Multinational Gas and Petrochemical Company v Multinational Gas and Petrochemical Services Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE LAWTON,LORD JUSTICE MAY,LORD JUSTICE DILLON
Judgment Date16 February 1983
Judgment citation (vLex)[1983] EWCA Civ J0216-1
CourtCourt of Appeal (Civil Division)
Docket Number83/0051
Date16 February 1983
Multinational Gas and Petrochemical Company (a company incorporated in the Republic of Liberia) (in liquidation)
Plaintiffs
and
(1) Multinational Gas and Petrochemical Services Limited (In Liquidation)
(2) Herman Sauer
(3) Masataka Tamaki
(4) Pierre Daridan
(5) Phillips Petroleum Company (a company incorporated in the State of Delaware in the United States of America)
(6) Philtankers Inc. (A Company Incorporated in the Republic of Liberia)
(7) William Lonnie Phillips
(8) John E. Harris Junior
(9) Soctete Anonyme De Gerance Et D'armement (a company incorporated in the Republic of France)
(10) Stephan Redon
(11) Eric De Rothschild
(12) Bridgestone Liquefied Gas Company Limited (a company incorporated in Japan)
(13) Chozo Ogishi
(14) Michio Doi
Defendants

[1983] EWCA Civ J0216-1

Before:

Lord Justice Lawton,

Lord Justice May

and

Lord Justice Dillon

83/0051

1980 M. No. 1769

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (Civil Division)

(On appeal from Mr. Justice Peter Gibson)

Royal Courts of Justice

Mr. JOHN CHADWICK, QC, and Mr. MARTIN KEENAN (instructed by Messrs. Stephenson Harwood) appeared on behalf of the Appellants (Plaintiffs).

Defendants 1, 2, 3 and 4 were not represented.

Mr. ALLAN HEYMAN, QC, and Mr. ROBIN HOLLINGTON (instructed by Messrs. Freshfields) appeared on behalf of the Respondents (Defendants 5, 6, 7 and 8).

Mr. ANDREW BATESON, QC, and Mr. MICHAEL TUGENDHAT (instructed by Messrs. Lewis Lewis & Co.) appeared on behalf of the Respondents (Defendants 9,10 and 11).

Mr. DONALD NICHOLLS, QC, and Mr. RICHARD McCOMBE (instructed by Messrs. Linklaters & Paines) appeared on behalf of the Respondents (Defendants 12 and 13).

Defendant 14 is deceased.

LORD JUSTICE LAWTON
1

The issue in this appeal is whether nine out of thirteen defendants named in the writ of summons issued on April 25, 1980, should be served out of the jurisdiction, being resident outside. When the writ was issued there were ten defendants outside the jurisdiction, but one of them, a Mr. Michio Dio has died and the plaintiffs have not asked for leave to serve his personal representatives.

2

On February 27, 1981, Master Dyson granted leave to issue concurrent writs in the United States, Liberia, France and Japan against these nine defendants. On December 21, 1981, Mr. Justice Peter Gibson set aside Master Dyson's order and refused the plaintiffs leave to appeal. The plaintiffs applied to this Court for leave to appeal and gave notice of appeal if leave were granted. With the consent of counsel we heard the application and the appeal together. We grant leave to appeal.

