Antonio Gramsci Shipping Corporation and Others v Aivars Lembergs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Beatson,Lord Justice Ryder,Lord Justice Lloyd |
| Judgment Date | 19 June 2013 |
| Neutral Citation | [2013] EWCA Civ 730 |
| Docket Number | Case No: A3/2012/1905 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 June 2013 |
[2013] EWCA Civ 730
Lord Justice Lloyd
Lord Justice Beatson
and
Lord Justice Ryder
Case No: A3/2012/1905
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION, COMMERCIAL COURT
The Hon. Mr Justice Teare
Royal Courts of Justice
Strand, London, WC2A 2LL
Simon Rainey QC and Natalie Moore (instructed by Clyde & Co LLP) for the Appellant
Anthony de Garr Robinson QC and Laurence Emmett (instructed by Pinsent Masons LLP) for the Respondent
Hearing date: 10 June 2013
Approved Judgment
This is an appeal by Antonio Gramsci Shipping Corporation and others ("Antonio Gramsci") against the Order by Teare J on 24 July 2012 reflecting his judgment handed down on 12 July. The judge held that the courts of England and Wales do not have jurisdiction pursuant to Articles 23 and 24 of the Brussels Regulation1 over Mr Aivars Lembergs, a wealthy businessman domiciled in Latvia. This appeal is only concerned with Article 23.
Article 23 provides that where parties (one or more or whom is domiciled in an EU Member State) "have agreed that … 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, … those courts shall have jurisdiction". Absent an agreement otherwise, such jurisdiction is to be exclusive.
As will be seen, in this appeal Antonio Gramsci relies, as it did below, on "piercing" a corporate veil. It does not, however, rely on the principal way jurisdiction pursuant to Article 23 was asserted against Mr Lembergs below. That was a direct contractual route. The appeal is concerned only with the circumstances in which a person who is not a party to a contract containing a jurisdiction clause can be regarded as having given his consent to the chosen jurisdiction. Antonio Gramsci's case is that as a matter of EU law such a person will be so regarded where he is a controller of a corporate entity which is a party to the contract and he has arguably fraudulently caused that corporate entity to enter into the contract in order to defraud the other party to the contract who has brought a claim.
The background:
The material parts of the factual and procedural background are stated in [2] – [10] of the judgment below, and can be summarised as follows. The substantive dispute concerns sixty-three charterparties of vessels owned by Antonio Gramsci to five offshore companies ("the Corporate Defendants") on the SHELLTIME 4 Time Charterparty form which contained an exclusive jurisdiction clause in favour of the courts of England and Wales. Antonio Gramsci alleges that the charterparties were entered into as part of a fraudulent scheme to charter the vessels from it at less than the market rate, and to sub-charter them at the market rate, thereby depriving it of the difference between the market rate and the charter rates. It alleges that the profits so made by the Corporate Defendants were to be used to enable Mr Lembergs and others who are alleged to have at that time been in control of the Corporate Defendants (including a Mr Stepanovs) to purchase shares in Antonio Gramsci's parent company, the Latvian Shipping Company ("LSC").
Proceedings were initially brought only against the Corporate Defendants. Although an application for summary judgment against them was refused by Gross J ([2010]
EWHC 1134 (Comm)), he permitted them to defend the claim only if they made a substantial payment into court. They did not do this, and in due course Antonio Gramsci obtained judgment against them in its claim for restitution of the profits unlawfully diverted from it. Antonio Gramsci has since sought to make Mr Lembergs and Mr Stepanovs liable for the diverted profits. The allegation is that they, along with others, established the Corporate Defendants and used them as a device for the purpose of diverting the profits, and that Antonio Gramsci is therefore entitled to pierce the corporate veil both in respect of the substantive claims and also to enforce the English jurisdiction clausesProceedings against Mr Stepanovs were lodged in October 2010 and he challenged the jurisdiction of the English court. The question for decision for Burton J in that case was whether a party to a contract with a corporation, which is controlled by an individual who has used it as a device or façade to conceal wrongdoing, can proceed against the individual in contract, and can establish jurisdiction by virtue of a jurisdictional clause in the contract with the corporate entity. On 25 February 2011, in Antonio Gramsci Shipping Corporation v Stepanovs [2011] EWHC 333 (Comm) 2011]; 1 Lloyd's Rep 647 ("the Stepanovs case") Burton J held there was a good arguable case that the corporate veil could be pierced or lifted to permit this and dismissed Mr Stepanovs' challenge to jurisdiction.
