIA’s disclosure obligations. |
| Knauf UK GmbH v British Gypsum Ltd [2001] EWCA Civ 1570 |
Golden rule of full and frank disclosure on ex parte applications. |
Applied in evaluating the LIA’s disclosure failures. |
| BP Exploration Co (Libya) Ltd v Hunt [1976] 1 WLR 788 |
Materiality in disclosure on permission to serve out of jurisdiction. |
Referenced in disclosure analysis. |
| Banca Turco Romana S.A. (in liquidation) v Cortuk [2018] EWHC 662 |
Importance and penal nature of duty of disclosure. |
Supported sanction of setting aside service. |
| MRG (Japan) Ltd v Engelhard Metals Japan Ltd [2003] EWHC 3418 |
Scope of material facts for full and frank disclosure. |
Guided court’s evaluation of materiality. |
| Mahesan v Malaysia Government Officers Co-Operative Housing Association Ltd [1979] AC 374 |
Legal basis for claims of money had and received and fraud in bribery cases. |
Applied to assess validity of LIA’s claims for sums beyond bribes. |
| Fiona Trust & Holding Corp v Skarga [2013] EWCA Civ 275 |
Recovery of bribes and consequential loss under English law. |
Considered in relation to claims for money had and received. |
| Hovenden v Millhoff [1900-03] All ER Rep 848 |
Recovery limited to amount of bribe, not underlying transaction sums. |
Applied to reject novel claim for inflated premium sums. |
| Johnson v Gore Wood & Co [2002] 2 AC 1 |
Abuse of process principle preventing multiple claims on same facts. |
Applied in abuse of process analysis. |
| Aldi Stores Ltd v WSP Group Plc [2008] 1 WLR 748 |
Guidance on abuse of process and requirement to put all claims before the court. |
Applied to assess whether claims should have been brought together. |
| Stuart v Goldberg Linde [2008] 1 WLR 823 |
Requirement that parties disclose subsequent claims to court for case management. |
Referenced in abuse of process discussion. |
| Westbrook Dolphin Square Ltd v Friends Provident Life and Pensions Ltd [2011] EWHC 2302 |
Application of abuse of process principles to CPR Part 38.7 permission for subsequent claims. |
Considered in stay and abuse of process context. |
| Hague Plant Ltd v Hague [2014] EWCA Civ 1609 |
Analogy between re-introduction of claims and fresh claims requiring court permission. |
Referenced in abuse of process and permission requirements. |
| Abela v Baadarani [2013] UKSC 44 |
Test for good reason or exceptional circumstances to order alternative service. |
Guided court’s assessment of alternative service. |
| Société Générale v Goldas Kuyumculuk Sanayi Ithalat Ihracat AS [2017] EWHC 667 |
Principles relating to service abroad and alternative service orders. |
Applied in alternative service evaluation. |
| Marashen Ltd v Kenvett Ltd [2017] EWHC 1706 |
Requirement of exceptional circumstances for alternative service under service treaties. |
Considered in alternative service analysis. |
| Punjab National Bank v Srinivasan & Ors [2019] EWHC 89 |
Application of exceptional circumstances test for alternative service under bilateral treaties. |
Applied in alternative service determination. |
Court's Reasoning and Analysis
The court began by examining whether the LIA had a real prospect of success on its claims against Mr Giahmi and Lands, focusing on limitation under English law. The claims, relating to a 2007 transaction, were issued in 2018, outside the usual six-year limitation period. The LIA relied on Section 32 of the Limitation Act 1980 to postpone limitation by showing that fraud or concealment prevented earlier discovery.
Applying established legal principles, the court found the LIA bore the burden of proving it could not, with reasonable diligence, have discovered the fraud before April 2012. The evidence showed the LIA had knowledge or could have discovered key facts earlier through reasonable investigation, including internal concerns about corruption, investigations conducted in 2010, and publicly available reports. The LIA failed to make inquiries to Bear Stearns/JP Morgan, despite invitations in transaction documents to seek further information, and the confidentiality arguments advanced by the LIA were not credible.
The court concluded that the LIA either knew or could have known the necessary facts to plead its claims before the limitation period expired, and thus the claims stand no real prospect of success due to limitation defenses.
Regarding full and frank disclosure, the court held that the LIA deliberately failed to disclose the limitation issues and the necessity of relying on Section 32 to the court in the without notice application. The supporting witness statement and skeleton argument omitted any meaningful reference to limitation under English law, misleading the court about the prospects of success. This breach was serious, deliberate, and went to the heart of the merits of the application.
The court emphasized the penal nature of the duty of full and frank disclosure and found that the appropriate sanction was to set aside the order permitting service out of the jurisdiction.
On the claims for money had and received and fraud, the court analysed applicable legal principles and found that English law permits recovery only of the amount of the bribe or actual loss caused. The LIA's claim for the full amount of fees paid to Lands, which far exceeds the alleged bribes, lacks legal foundation and stands no real prospect of success. The LIA also failed to disclose this novel legal position, compounding its disclosure breaches.
On abuse of process, the court found that the claims against Mr Giahmi substantially overlap with earlier proceedings and should have been brought together. However, given the advanced stage of the earlier proceedings and practical difficulties, the court did not find the current proceedings amounted to abuse of process or warranted striking out.
Regarding alternative service, the court applied the established test of exceptional circumstances for service under the UK/UAE Treaty. It found that delay via diplomatic channels, risk of evasion by Mr Giahmi, and previous difficulties justified the grant of alternative service orders. Nonetheless, this point was academic given the setting aside of service on other grounds.
On the stay application pending Receivership discharge, the court found no sufficient basis to grant a stay given the speculative nature of the outcome and the need to avoid undue delay.
Holding and Implications
The court SET ASIDE the order permitting service of the claim form out of the jurisdiction on Mr Giahmi and Lands.
This decision was based primarily on the conclusion that the LIA's claims against these Defendants stand no real prospect of success due to limitation defenses and that the LIA deliberately breached its duty of full and frank disclosure by failing to disclose these limitation issues on the without notice application. Additionally, claims for money had and received and fraud were found to lack a reasonable legal basis under English law.
The court declined to find the proceedings an abuse of process and upheld the grant of alternative service as appropriate in the circumstances, although these points were academic given the setting aside of service.
No stay of proceedings was granted.
The direct effect of this ruling is that the LIA cannot proceed against Mr Giahmi and Lands on the current claims as served, and service is set aside accordingly. No new precedent altering the law was established; the decision applies established principles to the facts of this case.