nn
[1992]
[court oF APPEAL]
In re HARRODS (BUENOS AIRES) LTD.
1990 April 2, 3, 4, 5 Harman J
1990 Nov. 29, 30; Dillon, Stocker and
Dec. 19; Bingham L.JJ.
1991 Feb. 6, 7, 8;
March 13
Practice—Originating process—Service out of jurisdiction—Application
to set aside—Petition concerning conduct of affairs of English
company operating solely in Argentina—Whether leave required—
Whether Argentina more appropriate forum—Whether petitioner
able to obtain substantial justice in Argentina—Companies Act
1985 (c. 6), 3s. 459, 46I'—-RS.C., Ord. 11, r. 1(2)(b)P—
Companies (Unfair Prejudice Applications) Proceedings Rules
1986 (S.1. 1986 No. 2000), r. 2(2)*
Practice—Stay of proceedings—Jurisdiction—European Convention—
English company operating solely in Argentina—Petition concer-
ning conduct of company's affairs brought under English
companies and insolvency legistation—Application to stay petition
on ground that Argentina more appropriate forum for trial of
issues—Whether court's jurisdiction to grant’ stay excluded by
Convention of European Communities—Whether stay 10 be
granted—Civil Jurisdiction and Judgments Act 1982 (c. 27), s. 49,
Sch. 1, art. 2
L., a company incorporated in Switzerland was the minority
shareholder in a company incorporated in England whose
business was carried on exclusively in Argentina and whose
central management and control was exercised in that country.
All the remaining shares were owned by another company
incorporated in Switzerland. L. alleged that the affairs of the
company were being conducted in a manner unfairly prejudicial
to it and brought a petition under sections 459 and 461 of the
Companies Act 1985 for an order that the majority shareholder
purchase its shares in the English company, alternatively an
order that the English company be wound up compulsorily
under the Insolvency Act 1986. By statutory rules the English
company was a necessary party to the proceedings. The registrar
having given leave pursuant to R.S.C., Ord. 1, r. 1, the
* Companies Act 1985, s. 459(1): “A member of a company may apply to the court by
petition for an order under this Part on the ground that the company’s affairs are being or
have been conducted in a manner which is unfairly prejudicial to the interests of some
part of the members (including at least himself) or that any actual or proposed act or
‘omission of the company (inchiding an act or omission on its behalf) is or would be so
prejudicial.”
S. 461(1): “If the court is. sa
may make such order a8 it think
of.”
? R.S.C., Ord. IL, r. 1(2)(b): see post, p. 115c-p.
3 Companies (Unfair Prejudice Applications) Proceedings Rules 1986, r. 2(2): see post,
p. 15a.
* Civil Jurisdiction and Judgments Act 1982, s. 49: “Nothing in this Act shall prevent
any court in the United Kingdom from staying, sisting, striking out or dismissing any
proceedings before it, on the ground of forum non conveniens or otherwise, where to do
50 is not inconsistent with the 1968 Convention.”
Sch. I, art. 2: see post, p. 92c
isfied that a petition under this Part is well founded, it
fit for giving relief in respect of the matters complainedch.
In re Harrods (Buenos Aires) Ltd. (C.A.)
petition was served on the majority shareholder out of the
jurisdiction. The majority shareholder sought by summons
orders that the registrar’s order and service of the petition be
set aside and that the petition be stayed on the ground that
Argentina was a more appropriate forum for the trial of the
issues raised. Harman J. held that leave to serve the petition
out of the jurisdiction was not required and that England was
the appropriate forum, and dismissed the summons. On appeal
by the majority shareholder, the preliminary question was raised
whether the court’s discretion to stay the petition on the ground
of forum non conveniens was excluded by provisions of the
Civil Jurisdiction and Judgments Act 1982, which had enacted
in England the Convention on Jurisdiction and the Enforcement
of Judgments in Civil and Commercial Matters 1968, article 2 of
which provided that, subject to the provisions of the Convention,
a person domiciled in a contracting state was to be sued in the
courts of that state.
On the preliminary question:—
Held, that on the true construction of the Convention of
1968 taken as a whole and in the light of its purpose of securing
uniformity, simplicity and certainty with regard to the reciprocal
recognition and enforcement of judgments as between contracting
states, the Convention was intended to regulate jurisdiction only
as between the contracting states and it was not inconsistent
with the letter or spirit of the Convention for the English court
to stay proceedings on the ground of forum non conveniens in a
case involving a conflict of jurisdiction between that court and
the courts of a non-contracting state; and that, accordingly,
since section 49 of the Act of 1982 preserved the power of the
English court to stay or dismiss proceedings where to do so was
not inconsistent with the Convention, the court had jurisdiction
to stay the petition on the ground that Argentina was the more
appropriate forum for the trial of the issues (post, pp. 93c-E,
96c, 97A-B, G-98C, G-99C, 1006, 1018, 103c-p).
S. & W. Berisford Plc. v. New Hampshire Insurance Co.
[1990] 2 O.B. 631 and Arkwright Mutual Insurance Co. v.
Bryanston Insurance Co. Ltd. [1990] 2 Q.B. 649 disapproved.
On the substantive appeal:—
Held, (1) that neither R.S.C., Ord. 11, r. 1(2)(b) nor the
Companies (Unfair Prejudice Applications) Proceedings Rules
1986 permitted a petition under section 459 of the Companies
Act 1985 to be served out of the jurisdiction without the leave
of the court; and that L. had therefore required leave under
Ord. 11, r. 1(1)(@) and the onus accordingly lay on it to
demonstrate that England was clearly the more appropriate for
the trial of the issues raised in the petition (post, pp. 1164-p,
1178, 118¢-119a, 1230).
(2) That the fact that the proceedings were by petition in
the Companies Court, secking relief under English companies
legislation in respect of the affairs of an English company, did
not remove them from the scope of the general principles to be
applied on an application for leave under Ord. 11, r. 1 or for a
stay on the ground that another jurisdiction was the more
appropriate forum for the trial of the issues, or render England
automatically the appropriate forum; that, on consideration of
all the relevant factors and in all the circumstances, the
EE74
In re Harrods (Buenos Aires) Ltd. (C.A.) (1992)
Argentine court was that with which the dispute had the most
real and substantial connection (post, pp. 1098-p, 112E-r,
117-0, 121F, 1248-6, 125H-1268).
Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C.
460, H.L.(E.) applied.
(3) Allowing the appeal (Dillon L.J. dissenting), that,
notwithstanding that the Argentine court had no power
equivalent to that under sections 459 and 461 of the Act of 1985
.to order the majority shareholder to purchase the minority
shareholder's shares, its powers to wind the company up and to
award damages for negligent or unlawful handling of the
company's business were such that the minority shareholder
could obtain substantial justice in Argentina; and that,
accordingly, since the judge had misdirected himself, the court
was free to exercise its own discretion and would grant the stay
of proceedings sought (post, pp. 122r-123c, 126c-p, H-1278, F).
de Dampierre v. de Dampierre [1988] A.C. 92, H.L.(E.)
applied
Decision of Harman J., post, pp. 768 et seq.; [1991] 3
W.L.R. 397 reversed.
The following cases are referred to in the judgments of the Court of Appeal
on the preliminary question:
Abidin Daver, The [1984] A.C. 398; [1984] 2 W.L.R. 196; [1984] 1 All E.R.
470, H.L(E.)
Arkwright Mutual Insurance Co. v. Bryanston Insurance Co. Ltd. [1990] 2
Q.B. 649; [1990] 3 W.L.R. 705; [1990] 2 All E.R. 335
Berisford (S. & W.) Plc. v. New Hampshire Insurance Co. [1990] 2 Q.B.
631; [1990] 3 W.L.R. 688; [1990] 2 All E.R. 321
Lufttransportunternehmen (L.T.U.) G.m.b.H. & Co. K.G. v. Eurocontrol
(Case 29/76) [1976] E.C.R. 1541, E.C.J.
Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460; [1986] 3
W.L.R. 972; [1986] 3 All E.R. 843, H.L.(E.)
The following additional cases were cited in argument before the Court of
Appeal on the preliminary question:
Arab Monetary Fund v. Hashim (No. 3) (1991) 2 A.C. 114; [1990] 3 W.L.R.
139; [1990] 1 All E.R. 685, Hoffmann J.
Deichland, The [1990] 1 Q.B. 361; [1989] 3 W.L.R. 478; [1989] 2 All E.R.
1066, C.A.
Kalfelis v. Schréder, Miinchmeyer, Hengst and Co. (Case 189/87) [1988]
E.C.R. 5565, E.C.J.
Overseas Union Insurance Lid. v. New Hampshire Ltd., The Times, 27
September 1988
The following cases are referred to in the judgments of the Court of Appeal
‘on the substantive issue:
Abidin Daver, The (1984] A.C. 398; [1984] 2 W.L.R. 196; [1984] 1 All E.R.
470, H.L.(E.)
de Dampierre v. de Dampierre (1988) A.C. 92; [1987] 2 W.L.R. 1006; [1987]
2 AILE.R. 1, H.L.(E.)
Harmer (H.R.) Ltd., In re [1959] 1 W.L.R. 62; [1958] 3 All E.R. 689, C.A.
Scottish Co-operative Wholesale Society Ltd. v. Meyer [1959] A.C. 324;
[1958] 3 W.L.R. 404; [1958] 3 All E.R. 56, H.L.(Sc.)
Sim v. Robinow (1892) 19 R. 66575
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.)
Spiliada Maritime Corporation v. Cansulex Ltd. (1987] A.C. 460; [1986] 3
W.L.R. 972; [1986] 3 All E.R. 843, H.L.(E.)
Westbourne Galleries Ltd., In re [1973] A.C. 360; [1972] 2 W.L.R. 1289;
[1972] 2 AIL E.R. 492, H.L.(E.)
The following additional cases were cited in argument before the Court of
Appeal on the substantive issue:
Company (No. 004377 of 1986), In re A {1987] 1 W.L.R. 102
Hagen, The [1908] P. 189, C.A.
Société du Gaz de Paris v. Société Anonyme de Navigation “Les Armateurs
Francais,” 1925 8.C. (H.L.) 13, H.L.(Sc.)
‘The following cases are referred to in the judgment of Harman J.:
Abidin Daver, The [1984] A.C. 398; [1984] 2 W.L.R. 196; [1984] 1 All E.R.
470, H.L.(E.)
Hagen, The {1908} P. 189, C.A.
Rex v. Kensington Income Tax Commissioners, Ex parte Princess Edmond
de Polignac [1917] 1 K.B. 486, C.A.
Spiliada Maritime Corporation v. Cansulex Ltd. (1987] A.C. 460; [1986] 3
W.L.R. 972; [1986] 3 All E.R. 843, H.L.(E.)
The following additional cases were cited in argument before Harman J.:
Amin Rasheed Shipping Corporation v. Kuwait Insurance Co. [1984] A.C.
50; [1983] 3 W.L.R. 241; [1983] 2 All E.R. 884, H.L.(E.)
Westbourne Galleries Ltd.," In re [1973] A.C. 360; [1972] 2 W.L.R. 1289;
[1972] 2 All E.R. 492, H.L.(E.)
