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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Antonio Gramsci Shipping Corp & Ors v Recoletos Ltd & Ors [2012] EWHC 1887 (Comm) (12 July 2012) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2012/1887.html Cite as: [2012] EWHC 1887 (Comm) |
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and 2010 Folio 1176 |
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice Strand, London, WC2A 2LL |
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B e f o r e :
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Antonio Gramsci Shipping Corporation and others |
Claimants |
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- and - |
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Recoletos Limited and others including Aviars Lembergs |
Defendants |
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Anthony de Garr Robinson QC and Laurence Emmett (instructed by Pinsent Mason LLP) for Mr. Lembergs
Hearing dates: 16 November 2011, 13-15 February 2012 and 21 March 2012
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Crown Copyright ©
Mr. Justice Teare :
"In my judgment, however, there is a wealth of evidence which shows that the claimants have a good arguable case on the merits against Mr. Lembergs. Mr. Justice Burton found that they did have such a good arguable case against Mr. Stepanovs and, much for the same reasons – but in particular, on the evidence of Mr. Meroni, Mr. Kveps and Mr. Stepanovs, and the documents available to the court that has considered the position of both these two defendants I find the same in relation Mr. Lembergs. I proceed, therefore, on the basis that there is such a good arguable case."
The factual issue
"First, ……..the Claimants have a powerful case both in respect of Want of Authority and Illegality. Secondly, ………I would readily conclude that the Claimants have the better of the arguments thus far. Thirdly, it would not be over-stating the matter to characterise the explanation of the Scheme as "shadowy" (to use the old terminology of O.14, RSC)."
"the "good arguable case" test, although obviously applicable to the ex parte stage, becomes of most significance at the inter partes stage where two arguments are being weighed in the interlocutory context which, as I have stressed, must not become a "trial". "Good arguable case" reflects in that context that one side has a much better argument on the material available. It is the concept which the phrase reflects on which it is important to concentrate i.e. of the court being satisfied or as satisfied as it can having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction."
"In granting permission to serve out of the jurisdiction the court is exercising an exorbitant jurisdiction over those who are not within its ordinary reach. In those circumstances the court is, as it seems to me, justified in applying the good arguable test in that manner in order to avoid the risk of compelling individuals or companies to submit to a jurisdiction to which they ought not in truth to be made subject. "
"I do not regard this as introducing by the back door a requirement that a claimant seeking permission should prove his case on the balance of probabilities. The Court is concerned, at this stage, with the arguments in favour of the respective parties in the light of the material then tendered. Whilst the Court is entitled to reject the wholly implausible, what it will be concerned with is the relative plausibility of the contentions. Proof on the balance of probabilities would require a finding of fact, not a decision about the strength of arguments, and would probably require the availability of oral evidence and discovery. "
"When the subject matter involves questions of fact on which the evidence is incomplete or contradictory, it may be very difficult for a court to form even a preliminary view as to the parties' rival strengths. Reading Waller LJ's judgment as a whole, I do not understand him to be suggesting that in such a case the court has to be satisfied that the evidence on the claimant's side is stronger than the evidence on the defendant's side in order for the claimant to make out a good arguable case, for that would be in effect to apply the civil standard of proof, which he emphasised is not applicable at the interlocutory stage. "
"There might be a case in which, because of the limitations imposed by the interlocutory process, the court found it impossible to form a positive view which side had the better argument. ... I would not exclude the possibility that application of the principle in the Bols case might lead a court to conclude that if the case for jurisdiction was as good as the case against jurisdiction, and that it was not possible to reach any firmer conclusion without conducting a mini-trial, in those circumstances factors would exist which would allow the court to take jurisdiction.
The legal issue
"There is in my judgment no good reason of principle or jurisprudence why the victim cannot enforce the agreement against both the puppet company and the puppeteer who, all the time, was pulling the strings."
"88. We come to our conclusions on the appeal against Arnold J's refusal to allow the amendment. We respectfully consider that Arnold J was correct to hold that the contract claim that VTB wishes to advance against the three defendants is not founded on a cause of action known to English law. We can also identify no principled basis upon which the law might be incrementally developed so as to recognise such a claim. We consider that Arnold J was right to refuse the amendments.
