Durnont Enterprises Limited v Fazita Investment Limited & Ors

On applications concerning a derivative claim and service out of the jurisdiction, the court must focus on whether the pleaded case has a real prospect of success, without conducting a mini-trial. It must assess each jurisdictional gateway, the clearly or distinctly more appropriate forum, and whether discretion should nevertheless be exercised against service out.

Where a claim directly challenges a default judgment for fraud, related claims and consequential remedies may be advanced in the same proceedings. A claimant’s case that the judgment was procured as part of a fraudulent plan can itself raise a serious issue to be tried. The court may determine foreign-law issues at trial rather than resolve conflicting expert evidence summarily.

Durnont Enterprises Limited brought proceedings on its own behalf and derivatively for Polish Real Estate Investment Limited, alleging that the defendants had fraudulently procured the transfer and enforcement of PREI’s interests in a Polish real-estate investment structure.

The defendants applied to strike out or obtain reverse summary judgment, challenge jurisdiction and service out, and set aside permission to pursue the derivative claim. The claims included alleged breaches of the Polish Civil Code, fiduciary duties under Cypriot law, breach of an English-law share subscription agreement, and relief to set aside a default judgment allegedly obtained by fraud.

The central issues were whether there was a serious issue to be tried, whether the claims satisfied the relevant jurisdictional gateways, and whether England and Wales was the clearly or distinctly more appropriate forum.

1. Applications dismissed. The applications to strike out, obtain reverse summary judgment, challenge jurisdiction, set aside permission for the derivative claim, and challenge service out were dismissed.
2. For the serious-issue requirement, the court had to consider the pleaded case on the assumption that its factual allegations were true, asking whether the claims had a real rather than fanciful prospect of success. A mini-trial and premature resolution of disputed factual or expert evidence were inappropriate. Pleading defects capable of amendment did not ordinarily justify striking out at this stage.
3. There was a serious issue to be tried under Articles 415 and 422 of the Polish Civil Code. The pleaded fraudulent plan, alleged control of the portfolio companies, causation, damage and limitation issues could not properly be resolved on the competing expert evidence.
4. The claim to set aside the default judgment also raised a serious issue. The principles in Royal Bank of Scotland plc v Highland Financial Partners LP required conscious and deliberate dishonesty which was material and causative of the impugned judgment. A fraudulent plan involving the commencement of proceedings and an application for default judgment could arguably satisfy that test. The claim was not a collateral attack because it directly sought to set aside the judgment and pursued consequential relief conditional on that outcome.
5. The pleaded claim under the English-law share subscription agreement was realistically arguable. The alleged long-term joint-venture structure, mutual reliance and need for co-operation supported an arguable implied duty of good faith in a relational contract. It was also arguable that contractual obligations concerning the exercise of shareholder and director powers extended to conduct by directors appointed by the shareholder.
6. For service out, the claimant had to establish a serious issue, a good arguable case within a gateway, and that England and Wales was the clearly or distinctly appropriate forum. The claims could properly be tried together. The English court alone could set aside the English default judgment, and the exclusive jurisdiction clause concerning the share subscription agreement weighed heavily in favour of England and Wales.
7. M-JWK had submitted to the jurisdiction in respect of an application to set aside its default judgment for fraud. The fact that such relief was brought by separate action rather than within the original proceedings did not alter its incidental character.
8. The material failure to disclose that the claimant’s expert was not independent did not justify setting aside the earlier orders. The evidence was impartial and accurate, the omission would not have affected the result, and setting aside the orders would have been disproportionate and unjust.