Sarrio SA v Kuwait Investment Authority
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE EVANS,LORD JUSTICE PETER GIBSON,LORD JUSTICE BROOKE |
| Judgment Date | 12 August 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0812-1 |
| Docket Number | FC3 96/6407/B |
| Court | Court of Appeal (Civil Division) |
| Date | 12 August 1996 |
[1996] EWCA Civ J0812-1
Lord Justice Evans
Lord Justice Peter Gibson
Lord Justice Brooke
FC3 96/6407/B
QBCMI 96/0342/B
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR. JUSTICE MANCE)
Royal Courts of Justice
Strand
London WC2
MR. C. HOLLANDER & MR. ALEX HAYDON (Instructed by Messrs Linklaters & Partners, 59/67 Gresham St, London, EC2V 7JA) appeared on behalf of the Appellant
MR. A. POPPLEWELL & MR. P. WRIGHT (Instructed by Messrs Baker & McKenzie, 233 Chancery Lane, London, EC4V 6JA) appeared on behalf of the Respondent
On 13 January 1995 Mance J. ordered a stay of these proceedings on the defendants' application under R.S.C. Order 12 Rule 8. His judgment is reported at [1996] 1 Ll. R. 650. The plaintiff now appeals.
The defendants applied for the stay on two main grounds. First, under Articles 21 and 22 of the Brussels Convention, given statutory effect by the Civil Jurisdiction and Judgments Act, 1982. Secondly, under the common law principles for determining whether the English Courts are the appropriate forum for the hearing of the dispute, as stated by the House of Lords in its Spiliada judgment ( Spiliada Maritime Corp. v. Cansulex Ltd. [1987] A.C. 460). They say that the issues should be determined in Spain, where proceedings between the parties were already pending when these actions were commenced.
The plaintiff contends that neither Article 21 nor 22 applies. The judge held that the Spanish proceedings are a "related action" for the purposes of Article 22 and that the English Court therefore has a discretion, which he exercised in favour of granting a stay. He also held, however, that the two sets of proceedings do not involve the "same cause of action" within Article 21, so as to require the English Court to decline jurisdiction. The defendants cross-appeal against the Article 21 decision.
The second ground gives rise to a number of separate issues. The plaintiff contended before the judge that to order a stay of proceedings on this ground would be inconsistent with the Brussels Convention and that such an order therefore is precluded by section 49 of the 1982 Act. The judge did not agree (see pages 654–6). Before us, Mr Charles Hollander put forward a modified submission: the court cannot order a stay on Spiliada grounds where proceedings are pending in a foreign state which is a party to the Brussels Convention ("Convention country") and where the English writ has been served on the defendants "as of right" within the territorial jurisdiction of the court, as opposed to service outside the jurisdiction under the provisions of R.S.C. Order 11. The defendants challenge the validity of service which has taken place in England, although they accept that a second writ has been validly served pursuant to Order 11 in Kuwait. The distinction is relevant both because of the foregoing submission as to whether the Spiliada principles apply, and also because the application of those principles differs as regards the burden of proof, depending on whether the defendant has been served 'as of right' within the jurisdiction. Moreover, if the plaintiff relies on Order 11, then service outside the jurisdiction cannot be justified unless there is a serious issue to be tried ( Seaconsar Far East Ltd. v. Bank Markazi Jamhouri Islami Iran [1994] 1 A.C. 438), and the defendants say that there is none.
There is also a dispute as to the terms on which a stay should be ordered, if Article 22 or Spiliada applies.
Outline facts
The appellant plaintiff is a Spanish company, domiciled in Spain. The defendants are the Kuwait Investment Authority ("KIA"), which may be described as the investment arm of the government of Kuwait, though with a separate legal identity from the government and State. Its head office is in Kuwait and it is domiciled there, but it has a long-established branch office in London where it operates under the style of Kuwait Investment Office ("KIO"). There are two actions in respect of the same subject-matter because of problems which arose in relation to service of the writ in the first action. The subject matter is a claim for damages for negligent misrepresentations allegedly made on behalf of the defendants in the course of negotiations for a contract for the sale of part of the plaintiff's business to a Spanish group of companies who represent the defendants' substantial investments in Spain. The group is called Grupo Torras S.A. ("GT").
