Antonio Gramsci Shipping Corporation v Stepanovs

JurisdictionEngland & Wales
JudgeBurton J
Judgment Date25 February 2011
Neutral Citation[2011] EWHC 333 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: 2010 Folio 1176
Date25 February 2011

[2011] EWHC 333 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Burton

Case No: 2010 Folio 1176

Between
Antonio Gramsci Shipping Corporation & Others
Claimants
and
Oleg Stepanovs
Defendant

MR S RAINEY QC, MR R THOMAS and MS N MOORE (instructed by Clyde & Co LLP) for the Claimants

MR R MILLETT QC, MR R SLOWE (of S J Berwin LLP), Professor A BRIGGS and MR J WILLAN (instructed by S J Berwin LLP) for the Defendant

Hearing dates: 27 and 28 January, 2 and 4 February 2011

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.

MR JUSTICE BURTON Mr Justice Burton

Mr Justice Burton:

1

On 24 th May 2010 Gross J gave a judgment in Claim No: 2008 Folio 1324 ("the Corporate Defendants' action") in favour of the Claimants, 30 "one ship" companies, incorporated in a number of off-shore jurisdictions, all in the ultimate beneficial ownership of the Latvian Shipping Company ("LSC"), after a four day summary judgment hearing against five companies (four of them registered in the British Virgin Islands ("BVI") and one in Gibraltar) ("the Corporate Defendants"). It is, at least for the purposes of this hearing, common ground, that the Defendant and four others (Mr Berkis, Mr Skoks, Mr Sevcovs and Mr Lembergs) ("the Beneficial Owners") are the ultimate beneficial owners of the Corporate Defendants. By that judgment Gross J granted leave to the Corporate Defendants to defend that action only upon terms of (in effect) a payment into court of $40 million, to be made by 17 June 2010. The Corporate Defendants failed to comply with that condition and judgment was entered against them.

2

The claim in this action is based, as was that against the Corporate Defendants, upon the Claimants' case that in order dishonestly to siphon out substantial profits from the chartering business of LSC and the Claimants, instead of the Claimant companies chartering out their vessels to arms-length commercial charterers, the Corporate Defendants were interposed, so that in the case of 63 charterparties they became the charterers, and the arms-length third parties were caused to be sub-charterers at substantially higher rates than in the head charters. The Defendant and the four other Beneficial Owners are said (see paragraph 60 of the Judgment of Gross J) to have "master-mindedthe Scheme", whereby he concluded that there was:

"(v) … a real and prima facie cogent case to answer that the Claimants' corporate opportunities were diverted …that the profits earned by the [Corporate] Defendants should have been earned by the Claimants and, hence, by LSC……

(vi) …the secrecy of the Scheme is a powerful pointer to all not being well with it …

(vii) …it is difficult to avoid the conclusion that the "masterminds" behind the Scheme … knew enough as to the transactions involved to expose them to a real and cogent case of dishonesty."

3

The evidence filed on behalf of the Corporate Defendants in that action, both in response to disclosure orders and in the summary judgment application, by (among others) Mr Martins Kveps, the lawyer for the Defendant and for three of the four other Beneficial Owners, by Mr Paderov, the sole (nominee) shareholder of each of the Corporate Defendants and by Ms Nina Glebova, who held Power of Attorney for the Second to Fifth Corporate Defendants and was sole director of the First Corporate Defendant.

i) the Corporate Defendants were "merely used as vehicles" (Ms Glebova's fifth affidavit paragraph 13) for the 63 chartering transactions in which the Corporate Defendants were interposed between the Claimants and third parties:

ii) the decisions were taken by an informal organisation with regular meetings, called the "Table", of which the Defendant and the other Beneficial Owners were the dominant members, who were, as Gross J found (paragraph 8 of his Judgment), "all senior executive officers of LSC and had, or are to be taken as having had, effective control of the tanker fleet department of LSC".

4

In the light of that evidence, and other evidence available to the Claimants, referred to in the first affidavit of Mr Lockwood dated 10 th December 2008 on their behalf (including a report from a Mr Kodols dated 1 st August 2007), the Claimants have commenced this action by which (paragraph 3 of the Particulars of Claim dated 7 th October 2010) "the Claimants seek to "pierce the corporate veil" and to hold the Defendant jointly and severally liable with each of the Corporate Defendants in respect of the Claimants'…losses", including, but not limited to the estimated sum lost to the Claimants by virtue of the Scheme of $100 million.

