Friis and Another v Colburn
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PETER SMITH |
| Judgment Date | 01 May 2009 |
| Neutral Citation | [2009] EWHC 903 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC08C02673 |
| Date | 01 May 2009 |
[2009] EWHC 903 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Justice Peter Smith
Case No: HC08C02673
Andrew Popplewell QC & Daniel Jowell (instructed by Skadden) for the Respondents
Sue Prevezer QC & Matthew Bunting (instructed by Quinn Emanuel) for the Applicant
Hearing dates: Tuesday 31st March 2009
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.
Peter Smith J:
INTRODUCTION
This is an application by the Defendant (Ms Colburn) pursuant to CPR 11 for an order staying or dismissing these proceedings on the basis that the Court does not have jurisdiction to determine the claim, alternatively, that it should not exercise its discretion to determine it.
These kind of hearings are meant to be dealt with quite robustly by the Courts. In this case the hearing attracted 5 lever arch files of documents followed by the (almost traditional) disregard of the vast majority of the documents. Lengthy skeleton arguments were submitted and the hearing lasted a full day. Further the costs (as will appear further in this judgment) can only be described as horrendous. In this case the Claim Form was issued as long ago as 22nd September 2008. The order under challenge that of Master Teverson was made on 29th October 2008. The only activity in the action since then so far as I am aware is the Defendant's application issued on 19th December 2008 to set aside the original order.
The Claimants had incurred £300,000 worth of costs apparently before dealing with the present application. Their cost schedule for the present application is £215,280.50. The Defendant's cost schedule is more modest but still a mind boggling £112,699.29.
It is costs like this which are driving people out of the Courts. I will be providing details of these costs to Lord Justice Jackson for his Costs Review currently under investigation. Further as appears later in this judgment the size of the Claimants' costs in particular is a factor which has led me to conclude (for other reasons as well) that I should exercise my discretion and not allow the action to proceed in this jurisdiction and set aside the order.
Further the case has been strung out by unrealistic stances and unnecessarily prolonged and complicated submissions which seem to achieve nothing other than create fogs of irrelevancy. It is plain that this case should have involved simply one issue only namely whether or not this Court should exercise its discretion on the facts to set aside the order for service out of the jurisdiction. None of the other arguments has any merit but simply raise irrelevancies which simply ought not to have been argued.
BACKGROUND
The Claimants are the co-founders of Skype SA (“Skype”) a limited liability company registered under the laws of Luxembourg. It is a well known internet telephone company based on peer to peer principles. It has become famous as a result of its ability to permit users free or low cost telephone over the internet.
The Claimants are resident in England (although they were remarkably coy about that). First in the statement in support of the application for permission of Gerald Steven Paul Mitchard dated 22nd September 2008 he said somewhat cryptically “I have been informed by both the Claimants that they reside in London England” the address given on the Claim Form turns out to be offices which provide post box services. The Defendant was rightly concerned about this because the Claimants' genuine residence was in my view a factor to be taken into consideration in the Court exercising its discretion. Ultimately on the day of the hearing the Claimants provided true addresses confidentially. I cannot understand the coyness (it cannot be suggested that they were fearful of anything the Defendant might do if she obtained their addresses).
The Defendant is an American citizen living in California.
The Defendant worked for 2 US companies, Europlay Capital Advisors LLC (“Europlay”) and Eurocapital Advisors LLC(“Eurocapital”). These companies provided investment banking services to the Claimants. There is no doubt that they provided those services for the purposes of this relevant dispute from September 2005 at the latest. There is a dispute as to the extent of services provided before that but none of that in my view is relevant.
The Claimants provided confidential information to the Defendant and this is not disputed. What is in dispute is the terms on which it was provided and the obligations that arose there under.
The Claimants contend that the material was provided and at a meeting (ultimately identified by the Claimants as being on 10th October 2005) at the Connaught Hotel they intimated to her that the information provided was to be held by her in strict confidence. They also contend that at that meeting she expressly undertook to them that she would keep the information strictly under confidence and would use it only for the purpose of her role in the transactions. In addition, the Claimants contend it was expressly agreed that the information supplied would be stored solely on servers in Netherlands operated by a company called Herho Holdings BV (“Herho”). That was a Dutch subsidiary of one of the Californian companies Europlay. It was formed for the purpose of acquiring and utilising material provided to it as the Sellers Representative under agreements which arose out of the decision made by the Claimants to sell Skype to Ebay. They also contend that it was expressly agreed that the information would not be kept in the United States. It is said that the reason for that was they did not wish to maintain documents in the United States because of disclosure obligations that might arise in disputes in the United States.
There are 3 difficulties about their case which have been seized upon by the Defendant. First the agreement ultimately they said took place on 10th October 2005 yet the vast bulk of the material had been provided from 11th September 2005. I do not think that is a serious difficulty because there is no reason why the Claimants and the Defendant cannot agree on 10th October how documentation that had been received on 11th September 2005 should be held. Second the Defendant points out that a large amount of material was provided by email to her at her Californian based server of Europlay. The Defendant rightly points out in other litigation this supposed importance was not referred to which I accept is somewhat surprising. Third the Defendant points out that Herho was not actually incorporated until 11th October 2005 and did not become operational until December 2005.
The Defendant denies she gave any express direct undertaking as to confidentiality. She contends that the documents were received by her confidentially but under the umbrella of the confidentiality arrangements that were in place between the Claimants and Europlay and Eurocapital. Thus it is submitted that the jurisdiction and law is that of California.
BACKGROUND TO THE SALE
As I have said above the Claimants were the major shareholders in Skype. In 2005 they and other Skype shareholders negotiated a sale of Skype (or rather its shares) to Ebay. The consideration was divided in to 2 parts (1) an upfront payment comprising cash and Ebay stock and (2) a package of deferred consideration under which certain Skype shareholders (“the Earn-Out Sellers”) would be paid for their shares at a future date at a price which reflected Skype's performance. The core documents giving effect to the sale were a Sale and Purchase Agreement entered into by Ebay and Skype shareholders dated 11th September 2005 (“Sale Agreement”) and a separate Earn-Out Agreement on the same date.
Both those documents provided (although they have not been produced in their entirety for confidentiality reasons) for English law to apply to the agreements and that the jurisdiction for any disputes was to be England and Wales.
Of course neither the Defendant nor her employers was a party to either of those agreements but it is the Claimants contend part of the background material to justify the existing issue of the present proceedings.
Once the Sale Agreement and Earn Out Agreement had been signed it was necessary to establish a Sellers Representative and an Earn Out Representative. The Second Claimant Mr Zennstrom had been initially appointed to both roles but that was only on a temporary basis. The Claimants discussed the issue of who should be a permanent representative in London with their financial advisors from Europlay which that is a company in Delaware. The advisors included the Defendant. This led to the decision to form Herho. The Defendant became its sole director when it became operational.
In my view it is impossible to say that the Claimants have not raised a case that there was a duty of confidence in England assumed directly by the Defendant. This is not the trial. There are difficulties about the Claimants' evidence but at the end of the day when the question as to the issues as to jurisdiction is concerned unless the evidence is capable of being rejected as being incredible along the lines of the well known case of National Westminster Bank Plc v Daniels [1993] 1WLR 1453 I am bound to assume that what the Claimants say in signed witness statements backed by a statement of truth is for the present purposes correct. If the factual background that they set out in those statements is correct it is clear that the Claimants have a good arguable case that the claim falls within one or...
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