Angeliki Frangou v Ioannis (John) Frangos
| Jurisdiction | England & Wales |
| Judge | Mr Stephen Houseman |
| Judgment Date | 08 December 2022 |
| Neutral Citation | [2022] EWHC 3129 (Comm) |
| Docket Number | Case No: CL-2021-000535 |
| Year | 2022 |
| Court | King's Bench Division (Commercial Court) |
[2022] EWHC 3129 (Comm)
Mr Stephen Houseman KC
Sitting as a Judge of the High Court
Case No: CL-2021-000535
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Timothy Hill KC & Andrew Feld (instructed by Wikborg Rein LLP) for the Claimant
Oliver Caplin (instructed by Waterson Hicks) for the Defendant
Hearing dates: 28, 29, 30 November & 1 December 2022
Draft judgment provided on 6 December 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Stephen Houseman KC
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Thursday 08 December 2022 at 14:00.
Mr Stephen Houseman KC:
Introduction
By this action the claimant (“AF”) seeks payment of US$11,866,844, alternatively damages, plus interest from the defendant (“JF”). JF and AF are brother and sister. They are part of a successful and prominent Greek ship-owning family founded by their late father, Captain Nikolaos ‘Nicos’ Frangos.
The claim is made pursuant to a written agreement stated to be concluded on 1 September 2011 between the two of them and their father. The agreement is governed by English law. Although Capt. Nicos did not counter-sign it as originally envisaged, JF's challenge to its enforceability on this basis was dropped by amendment to his defence settled by new counsel a week before trial.
In a separate judgment [2022] EWHC 3031 (Comm) handed down on the morning of the second day of trial, I dealt with disputes concerning the scope of JF's pleaded case and his contingent application for permission to re-amend the defence following exchange of opening submissions. The scope of the pleaded dispute remains a feature of the analysis below. I refer to the agreement as the “TTA” as it was defined in my procedural judgment.
The TTA concerned the fate of a vessel known as m/v TAURUS TWO (“TT” or “vessel”). The core dispute is about the duration or durability of a payment covenant in clause 5 of the TTA. AF seeks payment in respect of (a) capital shortfall and (b) accumulated trading losses for the vessel said to have arisen upon its sale at her direction in May-July 2020. JF denies liability and separately disputes quantum.
His primary defence is one of construction: the TTA did not contemplate an indemnity arising where the vessel was not sold or refinanced upon the maturity of its existing finance on 1 September 2015. The parties' subsequent conduct and communications — and contextually conspicuous silence or omission — are appropriated by each side in support of extra-contractual doctrines which are said to define or redefine their original substantive rights. Witness evidence was largely directed at this aspect of the dispute.
This action and its trial take place in the shadow of prior and pending litigation in this jurisdiction and abroad involving the same or related parties and events. My summary of relevant background is subsidised with gratitude by the narrative set out in the judgment of HHJ Pelling QC (sitting as a judge of the High Court) following a five day trial in October 2020 in Ferand Business Corporation & others v. Maritime Investments Holdings Limited & another [2021] EWHC 40 (Comm). That said, and as explained below with one important exception, I do not regard factual matters as central to determination of the issues before me at this trial.
There is a separate action pending in the Commercial Court which is set down for trial in July 2023. In so far as witness testimony at this trial encroached upon issues in that pending matter, I avoid saying anything that may be taken as assisting one side or the other in those proceedings. I was treated by both camps to snippets of pleaded propositions in that action in support of their rival positions in this case. This provided further data to support the theory that frequency of inadvertent analytical hypocrisy tends to increase in proportion to the number of words used in commercial litigation. I hope to avoid adding further data within this judgment.
Another and far more important shadow is cast by the disputants' late father. Capt. Nicos passed away in December 2016 at the age of 90. Although each was a successful and experienced businessperson in their own right by the relevant period, it is clear that the mutual dealings between AF and JF were arranged with and sometimes by or through, and effectively subject to, their father's imprimatur on anything significant affecting their business. This was not formal. But it was pervasive.
