BAS Capital Funding Corp & Ors v Medfinco Ltd & Ors

Neutral Citation No. [2003] EWHC 1798 (Ch) IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION Case Nos: HC 03 C 02101 Royal Courts of Justice Strand London WC2A 2LL Friday, July 25, 2003 Before MR JUSTICE LAWRENCE COLLINS - - - - - - - Between (1) BAS CAPITAL FUNDING CORPORATION (2) DEUTSCHE BANK AG LONDON (3) PAINE WEBBER CAPITAL INC (4) PW EXE LP (5) PW PARTNERS 1999 LP - Claimants and (1) MEDFINCO LIMITED (2) ABACUS HOLDINGS LIMITED (3) ANDREAS W GERDES (4) HTC INC (5) iWORLD GROUP EUROPE HOLDINGS LIMITED – Defendants - - - - - - - - - - - - - - Mr Robin Hollington QC and Mr John Machell (instructed by Peters & Peters) for the Claimants Mr Stephen Auld QC (instructed by Wragge & Co) for the First, Second, Third and Fifth Defendants. - - - - - - - JUDGMENT Mr Justice Lawrence Collins: I Introduction 1. The claimants are the investment arms of three of the largest financial institutions in the world, Bank of America, Deutsche Bank, and Union Bank of Switzerland. In the year 2000 they entered into agreements to invest in a Maltese technology company. Disputes have arisen with one of the principal founders of the company, Mr Gerdes, the third defendant, and there are proceedings pending in Malta. The shareholders agreement provides that the parties submit to the non-exclusive jurisdiction of the English court in relation to all claims arising out of or in connection with the agreement. 2. The claimants seek to bring a variety of claims in England against the company, Mr Gerdes and other shareholders, and seek injunctions pending trial in England. The defendants challenge the jurisdiction of the English court and resist the injunctions. These applications involve, among other matters, the effect of the non-exclusive jurisdiction clause. II The parties 3. The claimants are BAS Capital Funding Inc ("BAS"), which was previously known as Banc of America Equity Corporation (and which is part of the Bank of America), Deutsche Bank AG, and three Paine Webber entities, Paine Webber Capital Inc, PW Exe LP, and PW Partners 1999 LP, which are part of Union Bank of Switzerland. 4. The first three of the claimants, together with the fourth defendant, HTC Inc, then known as Hikari Tsushin Partners [II], LP, were parties to a Shareholders’ Agreement ("the Agreement") which forms the basis of these proceedings. PW Exe LP and PW Partners 1999 LP subsequently became parties after taking a proportion of the investment of Paine Webber Capital Inc. HTC Inc has not joined the other financial institutions in these proceedings as a claimant, and therefore it has been joined as a fourth defendant, but has taken no part. In this judgment, the expression "the defendants" does not include HTC Inc. 5. The parties to the Agreement were the financial institutions and the other shareholders in iWORLD Group Europe Holdings Ltd ("the Company"), and the Company itself. 6. The principal founders of the Company were Mr Andreas Gerdes ("Mr Gerdes"), and his wife, Ms Bettina Vossberg ("Ms Vossberg"). Mr Gerdes is a German national. He founded Germany’s first mobile service provider, ABC Telekom. He sold the business, and left Germany to work in Asia where he advised Deutsche Telekom and other telecommunication companies. Ms Vossberg worked for Daimler Benz’s telecommunications unit, and subsequently for Deutsche Telekom in Asia. Mr Gerdes and Ms Vossberg moved to Malta in 1995, where they married, and had two sons. The evidence is that they are now estranged and are judicially separated. It may be (although there was no evidence on this) that the breakdown in relations in the management of the Company was linked to their matrimonial problems. 7. The other founders of the Company were Mr Ian Arstall (who was previously an international partner and head of corporate finance, South East Asia, of the solicitors Linklaters), Mr Malcolm Ross (formerly a senior vice- president and head of telecommunications of Arthur D Little), and Daniel Kranzler (who also had considerable experience in telecommunications). 8. The other shareholders were named in the Agreement as Perikles Trust, which was described as "a trust established under the laws of Jersey for the benefit of the founders of the Company" and Dolphins Trust, which was described as "a trust established under the laws of Jersey for the benefit of employees and advisers of the Company." Neither Perikles Trust nor Dolphins Trust is a legal entity, and the Agreement was signed for each trust by Abacus Holdings Ltd ("Abacus"), a Maltese trust company, as trustee. 9. Perikles Trust was established by Mr Gerdes and was administered by PriceWaterhouseCoopers in Malta through Abacus. The evidence was that the beneficiaries of the Perikles Trust were Mr Gerdes, his children, and Ms Vossberg. Among the assets held on trust by Abacus were shares in the Company. The first defendant, Medfinco Ltd ("Medfinco") is a Maltese company to which, in December 2002, Abacus transferred, or purported to transfer, the shares in the Company which were held on trust by Abacus. 10. Other persons who play a major part in the events which are the subject of these proceedings include Mr Edward McCaffrey, who is a managing director of the first claimant ("BAS") and chief investment officer of Banc of America Equity Partners; Mr Kevin Valenzia, who is a director of, and the secretary of, Abacus, and a partner in the Malta firm of PriceWaterhouseCoopers. III The Company and the investment 11. The Company was incorporated in Malta on 19 January 2000 and was formed to carry on the business of "business incubation" in the e-mobile sector, that is, mobile telecommunications applications and services. It was intended that the Company would derive its income and profits from retaining a majority shareholding in ventures in this sector which it had successfully "incubated". 12. Mr Gerdes sought finance for the project, and after discussion with several investment partners, the claimants (and HTC Inc) agreed to invest $36 million in the Company by subscription for preference shares and non- voting ordinary shares. 13. The claimants were shown a Business Plan which said: "iWORLD Group will deploy its first business incubation facility in Europe within first quarter 2000 and establish an international presence in the ensuing months. By the end of 2003 the company plans to grow its capital value to a baseline figure of approximately USD3.4 billion. We offer selected strategic investors the opportunity to participate in iWORLD Group’s success. To establish the first of the iWORLD Group global incubators and fund the operations of the company during the next 24 months we will raise USD35 million by offering equity in the company. iWORLD Group offers a compelling opportunity to its investors. Within 12-18 months, iWORLD Group will position itself for an early IPO that will strengthen brand recognition, offer market valued equity incentives to its staff and provide an opportunity for investors to realise a portion of their gains. Investment partners will also benefit through the possibility of early participation in ventures emerging from the incubators, and in the eventual spin-off of iSmartMoney, iWORLD Group’s seed fund, as a growth fund specialising in the mobile e-business sector." 14. Later in the document it is said that the iWorld Group expected that in the first four years (a) it would aggregate a capital value of approximately US$3.4 billion from its share of incubated ventures (or offspring); (b) it would incubate on average 12 ventures per annum, of which 40 out of 48 were expected to succeed. $35 million was sought to: "● Establish Eurolncubators, its full-service incubation facilities for Europe, located in Germany, Europe’s largest national market, and later (3Q2001) replicate the facility by developing Asialncubators in Asia ● Establish an office network covering Sweden, Finland, UK, Italy, US, Hong Kong, and Japan to gather market intelligence and to provide its offspring with access and acumen for successful roll-out and execution ? Build an international team of recognized and experienced Internet and telecom professionals as the focus of a network of in-house and external resources and services in these international hubs, together with operational experts in the fields of marketing, business building, finance and fiscal matters, and logistics." 15. The process of incubation of new businesses would involve two distinct preliminary stages: (a) the Company would establish a committee called "iDeasTank" which would develop business concepts and plans for submission to another committee of the Company, namely "iSmartMoney;" and (b) the Company’s iSmartMoney committee would make decisions upon whether or not to fund incubated companies for a defined incubation period. 16. The Agreement (together with a Subscription Agreement) was entered into by the Investors on March 31, 2000. The investors (together with Mr Keith McCaw, who invested $1m for 1,108,192 preference shares) agreed to subscribe in aggregate the sum of $37 million for 3,102,942 ordinary non- voting shares and 41,003,108 preference shares in the Company. IV The Agreement 17. The principal relevant provisions were these: "1.1 In this Agreement and its recitals and the Schedules save where otherwise expressly provided or unless the context provides otherwise: ‘Incubation Period’ ‘Initial Funding’ ‘iSmart Money’ … Means the period of up to twelve (12) months from the formation of an Incubated Company. Means the initial investment by the Company in an Incubated Company pursuant to Clause 8.1 Means the investment committee of the Company responsible, inter alia, for making the decision whether to fund Incubated Companies 4.1 The principal purpose of the Company is to develop, invest in and own businesses in the e-mobile sector, principally in the area of service businesses (starting with at least majority ownership of such businesses). The Company may develop, invest in or own a business or businesses relating to technology or software in the e-mobile sector if it will facilitate or assist its other e- mobile service business. … 4.3 The holders of the majority of the total issued Preference Shares shall be entitled to elect one investor representative as a Board member of the Company … Such Investor Board Representative shall be entitled to vote at Board meetings of the Company … … 7.1 Each Party, severally and not jointly, agrees and acknowledges that such Shareholder will not directly or indirectly, offer, sell, assign … or otherwise transfer any Shares … unless such offer, sale, assignment … or other transfer complies with the provisions of this Agreement. … 7.9 If at any time Perikles Trust proposes to transfer Shares constituting more than 5% of the issued share capital of the Company to a third party pursuant to an understanding with such third party (a "Transfer"), then Perikles Trust shall give each Investor written notice of Perikles Trust’s intention to make the Transfer (the "Transfer Notice") … 7.10 The Investors shall have an option for a period of thirty (30) days from the Investor’s receipt of the Transfer Notice from Perikles Trust set forth in Clause 7.9 to elect to purchase their respective pro rata shares of the Perikles Offered Shares at the same price and on the same material terms as described in the Transfer Notice (the "Investor Right of Refusal") … … 7.16 Notwithstanding the provisions of Clauses 7.9, 7.10 and 7.11 of this Agreement, Perikles Trust may sell or otherwise assign, with or without consideration, Shares to a trustee for the account of the beneficiaries of Perikles Trust or to a trust for Perikles Trust’s own self … , provided that each such transferee or assignee, prior to the completion of the sale, transfer, or assignment shall have executed documents assuming the obligations of Perikles Trust under this Agreement with respect to the transferred securities. … 9.1 The Company may provide to each Incubated Company during its Incubation Period (A) in the period up to the second anniversary of the closing pursuant to the Subscription Agreement of up to a maximum of whichever is the greater of (i) US$5 million or (ii) 15% of its most recent cash reserves immediately prior to the date of the funding (B) in the period from the second anniversary of the closing pursuant to the Subscription Agreement of up to a maximum of whichever is the greater of (i) US$10 million or (ii) 25% of its most recent cash reserves immediately prior to the date of funding. For the purposes of this Clause 9, such funding provided by the Company pursuant to the preceding sentences shall be the "Initial Funding". The limit on the amount of the Initial Funding or the period of the Incubation Period for any particular Incubation Company may be increased or extended pursuant to Clause 10.1.8. … 10.1 Each of Perikles Trust, Dolphins Trust and the Investors agrees with each of the other Parties to exercise (or, if appropriate, refrain from exercising) his voting rights as a shareholder in and, if appropriate, a director of the Company so as to procure so far as each is able that the Company will obtain written approval of Investors holding of a majority of the issued Preference Shares prior to: … … 10.1.8 Increasing the Initial Funding provided to an Incubation Company in excess of the amounts provided in Clause 9.1 or extending the Incubation Period longer than the period provided in Clause 9.1 or increasing the percentage allocated for strategic purposes exceeding the percentage contemplated in Clause 9.2 … 14.1 No variation of this Agreement or of any of the documents contained or referred to in this Agreement as being in the Agreed Form shall be valid unless it is in writing and signed by or on behalf of each of the Parties. … 14.3 The rights and remedies of each of the Parties contained in this Agreement are cumulative and not exclusive of any rights or remedies provided by law. No exercise by any party of any one right or remedy shall operate so as to hinder or prevent the exercise by it of any other right or remedy. … 16.1 This Agreement shall be binding on each party’s assigns, personal representatives and successors in title and references to ‘Perikles Trust’, ‘Dolphins Trust’, ‘the Company’ or ‘the Investors’ (or any one or more of them) shall be read and construed accordingly. … 17. TIME OF THE ESSENCE Time shall be of the essence of this Agreement both as regards the dates and periods specifically mentioned and as to any dates and periods which may by agreement in writing between or on behalf of the parties be substituted for them. 18. INTEGRATION This Agreement embodies the entire understanding of the Parties as it relates to the subject matter hereof. This Agreement supersedes any prior agreements or understandings between the Parties as to this subject matter. No amendment or modification of this Agreement shall be valid or binding upon the Parties unless in writing and signed by an officer of each party. … 23. ENGLISH LAW This Agreement shall be governed by and construed in accordance with English Law and the parties submit to the non-exclusive jurisdiction of the English courts in relation to all matters claims and disputes arising out of or in connection with this Agreement." V Events subsequent to the Agreement 18. In this section I shall outline the main events which led to the breakdown in relations between what ultimately emerged as the two main factions, namely Mr Gerdes and his supporters on the one hand, and Ms Vossberg and the claimants, and their supporters, on the other hand. Two preliminary points should be made. First, nothing in this section is intended to constitute a finding of fact. Second, in outlining the history, I shall include references to the principal documents on which the defendants rely in support of their contention that the claimants have acquiesced in, or waived, the breaches of the funding limitations of the Agreement which the claimants allege, and in particular the contention by the Claimants that the Company was not entitled to provide to one of its projects, iModelMusic ("iModel"), funding of more than $5 million. 19. The claimants’ contention is that the effect of clause 9.1 of the Agreement is that the Company was under an obligation not to provide more than $5 million to the iModel project, because in the period to the second anniversary of the closing of the Subscription Agreement (i.e. to March 2002) the Company was entitled to provide to iModel during its Incubation Period (i.e. a 12 month period, expiring at the latest in February 2002) not more than $5 million. 20. The claimants complain that in the period of more than three years which have passed since its incorporation, the Company has only attempted the incubation of three businesses, namely iModel, iResponse, and iBet. The last meeting of iSmartMoney was held on January 25, 2001. The iBet project was put on hold in early 2001 as it was felt that the legal risks of mobile betting in Germany were too unpredictable. The iResponse project (which involved readership profiling for advertising purposes) was halted at the end of 2001 (with the running off of its activities continuing until the end of February 2002) following poor market trials in Germany. 