Summons,
On 7 July 1989 Ladenimor $.A. (“Ladenimor”) a company
incorporated in Switzerland with a registered office at Via Pioda, 14
Lugano, Switzerland presented a petition pursuant to section 459 of the
Companies Act 1985 against Intercomfinanz S.A. a company registered
in Switzerland with a registered office at 12, Via San Gottardo, Lugano,
Switzerland in respect of Harrods (Buenos Aires) Ltd. (“the company”),
a company incorporated in England with its registered office at Royex
House, Aldermanbury Square, London, EC2V 7LD. By the petition
Ladenimor alleged that the affairs of the company had been and
continued to be conducted in a manner unfairly prejudicial to the
interests of Ladenimor, which owned 49 per cent. of the company’s
shares, and further or alternatively that it was just and equitable that
the company should be wound up, and prayed, inter alia, for (1) an
order that Intercomfinanz, as the owner of 51 per cent. of the shares of
the company, purchase Ladenimor’s shares in the company at a price
representing 49 per cent. of the value of the company and on the basis
that there be added back to the value of the company such loss as might
be found to have been caused to it by the matters complained of in the
petition, or, alternatively, (2) an order that the company be wound up
by the court under the provisions of the Insolvency Act 1986. On 12
July 1989, Mr. Registrar Buckley made -an order giving leave to serve
the petition out of the jurisdiction pursuant to R.S.C., Ord. 11, r. 1.76
In re Harrods (Buenos Aires) Ltd. {1992}
On 20 November 1989 Intercomfinanz applied by summons for relief
by way of, inter alia, orders (1) to set aside the registrar's order, (2) to
set aside the service of the petition, and (3) to stay the petition on the
grounds that there was another forum (namely, Argentina) having
competent jurisdiction which was the appropriate forum for the trial of
the issues raised by the petition.
Michael Briggs for Ladenimor.
Alan Boyle for Intercomfinanz.
George Bompas for the company.
Harman J. On 7 July 1989 a petition was presented to this court in
the matter of a company called Harrods (Buenos Aires) Ltd. The
petition was presented by a company incorporated in Switzerland, called
Ladenimor $.A. It specifies that the company was incorporated in
September 1913 in England. Its registered office is at Royex House, an
address very well known in this court. Its nominal capital is £5,457,000
sterling. Ladenimor holds a large percentage, 49 per cent., of the issued
shares of the company. The object of the company is:
“to carry on, in Buenos Aires, in the Argentine Republic and
elsewhere in South America, the business of a universal supply
company and general stores in all its branches.”
The remainder of the company’s shares, other than those held by
Ladenimor are held by the first respondent; Intercomfinanz S.A., which
is a Swiss company that has a controller or beneficial owner named
Gibertoni.
The petition sets out allegations as to relationships between Mr.
Gibertoni and the individuals behind Ladenimor. It alleges that in
September 1979 they made an agreement in principle to acquire the
shares in the company, and at that date its only activity was the running
of a large department store in Florida Street, Buenos Aires. The share
capital was acquired and the very substantial price was paid by
instalments between November 1979 and December 1984. Mr. Gibertoni
ran the company and had complete de facto control of it with the
agreement of Ladenimor. In 1985, Mr. Gibertoni and the Italian family
behind Ladenimor fell out, and various matters then took place in
regard to the company’s business. Amongst other matters the company
was advised by the formerly well known firm of Clifford Turner, the
solicitors for the company, as to how distributions might be made by the
company, which had a lack, according to English law then applicable, of
distributable reserves, so that it was unable to pay a dividend. Upon
advice, a structure of loans was created but, according to the allegation
in the petition, Ladenimor did not receive the alleged part of the loans
intended to be for its 49 per cent. of the interest in the company.
Further, the petition alleges that the company had its activities
diversified into cattle breeding, but that that cattle breeding was
remarkably unsuccessful in that, throughout the period September 1984
to March 1986 there were according to the records no calves at all born
of the company’s cattle. It is alleged that that leads to an inference that77
Ch. In re Harrods (Buenos Aires) Ltd. Harman J.
the affairs of the cattle were being manipulated in a way that
disadvantaged the company. It is further alleged that other transactions
took place in a sort of bond issued in Argentina called a Bonex, which
were disadvantageous to the company compared with the loans also
made by the company to another Argentine company controlled by Mr.
Gibertoni. Another allegation concerns the acquisition of shares from a
further company in Argentina controlled by Mr. Gibertoni, at a grossly
excessive price and so on, leading to the conclusion, in paragraphs 41
and 42 of the petition:
“41. In the premises the affairs of the company have been, are
being and for as long as the same remain under the control of Mr.
Gibertoni will be conducted in a manner which is unfairly prejudicial
to the interests of the petitioner.
“42, Further or alternatively it is just and equitable that the
company should be wound up. Upon a winding up of the company,
a substantial surplus would be distributable to its members.”
The prayer seeks in paragraph 1 that Intercomfinanz S.A. be ordered
to purchase Ladenimor’s shares on a particular valuation basis; there is
a temporary order sought in paragraph 3 and, alternatively, in paragraph
4 an order for the winding up of the company under the Companies Act
1985. The petition was to be served upon the company at its own
registered office at Royex House, and upon Intercomfinanz at Lugano.
That was followed by an application made ex parte which sought
leave to serve the petition out of the jurisdiction, pursuant to R.S.C.,
Ord. 11; presumably, I do not think I have seen the actual application,
pursuant to Ord. 11, r. 1(1)(@). By that provision service out is
permissible because in “the action,” so called, begun “by writ,” so called
(those words apply to an application to the court by petition) relief was
sought against a person domiciled within the jurisdiction. Plainly, that
would have been the appropriate case because the company is a person
within the jurisdiction subject to the petition, and the service on
Intercomfinanz is on a person outside the jurisdiction.
The application to serve out was supported by a somewhat exiguous
two-page affidavit, by an assistant solicitor, which was severely, and in
my view justifiably criticised by Mr. Boyle for the applicant in this
summons. He did so on the ground that the affidavit was in breach of
the golden rule, sometimes referred to as the‘rule in The Hagen [1908]
P. 189, sometimes referred to as the rule in Rex v. Kensington Income
Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1
K.B. 486, but in any event the rule that on all ex parte applications full
and frank disclosure of any matter that may influence the judge in
exercising his discretion ex parte must be made by the person applying.
In my view the golden rule plainly was not satisfied.
The order was in fact made by Mr. Registrar Buckley, and service
eventually took place after a long time. Thereupon, this summons was
issued on 20 November 1989. The summons by Intercomfinanz sought
an order from the registrar, now adjourned to me, seeking to set aside
the order giving leave to serve out and an order that service be set
aside; the summons also sought an order that the petition and all78
Harman J. In re Harrods (Buenos Aires) Ltd. [1992
proceedings thereunder be stayed. Those are, in a sense, quite separate
applications. Paragraphs 1 and 2 are based upon the golden rule, and
would not bring the proceedings to an end. They would simply result in
the order and the service being set aside and the petitioner being left to
start again if it could properly manage to do so. Paragraph 3 is an order
effectively driving the petitioner from this judgment seat.
