Haji-Ioannou v Frangos
| Jurisdiction | England & Wales |
| Judge | THE LORD CHIEF JUSTICE |
| Judgment Date | 31 March 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0331-14 |
| Docket Number | CHANI 1998/0120/3 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 March 1999 |
[1999] EWCA Civ J0331-14
The Lord Chief Justice Of England And Wales
(Lord Bingham of Cornhill)
Lord Justice Brooke
and
Lord Justice Chadwick
CHANI 1998/0120/3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE NEUBERGER)
Royal Courts of Justice
The Strand
London
APPEARANCES:
MR MICHAEL BELOFF QC, MR ROBERT MILES and MR ADRIAN BRIGGS (instructed by Ince & Co, London EC3R 5EN) appeared on behalf of THE APPELLANTS
MR CHARLES PURLE QC, MR NICHOLAS HAMBLEN QC and MR STEPHEN SMITH (instructed by Messrs Holman, Fenwick & Willan, London EC3N 3AL) appeared on behalf of THE RESPONDENTS
Wednesday 31 March 1999
This is the judgment of the court, to which all members have substantially contributed.
Before the court are an appeal by the plaintiffs and a cross-appeal by the defendants in these proceedings. Both arise out of a judgment given and an order made by Neuberger J on 14 November 1997 on a notice of motion issued by the first defendant on 23 October 1997 and an application made by the plaintiffs. The notice of motion was given in response to a writ issued in the Chancery Division of the High Court on 19 September 1997 and served on the first defendant, Mr Frangos, on 7 October 1997 when he was temporarily in London.
A number of different questions were raised and fully argued before the judge, and again before this court. The overriding issue is whether the plaintiffs' proceedings against
Mr Frangos should be allowed to proceed in this country. An allied, but to some extent subsidiary, issue is whether the plaintiffs should have leave under RSC Order 11 Rule 1(1)(c) to serve the second to fifteenth defendants out of the jurisdiction.
The first plaintiff is a Greek Cypriot shipowner of immense wealth. He holds both Cypriot and British passports. His domicile of choice is in Monaco. He spends most of his time in Greece. He has a house in London, but the judge found nothing in the evidence to suggest that he had spent significant amounts of time in England during the past few years. The second and third plaintiffs are Panamanian companies owned and controlled by the first plaintiff and managed in Greece.
Mr Frangos, the first defendant, is a much younger man. He is Greek by nationality. He is the son of a shipowner, although not an owner of the same scale of affluence as the first plaintiff, as few owners are. Mr Frangos has a house in Monaco and his personal domicile is there, but the judge concluded that his main residence and what the judge considered his major business are in Greece. The second and third defendants are Panamanian companies which he controls.
The first plaintiff has a daughter Clelia. In January 1990 she and Mr Frangos were engaged to be married. On their engagement the first plaintiff gave the couple a yacht. The marriage was solemnised in Greece in September 1990. The plaintiffs' statement of claim in these proceedings pleads that an agreement or understanding was made between the first plaintiff and Mr Frangos at about the time of this engagement. In paragraph 3 it is pleaded thus:
"In or about January 1990 Mr Haji-Ioannou and Mr Frangos had several conversations in the course of which they entered into an agreement or understanding to the following effect:
(1) Mr Haji-Ioannou agreed that he would (directly or through companies he controlled) transfer sums of monies to Mr Frangos (or his agents) to be used for the purpose of acquiring vessels to be run and managed as a commercial enterprise. (The said monies or the proceeds thereof including all assets acquired with and/or representing and/or derived from the same and all profits made therewith, and accretions or additions thereto, are referred to below as "the Funds");
(2) Mr Frangos was to hold and manage the Funds on behalf of the Plaintiffs and subject to the instructions of Mr Haji-Ioannou;
(3) The Plaintiffs were to remain the beneficial owners of the Funds (including all profits thereon and additions thereto) and Mr Frangos was to account to Mr Haji-Ioannou in respect of the Funds;
(4) It was further agreed that when a specific vessel was to be acquired using the Funds, it would be acquired by a single ship company set up or acquired for that purpose; and that the shares in such company would (if registered shares) be issued or transferred into the name of Mr Haji-Ioannou, or (if bearer shares) be delivered to or be held to the order of Mr Haji-Ioannou;
(5) By managing the Funds, Mr Frangos would, for his part, be able to develop experience and gain contacts in the shipping business."
