Recent Commercial Court judgment provides further clarity on these frequently argued points (Alimov v Mirakhmedov & Ors (Rev1) [2024] EWHC 3322 (Comm)).

Factual background

Mr Alimov (“Claimant”) launched a claim in England against four defendants: Mr Mirakhmedov (“D1”), Mr Makhat (“D2”), Mr Kim (“D3”) and Genesis Digital Assets Limited (“D4”). The Claimant contended that he was a leading specialist in the energy sector in Kazakhstan, before moving to England in August 2018. D1, D2 and D3 are businessmen of Kazakhstani origin. D1 was a businessman who lived in the UK and/or the UAE (this was a subject of debate between the parties). D2 was resident in Kazakhstan until 2020 and now lives in the UAE. D3 was resident in the UAE from 2021, but until 2020 spent most of his time in Kazakhstan. D4 was a company incorporated in Cyprus, which the Claimant alleged was one of the world’s largest bitcoin mining companies. At one point, between them, D1 to D3 owed 50% of the shares in D4.

The relevant events are highly contentious, with the Deputy Judge, Simon Birt KC, stating that there were “numerous issues of fact” between the parties and “little that is common ground between them”. There were 29 witness statements and 9 expert reports before the Court.

However, in brief summary, the Claimant alleges that there were meetings in April and May 2017 involving the Claimant and (variously) D1-D3, pursuant to which a joint venture involving the mining of bitcoin (hereafter the “GM JV”) was discussed, whereby the Claimant would own 50% of the business and D1-D3 the other 50%. In June 2017, at a family meal at D1’s house in London, the Claimant contends that an oral agreement was reached between the Claimant and D1, which involved:

1. The Claimant sourcing energy in Kazakhstan of up to 100MW for the GM JV at no more than USD 0.04 per kWh.
2. In return, the Claimant would get (a) 35% of the shares in the vehicle to be established as part of the GM JV (b) 35% of the bitcoin (or other cryptocurrency) mined by the GM JV and (c) a further sum, being the difference between the actual kWh cost obtained at the USD 0.04 cap referred to above.

The Claimant also alleged there were various other implied terms in this oral agreement, including mutual duties of good faith, trust and confidence.

Renovation work was carried out at two locations in Kazakhstan to make them suitable for use. Half of the USD 1.9m cost was borne by D1-D3, and the other half by the Claimant, for which he was repaid in bitcoin mined by the GM JV.

The Claimant also received bitcoin between January 2018 and September 2018 (equating to USD 16.9m at the time of payment), which he said represented his 35% share per 2(b) above. He was not paid anything further and therefore commenced these proceedings.

Procedural background

Following letters before action being sent by the Claimant in late June 2022 (to D1-D3 and to D4 “for information”), the claim form was issued on 12 May 2023. Particulars of Claim were signed by the Claimant on 11 September 2023 and the Claimant’s position is that he served the Claim Form on D1 on that day at 3 addresses in London.

In response to purported service on D1, D1’s solicitors responded to state that D1 was no longer resident in England and resided in Dubai and asserting that service had not been effective and/or was defective.

That led to a without notice application by the Claimant for permission to serve the claim out of the jurisdiction on (a) D1 in Dubai (without prejudice to its contention that service had already taken place) and (b) D2 – D3 and (c) D4 in Cyprus. The application also sought permission for alternative service via email, WhatsApp and LinkedIn). The order was granted by Dias J on 24 October 2024 (“the Dias Order”).

That, in turn, led to various applications in response, which included:

1. Applications by D1 and D3 to (a) strike out the claim for failing to serve it within the time limits for service or (b) to stay the claim on forum non conveniens grounds in favour of the courts of Kazakhstan.
2. Applications by all of the Defendants to set aside the Dias Order. This was on the basis that there was (a) no serious issue to be tried / good arguable case and/or (b) the Courts of England were not the appropriate forum and/or (c) there was no basis for the alternative service order to have been made and/or (d) that the Dias Order should not have been made on the basis of the Claimant’s non-disclosure.