21. The only project which the Company continues to pursue is iModel. The activity intended to be undertaken by this business is the provision of information, via mobile telephones, to teenage music fans. Customers would, it is envisaged, telephone premium rated telephone numbers to listen to messages recorded by their music idols, or learn details of trivia and gossip relating to them. 22. iModel has been in "incubation" since October 2000. The project was given the go-ahead as a company to be incubated at a meeting of the iSmartMoney committee that was held on October 7, 2000, and work upon the project began from that date. iModel was incorporated as a subsidiary company under the name iModel Music Holdings Ltd on February 21, 2001. 23. In April 2001 Brigitte Baumann was appointed CEO. She had previously been a senior vice president of American Express, responsible for their global internet business. 24. At a board meeting on May 30, 2001 it was reported that no businesses had been launched, and that there was a loss of $2.5 million. At this stage the members of the board were Mr Gerdes (who was chairman), Ms Baumann, Mr McCaffrey, Ms Vossberg, and Abacus (acting by Mr Valenzia). It was also reported that one of the founders, Daniel Kranzler, had resigned as a director and chairman of the Company, and had expressed a lack of confidence in the Company to succeed. His resignation letter of May 27, 2001 stated that the principal ground for his resignation was that he had been "excluded from communications and activities of the company." He ended by saying that the Company had made little progress on its original business plan, and the business architecture was not viable and not fundable. The best return on investment would be to close down and return the unspent funds to the investors. 25. Ms Baumann undertook a review of the strategies that the Company could adopt. She suggested three options: (a) to close down the companies and return the remaining capital to investors; (b) to change the business model from a three-step business architecture to a venture capital business model with a focus on finding, concluding and growing a portfolio of investments in the e-mobile industry; (c) to continue to pursue the original strategy (creating, building and growing e-mobile businesses) with some adaptations to take into account the changes in the external environment. It was agreed by the board that the original strategy would continue to be pursued and accordingly that the third option remained the appropriate one. 26. To meet the concerns of the investors, on August 7, 2001 a meeting between the Company and the investors was held in New York at the offices of UBS/Paine Webber to review the Company’s strategy and the investors’ position. The Company produced financial papers for the meeting, which included a costs figure of $21.1 million for 2000/2001. Mr McCaffrey made a handwritten annotation that it included $7 million each for iResponse and iModel. 27. Following this meeting the investors decided to seek the return of their investment, and Mr Gerdes agreed to suggest "a possible change of their shareholding by redistribution of capital or by alternative options." The investors agreed that Mr Cummins and Mr Clempson, both of Deutsche Bank, would be the active persons to pursue the return of the investors’ money. 28. Mr Cummins says that he made it clear to Mr Gerdes, Ms Vossberg, Ms Baumann and Mr Valenzia that the investors as a group had no faith in the Company and that they wanted to extract the remainder of the investors’ money from the Company, and he says that at no point did he, or any of the other investors, agree to increase the funding limits in the Agreement. He says that he emphasised to the Company representatives at this meeting that the investors were no longer interested in supporting the investment any further. Ms Vossberg says that as far as she knew, the investors never agreed to any extension of either incubation periods or funding limits. 29. At a board meeting on October 15, 2001, the board decided to appoint a committee, consisting of Mr Valenzia and Mr Arstall, who would work in consultation with Mr Gerdes, to negotiate with the investors. Mr McCaffrey is recorded as having complimented the management team on its ability to stay below projected budgets. 30. According to Mr McCaffrey, the investors put forward a proposal to the Company for a refund of $20 million at this stage (i.e. the $36 million, less $3-4 million already spent and $9 million budgeted to be spent). 31. At a meeting at Deutsche Bank, London, in November 2001, Mr Arstall put forward a proposal for the return of $3 million to the investors, together with grant of share options. Mr Clempson made a counter-proposal involving the return of $10 million in cash, together with shares in the offspring companies. 32. On November 29, 2001 Mr Cummins sent an e-mail to Ms Baumann, Mr Gerdes, Ms Vossberg and Mr Valenzia, in which he complained that 50% of funds had been spent in overheads, which was "a fundamentally different application of funds than was expected by investors." On December 5, 2001 Mr Valenzia replied: "iWORLD rejects the assertion that funds were being applied in a ‘fundamentally different’ manner than was expected by the investors." He put forward three alternative proposals: (a) to leave matters as they were: (b) the proposal put forward on November 2, 2001; (c) total redemption of the preference shares for a one-off payment of $10 million. 33. At a board meeting on February 11, 2002 (which Mr McCaffrey attended by telephone), Mr Valenzia reported that he had received no response to his proposal. 34. The board minutes (and other documents) show that by early 2002 the only active project was iModel. Under "Funding required for iModel" the minutes state: "In reply to questions from Edward McCaffrey and Kevin Valenzia, Brigitte Baumann furthermore explained that it is estimated that about USD 8 million will be required to achieve break even in 2003 with the highest capital requirement in 2002. The budget for 2002 shows that the funding is assumed to be coming out of iWG’s capital although a fundraising is planned to take place in the second half of 2002. Edward McCaffrey asked for the specific amount necessary to take iModel into profitability, and potentially public. Brigitte Baumann stated that the total amount is assumed to be up to 10-12 million USD maximum. Upon his request Brigitte Baumann agreed to send him the iModel business plan financials in order to discuss financial projections." 35. Under "Budget approval" the minutes state: "The Board agreed to approve the base case scenario budget, submitted to the Board by Brigitte Baumann, subject to a quarterly review in order to ensure that the investors will agree that monies are spent judiciously. It was also agreed that the success of iModel within the expected periods of time was therefore critical." 36. Subsequently the investors rejected the proposals and required the return of $20 million together with the retention of an interest in the project. Mr McCaffrey says that, although the investors were aware that the limits for iModel were due to be exceeded, they had at no stage acquiesced in or agreed these revised limits. The only basis they were even prepared to contemplate the increased investment in iModel was that the rest of the money would be returned to them and the Company could then consider itself discharged from the Agreement. 37. On April 8, 2002 there was a board meeting in Malta. A review of the Company’s position and prospects was circulated to directors, which stated that the Company was forecast to have losses of $1.1m in that quarter against a budgeted loss of $1.7 million and that iModel was accounting for some 70% of the Company’s total costs. 38. The minutes state: "Edward McCaffrey commented that in his view as well, the incubation business model is not valid. The industry has gone back to basics, and building businesses requires too much money and effort to still make sense. Therefore, the focus must be on iModel, the failure of which would bring the incubator model into question. Bettina Vossberg and Brigitte Baumann responded that the business incubator model could work if the scope within the industry is sufficiently vertical to exploit knowledge and assets. Several businesses could be created from one core asset, and the iModel platform could be used in other ways and other fields. Also, using and improving incubation processes has proven to be a least as beneficial to iModel as to the incubation model. Nevertheless, they agreed that it is as hard as ever to build companies, which cannot be done as fast as expected, and that the focus must first be on making a success out of iModel before the question of the incubation of further businesses is addressed." 39. The AGM of the Company, and a board meeting, were held in London on July 8, 2002. The Review for the meetings stated that "iWG continues to be solely focused on iM[odel]," and that the Company anticipated a loss of $4.9m on iModel in 2002. It also said that "Since IWG is now focused on launching iM[odel], it was decided to defer further work on the incubation process. The process team was dissolved …". 40. Ms Baumann resigned as CEO at this time, and at the AGM of the Company Mr Cummins said that Deutsche Bank was no longer convinced of the Company’s business model as per the original business plan to the extent that it had written off its investment. Mr Cummins asked for the return of $20 million to the investors unless a fundamental change occurred within the Company. 41. At this stage HTC Inc indicated that it was not seeking a refund of capital, and would consider further investment. 42. On September 18, 2002, the board approved a new management structure which had been proposed by Mr Gerdes, including the appointment of Mr Ian Arstall to the board and of Mr Philip Lingard as a new head of finance management. 43. At a board meeting held on November 18, 2002 it was proposed by Mr Valenzia and Mr Gerdes that Ms Vossberg be the Chief Executive, and Mr Gerdes should become non-executive chairman of the board. The board approved this proposal, and it was agreed that Mr Gerdes and Ms Vossberg would agree on a division of tasks in writing in due course. 44. A proposed offer by the Company to the investors was also discussed, which involved $14 million being paid in return for cancellation of their shareholding, and the issue of a 15% holding in iModel. This offer was not acceptable to the claimants, who wanted substantially all of their investment returned leaving a small remainder in iModel with a structure that guaranteed that, if iModel were successful, they could have all their money returned together with an additional return. 45. Ms Vossberg says that following the board meeting of November 18, 2002 she had some two weeks of discussions with Mr Gerdes about his role as non- executive chairman of the Company. She had requested the Company secretary to call a board meeting since Mr Gerdes had resiled from his position to the extent that her role would have been diminished to one of assisting him in his attempts to steer the Company. 46. On November 25, 2002, Ms Vossberg sent an e-mail to Mr Valenzia seeking advice with regard to the protection of her beneficial interests in Perikles Trust through mechanisms such as the installation of a protector. 47. According to Mr Gerdes’ first affidavit: "In early December 2002, Abacus gave notice of its intention to retire as Trustee which it did on December 3, 2002 and Medfinco was appointed Trustee in its stead". 48. Mr Valenzia merely says that, pursuant to a change of trustee, which occurred on December 3, 2002 Medfinco became the trustee of Perikles Trust. 49. According to the claimants, about an hour before the board meeting scheduled for December 3, 2002, at which Ms Vossberg was to be confirmed as CEO instead of Mr. Gerdes, Abacus tendered its resignation from the board of the Company and as trustee of Perikles Trust. It seems that Ms Vossberg had learned of, or was party to, discussions about the appointment of "additional directors." She wrote to Mr Valenzia, asking him not to appoint additional directors and not to retire as trustee until the dispute with the investors was resolved. 50. An e-mail was received on the same day from Medfinco which indicated that it had been appointed as the new trustee of Perikles Trust. Medfinco signed a written resolution as shareholder of the Company, appointing as directors persons whom the claimants say are Mr Gerdes’ girlfriend, a middle manager loyal to Mr Gerdes, and two German lawyers who were previously unrelated to the Company and unknown to any of the other directors. Medfinco also purported to remove Ms Vossberg as a director. 51. Ms Vossberg says (and the claimants support her) that it is clear that Medfinco was selected and nominated by Mr Gerdes, and that Medfinco accepted this nomination for the purpose of immediately carrying into effect his desire to fill the board with his associates, without any regard for the interests of the Company or the beneficiaries of the Perikles Trust as a whole. 52. A board meeting took place on December 3, 2002. Mr Gerdes, Ms Vossberg, Mr McCaffrey and Mr Arstall were present, in addition to those purportedly appointed by Medfinco. After Mr Gerdes and the Medfinco nominees withdrew from the meeting, Ms Vossberg, Mr McCaffrey and Mr Arstall passed resolutions calling meetings of the subsidiaries (inter alia) to remove Mr Gerdes as a director, to appoint Ms Vossberg as CEO and to appoint additional directors. 53. On December 5, 2002 Medfinco requested an extraordinary general meeting of the Company in order (among other things) to remove Ms Vossberg as a director. On December 6, 2002, she received a letter from a Dr de Marco acting on behalf of both Medfinco and Mr Gerdes, demanding that she cease and desist from acting as CEO. VI Institution of Maltese Proceedings 54. There then followed on December 10 and 11, 2002 a number of applications to the Maltese courts. 55. Application 2497/2002 was an application for a prohibitory injunction by Mr Gerdes (for himself and on behalf of the Company and its subsidiaries), the directors appointed by Medfinco, and Medfinco. The respondents included Ms Vossberg, Mr Arstall and Mr McCaffrey. It claimed that the decisions taken by the board on December 3, 2002 and the extraordinary general meetings of the subsidiaries called for that day were invalid, and sought to prohibit (inter alia) Ms Vossberg from acting as CEO and the newly appointed directors from acting. The application also sought to prohibit the respondents from changing the locks at the offices of the Company and its subsidiaries. 56. The applicants claimed that Medfinco was the majority shareholder of the Company following a transfer of shares in the Company from Abacus to Medfinco, and that on December 3, 2002, Medfinco, as majority shareholder, appointed Richard Leitermann, Robert Leitermann, Pauntea Morshedi and Jason Franklin Stokes as directors of the Company by a written resolution; that Mr Gerdes had adjourned the board meeting; that the respondents had no right to call the meetings of the subsidiaries in view of the fact that the agenda for the meeting did not include the calling of such meetings; that the new appointments were void; that the actions of Ms Vossberg, Mr McCaffrey and Mr Arstall were abusive, illegal and fraudulent, and made with the intent of taking over the Company. The applicants also said that they suspected that the respondents were going to give instructions for the transfer of funds to the amount of $25 million held in the name of the Company and its subsidiaries. 57. The response was that Medfinco had not validly acquired the shares in the Company, and was therefore unable to appoint any directors. The transfer was in violation of the Articles of Association of the Company, which expressly incorporated the terms of the Agreement, and subjected all share transfers to its terms. The meetings of the subsidiaries had been validly held and there was no obligation to give notice on the agenda. It was the applicants who acted abusively and fraudulently and not the respondents. 58. Application 2513/2002 was by Medfinco as trustee of the Perikles Trust against the Company, Ms Vossberg, Mr Arstall, Mr McCaffrey and other officers. It sought to prohibit the Company from holding any board meetings, or from taking any decisions which might have an effect on the operations, finance, assets or other property of the Company until the shareholders decided who the directors of the Company should be. It sought an order that no payments be effected by the Company to Ms Vossberg and the other persons in her camp. It was alleged that she and other persons in her camp had taken steps to increase their remuneration, and that she had entered into a new consultancy agreement, the terms of which were disadvantageous to the Company. 