It is not pleaded exactly when or where this agreement or understanding was made, nor what (if any) remuneration Mr Frangos was to earn. No reliance is placed in the pleading on any document evidencing or supporting it. The pleading continues in paragraph 4:
"In the premises:
(1) any Funds transferred to Mr Frangos pursuant to the said agreement or understanding were to be held by Mr Frangos (or his agents) on trust for the Plaintiffs;
(2) Mr Frangos was under a fiduciary duty to ensure that such Funds were applied only in accordance with the terms and conditions of the said agreement or understanding; and
(3) Mr Frangos was under a duty to account to the Plaintiffs in respect of the use and application of the Funds and in respect of all profits thereon and additions thereto."
In May 1990, just before Mr Frangos' 28th birthday, the second plaintiff paid US $5,000,000 to the account of the second defendant in Piraeus. Immediately following the wedding in September 1990 the second and third plaintiffs paid sums totalling US $10,000,000 to the account of the second defendant in Piraeus. Over the next six months three vessels were bought, respectively by the fourth, fifth and sixth defendants, each of them Panamanian companies controlled by Mr Frangos. Within a week of Mr Frangos' 29th birthday in May 1991, the second plaintiff paid US $5,000,000 into the account of the second defendant in Piraeus. Six months later another vessel was bought, this time by the seventh defendant, a Panamanian company controlled by Mr Frangos. On Mr Frangos' name day in January 1992, the second plaintiff made two payments, amounting in total to over US $5,000,000, to the account of the third defendant in London. During the next four months vessels were acquired by the eighth and ninth defendants, both of them Panamanian companies controlled by Mr Frangos. One of these vessels was a yacht, bought to replace the yacht given by the first plaintiff to Mr Frangos and Clelia on their engagement. Just over a week after Mr Frangos' second wedding anniversary, the second plaintiff paid US $10,000,000 to the account of the third defendant in London. Further vessels were then bought by the tenth defendant, a Liberian company, and the eleventh defendant, a Panamanian company, both companies controlled by Mr Frangos. Within a month of Mr Frangos' 31st birthday in May 1993, the second plaintiff paid US $10,000,000 to the account of the third defendant in London. Further vessels were then bought by the twelfth, thirteenth and fourteenth defendants, the first two being Panamanian companies controlled by Mr Frangos, the last a Liberian company controlled by him. Finally, in April 1994, a new build, which had been ordered from a Bulgarian shipyard in 1992, was delivered to the fifteenth defendant, another Panamanian company controlled by Mr Frangos.
The marriage between Mr Frangos and his wife had by the end of 1993 broken down, and in January 1994 they separated. On 6 May 1994 the three plaintiffs addressed to Mr Frangos at the offices of his management company Seaways Shipping Enterprises Limited (a Liberian company) in Piraeus an extra-judicial witness statement and without prejudice notice. By this notice the plaintiffs terminated with immediate effect and on the grounds of Mr Frangos' unlawful conduct the informal agreement with him for the management by him of the plaintiffs' capital in the sum of US $49,000,000 which on the instructions of the first plaintiff had been transferred by the second and third plaintiffs to the second and third defendants:
"… for the purchase of ships on our behalf, in the name of foreign shipping companies, available on the market for purchase, the ownership of the shares in which, together with revenue and dividends, you undertook to transfer to us and to manage these companies and these ships, being paid the usual reasonable salary in return."
The notice called for the delivery to the plaintiffs of all shares, company documents and records relating to the fourth to fifteenth defendants inclusive and the ships which they had bought. The plaintiffs called for full written accounts in accordance with the provisions of the Greek Civil Code and Civil Procedures Code.
On 8 June 1994 the boards of the...
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