Global Container Lines Ltd v Bonyad Shipping Company [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Rix J |
| Judgment Date | 12 June 1998 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 12 June 1998 |
Queen's Bench Division (Commercial Court).
Rix J.
Steven Berry (instructed by Theodore Goddard) for the plaintiffs.
Karen Troy-Davies (instructed by Brookes & Co) for the defendants.
The following cases were referred to in the judgment:
Baytur SA v Finagro Holding SAUNK [1992] 1 Ll Rep 134.
Beals v Washington International Inc (1978) 386 A 2d 1156.
Eastern Capital Holdings v FitterUNK (unreported, 19 December 1991, Evans J).
Foster Yates & Thom Ltd v H W Edgehill Equipment LtdUNK (unreported, 28 November 1978, CAT No. 800/1978).
Heit v Tenneco IncUNK (1970) 319 F Supp 884.
Industrie Chimiche Italia Centrale v Alexander G Tsavliris & Sons Maritime Co (“The Choko Star”) [1995] CLC 1461; [1996] 1 WLR 774.
Lazard Brothers and Co v Midland Bank LtdELR [1933] AC 289.
Lewis v Anderson (1982) 453 A 2d 474; (1984) 477 A 2d 1040.
Meier v MeierELR [1948] P 89.
Mercer Alloys Corp v Rolls Royce LtdWLR [1971] 1 WLR 1520.
Morris v HarrisELR [1927] AC 252.
Sardinia Sulcis, TheUNK [1991] 1 Ll Rep 201.
Steans Fashions Ltd v Legal and General Assurance Society LtdUNK [1995] BCC 510.
Thynne v ThynneELR [1955] P 272.
Toprak Enerji Sanayi AS v Sale Tilney Technology plcWLR [1994] 1 WLR 840.
Yorkshire Regional Health Authority v Fairclough Building Ltd [1996] CLC 366; [1996] 1 WLR 210.
Proceedings — Substitution of plaintiff — Conflict of laws — Universal succession — Plaintiff Bahamian company merged with Delaware company — Whether Bahamian company continued to exist under Bahamian and Delaware law — Whether English court would recognise continued existence — Whether merged company could be substituted as plaintiff after original company ceased to exist — RSC, O. 15, r. 7(2).
The plaintiff company applied to be substituted as plaintiff in an action under RSC, O. 15, r. 7(2).
The plaintiff company, registered in the Bahamas (“Global Bahamas”), was run from New York. Its controllers incorporated another company with the same name as the plaintiff in Delaware (“Global Delaware”). In August 1997 when proceedings by the plaintiff against the defendant, Bonyad, were on foot, Global Bahamas and Global Delaware agreed to merge. The merger agreement provided for the merger to become effective on the filing of a merger certificate in the Bahamas and in Delaware. The certificate was filed in Delaware in August and in the Bahamas on 4 September 1997. The International Business Companies Act of the Bahamas provided that proceedings for or against a constituent company to a merger did not abate but were continued by or against the surviving company, and that where the surviving company was a foreign company the merger was effective as provided by the laws of the foreign jurisdiction. The Delaware General Corporation Law provided for proceedings to be prosecuted as if the merger had not taken place. Global Bahamas was struck off the Bahamian register on 1 April 1998 with effect from 30 September 1997. On 17 March 1998 the plaintiff applied for Global Delaware to be substituted for Global Bahamas in the proceedings against Bonyad under RSC, O. 15, r. 7(2). Bonyad would consent to substitution but only on terms that most of the orders made in the proceedings since 4 September 1997 (when, Bonyad argued, the plaintiff ceased to exist and the proceedings became a nullity) were discharged and its costs paid on the indemnity basis.
Held, making an order substituting Global Delaware as plaintiff:
1. When the application to substitute Global Delaware for Global Bahamas was made in March 1998, Global Bahamas was still in existence because it was only struck off the Bahamian register on 1 April 1998. The fact that by administrative fiat of the registrar the company was deemed struck off six months earlier did not affect its existence and ability to make that application.
2. In any event Global Bahamas had not wholly ceased to exist, despite its merger into Global Delaware, and in particular it continued to exist for the purposes of the litigation. Under Bahamian law, which was the relevant law as the law of Global Bahamas' incorporation, the statute provided that a constituent company after an effective merger continued in existence so far as current litigation was concerned. Under Bahamian law, to the extent that Delaware law provided otherwise, Delaware law would prevail and the Delaware statute was to the same effect in relation to existing litigation. The provisions of Bahamian and Delaware law had a procedural context but were not procedural only and would be recognised by the English court.
