Degroma Trading Inc v Dreter 2 Ltd & Anor

Permission to serve a foreign defendant out of the jurisdiction requires a serious issue on the merits, a good arguable case within a jurisdictional gateway, and England and Wales being the appropriate forum. At the merits stage, the court ordinarily focuses on the pleaded case, but an inference-based dishonesty or control claim must have properly particularised primary facts and a solid evidential foundation. A without-notice applicant must fairly disclose matters that might cause the court to doubt granting relief. Failure to disclose material documents or to present contrary evidence fairly can justify setting aside permission. The duty does not extend to every matter relevant only to the ultimate trial.

The two actions concerned alleged deceit arising from the failure to transfer title to vessels after payments under terminated bareboat charters. The claimants sought to join IMC, a Panamanian company, and serve it out of the jurisdiction under paragraph 3.1(3) of Civil Procedure Rules 1998 Practice Direction 6B, alleging that IMC controlled the vessel-owning defendants and was their ultimate beneficial owner.

Waksman J granted permission after hearings on 1 and 6 May 2026, making an order dated 11 May 2026. IMC applied to set that order aside on the grounds that there was no jurisdiction and that the claimants had failed to give full and frank disclosure. The central issues were whether the claim against IMC raised a serious issue to be tried and whether the application had been fairly presented.

IMC’s application succeeded. The order of Waksman J dated 11 May 2026 was set aside insofar as it permitted service out of the jurisdiction and joinder of IMC. The decision rested on two independent grounds.

1. Jurisdiction. The court applied the three-stage test stated in Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran ([1994] 1 AC 438) and Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd ([2011] UKPC 7): serious issue on the merits, a good arguable case within a gateway, and forum discretion. The stages are conceptually distinct but commonly overlap. The merits inquiry ordinarily focuses on the pleaded case unless it is demonstrably untrue or unsupportable, while the gateway requires a plausible evidential basis, as explained in Magomedov v TPG Group Holdings (SBS) LLP ([2025] EWHC 59) and Brownlie v Four Seasons Holdings Inc ([2017] UKSC 80).

   The deceit allegations against the Dreter Defendants themselves raised serious issues. However, the claim that IMC controlled Ocean Chem and the Dreter Defendants, or was their ultimate beneficial owner, did not. Family relationship, corporate affiliation, involvement in arranging the transaction, and financing by a connected lender did not support the alleged control without evidence of dominance or control. Formal beneficial-ownership documents and communications identifying Alexandra Mangos as the ultimate beneficial owner pointed in the opposite direction.

2. Dishonesty and pleaded inferences. Serious wrongdoing must be clearly pleaded, and primary facts must be properly particularised where dishonesty is inferred. The interlocutory question is whether dishonesty is more likely than innocence or negligence, not whether the evidence will ultimately prove fraud at trial. The court applied Ivy Technology v Martin ([2019] EWHC 2510 (Comm)), Lakatamia Shipping Co Ltd v Su ([2021] EWHC 1907 (Comm)), Sofer v Swissindependent Trustees SA ([2020] EWCA Civ 699), JSC Bank of Moscow v Kekhman ([2015] EWHC 3073 (Comm)) and Three Rivers District Council v Governor and Company of the Bank of England (No.3) ([2003] 2 AC 1).

3. Alternative liability analysis. Joint tortious liability requires participation pursuant to a common design and substantial assistance, although the assistance may be relatively minor or indirect: Fish v Fish Ltd v Sea Shepherd ([2015] UKSC 10). If the nominee and control case had been established, the pleaded involvement of IMC’s director in setting up the transaction could have raised a serious issue on joint tortfeasor liability and conspiracy. That conditional analysis did not affect the result.

4. Full and frank disclosure. On a without-notice application, the applicant must disclose facts that might reasonably affect the jurisdiction or discretion decision, but need not disclose every matter relevant only to the ultimate merits. The court applied the principles accepted from MRG (Japan) Ltd v Engelhard Metals Japan Ltd ([2003] EWHC 3418 (Comm)), including the guidance in BP Exploration Co (Libya) Limited v Hunt ([1976] 3 AER 879).

   The claimants failed to disclose two beneficial-ownership notices, presented an email identifying Alexandra Mangos as ultimate beneficial owner as supporting rather than contradicting their case, and gave Waksman J a misleading impression of the relationship between IMC and affiliated entities. These were serious failures and independently justified setting aside the order.

5. The judgment also gave prospective guidance. Practitioners should structure service-out applications by reference to the Commercial Court Guide Appendix 9 checklist, addressing the three jurisdictional stages and full and frank disclosure separately, even where the application is ancillary to an amendment application.

The judgment describes a contested hearing before Waksman J on 1 and 6 May 2026. His extempore judgment was given on 6 May and the order dated 11 May 2026 granted permission to serve IMC out of the jurisdiction and to join it to the proceedings. High Court (Commercial Court): IMC’s application was granted and that order was set aside to that extent.