Manek & Ors v IIFL Wealth (UK) Ltd & Ors (2)

A court should not permit service outside the jurisdiction where a valid arbitration agreement binds the relevant parties and covers the dispute. Broad construction of an arbitration clause does not make company directors parties to the agreement or extend it to claims against them in a personal capacity.

An ad hoc agreement to arbitrate must be clear and unqualified. For service outside the jurisdiction, the claimant must show that England and Wales is clearly or distinctly the proper place for trial. In an international tort claim, the court should assess the dispute realistically. The place of the tort, the desirability of trying related claims together and the domicile of relevant witnesses may collectively satisfy that burden.

The appellants alleged that they had been induced by fraudulent representations made at critical meetings in London to sell minority shares in an Indian company at a substantial undervalue. They brought deceit claims against, among others, two directors of the purchasing company.

Andrew Baker J granted permission to serve the claim outside the jurisdiction. The defendants successfully challenged service before the Commercial Court, but the Court of Appeal allowed the appellants’ appeal on the tort gateway in an earlier judgment, [2021] EWCA Civ 264. The court reconvened to decide four outstanding issues: whether the defendants could rely on the arbitration clause in the share purchase agreements; whether correspondence created an ad hoc arbitration agreement; whether permission had been obtained through material non-disclosure; and whether England and Wales was the proper place for trial.

1. Application to set aside service dismissed. The two directors were not parties to the share purchase agreements or their arbitration clauses. A contractual definition recognising that a company acts through its directors and officials did not confer personal contractual rights or liabilities on those individuals. The non-signatory director also had no evidential basis for claiming through or under the signatory director. Even if the directors had been parties in their corporate capacities, the deceit claims concerned representations allegedly made in their personal capacities and did not arise from their roles as directors. The arbitration clauses therefore did not cover the claims: paras 16–28, 36–37.
2. No ad hoc arbitration agreement arose from the parties’ correspondence. Because arbitration is consensual, an ad hoc submission inferred from correspondence must be clear and unqualified. The claim letter contemplated remedies in several jurisdictions and was neither an unequivocal offer to arbitrate nor met by an unequivocal acceptance. Its reference to the existing arbitration clause did not create a new agreement. The proposed fast-track procedure was also inconsistent with the contemplated multi-party fraud claims: paras 41–50.
3. No estoppel by convention arose. Read as a whole, the correspondence disclosed no common understanding that the personal claims would be arbitrated. The directors had also taken no detrimental step in reliance upon the alleged understanding: paras 51–54.
4. There was no material non-disclosure when permission to serve outside the jurisdiction was obtained. The supporting witness statement fairly identified the arbitration issue and the potential opposition. It was unnecessary to anticipate an ad hoc arbitration argument which had not then been advanced: paras 55–60.
5. England and Wales was clearly or distinctly the proper place for trial under the first stage of the Spiliada test. The tort occurred in England; related claims against other defendants would proceed there; and most relevant individuals were domiciled there. Those considerations outweighed the international distribution of documents and parties. The court rejected the contention that the location of evidence concerning falsity made India the natural forum: paras 62–80, 86.
6. The second stage did not require decision. The evidence about likely delay in India was cursory and unsatisfactory. The court declined, on grounds of comity and caution, to make findings about the Indian court system: paras 81–86.

Phillips and Underhill LJJ agreed with Coulson LJ.

1. Court of Appeal (Civil Division): In [2021] EWCA Civ 625, the court rejected the remaining grounds for setting aside permission to serve outside the jurisdiction.
2. Court of Appeal (Civil Division): In the earlier judgment, [2021] EWCA Civ 264, the court allowed the appeal against the conclusion that the tort gateway had not been satisfied and directed a further hearing of the outstanding issues.
3. Commercial Court: The judge below had concluded that the appellants had not shown sufficiently substantial or efficacious acts within England and Wales. He had not needed to decide the four issues determined in this judgment.
4. High Court: Andrew Baker J granted permission on 2 February 2018 to serve the claim form and particulars of claim outside the jurisdiction.