59. The response was that Medfinco was being manipulated by Mr Gerdes, and was not properly taking into account the interests of Ms Vossberg as beneficiary. It had been decided on November 18, 2002 that Mr Gerdes would withdraw from a great part of his executive management role, and that Ms Vossberg would assume the duties of CEO. Mr McCaffrey, as director representing the investors, had also insisted that such duties of CEO be carried out without the intervention of Mr Gerdes. 60. Medfinco had committed a breach of trust, and Mr Gerdes was directing its actions, and the transfer of shares between Abacus and Medfinco had not been validly carried out. 61. The other applications relate to proceedings by BAS (and an affiliate) which are under the Maltese equivalent of section 459 of the Companies Act 1985, namely section 402 of the Companies Act, Cap. 386. The applicants claimed that as minority shareholders, they were suffering unfair prejudice because of respondents’ actions, and that their only option was to seek a remedy in terms of Article 402 of the Companies Act. The substantive proceedings (1409/2002) are against Abacus, Medfinco, the Company and Mr Gerdes. The application for a prohibitory injunction (2510/2002) is against Mr Gerdes, the directors appointed by Medfinco, and the Company. 62. The application for an injunction requested the court to stop the respondents, and particularly Mr Gerdes, from (a) acting as directors of the Company or its subsidiaries; (b) transferring or disposing any assets of the Company or its subsidiaries (excluding the payment of wages and payment to third parties made in the ordinary course of business); and to stop the Company from executing any instructions given by the respondents. 63. The section 402 proceedings claimed that the transfer of shares in the Company from Abacus to Medfinco was in violation of the Agreement, and that the appointment of additional directors was invalid; that Mr Gerdes had mis-managed the affairs of the Company by spending Company money for his own interests; that he had sent four bouncers to the Company offices with the intention of intimidating persons there present; that on December 9, 2002 he and others had tried to call a board meeting without giving notice, and without obtaining the consent of all directors. 64. The applicants requested the court urgently (a) to revoke the transfer of shares in the Company which had been effected between Abacus and Medfinco; (b) to revoke the appointment of the additional directors; (c) to appoint an interim board; (d) to order the Company to take all necessary action to obtain a refund of funds used by or for the Company; (e) to order that Mr Gerdes take no part in the running of the Company; (f) to revoke all actions of the irregularly constituted board; (g) to order that matters agreed on November 18, 2002 be implemented; (h) in view of the unfair prejudice suffered by applicants, to give such directions or orders which it deemed expedient in the circumstances. 65. The respondents denied that there were the serious and grave circumstances to which Article 402 of the Companies Act referred. The issue of whether the transfer of shares or the appointment of directors took place according to law did not fall within the ambit of section 402, but was a matter which was to be determined in accordance with general principles of law. 66. All that took place on the December 3 was a change in trustee. The shares still formed part of Perikles Trust. Perikles Trust held the absolute majority of the shares in the Company, and it therefore had the right to appoint additional directors. Mr Valenzia on behalf of Abacus stated that the transfer of shares to Medfinco was valid. 67. Mr Gerdes also categorically denied all the allegations made by applicants: he was the party suffering prejudice, and referred to the EGMs called on the December 3, 2002 which, he claimed, had been illegally and abusively convened. VII The Board of Administration and hearings in Malta 68. At a court hearing in Malta on December 23, 2002, after discussions between the parties and their lawyers, the following agreement was reached: (a) the Board of Directors of the Company was suspended; (b) the affairs of the Company and its subsidiaries were to be administered by a Board of Administration composed of Joe Zammit Tabona (Chairman) ("Mr Tabona"), Mr Gerdes and Richard Leitermann or their alternates, and Ms Vossberg and Dr Andrew Borg-Cardona (the Maltese lawyer for the claimants in these proceedings) or their alternates; (c) the Board of Administration was to have all powers normally exercised by the Board of Directors and legal and judicial representation of the Company was to vest in the Chairman; (d) the Board of Administration was to function up to February 11, 2003, subject to renewal by agreement for further periods of 30 days each. 69. Mr Tabona is a person of considerable standing in Malta. He was articled with Turquand Young & Co, London and qualified as a chartered accountant in 1971. He became a partner of the Malta branch of that firm in 1972 and was a senior partner of PriceWaterhouseCoopers until his retirement from active practice in March 2000. 70. He is now chairman of the Malta Accountancy Board, a director of the Malta Development Corporation, and a council member of the Malta Council for Science and Technology. He is a director of HSBC Life Assurance Co Ltd in Malta, and he is the executive director of the Malta Enterprise Board. Until February 2000 he was president of the Malta Federation of Industry. In the past he has been a director of the Bank of Valletta plc and served as a member of its finance committee and chairman of its compliance committee and chairman of its purchasing committee. 71. It is not suggested on either side that the Board of Administration is a court-appointed body or court-supervised body with a special legal status. It is common ground that the factions agreed not to exercise any powers as directors and appointed the Board of Administration to act in their place with all the powers of a board of each of the companies. The evidence for the claimants is that the agreement between the parties was recorded in a court order, but the court has no powers over the Board of Administration, whose powers are derived solely from what was agreed by the parties to the litigation. The life of the Board of Administration has been extended at several court hearings purely by the agreement of the parties. 72. The parties agreed extensions until June 16, 2002, and then at a hearing on June 12, 2003, it was agreed that its powers be extended to November 2003. The defendants’ evidence was that the court indicated that it was its intention to hold the section 402 proceedings by the end of November 2003, but the claimants say that all that was envisaged was that the process of taking evidence (piece-meal) would begin by then, and that it will take 2 years for the proceedings to be completed. 73. It appears from the note of the hearing that the proceedings were adjourned until after the present hearing in England. BAS asked for an interim order requiring that the bank mandates of the Company be changed forthwith so as to require one signatory nominated by Medfinco and one signatory nominated by the first claimant on a joint basis; and that payments be only authorised if it agreed an established, to the satisfaction of each of Medfinco and the first claimant, either that the payee is legitimate creditor of the Company or that the payments are in the ordinary course of business; and that unless Medfinco and the first claimant otherwise agreed, the Company shall refrain from entering into any new business or onerous contracts or other arrangements until the pending issues were decided. The judge decided that there was no need for such an injunction once the parties had agreed that the Board of Administration should be continued until later in the year. 74. In the course of the proceedings Dr Fenech said on behalf of BAS about Mr Tabona: "We have absolutely no problem with his good faith". 75. Ms Vossberg resigned from the Board of Administration on May 26, 2003 and was replaced by Mr Fenech, or, failing him, Mr Borg-Cardona. In her resignation letter she claimed that she had experienced obstructions of her functions within the Board of Administration, and that the actions or inactions of the Board of Administration did not meet ethical and professional standards she felt were appropriate. She also claimed that information had been withheld and that the Board of Administration had supported Mr Gerdes in his abuse of the Company resources. 76. The Annual General Meeting of the Company was held on May 30, 2003. Mr Tabona allowed Medfinco to vote on the accounts and appointment of directors, including Medfinco itself and Mr Gerdes. VIII The English proceedings: the Particulars of Claim and evidence in support of the application for permission to serve out of the jurisdiction 77. These proceedings were commenced on June 6, 2003, with an application to Master Price for permission to serve out of the jurisdiction, and the subsequent issue of a claim form on the same day, with attached Particulars of Claim. 78. The Particulars of Claim cover 22 pages, with lengthy quotations from the Agreement. The allegations are these. 79. First, it is claimed that the Agreement has been frustrated. It is pleaded that, as appeared from the contents of the Business Plan and the terms of the Agreement, it was of the essence of the commercial venture that the Company should carry on the business of business incubation and that the process of "incubation" of new businesses by the Company was to have two stages. The first stage was the selection of ideas and the preparation of a business plan for a selected idea, by a division to be called "iDeasTank". The second stage was the authorisation of the injection of seed capital for a particular business plan, by a committee to be called "iSmartMoney". During this stage it was provided that the Investors would be fully consulted. 80. By about the end of January 2001, the Company had ceased to carry on the business of business incubation, and it abandoned the business with effect from about that date. Further and in the alternative, since about that date the Company has been substantially incapable of carrying on the business of business incubation as envisaged in the Business Plan and the Agreement, without a substantial further injection of capital which the Claimants are willing neither to provide nor to consent to under the Agreement. 81. The particulars given are that (i) the last meeting of either iDeasTank or iSmartMoney was held on January 25, 2001, and since then, no business case for an incubated company has been presented to the Claimants for approval; (ii) the only incubated companies (other than iModel) for which Initial Funding was authorised by iSmartMoney were as follows and all the same have been terminated from about the dates indicated: (a) iResponse (January-February 2002); and (b) (b) iBet (March 2001); (iii) since about March 2002, the only incubated company in operation has been iModel and the Company’s resources have been devoted entirely to that venture and remain so devoted; (iv) the Company’s operations in Germany were never established as anticipated; (v) the Company’s only administrative premises have been based in Malta; (vi) the Company and its subsidiaries have approximately 45 employees, and since it commenced trading in March 2000, the Company and its subsidiaries have had approximately 200 employees in total, of which more than 150 have left, often within six months of the commencement of their employment. 82. Accordingly, the Agreement (and the Subscription Agreement) has been frustrated, and the claimants are entitled to the return of the monies subscribed by them pursuant to the said agreements. 83. Secondly, it is claimed that there has been a repudiatory breach of the Agreement. It is pleaded (paras 14 and 15): "In breach of Clause 9.1 of the Shareholders’ Agreement, the Company has continued to fund iModel after the expiry of its ‘Incubation Period’ as defined in the Shareholders’ Agreement, namely October 2001, alternatively February 2002, whichever is the date of expiry of 12 months after the formation of iModel. Further and in the alternative, in breach of Clause 9.1 of the Shareholders’ Agreement, the Company has provided to iModel funding in excess of the maximum ‘Initial Funding’ permitted under the said Clause, namely US$5 million." 84. The particulars given are these: (i) since it commenced business in March 2000, the total cash outflow of the Company to 31 December 2002 has been $17,596,989; (ii) expenditure on the iModel project commenced in October 2000; (iii) according to the 2001 accounts, iModel costs were 70% of total costs compared to a target of 88%; (iv) since March 2002 the Company’s sole activity has been the iModel project; (v) according to materials available to the directors of the Company in about June 2002, iModel accounted for 87% of total costs; (vi) the total expenditure attributed to iModel in the 2002 accounts was $5,843,598, comprising $5,188,598 (Write-Off), $375,000 (provision for investment in Rights Group LLC), and $280,000 (Note 16: guaranteed payments to artists). 85. Further and in the alternative, the Company is continuing and threatening to continue to provide funding for iModel in breach of clause 9.1 of the Agreement. According to a draft "business plan" produced in or about May 2003 by Mr Tabona, all of the Company’s resources are devoted to iModel and the Company is budgeting for losses of $3,250,012 in 2003. The claimants reject the "business plan" and the said proposed funding. 86. It is alleged that these breaches of the Agreement and each of them severally amounted and continue to amount to a repudiatory breach and/or breaches thereof entitling the claimants to accept the same and terminate the Agreement. 87. Since about August 2001 the claimants have made it clear to Mr Gerdes and the other shareholders in the Company that they desired the return of the monies invested by them in the Company and the claimants on the one hand and Mr Gerdes on the other have been in negotiation with each other with a view to a mutually agreeable settlement of the dispute between them, including a programme for the return of the said monies. Service of the proceedings constitutes notice by the claimants to the defendants that the claimants elect to terminate the Agreement. In the alternative, and without prejudice to the claimants’ principal case, it is averred that the negotiations constituted such notice. 88. The third claim is that in or about December 2002, without the prior knowledge or approval of the claimants, in breach of clauses 7.1 and 7.9 of the Agreement and/or in breach of clauses 16 and 17 of the Company’s Articles of Association, Mr Gerdes procured Abacus to transfer its entire shareholding in the Company held for the benefit of Perikles Trust to Medfinco, without the prior consent of any other shareholders in the Company and without offering the claimants the right of first refusal. 89. The transfer amounted to or formed part of a "transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of", with the meaning of clause 8.2 of the Agreement, entitling the claimants to receive the distributions that they would receive upon a liquidation of the Company pursuant to clause 8.1. 90. The fourth claim is that on or about November 21, 2002, in breach of the confidentiality provisions in the Agreement (clause 13), Mr Gerdes caused to be disclosed to Messrs Wragge & Co, solicitors, for his personal benefit more than 600 confidential files belonging to the Company and its subsidiaries, and that the claimants fear that unless restrained by the court Mr Gerdes will continue to disclose to third parties confidential documents in breach of the Agreement. 91. The basis of the application for permission to serve out of the jurisdiction was CPR 6.20(5)(c) and (d), i.e. that the Agreement was governed by English law and conferred jurisdiction on the English court. 92. Draft Particulars of Claim were exhibited, and the background was succinctly described in the witness statement of Ms McMillan of Peters & Peters, including the events of December 3, 2002 and the subsequent Maltese proceedings and the appointment of the Board of Administration. There was also a witness statement of Dr Fenech describing the Maltese proceedings and exhibiting many of the papers in those proceedings. 93. As regards expenditure on iModel, Ms McMillan said that the claimants had come to the conclusion that they were not prepared to countenance any further expenditure by the Company of the funds invested by them. She also said that it could be anticipated that Mr Gerdes might argue against the claims that the claimants had in practice, either by reason of their delay in initiating legal proceedings or by other specific acts or omissions, acquiesced in the breaches and in the abandonment of the business model. She said that she believed that such an argument by Mr Gerdes would be lacking in substance. The claimants had since August 2001, if not before, been expressing to Mr Gerdes and to the management of the Company their unhappiness at the state of the Company, the abandonment of its core business purpose, and demanding the return of their invested funds. 