On the matter being argued before me Mr. Briggs, in a most cogent
argument, submitted to me that Ord. 11, r. 1 was not in fact applicable
to this matter, and leave to serve the respondent was not necessary. He
made that submission by reference to the rules which govern these sorts
of proceedings. Firstly, the Insolvency Rules 1986 (S.I. 1986 No. 1925),
which provide in relation to a petition, by rule 4.22(4): “The petitioner
shall, at least 14 days before the return day, serve a sealed copy of the
petition on the company.” That is the only requirement for service in
the Insolvency Rules 1986 at that point. That was complied with. That
results in the service on the company being effective. Rule 4.23(1)
provides: “On the return day .. . the court shall give such directions as
it thinks appropriate with respect to the following matters .. .” as to
service and other matters, including, under rule 4.23(2), whether any of
the persons in rule 4.10 is to be served with the petition.
By rule 12.12(1), Order 11 does not apply in insolvency proceedings.
The result is that the code for insolvency proceedings is in the Insolvency
Rules 1986 and Order 11 has nothing to do with petitions seeking the
winding up of the company, whether by a creditor for debt, or by a
contributory upon the just and equitable ground. Rule 12.12(3) provides:
“Where for the purposes of insolvency proceedings any process or
order of the court, or other document, is required to be served on a
person who is not in England and Wales, the court may order
service to be effected within such time, on such person, at such
place and in such manner as it thinks fit . . .”
Thus, the insolvency court is in control of the method, time and so forth
of service, and there is no requirement for leave to serve out, nor does
the provision of Ord. 11, r. 4(2), that no leave shall be granted unless it
is made to appear to the court that the case is a proper one for service
out of the jurisdiction, which throws a burden upon the person seeking
leave to show a prima facie case, apply to insolvency proceedings.
All that seems to me extremely obvious and natural. An English
company, being an artificial person created pursuant to this very statute,
subject to the jurisdiction inevitably of this court, must plainly be
properly brought before this court, and the fact that other persons
outside the jurisdiction may need also to be heard is sufficiently covered
by the power and requirement to give directions about service on them.
Thus, if this petition were simply a petition for a just and equitable
winding up there could be, in my judgment, no doubt that Order 11
would have nothing to do with the matter at all.
The Insolvency Rules 1986, however, do not necessarily apply to
petitions under section 459. To them, the Companies (Unfair Prejudice
Applications) Proceedings Rules 1986 apply. These were made, as was
pointed out, 10 days later than the Insolvency Rules, in November 1986.79
ch. In re Harrods (Buenos Aires) Ltd. Harman J.
These are rules applying to petitions presented under Part XVII of the
Act of 1985 which, of course, includes section 459 of that Act. Rule 2(2)
provides: “Except so far as inconsistent with the Act and these Rules,
the Rules of the Supreme Court ... apply to proceedings under Part
XVII of the Act ... with any necessary modifications,” but rule 4(1)
provides: “The petitioner shall, at least 14 days before the return day,
serve a sealed copy of the petition on the company” and, under rule
4(2):
“In the case of a petition based upon section 459 of the Act, the
petitioner shall also, at least 14 days before the return day, serve a
sealed copy of the petition on every respondent named in the
petition.”
Thus, there are mandatory directions in these rules requiring services on
the company, which must be a company having a place for service
within the jurisdiction and, therefore, there is no question of service out
under rule 4(1) and, under rule 4(2), a mandatory requirement for every
respondent named to be served. It would seem curious if the rule
mandatorily obliged the petitioner to serve respondents named in the
petition, but also required the petitioner to get leave to make such
service. There would be, to my mind, an inevitable conflict between
those two rules.
Mr. Boyle observed correctly that these rules do not, unlike the
Insolvency Rules 1986, specifically exclude Order 11 but, in my
judgment, service is sufficiently dealt with by rule 4, in the two
paragraphs there set out, plus the provisions under rule 5(a), enabling
the court on the return day to give directions for service of the petition
on any person that it thinks fit. Those provisions seem to me to amount
to a code for service of company petitions, bearing in mind the
provisions of rule 2(2), so that it would be inconsistent with these rules
for Order 11 to apply also to section 459 petitions. In my judgment,
despite Mr. Boyle’s extremely elegant reasoning upon the point, Mr.
Briggs’ argument is undoubtedly correct. In my judgment, there is no
requirement in respect of petitions, either under the Insolvency Rules
1986 or under the Companies (Unfair Prejudice Applications) Proceedings
Rules 1986, requiring leave for service out of the jurisdiction under
Order 11.
Further, it is to be noticed that Ord. 11, r. 1(2) itself provides:
“Service of a writ”—which in this context includes a petition—“out
of the jurisdiction is permissible without the leave of the court
provided that each claim made by the writ”—the prayers in the
petition, I suppose, is the proper way to read that—‘is ... (b) a
claim which by virtue of any other enactment the High Court has
power to hear and determine notwithstanding that the person
against whom the claim is made is not within the jurisdiction of the
court or that the wrongful act, neglect or default giving rise to the
claim did not take place within its jurisdiction.”
In my judgment, were it necessary to go back to Order 11, which I do
not believe it is as I read the two sets of rules applicable to this petition,80
Harman J. In re Harrods (Buenos Aires) Ltd. {1992}
that second limb of rule 1(2)(b) would apply because the claim here
would be a claim by virtue of an enactment, viz. the Companies Act
1985, which the High Court undoubtedly has power to hear. That must
be so because this is a petition which falls precisely, in my judgment,
within the opening words of section 459, which provides: “A member of
a company”—and note there are no restrictions whatever as to residence,
nationality or other qualification, save that the applicant be a member
i.e. a shareholder or a person entitled to be entered on the register of
members of the company)—“may apply to the court by petition for an
order under this Part. . .” That plainly, then, gives the court jurisdiction
to hear and determine that petition, and that is so notwithstanding, in
my view, the fact that the wrongful act, neglect or default giving rise to
the petition did not take place within this court’s jurisdiction. Thus, in
my view, there can be no doubt at all that leave to serve this petition
out was never required.