89. First, we derive no assistance from any analogy with the law relating to undisclosed principals. That corner of the law of contract is recognised as anomalous and we are unable to draw from it any guidance that can be said to assist, let alone support, Mr Snowden's essential submission. At least one reason why it does not is that the undisclosed principal can neither sue nor be sued unless the agent entering into the contract on his behalf did so with his authority. On the assumed facts of the present case, there is no question of the puppeteers having authorised the puppets to enter into the contracts on their behalf, whether expressly or impliedly, or by any means of apparent or "usual" authority. Therefore there is no analogy with the position of an undisclosed principal. The question that the appeal poses for us must, we consider, be answered by reference to considerations of more general principle.
90. Second, … VTB's submission amounts to the proposition that there is a principle of English law that a person can be held to be a party to a contract when, assessed objectively, none of the undisputed parties to the contract had any thought that he was, let alone an intention that he should be. In our judgment, to accede to VTB's submission would be to make a fundamental inroad into the basic principle of law that contracts are the result of a consensual arrangement between, and only between, those intending to be parties to them. It is contrary to that principle, which is applicable save in some exceptional cases, none of which applies here, that a stranger to the contract should be held to be a party to it.
91. Third, whilst we accept that the court can, in an appropriate case, "pierce a company's corporate veil" and, in doing so, substantially identify the company with those in control of it, no authority has been cited to us, apart from Burton J's decisions in Gramsci and Alliance, that supports the proposition that, once the veil is pierced, the court either does or can (or that it is arguable that it does or can) proceed in consequence to a holding either that the puppet company was a party to the puppeteer's contract, or vice versa. As we have said, we interpret Burton J as having regarded Gilford and Jones as cases in which the remedies against the companies were granted on the basis that they were themselves parties to the individuals' contracts. We respectfully regard that as a misreading of both cases.
92. We of course recognise the logic of Mr Snowden's proposition in relation to Gilford and Jones that, if the remedies of an injunction and specific performance were to be granted against the companies, it was necessary for such orders to be underpinned by the existence of recognisable causes of action against them. We nevertheless do not regard the orders made against the companies in either case as premised on the basis that there was a cause of action in contract against them. Neither court so explained its decision. We regard the order made in Gilford as having been based on the conclusion that, for the reasons we have given, it was convenient to make an order against the company directly. The latter explanation is also clearly the basis on which Russell J made his order in Jones. Our consideration of the reported authorities leads us to the conclusion that, in a case in which it is thought appropriate to pierce the veil, any order made in consequence of such veil piercing is by way of the exercise by the court of a discretionary jurisdiction. We do not see how else the orders against the companies in Gilford and Jones can be explained. Neither case supports VTB's proposition that the judicial piercing of the veil of a company that an individual has used with a view to masking his own breach of contract results in the court treating the company as itself a party to that contract. Insofar as the starting premise for Burton J's decisions in Gramsci and Alliance was to a different effect, we have indicated our disagreement with it. It follows that we also respectfully regard as wrong Burton J's extension of the decisions in Gilford and Jones to embrace the proposition that there is a good arguable case in law for the conclusion that, if the puppet can have the puppeteer's contract imposed on it, so can the puppeteer have the puppet's contract imposed on him.
93. Fourth, we respectfully consider that Mr Snowden's submission is flawed by its own inherent unreality. His proposition is that, once the corporate veil is lifted and the true facts are revealed, such facts will require the court to conclude that the puppeteers are additional parties to the contracts into which they have procured the puppet to enter. We do not understand this. It is inconceivable that the revelation of the true facts will show Marcap BVI, Marcap Moscow or Mr Malofeev to be parties to either of the relevant contracts. It will at most show no more than that they induced VTB to enter into the relevant contracts by dishonest deception. The suggestion that the application of the veil piercing principle to the facts will require the court to find that these three defendants were original, additional parties to the contracts is nothing more than an appeal to the court to decide the case on the basis of pure fiction. No authority, Gramsci and Alliance apart, supports the view that that is something the court might or should do.