The inter-personal cohesion and impetus for compromise imposed by paterfamilias dissipated following his passing. The siblings spiralled into bitter dispute and ratcheting mistrust. The pre-existing family dynamic supplies a feature of the matrix when seeking to ascertain the proper meaning of the TTA. It was not an arms-length bargain between independent commercial operators in the usual or purest sense.
There are complex emotions and grievances on the part of AF and JF towards and about one another. Both feel they are indisputably correct. Each one feels wronged by the other. This was most evident in their oral testimony. The parties' respective advocates were encouraged to filter this out of their analysis and did so in a commendable way for the benefit of the Court and in furtherance of their respective client's interests. The trial was conducted efficiently and courteously. I am grateful to both legal teams for all their assistance.
Relevant Background
From July 2007, TT was owned by a company ultimately belonging to JF called Shipping Fortune Maritime SA. It was financed by lenders led by Hamburg Commercial Bank AG (formerly HSH Nordbank AG) to whom I refer as “HSH” irrespective of the precise identity of primary or additional finance parties. That original loan was secured by a mortgage over TT and a personal guarantee from JF. TT was managed by JF's company called Irika Shipping SA.
By mid-2011 the loan was deep into default. TT's trading income was insufficient to service the facility. HSH qua mortgagee arrested the vessel in August 2011.
An agreement was reached between JF and AF, at the insistence or interposition of their father, whereby TT would be sold to a company beneficially owned by AF called Brandon Maritime SA (“Brandon”) and thereafter managed by another company which she beneficially owned and effectively controlled called Maritime Enterprises Management SA (“MEM”). The purchase price was US$33.5m. Brandon's acquisition of TT was part-financed with a new facility (US$26.8m) with HSH; whilst Capt. Nicos himself contributed US$7.8m in cash. AF provided a personal guarantee in respect of Brandon's liabilities to HSH.
TT was about six years old at this time. It was worth substantially less than US$33.5m — somewhere in the region of US$22m. Brandon was, therefore, in negative equity from the outset to the tune of around US$4–5m.
This new loan facility (“Brandon Loan”) was for a four year term maturing on 1 September 2015. The balloon payment was payable on that date. The loan profile was 15 years, although the vessel may have had a projected maximum lifespan of another 19 years or so at this time. In parallel with this sale and fresh financing of TT, HSH agreed a restructuring of the original loan (reduced through receipt of the US$33.5m sale proceeds to about US$14m) which deferred repayment until the same maturity date as the Brandon Loan. HSH therefore released TT from arrest.
When speaking of beneficial ownership in this case, I refer to ultimate beneficial ownership. As a further shorthand, this is referred to simply as ‘owning’ or ‘controlling’ to reflect the functional or economic realities. Brandon is and has at all material times been legally owned by another Panamanian entity, Maritime Enterprises Holdings SA (“MEH”). MEH itself is and has at all material times belonged ultimately to AF. It is a holding company which owns the shares in Brandon and other single-vessel-owning entities with effective power to declare and distribute dividends or cash such as sale proceeds or operating profits.
The arrangement described above was a family-led ‘bail out’ for the benefit of JF. Some part of its impetus concerned protection of the family name and goodwill. It wasn't a purely commercial or necessarily prudent solution to the problem of TT as an unprofitable or distressed asset. It was instigated as a form of parental intervention or mediation by Capt. Nicos.
This compromise solution imposed a burden upon AF. She took on and became personal guarantor of instalment payments under a new loan for a mortgaged vessel already in negative equity. This is not something she is likely to have undertaken as a matter of autonomous commercial judgement. Conversely, the deal provided a benefit to JF which he may not have been able to obtain from the ship-financing market at that time or in the foreseeable future. JF was nevertheless hurt by the loss of TT in this way. He wanted to buy it back from AF.
The above summary may be shorter and simpler than the parties expected. However, it constitutes the entirety of the admissible matrix against which the TTA falls to be construed. This reflects the pleaded position and what I consider pertinent, save to add that both sides were advised and assisted by their long-standing in-house lawyers who drafted the TTA for execution by the principals.
The precise drafting history is not material for present purposes. By way overview: draft text was...
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