Base Metal Trading Ltd v Shamurin [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Tomlinson J,Tuckey,Arden L JJ,Newman J |
| Judgment Date | 14 October 2004 |
| Date | 14 October 2004 |
| Court | Queen's Bench Division (Commercial Court) |
Queens Bench Division (Commercial Court);
Court of Appeal (Civil Division).
Tomlinson J; Tuckey and Arden L JJ and Newman J.
Charles Hollander QC and Brian Dye (instructed by Holman Fenwick and Willan) for the claimant.
John Jarvis QC and James Evans (instructed by Weightmans) for the defendant.
The following cases were referred to in the judgments:
Arcado SPRL v Haviland SAECAS (Case 9/87) [1988] ECR 1539.
Attorney General of England and Wales v R [2002] NZLR 91.
Banque des Marchands de Moscou, ReELR [1958] Ch 182.
Barron v PotterELR [1914] 1 Ch 895.
Base Metal Trading Ltd v Shamurin [2002] CLC 322.
Boys v ChaplinELR [1971] AC 356.
Bristol & West Building Society v MothewELR [1998] Ch 1.
Castree v ER Squibb & Sons LtdWLR [1980] 1 WLR 1248.
Concha v ConchaELR [1892] AC 670.
Cook v DeeksELR [1916] AC 554.
Cordoba Shipping Co v National State Bank (The Albaforth)UNK [1984] 2 Ll Rep 91.
Coupland v Arabian Gulf Oil CoWLR [1983] 1 WLR 1136.
Credit Lyonnais v New Hampshire Insurance Co [1997] CLC 909.
Criterion Properties plc v Stratford UK Properties LLCUNK [2004] UKHL 28.
Daniels v DanielsELR [1978] Ch 406.
Definitely Maybe (Touring) Ltd v Marek Lieberberg Konzertagentur GmbH [2002] CLC 360; [2001] 1 WLR 1745.
Diamond v Bank of London and MontrealELR [1979] QB 333.
Distillers Co (Biochemicals) Ltd v ThompsonELR [1971] AC 458.
D'Jan of London Ltd, ReUNK [1993] BCC 646.
Duomatic, ReELR [1969] 2 Ch 365.
Ennstone Building Products Ltd v Stanger Ltd [2003] 1 CLC 265; [2002] 1 WLR 3059.
Henderson v Merrett Syndicates Ltd [1994] CLC 918; [1995] 2 AC 145.
Iran Continental Shelf Oil Co v IRI International CorpUNK [2002] EWCA Civ 1024; [2004] 2 CLC 696.
Jakob Handte & Co GmbH v Societe Traitments Mecano-Chimiques des Surfaces (TMCS)ECAS (Case 26/91) [1992] ECR I-3967.
Kalfelis v Bankhaus Schroder Munchmeyer Hengst & CoECAS (Case 189/87) [1988] ECR 5565.
Konamaneni v Rolls Royce Industrial Power (India) LtdWLR [2002] 1 WLR 1269
Kuwait Oil Tanker Co SAK v Al-BaderUNK [2000] 2 All ER (Comm) 271.
Leadenhall Capital Management Ltd v Shamurin (December 2001, Cresswell J).
Martin Peters Bauunternehmung GmbH v Zuid Nederlandse Aannemers VerenigingECAS (Case 34/82) [1983] ECR 987.
Metall und Rohstoff AG v Donaldson Lufkin & Jenrette IncELR [1990] 1 QB 391.
National Commercial Bank v Wimborne (NSW Supreme Court).
New British Iron Co, ReELR [1898] 1 Ch 324.
Paramasivam v FlynnUNK (1998) 160 ALR 203.
Pergamon Press Ltd v MaxwellWLR [1970] 1 WLR 1167.
Permanent Building Society v Wheeler (1994) 14 ACSR 109.
Raiffeisen Zentralbank Osterreich AG v Five Star General Trading LLCUNK [2001] EWCA Civ 68; [2001] CLC 843; [2001] QB 825.
Red Sea Insurance Co Ltd v Bouygues SA [1994] CLC 855; [1995] 1 AC 190.
Runciman v Walter Runciman plcUNK [1992] BCLC 1084.
Samcrete Egypt Engineers & Contractors SAE v Land Rover Exports LtdUNK [2002] EWCA Civ 2019; [2002] CLC 533.
Shaker v Al-BedrawiELR [2003] Ch 350.
Societe Nouvelle des Papeteries de l'Aa SA v BV Machinenfabriek BOA 1992 Nederlandse Jurisprudentie No 750.
Suidair International Airways Ltd, ReELR [1951] Ch 165.
Tai Hing Cotton Mill Ltd v Liu Chiong Hing Bank LtdELR [1986] AC 80.
