English court had jurisdiction over conspiracy claim in gambling case

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English court had jurisdiction over conspiracy claim in gambling case

A Guernsey-registered online gambling company can pursue a conspiracy claim against a group of Peruvian-resident customers in the English courts, the Court of Appeal has ruled.10 Aug 2018

The decision appears to be the first at appeal level to have considered whether a case fell within the 'same facts' jurisdictional gateway in paragraph 3.1 of Practice Direction 6B, which only came into force on 1 October 2015, according to fraud litigation expert Andrew Barns-Graham of Pinsent Masons, the law firm behind Out-Law.com.

The Court of Appeal's judgment is also a reminder that applying the jurisdictional gateways, which deal with the circumstances in which a party outside of the EU may be sued in England and Wales, is "not an exact science", Barns-Graham said.

The claimant, Eurasia Sports Ltd, is a betting agency incorporated and regulated in Alderney. It operates through an agency called Xanadu, which is incorporated in Ireland but which provided its relevant services through consultants based in England.

Eurasia has claimed that 11 defendant individuals, all of whom were resident in Peru at the time of the relevant events, conspired to defraud it by placing bets on credit that they had no intention of repaying. The decisions to open the defendants' accounts and extend credit facilities to them were made by a Xanadu consultant while the consultant was in England, although the meetings between the defendants and the consultant took place in Peru. The defendants ultimately lost around $12.6 million.

The company has claimed against each of the defendants for sums due under the terms of their individual gambling accounts. It is also pursuing some of the defendants for fraudulent misrepresentation and unlawful means conspiracy. The defendants claimed that they would provide security for the credit facilities by way of a $10m payment by cheque into Eurasia's bank account in Malta; however, the payment ultimately bounced due to insufficient funds.

As the defendants are domiciled in Peru, Eurasia first had to establish that it was able to bring its claims in England and Wales, based on the common law. In order to do so it had to establish that there was a serious issue to be tried; that it had a good arguable case that each of its claims fell within one of the jurisdictional gateways; and that in all the circumstances England was clearly or distinctly the appropriate forum for the trial of the dispute.

Four of the jurisdictional gateways were relevant to the facts of this case. These are the 'contract' gateway, which applies to contractual claims where the contract has at least one of four specified types of connection with the jurisdiction; the 'tort' gateway, which applies to tortious claims where the damage either occurred within the jurisdiction or resulted from an act committed in the jurisdiction; the 'necessary or proper party' gateway, which applies where a claim has been served on an 'anchor' defendant within the jurisdiction and the defendant is a 'necessary or proper party' to that claim; and the new 'same facts' gateway, which applies where one claim already meets the tests and a further claim is made against the same defendant which arises out of the same or closely connected facts.

At first instance, the High Court judge held that the conspiracy and fraud claims fell within the tort gateway, on the grounds that London was the place where the Xanadu consultants made the decision to open the betting accounts and provide the credit facilities; while the contractual claims against four of the defendants fell within the contract gateway. The remainder of the claims could then be joined using the necessary or proper party and same facts gateways, on the grounds that resolving them would involve the same investigation as resolving the claims which fell within the tort and contract gateways.

One of the 11 defendants, Omar Mahchi Aguad, appealed. He argued that the tort gateway did not apply because the damage was sustained in Malta and not London, and that this undermined the other claims brought against him based on the necessary or proper party gateways. The Court of Appeal agreed with Mahchi Aguad on the first point but not on the second, meaning that the English court has jurisdiction to hear all of the claims against him.

Lord Justice Floyd, giving the judgment of the court, said that the steps taken by the consultants were "merely prefatory to the sustaining of damage", and that that damage only occurred when the defendants failed to provide security in Malta. "To put it another way, the provision of credit merely exposes the claimant to the risk of damage, but does not itself amount to damage," the judge said.

However, he went on to find that this was not fatal to Eurasia's claim.

"Given the judge's finding that the claim in contract passes the contract gateway against the first, second, seventh and eighth defendants, the application of the [same facts] gateway allows through the claims in conspiracy against those defendants," he said.

"By this route the position is restored to that considered by the judge, namely that there are a number of defendants who can properly be served for both the tort and contract claims. Those are issues which it is reasonable for the court to try and the claimant should be entitled to serve the eleventh defendant as a necessary and proper party to that action," he said.

"It is not immediately obvious why the first instance judge was wrong to conclude that the decisions which the consultant made in London were a direct cause of Eurasia's loss; indeed, the Court of Appeal noted that it might have reached the same conclusion had there been evidence that the claimant provided gambling services or facilities in London," said fraud litigation expert Andrew Barns-Graham.

"The Court of Appeal's own reasoning was also not without imperfection. It identified Malta as the relevant place for the purposes of the tort gateway on the grounds that the claimant's damage consisted of the non-payment of the $10m security into its Maltese bank account. However, the claimant's pleaded loss was based on the defendants' total indebtedness, which was in the greater sum of around $12.6m. In other words, the damage which the Court of Appeal referenced when applying the tort gateway represented only part of the claimant's overall loss," he said.

"From a claimant's perspective, in cases like this one where the relevant facts and events straddle numerous jurisdictions, this scope for contrasting applications of the gateways makes it all the more important to have jurisdiction at the forefront of one's mind when formulating the claim and litigation strategy. Noone wants to spend time and money on a claim, only for it to be thrown out due to lack of jurisdiction," he said.

The case also demonstrates the "vital importance" of victims of fraud acting quickly and seeking appropriate advice on how to recover funds from civil fraud and asset recovery experts "who are well versed in overcoming jurisdictional hurdles such as those set out in the present case", said Alan Sheeley, head of civil fraud and asset recovery at Pinsent Masons.

"The gambling sector is at present in turmoil, with the Gambling Commission becoming more and more robust in its governance and the issuing of fines for AML issues, the largest in 2017 being £7.8m," he said.

"As the Gambling Commission continues its efforts, gambling operators need to be ever more conscious of who their ultimate clients are and the origin of their clients' monies which enable them to gamble, and ultimately apply robust AML procedures and strong customer authentication protocols to all their clients. If the English courts can reach individuals in Peru and gambling operators incorporated and regulated in Alderney who have agents working for them in England, it may only be a matter of time before the Gambling Commission also seeks to extend its reach," he said.