94. The Agreement and Subscription Agreement were both governed by English law and contained a non-exclusive choice of jurisdiction clause. It was submitted therefore that England was the proper place to hear claims arising out of the agreements. IX Application for injunction 95. On June 6, 2003 Peters & Peters, on behalf of the claimants, wrote to the defendants informing them of the proceedings, and asking for the following undertakings: (i) the Board of Administration would remain in place for the time being, with a continuing stay on the proceedings in Malta; (ii) the mandates for all bank accounts of the Company and its subsidiaries would be changed so as require one signatory nominated by the Gerdes parties and one signatory nominated by the claimants; (iii) payments out of the bank accounts would only be authorised in the event that it was agreed and established, to the satisfaction of the claimants, that the payee was a legitimate creditor of the Company (or any of its subsidiaries); (iv) all parties would co-operate with a view to returning the remainder of the monies advanced by the claimants in an orderly and expeditious manner. Notice was also given of the proceedings and the claims to the managers of HSBC Malta, the Bank of Valletta, Commerzbank AG (Munster, Germany) and Lombard Bank (Malta). 96. In correspondence Peters & Peters expressed concern about the safety and security of the group’s assets, particularly its cash reserves of $24 million, and stated that they were being depleted at the rate of about $400,000 per month. They indicated that in the absence of undertakings the claimants would apply to the English court for such injunctive relief as was appropriate to protect their position and in particular avoid the continuing depletion of the Company’s cash reserves. When Wragge & Co asked for confirmation that they would be given notice of any application, Peters & Peters replied that the claimants would take such action as they deemed necessary. The application was made on June 13, returnable on June 20. 97. The application notice dated June 13, 2003 sought an interim injunction against Medfinco, Abacus, Mr Gerdes and the Company, to restrain (1) any payment out of the bank accounts of the Company and its subsidiaries; (2) the entry into any contract or agreement by the Company or any of its subsidiaries or any other arrangement imposing liabilities upon the them unless (a) the Board of Administration continued to manage them; and (b) in the case of a payment by the Company or its subsidiaries, not less than 2 clear working days’ prior notice of the proposed payment, together with details of the amount, the payee and sufficient details of the purpose of the payment, shall have been given to the claimants’ solicitors, and in the case of an agreement, not less than 3 clear working days’ prior notice of the proposed entry into the agreement shall have been given to the claimants’ solicitors; and (3) any payment by or disposition of any of the assets of or the incurring of any liability on the part of the Company or any of its subsidiaries for the purpose of defending these proceedings. 98. On June 19 Peters & Peters said that the Company was continuing to spend $400,000 per month and had since December 2002 spent approximately $2.4 million of the money invested by the claimants. That could not be allowed to continue, and it was for that reason that the claimants were forced to seek injunctive relief. It was adjourned for a date to be fixed, with a timetable for evidence. 99. Following the receipt of evidence from the defendants, on June 27, 2003 Peters & Peters said that their clients were entitled to restrain further use of the funds in breach of the Agreement and damages, unless the defendants established a variation to the Agreement or that the claimants were estopped from denying a variation. They proposed an expedited trial, together with an interim regime, the key component of which was the ring-fencing of the funds of the Company save to the limited extent that they were required to fund the iModel project, and the ordinary expenditure of the Company, in the period up to trial. They understood that the Company was spending less than $400,000 per month, and they saw no reason why a trial should not take place in October or November 2003. Without prejudice to the merits of the claims, they suggested an interim regime under which the Company, under the auspices of the Board of Administration, would be permitted to continue to reasonably expend monies up to $2 million with the balance of the money being ring-fenced in a joint account to be opened in the names of the two firms. A draft form of order was enclosed, under which the Company was by July 7, 2003 to pay $22 million into a joint bank account in the name of Peters & Peters and Wragge & Co and no sum was to be paid out of the account except pursuant to an agreement in writing between the claimants and the defendants, or further order. 100. The draft further provided that the defendants must not procure, authorise or permit the entry into any contract or agreement by the Company or its subsidiaries, or any other arrangement imposing liabilities on them, unless 7 days prior notice in writing was given to the person nominated by the claimants to be their representative. 101. Wragge & Co indicated that the offer was not going to be acceptable because (among other reasons) the ring-fencing suggestion was far too restrictive on the Company, which was after all under the supervision of a board of administration under the auspices of the Maltese court. X The applications 102. The application for the injunction (together with the defendants’ challenge to the jurisdiction) came on for a two day hearing on July 4, 2003. The applications before the court are these: (a) an application by the defendants (other than the fourth defendant, which is a nominal defendant) seeking (1) a declaration that the court will not exercise its jurisdiction pursuant to CPR 11.1 and an order that the claim form and service be set aside; (2) an order that service of the claim form be set aside on the grounds of improper service pursuant to CPR 6.24; (3) an order that the claim form be set aside on the basis that the Claimants failed to make full, frank or adequate disclosure; and (b) an application by the claimants for an interim injunction (1) preventing the Company and any of its subsidiaries from making any payments out of any of its bank accounts; (2) preventing the Company (and any of its subsidiaries) from entering (and preventing the other defendants from procuring or permitting the Company to enter) into any contract or agreement or any other arrangement imposing liabilities upon any of the companies; and (3) preventing the Company (and any of its subsidiaries) from financing the defence of these proceedings and requiring disclosure and repayment of all monies improperly applied to date in such defence. 103. The claimants do not now insist on the wide injunctions relating to payments and the entering into of agreements, but are prepared to limit their claim to the relief set out in the draft order supplied on June 27, 2003, i.e. that $22 million be paid into a joint account, and that they be given 7 days notice of agreements to be entered into by the Company. XI Arguments on jurisdiction A. Defendants’ arguments 104. The defendants say that in relation to several of the alleged causes of action that (a) there is no reasonable prospect of success (or, in the old parlance, no serious issue to be tried); or (b) permission to serve out was not properly sought or sought at all. They say that the claimants have not shown that England is the forum conveniens. They also say that the permission should be set aside because proper disclosure was not made on the without notice application to Master Price. 105. On the causes of action, the defendants make the following principal points. First, the claim in frustration is misconceived and the claimants have not pleaded a case which could possibly support a claim that the Agreement has been frustrated. Secondly, the claims against Mr Gerdes of procuring Abacus to transfer shares and of disclosing confidential files to Wragge & Co were not claims under the Agreement. Thirdly, Medfinco and Abacus were improperly joined. 106. On forum conveniens, the defendants rely on these matters. The only basis for jurisdiction put forward is clause 23 of the Agreement. This can only apply to parties to the Agreement and to claims of such parties arising out of or in connection with the Agreement. The defendants have no connection with England. Abacus is a reputable Maltese trust company managed by PriceWaterhouseCoopers. Medfinco is a respectable Maltese trust company managed by experienced professional lawyers and trustees. They are both based entirely in Malta and have nothing to do with England. Mr Gerdes is a German national who resides in Malta. He has no property in or connection with England. The Company is a Maltese company based in Malta which has no connection with or assets in England. With the exception of the second claimant, Deutsche Bank, which negotiated through the bank’s venture capital operation in Germany, but entered into the Agreement through its London branch, the claimants have no relevant connection with England. All the relevant events, witnesses and documents are likely to be outside England, particularly in Malta. The subject matter of the underlying dispute is the Company, its business and financial affairs all of which are in Malta. It would be a very serious interference with the jurisdiction of the Maltese court for the English court to be seen in effect to make extra-territorial orders in Malta in relation to its affairs. 107. The claimants (or at least BAS) have chosen to commence proceedings in Malta and to participate fully in those proceedings. They rely on The Abidin Daver [1984] AC 398, where Lord Diplock said (at 411-412): "Where a suit about a particular subject matter between a plaintiff and a defendant is already pending in a foreign court which is a natural and appropriate forum for the resolution of the dispute between them, and the defendant in the foreign suit seeks to institute as plaintiff an action in England about the same matter to which the person who is plaintiff in the foreign suit is made defendant, then the additional inconvenience and expense which must result from allowing two sets of legal proceedings to be pursued concurrently in two different countries where the same facts will be in issue and the testimony of the same witnesses required, can only be justified if the would-be plaintiff can establish objectively by cogent evidence that there is some personal or juridical advantage that would be available to him only in the English action that is of such importance that it would cause injustice to him to deprive him of it." They also rely on Dicey & Morris, Conflict of Laws, 13th ed. 2000 (paragraph 12-030): "…if genuine proceedings have been started and have had some impact on the dispute between the parties, especially if it is likely to have a continuing effect, then this may be a relevant (but not necessarily decisive) factor when considering whether the foreign jurisdiction provides the appropriate forum". It is not necessary for there to be an identity of issues or parties in the other proceedings: Konamaneni v Rolls Royce Industrial Power (India) Ltd [2001] 1 WLR 1269. 108. The defendants say that there is a very substantial overlap between the issues in the various Maltese proceedings and the English claim. For example: (a) the question of the validity of the transfer of shares from Abacus to Medfinco forms the essential issue in applications for prohibitory injunctions 2510/2002 and 2513/2002 in Malta, while in the English action the claimants claim that the transfer was in breach of the Agreement; (b) in the Maltese section 402 proceedings, the allegations relate to the share transfer alleged to be in breach of the Agreement, the incorrect appointment of directors in breach of the Agreement and various allegations of mismanagement by Mr Gerdes. The English action is based upon the Agreement which forms the basis for the allegations in the Maltese section 402 proceedings, and again raises the issue of the propriety of the share transfer; (c) it appears that the construction of the Agreement is in issue in both proceedings; (d) the Claimants’ purpose is the same in both proceedings, to obtain the return of the monies invested in the Company. These proceedings are part of a dispute as to the management and control of a Maltese company in Malta, which is already before the Maltese court, which has already appointed a Board of Administration. The section 402 proceedings are continuing in Malta. The Maltese court has already refused to grant an order almost identical to that sought in the English proceedings. The Maltese court anticipates that the matter be resolved by the end of November 2003. The claimants have themselves sought to stay their proceedings in Malta pending the outcome of these proceedings in England. 109. There is a clear risk of inconsistent decisions between English and Maltese courts. It will put the defendants to great unnecessary expense and inconvenience to have to fight in two jurisdictions over the same fundamental issue (i.e. control of the Company). This is an obvious case of forum shopping by these claimants. It is vexatious and misconceived to have two sets of proceedings in two jurisdictions at the same time. 110. On failure to make adequate disclosure the defendants rely on these matters: (a) the claimants failed to bring to the attention of the court the fact that the claims against Mr Gerdes were misconceived; (b) they failed to bring to the attention of the court that Abacus was a reputable trust company and that any claim for breach of the funding provision was a claim against the Company; (c) no reference was made to the alleged basis upon which the Agreement was said to be frustrated: (d) no adequate disclosure was made of the nature of the likely defence of acquiescence to the claim for breach of the funding provision; (e) although the claimants referred to the Maltese proceedings in making their ex parte application, the court could not reasonably have been expected to read the entirety of the evidence and understand the complicated procedural matters which it referred to, and there should have been clear disclosure of the fact that the claimants (or BAS) had commenced proceedings in Malta, the purpose of which was precisely the purpose which the claimants attached to the English action, namely to recover their investment. B. Claimants’ arguments 111. On the causes of action, the claimants accept that Mr Gerdes should not have been joined. They maintain the claim that the Agreement has been frustrated. They accept that the claim against Medfinco and Abacus in relation to the breach of the funding provision is not clearly pleaded, and they have put forward an amendment under which it is alleged that Medfinco and Abacus have, in breach of the Agreement, permitted the Company to fund iModel in breach of the funding limits. 112. As regards forum conveniens, the defendants accept that where (as in this case) permission to serve out is required, the burden is (in the ordinary case) on the claimant to show that England is the appropriate forum: Spiliada Maritime Corp v. Cansulex Ltd. [1987] AC 460. But where, however, as here, the parties have included in their contract a non-exclusive jurisdiction clause in favour of the English court, the burden in a leave to serve out case is reversed: the defendants must show that their preferred jurisdiction, i.e. Malta, is clearly the more appropriate jurisdiction. Given that the parties have by their contract agreed that England is an appropriate jurisdiction (and have, therefore, agreed to submit to the English court), the burden on the defendants is heavy: a non-exclusive jurisdiction clause raises a strong prima facie case that the chosen jurisdiction is the forum conveniens. Although the court retains a discretion, the defendants are not – in the face of a non- exclusive jurisdiction clause – entitled to rely upon matters that go simply to the relative convenience of the competing jurisdictions or, indeed, any matters that could have been foreseen at the time they entered into the Agreement. 113. The claim brought by the claimants is (essentially) a claim for damages for breach of the Agreement and an injunction to prevent further breaches. This dispute clearly arises out of the Agreement and there is no proper reason why the court ought not give effect to the choice of jurisdiction made by the parties. That the Company is Maltese, that its administrative operations are in Malta (as an International Trading Company it is forbidden to trade in Malta) and that the granting of relief by an English court is likely, de facto, to lead (one way or the other) to the closing down of the Company, cannot be relevant to the issue whether the Court should give effect to the agreement and accept jurisdiction. The grounds relied upon by the defendants are all grounds that go to the relative convenience of the Maltese and English courts and are all matters that could have been foreseen at the time that the parties entered into the Agreement. 