Choice of law — Directors duties — Equitable duties — Central management and control of Guernsey company exercised in Russia — Company claimed against former director for breach of duty in entering into speculative metal trading — Contract of employment governed by Russian law — Any tort in substance occurred in Russia — Whether director's equitable duty to company governed by law of place of incorporation — Whether speculative trading authorised or in breach of duty — Contracts (Applicable law) Act 1990, Sch. 1 (Rome Convention), Art. 1(2)(e), 6.
This was an appeal by the claimant (BMTL), a Guernsey corporation, from a judgment of Tomlinson J dismissing bmtl's claim for damages against the defendant (“S”), a Russian national and its former director and employee, for breach of a common law, equitable and/or implied contractual duty of care by entering into speculative trades on the London Metal Exchange on its behalf.
BMTL was a metal trading company whose central management and control was exercised in Russia and which was incorporated in Guernsey as a convenient offshore location. S was a director and 50 per cent shareholder. The other 50 per cent shareholder bought metal in russia and arranged for its delivery. S sold the metal to foreign purchasers and was responsible for the company's activities outside Russia. BMTL traded on the lme to hedge its exposure on physical trades. The shareholders fell out and s left the company. BMTL made claims against S in respect of losses said to have been incurred as a result of S's speculative trading on the LME. S contended that that trading was within the scope of his authority.
BMTL claimed that S was in breach of a common law duty of care, of an implied term in his contract of employment and of his equitable duty as a director. BMTL accepted that such claims were not actionable under Russian law and in any event would have been time-barred in Russia. The judge held that Russian law was the proper law of each claim. The contractual claim was governed by Russian law under the provisions of art. 6 of the Rome Convention. S's employment contract was not more closely connected with Guernsey within the proviso to art. 6. Any tort was in substance committed in Russia where BMTL's business was conducted. Although the trades were done in London, where BMTL had its bank account, in reality the loss was felt by BMTL in Russia. The judge rejected the application of English law on the basis that England or Guernsey had the most significant relationship with the events which had occurred. The great similarity between the tort and equity claims meant that the same law should apply to both. The judge rejected BMTL's submission that Guernsey law should apply as the law of the place of its incorporation. He also indicated that even if Guernsey law or English law (which were taken to be the same) applied no breach of duty had been established against S. BMTL accepted the judge's finding that Russian law was the proper law of S's contract of employment, but challenged his other findings.
By respondent's notice S submitted that the common law and equitable duties of care relied on by BMTL were contractual obligations for the purposes of art. 1 of the Rome Convention and so were governed by the same law (Russian) as the contractual duty of care; and that although as a matter of English domestic law a claimant could rely on concurrent causes of action in contract and tort it was unfair to allow BMTL to choose which cause of action to rely on for the purposes of private international law.
Held, dismissing the appeal (Arden LJ dissenting):
1.The language of the Rome Convention did not support the submission that the common law and equitable duties of care relied on by BMTL were contractual obligations. A contractual obligation was by its very nature one which was voluntarily assumed by agreement. Terms might be implied into that agreement, but that was because they were necessary to make what had been agreed work and so that did not undermine the fact that the obligation was consensual. There was nothing consensual about the imposition of a tortious or equitable duty of care. It arose from a voluntary assumption of responsibility, but that was a state of affairs which was not dependent upon agreement.
2.Domestic law allowed concurrent claims in contract and tort and English private international law did so also. (Coupland v Arabian Gulf Oil CoWLR[1983] 1 WLR 1136applied.)
3. The wrongful acts in tort, being the decisions to speculate and give instructions accordingly, all took place in Russia. When damage had occurred which made the tort complete the right approach was to look back over the series of events constituting it and ask where in substance the cause of action arose and the judge was entitled to conclude that BMTL really felt its loss in Russia. The judge was entitled to reach the conclusion he did that the exception to the general rule of double actionability did not apply. That was almost inevitable given his conclusion, which was no longer challenged, that the contractual claim did not fall within the proviso to art. 6 of the Rome Convention.
4.The equitable duty arose from and only from the director's relationship with the company. If it did not relate to the constitution of the company, it related to its internal management. A director's duties to his company were inextricably bound up with those matters and must therefore be governed by the place of the company's incorporation. The question of the liability of a director by virtue of his office fell within the category of company law issues excluded from the operation of the Rome Convention by art. 1(2)(e). The law of the place of incorporation applied to the duties inherent in the office of director and it was irrelevant that the alleged breach of duty was committed, or the loss incurred, in some other jurisdiction. As Guernsey law, the law of BMTL's place of incorporation, imposed an equitable duty of care on its directors the judge was wrong to hold that Russian law governed that aspect of S's relationship with the company.
5.BMTL had not established any breach of duty by S. S was BMTL's managing director and responsible for its activities outside Russia which included entering into future trades on the LME. It could not be said that he had no power to enter into any speculative trade. It was not implicit from the agreement about hedging that he should not speculate. An agreement to do something did not usually equate to an implicit agreement not to do anything else. The answer would be different if speculation was outside the powers of the company although simply because it was...
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