Suppipat v Narongdej

Mr Justice Butcher has handed down a judgment which concerns two matters of general importance to cross-border commercial litigation: (i) the potential consequences of relying on Dicey’s default rule that English law applies, and (ii) the extraterritorial application of s.423 of the Insolvency Act 1986.

The case concerns an alleged fraudulent conspiracy to deprive Cs of shares worth $1-2bn in Thai energy companies (REC, and its subsidiary WEH).  In 2014, C1 was changed with lèse-majesté (insulting the King), fled Thailand and was granted political asylum in France. In the years that followed, Ds are alleged to have conspired fraudulently to induce C1 and his companies to sell the REC shares at an undervalue to companies owned by D1; then to transfer the WEH shares away from REC at an undervalue or for no consideration so as to leave D1’s companies with no valuable assets; and to have transferred the WEH shares away through a series of fraudulent transactions.  Ds are Thai individuals, offshore companies alleged to be owned by them, WEH’s English CEO (D2) and WEH’s bank, in which the King of Thailand owns a substantial stake (D10).  Save for D1’s father (D14), who has been debarred from defending, Ds all deny the claims.

The facts are complex but the judgment addresses two matters of general interest.

The first was as to the consequences of pleading a case by reference to Dicey’s ‘default’ rule 25(2). The rule is well known: the Court will apply English law unless the application and content of foreign law is pleaded and proved.  A claimant is entitled to plead its case by reference to that rule.  But where does that leave it if the defendant pleads foreign law in their defence: where should the claimant plead foreign law, and who should pay the costs of doing so?  The Court gave two welcome clarifications in this regard (§§47-48):

1. As to where to plead: A claimant will often be entitled to plead to the content of foreign law in its reply, and does not necessarily have to amend its particulars of claim, even if those elements go to the cause of action under the foreign law on which the claimant is relying. The Court recorded, however, that in some cases it may nonetheless be more convenient for the foreign law relied on to be pleaded (by way of amendment) in its particulars of claim. In reaching those conclusions, the Court analysed the judgments of the Court of Appeal in FS Cairo v Brownlie [2020] EWCA Civ 996, and accepted that the approach of Underhill LJ therein represented the majority.
2. As to costs: A claimant who amends its particulars of claim to plead foreign law after it is raised by way of defence will not necessarily be ordered to pay the costs of and occasioned by the relevant amendments. The default rule is useful in avoiding the trouble and expense of pleading foreign law, and it would undermine that useful effect of the rule, if a party could too readily be penalised in costs if it had to amend its Particulars of Claim.  However, a claimant may be ordered to pay the costs of the amendments where, on the facts, it was unreasonable for the claimant ever to rely on the presumption, e.g. where the defendant has made its position in relation to the applicable law clear before the claim is issued.

The second was that it is not necessary to show a pre-existing connection of the claims with England to obtain relief under s.423 of the Insolvency Act 1986. Section 423 gives the English court a broad discretion to make such orders in respect of transactions at an undervalue. It has extraterritorial effect, applies regardless of the law governing the claims, and benefits from a jurisdictional ‘gateway’ in paragraph 3.1(20)(a) of PD 6B. To safeguard against the oppressive or unreasonable exercise of that power, in the exercise of that discretion the Court will take into account the connections with the jurisdiction and any other relevant circumstances: Re Paramount Airways (No. 2) [1993] Ch 223; Orexim Trading Ltd v Mahavir Port and Terminal Private Ltd [2018] EWCA Civ 1660.  However, there is authority, not overruled in the subsequent Court of Appeal decisions, that relief may be granted even where the claims have no prior connection to England: Jyske Bank (Gibraltar) Ltd v Spjeldnaes [2000] BCC 16.

The judge held that it was not necessary to show such a prior connection. Cs had pleaded a claim under s.423 of the Insolvency Act, based on the same facts as its tort claims under Thai, Singapore and Chinese law.  D10 (the bank) sought to strike out the s.423 claim on the basis that there was no “sufficient connection” with the jurisdiction: neither Cs nor D10 had any connection with England before the claims were issued, and the impugned transfer of shares in a Thai company was effected from a Thai company to a Thai individual resident in Thailand, well before the English proceedings began.  The judge dismissed the application, finding that there may be an arguable case for relief even in the absence of “initial or standard” connecting factors, if the defendant is in any event facing a claim for damages in England in respect of the same facts (§§74-76, citing the decision of Cockerill J in Avonwick Holdings v Azitio Holdings [2018] EWHC 2458 (Comm) in support).

Anthony Peto QC, Victoria Windle, Shane Sibbel and Andrew Trotter appeared for the Claimants.

The full judgment is available here.