On that basis the application for leave to serve out was misconceived.
It was wholly unnecessary and the defective affidavit, which would, in
my view, have been in breach of the golden rule and would have led me
at least to set aside the order for service out without more ado on the
ground that it had been obtained without proper disclosure, was all a
wholly wasted exercise and gave rise to no consequences at all. I shall,
therefore, pay no further attention to paragraphs 1 and 2 of the
summons now before me, on the ground that the order of Mr. Registrar
Buckley was an unnecessary order and the application was an unnecessary
application. There was a right to serve and, therefore, no question of
the inadequacy of the affidavit has any material bearing upon this case.
I turn to the matter which is really the substance of this application,
and that is the question whether the court should make an order for a
stay. The foundation for Mr. Boyle’s extremely interesting and intelligent
argument is, of course, Spiliada Maritime Corporation v. Cansulex Ltd.
[1987] A.C. 460, particularly Lord Goff of Chieveley’s speech. I cannot
resist observing that on one part of the Spiliada case it is demonstrable
that the views of the House of Lords are wholly out of touch with
reality. Lord Templeman, at p. 465r, observed that he hoped that in
future the judge will be allowed to study the evidence and refresh his
memory of the speech of his noble and learned friend, Lord Goff, in the
quiet of his room without expense of the parties. He will not be referred
to other decisions on other facts, and submissions will be measured in
hours, not days. An appeal should be rare and the appellate court slow
to interfere.
This matter came on before me at 2 o'clock on Monday. I am
delivering judgment at a quarter to four on a Thursday afternoon. I do
not regard any minute of the time that has been taken before me as
having been wasted. The matter is, in my view, difficult. 1 have been
assisted by extremely able arguments from all three of the counsel
before me, to each of whom I am greatly indebted. Lord Templeman’s
observations bear no relation to any conceivable way in which this
matter could have been conducted. Where I should have found the time
to read the evidence, which runs in the exhibits to some hundreds of81
Ch. In re Harrods (Buenos Aires) Ltd. Harman J.
pages and in the affidavits alone to 134 pages, 1 cannot imagine. The
result is that Lord Templeman’s wishes are wholly incapable of
performance and have not been performed.
The matter that is of importance, however, is Lord Goff's speech,
which is obviously extremely well known. It is very important, however,
to remember that even a speech by so very able a lawyer as Lord Goff
undoubtedly is, assented to expressly by other members of the House,
so that it constitutes the unanimous view of the House, must not be
construed as if it were a statute. Every word is not to be taken as
literally applying to every other case. It is to be taken as setting out his
Lordship’s reasoning in reaching the principles which he expressed and
to which his brethren assented. The principle is one which is of fairly
recent development. The Spiliada case itself is under four years old, and
the decisions before it, which led up to it, are mostly, I think, within the
last decade.
The doctrine is commonly called forum non conveniens, although it
is very important to remember, as Lord Goff specifically pointed out,
that “conveniens” is not adequately translated as “convenient.”: It is
used in the sense in which lawyers use the word convenience, as in the
phrase “balance of convenience” in cases when the court is deciding
whether or not to grant an injunction. In such cases what the court is
trying to do is achieve a balance of justice, or a balance of fairness
between the parties, upholding existing rights and not upsetting matters
which later will have to be undone, preserving the status quo so far as is
reasonably possible. That is not convenience in the sense of what is nice
and easy for the parties in any proper sense, and nor here do the words
forum non conveniens mean the most handy court into which to pop.
The phrase means, and it is clearly laid out as a matter of principle
by Lord Goff, where he cited, Lord Keith of Kinkel in The Abidin
Daver [1984] A.C. 398, 415, where he had referred to the “natural
forum” as being “that with which the action had the most real and
substantial connection” and Lord Goff said [1987] A.C. 460, 478a: “it is
for connecting factors in this sense that the court must first look.”
Lord Goff, it must be remembered, was dealing with a case from the
Commercial Court concerning the shipping of a cargo, | think sulphur—
it does not really matter—in a ship from Canada to England. The
connection of the case with England was not particularly obvious. It was
a case in the Commercial Court to which many international cases are
brought, and where the rights of the parties are frequently dependent
upon express provisions that English law shall apply in the contract. The
rights are almost always rights to sums of money by way of damages for
some breach of contract or perhaps, although more rarely, in tort, and
the matters are all matters of true litigation inter partes. None of the
phrases in Lord Goff’s observations naturally and easily apply to cases
such as the Chancery Division is so commonly concerned with, where a
party applies to it for assistance and guidance and it may be for a
discharge of liabilities.
For example, if English trustees beset by conflicting claims from
beneficiaries come to the court to have determined what their duty may
be; if trustees of pension funds come to a court and surrender any82
Harman J. In re Harrods (Buenos Aires) Ltd. [1992]
discretion they may have to choose as to who shall be the recipient of
surplus funds, so that the court, acting on proper principles and
considering the terms of the pension fund trust deed, can decide where
the moneys should go. Those matters are very much matters which are
not matters of a lis inter partes, with rights to damages one way or the
other and where, above all, the person seeking relicf from the court,
can effectively only get relief from the court being the English High
Court here in London. That is so because a trustee can be sued by a
beneficiary to account for the trust property at any time, and it is only if
the trustee has an order of the court confirming the administration that
he is safe from future action. Thus, the trustee has to be protected and
is entitled to be protected. That is miles from a claim by one corporate
owner of a ship against another corporate owner of cargo for damages
for mis-shipping the relevant substance.
Here in this present case, again, one has a matter which is very far
from the formulations adopted by Lord Goff. Here one has an
application by a member of an English company, pursuant to an express
right given by an English statute, in respect of a matter where the
English law gives a particular remedy by section 461 of the Act of 1985
as a matter of discretion, enabling it to effect what Mr. Briggs rather
neatly described as “corporate divorce.” The order made requires a buy-
out by one side of the other, and it may be by the petitioner of the
respondent, or by the respondent of the petitioner, or it may in many
cases be by the company of the petitioner. That will alter the future
conduct of the affairs of the company, which will affect many people
other than the two major protagonists in their future rights and
entitlements. All such matters are plainly matters where the English law
applies to the English artificial entity which has been created. None of
that has much resemblance to a lis inter partes in the Commercial
Court.