Proceedings against Mr Lembergs commenced with an application for a worldwide freezing order which was granted on 13 April 2011, and which, in a decision given on 4 August 2011, Cooke J refused to set aside. Shortly after that, on 24 August, Mr Lembergs issued his challenge to the jurisdiction of this court. At that time, the main way Antonio Gramsci put its case for jurisdiction based on Article 23 was the direct contractual route accepted by Burton J in Mr Stepanovs' case.
The hearing before Teare J commenced on 16 November 2011. By then the hearing before Arnold J in VTB Capital plc v Nutritek International Corp. and others, had concluded. In that case after a jurisdictional challenge to its pleaded case in tort the claimant sought to amend to raise the direct contractual route to jurisdiction in the Stepanovs case. The defendant challenged that route too. The decision in ( VTB Capital [2011] EWHC 3107 (Ch)) was handed down before the conclusion of the hearing in these proceedings. Arnold J disagreed with Burton J's decision in the Stepanovs case and rejected the direct contractual route to jurisdiction. His decision and his view of Burton J's decision was affirmed by this Court in its decision in the VTB Capital case on 20 June 2012: [2012] EWCA Civ 80 Teare J, who had deferred giving his decision, pending the outcome of that appeal, held that, in the light of it, he was bound to reject this argument.
As a result of permission being given by the Supreme Court for an appeal in the VTB Capital case on the direct contractual route to jurisdiction, permission to appeal that aspect of Teare J's decision was given. This ground was properly abandoned by Antonio Gramsci when the Supreme Court affirmed the decision of this court in the VTB Capital case: [2013] UKSC 5. That it is untenable has, if anything, been underlined by the very recent decision of the Supreme Court, after the hearing in these proceedings, in Prest v Petrodel Resources Ltd and others [2013] UKSC 34, on which see [65] and [66] below. Permission to appeal against Teare J's decision that Mr Lembergs had not submitted to the jurisdiction for the purposes of Article 24 of the Brussels Regulation was refused.
The question for decision:
The sole question for decision in this appeal now is what I, reflecting the substance of its characterisation in the submissions of Mr Rainey QC, on behalf of Antonio Gramsci, will describe as "the EU law point". It is whether the controller of a corporate body who has used the corporate body as a device or façade to conceal wrongdoing by entering into a contract with another containing an English jurisdiction clause can be regarded as having consented to jurisdiction within Article 23, although he is not a party to the contract with that other. In his judgment dated 24 July 2012 Teare J held that unless the controller "himself" has expressed or indicated any willingness that claims brought against him by the other contracting party may be tried in this jurisdiction, the answer is "no". I deal with Mr Rainey's submissions as to why the judge fell into error at [20]-[31]. At this stage it suffices to say that he maintains that the judge gave insufficient weight to the European jurisprudence on this point, in particular an established use in the context of Article 23 of deemed consent in particular circumstances, and that he was unduly and wrongly influenced by English contract law analysis including the analysis of the Court of Appeal in the VTB Capital case.
The judgment:
The judge dealt with the direct contractual route to jurisdiction, now blocked as a result of the Supreme Court's decision in the VTB Capital case, under two headings; "the factual issue" between [11] and [48], and "the legal issue" between [49] and [55]. I have stated that this is no longer a live issue in this appeal. But because of at least the significant factual overlap between it and the "EU law" Article 23 point, I will summarise the part of his judgment dealing with the first of the two headings before dealing with the "EU law" point.
Under the heading "the factual issue", the judge dealt with whether there is a good arguable case that Mr Lembergs was a beneficial owner and controller of the Corporate Defendants which were, on Antonio Gramsci's case, incorporated for the purposes of diverting profits from it. He stated (at [11]) that this was the factual case which Antonio Gramsci was required to establish in order to the lay the foundation for its argument the corporate veil may be pierced. At [34] he put the matter as follows:
"The factual issue is whether or not Mr Lembergs...
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