SMA Investment Holdings Ltd v Harbour Fund II LP & Ors

A party cannot reopen, in later proceedings, claims which were within the scope of an earlier directed trial and could then have been advanced. This applies to personal claims said to have proprietary consequences or priority over trust assets. A later attempt to relitigate such matters may be an abuse of process.

Equity will not order a trustee to perform contractual obligations in a manner which would breach its duties or divert trust property from those beneficially entitled to it. Where legal title is held by a bare trustee and the beneficial ownership has already been determined, the trustee may be ordered to transfer that title. The court may also refuse a stay where England and Wales is the natural forum and foreign proceedings amount to a collateral attack on an existing judgment.

The judgment concerned applications arising from long-running litigation concerning assets held by SMA Investment Holdings Ltd. The Harcus Parker Parties sought transfer of shares held by SMA as bare trustee to trustees of the Harbour Trust, continuation of a worldwide freezing order, and summary judgment.

Minardi Investments Ltd sought an adjournment so that it could advance claims for specific performance and damages under the LICSA, together with arguments that SMA was entitled to an indemnity from trust assets. BKV Limited, purporting to act for SMA, challenged service out of the jurisdiction and sought a stay in favour of proceedings in the Marshall Islands.

The central issues were whether Minardi’s proposed claims were an abuse of process, whether they had any substantive merit, whether the English proceedings should be stayed, and whether SMA should be required to transfer the shares.

1. Adjournment and abuse of process. Minardi had known for months of the relief sought and of the legal arguments it wished to advance. The directed trial had been structured to achieve a final determination of proprietary interests and claims said to have priority over them. Claims for specific performance, damages, indemnity, lien or subrogation which could affect the Harbour Trust’s proprietary interest therefore had to be advanced at that trial. Minardi’s proposed relitigation was an abuse of process, and the adjournment was refused.
2. Merits of the proposed claims. The specific-performance claim was hopeless. SMA had never beneficially owned the relevant shares and could not be ordered to perform obligations in breach of its duties as trustee or to require liquidators to make payments contrary to their legal obligations. SMA also did not hold legal title to some of the assets identified in the LICSA. The damages claim depended on breach, indemnity and subrogation arguments which had either failed when advanced by Phoenix or had not been advanced by Minardi.
3. Jurisdiction and stay. The challenge to service out and the stay application were dismissed. SMA was a necessary or proper party, and the claim fell within PD6B paragraphs 3.1(4) and 3.1(12). England and Wales was the natural forum, given the existing proceedings, the governing law and SMA’s former place of business. The Marshall Islands proceedings post-dated the English litigation and represented a collateral attack on the directed trial judgment.
4. Final relief. Summary judgment was granted for the transfer of the shares to the court-appointed trustees. The interim injunction was made final. BKV was joined for costs purposes, and permission was granted to serve an application for a third-party costs order under section 51 of the Senior Courts Act 1981.