Smay Investments Ltd & Anor v Sachdev & Ors

A defendant who follows the procedure for disputing jurisdiction does not submit to the court unless subsequent conduct is wholly unequivocal and explicable only as accepting jurisdiction. Opposing interim protective relief, seeking a temporary undertaking or obtaining time for a defence will not suffice where the jurisdictional challenge remains clear.

On forum non conveniens, the place of incorporation will ordinarily be the natural forum for disputes about ownership of shares in a foreign company and a shareholder’s authority to pursue a derivative claim. Closely connected contractual and personal claims may also be stayed where separating them would be artificial and another competent court is clearly more appropriate.

The claimants brought English proceedings arising from a contest over ownership and control of an Indian company. They challenged an alleged tripartite agreement, sought permission to pursue a derivative claim for breach of fiduciary duty and advanced personal claims concerning a later agreement made in England.

Related proceedings in India would determine the validity of the tripartite agreement, the voting status and ownership of the shares, and the claimants’ standing to pursue the derivative claim. The first defendant, who had been served in England, sought a stay on forum non conveniens grounds. Two Indian corporate defendants sought to set aside service outside the jurisdiction. The claimants argued that two defendants had submitted to English jurisdiction and sought continuation of a freezing order.

The principal questions were whether the defendants had waived their jurisdictional objections and whether England or India was the appropriate forum.

1. The English proceedings were stayed in favour of India. India was clearly the natural and appropriate forum for a dispute whose substance concerned ownership of, investment in and control of an Indian company. The fact that one agreement had been made in England did not outweigh the connections with India or the existence and scope of the Indian proceedings.

2. A defendant who complies with Part 11 of the Civil Procedure Rules 1998 and remains within the period for challenging jurisdiction submits only through conduct that is wholly unequivocal. The conduct must be explicable only on the basis that the defendant accepts trial in England. A step that is also useful for preserving the defendant’s position or regulating matters pending determination of jurisdiction does not amount to submission.

   The acknowledgments of service recorded an intention to contest jurisdiction. The request for additional time to serve a defence was consistent with postponing that obligation until jurisdiction had been decided. Nor did attendance to oppose the freezing order, or the offer of an undertaking lasting only until the effective hearing, contemplate an English trial. The decision in Esal (Commodities) v Pujara [1989] 2 Lloyds Law Reports 479 was distinguishable because the defendant there consented, without reservation, to an order continuing until trial.

3. Under Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460, a claimant seeking to serve abroad must show that England is the proper forum. A defendant properly served within England must show both that England is not the natural forum and that another competent court is clearly or distinctly more appropriate. A stay may nevertheless be refused where justice requires, including where the alternative forum’s law or procedure would cause injustice.

4. The courts of a company’s place of incorporation will ordinarily, though not invariably, be best placed to decide share-ownership questions and whether a shareholder may pursue a derivative claim. The approach in Konamaneni v Rolls Royce Industrial Power (India) Ltd [2002] 1 WLR 1269 was followed. The Indian court would decide the claimants’ shareholder status and could then determine whether derivative proceedings should be permitted and whether the alleged fiduciary breaches were established.

5. The remaining personal and contractual issues depended directly upon the Indian court’s findings. Separating them for trial in England would be artificial. There was no evidence that Indian procedure would cause unjustifiable delay or other injustice.

6. The stay was granted upon undertakings by the first defendant to submit to Indian jurisdiction, abide by its orders and give notice before dealing with specified property. Service on the Indian defendants was set aside. The freezing orders were discharged, and the applications to continue the freezing order and obtain permission for the derivative claim were dismissed. Permission was granted to continue the Indian proceedings.

• High Court (Chancery Division), 14 March 2003: the proceedings were stayed in favour of India, service on the Indian corporate defendants was set aside and the existing freezing orders were discharged.

• High Court (Chancery Division), 6 December 2002: Peter Smith J continued the freezing order pending the effective inter partes hearing and gave directions.

• High Court (Chancery Division), 22 November 2002: Lloyd J granted a worldwide freezing order without notice and permitted service outside the jurisdiction.