3. In any event there was jurisdiction under O. 15, r. 7(2) to substitute Global Delaware as plaintiff even after Global Bahamas had ceased to exist. Neither the authorities nor the rules were inconsistent with a power to substitute a new party under r. 7 even after the dissolution of a company litigant, and such a power was desirable and necessary to enable the courts to do justice in the case of universal succession following a corporate reorganisation. Once the party was substituted the proceedings were revived including what had happened in the interim between dissolution of the company and substitution. ( Morris v HarrisELR [1927] AC 252 distinguished, Mercer Alloys Corp v Rolls Royce LtdWLR[1971] 1 WLR 1520andYorkshire Regional Health Authority v Fairclough Building Ltd[1996] CLC 366; [1996] 1 WLR 210applied.)
4. As a matter of discretion Global Delaware should be substituted. That would give effect to the foreign law which contemplated that substitution was not necessary or that the surviving company would be substituted. The fact that orders had been made in the interim was not a good reason not to substitute. Bonyad argued that had the application to substitute been made in good time, it would have taken time to argue and the subsequent course of proceedings would have been different, but that was wrong because if the application had been made in time there would have been no answer to it. Accordingly Global Delaware would be substituted on terms which did not discharge the orders made in the interim.
Rix J: In this long-running litigation the defendants, Bonyad Shipping Co (“Bonyad”), now submit that the plaintiffs, Global Container Lines Ltd, ceased to exist on 4 September 1997, and that this action therefore irrevocably came to an end on that date. They submit that all the proceedings which have occurred since that date are a nullity and wholly void. They are willing, however, to permit a substitution under RSC, O. 15, r. 7 of the new company into which the allegedly defunct plaintiffs have been merged, but only on terms which effectively discharge nearly all the orders which have been made in this action in the interim, with an award of indemnity costs against the new company. They have drawn up a draft order which contains the terms upon which they are willing to consent to substitution. Otherwise, however, they wish to stand on their rights, and ask that these proceedings be declared a nullity as from 4 September 1997.
The plaintiffs for their part submit that they have not wholly ceased to exist, but survive the merger for the purpose of existing actions. In any event the new company applies to be substituted, on terms which it is submitted would protect Bonyad's legitimate interests, but not so as to eliminate the progress of the last eight months' litigation. It is submitted that there is power to substitute the new company even after the death of the old, and that as a matter of discretion the court ought to do so in this case.
Those are the battle-lines. These are the facts.
The plaintiffs, Global Container Lines Ltd, are (or were: my tenses are without prejudice to the issue before me) a Bahamian company, registered under the laws of the Commonwealth of the Bahamas, with an address in Nassau, Bahamas. I shall call the plaintiffs “Global Bahamas”. The company was incorporated in August 1985, originally as a domestic corporation under the general company legislation of the Bahamas, with a registered address at 50 Shirley Street, Nassau, Bahamas. In July 1990 its registered address changed to Mareva House, 4 George Street, Nassau, Bahamas. That change of address resulted from the office move of the firm of attorneys who provided office services for the plaintiffs in the Bahamas. In December 1990 Global Bahamas was incorporated afresh (or re-registered and continued) as an international business company under the International Business Companies Act 1989. In 1995 when it commenced this action its address was given as 50 Shirley Street: that was an error, for the new address at Mareva House should have been used.
Global Bahamas has always been operated by its principals from offices at 100 Quentin Roosevelt Boulevard, Garden City Center, Garden City, New York. It is from there that Global Bahamas has conducted its joint shipping venture with Bonyad, an Iranian company. It is there that Bonyad has from time to time visited Global Bahamas during the course of that venture. The joint venture, which operated liner and tramp services to Iran and the Persian Gulf, lasted between 1991 and 1994 but ended in disputes which have given rise to this litigation. The details of those disputes can be read about in [1998] 1 Ll Rep 528. For the present, those details do not matter.
In 1990 the principals of Global Bahamas incorporated another company with the identical name of Global Container Lines Ltd in the State of Delaware, USA, with a registered address at c/o United Corporate Services Inc, 15 East North Street, Dover, Kent, Delaware 19901, USA. I shall call that company “Global Delaware”. It was incorporated in order to protect the name of Global Container Lines Ltd in the US, but it remained a dormant company until the 1997 merger to which I shall refer below. Its name and...
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