114. The proceedings in Malta (which were essentially initiated by the defendants and were a response solely to events on December 3, 2002) do not in substance overlap with the English proceedings at all. The only overlap is the issue of the validity of the transfer to Medfinco, which necessarily arises in the English proceedings because it affects the identity of the party liable for continuing breaches. 115. If considerations of relative convenience are relevant, England is the most appropriate forum or, at least, Malta is not obviously a more appropriate forum: (a) there is an English choice of law clause in the Agreement; (b) the parties to the Agreement, and the relevant witnesses, are located in a number of different locations and a trial in Malta would be no more convenient than one in London; (c) there is no practice or custom in Maltese law which permits evidence to be given by video-link or other remote form of communication; (d) determination of the dispute will take considerably longer in Malta: final determination of the existing proceedings is likely to take 2 years, and a further 2 years for an appeal; (e) due to a lack of a system of precedent and the lack of Maltese authority on its section 402, it is easier for lawyers to advise their clients as to the outcome of the proceedings in England than it is in the case of the Maltese proceedings. 116. On non-disclosure, the claimants say that no criticism can be made of their evidence in support of the application for permission to serve out of the jurisdiction. XII Arguments on the injunctions A. Claimants’ position 117. The scope of the injunction which is sought has been narrowed considerably. The injunction as originally sought had more in common with a freezing injunction that with an injunction to restrain breach of contract. The application, and the evidence in support, stemmed from a concern that Mr Gerdes had persuaded Mr Tabona that the funds of the Company should be put beyond the reach of the claimants; that the Company had already spent more than $10 million on iModel, and was intending to spend more; and that the protection which the claimants had from the establishment of the Board of Administration would not last beyond June 13, 2003. 118. The application for an injunction was supported by witness statements from Mr Borg-Cardona and Mr McCaffrey. Mr Borg-Cardona relied in particular on a suggestion allegedly made by Mr Gerdes during a meeting of the Board of Administration held on March 3, 2003. Mr Gerdes had raised the suggestion that a "ring-fencing" exercise be undertaken to protect the funds of the Company from actions by the claimants. The minutes stated: "… the board discussed whether it should consider protecting the Company’s operations from possible garnishee orders on its bank accounts which could have the effect of bringing the operations of the company to a stand-still. The idea would be to establish an account with sufficient funds to take the company through the next six months of operations and which would be ring-fenced from other company funds for the purposes of attachment by a possible garnishee order." 119. Mr Tabona had confirmed to Mr Borg-Cardona that the meeting was held in order to identify means of protecting the funds of the Company from the investors but no measures were in fact taken as a result of the meeting. 120. Mr McCaffrey’s evidence was that BAS had on about May 6, 2003 instructed Deloitte & Touche to look at the affairs of the Company. Deloitte & Touche reported that their access to both documents and personnel had been heavily restricted. In the circumstances the faith of the claimants in the Board of Administration, and in the suitability of the Board of Administration as a mechanism to protect their interests, even temporarily, had been heavily eroded. 121. The Deloitte & Touche report concluded (inter alia) that the business plan for iModel as presented by Mr Tabona forecast expenditures for the remainder of the year 2003 of $3,192,716, which would bring the total expenditure attributable to iModel to a total of $10,229,623. The claimants’ position was that that level of expenditure constituted a clear and fundamental breach of the Agreement, and it was obvious that the Company was continuing and threatening to continue to provide funding for iModel in further fundamental breach of clause 9.1 of the Agreement. 122. Mr Tabona’s report to the Maltese court dated May 11, 2003 stated that iModel was proving the iWG concept and has already proven five of the six main components of the business. On the basis of the current business plan and projections, iModel expected to reach $1.3 million revenue in 2005 which should leave the Company with a $6 million profit; that the Board of Administration was satisfied that Company funds had been and were being correctly applied to the beneficial development of the business in accordance with normal business practice, which had been confirmed by an independent audit and an independent investigation. 123. But Mr McCaffrey said that so far as he was aware it was not the case that either the Company’s auditors or any independent investigation concluded or confirmed that the Company’s monies were being properly applied; and the report did not address the fact that the funding to date, and any further funding, of iModel had been and would be a continuing breach of the terms of the Agreement unless the claimants were to agree to it. As a result the claimants wholly lacked confidence in the entire Board of Administration process. 124. The Board of Administration’s term in office was due to come to an end on June 15, 2003, and in any event the claimants would have grave reservations in agreeing to the extension of the Board of Administration (even if Mr Gerdes were to agree to it). Once the Board of Administration’s powers lapse Mr Gerdes and his appointees would control the board of the Company, and there was every reason to believe that he will continue to expend substantial funds upon iModel in continuing breach of the Agreement. 125. Mr Gerdes’ domination of the board of the Company would mean that he would have unrestricted access to the funds of the group. The claimants considered that there was a substantial risk that those funds would be dissipated unless an order were made by the Court preventing their dissipation. 126. If the funds were dissipated the claimants would be left without an effective remedy since the accounts of Medfinco showed that it had never traded and had no assets. 127. There was a great deal of evidence about the status of current contracts for the iModel project, and in particular about the state of agreements with various popular singers, involving licences to use the artist’s name, image and likeness for "e-mobile" services distributed via mobile telecommunications devices. Between July 2002 and May 2003 nine artists had entered into contracts with iModel. The claimants’ evidence was that each of the contracts impacted on the future monthly cash outflow of iModel because of the expense obligations assumed by iModel. It would expend a total sum of $918,228 over the next 6 months pursuant to these contracts. 128. Ms Vossberg’s evidence was that the Board of Administration was not an effective control on the expenditure of the Company. The Company’s day-to- day operations were currently run by people who lacked the necessary experience and/or professional background, in particular with regard to operational experience in the anticipated target markets. She believed that there was abuse of funds and Company resources to an extent that she, as beneficiary and long-time director, could not and did not accept being in line with proper corporate governance. She inferred that a meeting had taken place to investigate how the funds of the Company could be brought beyond the reach of the claimants. 129. In late December 2002, at the suggestion of the chairman of the Malta Financial Services Authority (Professor Joe Bannister), BDO were appointed to produce a valuation of the shares in the Company in the hope that this might assist the parties to reach an amicable settlement of the dispute. The report came to the conclusion that the Company’s value was effectively its cash value. 130. The claimants’ case on their application for an injunction is that the Company is continuing to expend money on the iModel project in breach of clause 9 of the Agreement. The Company appears to be continuing to expend money at the rate of about $400,000 per month. If the claimants are right, this expenditure should not be happening and the remaining money should be returned to them. Their losses increase with any further expenditure, and they may in effect be irrecoverable. Although the Company has substantial funds, the source of the funds is the capital contributed by the investors, and in effect the result of any damages award against the Company would be that they would be paying themselves. Of the investment of $36m, some $24m is believed to remain on deposit at the Bank of Valletta International, but this is being run down. There is no evidence that the defendants will be able to satisfy any order for damages that is made at trial. 131. Given the inability of Medfinco to satisfy any money judgment given against them save out of the funds remaining in the Company, it is submitted that it is imperative that interim injunctive relief be granted as a matter of urgency and that an expedited trial be directed – as the defendants are plainly calculating, any delay without such relief can only be for their benefit, who will succeed, in effect, in defeating the claim against them by default to the extent of any such further expenditure. The claimants are very substantial financial institutions and are beyond question good for their proffered cross- undertaking in damages. 132. The Board of Administration is not managing the Company in a manner that serves to protect the claimants’ investment: the Company is continuing to expend funds on the iModel project in breach of the Agreement and without regard to its terms. The claimants say that since June 6, 2003, Mr Tabona’s position has been to support Mr Gerdes and his interests, who wish the iModel project to be continued to be funded. Even if it is accepted that the Board of Administration (effectively acting through its Chairman who has a casting vote) is acting in good faith, the continued existence of the Board of Administration does not – because it is (on the claimants’ case) spending money in breach of the Agreement – meet the need for an interim regime of some kind. 133. A regime of the kind proposed, limiting expenditure to $2 million by segregating the remainder of the Company’s funds, and requiring notice of contracts to be entered into, will enable the Company to continue the iModel project pending trial but would ensure that claimants’ investment is not otherwise depleted any further. If the defendants have no current intention of spending the investment otherwise than on the iModel project (and ordinary Company expenditure), there is no reason why they should refuse to agree to such a regime. B. Defendants’ position 134. Most of the defendants’ arguments are directed towards the wide form of injunction originally sought, and not to the proposal to segregate all but $2 million of the Company’s funds, and to allow the $2 million to be used pending a speedy trial. 135. Mr Gerdes says that there is no risk of dissipation of the Company’s assets. He did not, and had never signed, bank transfers on his own and only rarely as a joint signatory. The Company maintained a rule that there had to be two signatories to a bank transfer. Taken together with the fact that the Company is now under the management of an Board of Administration with an independent chairman, it is quite wrong for the claimants to seek to suggest that the present arrangements are improper or inadequate or in any way need changing to facilitate the further proper management of the Company. The only basis for this assertion is the claimants’ desire to interfere in the management and in effect to close the Company down so as to facilitate their own perceived objectives as a minority preferential shareholder. 136. iModel was close to converting the investment in terms of time and resources into an income generating and positive cash flow business. The focus has had to be on establishing a product which is bought in the marketplace. For iModel this meant access for fans to communication from their pop star idols. He set out the artists whom they had signed. 137. The defendants’ position is that the application made on June 13 in England (i.e. the wide form of injunction) very closely replicates the request made on June 12 to the Maltese court and which the Maltese court did not grant. The Maltese court was not willing to countenance the highly restrictive injunctive relief originally sought by BAS in Malta because it would be to close down the business altogether. The Maltese court seemed fully satisfied that the controls currently existing within the Company, with the Board of Administration in place, are adequate to ensure proper monitoring of payments and disposal of funds for the business of the Company. The relief sought relates entirely to the management and administration of a Maltese company in Malta and the management and conduct of bank accounts transactions and funds held by Maltese banks and Maltese parties in Malta. The only basis upon which the English court could fully make the order sought is that the Maltese court would enforce it. It is probably clear that they would not. I should add that Mr Borg-Cardona accepts that Dr Fenech, for BAS, did ask the court to impose terms similar to those sought in the letter dated June 6, 2003, but the court made it clear that it was not going to entertain any submissions or make any decision involving the merits of the case on that occasion. The claimants therefore agreed to the continuation of the Board of Administration without prejudice to their rights generally and their proceedings in England in particular. 138. This is not a suitable case for an expedited trial. The claimants’ own conduct shows that there is no urgency whatsoever and that the alleged urgency is entirely tactical. The position is fully protected by the Maltese court in Malta and the underlying issues can and will be resolved in Malta in the very near future. The Maltese proceedings were after all commenced by the claimants themselves. In terms of the alleged claims, all the facts are stale and go back many years. Even the complaint about the Trust arrangements occurred in early December 2002. 139. In circumstances where the claimants themselves have commenced proceedings in Malta, the injunction involves an unnecessary and unwarranted interference with the territorial sovereignty and jurisdiction of the Maltese court in the principal substantive proceedings. The Maltese court has already refused similar relief. There is a serious risk of conflict and inconsistency between the two courts. The injunction was sought in support of a mere damages claim where there is no allegation of fraud or impropriety, no urgency and no risk of dissipation and where, moreover, the conduct of the Maltese company against which it is in substance directed is proceeding under a Board of Administration under the auspices of the Maltese court. 140. The very unusual circumstances which the claimants have achieved in this case are not dissimilar to those cases in which a party asks the English Court to grant interim relief in respect of foreign proceedings. The English court should not, except in connection with substantive litigation here or in exceptional circumstances, make orders seeking to control the conduct of foreigners abroad or affecting their assets abroad: Mackinnon v. Donaldson Lufkin & Jenrette [1986] Ch 482 at 494. Where substantive litigation is proceeding in this jurisdiction, it may well justify orders affecting foreign parties to it even in relation to their conduct abroad. This principle cannot apply where substantive litigation is elsewhere and the English court has in substance only a supporting role. 141. It would be contrary to comity for the English court to grant the relief sought in this case in circumstances where the same relief was asked of an independent administrator appointed under the auspices of the foreign court; the same or very similar relief was sought from a foreign court itself and refused; a stay was applied for in the foreign courts specifically to enable the English court to express its views on English law and this was also refused; there is a risk that such relief will obstruct or hamper the management of the principal proceedings in Malta. It would be a serious and inappropriate interference with the territorial sovereignty and procedures before the Maltese court to seek to grant such relief, in the place of the proceedings started by the claimants and the procedures agreed by the claimants which are in train in Malta in circumstances where the entire effect of the English courts order is against parties assets and transactions in Malta. 