Antonio Gramsci Shipping Corporation and Others v Recoletos Ltd and Others Including Aviars Lembergs
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 12 July 2012 |
| Neutral Citation | [2012] EWHC 1887 (Comm) |
| Docket Number | Case No: 2008 Folio 1324 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 12 July 2012 |
[2012] EWHC 1887 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Justice Teare
Case No: 2008 Folio 1324
and 2010 Folio 1176
Simon Rainey QC, Robert Thomas QC and Natalie Moore (instructed by Clyde & Co) for the Claimants
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
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an application by the Seventh Defendant ("Mr. Lembergs") challenging the jurisdiction of this court to hear and determine claims brought by the Claimants against him. In essence he says that there is no good arguable case for establishing jurisdiction over him pursuant to the Brussels Regulation. The Claimants rely upon Articles 23 and 24 of the Brussels Regulation.
The claim made by the Claimants against Mr. Lembergs stems from a claim brought by the Claimants against five offshore companies ("the Corporate Defendants"). Both claims arise out of what the Claimants say was a fraudulent scheme by which the Corporate Defendants chartered a number of vessels owned by the Claimants on charterparties at less than the market rate and sub-chartered the vessels at the market rate thereby depriving the Claimants of the difference between the market rate and the charter rates and keeping the profits themselves. The profits were to be used to enable Mr. Lembergs and others to purchase shares in the Latvian Shipping Company (LSC), the parent company of the Claimants.
The jurisdiction of this court in respect of the claim against the Corporate Defendants was established because the charterparties provided for English jurisdiction. The claim against the Corporate Defendants in respect of which the Claimants sought summary judgment was a claim for restitution of the profits unlawfully diverted from the Claimants. It was based upon the charterparties being void (on the grounds that, to the knowledge of the Corporate Defendants, LSC, who made the charterparties on behalf of the Claimants, had no authority to do so) or unlawful (being a fraud on the minority shareholders of the Claimants). These two causes of action were discussed and explained by Gross J. in his judgment upon the summary judgment application; see [2010] EWHC 1134. He refused to give summary judgment but only permitted the Corporate Defendants to defend the claim on condition that they made a substantial payment into court.
In due course the Claimants obtained judgment against the Corporate Defendants following their failure to make the required payment into court. The claim against the Corporate Defendants is proceeding towards a hearing on quantum.
The Claimants have sought, in addition, to make two individuals, Mr. Stepanovs and Mr. Lembergs, liable for the diverted profits. It is said that they, along with others, used the Corporate Defendants as a device for the purposes of diverting the profits and that the Claimants are therefore entitled to pierce the corporate veil and hold them jointly and severally liable with the Corporate Defendants. Piercing the corporate veil permits the Claimants, it is said, not only to enforce the charterparties and the resulting claims for restitution against Mr. Stepanovs and Mr. Lembergs but also to enforce the English jurisdiction clause contained in the charterparties against Mr. Stepanovs and Mr. Lembergs. The argument is that by piercing the corporate veil Mr. Stepanovs and Mr. Lembergs are revealed as the true parties to the charterparties and the jurisdiction clause contained within them.
The Claimants proceeded, first, against Mr. Stepanovs. He challenged the jurisdiction of this court but his application was dismissed on 25 February 2011 by Burton J.; see [2011] 1 Lloyd's Reports 647. There has been no appeal from that decision.
The Claimants proceeded, second, against Mr. Lembergs. On 13 April 2011 Beatson J. granted a worldwide freezing order against Mr. Lembergs. Mr. Lembergs applied for an order setting aside that order but Cooke J. refused to do so on 4 August 2011; see [2011] EWHC (2242) (QB). In his judgment Cooke J. said as follows:
"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."
On 24 August 2011 Mr. Lembergs issued his application which challenged the jurisdiction of the court to hear and determine the claim brought against him.
The Claimants' case against Mr. Lembergs is the same as their case against Mr. Stepanovs and their case that this court has jurisdiction to decide the claim which is brought against him is the same as that which Burton J. decided was good against Mr. Stepanovs. But Mr. Lembergs was not party to Mr. Stepanovs' challenge and so is not bound by the decision of Burton J.
Mr. Lembergs' challenge to the jurisdiction was estimated to last half a day but that estimate was most inadequate. The half day hearing fixed for 16 November 2011 was barely sufficient for the parties to make their submissions on the factual aspect of the jurisdictional challenge. The hearing had to be adjourned for submissions on the law. The arguments on the law were heard on 13–15 February 2012 but were not completed even then. They were only completed on 21 March 2012. Some matters, including the scope of Article 23 and the argument based on Article 24, were dealt with by way of written submissions only. At the same time the Court of Appeal was hearing an expedited appeal in an unrelated case which involved the question whether Burton J.'s approach to the Stepanovs case was correct. In those circumstances I considered that it was sensible to delay giving judgment in this matter until the Court of Appeal had given judgment. The Court of Appeal gave judgment on 20 June 2012.
The factual issue
The factual issue to be determined is whether there is a good arguable case that Mr. Lembergs was a beneficial owner and controller of the Corporate Defendants which were, it is said, incorporated for the purpose of diverting profits from the Claimants. This is the factual case which the Claimants must establish in order to lay the foundation for their argument that the corporate veil may be pierced.
It would appear from the judgment of Cooke J. dated 4 August 2011 that he has already found, in proceedings to which the Claimants and Mr. Lembergs were party, that there was a good arguable case against Lembergs and that it is therefore not open to Mr. Lembergs to seek any different finding now. This point was not taken in the Skeleton Argument of Robert Thomas QC, counsel for the Claimants who appeared at the hearings, but he said, when asked on 16 November 2011, that he was taking the point. Laurence Emmett, counsel for Mr. Lembergs at the November 2011 hearing, said that it was not open to the Claimants to take such a point. There was no final determination of the point and new evidence has since been adduced.
Although there was some debate before Cooke J. on the merits of the case against Mr. Lembergs it is clear that it was known that there was to be, in the future, a jurisdictional challenge notwithstanding the prior challenge to the freezing order. In those circumstances, although Cooke J. does appear to have made a finding on the question of a good arguable case, I shall myself consider the evidence and in particular the new evidence which has been adduced by Mr. Lembergs in order to determine whether there is a good arguable case against Mr. Lembergs.
The evidence relied upon by the Claimants is, in essence, the evidence adduced by the Corporate Defendants on the summary judgment application against them. It was analysed in some detail by Gross J. He concluded, at paragraph 85 of his judgment:
"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)."
However, he decided not to give summary judgment because, having regard to an ex turpi causa defence, he could not say that the Corporate Defendants had no real prospect of defending the claim. He therefore gave leave to defend on condition that the Corporate Defendants paid a sum of money into court. They did not do so and accordingly judgment was given against them.
When Mr. Stepanovs sought to challenge the jurisdiction of this court against him Burton J. noted that it was common ground that Mr. Stepanovs and four others, including Mr. Lembergs, were the ultimate beneficial owners of the Corporate Defendants; see [2011] 1 Lloyd's Reports 647 at paragraph 1. He said that the evidence filed on behalf of the Corporate Defendants was to the effect that the Corporate Defendants were "merely used as vehicles for the 63 chartering transactions in which the Corporate Defendants were interposed between the...
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