Grupo Torras SA v Al-Sabah [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mance J. |
| Judgment Date | 24 June 1999 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 June 1999 |
Queen's Bench Division (Commercial Court).
Mance J.
Anthony Boswood QC, Andrew Popplewell QC and Paul Wright (instructed by Baker & McKenzie) for the plaintiffs.
Richard Field QC, Robin Knowles and Antony Zacaroli (instructed by Nicholson Graham Jones) for the first defendant until 4 December 1998.
John Jarvis QC and Michael Rollason (instructed by Simmons & Simmons) for the third defendant until 3 December 1998.
Edward Bailey (instructed by Edwin Coe) for the fourth defendant.
The sixth, ninth, tenth and 24th defendants appeared in person.
John McGhee and John Bignall (instructed by Morgan Lewis & Bockius) for the 53rd defendant.
Richard Hacker QC (instructed by Norton Rose) for the second defendant by counterclaim.
The following cases were referred to in the judgment:
Agip (Africa) Ltd v JacksonELR [1990] Ch 265
Anglo-French Co-operative Society, ex parte Pelly, ReELR (1882) 21 ChD 492
Arab Monetary Fund v Hashim (unreported, 15 June 1994)
Arab Monetary Fund v Hashim (unreported, 29 July 1994)
Armagas Ltd v Mundogas SA (The “Ocean Frost”)UNK [1985] 1 Ll Rep 1
Baden v Société Génerale pour Favoriser le Développement du Commerce et de l'industrie en France SAWLR [1993] 1 WLR 509
Banco de Bilbao v SanchaELR [1938] 2 KB 176
Banque Financière de la Cite v Park (Battersea) Ltd [1998] CLC 520; [1999] 1 AC 221 (HL(E))
Belmont Finance Corp Ltd v Williams Furniture Ltd (No. 2)UNK [1980] 1 All ER 393 (CA)
Boys v ChaplinELR [1971] AC 356
Brink's Ltd (formerly Brink's Mat Ltd) v Abu-Saleh [1996] CLC 133
Chase Manhattan Bank NA v Israel-British Bank (London) LtdELR [1981] Ch 105
Chemetron Corp v Business Funds IncECAS (1982) 682 F 2d 1149
Citadel General Assurance Co v Lloyds Bank CanadaUNK (1997) 152 DLR 411
Courtaulds Investments Ltd v FlemingWLR [1969] 1 WLR 1683
Cowan de Groot Properties Ltd v Eagle Trust plcUNK [1992] 4 All ER 700
Crofter Hand Woven Harris Tweed Co v VeitchELR [1942] AC 435
Dubai Aluminium Co Ltd v SalaamUNK [1999] 1 Ll Rep 415
Eagle Star v SBC SecuritiesUNK [1996] BCLC 121
El Ajou v Dollar Land Holdings plcUNK [1994] 2 All ER 685; [1994] BCC 143
Generale Bank v Export Credits Guarantee Department (unreported, CA Transcript No. 1457 of 1997)
Gray v Lewis (1873) 8 Ch App 1035
H (Minors) (Sexual Abuse: Standard of Proof), ReELR [1996] AC 563
Jones (F C) & Sons (a firm) (Trustee of the property of) v JonesELR [1997] Ch 159
Kuwait Oil Tanker SAK v Al Bader (unreported, 16 November 1998)
Lipkin Gorman (a firm) v Karpnale LtdELR [1991] 2 AC 548
Lonrho v Shell Petroleum Co Ltd (No. 2)ELR [1982] AC 173 (HL)
Lonrho Ltd v Shell Petroleum Co Ltd (unreported, 6 March 1981, CA)
Lonrho plc v FayedELR [1992] 1 AC 448; [1991] BCC 641
Marrinan v VibartELR [1963] 1 QB 234
Mason v SainsburyENR (1782) 3 Doug KB 61
Metall & Rohstoff AG v Donaldson Lufkin & Jenrette IncELR [1990] 1 QB 391
Midland Bank Trust Co Ltd v Green (No. 3)ELR [1979] 1 Ch 496; [1982] 1 Ch 529 (CA)
National Phonograph Co Ltd v Edison-Bell Consolidated Phonograph Co LtdELR [1908] 1 Ch 335
O Company v M CompanyUNK [1996] 2 Ll Rep 347
Presentaciones Musicales SA v SecundaELR [1994] Ch 271
R v SimmondsELR [1969] 1 QB 685
RCA Corp v PollardELR [1983] Ch 135
Royal Brunei Airlines Sdn Bhd v TanELR [1995] 2 AC 378 (PC)
Russian Commercial & Industrial Bank v Comptoir d'Escompte de MulhouseELR [1925] AC 112
Scandinavian Bank Group plc, ReELR [1988] Ch 87; (1987) 3 BCC 93
Selangor United Rubber Estates Ltd v Cradock (No. 3)WLR [1968] 1 WLR 1555
Target Holdings Ltd v Redferns (a firm) [1995] CLC 1052; [1996] AC 421
Watson v Dutton Forshaw Motor Group Ltd (unreported, 22 July 1998, CA)
Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] CLC 990 (HL); [1996] AC 669
Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia (No. 2)WLR [1998] 1 WLR 294; [1998] BCC 870
Conspiracy — Conflict of laws — Limitation — Breach of directors' fiduciary duties — Dishonest assistance in breach of trust and/or knowing receipt of trust property — Whether moneys dishonestly misappropriated from claimant companies through conspiracy and/or breach of duty — Whether claimant had capacity and/or authority to sue under Spanish law — Whether proceedings against directors out of time under Spanish law.