142. With the claimants’ own agreement in their own proceedings, the administrator is now in place until November 2003. There is therefore no risk to the claimants. All parties involved have proceeded on the basis that the Company would continue trading under the Board of Administration with a view to getting iModel off the ground. It is also plain that, if this is not done, the entire rationale which has now continued for two years, with the claimants’ agreement will be destroyed. The status quo requires refusal of any injunction. C. Mr Tabona’s position 143. Mr Tabona put in a witness statement on behalf of the defendants, He states that his role on the Board of Administration is to be a balancing figure between the two principal factions to the dispute and to act honestly, fairly and in good faith. He says he has tried to be scrupulously fair and independent. As chairman of the Board of Administration he is fully aware of the responsibilities of the office and will continue to act in a prudent honest manner to the best of his ability in the best interests of the Company and its shareholders as a whole. There will be times when bold decisions need to be taken and he will have to cast a decisive vote. It has been agreed that the Board of Administration will continue until November 2003, and he is willing to continue in his present position for as long as necessary as agreed by the parties. 144. When he was appointed in December 2000, the group was in turmoil, its staff was demotivated, and it was completely paralysed. An injunction would bring the group to a halt, and would be tantamount to the claimants having achieved their aims without a trial of the merits of the case. 145. The Board of Administration is finalising all the actions for the group to continue in the normal course of business, and (among other things) the resources and funds are being applied prudently and in accordance with normal business practice, and it is has now strengthened internal controls and the financial statements are now suitable for approval by shareholders. 146. The Company was conceived as and still is designed to be an incubation business. But it was unfortunate that only one week after the investment was made by the preference shareholders the first signs appeared of what became the internet meltdown. It continues with the intent of the original business plan. iModel is proving the concept and has already proven five of the six main components of the business. It expects to reach $30 million revenue in 2005, i.e. a profit of $6 million. 147. He says that the Company will vigorously defend the English proceedings "since I have been advised that they are groundless". To achieve this "after discussion with other directors, I have instructed Wragge & Co as the Company’s solicitors. I do not consider that there is any conflict of interest between the Company and the other Defendants in the English proceedings." D. The Company’s costs 148. The claimants rely in support of their application to restrain the expenditure by the Company on costs of this litigation on the "general principle of company law that the company’s money should not be expended on disputes between the shareholders: see Pickering v Stephenson (1872) LR 14 Eq 322": Hoffmann J in Re Crossmore Electrical and Civil Engineering Ltd (1989) 5 BCC 37 at 38; Re A Company No. 01126 of 1992 [1993] BCC 325. 149. The claimants say that the Company should not be incurring any expenditure in the defence of these proceedings, particularly when it is instructing the same solicitors as the main defendants. Although relief is being sought against the Company, the dispute is quite plainly a dispute between shareholders. A company has no interest (in a dispute of this kind and where no question of insolvency arises) separate from its shareholders. The claimants accept that the Company (through the Board of Administration) may have a sufficient interest to justify separate preliminary advice, for example, but once such advice is obtained the general principle applies. However, given that the Company (acting by the Chairman of the Board of Administration) feels able to instruct the same solicitors as the majority shareholders, it has taken the view that it has no separate interests. The conflict of interest is obvious: Mr Smith of Wragge & Co has made a witness statement seeking to place all liability for any breach on to the Company and to deflect it away from Abacus and Medfinco. 150. The defendants say that in contrast to the position in the general run of section 459 petitions, in the present action the Company is a substantive defendant, not joined as a matter of procedure (and because this is required under the rules). On the contrary, the Particulars of Claim seeks declarations with regard to the Agreement to which the Company is a party, has claimed breach of the Agreement by the Company and claims damages against all the defendants for sums not particularised but including the entirety of the sums invested by the claimants. As a result, the principle derived from Pickering v Stephenson is of no application in the present proceedings: Jones v Jones [2002] EWCA Civ 961. XIII Service out of the jurisdiction 151. The only bases of jurisdiction claimed in this case arise under CPR 6.20(5)(c) and (d), the effect of which a claim form may be served out of the jurisdiction with the permission of the court if the claim is made in respect of a contract where the contract is governed by English law or contains a term to the effect that the court shall have jurisdiction to determine any claim in respect of the contract. 152. By CPR 6.21(1)(a) and (b) and application for permission under r. 6.20 must be supported by written evidence stating (a) the grounds on which the application is made and the paragraph or paragraphs of r. 6.20 relied on; and (b) that the claimant believes that his claim has a reasonable prospect of success. 153. It was held by the House of Lords in Seaconsar (Far East) Ltd v. Bank Markazi [1994] 1 AC 438 that the standard of proof in respect of the cause of action relied on was whether, on the evidence, there was a serious question to be tried, i.e. a substantial question of fact or law, or both, which the claimant bona fide desired to have tried. There is no reason to believe that the standard introduced under CPR 6.21(b) of a "reasonable prospect of success" differs in any material way from the "serious issue to be tried" test. 154. By CPR 6.21(2A) the court will not give permission unless satisfied that England is the proper place in which to bring the claim. 155. By CPR 11.1(1) a defendant who wishes to dispute the court’s jurisdiction to try the claim or argue that the court should not exercise its jurisdiction may apply to the court for an order declaring that it has no jurisdiction or should not exercise any jurisdiction which it may have. By CPR 11.1(2) a defendant who wishes to make such an application must first file an acknowledgment of service, but by filing an acknowledgment of service the defendant does not lose any right to dispute the jurisdiction of the court, and if the court does not decline jurisdiction, the acknowledgment of service ceases to have effect and the defendant may file a further acknowledgment of service: CPR 11.1(3), (7). In this case the relevant defendants have each filed acknowledgments of service stating that they intend to contest the jurisdiction. XIV Service 156. Service has not yet been effected in Malta. Malta is not a party to the Hague Service Convention, and there is no bilateral convention with Malta. Accordingly, by CPR 6.24 the claim form may be served by any method (a) permitted by the law of Malta; (b) through the Maltese government or a through a British consular authority (CPR 6.24(b)(i) and 6.25(3)). But nothing in the rule or any court order is to authorise or require any person to do anything in the country where the claim form is to be served which is against the law of that country: CPR 6.24(2). 157. In The Sky One [1988] 1 Lloyd’s Rep 238, Hobhouse J held that the RSC equivalent of CPR 6.24 (O.11, r.6(3)) did not provide exclusive methods of service, and that service might be effected by private means rather than through the methods set out there, provided always that nothing was done in the country where service was to be effected which was contrary to the law of that country. Under Swiss law it was contrary to serve proceedings privately, and although the court had a discretion to cure the default (under what is now CPR 3.10), it would require a very strong case to exercise the discretion to allow service to stand where it was expressly prohibited. In Knauf UK GmbH v. British Gypsum Ltd [2002] 1 WLR 907 it was common ground between counsel for the parties that English law did not permit service abroad by post, but the Court of Appeal said (obiter) that it did not see why service outside the jurisdiction by post was not permitted as a matter of English law: paras 37 and 44, pp. 919-920. 158. Service of foreign proceedings in Malta is mainly governed by Legal Notice 381 of 1911. Article 3 provides that where, relative to any civil or commercial matter pending before a foreign court, a letter of request for the service on any person in Malta, is transmitted to the superior courts with an intimation that it is desirable that effect should be given to same, service of the process or citation shall be effected by one of the marshals of the superior courts. The Registrar transmits through the Prime Minister to the President of Malta the letter of request for service received from the foreign country, together with the evidence of service, with a certificate appended thereto duly sealed with the seal of the Superior Courts. 159. Accordingly a letter of request accompanied by the documents to be served is sent by the English High Court to the British High Commission in Malta. The British High Commission arranges for the documents to be sent to the Maltese Ministry of Foreign Affairs. The Ministry of Foreign Affairs then sends the documents to the Attorney General’s Office, which issues requests for service of proceedings. Once service has been effected, the Court Marshal would then register the service in Court. The office of the Registrar of Superior Courts then advises the Ministry of Justice that service has been effected. The Ministry of Justice in turn advises the Ministry of Foreign Affairs, which advises the British High Commission, which would in turn advise the English court accordingly. 160. This procedure can take up to 4 months, although the evidence is that it may be expedited and can sometimes be done within a month. 161. In their application for permission to serve out of the jurisdiction, the claimants said that they would take steps to serve the defendants formally in accordance with Maltese law, but would also serve the proceedings by fax, e- mail and also by the immediate hand delivery of the papers to the defendants, so that they would be brought forthwith to their attention. 162. The claim form and Particulars of Claim were faxed and e-mailed, and were left by hand on Saturday June 7, 2003 at the registered offices of the Company, Abacus, and Medfinco, and at the home address of Mr Gerdes. It is not suggested that this was good service under Maltese law. 163. By CPR 6.8(1) where it appears to the court that there is a good reason to authorise service by a method not permitted by the rules, the court may make an order permitting service by an alternative method. By CPR 6.8(3) an order permitting service by an alternative method must specify the method of service, and the date when the document will be deemed to be served. 164. In Knauf UK GmbH v. British Gypsum Ltd [2002] 1 WLR 907 it was held that CPR 6.8 could not be used as a means to avoid the application of the Hague Service Convention and the bilateral convention with Germany, which did not permit service by post, since that would be to subvert the Conventions governing the service rules as between claimants in England and defendants in Germany, and a mere desire for speed was not itself a good reason for alternative service. The evidence was that a service would have taken three months. It was common ground that Germany had objected to postal service for the purposes of Article 10 of the Hague Service Convention. English law was not free to circumvent the lis alibi pendens provisions of the Brussels Convention by other procedural routes. 165. Under CPR 6.8 an order for alternative service may be made prospectively, but not retrospectively: Anderton v. Clwyd CC (No.2) [2002] 1 WLR 3174 at 3185. 166. By CPR 6.9 the court may dispense with service of a document. The power under CPR 6.9 can be exercised retrospectively, but only in exceptional circumstances: Anderton v. Clwyd CC (No.2) [2002] 1 WLR 3174, 3195. The Court of Appeal distinguished the case where the claimant had not even attempted to serve a claim form in time, with the case where the claimant had made an ineffective attempt to serve, and where the defendant did not dispute that he or his legal adviser had in fact received and had his attention drawn to the claim form by a permitted method of service. In the latter case the claimant does not need to serve the claim form in order to bring it to his attention, but he has failed to comply with rules for service. The basis of the application to dispense with service is that there is no point in requiring him to go through the motions of a second attempt to complete in law what he has already achieved in fact. The defendant will not usually suffer prejudice as a result of the court dispensing with the formality of service of a document which has already come into his hands. 167. But in the present case there has been no valid service either by Maltese law or by English law. Service by post was not attempted. The service by facsimile and email was not effective because the defendants had not previously indicated in writing that they were willing to accept service by facsimile or by e-mail: see CPR 6PD 3.1 and 3.3. Nor was there service under CPR 6.4, which provides that personal service on a company or corporation takes place by leaving it with a person holding a senior position within the company or corporation; nor under CPR 6.5(6), which only applies to documents left with a foreign company at a place where the corporation carries on its activities within the jurisdiction. 168. The claimants accept that the claim form has not been formally served on the defendants in accordance with Maltese law as required by CPR 6.24. But they say that the defendants have: (a) had informal service of the claim form well within the 4 month period for service; (b) received copies of all the relevant documents; (b) instructed English solicitors; and (c) taken an active part in the proceedings. Any defendant, acting sensibly and in accordance with the overriding objective, would – on receipt of the relevant documents well within the four month period and having instructed English solicitors – have waived the need for formal service or would have instructed their English solicitors to accept service in the jurisdiction. XV Conclusions: reasonable prospect of success 169. In this section I consider the question whether, on the material before the Master, there was sufficient to justify an order for service out of the jurisdiction in relation to the parties and the causes of action. 170. Since the application was based only on the contractual heads of jurisdiction (contract governed by English law and contractual choice of English jurisdiction), permission can only stand in relation to contractual causes of action, and the claimants do not seek to uphold the permission in relation to the claims against Mr Gerdes. 171. Perikles Trust is, as I have said, not a separate legal entity, and Abacus signed the Agreement on its behalf. It is therefore plain (despite the assertion of the defendants to the contrary) that Abacus was an original party to the Agreement. But in my judgment the application, and the Particulars of Claim, did not make out a case against Medfinco and Abacus, either in relation to the claim relating to breach of the funding agreement or the provisions on transfer of shares. 172. In her witness statement in support of the application for permission to serve out of the jurisdiction, Ms McMillan did not refer to any causes of action against Medfinco or Abacus, but Ms McMillan explained the joinder of Abacus and Medfinco in this way. The principal beneficiary of Perikles Trust was Mr Gerdes, and its other beneficiaries were believed to be his descendants, and Ms Vossberg. Because they were estranged and in dispute with one another it was possible that the interests of Ms Vossberg may not have been properly taken into account in the purported appointment of Medfinco in December 2002. The Gerdes parties would say that the appointment of Medfinco was valid and was no more than a replacement of one trustee of the Perikles Trust with another, and that this was permitted under the Agreement and Articles of Association. 