Al Sanea v Saad Investments Co Ltd

After a claimant has established a jurisdictional gateway for service out, it need show only a serious issue to be tried, or a reasonable prospect of success, on the merits. The court should usually avoid a mini-trial. It may nevertheless determine a point of contractual construction at the jurisdiction stage where further evidence cannot realistically improve the claim.

A cash-difference provision expressed as an alternative to settlement by sale did not create a free-standing contract for differences. Read as a whole, the put option required the buyer to retain the relevant shares and be able to complete the contemplated sale. A claim based on an exercise after disposal of the shares had no reasonable prospect of success.

SICL, acting through its joint official liquidators, claimed more than £57 million from Al Sanea under a put option agreement concerning Berkeley Group Holdings plc shares. SICL had disposed of most of the shares before purporting to exercise the option and electing cash-difference settlement.

Walker J refused Al Sanea’s jurisdiction challenge and granted a freezing order: [2011] EWHC 2584 (Comm). Al Sanea appealed. The central questions were whether SICL could exercise the option without owning the shares, whether the exercise notice complied with the agreement, and whether it had been delivered in time.

1. Appeal allowed unanimously. The court set aside permission for SICL to proceed against Al Sanea in England and discharged the £57.365 million freezing order. Gross LJ gave the principal judgment; Ryder J and Lloyd LJ agreed that Issue (I) required that result.

2. The relevant jurisdictional gateways were plainly met. Once jurisdiction was established, SICL needed only to show a serious issue to be tried, equivalent to a reasonable prospect of success. Walker J therefore selected the correct test. However, the low threshold does not preserve a claim which could not survive a Part 24 challenge. A court should ordinarily avoid resolving merits challenges summarily, but may decide a discrete issue of construction where it is as well placed at that stage as at trial.

3. Applying the contractual-construction approach stated in Rainy Sky SA v Kookmin Bank, [2011] UKSC 50, the agreement was read as a whole, beginning with its language and checking the rival constructions against its commercial context and consequences. Clauses 1(A), 1(C), 1(D) and 1(E)(i) contemplated a sale of shares. Clause 1(E)(ii) was expressly an alternative only to settlement under clause 1(E)(i); it was not an autonomous obligation.

4. The agreement hedged SICL’s balance-sheet exposure while the shares remained its asset. It did not entitle SICL to sell the shares, retain any gain, and later recover a cash difference from Al Sanea if the market price fell. SICL therefore had no reasonable prospect of establishing that it could exercise the option in respect of shares it did not own and could not sell at the option closing.

5. Gross LJ held, obiter, that Issues (II) and (III) would not independently have defeated SICL’s claim at the interlocutory stage. If cash settlement had been available, the notice was arguably sufficiently clear to a reasonable recipient, and the evidence of delivery to the relevant post office was sufficient to raise a realistic prospect of timely delivery at trial. Those issues were academic once Issue (I) was resolved.

• Court of Appeal (Civil Division): Allowed Al Sanea’s appeal and set aside permission to proceed in the jurisdiction and the freezing order: [2012] EWCA Civ 313.
• High Court (Commercial Court): Walker J refused Al Sanea’s Part 11 jurisdiction challenge and granted SICL a freezing order: [2011] EWHC 2584 (Comm).