The Libyan Investment Authority v J.P. Morgan Markets Ltd & Ors (Rev 1)

A claimant seeking permission without notice to serve proceedings outside the jurisdiction must disclose any limitation defence which may materially affect whether the claim has a real prospect of success. Where fraud is alleged after the ordinary limitation period, the claimant must show a real prospect of proving that the fraud or concealment could not have been discovered earlier with reasonable diligence under section 32 of the Limitation Act 1980.

Material non-disclosure ordinarily requires the resulting order to be discharged. Re-grant is exceptional, particularly where the omission was conscious and concerned a potentially complete defence. For bribery, a principal may recover the bribe without proving loss, but recovery exceeding the bribe requires pleaded and proved consequential loss.

The Libyan Investment Authority alleged that a US$200 million derivative transaction with Bear Stearns had been procured through a fraudulent and corrupt scheme involving Mr Giahmi and Lands Company Limited. It claimed restitution, equitable relief and damages for fraud. The transaction occurred in 2007, but proceedings were issued in April 2018.

On a without notice paper application, Teare J permitted service on Mr Giahmi and Lands outside the jurisdiction and authorised alternative service on Mr Giahmi. Both defendants applied to set aside service. They relied principally on limitation and the claimant’s failure to disclose the limitation problem on the without notice application. They also challenged the legal basis of certain claims. Mr Giahmi additionally alleged abuse of process and sought a stay, while the claimant defended the use of alternative service.

The central questions were whether the claims had a real prospect of overcoming limitation and whether the claimant’s disclosure failures required the service order to be discharged.

1. Service was set aside. The claims against Mr Giahmi and Lands had no real prospect of success because the claimant knew, or with reasonable diligence could have discovered, the facts needed to plead them before 6 April 2012. The claims were therefore time-barred. The claimant had known of the fees paid to Lands, the suspicious involvement of an unknown intermediary, Bear Stearns’ lack of any apparent need for structuring services and the prevailing concern about corruption. Reasonable enquiries of Bear Stearns or JP Morgan would probably also have revealed Mr Giahmi’s involvement: paras [40]–[88].

2. Under section 32 of the Limitation Act 1980, a claimant bears the burden of proving that the relevant fraud or concealment could not have been discovered earlier with reasonable diligence. Time begins once the claimant can plead the complete cause of action, even if its evidence remains weak. It need not possess every fact or every item of supporting evidence: paras [27]–[37].

3. The claimant committed a conscious, substantial and egregious breach of its duty of full and frank disclosure. It failed to tell Teare J that the English claims were prima facie out of time, that reliance on section 32 was essential, or what facts supported such reliance. Those matters went to the heart of the real-prospect-of-success requirement. The order therefore had to be discharged and not renewed, independently of the court’s conclusion on limitation: paras [99]–[123].

4. The claims seeking more than the value of the alleged bribes as money had and received or damages for fraud also had no real prospect of success on existing English law. A principal may recover the bribe without proving loss. Any recovery exceeding the bribe requires actual loss to be pleaded and proved. This was an alternative, academic conclusion because service had already been set aside: paras [124]–[135].

5. The later proceedings arose from substantially the same facts as the earlier SocGen proceedings, but they were not an abuse of process. Even if the overlap had been disclosed earlier, the scale and progress of the separate litigation made a combined trial unlikely: paras [136]–[158].

6. The circumstances justified alternative service, including the delay and practical impediments associated with diplomatic service, the risk of evasion and Mr Giahmi’s knowledge of the proceedings. A stay pending the receivership-discharge applications would have been refused as speculative and inconsistent with expeditious case management. Both conclusions were academic: paras [159]–[193].

• High Court (Commercial Court), 10 June 2019: set aside the earlier order permitting service outside the jurisdiction because the claims had no real prospect of overcoming limitation and because of egregious non-disclosure.
• High Court (Teare J), 12 June 2018: on a without notice paper application, permitted service on the third and fourth defendants outside the jurisdiction and authorised alternative service on the third defendant.