Curtis v Lockheed Martin UK Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare,MR JUSTICE SIMON,Mr Justice Simon |
| Judgment Date | 06 November 2008 |
| Neutral Citation | [2008] EWHC 260 (Comm),[2008] EWHC 2691 (Comm) |
| Docket Number | Case No: 2007 FOLIO 961,Claim No: 2007 Folio 961 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 06 November 2008 |
[2008] EWHC 260 (Comm)
Mr. Justice Teare
Case No: 2007 FOLIO 961
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Catherine Newman QC and Gregory Banner (instructed by Kerman and Co.) for the Claimants
Michael Brindle QC and Rebecca Sabben-Clare (instructed by Allen &Overy) for the Defendant
Approved Judgment
Hearing dates: 15 February 2008
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 TEARE
The Court has before it an application by the Defendant to stay the determination of some of the issues in this action pending the completion of certain proceedings in Italy. The stay is sought, not on the basis of the Judgments Regulation, but on case management grounds. There is no dispute that a stay can be exercised on such grounds. Guidance as to how this discretion to stay should be exercised is to be found in the decision of this Court and of the Court of Appeal in Reichold v Goldman Sachs [1999] 2 Lloyd's Rep.567
The London Action
The Claimants in this action are two persons who sold the shares in Stasys Limited (“Stasys”) to the Defendant, a UK company, pursuant to the terms of an agreement dated 10 December 2004 and which was completed on 28 February 2005. The claim is for the sum of £2m., being the final tranche of the sale price. The Defendant resists that claim on the basis that it has given notice of a General Warranty Claim which entitles it to withhold the final tranche. It counterclaims for damages for breach of several warranties. The Defendant alleges that the Claimants, in breach of warranty, failed to disclose the existence and terms of all contracts relating to a project named PUBCYS which had been entered into by Stasys (which I shall refer to as the “material contracts warranty”) and/or failed to make fair disclosure of allegations of breach of obligation relating to PUBCYS and/or failed to disclose threats of legal proceedings against Stasys in respect of PUBCYS (which I shall refer to as the “litigation warranty”). PUBCYS was a proposed publishing refuse certification system. The idea underlying PUBCYS was to track magazine and newspaper stocks for the publishing industry.
The PUBCYS project involved at least two contracts. The first was a contract dated 19 September 2002 known as the Exploitation Agreement. The second was a contract dated 16 October 2001 known as the Development Agreement. The Claimants admit that they did not disclose the Exploitation Agreement or the annexes to the Development Agreement to the Defendant. They say that they were not obliged to because those contracts were not “material contracts” as defined in the share sale agreement. Material contracts were defined as contracts and agreements to which Stasys was party and in respect of which its obligations had at the date of the share sale agreement not been completely fulfilled. They further say that the Development Agreement had been completed by no later than 23 July 2004 and that Stasys had discharged its obligations under that agreement. The Claimants rely in particular on a statement by the EC (which was a party to the Development Agreement and had funded the PUBCYS project) that the Development Agreement had been completed. As to the Exploitation Agreement the Claimants say that that was “nothing more than a revocable indication of willingness to form a corporate vehicle upon the Development Agreement producing 'expected results'”. They further say that Stasys did not indicate that it wished to proceed with PUBCYS after the completion of the Development Agreement and so had no obligations under the Exploitation Agreement. Thus neither the Development Agreement nor the Exploitation Agreement was a material contract.
The Turin Action
Before the proceedings in the London action were commenced on 5 June 2007 proceedings had been commenced in the Turin Civil Court on 19 July 2006 against Stasys and others by Antonio Pacile in relation to the PUBCYS project. He claims damages of over 36m. Euros. The other defendants have filed third party claims against Stasys claiming damages of over 80m. Euros.
