Abraaj Investment Management Limited & Anor v Kes Power Limited

A stay of English proceedings will be granted cautiously. The ordinary starting point is that a claimant is entitled to access the court to pursue a bona fide claim, subject to abuse of process or other rare and compelling circumstances.

A dispute about whether a defendant company’s directors have authorised solicitors to act does not, without more, render the proceedings improperly constituted or amount to abuse of process. The court may instead use its wide case-management powers to join interested persons and permit them to advance evidence and submissions relevant to the company’s defence. A prolonged stay is inappropriate where that procedural solution protects a fair determination without suspending a properly commenced claim.

The claimants pursued an English contractual debt claim against a Cayman Islands company. A dispute had arisen among the company’s shareholders and directors about the composition of its board and whether solicitors had been validly authorised to defend the English proceedings.

The applicant, one of the company’s directors, sought a stay until related Cayman Islands proceedings determined the validity of the board arrangements and the authority to instruct solicitors. The claimants argued that the English proceedings were validly commenced and offered to consent to the applicant, other shareholders and a third party participating in the English proceedings to advance any available defences.

The central issues were whether the alleged inability of the company to defend itself constituted abuse of process or otherwise justified a stay, and whether the court could adopt the proposed procedural workaround.

1. Application dismissed. The stay application was dismissed subject to the claimants’ undertaking to consent to the applicant, the Original Shareholders and/or Mashreq participating in the English proceedings in the manner described.
2. Under CPR 3.1(2)(f) and the inherent jurisdiction preserved by Senior Courts Act 1981, a stay outside the specific rules must be granted cautiously. A claimant ordinarily has untrammelled access to the court for a bona fide claim based on a properly pleaded cause of action. A stay may nevertheless be justified for abuse of process or in rare and compelling circumstances.
3. The applicant’s submission that a defendant’s inability to instruct lawyers automatically meant that the action was not properly constituted was rejected. The authorities concerning claims brought without authority addressed a different problem. A defendant need take no positive step for proceedings against it to be properly constituted.
4. The alleged misconduct concerned the conduct of directors and the corporate structure, rather than the manner in which the claimants were using the English judicial process. The allegations remained unproved, and the appropriate remedy was likely to be sought in the Cayman Islands. Even if established, a board deadlock did not itself justify a prolonged stay.
5. The court rejected the suggested jurisdictional fetter on joining an interested party. CPR 19.4 was widely expressed, and, where the board was deadlocked and the claimants consented, the applicant or shareholders could be joined and permitted to file evidence and make submissions in their own names. This did not permit them to defend the claim in the company’s name or override the company’s corporate organs.
6. The proposed participation procedure addressed the concern that genuine defences might otherwise go unheard. It avoided the delay and prejudice inherent in staying the English claim while complex foreign proceedings continued.