MRG (Japan) Ltd v Engelhard Metals japan Ltd

On a without-notice application for permission to serve proceedings outside the jurisdiction, full and frank disclosure extends to facts which might reasonably affect the court’s decision on the jurisdictional gateway, the merits threshold, or the appropriate forum. It does not require disclosure of every matter relevant to the ultimate merits.

Potential defences need be disclosed only where they could reasonably cause the judge to doubt whether permission should be granted. The court is deciding whether to assume jurisdiction, rather than who is likely to win at trial. Where a material non-disclosure is established, setting aside permission remains discretionary and must be proportionate.

The claimant and defendant were metals dealers. The claimant brought claims arising from four contracts for the sale of cobalt. Each contract selected English law and the exclusive jurisdiction of the English courts.

David Steel J granted the claimant permission, without notice, to serve the proceedings on the defendant in Japan. The defendant applied to set aside that order. It alleged that the claimant had failed to disclose a complex factual background concerning alleged fraud involving another company and a potential defence that some contracts, including their jurisdiction clauses, were void.

The defendant did not pursue its forum challenge. The central issue was whether the claimant had been obliged, on the service-out application, to disclose the alleged background and potential defences.

1. The application was dismissed. The order permitting service on the defendant in Japan remained in force. It was undisputed that the claims had a good arguable connection with the contractual service-out gateways and raised serious issues to be tried. The challenge to England as the appropriate forum was not pursued.

2. Permission to serve out required the claimant to establish three matters: a good arguable case within a relevant jurisdictional gateway; a serious issue to be tried, assessed by the same merits threshold as summary judgment; and that England was clearly the appropriate forum. The court’s inquiry at that stage was whether it should assume jurisdiction, not whether the claimant would ultimately succeed.

3. The ordinary duty of full and frank disclosure applied to the without-notice application. Material facts were those known to the applicant which might reasonably be taken into account by the judge deciding whether to grant permission. Materiality was for the court to assess objectively. However, the scope of disclosure depended on the nature of the application. In a service-out application, the claimant was not required to disclose matters which went only to an arguable defence on the ultimate merits and could not reasonably affect the jurisdictional, merits-threshold, or forum inquiries.

4. The alleged fraudulent background and potential defence concerning the validity of the contracts did not require disclosure. Those matters could only properly be resolved at trial and did not cast doubt on the serious issue to be tried. Nor had it been shown that the claimant should have anticipated the particular defence ultimately advanced.

5. Toulson J further indicated that, even if there had been wrongful non-disclosure, setting aside the order would have been disproportionate. Where the substantive service-out requirements were met and there was no intention to mislead, a costs sanction could address non-disclosure without defeating the overriding objective.

High Court (Commercial Court): David Steel J granted without-notice permission on 24 June 2003 for service of the proceedings in Japan. Toulson J dismissed the defendant’s application to set aside that order.