Nonetheless, in my judgment the Spiliada propositions about trying
to assess what is the most appropriate forum do apply in the sense that,
so far as they lay down principles, those are.,universal principles of
English law. The question whether a stay should be granted is answered
by applying the following test, according to Lord Goff, at p. 476:
“a stay will only be granted on the ground of forum non conveniens
where the court is satisfied that there is some other available forum,
having competent jurisdiction, which is the appropriate forum for
the trial of the action. . .”
I have, therefore, to say: what is the appropriate forum for the trial of
this action? To answer that question I have to pose another: what is this
action? This action is a petition, in my judgment, for relief against the
conduct of the company’s business in a manner unfairly prejudicial to
some part at least of its members, including Ladenimor. The court will
hear a whole series of instances of things that have been done, acts that
have been committed, and it will have to decide whether the allegation
that this or that was done is true or false. But in the end what the court,
in my judgment, has to do in these matters is reach an overall
conclusion: has Ladenimor suffered by reason of the conduct of the83
Ch. In re Harrods (Buenos Aires) Ltd. Harman J.
company’s affairs in such a manner as to be unfairly prejudicial to it?
That is a general conclusion, but it is the essential conclusion and the
foundation for the jurisdiction.
Section 461 says that the court may not make any order, unless it is
so satisified. Mr. Boyle submitted to me that the question was not
properly formulated as to what was the issue in this petition by making
that conclusion. He submitted that that was not the issue in the petition.
The issue in the petition was whether the “substantive complaints”—his
phrase—the particular acts complained of, I would say, had been
committed. Here it is quite clear that what the petitioner alleges is a
whole series of acts committed in Argentina. There is no doubt that all
the principal witnesses are Argentinian. There is no doubt that the
books of the company are in the Argentine. There is no doubt that the
company, although an English company, and although it has its annual
general meetings here, has its accounts in sterling, has its minute book
of general meetings kept here, yet the residence for tax purposes of the
company is Argentina and not England.
Nonetheless, as it seems to me, the question must always be: “How
is this company properly to be regulated?” When one is looking at a
company incorporated in England, which has its life and being only by
virtue of the act of the English law creating this artificial person, it is to
my mind extremely difficult to see that it can be appropriate to hold that
“the forum” appropriate to decide that sort of matter is any forum other
than the forum of the English court. It is, as Mr. Briggs submitted, in
my view “blindingly obvious” what the answer to the question is once
the question is posed.
Mr. Boyle submitted that that was not a proper approach to the
matter, and J have to start with even scales and put into the balance on
each side the various possible factors which Lord Goff listed. In my
view, I do have to start with even scales, and I do have to consider what
factors effect the matter, but when I find, when I am asked, to stay a
petition and drive from the English seat of justice a person entitled by
English statute to a remedy which it is conceded is not available
anywhere else, it is impossible, that being a relationship governed by
English law, for one to come to a conclusion that another forum will be
the better or the more appropriate forum. It seems to me quite wrong
to say that the issues that have to be decided are the particular factual
issues as to what has been done. Those are steps, facts that have to be
proved along the way to deciding the eventual issue, and the same, in
my judgment, applies to the question whether the company should be
wound up upon the equitable ground or not.
The evidence as to Argentine law, which would be relevant if one
were in doubt as to the matter and were considering whether or not
substantial justice could be obtained in the other forum, is interesting
and curious. It is quite plain that Argentine law provides fairly extensive
protection to shareholders in companies against wrongdoings by those
managing the companies, It is clear that the Argentine law can provide
for the winding up of Argentine companies. The oddity lies in the
apparent provisions of Argentine law. Argentine law, by article 118 of
what, I think, is the Companies Law—it is defined in the affidavits as84
Harman J. In re Harrods (Buenos Aires) Ltd. [1992]
“C.L.,” and I hope I have not misunderstood it—provides that a branch
of a foreign company is required to be registered in Argentina according
to certain particular laws.
This company, Harrods (Buenos Aires) Ltd., registered itself as a
branch of the English company, stating that the branch had no capital of
its own, stating that the company had a capital of £5-4m.-odd sterling,
stating that the company, not the branch, had objects of very wide
extent and plainly complied in all respects with article 118. So much one
would expect, and so much would be similar to our own company
practice requiring foreign companies to give notice to the registrar under
the relevant sections when they seek to set up a place of business here.
If a company is registered in accordance with article 118 then
Argentine law provides that the law of the place of incorporation shall
govern the fundamental points as to the company’s existence and so
forth. If that article were applicable English law would apply to this
matter if tried in Argentine courts. That would make it plainly desirable
that the English court try the case, because the English court is likely, in
general terms, to be better at applying English law than a foreign court
acting on expert evidence, however able.
Despite the provisions of article 118, Argentine law goes on in article
124 to provide—I read from what is called a “free” translation:
“A company incorporated abroad which has its seat in the Republic,
or whose principle corporate purpose is sought to be accomplished
in the same, shall be considered as a local corporation in relation to
the accomplishment of its incorporation and modification and the
control of its performance.”
I have had shown to me a textbook by an Argentine academic, a
professor who was formerly a member of the Court of Appeal in
Argentina, on this very subject. The evidence is really not in controversy
before me that a foreign company which has its seat, its principal office,
I suppose, is the best English equivalent to “seat,” in the Republic is
treated in the Argentine courts as an Argentine company. Such a
company is taken out of article 118 which treats it as a foreign company
which has registered a branch in Argentina. And alternatively, if a
foreign company’s principal corporate purpose, limiting the word
“principal” to mean “only” corporate purpose being its business, is
carried on in the Argentine, then again the Argentine law, as it were,
adopts and takes over the company.