3

The plaintiffs were incorporated in Liberia on August 14, 1970. There was evidence before us that the law of Liberia relating to companies is substantially the same as English law. The plaintiffs' registered office was in Monrovia. Their existence was due to a decision by three multinational oil companies, Phillips Petroleum Co., a company incorporated in the State of Delaware, U.S.A. (Phillips), Société Anonyme de Gérance et d'Armement (SAGA), a company incorporated in France, and Bridgestone Liquified Gas Co.Ltd. (Bridgestone), a company incorporated in Japan. These three oil companies intended to join together in a commercial enterprise for the purchase, transport storage and sale of liquified petroleum gas and liquified natural gas and similar products. They contemplated chartering and acquiring suitable tankers. So far as Phillips were concerned this aspect of the enterprise was to be conducted by their wholly-owned subsidiary Philtankers Inc. (which was incorporated in Liberia) for the purposes of the joint enterprise. Shares in the plaintiffs were allotted 40 per cent to each of Phillips and SAGA and 20 per cent to Bridgestone. The original plan was for these three oil companies to appoint an executive committee to run the plaintiffs' business from London. English tax counsel advised, however, that an arrangement of this kind would probably have the result of making the plaintiffs' profits, wherever earned, liable to British taxation. In order to avoid this consequence the three oil companies decided to form, and did form in December 1970, a company in the United Kingdom which was to act as the plaintiffs' agents. This company was given the name of Multinational Gas and Petrochemical Services Ltd. (Services They had offices in London and as agents advised the plaintiffs about business prospects, gave them financial information, performed routine management work and put into effect any decisions made by the plaintiffs who had no place of business in the United Kingdom or anywhere else. The members of the plaintiffs' executive committee resigned as such in November 1970 and became the first directors of Services. After November 1970 the plaintiffs had no formal executive committee. According to the statement of claim (from which I have taken the history of this case up to 1977) the three oil companies from time to time nominated certain of their employees or officers to act as the plaintiffs' directors. At the times material to this action the individuals named in the writ after Philtankers Inc. were directors. Paragraph 11 of the statement of claim made the following allegation: "Further…the Multinational directors acted at all material times in all relevant matters in accordance with the directions and at the behest of the joint venturers"—that is, the three oil companies; "and, accordingly, the powers of directing and managing the affairs of Multinational in relation to the matters hereinafter complained of were vested in and were exercised by the joint venturers". Save on two occasions, which are irrelevant for the purposes of these proceedings, the plaintiffs' directors never met within the jurisdiction of this Court to make any decisions. When they did meet it was in New York, or Paris or Copenhagen.

4

The plaintiffs started trading in 1971. They had a capital of 25,000,000 United States dollars but only one million was in cash, the remainder being represented by vessels or interests in vessels. At first their operations were on a smallish scale for oil companies and ran at a loss; but by 1974 they were making a profit. The plaintiffs allege that between 1973 and January 1975 the directors changed their trading policy. They decided to acquire gas tankers for employment on the spot market. To do this they had to undertake substantial future liabilities which were not offset by forward charters. The market turned against them. They found themselves in financial difficulties. In September 1977 they had to cease trading. On October 6, 1977, the estimated deficiency as regards creditors was shown as £113,853,857. The only assets within the jurisdiction of the Court were bank accounts which were in credit to between £300,000 and £400,000. The existence of these assets justified, pursuant to section 399 of the Companies Act 1948, the making of a winding up order on January 25, 1978. The plaintiffs, however, have not suggested that their directors and the three oil companies who told them what to do at any material time knew or suspected that the plaintiffs were insolvent.

5

There has been a financial disaster for the plaintiffs' creditors. Those affected by five decisions made by the plaintiffs' directors and particularised in paragraph 97 of the statement of claim were alleged to have suffered loss to the extent of about £75,416,000. The three oil companies did not offer to discharge the plaintiffs' liabilities. The disaster which befell the plaintiffs put Services into difficulties too. That company was ordered to be wound up on February 7, 1978. Their assets were worth about £34,000. We were not told what their liabilities were; but whatever they were, the liquidator of Services was unlikely out of the assets to be able to finance litigation of the kind which was started by the writ issued on April 25, 1980.

6

During the Autumn of 1979 and the early months of 1980 the plaintiffs' liquidator consulted accountants and lawyers for the purpose of being advised whether the plaintiffs could recover from their directors and the three oil companies the losses, or part thereof, which they had sustained as a result of the unsuccessful trading, particularly during the period November 1973 to January 1975. A substantial proportion of the plaintiffs' creditors wanted action taken if a successful outcome was possible.

7

The liquidator was advised that there was evidence that Services, as the plaintiffs' agents, had acted negligently in providing financial information for the plaintiffs and that their directors and the three oil companies had negligently failed to appreciate that Services were giving them inadequate financial information and had made decisions negligently. The decisions complained of, so it was alleged, had been highly speculative and could not properly be regarded as falling within the scope of reasonable business judgment. The making of these decisions had caused a large proportion of the losses sustained by the plaintiffs.

8

The liquidator was willing to accept this advice but he seems to have appreciated at least until April 21, 1980, that there were difficulties in the way of getting any worthwhile result from starting litigation. Services would be unable to satisfy any judgment given against them. In any event leave to commence an action against Services would have to be obtained from the Companies Court and if given there was likely to be the usual condition that no monetary judgment in such action was to be enforced without the leave of the Court. All those who would be able to satisfy a monetary judgment were resident out of the jurisdiction. Leave to serve them out of the jurisdiction would not be granted unless the...

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