173. The witness statement said: "The trustee that Medfinco purported to replace is the Second Defendant, Abacus Holdings Limited, a company incorporated under the laws of Malta. The validity and effect of the purported replacement by the first defendant of the second defendant as trustee to the Perikles Trust is open to question. For this reason, together with the fact that on the facts known to the Claimants there appears to have been a breach of the provisions of the Shareholders’ Agreement relating to share transfers, the claimants intend to proceed against both Medfinco and Abacus. Abacus was at all material times and remains, in any event, trustee of the Dolphins Trust, a party to the Shareholders’ Agreement … and therefore is a necessary party to the proposed proceedings." 174. The claimants say that they are entitled to sue Medfinco and Abacus on two causes of action. The first is in relation to what is now alleged to be a breach of clause 10.1.8, which provides that "…Perikles Trust agrees with each of the other Parties to exercise (or, if appropriate, refrain from exercising) his voting rights as a shareholder in and, if appropriate, a director of the Company so as to procure so far as each is able that the Company will obtain written approval of Investors holding of a majority of the issued Preference Shares prior to … increasing the Initial Funding provided to an Incubated Company in excess of the amounts provided in Clause 9.1 …" 175. The second is in relation to what is said to be a breach of clauses 7.1 and 7.9 of the Agreement (and/or clauses 16 and 17 of the Company’s Articles of Association) in relation to the transfer of shares by Abacus to Medfinco without the consent of any other shareholders and without offering the claimants the right of first refusal. 176. In neither case do the Particulars of Claim, on which permission to serve out was sought and obtained, allege breach by Medfinco or Abacus. In relation to the alleged breach of the funding limits the particulars allege breach only by the Company, although the relief claimed includes an order requiring Medfinco and Mr Gerdes to procure repayment by the Company of money invested by the claimants, and an injunction restraining them from causing or permitting any money of the Company to be applied for any other purpose than repayment, or to be applied to fund iModel. In the case of the transfer the particulars allege that in breach of the Agreement and/or the Articles "Mr Gerdes procured Abacus to transfer its entire shareholding in the Company held for the benefit of Perikles to Medfinco ..." 177. None of this provided a sufficient basis for service out of the jurisdiction on Medfinco and Abacus. No claims were properly pleaded against them, and the evidence did not provide a basis for service out of the jurisdiction. Consequently, in response to criticism of their pleading, the claimants at the hearing put forward an amendment, as follows: "14. In breach of Clauses 9.1 and 10.1 of the Shareholders’ Agreement, the Company has continued, and the First Defendant and/or (since 3 December 2002) the Second Defendant have permitted the Company to continue, to fund iModel after the expiry of its ‘Incubation Period’ as defined in the Shareholders’ Agreement, namely October 2001, alternatively February 2002, whichever is the date of expiry of 12 months after the formation of iModel. 15. Further and in the alternative, in breach of Clauses 9.1 and 10.1 of the Shareholders’ Agreement, the Company has provided, and the First Defendant and/or (since 3 December 2002) the Second Defendant have permitted the Company to provide, to iModel funding in excess of the maximum ‘Initial Funding’ permitted under the said Clause, namely US$5 million." 178. They also said that the relevant relief sought in the prayer should refer not to Medfinco and Mr Gerdes, but to Medfinco and Abacus. They did not proffer any evidence in support of an order permitting service out of the jurisdiction of the amended pleading. They would have been in some difficulty. The breach which would have had to have been pleaded would not merely have been permitting the excess funding. The relevant obligation is "to exercise (or, if appropriate, refrain from exercising)" voting rights as a shareholder or director. The claim can only be that Abacus and Medfinco failed to exercise their voting rights to prevent a breach of the funding limits. But it is wholly unrealistic to imagine that the claimants envisaged in the period prior to December 3, 2002, that Abacus would remove the board and close the Company down, or join Ms Vossberg and Mr McCaffrey in a board decision to stop the project. For most of the period after December 23, 2002, the Company was under the management of the Board of Administration established by agreement, and there would be no basis for any claim that Medfinco (or Abacus) could have exercised its voting rights to prevent the expenditure. In my judgment in this respect at least the claimants would have been in serious difficulty in answering a defence by Abacus and Medfinco of acquiescence or estoppel. 179. The claimants accept that they have submitted the question of the validity of the share transfer to the Maltese courts, and that they only raise it in England so as to determine which of Abacus and Medfinco is liable on any cause of action which they may have against "Perikles Trust". This point does not arise if I am right that there is no present basis for their joinder. Consequently in my judgment there was no basis for the order permitting service out of the jurisdiction on Abacus and Medfinco. The claimants do not require permission to amend the particulars of claim before service, but they do require permission to serve amended particulars of claim out of the jurisdiction. In my judgment they have not adduced material in support or a properly pleaded case which would justify service out of the jurisdiction on Medfinco or Abacus on the basis of the amended particulars of claim. 180. Nor do I consider that any case for a claim for frustration is revealed by the pleading. In Davis Contractors Ltd v. Fareham UDC [1956] AC 696 the House of Lords decided that the test for frustration was whether, if the literal words of the contractual promise were to be enforced in the changed circumstances, would performance involve a fundamental or radical change from the obligation originally undertaken. There must be such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for: at 729 per Lord Radcliffe. Lord Reid said that the question was whether the contract which the parties made was, on its true construction, wide enough to apply to the new situation: if not, then it was at an end: p.721. In National Carriers Ltd v. Panalpina (Northern) Ltd [1981] AC 675 at 700, Lord Simon said the frustration of a contract took place when there supervened an event (without default of either party and for which the contract made no sufficient provision) which so significantly changed the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances, and in such a case the law declared both parties to be discharged from further performance. 181. What is pleaded is that it was of the essence of the commercial venture (as derived from the Business Plan and the terms of the Agreement) that the Company should carry on the business of business incubation and that the process of "incubation" of new businesses by the Company was to have two stages; that by about the end of January 2001, the Company had ceased to carry on the business of business incubation, and it abandoned the business with effect from about that date; and that since about that date the Company has been substantially incapable of carrying on the business of business incubation as envisaged in the Business Plan and the Agreement, without a substantial further injection of capital which the Claimants are willing neither to provide nor to consent to under the Agreement. 182. In my judgment this claim has insuperable difficulties: the claimants have subscribed for the shares pursuant to the Subscription Agreement, and it is not suggested that this Agreement has been frustrated; it is not pleaded that the Business Plan is a contractual document; the purpose of the Agreement is to regulate the rights and obligations of the parties as shareholders (as stated in the recital) in a Company whose principal purpose is to develop, invest in, and own businesses in the e-mobile sector (clause 4.1). All that happened is that the claimants have made what (at least in the light of the collapse in the e-communications market) is a thoroughly bad investment in a Company with whose founder they have a very bad relationship. I see no basis for the law of frustration being a route for recovery of their investment. 183. That leaves only the cause of action against the Company for breach of the funding agreement. The defendants rely on acquiescence, estoppel, and waiver. Mr Gerdes says (as do other witnesses for the defendants) that throughout the relevant period the claimants have been kept fully involved in the management of the Company, and have at all times been made fully aware of its intentions, its projections and its budgets. Mr McCaffrey and others have been allowed to and have taken the opportunity to participate in the management of the Company, including its budgets and the amounts spent on in particular the iModel Project. Mr McCaffrey approved the fact that the Company had adapted to the original business plan to reflect changing market environments by scaling back the number of offspring and self- financing offspring until break even. The claimants say that any failure to react to the overspend must be seen in the context of their negotiations for the return of their investment. The only basis on which they were prepared to contemplate the increased investment in iModel was that the rest of the money would be returned to them and the Company could then consider itself discharged from the Agreement. 184. There is plainly a serious argument that at any rate prior to December 3, 2002, the claimants acquiesced in the funding of iModel, and did not reserve their rights. But a party which has acquiesced in breach may be entitled, upon reasonable notice, to require the other party to comply with the original mode of performance, unless in the meantime circumstances have so changed as to render it impossible or inequitable to do so: Chitty on Contracts, 28th ed 1999, para 23-041. It would be a very extraordinary result if the actions of the claimants to December 3, 2002 had given the Company a blank cheque to spend on iModel the rest of the funds invested by the claimants. But in any event I do not consider that it can be suggested that there is no serious issue to be tried in relation to this claim. 185. My conclusion therefore is that on the material before the court the only claim which can legitimately be the subject of permission to serve out is the claim against the Company for breach of the funding limits. XVI Jurisdiction clauses and forum conveniens 186. The contract contains a non-exclusive choice of English jurisdiction, i.e. confers jurisdiction on the English court without prejudice to the right of the parties to sue in any other court which may have jurisdiction. Such clauses are very common in agreements to which banks are parties, especially loan agreements. Their commercial objective is not to allow bona fide disputes to be litigated in several possible jurisdictions, but to identify the primary place of jurisdiction and also to give the banks the greatest possible latitude in the enforcement of their rights to recovery of monies advanced. 187. A jurisdiction clause may provide for jurisdiction in a country which is associated with one or more of the parties, or it may provide for jurisdiction in a neutral forum. This is a case somewhat between the two, since two of the financial institutions (Deutsche Bank and HTC Inc) entered into the contracts through London offices or branches. 188. None of the parties to the Agreement is domiciled in the United Kingdom or in a Member State of the European Union to which Article 23 of the Council Regulation 44/2001 on jurisdiction and the enforcement of judgments in civil and commercial matters, or Article 17 of the Brussels or Lugano Conventions, apply. Consequently the English court has a discretion whether to assume jurisdiction on the basis of the clause. 189. The Chaparral [1968] 2 Lloyd’s Rep 158 was a case of a contract conferring exclusive jurisdiction on the English court as a neutral forum. Diplock LJ said (at 164), in the context not only of English jurisdiction clauses, but jurisdiction clauses in general: "In the present case the choice of the parties was the English Court, and … I should myself require strong grounds for saying that one of the parties should not keep his word." It has been held that the same principles apply whether the contractual forum is England or another country: Akai Pty Ltd v. People’s Insurance Co Ltd [1998] 1 Lloyd’s Rep 90, 104; Import Export Metro Ltd v Cia Sud Americana de Vapores SA [2003] EWCH 11 (Comm), [2003] 1 Lloyd’s Rep 405, 410. 190. But it has been said that where the parties have agreed to an English forum it would require strong grounds for one of the parties to resist the exercise of jurisdiction by the English court: Dicey and Morris, Conflict of Laws, 13th ed. 2000, para 12-112. In Attock Cement Co v. Romanian Bank for Foreign Trade [1989] 1 WLR 1147 at 1161 Staughton LJ said that: "We should also look with favour on a choice of our own jurisdiction, when it appears to have been made in order to find a court which is neutral rather than one that is convenient." See also Egon Oldendorff v Libera Corp [1995] 2 Lloyd’s Rep 64, 72; Akai Pty Ltd v. People’s Insurance Co Ltd [1998] 1 Lloyd’s Rep 90, 105. 191. In British Aerospace v. Dee Howard [1993] 1 Lloyd’s Rep 368, at 376, Waller J said (in the context of an exclusive English jurisdiction clause) that it should not be open to a party to start arguing about the relative merits of fighting an action in the foreign jurisdiction as compared with fighting an action in London, where the factors relied on would have been eminently foreseeable at the time that they entered into the contract. They had to point to some factor which they could not have foreseen on which they can rely for displacing the bargain which they made, i.e. that they would not object to the jurisdiction of the English court. In those circumstances, inconvenience for witnesses, location of documents, the timing of a trial, and all similar matters were aspects which they were precluded from raising. The proper approach therefore was to consider the proceedings as equivalent to proceedings commenced as of right, and therefore it was right to consider only the matters which would not have been foreseeable when the bargain was struck. This approach has been followed in many cases in the Commercial Court: e.g. Credit Suisse First Boston (Europe) Ltd v. MLC (Bermuda) Ltd [1999] 1 Lloyd’s Rep 767, 781; Sinochem International Oil (London) Co Ltd v. Mobil Sales and Supply Corp [2000] 1 Lloyd’s Rep 670. 192. I am satisfied that it would require very strong grounds to override a choice of English jurisdiction, and that the normal forum conveniens factors have little or no role to play, especially where it could be inferred from the lack of other connections with England that the parties had chosen the English forum as a neutral forum. In some cases the fact that the clause was non- exclusive might make it easier to displace the strong presumption in favour of upholding the choice, particularly where more than one jurisdiction was chosen, but that would depend on the circumstances. 193. It would not be useful to speculate on what exceptional circumstances would justify the court in not accepting jurisdiction where the parties had conferred non-exclusive jurisdiction on the English court, but I accept that one feature which may be highly relevant is whether there are already proceedings in a foreign country which involve overlapping issues, especially if they have been commenced by the party which subsequently seeks to sue in England. 194. In the circumstances of this case, the only matter which I consider would have a bearing on whether the English court should decline to accept jurisdiction on the basis of clause 23 is the impact of the Maltese proceedings. In the light of my conclusion that the English proceedings should be limited to a claim against the Company in relation to the funding provision, I do not consider that there will be a serious overlap between the Maltese proceedings (which were essentially initiated by the defendants and were plainly a response to the events of December 3, 2002) and the English proceedings at all. The question of funding is not an issue in any of the Maltese proceedings. 