That seems to me to be an unusual form of provision, There is no
such provision in English law, and I know of no such provision in such
other systems of continental company law as those with which I have
any familiarity, Nonetheless, that is what the law is. The result in the
case of this company, which has its whole business carried on within
Argentina, has its main directing office in Argentina, whose directors
live, meet and have their daily lives and being in Argentina, is that it
would probably be held to have its seat in Argentina. Alternatively, it
would certainly, even within the restrictive understanding of the word85
ch. In re Harrods (Buenos Aires) Ltd. Harman J.
“principal,” be held to carry on business exclusively within Argentina.
The result would be that Argentine law would apply and the English law
would be ousted.
The result of that would be that Ladenimor could not obtain,
according to the undoubted and uncontroverted evidence before me, the
remedy which it primarily seeks, the corporate divorce or buy-out. It
could, perhaps, obtain a winding up on grounds that seem not at all
dissimilar to a just and equitable winding up, but the petition is quite
plainly aimed, and Mr. Briggs asserted justifiably that it was, primarily
at obtaining a buy-out on the proper basis of valuation, giving Ladenimor
all the value which it was entitled to. That, in Argentina, cannot be
obtained. That, by English standards applying to this English company,
is a right that Parliament has granted. That right I would be defeating if
I were to grant a stay in this case.
It seems to me that that right being defeated, the fact that another
right, which is the fall-back position in this country of a just and
equitable winding up, would be available in Argentina by way of a
winding up and sale of the assets so that the parties would be separated,
is not enough to ensure that substantial justice would be done. It is
notorious in England that, upon a winding up, less is obtained from
assets in a sale by a liquidator than is obtained by some other form, for
example by an administrator appointed by the court under the Insolvency
Act 1986 or, even better, by a receiver appointed by a debenture-
holder. I have no reason to suppose that that general proposition, that a
forced sale by a liquidator tends to produce a worse price, is not true in
Argentina as in England. It is, in fact, a proposition of elementary
commercial sense. That being so, there is plainly a serious disadvantage
to Ladenimor if the petition were to be stayed on the ground, which I
do not accept, that the Argentine court was the more appropriate
forum. It would still result in Ladenimor being deprived of substantial
justice, as I see the case, and upon that ground also I would not
conclude that there should be any stay. For those reasons, I have
reached a clear conclusion that paragraph 3 of this summons is not
justified, and no stay should be ordered.
Application dismissed.
Solicitors: Bower Cotton & Bower; Frere Cholmeley; Clifford Chance.
[Reported by IAN Saxton Eso., Barrister]
INTERLOCUTORY ApPeAL from Harman J
Pursuant to leave granted by Nicholls L.J. on 14 June 1990,
Intercomfinanz appealed by a notice dated 25 June 1990, on the grounds,
inter alia, that the judge had failed properly to apply the principles laid
down in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C.
460, that the remedies available in proceedings brought in Argentina
were such as to enable practical justice to be done should the factual
basis for the complaints made in the petition be established, that by86
In re Harrods (Buenos Aires) Ltd. (C.A.) 11992]
reason of factual circumstances specified in the notice Argentina was the
more appropriate forum, and that for those and other reasons the judge
had erred in his decision.
By a respondent’s notice dated 26 November 1990, Ladenimor sought
that the judge’s decision be affirmed on the grounds additional to those
relied on by him that (1) the court had no jurisdiction on grounds of
forum non conveniens to stay a contributory’s petition for the winding
up of a company incorporated in and having its registered office in
England or to stay a petition seeking relief in respect of such a company
under Part XVII of the Companies Act 1985, by reason of sections 2, 3,
42 and 49 of the Civil Jurisdiction and Judgments Act 1982 and article 2
of the Brussels Convention on Jurisdiction and the Enforcement of
Judgments in Civil and Commercial Matters 1968, and (2), alternatively,
the court had no jurisdiction on grounds of forum non conveniens to
stay such proceedings as aforesaid against the company, and in the
circumstances it could not be a proper exercise of any such jurisdiction
to stay the same proceedings not against the company but against a
shareholder therein.
At the beginning of the hearing in the Court of Appeal, the court
granted leave to Ladenimor to serve the respondent’s notice out of time.
The issue raised therein was treated as a preliminary question. The
court heard argument on that question alone and deferred the hearing
of argument on the appeal concerning the appropriate forum.
The facts are stated in the judgment of Dillon L.J. in the hearing on
the preliminary question.
Alan Boyle for Intercomfinanz. Read as a whole and in the light of
its Preamble and the reports of Mr. P. Jenard and Professor Peter
Schlosser, Official Journal 1979 No. C. 59/1 and 59/71, the Convention
of 1968 provides a complete code for determining which courts are
appropriate for deciding disputes as between member states of the
E.E.C. but does not deal with questions of jurisdiction affecting other
states.
In view of section 49 of the Act of 1982, the ultimate question raised
by the respondent’s notice is whether the court’s exercise of its discretion
in regard to forum non conveniens is inconsistent with the Convention.
It is therefore only necessary for Intercomfinanz to show that there is no
such inconsistency, and the fact that the Convention makes no express
jurisdictional provision in relation to disputes in which one party is
domiciled in a contracting state and another is not is nihil ad rem.
Where the Convention applies there is no room for the application of
the doctrine of forum non conveniens, but it is not inconsistent with the
scheme of the Convention that a member state should have power to
stay proceedings in that state where there is a conflict of jurisdiction
between a member state and a non-member state.
What is important under the Convention is that the jurisdiction of
the courts of a member state to hear a case should be clear within the
sphere of operation of the Convention. The Preamble to the Convention
tefers to the parties to the E.E.C. Treaty (Cmnd. 5179—II), the desire
to implement article 220 of the Treaty, the duty of the member states87
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.)
under that article to negotiate between themselves with a view to
securing the simplification of formalities governing the reciprocal
recognition and enforcement of judgments, and the desire to strengthen
“in the Community” the legal protection of persons “therein established.”
The words “for this purpose” immediately following those provisions
emphasise that the Convention is concerned with reciprocity as between
the member states only, and therefore the reference to “international
jurisdiction” in the Preamble must mean jurisdiction as between those
states only. If, for example, a United States company sues a company
domiciled in the United Kingdom, the court, applying domestic rules,
has a discretion to decline jurisdiction on the ground of forum non
conveniens: see Cheshire and North's Private International Law, 11th ed.
