Cunico Resources NV v Cunico Marketing FZE Feni Industries AD
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Baker |
| Judgment Date | 07 December 2018 |
| Neutral Citation | [2018] EWHC 3382 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case Nos: CL-2017-000402 & CL-2018-000025 |
| Date | 07 December 2018 |
Cl-2017-000402 (‘the 2017 Claim’)
Cl-2018-000025 (‘the 2018 Claim’)
[2018] EWHC 3382 (Comm)
Mr Justice Andrew Baker
Case Nos: CL-2017-000402 & CL-2018-000025
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London EC4A 1NL
(but handed down in the Crown Court at Manchester)
Thomas Grant QC and Caley Wright (instructed by Hogan Lovells International LLP) for Cunico Resources NV and Cunico Marketing FZE
Alain Choo Choy QC (instructed by Wallace LLP) for the Defendants
Feni Industries AD did not appear and was not represented on this hearing
Hearing dates: 5, 6, 7 November 2018
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.
Introduction
The defendants, Mr Daskalakis and Mr Mundhra, worked for the Cunico group, respectively from late 2004 to January 2016 and from August 2005 to October 2015. The group operated in base metals industries and markets. The name ‘Cunico’ is an amalgam of the periodic table abbreviations for copper (Cu), nickel (Ni) and cobalt (Co). The defendants’ primary jobs were CEO and CFO respectively of Feni Industries AD (‘Feni’), the main industrial operating subsidiary of the group, incorporated and operating in FYR Macedonia. Feni owned and operated a ferronickel production plant in Kavadarci and the Rzanovo iron and nickel mine 50 km or so south of the city.
Cunico Resources NV (‘Resources’) was incorporated in the Netherlands, to become the group holding company, in May 2007. Cunico Marketing FZE (‘Marketing’) was incorporated in Dubai, UAE, in July 2007, and operated in the Jebel Ali Free Zone as the main market-facing trading entity in the group. Resources had no operating activities. It existed as a holding company for the operating subsidiaries as investment assets, with a single dedicated (full-time) employee. Marketing traded by purchasing ore from other Cunico subsidiaries, and bailing the ore to a ferronickel plant within the group under a ‘tolling agreement’, for conversion by the plant to finished ferronickel. Marketing then sold the finished product to the market. Under the tolling agreement, fees for converting Marketing's ore into finished ferronickel would be payable by Marketing to the operator of the ferronickel plant (e.g. Feni).
Thus, the group became the Cunico group only in May 2007, when Resources was incorporated, whereas the defendants joined in late 2004 and August 2005. That does not matter for the purposes of this judgment and I shall refer to the group as the Cunico group throughout.
The Cunico group was owned, at the time of the events said to give rise to claims against the defendants, as a joint venture between International Mineral Resources BV (‘IMR’) and BSGR Cooperatief UA (‘BSGR’). Latterly, IMR has effectively all but bought BSGR out, via the intervention of proceedings in the Amsterdam Enterprise Chamber, so that today Resources is owned as to c.80% by Summerside Investments S.a.r.l., IMR's parent company, with 50% of the remainder owned by each of IMR and BSGR.
So-called ‘Advisory Contracts’ were signed as between Marketing and each of the defendants, in 2007 and again in 2010, that contained a jurisdiction provision in these words: “In case of disagreements, they shall be solved in the Court of the United Kingdom”. The claimants say that provision gives this court jurisdiction over their respective claims against the defendants under Article 23 of the Lugano Convention. It is common ground that the defendants were domiciled in Switzerland when proceedings were brought and that the claims brought against them are within the material scope of the Lugano Convention, so indeed it governs the question of jurisdiction in this case. It is also common ground that, in this international business context, the reference in the Advisory Contracts to “the Court of the United Kingdom” should be interpreted to mean the courts of England and Wales.
Feni is now subject to a form of insolvency process in Macedonia pursuant to which a trustee in bankruptcy has been appointed who has control of Feni's affairs. There is a dispute that does not require to be considered at this stage whether any rights Feni may have against the defendants have been validly assigned to Resources. Because of that dispute, Feni, acting by the trustee in bankruptcy, is separately represented in the proceedings generally. But it made no separate appearance in or submissions on the applications argued before me. They were therefore argued by Mr Choo Choy QC for the defendants and by Mr Grant QC for Resources and Marketing, but Mr Grant's submissions on behalf of Resources as (so it claims) assignee of Feni's rights dealt also with the position of Feni.
