Cunico Resources NV v Konstantinos Daskalakis
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Baker |
| Judgment Date | 18 January 2019 |
| Neutral Citation | [2019] EWHC 57 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 18 January 2019 |
| Docket Number | Case Nos: CL-2017-000402 & CL-2018-000025 |
[2019] EWHC 57 (Comm)
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
Mr Justice Andrew Baker
Case Nos: CL-2017-000402 & CL-2018-000025
(‘the 2017 Claim’)
(‘the 2018 Claim’)
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
I handed down a judgment in this matter on 7 December 2018, [2018] EWHC 3382 (Comm), dealing with an application in the 2018 Claim by the claimant Cunico Marketing FZE (‘Marketing’) for judgment against the first defendant, Mr Daskalakis, in default of acknowledgment of service. It also dealt with an application by Mr Daskalakis for an extension of time and/or relief from sanctions in respect of the lateness of his acknowledgment of service. Much of the introduction to that judgment is repeated here, so that either judgment can be read without reference to the other.
Mr Daskalakis and the second defendant, 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. 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. Where it is necessary to have regard to that timing point below, I do so; but for convenience 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. In the description I give below of the claims being made, I shall ignore this aspect entirely and refer to Feni's claims simply as such.
It is clear to me that all of the claims advanced against them are disputed on the merits by the defendants, but those merits do not fall to be considered in this judgment. The summary description of the claims that I give below is therefore, and must be understood as, just a description of those claims as they are asserted by the claimants, to allow analysis of the jurisdictional issues that arise for determination.
The following applications were argued before me:
i) In the 2017 Claim, the defendants' application dated 11 January 2018 challenging jurisdiction, dealt with in this judgment. 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. That is because the only basis for English jurisdiction relied on by the claimants is the jurisdiction provision in the defendants' respective Advisory Contracts with Marketing, quoted above. That jurisdiction provision does not satisfy Article 21 of the Convention. Therefore, it has no legal effect if Section 5 of the Convention applies, because it departs from the rule of jurisdiction under Section 5 that in matters relating to individual contracts of employment, the employer may only sue an employee domiciled in a Convention state in his or her state of domicile (see Articles 18, 20 and 23(5)).
ii) In the 2018 Claim, the applications I dealt with in my earlier judgment [2018] EWHC 3382 (Comm), that is to say:
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 and/or for relief from sanctions for the late filing of his acknowledgment of service.
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 ruling on the jurisdiction challenge in the 2017 Claim will determine it. That involved 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, and to that extent I granted Mr Daskalakis relief from sanctions as I explained in my earlier judgment.
The Claims
In CL-2017-000402 (‘the 2017 Claim’), Resources, Marketing and Feni are all claimants. The following claims are asserted.
EC Ecotech Consulting AG (‘Ecotech’), a Swiss company incorporated in December 2013 and alleged by the claimants to be connected to Mr Daskalakis or his family, is said to have received US$230,000 from Resources during 2014 and 2015 under two contracts for consulting services, dated 1 January 2014 and 1 January 2015, concluded between Resources and Ecotech. Resources alleges that the defendants caused or procured Resources to conclude those contracts and/or make those payments in breach of contractual and fiduciary duties owed to Resources.
Ecotech is also said to have received US$1,539,838.11 from Marketing in February 2015 under a service agreement dated 28 January 2015 concluded between Marketing and Ecotech for the provision of phyto-sanitary and environmental compliance services. Marketing alleges that the defendants caused or procured Marketing to enter into that contract and/or make that payment in breach of contractual and fiduciary duties owed to Marketing.
Finally, as regards Ecotech, it is said to have received US$39,486.80 from Marketing in settlement of an August 2015 invoice from Ecotech to Resources under the 1 January 2015 contract referred to in paragraph 12 above. Marketing alleges that the defendants caused or procured it to make that payment in breach of contractual and fiduciary...
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Cunico Resources NV v Konstantinos Daskalakis Arvind Mundhra
...Orders’). The judgments upon the basis of which those orders were made are [2018] EWHC 3382 (Comm) (‘the December Judgment’) and [2019] EWHC 57 (Comm) (‘the January Judgment’). The parties will not need me to reiterate the background or explain the proceedings. If anyone outside the case ......