5

The Claimants rely (primarily) in order to establish jurisdiction against the Defendant upon the jurisdiction clause (41) in the 63 charterparties to which the Corporate Defendants, and thus, on the Claimants' case, by virtue of the piercing of the veil, the Defendant were parties, namely that, by way of a standard form SHELLTIME 4 Time Charterparty, "any dispute arising under this charter shall be decided by the English Courts to whose jurisdiction the parties hereby agree".

6

Beatson J granted, on an ex parte application by the Claimants on 17 th November 2010, a freezing order, when he concluded that "although the evidence is that the Defendant was not the sole controlling mind, if on the evidence before me there is a good arguable case that he was one of the controlling minds, then that condition in the principles summarised in Ben Hashem v Ali Shayif[ [2008] EWHC 2380 (Fam)] is satisfied" (paragraph 17 of the judgment) and (paragraph 19) "that the Corporate Defendants were used solely for pursuing the Scheme … there were no directors of the Corporate Defendants involved in their management or administration … the Defendant and the others used the Corporate Defendants as vehicles for these transactions". He concluded in paragraph 36:-

"… where there is a good arguable case that the requirements for piercing the corporate veil have been satisfied and that the Defendant is the alter ego, or one of the alter egos of the Corporate Defendants, there is also a good arguable case that he should be regarded as stepping into their shoes so that the acts of those Corporate Defendants are seen as his acts. For this reason, there is a good arguable case that the Defendant is to be seen as agreeing to the jurisdiction of the court by reason of the jurisdiction agreement set out in Clause 41 of the Charters in a manner which satisfies the requirement of Article 23."

7

By order of Beatson J on 24 th November 2010, being the return date of his original Order, it was agreed that there would be an inter partes hearing to determine the issue of the Court's jurisdiction in the proceedings and the jurisdiction to make the continuing freezing order, which was continued until that date. This has been such hearing, at which I have been given very great assistance by counsel on both sides, and there has been no separate argument in relation to the continuation of the freezing order. If I conclude that this court has no jurisdiction to entertain these proceedings, then of course the freezing order falls away. If I accept the Claimants' case as to jurisdiction then there is no material separate argument as to the existence or non-existence of a good arguable case (or risk of dissipation) in relation to the freezing order, which would accordingly continue until trial.

8

The issues appear to me to be as follows, on the Claimants' case, and by reference to the evidence before me:-

i) Whether the Claimants can pierce the corporate veil on the basis that the Corporate Defendants were used, by the Defendant (and the other Beneficial Owners) controlling them, as a device for the purpose of a fraud on the Claimants, and if so, whether the Defendant (with the others) is liable as a party to the charterparties which the Claimants were caused to enter into with the Corporate Defendants, and

ii) if so, whether, by virtue of the exclusive jurisdiction clause in the charterparties, jurisdiction can be founded against the Defendant under Article 23 of the Judgments Regulation EC No 44/2001, or

iii) whether the Defendant has submitted to the jurisdiction of the English court by reference to Article 24.

9

In my judgment, the first question is whether, on the Claimants' case, at English law the veil can be pierced against the Defendant:-

i) Because the Corporate Defendants were set up and used as a fraudulent device to conceal the personality and involvement of (among others) the Defendant ("Piercing the Veil"):

ii) Whether the Defendant (with others) controlled the Corporate Defendants ("Control"):

iii) Is it required to be, and if so is it, necessary to pierce the corporate veil ("Necessity")?

iv) Is the Defendant liable to the Claimants as party to the charterparties ("Liability in contract")?

v) Have the Claimants elected against pursuing the Defendant in contract, by issuing proceedings and obtaining judgment against the Corporate Defendants ("Election")?

vi) Is the Defendant a party to the jurisdiction clause ("Separability")?

10

The second question in my judgment is then whether the Claimants can found jurisdiction by reference to Article 23. On the Claimants' case:-

i) Does English law apply to the identity of the parties to the contract ("Identity of the parties")?

ii) Was there consensus between the Claimants and the Defendant so as to found jurisdiction within Article 23 ("Consensus")?

11

The third question then relates to Article 24, namely as to whether, on the Claimants' case, the UK Courts have jurisdiction because the Defendant entered an appearance ("Entry of appearance").

12

After considering those...

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