King v Tune & Ors

A claimant has a good arguable case on title to sue where, despite losses being sustained by companies or a foundation, she may be more closely analogous to a beneficiary than a shareholder suffering reflective loss. A pleading that alleges knowing participation in a fraud, procurement, or a common design is not liable to be struck out merely because the defendants contend that it pleads only knowing assistance. At the jurisdictional stage, fact-sensitive questions of knowledge and participation should generally be left for trial where the pleaded evidence supports an arguable inference. A claim in deceit may arise from a contract containing an arbitration clause where the tort claim is sufficiently closely connected with contractual obligations concerning good faith compliance with instructions.

The claimant alleged that Mr Tune fraudulently advised her to invest substantial savings through overseas entities and that the eighth and ninth defendants, who administered relevant foundations and companies, participated in or assisted the fraud. The defendants applied to set aside permission to serve them outside the jurisdiction, arguing that the claimant lacked title to sue and that the pleading disclosed no arguable cause of action. Alternatively, they sought a stay under section 9 of the Arbitration Act 1996 based on an arbitration clause in the Contract of Mandate. The central issues were whether the claimant had a good arguable case on title and liability, and whether the claims arose from the contract.

1. The application to set aside permission to serve the eighth and ninth defendants out of the jurisdiction was dismissed. The claimant had a good arguable case on title to sue. Although funds had been paid from Lemur and the Foundation, her position in relation to the Foundation might be analogous to that of a beneficiary, since she was said to be solely entitled to its net assets and income. The reflective-loss principle did not therefore justify disposing of the claim at this stage.

2. The pleading disclosed an arguable claim that the defendants were joint tortfeasors. It alleged that they knew Mr Tune was deceiving the claimant, arranged the investments against that background, and thereby participated in or assisted the fraud. The distinction identified in Credit Lyonnais v ECGD [1998] 1 Lloyd’s Rep 19 between mere knowing facilitation and procuring or joining a common design did not require strike out. The pleaded facts, including the defendants’ connections with the investment entities and the nature of the investments, supported a strongly arguable inference of knowledge.

3. The proceedings were stayed under section 9 of the Arbitration Act 1996. The Contract of Mandate contained an arbitration clause covering disputes arising from it and expressly addressed good-faith compliance with the claimant’s instructions. Following the approach in The Angelic Grace [1995] 1 Lloyd’s Reps. 7, the deceit claim was sufficiently closely connected with the contractual claim to arise from the contract.

First-instance decision. The judgment records that Tomlinson J had granted permission on 31 October 2003 to serve the eighth and ninth defendants outside the jurisdiction. That permission was not set aside, but the proceedings were stayed pursuant to section 9 of the Arbitration Act 1996.