Decision

Dealing with the various applications in turn:

D1 to D3’s applications

(1) Were the proceedings validly served on D1?

To serve an individual, service must be effected at the individual’s “usual or last known residence”. Ultimately the judge found that there was sufficient evidence to suggest that D1 did maintain residence in the UK, as well as Dubai. The fact D1’s solicitors had asserted that he was no longer resided in the UK did not affect the actual position. D1 had confirmed in UK corporate filings in May 2023 – i.e. a few months before service in September 2023 – that he was usually resident in the UK. Coupled with an absence of any address in Dubai for D1 from publicly available documents, this was sufficient to allow the court to conclude that D1’s usual address was one of the three London addresses used by the Claimant for service purposes. As a result, he had been validly served at that address.

(2) Was there a serious issue to be tried and a good arguable case?

D1-D3 contended that the Claimant had no real prospect of succeeding with his case that an oral contract existed. D2 -D3 also contended that even if such a contract existed, there was no real prospect that they were bound by it under the law of Kazakhstan.

Given the overlap between the serious issue / good arguable case requirement and the contract gateway for jurisdiction purposes, the Deputy Judge dealt with the two facets together.

Gateway 1 (domicile) was satisfied in relation to D1 as explained above. Gateway 3 (necessary or proper party) was also clearly satisfied as regards D2 and D3. Gateway 6 (a claim in relation to a contract made within the jurisdiction) required more detailed analysis.

The Deputy Judge made clear that whilst there were “certain apparent difficulties or oddities about the Claimant’s case” (including the contrast between the case advanced in pre-action correspondence and that advanced in his Particulars of Claim, and the fact that such a detailed oral agreement was said to have been reached in a short discussion during a family occasion), he did not feel this was a case where he could conclude at that early stage that there was either no serious issue to be tried nor that there was no good arguable case that an oral agreement had been reached. However, in relation to other points, the Deputy Judge held (a) the Claimant did not have a real prospect of success in relation a challenge by D2 and D3 that D1 had no authority to bind them, such that there was no serious issue to be tried as against them, however (b) the Claimant did have a real prospect of success with its argument (for which it sought and was given permission to amend its particulars) that D2 and D3 had ratified the oral contract through their subsequent actions.

(3) Where was the appropriate forum?

There were two limbs to be considered under this heading: (a) D1’s application for a stay (in relation to which the burden was on D1 to show there is another forum that is clearly and distinctly more appropriate) and (b) in response to the applications by the Defendants to set aside the Dias Order (in relation to which the burden is on the Claimant to show England was clearly the most appropriate forum). The judge described this point as being the “central battle-ground” between the parties.

After detailed consideration, the Deputy Judge considered that the matters connecting the dispute with Kazakhstan were “numerous and significant”. They included (a) the fact that the claims were all pursued (and only pursued) under the laws of Kazakhstan, where the interpretation of Kazakhstani law was a “central” feature of the case (b) the Claimant and D1-D3 all had “substantial” connections to Kazakhstan and that “almost all” of the events relevant to this dispute took place in Kazakhstan (c) the first languages of all of the potential witnesses for trial (and language of almost all of the relevant documents) was Kazakh and/or Russian. All of these factors outweighed the “very little connection” the proceedings had with England. Accordingly, Kazakhstan was found to be an available and the most appropriate forum for the proceedings.

Having made that finding, the next question was whether there was a substantial risk of injustice if the proceedings were to be heard in Kazakhstan, as the Claimant contended. The Claimant advanced two main points: (a) that Kazakhstan Courts had previously refused to admit witness evidence relating to an oral contract and (b) alleged threats made to the Claimant’s witnesses and potential witnesses not to give evidence for him. The Deputy Judge considered that whilst any threats are to be deplored, even if they had been made here, which was not clear, those threats do not relate to the question of forum – the alleged threats were as regards pursuit of litigation generally. Accordingly, the Deputy Judge considered that the Claimant had not made out his case that he could not get substantial justice in Kazakhstan.

