UCP Plc v Nectrus Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 21 February 2018 |
| Neutral Citation | [2018] EWHC 380 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000542 |
| Date | 21 February 2018 |
[2018] EWHC 380 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mrs Justice Cockerill
Case No: CL-2017-000542
Mr Huw Davies QC, Mr Felix Wardle (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the Claimant
Prof. Dan Sarooshi, Mr Andrew Legg (instructed by Hugh Cartwright & Amin) for the Defendant
Hearing dates: 21 st February 2018
Approved Judgment
Wednesday, 21 st February 2018
(11.54 am)
Ruling by Mrs Justice Cockerill
This is a hearing to determine the application of the defendant, “Nectrus”, under CPR 11(b). Nectrus seeks an order either that this court should not exercise its jurisdiction over the claim brought in this court or that the court should stay the proceedings under CPR 11.(6)(d) or CPR 3.12(f) pending resolution of a claim which is currently proceeding in the Isle of Man and to which I will generally refer as “the Manx claim”.
Nectrus asks the court to decline its jurisdiction in this case because it says, firstly, that the courts of the Isle of Man are the most appropriate forum to determine the matters in dispute and/or secondly that the courts of the Isle of Man were first seised in relation to the proceedings and the claimant has indicated its intention to rely on the same issues raised in the present proceedings as a defence to the Isle of Man proceedings.
The claimant, “UCP”, opposes the application. It submits that the application should be dismissed for, in summary, the following reasons: firstly, that the claim underlying this application is made pursuant to a contract which contains a non-exclusive jurisdiction clause in favour of the English courts which falls within the scope of Article 25 of Brussels 1 Regulation Recast. It therefore submits that the court has no jurisdiction under the Regulation or otherwise to stay or decline jurisdiction in favour of the Isle of Man in these circumstances, and it says that the operation of Brussels I Regulation Recast requires the application to be dismissed.
It then says, secondly, that even if the common law applied, the parties have agreed via the non-exclusive jurisdiction clause that the English court should have jurisdiction over disputes arising out of the Investment Management Agreement dated 14 December 2006 (“the IMA”) which is the subject matter of the claim in this court. It therefore says that UCP is to be treated as having founded jurisdiction here as a matter of right. As a consequence of that, it says that as a matter of law, Nectrus is required to identify overwhelming, or at least very strong reasons for departing from the usual rule that parties should be held to their contractual choice. It says that the reasons relied on do not meet this test, and therefore the application would fall to be dismissed on this basis as well.
Thirdly, it says that the normal Spiliada test is not appropriate to this application as a result of the previous points, but even if it were and the court were to apply the Spiliada test, the application would still fall to be dismissed. This is on the basis firstly that Nectrus has not identified another forum that is available to hear the English claim; on the contrary, it argues that the forum it has identified as more appropriate is not available, and that is fatal to the argument that the court should stay the English claim or decline jurisdiction in favour of the Manx courts. Secondly, it says even if the Manx courts were available, it is not correct that Nectrus can pass the hurdle of saying that the Isle of Man is clearly a more appropriate jurisdiction for the English claim, taking into account, inter alia, that the IMA is an English law governed contract with non-exclusive jurisdiction clause.
The factual background
The starting pointing here is the factual background, which is somewhat complicated. In summary, both parties say that they have good claims against the other, and that the other has been guilty of tactical fancy footwork in the history of the dispute to date. I express no views about either of these points.
UCP is an Isle of Man company which is and was in the business of investing in the Indian real estate sector and in the IT sector through its subsidiary, Candor, a company incorporated in Mauritius. Pursuant to the IMA, UCP and Candor engaged Nectrus, a Cyprus-based company, to provide Candor — and thus, it is said, UCP — with real estate investment advisory services and related advice. Under the IMA, Nectrus received management and performance fees, a portion of which were required, following an amendment to the IMA in 2009, to be used by Nectrus to purchase UCP shares. Consequently, it holds a 13.62 per cent beneficial shareholding in UCP through some nominee companies known as Luna and Lynchwood, both of which are incorporated in England and which are not contracting parties to the IMA.