These were claims by the plaintiff companies against numerous defendants including former directors alleging conspiracy, dishonest assistance in breach of trust, breach of directors' duties, money had and received and knowing receipt in relation to certain transactions in which moneys were allegedly wrongly paid away by the companies.
The first plaintiff, “GT”, was a Spanish company which was acquired in the 1980s by the Kuwait Investment Office (“KIO”). Officers of KIO became directors of GT. Between 1988 and 1992 several large payments were made by GT or its wholly owned subsidiary, “THL”, which were later explained as loans. The amounts involved were subsequently written off or capitalised in GT's accounts. In 1992 the KIO investigated its Spanish investments and the alleged loans came under scrutiny. In 1993 GT commenced proceedings against former directors and others involved in the transactions seeking to recover the payments on the grounds of alleged conspiracy, breach of fiduciary duty, dishonest assistance in breach of trust, money had and received and knowing receipt. The defendants advanced various explanations for the payments: that they were commissions properly agreed to be paid in connection with other transactions, or payment for services rendered or payments made on political instructions after Iraq invaded Kuwait. The defendants denied that the payments involved misappropriations of GT's funds and also denied that the plaintiffs had suffered any loss because the alleged loans had capitalised or written off in any event. Various defendants also claimed that GT lacked capacity and/or authority to bring the proceedings under Spanish law because they had not been resolved upon in general meeting as required by art. 134(1) of the Spanish Companies Act 1989 or that the proceedings were not sanctioned by the judge when GT was in suspension of payments under Spanish law between 1993 and 1997, as required by art. 5.4 of the Law of Suspension of Payments. The 1993 proceedings were purportedly ratified by GT in 1996 and a second set of proceedings was issued which was consolidated with the 1993 proceedings. Defendant directors argued that the 1996 proceedings were out of time under art. 949 of the Spanish Commercial Code which required proceedings against directors to be commenced within four years of the end of the director's involvement with the company.
Held, giving judgment for the plaintiffs:
1. Article 134(1) of the Spanish Companies Act 1989, requiring a company's claim for liability of directors to be filed after resolution of the company in general meeting, applied only in respect of GT's claims to enforce directors' liability as such and was incapable of assisting defendants who were not directors. It also only applied to claims under Spanish law. There was no problem in English law about ratifying English proceedings begun without authority. The effect of art. 134 under Spanish law was not to prevent GT ratifying the English proceedings or to provide a preliminary defence which could not be removed or cured by a subsequent resolution. On the expert evidence the clear conclusion was that Spanish law did permit the ratification of the English proceedings. The 1996 resolution ratifying the proceedings was not invalidated because it did not appear on the agenda for the relevant meeting nor because it failed to identify the proposed defendants and proceedings with sufficient precision.
2. Article 5(4) of the Suspension of Payments Law required the receivers to report to the judge on the appropriateness of claims made by the company. It was clear that that was done by GT's receivers and also clear that a Spanish court would consider that sufficient compliance with the article and would not require any express authorisation of the proceedings by the judge. In any event failure by the receivers to comply with art. 5(4) did not incapacitate the company in suspension from commencing proceedings or invalidate any proceedings in fact commenced or pursued. Further the Spanish court would have recognised the proceedings after termination of the suspension of payments, even if they had lacked prior judicial authorisation. Other procedural objections to the proceedings failed.
3. Article 949 of the Spanish Commercial Code could provide a limitation defence in relation to claims by GT for breach by its former directors of their duties as directors under Spanish law. It had no application to claims against non-directors, to claims by THL or to claims brought by GT which were not subject to Spanish law. However the directors who relied on the article failed to show that they had ceased to be involved as directors more than four years before the issue of proceedings and their defences based on the article failed.
4. The plaintiffs had established that the transactions involved misappropriation of moneys from GT or THL accompanied by steps to cover up the misappropriation. The defendants' explanations for the payments did not show that they were made for any proper purposes of GT, THL or KIO. The first, third, fifth and 53rd defendants were knowing parties to fraudulent schemes to misappropriate the moneys involved in the transactions. The sixth, tenth, 24th and fourth defendants, although they assisted in the transactions, were not aware that they were part of a fraudulent scheme and thought they were acting in the interests of the plaintiffs. The ninth defendant, a Spanish lawyer, dishonestly assisted in the transactions because the instructions he received were such that an honest person in his position...
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