The position of D4

Given that D4’s position was slightly different to that of D1-D3, the question as to whether there was a serious issue to be tried as against D4 was addressed separately. On the basis that there was no claim brought against it (save for being named as a defendant), and no relief (at least at this stage) being claimed against it, the Deputy Judge concluded that there was not a serious issue to be tried as against D4.

Alternative service

The alternative service order obtained by the Claimant included permission to serve D2 and D3 by post in Dubai. There is a bilateral treaty in place between the UK and the UAE in relation to judicial assistance in civil and commercial matters, dated 7 December 2006 (“the Treaty”).

Having considered CPR 6.15(1) (the requirement for a “good reason to authorise” alternative service), and equating the Treaty with the Hague Service Convention (in relation to which permission under CPR 6.15(1) has been held to be given only in “exceptional circumstances”), the Deputy Judge concluded that, in the circumstances of this case, there was not a good reason for alternative service. Delay would not ordinarily be sufficient of itself, and the Claimant had not identified any particular urgency or prejudice as a result of the 12-18 month period that the Claimant’s own expert estimated it would take to effect service in Dubai under the Treaty.

The Deputy Judge was also unpersuaded by the Claimant’s arguments that service had been effective because D2 and D3 were, in fact, aware of the claim, had instructed English solicitors , had engaged in pre-action correspondence and had not given a good reason as to why their English solicitors were not authorized to accept service. As he pointed out, if that constituted a “good reason” for CPR 6.15 purposes, it would “subvert” any relevant treaty or convention in place.

Non-disclosure complaints

Whilst the Deputy Judge’s conclusion as to forum meant the Dias Order was already going to be set aside, he nonetheless considered the non-disclosure points raised by the Defendants.

Whilst some 20 non-disclosure points were raised by the Defendants, the Deputy Judge considered their complaint about the Claimant’s failure to mention a criminal judgment in Kazakhstan which referred to some of the same facts, was the most significant.

In summary, it was asserted by the Claimant in his without notice application that there was a strong case that he would be unable to get substantial justice in Kazakhstan, owing to prior criminal proceedings there. Whilst the Claimant was not a party to those proceedings (brought by D2 against a journalist), it was said by the Claimant that other courts in Kazakhstan would find themselves bound by the criminal court’s findings, despite the Claimant not being a party to that case.

However, it became apparent that the Claimant had seemingly overplayed this risk, and his own expert changed position on the point (having initially said that res judicata would apply in Kazakhstan and other courts there would be bound by the criminal judgment). The Claimant also failed to disclosed that the Kazakhstan appellate court had, in response to an appeal by the Claimant himself as an interested party, confirmed that the criminal judgment had no res judicata effect against the Claimant.

Whilst the Claimant accepted that a failure to explain this point was a material one, he maintained it was inadvertent and unintentional. The Deputy Judge did not accept this characterisation, stating it was “difficult to accept”, and if this was not a deliberate failure, it otherwise displayed a “highly cavalier attitude” to the obligations on a party making a without notice application.

The Deputy Judge therefore concluded that this failure meant that he would have set aside the Dias Order on the basis of material non-disclosure by the Claimants (and he also noted three further material failures, each of which may have on their own caused the same outcome).

Conclusion

The judgment provides a timely reminder of the high expectations of Claimants when making without notice applications, and the standards the Court will expect of them if any order made is to be maintained following a challenge by the Defendant(s) on non-disclosure grounds. It also provides a useful summary of the various tests for service out of the jurisdiction and alternative service, and the high “exceptional circumstances” hurdle that will need to be overcome if proceedings are to be served in a country that is either a party to the Hague Service Convention or an equivalent bilateral treaty.

If you would like to discuss the contents of this article further, please contact Edward Allen.