The defendants object to the jurisdiction of the English Court essentially because they say that the plaintiff should be required to consolidate these actions with proceedings which the same plaintiff has brought against them in Spain. The Spanish proceedings were commenced by the plaintiff in 1993, before either of the writs was issued in England, and the jurisdiction of the Spanish Court over the defendants has now been established, though only after a number of interlocutory rulings.
The Spanish proceedings do not include the claim for damages for negligent misrepresentation which is made in these actions, but they arise out of the sale contract between the plaintiff and GT which the representations are alleged to have induced. The defendants contend, therefore, that the two sets of proceedings either involve the same cause of action, within Article 21, or that they should at least be consolidated or heard together under the procedure which is known as "accumulation" in Spain. If these actions are stayed, then it will be necessary for the plaintiff to bring fresh proceedings in Spain which can be accumulated with their existing claims.
Detailed facts
The defendants' application and the plaintiff's resistance to it are supported by voluminous affidavit evidence. This is summarised in the admirable judgment of Mance J. which includes a clear and careful account of the history of the relevant transactions. We gratefully adopt this and need only refer, therefore, to those specific facts which are directly relevant to the issues raised by the appeal. We are grateful also to both counsel, Mr Charles Hollander and Mr Andrew Popplewell, for their exemplary submissions, both written and oral.
The English actions
The allegation in the Points of Claim is that Mr Javier de la Rosa, with whom the plaintiff's representative Dr. Carlo Bonomi negotiated the sale of its special paper business in Spain, was acting for the defendants as well as for GT in the course of negotiations between November 1990 and early 1991. There was in particular a meeting in London on 18 December 1990 at the offices of Johnston Associates (U.K.) Ltd. who had brought the parties together and, as the plaintiff alleges, introduced Mr de la Rosa as acting for KIA as well as GT. It was proposed that part of the consideration for the sale would consist of shares in two of GT's subsidiaries in Spain, which can be called 'Prima' and 'Ebro' respectively. This made it necessary for Dr. Bonomi to be satisfied as to the value of those companies, and for this purpose he was provided with audited accounts and a property valuation for Prima, together with a laudatory Information Memorandum describing Prima's business. The book values were higher than the current market price of the shares. In reply to Dr. Bonomi's questions, Mr de la Rosa said the documents were accurate and reliable and that Prima's situation had improved since they were prepared. He also said, according to Dr Bonomi's affidavit evidence, that with KIO behind Prima it had no cash problems. The alleged representations are pleaded as follows: —
"11.1 The share price of Prima currently undervalued the true worth of the company, and was expected to rise to reflect the true worth of the company …..
11.2 ……
11.3 ……
11.4 KIO's clear policy was to stand behind its investments and provide funding where necessary."
Sale agreements were duly entered into between the plaintiff and GT and another of its subsidiaries dated 7 February 1991. The purchasing subsidiary was Torraspapel S.A. The total consideration was Ptas. 43,600 million. Ptas. 39 million was payable forthwith but the plaintiff undertook immediately to use Ptas. 14,600 million to acquire shares in Prima and in Ebro, and Ptas. 15 million to acquire shares in Torraspapel. In addition, there was a "put and call" option which entitled the plaintiff to transfer the shares in Torraspapel back to GT in three tranches on 31 December 1991, 1992 and 1993 respectively, each for a fixed price of Ptas. 4 million, plus interest.
The plaintiff exercised the option on 12 December 1991. GT paid the first but not the second and third instalments of the option price. The market price of Prima shares fell from Ptas. 7,760 on 28 December 1990 to Ptas. 150 on 31 December 1993 after Receivers were appointed on 13 December 1992. Prima has since been declared insolvent by the Spanish Courts. There is evidence that GT itself suspended payments under court order dated 10 December 1992.
The plaintiff alleges that the sale contract was entered into with GT and Torraspapel in reliance on the representations made by Mr de la Rosa and that they were made on behalf of the defendants. The plaintiff claims as damages for negligent misrepresentation the significant losses which it has incurred as the result of entering into the transaction. The claim is made in tort and under the common law. No remedy lies under the Misrepresentation Act 1967 because the plaintiff entered into a sale contract with GT and Torraspapel, not with...
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