James Price and Luca del Panta use a recent case in England and Wales to illustrate the importance of full and frank disclosure for ex parte applications

Any party seeking to serve English proceedings outside the jurisdiction would be well advised to read the recent decision in LIA v JP Morgan [2019] EWHC 1452 (Comm).  The Libyan Investment Authority (the LIA) issued proceedings in the England and Wales Commercial Court against a UK-based JP Morgan entity (JPM), Libyan businessman Walid Mohamed Ali Al-Giahmi and Lands Company Ltd (Lands), a Cayman company.

The LIA alleged that a GBP200 million transaction with Bear Stearns (subsequently acquired by JPM) in 2007 had been procured by bribes or threats made by Giahmi, and that payments in respect of the transaction were paid to Lands for the benefit of Giahmi. The LIA applied on an ex parte basis for permission to serve proceedings outside the jurisdiction (known as a ‘service out application’) on Giahmi and Lands, which was granted by Mr Justice Teare in June 2018.

In May 2019, Mr Justice Bryan heard an application from Giahmi and Lands in LIA v JP Morgan to set aside that permission on the grounds that the English court lacked jurisdiction because the claims had no real prospect of success (as they were time-barred) and that this had not been adequately brought to Teare J’s attention – in breach of the duty of full and frank disclosure in service out applications.

It was also argued that the claims for money had and received had no prospect of success, as they were bad in law, and the claims against Giahmi were an abuse of process.

As the LIA’s claims were prima facie time-barred (the relevant events having occurred more than six years before issue of the claim form), their prospects of success depended on the LIA being able to rely on s.32 of the England and Wales Limitation Act 1980 (the Act). This suspends the running of time against a claimant until it ‘has discovered the fraud … or could with reasonable diligence have discovered it’.


A breach of duty?

On an analysis of the evidence, Bryan J found that the LIA could, with reasonable diligence, have discovered the facts necessary for its claim more than six years before issue. Although that meant the claims were time-barred, which was itself sufficient to set aside permission to serve out, he went on to consider whether the LIA’s failure to draw to Teare J’s attention the fact that it needed to rely on s.32 of the Act constituted a breach of its duty of full and frank disclosure, such that permission should also be set aside on that basis.

Having reviewed the material before Teare J on its service out application, Bryan J found there had been a ‘conscious, and therefore deliberate’ decision not to draw to his attention the fact that there was a prima facie limitation defence to the claims and that the LIA had the burden of proving it could not, with reasonable diligence, have discovered the facts necessary to bring its claim more than six years before it did. The failure to draw these matters to the attention of the court was ‘a substantial, indeed an egregious’ breach of its duty to the court and ‘the degree and extent of [its] culpability was of a high order’, Bryan J stated.

Bryan J considered the public policy behind the duty of full and frank disclosure in without notice applications, commenting that: ‘A failure to comply with that duty is by its very nature serious – an individual or entity has been brought into the jurisdiction without having had any opportunity to address the court as to why permission should not be granted, and as demonstrated by the present case, they are then exposed to very considerable costs upon an application to set jurisdiction aside.’

He held that ‘[a]n adverse costs order or the like would not begin to reflect the seriousness of the breach, nor would it reflect, or adequately further, the public policy behind the duty which is fully engaged, and clearly illustrated, by the failings in the present case’, and that consequently setting aside the order for service was ‘the only appropriate sanction’.

The case is a useful reminder of the importance in ex parte applications of giving full and frank disclosure of all matters that have a bearing on the prospects of a claim, and of the seriousness with which any breach of a party’s duty in that respect is regarded by the court.


This article, ‘Full Disclosure’, appears in STEP Journal (Vol27 Iss9), p.71



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