The basis of Mr. Pacile's claim in Turin is not clear, at least to English lawyers. It has been summarised by the Defendant as follows. Mr. Pacile alleges that he created the PUBCYS project and that he reached an agreement with Stasys and other companies through which he entrusted them with the development of the project. His case is that they agreed to provide services in exchange for a share of the profits. He refers to contracts dated 20 December 2001 and 3 September 2002 which are neither the Development Agreement nor the Exploitation Agreement. However, it is common ground between the parties to the English action that Mr. Pacile's claim is based on the premise that PUBCYS should have been developed in accordance with the Development Agreement. It is also common ground that the other companies who have brought third party proceedings against Stasys allege breaches by Stasys of the Development Agreement. The Defendant says that the other companies also allege breaches of the Exploitation Agreement. The Claimants put the Defendant to proof of this allegation.
Stasys denies that is has any liability either to Mr. Pacile or to the other companies. So far as Mr. Pacile is concerned Stasys says, firstly, that Mr. Pacile was not party to the Development Agreement or to the Exploitation Agreement and therefore has no claim and, secondly, that the Development Agreement has been performed, relying upon the same statement by the EC as the Claimants in the London action rely upon. So far as the Exploitation Agreement is concerned Stasys says that it did not bind Stasys to undertake exploitation of the PUBCYS project. This appears to mirror what the Claimant says about that agreement in the London action.
The application for a stay
The Defendant's application is for a stay of the issue concerning the material contracts warranty. The key point relied upon is that there is an issue which is common to both the London and Turin actions, namely, whether the Development Agreement and Exploitation Agreement had been performed by Stasys. That issue is raised in the London action because a material contract is one which has not been completely fulfilled. It is raised in the Turin action because Mr. Pacile and/or the other companies allege that Stasys was in breach of the Development Agreement and/or of the Exploitation Agreement. There is therefore a risk of inconsistent decisions between the London and Turin Courts. This Court might hold that the Development Agreement and Exploitation Agreement had been completely fulfilled and the Turin Court might later hold that they had not been. The Defendant said this would be an injustice. For this reason it was said that the determination of the material contracts issue should be stayed pending the decision in the Turin action to which all those who entered into the two agreements are party. All other issues in the London action (save perhaps the quantification of damages on the counterclaim) could be heard.
It was said on behalf of the Claimants that the Turin Court might dismiss Mr. Pacile's claims on the basis that he was not a party either to the Development Agreement or to the Exploitation Agreement and that therefore the Turin Court might not determine whether or not those contracts were breached. It is no doubt possible that Mr. Pacile's claim may be dismissed on the grounds that he was not a party to those agreements but it would appear that the question whether the Development Agreement and, possibly, the Exploitation Agreement were breached, even if not answered in Mr. Pacile's claim, will have to be answered by the Turin Court in the third party claim.
It therefore appears that there is, as suggested by the Defendant, a risk of inconsistent decisions.
A related point relied upon by the Defendant is that it would be forced to adopt contrary positions if the two actions proceeded at the same time. In London the Defendant would be saying that the agreements had not been completely fulfilled and in Turin Stasys, now owned by the Defendant, would be saying that they had been completely fulfilled.
The relevant principles
As already indicated I take these from the decision of this Court and of the Court of Appeal in Reichold v Goldman Sachs [1999] 2 Lloyd's Rep. 567. The Court has an interest in deciding the order in which related proceedings should be tried
“not only because the existence of concurrent proceedings may give rise to undesirable consequences in the form of inconsistent decisions, but also because the outcome of one set of proceedings may have an important effect on the conduct of the other” (per Moore-Bick J. at p.571).
For that reason the court may manage the order in which the proceedings are heard. It is clear from the decision in that case that such case management is appropriate even where the proceedings are taking place between different parties in different jurisdictions.
However, before an action which has been properly commenced here is stayed pending the outcome of proceedings between different persons in another jurisdiction is granted, the defendant must show
“very strong reasons for doing so and the benefits which are likely to result from doing so clearly outweigh any disadvantage to the plaintiff” (per Moore-Bick J. at p.572).
Although there is “very real burden” on the defendant “to satisfy the Court that the ends of justice would be better served by granting a stay”...
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