195. I am satisfied that there are no countervailing considerations which are of sufficient weight to satisfy the heavy burden which a defendant must have of displacing a choice of English jurisdiction. English law governs the contract, and the only major factual issues would relate to the funding of iModel, and the question whether the financial institutions waived or varied the funding provision. I have already expressed the view that the normal forum conveniens factors are of little or no significance. It is true that much of the documentary and witness evidence would be in Malta, but most of the claimants’ important witnesses (apart from Ms Vossberg and Mr Arstall) would be outside Malta. The expert accounting evidence can be given by the major accounting firms, many of whom have been involved in this case already, and all of whom will have branches or local partnerships in Malta. XVII Non-disclosure 196. Since an application for permission to serve out of the jurisdiction is made without notice, full and fair disclosure of all relevant facts must be made. I was referred to many authorities on non-disclosure, including my own judgment in Konamaneni v Rolls Royce Industrial Power (India) Ltd [2002] 1 WLR 1269 at 1301, where I summarised the authorities as follows: "180. On an application without notice the duty of the applicant is to make a full and fair disclosure of all the material facts, i.e. those which it is material (in the objective sense) for the judge to know in dealing with the application as made: materiality is to be decided by the Court and not by the assessment of the applicant or his legal advisers; the duty is a strict one and includes not merely material facts known to the applicant but also additional facts which he would have known if he had made proper enquiries: Brinks Mat Ltd v. Elcombe [1988] 1 WLR 1350 at 1356-7. But an applicant does not have a duty to disclose points against him which have not been raised by the other side and in respect of which there is no reason to anticipate that the other side would raise such points if it were present. 181. These principles have long been applied to applications for permission to serve out of the jurisdiction: see, e.g. The Hagen [1908] P. 189 at 201 (CA). In that context it has been held that it would not be reasonable to expect an applicant for permission to serve out to anticipate all the arguments or points which might be raised against his case: see The Electric Furnace Co v. Selas Corporation [1987] RPC 23 at 29 (CA). A failure to refer to arguments on the merits which the defendant might raise at trial should not generally be characterised as a ‘failure to make full and fair disclosure’, unless they are of such weight that their omission may mislead the Court in exercising its jurisdiction under the rule and its discretion whether or not to grant permission: BP Exploration v. Hunt [1976] 3 All ER 879 at 89, approved in Electric Furnace at 29. 182. In BP Exploration v. Hunt, Kerr J warned (at page 894) that: ‘the Court should not consider the supporting affidavit as though it were marking an examination paper, deciding one way or the other merely on the basis of the extent to which the affidavit could have been improved. The primary question should be whether in all the circumstances the effect of the affidavit is such as to mislead the court in any material respect concerning its jurisdiction and the discretion under the rule.’" 197. No witness statement is incapable of being criticised, and the witness statement of Ms McMillan in support of the application was not rigorous in its analysis of the application of CPR 6.20 to the causes of action. But I am wholly satisfied that it made proper disclosure. 198. The particular matters of which complaint is made are these: (1) the failure to disclose that Mr Gerdes was not a party to the Agreement and therefore not within the Rule; (2) the failure to disclose that Abacus was a reputable trust company which would not be embroiled in wrongdoing; (3) the failure to mention the claim in frustration, which was inconsistent with other claims, and to reveal the weakness of the case; (4) the inadequacy of the disclosure of the defence of acquiescence; (5) the failure to make clear disclosure of the fact that the claimants had commenced proceedings in Malta, the purpose of which was precisely what they attached to the English action, namely to recover their investment. 199. As to (1), it is true that, although the Agreement was exhibited, the witness statement does not make clear who the parties were. The claimants do not now seek to assert any claim against Mr Gerdes. As to (2), I do not consider this to be material. As to (3), (4) and (5), I consider that the evidence made adequate disclosure of those matters. XVIII Injunction 200. The defendants rely on the principle that the "near universal rule of international law is that sovereignty, both legislative and adjudicate, is territorial, that is to say that it may be exercised only in relation to persons and things within the territory of the state concerned or in respect of its own nationals:" Lord Millett in Société Eram Shipping Co Ltd v. Compagnie Internationale de Navigation [2003] 3 WLR 21, at 48. 201. I do not consider that this case has anything to do with those cases in which a party asks the English court to grant interim relief in respect of foreign proceedings: Credit Suisse Fides Trust SA v. Cuoghi [1998] QB 818; Refco Inc v Eastern Trading Co [1999] 1 Lloyd’s Rep 159; Motorola Credit Corp v. Uzan [2002] EWCA Civ. 752. In such cases the court should not make an order when proceedings are pending abroad which might cause conflict or confusion developing between the English court and the foreign court, especially where there was no connection between the person against whom the injunction was sought and the English jurisdiction. 202. I do accept, however, that where there are proceedings pending in a foreign court between the same parties, comity requires that the English court should endeavour to avoid conflict with the foreign court and its processes. But where the defendant is subject to the personal jurisdiction of the English court, and provided that the case has some appropriate connection with England, there is no reason in principle why an English injunction should not be granted in relation to matters occurring abroad: see e.g. Babanaft International Co SA v Bassatne [1990] Ch 13, 37-39, 41-42. It is of course true that the court is reluctant to make orders which would be ineffective to achieve what they set out to do, but the fear that the defendant will not obey an injunction is not a bar to its grant: e.g. Castanho v. Brown & Root (UK) Ltd [1981] AC 557, 574. 203. Consequently, if there were good grounds for an interim injunction, I would have had jurisdiction to grant it, and would have exercised my discretion to grant it. In relation to the funding limitation the Company is subject to the personal jurisdiction of the English court by virtue of its contractual submission, and that submission and the choice of English law gives the matter a significant connection with England, and to have ordered segregation of the balance of the funds of the Company in a joint account, and to have ordered information to be given about pending contracts, would not have involved any interference with the processes of the Maltese court. 204. But I do not consider that the claimants have made out a case for an injunction, even on the limited terms which they now seek. They have probably known of the fact that (on their case) the iModel project has been over-funded since August 2001, and even when the crisis erupted in December 2002 they did not take any action with regard to this expenditure. They do not question the integrity of Mr Tabona, and there is no evidence that the funds of the Company are being used for any reason other than to fund iModel at the rate of around $400,000 per month. In effect, that money will be lost to the claimants if they are right on their claim. But they accept that consequence and seek to limit their exposure to $2 million pending trial. 205. I do not consider therefore that there are grounds for segregating the funds of the Company. They also seek information on contracts to be entered into by the Company. But they are represented on the Board of Administration by Mr Borg- Cardona, and I am sure that Mr Tabona can be relied upon to keep them properly informed. In my judgment their position will be adequately protected by the continuance of the Board of Administration, and by an order for an expedited trial, with which I deal below. XIX Funding, directions and representation 206. I do not see any objection to the Company funding the proper defence of the claim. In Jones v Jones [2002] EWCA Civ 961 the Court of Appeal held that the general principle of company law that the company’s money should not be expended on disputes between the shareholders did not apply in a duly authorised corporate action, unless it is said that the action was brought under the authority of directors who were motivated not by the company’s interests but by a desire to further the interests of shareholders, or it was in truth a shareholders’ dispute. In my judgment, the fact that different factions of shareholders take a different view of the ability of a Company to undertake a venture does not turn an action for breach of contract against the Company by one faction into a shareholders’ dispute. In my judgment, the same result would have flowed even if Abacus and Medfinco had been properly joined as defendants. 207. But I am concerned about the question of representation, and possible conflicts of interest. Mr Tabona is an extremely eminent businessman and public figure. He chairs a Board of Administration which has been agreed by the factions, and he has a controlling vote. There is a major issue between the factions on whether the Company is entitled to use its cash to fund iModel. 208. On May 9, 2003, Messrs Smith, Gambrell & Russell, LLP, lawyers in Atlanta, Georgia wrote to Mr Perucca, the President of Banc of America Equity Corp at its head office in Chicago on the instructions of Wragge & Co as follows: "We have been asked by U. K. counsel to iWORLD Group Europe Holdings Plc, a Maltese company (‘iWG’), to contact you in connection with the matters discussed herein. As you may know, Banc of America Equity Corporation (‘BoA’) is a holder of preference shares in iWG. In addition, Mr. Edward J. McCaffrey, an employee and agent of BoA, serves as BoA’s representative on the board of directors of iWG. We have been advised that Mr. McCaffrey, on behalf of BoA, has taken and continues to take actions that clearly are detrimental to the best interests of iWG and its shareholders, including, without limitation, creating severe disruption in the ranks of management and thereby diverting management’s attention from the proper operation of the business of iWG, and conspiring with others to improperly oust certain duly appointed board members of iWG. In addition, we are advised that BoA’s authorized representative made false and improper statements to potential clients of iWG with a materially adverse effect on the business of iWG. These actions by Mr. McCaffrey, on behalf of BoA, have caused serious and irreparable damage to the business and prospects of iWG and have prevented iWG from pursuing its business opportunities in a prudent manner. We have been advised by Maltese counsel that the actions of Mr. McCaffrey, on behalf of BoA, constitute a clear and wilful breach of Mr. McCaffrey’s fiduciary duty as a director of iWG to act in the best interests of iWG and its shareholders. On behalf of iWG, demand is hereby made that BoA and Mr. McCaffrey immediately cease and desists from all such activities and conduct themselves in the future strictly in conformity with the standard of conduct for directors of Maltese companies and all applicable laws and regulations. Notwithstanding BoA’s anticipated cessation of the activities complained about above, iWG does not waive any claims or damages that have accrued to date. Rather, iWG intends to pursue its right of recovery for all damages suffered as a consequence of BoA’s activities. If BoA and Mr. McCaffrey do not immediately cease these improper and actionable activities, iWG will not hesitate to take all action as it may deem necessary or appropriate to enforce its rights and remedies against BoA and Mr. McCaffrey, including the initiation of immediate legal action in the appropriate forum. Please govern yourself accordingly" 209. The Bank of America legal department replied on May 13, 2003 to ask by whom they were instructed, and said: "… you should be aware that the Maltese Civil Court, presided by Justice Gino Camilleri, has been having the affairs of the Company and its subsidiaries governed solely and exclusively by a Board of Administration. As far as we are aware, that Board of Administration has not properly engaged counsel in Malta, the UK, the US or otherwise to act on behalf of the Company or its subsidiaries in connection with the matters alleged in your letter." 210. The Atlanta lawyers replied on May 14, 2003: "We are aware of the appointment of the Board of Administration with respect to the operation of iWORLD Group Europe Holdings Plc (‘iWG’). The Board of Administration has appointed Wragge & Co., a firm of solicitors in the U. K., to act on behalf of iWG in connection with the matters referred to in my letter to Mr. Perucca dated May 9, 2003, with authority to appoint U. S. counsel. Pursuant to that authority, we have been appointed by Wragge & Co. to serve as U. S. counsel in connection with these matters. Mr. Joseph Zammit Tabona, the Court-appointed Chairman of the Board of Administration, recently submitted to the Court a report concerning the status of iWG and actions taken by the Board of Administration in connection with the management of the business of iWG. We trust that you have read the relevant portions of that report, particularly as they relate to BAS Capital Funding Corporation." 211. I find it very hard to believe that a person of the standing of Mr Tabona charged with the task of chairmanship of the Board of Administration would have authorised lawyers to engage in such a crude attempt to discredit Mr McCaffrey in the eyes of his superiors. 212. Mr Tabona has, as I have said, given evidence that the Company will vigorously defend the English proceedings "since I have been advised that they are groundless." I can see that there are some serious arguments on waiver and estoppel but, in the light of the terms of the Agreement, to say that the proceedings are "groundless" is calculated to weaken the confidence of the claimants in the independence of Mr Tabona. 213. I do not know (and should not know) what advice Mr Tabona has taken, but I would have thought that it was elementary that a person in his position should take absolutely independent advice in Malta and England as to the legal position of the Company, both as regards the merits of its position under the Agreement and on the issues which have been debated before me. 214. This is a dispute which has got out of hand. It has been exacerbated by the events of December 3, 2002, and by the claimants’ suspicions with regard to Medfinco, and their suspicion (no longer relied upon) that Mr Gerdes had the intention of putting more than $20 million of the Company’s funds beyond their reach. 215. But the Company has to know where it stands and whether it can lawfully continue to carry on the iModel business. If the claimants are right it cannot do so. In those circumstances I consider that this is a case suitable for an expedited trial, and once service is effected in Malta or, if necessary, I have made an order for service by an alternative method, or an order dispensing with service, I will order a timetable leading to a trial in December. 216. At the time of the hearing of this matter service had not been effected in Malta, although of course the Company, and its Board of Administration, have had the documents since at the latest June 9, 2003. It is true that a defendant is fully entitled to insist on proper service. Proper service is particularly important in international cases, where the basis of jurisdiction is service. I would therefore hesitate before ordering service by an alternative method, or dispensing with service. But I would hope that, on mature reflection, Mr Tabona would not be advised to take any purely technical point on service. What I propose to do is to adjourn determination of the question whether I should make a special order with regard to service until September, by which time I can be informed whether service has taken place, or, if not, what Mr Tabona’s position is. 217. The result of this judgment is that I set aside the order granting permission to serve the defendants out of the jurisdiction, except in relation to the alleged breach by the Company of the funding limits, and refuse to grant the injunctions either in the wide form originally sought, or in the modified form suggested in correspondence. I will adjourn the matter to a date in the week beginning September 8, 2003 convenient to the parties.