The IMA is an English law-governed contract which contains a non-exclusive jurisdiction clause in favour of the English courts by virtue of clause 10, which provides:
“Governing law and dispute resolution procedure
10.1 This Agreement shall be governed by and construed in accordance with the laws of England.
10.2 The courts of England shall have non-exclusive jurisdiction to settle any claim or dispute arising out of or in connection with this Agreement or the legal relationships established by this Agreement.”
As I have already noted, the IMA was amended by a Deed of Amendment dated 25 August 2009. That deed also is governed by English law; it also contains a non-exclusive jurisdiction clause in favour of the English courts in clause 5.2, which says:
“The courts of England shall have non-exclusive jurisdiction to settle any claim or dispute arising out of or in connection with this Amendment Deed or the legal relationships established by this Amendment Deed.”
It is UCP's case that between 2012 and 2014, certain funds known as “the Stranded Deposits” that belonged to UCP's subsidiaries in India and which were managed and/or monitored by Nectrus, and which ought to have been the subject of its reporting, monitoring and advice under the IMA, were improperly invested within entities in India and not returned to UCP's subsidiaries on maturity or when called for. UCP contends that Nectrus is responsible for the Stranded Deposits by virtue of its breaches of the IMA. It is this claim which forms the basis of UCP's claim against Nectrus in the proceedings underlying this application.
The dispute about the Stranded Deposits has been live since 2014. On 17 September, a letter was sent to Nectrus on behalf of UCP and Candor setting out Nectrus' obligations under the IMA and asserting that Nectrus had breached those obligations in respect of the Stranded Deposits. In particular, that letter said:
“[Y]our obligations to UCP and Candor under the IMA are to monitor and advise (…); to provide asset management advice in relation to the Portfolio; to monitor compliance with Investment Policies and Procedures; to review borrowing terms and to consider and identify financing options. In breach of these obligations, you allowed funds of the Investee Companies to be improperly placed on deposit (or invested) such that those funds (the Stranded Deposits) now cannot, apparently, be returned. Had you complied with your obligations, we would not have permitted such conduct.”
Nectrus was informed that its breaches of the IMA as at that date had, in the view of UCP and Candor, caused loss in the amount of 60 per cent of the Stranded Deposits. In November 2014, shortly thereafter, UCP sold Candor to a third party, Brookfield Strategic Real Estate Partners India Office Holdings Pte Limited (“Brookfield”). The total price paid by Brookfield is said to have been reduced by £15.8 million to reflect Candor's 60 per cent interest in the Stranded Deposits.
The shareholders of UCP approved a declaration on 22 December 2014 to distribute the proceeds of sale of Candor. Nectrus says that it, through Luna and Lynchwood, prima facie had become entitled to payments in excess of £24 million as a result, and this is not in dispute. However, because of the position regarding the Stranded Deposits, UCP notified Nectrus on 24 December 2014 that its losses had crystallised, and it said that it put Nectrus on notice that the purchase price paid was impaired in the amount of the Stranded Deposits plus interest at the amount of £15.8 million. In January 2015, UCP made a shareholder distribution arising from the sale of Candor to Brookfield. On 16 January and 23 January 2015, UCP notified Luna and Lynchwood that it would be withholding c. £18 million from the shareholder distribution to reflect the value of the Stranded Deposits, plus an estimate of the costs of recovery of the Stranded Deposits plus interest.
So far relevant, the letter of 16 January which was sent to Luna stated:
“We have outstanding claims against Nectrus Limited with respect to significant damages resulting from breaches by Nectrus Limited of an Investment Management Agreement (…) We have notified Nectrus Limited of such claims and of the fact that as a result of such breaches, the Company suffered a loss which, as of 19 December 2014, represented an amount in excess of (…) with contractual and commercial interests and costs (…) continuing to accrue.
In the light of the amount of our outstanding claim against Nectrus Limited, we hereby inform you that we are withholding the entire distribution of Cash Return payable to you, as a nominee for Nectrus Limited.”
I should note here that, so far as concerns the difference between the £24 million and the £18 million, that sum was distributed, and...
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