It is clear to me that all of the claims advanced against them are disputed on the merits by the defendants. Those merits do not fall to be considered at this stage, although in the case of Mr Daskalakis, why they have not yet been addressed in any detail is of some relevance to his application identified in paragraph 8(ii)(b) below.
The following applications are presently before the court:
i) In the 2017 Claim, the defendants' application dated 11 January 2018 challenging jurisdiction. The principal issue is whether the claims made are matters relating to individual contracts of employment so as to engage Section 5 of the Lugano Convention. It is common ground that any claims that do engage Section 5 cannot be brought here.
ii) In the 2018 Claim,
a) Marketing's application dated 4 July 2018 for judgment against Mr Daskalakis in default under CPR 12.3(1), and
b) Mr Daskalakis' cross-application dated 10 July 2018 for a retrospective extension of time for filing an acknowledgment of service. His time for doing so expired on 6 June 2018. He filed acknowledgment of service on 4 July 2018, an hour before Marketing filed its default judgment application. To the extent the extension of time application involves or requires it, Mr Daskalakis applies for relief from sanctions for the late filing of his acknowledgment of service.
This judgment deals with those applications in the 2018 Claim. There will be a separate judgment on the jurisdiction application in the 2017 Claim.
It will be relevant to the applications dealt with now to know that the defendants have also applied to challenge jurisdiction in the 2018 Claim, by application dated 26 July 2018, relying on the same grounds as they raise in respect of Marketing's claims in the 2017 Claim. That application was not listed for consideration at this stage, but the parties agreed that the outcome of the jurisdiction challenge in the 2017 Claim will determine it. That involves an acceptance by Marketing that Mr Daskalakis should be entitled to challenge jurisdiction in the 2018 Claim even though he filed his acknowledgment of service late. His application challenging jurisdiction was then made within 28 days of that filing, the time limit on the face of things set by CPR 11(4) as modified in the Commercial Court by CPR 58.7.
The Three Meanings
Marketing accepted that it could not ask for default judgment to be entered if it could not persuade the court that it has jurisdiction in respect of the claims made against Mr Daskalakis in the 2018 Claim. However, Mr Daskalakis did not acknowledge service in accordance with CPR Part 10, he did so 28 days after the period set by CPR Part 10.
On the face of things, Mr Daskalakis is therefore not entitled to challenge jurisdiction, unless he obtains a retrospective extension of time and/or relief from sanctions (see CPR 11(2)). But that is or may be a separate question to whether his late-filed acknowledgment of service precludes any judgment in default under CPR 12.3(1).
That issue, i.e. whether an acknowledgment of service filed late, but before a request or application for judgment in default under CPR 12.3(1), precludes the grant of such a judgment, is an important issue of principle. It is the subject of conflicting first instance decisions and obiter dicta.
The issue is one of the proper construction of the conditions fixed by CPR 12.3(1) for the obtaining of judgment in default. Three suggested constructions emerge from the prior decisions (‘the three meanings’):
i) firstly, that CPR 12.3(1) only allows the court to grant default judgment where, at the time of judgment, there is no acknowledgment of service and the time for acknowledging service has expired (‘the first meaning’);
ii) secondly, that CPR 12.3(1) allows the court to grant default judgment so long as, at the time the request or application for default judgment is filed, there was no acknowledgment of service and the time for acknowledging service had expired (‘the second meaning’);
iii) thirdly, that CPR 12.3(1) allows the court to grant default judgment where timely acknowledgment of service was not filed, irrespective of any acknowledgment of service later filed, ex hypothesi after expiry of the time period set under CPR Part 10 (‘the third meaning’).
In the present case, Marketing needs the third meaning to be correct. Only that third meaning prevents Mr Daskalakis' late-filed acknowledgment of service from defeating the application for default judgment (unless, if at all, that acknowledgment of service is first set aside by the court). Which meaning is correct will also define what sanctions (express or...
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