BAS Capital Funding Corp & Ors v Medfinco Ltd & Ors

Permission to serve proceedings out of the jurisdiction requires a reasonably arguable claim within the relevant jurisdictional gateway and England must be the proper place for the claim. A contractual non-exclusive jurisdiction clause creates a strong presumption in favour of the chosen forum. Ordinary forum conveniens considerations will usually have little weight, particularly where the English forum was selected as neutral, although existing foreign proceedings involving overlapping issues may be highly relevant.

A company’s commercial failure does not ordinarily frustrate a shareholders’ agreement regulating shareholders’ rights. An injunction affecting foreign assets may be granted against a person subject to the English court’s personal jurisdiction where the claim has an appropriate connection with England, but comity and the practical circumstances remain relevant.

The claimants, investment entities, invested in a Maltese technology company under a shareholders’ agreement governed by English law and containing a non-exclusive English jurisdiction clause. Disputes later arose concerning the company’s business model, expenditure on an incubated project, a transfer of shares, management of the company and related Maltese proceedings.

The claimants commenced English proceedings alleging frustration, breach of funding limits, invalid share transfers and misuse of confidential information. They obtained permission to serve proceedings out of the jurisdiction and sought interim injunctive relief concerning the company’s funds and contracts. The defendants challenged jurisdiction, service and the adequacy of disclosure. The central issues were whether any contractual claim had a reasonable prospect of success, whether England was the proper forum, and whether interim relief should be granted despite the Maltese proceedings.

1. Service out and claims. Permission to serve out was set aside except for the company’s alleged breach of the contractual funding limits. The pleaded claims against Mr Gerdes were not contractual claims within the jurisdictional gateways. The claims against Medfinco and Abacus were not properly pleaded or supported by evidence sufficient to justify service out.
2. Frustration. The claim that the shareholders’ agreement had been frustrated had insuperable difficulties. The agreement regulated the parties’ rights as shareholders in a company whose principal purpose was to develop and invest in e-mobile businesses. The collapse of the market and the failure of the venture made the investment unsuccessful, but did not fundamentally transform the contractual obligations. The pleaded case did not establish the radical change required by Davis Contractors Ltd v Fareham UDC [1956] AC 696 or National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675.
3. Funding claim. There was a serious issue to be tried concerning the company’s alleged breach of the funding limits. Although the claimants’ conduct raised a serious argument on acquiescence, waiver and estoppel, acquiescence in an earlier breach did not necessarily give the company an unlimited right to spend the remaining funds on the project.
4. Jurisdiction. The non-exclusive English jurisdiction clause created a strong presumption that England was an appropriate forum. The defendants bore a heavy burden in seeking to displace it. Ordinary considerations concerning witnesses, documents, timing and convenience were of little or no significance. The Maltese proceedings did not create sufficient overlap because, once the English claims were confined to the funding issue, funding was not in issue in Malta.
5. Injunction. The court had jurisdiction to grant an injunction concerning conduct and assets abroad because the company was subject to the court’s personal jurisdiction, the contract was governed by English law and the dispute had a significant connection with England. Nevertheless, the evidence did not justify segregation of the company’s funds or contractual-notice requirements. The claimants had long known of the alleged over-funding, accepted the integrity of the chairman of the Board of Administration, and were adequately protected by that board and an expedited trial.
6. Company’s costs and representation. The company could fund the proper defence of the proceedings. The general principle against using company money for shareholder disputes did not apply where the company was substantively sued for breach of contract. However, the chairman should obtain independent legal advice because of the evident conflict between the company’s interests and the interests of the shareholder factions.
7. Final order. Permission to serve out was set aside except for the funding-limit claim against the company. The injunction applications were refused. The question of special service arrangements was adjourned, and an expedited trial was contemplated.