94. Fifth, there remains a question as to whether, even if founded on mistaken reasoning, Gramsci and Alliance anyway represent a principled development of the law that this court should adopt. We have said enough to show that we consider that they do not. The "veil piercing" cases show that the principle is, in its application, a limited one, which has been developed pragmatically for the purpose of providing a practical solution in particular factual circumstances. The reported authorities certainly proceed on the basis that (in the usual case) the puppet company and the controlling puppeteer are to be closely identified, an identification that will or may be regarded as justifying the grant of a judicial remedy against the puppet as well as the puppeteer, if only on the basis that it will be just and convenient to do so. They do not, however, go to the length of treating the puppet company as other than a legal person that is formally distinct and separate from the puppeteer; and, were they to do otherwise, they would wrongly be ignoring the principles of Salomon. Consistently with that, they do not provide any basis for the proposition that the puppeteer should be regarded as having always been a party to a contract to which it or he plainly was not a party.
95. Not only do we not regard the common law as recognising the principle for which VTB contends, we are also not persuaded that it would be a principled development of the law for us to recognise it by our decision in this appeal. Any such development would not be a modest development of existing principle. It would, in substance, amount to the adoption by the courts of a jurisdiction to subject parties to contractual obligations under a contract to which neither they, nor the only undisputed parties to the contract, had ever agreed or intended that they should be subject. Yet further, if, which we question, it would ever be appropriate to develop any such principle, we do not regard this case as the right one in which to do so. There is no need to do so. Mr Snowden submitted that English law needs the tools to deal with commercial fraud. In principle, we agree. But if VTB's factual assertions are well founded, English law already provides it with a perfectly good remedy against the defendants, by way of a claim in the tort of deceit for the wrong which it claims they have inflicted upon it. There is no good policy reason for inventing and giving it an artificial remedy in contract, which VTB does not need, but which it merely invokes in support of its claim that the English courts should assume jurisdiction in its claims. In this context, Mr Lazarus referred us to the cautionary words of Lord Goff of Chieveley in Kleinwort Benson Ltd v. Lincoln City Council [1999] 2 AC 349, at 378A to D, as to the manner in which the judges do or should develop the common law. We have had regard to them.
96. We are conscious that we have not referred to Arnold J's full and careful reasons for declining to follow and apply Burton J's decision in Gramsci. We intend no discourtesy to the judge if we do not extend this part of our judgment yet further by setting out and discussing his reasons. We say simply that, for the reasons we have given, which are similar in substance to those expressed by him, we respectfully agree with his conclusion that, contrary to the view favoured in Gramsci, VTB's proposed contract claim is unsustainable as a matter of law. We therefore dismiss the appeal against his refusal to allow the amendments; and, to the extent that Gramsci and Alliance provide support for the view that the proposed amendments assert a cause of action for the reasonableness of which there is a good arguable case, we overrule them as having been wrongly decided."
Article 23 of the Brussels Regulation
"Article 23
1. If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. Such an agreement conferring jurisdiction shall be either:
(a) in writing or evidenced in writing; or
(b) in a form which accords with practices which the parties have established between themselves; or
(c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned."
Article 24 of the Brussels Regulation
"Article 24
Apart from jurisdiction derived from other provisions of this Regulation, a court of a Member State before which a defendant enters an appearance shall have jurisdiction. This rule shall not apply where appearance was entered to contest the jurisdiction, or where another court has exclusive jurisdiction by virtue of Article 22."
"In arriving at the view to be imputed to the disinterested bystander, it seems to me that one has to bear in mind that there will be an effective waiver, or a submission to the jurisdiction, only where the step relied upon as a waiver, or a submission to the jurisdiction, cannot be explained, except on the assumption that the party in question accepts that the court should be given jurisdiction. If the step relied upon, although consistent with the acceptance of jurisdiction, is a step which can be explained also because it was necessary or useful for some purpose other than acceptance of the jurisdiction, there will, on the authorities, be no submission.
If the well-informed bystander had been left in doubt because what the defendants had done was equivocal, in the sense that it was explicable on other grounds in addition to agreement to accept the jurisdiction of the court, then the conclusion must be, on the authorities, that there would have been no submission to the jurisdiction. The representation derived from the conduct of the party said to have submitted must be capable of only one meaning."
"Thus the test to be applied is an objective and what must be determined is whether the only possible explanation for the conduct relied on is an intention on the part of the defendant to have the case tried in England."
Conclusion