Kolden Holdings Ltd v Rodette Commerce Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lawrence Collins,Lord Justice Rimer,Lord Justice Tuckey |
| Judgment Date | 21 January 2008 |
| Neutral Citation | [2008] EWCA Civ 10 |
| Docket Number | Case No: A3/2007/1677 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 January 2008 |
[2008] EWCA Civ 10
Lord Justice Tuckey
Lord Justice Lawrence Collins and
Lord Justice Rimer
Case No: A3/2007/1677
2006–697
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISON COMMERCIAL COURT
MR JUSTICE AIKENS
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Bernard Eder QC and Mr Jeremy Brier (instructed by Steptoe & Johnson) for the Appellants
Sir Sydney Kentridge QC and Mr David Wolfson (instructed by Skadden, Arps, Slate, Meacher & Flom (UK) LLP) for the Respondent
Hearing date : December 11, 2007
IIntroduction
This is a dispute about forum. Rodette Commerce Ltd and Taplow Ventures Ltd (“the appellants”) and the respondent Kolden Holdings Limited (“Kolden”) are companies which are owned by opposing Russian interests. But, no doubt for reasons connected with rates of taxation for non-resident companies, and other benefits conferred on international business companies, each of them is incorporated in the Republic of Cyprus.
At the heart of the commercial dispute between the parties are allegations concerning breach of agreements about the transfer of shares in a Russian company. The agreements are expressly governed by English law, and contain a submission to the non-exclusive jurisdiction of the English court. There is no connection with Cyprus except for the fact that the companies involved are incorporated there.
In February 2007 the appellants comm.
enced proceedings in Cyprus for declarations that (inter alia) they are not liable to Kolden and other companies from which it took an assignment of rights in the contracts out of which the dispute arises.
The appellants claim that their Cyprus proceedings should have priority over English proceedings commenced in July 2006. Kolden claims that the English proceedings should have priority. Kolden is an assignee of the original claimants in the English proceedings and was substituted as claimant in those proceedings after the commencement of the appellants' Cyprus proceedings. The point of law which arises on this appeal is whether the parties to the English proceedings and the parties to the Cyprus proceedings are the “same parties” for the purposes of Article 27 of the Council Regulation 44/2001 (EC) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“the Judgments Regulation”), which gives priority to the courts of the Member State which is first seised.
The proceedings in Cyprus are for negative declarations. For the purposes of Article 27 of the Judgments Regulation (and its predecessor, Article 21 of the Brussels Convention) the European Court has held that an action for a negative declaration involves the “same cause of action” as a claim to establish liability: Case 144/86 Gubisch Maschinenfabrik v Palumbo [1987] ECR 4861. In that case the proceedings for the negative declaration were not the first in time, and the ruling meant that the substantive proceedings had priority. But in Case C-405/92 The Tatry [1994] ECR I-5436 the reasoning was applied to give priority to the action for a negative declaration which was commenced first.
When I asked Mr Bernard Eder QC, who appeared for the appellants, what possible advantage his clients might obtain from having the proceedings in Cyprus, not only was he without instructions, but he was unable to suggest any possible advantage they might have from suing in Cyprus.
About 20 years ago Kerr LJ said that claims for negative declarations, in particular, “must be viewed with great caution in all situations involving possible conflicts of jurisdictions, since they obviously lend themselves to improper attempts at forum shopping”: The Volvox Hollandia [1988] 2 Lloyd's Rep. 361, at 371. Although that is not always the case (see Messier Dowty Ltd v Sabena SA [2000] 1 WLR 2040, para 36), it is hard to resist the conclusion that the present case is one of the use of a claim for negative declarations to wrest jurisdiction from the natural forum.
There was a one day hearing before Aikens J in June 2007, and he gave judgment in July 2007. He gave permission to appeal, and there was a one day hearing before this court in December 2007. It is apparent from the costs schedules presented to this court that the legal costs for these hearings have been, in aggregate, at least £400,000.
IIThe litigation
The parties
Kolden is or was beneficially owned by Russia Partners Company LP (“Russia Partners”), a limited partnership incorporated in Delaware. It is an investment fund which specialises in investments in Russia. Russia Partners incorporated companies in Cyprus to act as special purpose vehicles for its investments in Russia. Three of them were Amherst Capital Investments Ltd (“Amherst”), Hensher Enterprises Ltd (“Hensher”) and Conway Holdings Ltd (“Conway”). In addition to Kolden, another associated company is relevant to the present proceedings, Serpell Holdings Ltd (“Serpell”). Russia Partners was at one stage the beneficial owners of all these companies.
Amherst, Hensher and Conway between them held 38.71% of the shares of OAO Maltsovsky Portlandcement (“Maltsovsky”), a joint stock company incorporated under Russian law. Kolden and Serpell are the owners of shares in another Russian company called OAO Eurocement, which is also known and referred to as JSC Eurocement (“JV”). It is one of the largest cement producing companies in Russia. In 2004 Russia Partners indirectly held a minority stake of 44.4% of the shareholding of Eurocement.
The appellants are companies incorporated in Cyprus. Kolden claims the ultimate beneficial owner of the appellants is Mr Filaret Galchev, who is said to be the ultimate beneficial owner of the majority shareholding in JV.
Sale Agreements: March 18, 2004
On March 18, 2004 Amherst, Hensher and Conway entered into four Agreements for the sale of their combined shareholding in Maltsovsky to the appellants. All the contracts are in the form of a Securities Sale and Purchase Agreement (the “SPAs”) and all are on the same terms. Each of the contracts specifically provides, by clause 9, that it shall be governed and construed in accordance with the laws of England. The same clause also provides:
“Any dispute arising under and in connection with this Agreement which cannot be mutually resolved shall be submitted to the non-exclusive jurisdiction of the Courts of England, or any other Court of competent jurisdiction.”
Each of the SPAs provides that the seller companies, as owners of an identified parcel of the Maltsovsky shares, will sell them to the appellants. There are four SPAs because Hensher entered into one SPA to sell some shares to Rodette and another SPA to sell some shares to Taplow. The third SPA was between Amherst and Taplow and the fourth was between Conway and Rodette.
Clause 2.1 of each of the SPAs states that the purchaser will take all steps necessary for re-registration of the shares in the name of the purchaser or a nominee within one business day of the date of the SPA. Clause 6.2(d) of each of the SPAs provides:
“6.2 The purchaser hereby represents and warrants as of the date of this Agreement and on a continuing basis hereafter that: ……….
(d) the purchaser is acquiring the securities in a private transaction for the purchasers' own account for purposes of further immediate distribution thereof to JSC “Eurocement” only ……..”
Kolden claims that the appellants were therefore the middle party in what was envisaged as a series of transactions under which the Maltsovsky Shares would move from Amherst, Hensher, and Conway to JV via the appellants.
The total purchase price under the four SPAs was approximately US$3,350,000. That figure corresponded to the price that Amherst, Hensher, and Conway had themselves paid to acquire the Maltsovsky shares in 2002. It is alleged that this price was far below the market value of the Maltsovsky shares either in 2004 or now.
The appellants allegedly did not transfer the Maltsovsky shares to JV as clause 6.2(d) of the SPAs allegedly contemplated, but instead were either retained by the appellants or transferred by them to other parties. The allegation, therefore, is that Mr Galchev's companies took the whole benefit of the value of the Maltsovsky shares, and not that which would be attributable to his interest in JV.
Proceedings in England: July 13, 2006
On July 13, 2006 Amherst, Hensher and Conway issued proceedings in the Commercial Court (“the English Action”), in which the present application was made. In these proceedings, Amherst, Hensher and Conway sought a declaration against the appellants that:
“…..On the true construction of [the SPAs] each of the first and second defendants was obliged immediately, alternatively as soon as reasonably practicable to transfer [the Maltsovsky shares] to [JV]……”.
As an alternative, Amherst, Hensher and Conway sought rectification of clause 6.2(d) of each of the SPAs in the following terms:
“…..in order to carry out the common intention of the parties, so as to incorporate into each [SPA] an obligation on the relevant [purchaser] immediately or alternatively as soon as reasonably practicable, to transfer [Maltsovsky shares] to [JV]”.
There was also a claim for damages for breach of contract.
The particulars of claim in the English Action were not served until after Aikens J gave judgment. But it should be noted at...
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