(1987), pp. 326-327. The application of the doctrine in those circum-
stances is of no interest to the other E.E.C. member states and does not
tend to impair the purpose of the Convention: see the article by Mr.
Lawrence Collins, “Forum non conveniens and the Brussels Convention,”
(1990) 106 L.Q.R. 535, 538-539.
The general scheme of Title H of the Convention is that a defendant
domiciled in a member state is to be sued in that state, subject to
exceptions: article 2. But there is nothing to compel acceptance of
article 2 by someone not domiciled in a member state: see the Jenard
report, Official Journal 1979 No. C. 59/1, pp. 18-19. Articles 3 to 6,
dealing with cases where a party can be sued in another member state,
are concerned with other member states, and not non-member states. If
Ladenimor’s contentions are correct, articles 5 and 6 do not make sense
where one party is domiciled in a non-member state. The other Titles of
the Convention do not in general have a direct bearing on the present
issue, but article 57, which preserves the effect of existing conventions in
relation to particular matters and envisages the making of further
jurisdictional rules between member states and non-contracting states, is
significant. As to the limited scope of the Convention, see the Jenard
report, Official Journal 1979 No. C. 59/1, pp. 3, 7, 13-15.
In S. & W. Berisford Plc. v. New Hampshire Insurance Co. [1990] 2
Q.B. 631 Hobhouse J. reached the wrong conclusion on jurisdiction. His
observations on the framework of the Convention being destroyed do
not apply to disputes involving a contracting and a non-contracting state.
[Reference was made to paras. 76, 174 and 176 of the Schlosser report,
Official Journal 1979 No. C. 59/71, pp. 97, 123-124.] In Arkwright
Mutual Insurance Co. v. Bryanston Insurance Co. Ltd. [1990] 2 Q.B.
649 Potter J. wrongly assumed that Hobhouse J. had reached a correct
conclusion in the earlier case.
In the context of article 53 of the Convention, although section 42 of
the Act of 1982 does not say where the seat of a company is if the
company is incorporated in the United Kingdom but has its central
management and control elsewhere, for present purposes Harrods
(Buenos Aires) Ltd. may be taken to have had seats both in the United
Kingdom (by section 42(3)(a)) and in Argentina (by section 42(6)(b)):
The Deichland [1990] 1 Q.B. 361, 373, 375, 378. The question whether
there can be more than one seat of a company for the purposes of
section 42 is, however, reserved.88
In re Harrods (Buenos Aires) Ltd. (C.A.) [1992]
Where there are two defendants, one domiciled in a member state
and the other not, there is a potential conflict between articles 2 and 4
of the Convention. Article 4 is to be preferred, so that it would not be
contrary to the purpose of the Convention for the court to decide that
the defendant not domiciled in a member state can be be sued elsewhere
even though the other defendant is so domiciled.
Michael Briggs for Ladenimor. The scope of the Convention is
comprehensive in relation to the court’s international jurisdiction in civil
and commercial matters, and article 2 in unambiguous terms requires
that persons domiciled in a contracting state shall be sued in the courts
of that state. The court is not invited to refer the case to the Court of
Justice of the European Communities. The answers to the questions
referred to that court in Overseas Union Insurance Ltd. v. New
Hampshire Ltd., The Times, 27 September 1988 will not assist in the
present case.
The limitation on the scope of the Convention contended for by
Intercomfinanz is not to be found anywhere in the Convention, A
purposive approach to the construction of the Convention is appropriate.
Ladenimor’s position, which is supported by S. & W. Berisford Plc. v.
New Hampshire Insurance Co. {1990] 2 Q.B. 631 and Arkwright Mutual
Insurance Co. v. Bryanston Insurance Co. Ltd. [1990] 2 Q.B. 649, is
consistent with the underlying purpose of the Convention. The principal
purpose of the Convention has to do with mutual recognition and
enforcement of judgments, but, as the Preamble to the Convention
makes clear, it was thought necessary to achieve that purpose by
establishing a system whereby the rules of private international law of
all the member states were put on the same basis: see the Jenard report,
Official Journal 1979 No. C. 59/1, pp. 7 and 14. The Convention is
designed to provide a simple, certain and uniform set of rules which
confer on member states their jurisdiction in international matters, and
enable a litigant to know immediately, by looking at the Convention,
whether and where he can sue a person domiciled in a member state.
By contrast, the practical effect of Intercomfinanz’s submissions is that
the courts of the member states continue to apply their own rules of
private international law unless and until there is a conflict between the
member states. The international nature of the scope of the Convention
emerges particularly clearly from the use in the French and Italian
versions of the Preamble of the literal translation of the words “in the
international order:” see O'Malley and Layton, European Civil Practice
(1989), p. 345, para. 14.02, note 7. There is no qualification in the
Preamble by reference to that part of the international order which
concerns only conflicts between member states. There is a principle of
construction in E.E.C. law that any claimed exception to a general
principle is to be construed narrowly: Kalfelis v. Schréder, Miinchmeyer,
Hengst and Co. (Case 189/87) [1988] E.C.R. 5565.
The supposed limitation on the scope of the Convention conflicts
with articles 4, 27, 57 and 58. The second part of article 4 is not a
limiting provision but, if anything, an enabling one; the implication from
article 27(5) is that the Convention is not confined to inter-member state
disputes; and articles 57 and 58 would be unnecessary if the limitation89
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.)
existed, since there could not be any possibility of conflict between the
Convention of 1968 and the other conventions there listed. Intercom-
finanz’s contentions also conflict with the general thinking both in the
Jenard and Schlosser reports (see Official Journal 1979 No. C. 59/1 and
59/71, pp. 13, 124) and in the leading textbooks: see Cheshire and
North’s Private International Law, 11th ed., pp. 333-334 and O'Malley
and Layton, European Civil Practice, pp. 1084-1085, para. 44.42.
The Convention should be interpreted in a way leading to uniformity
and certainty: Lufttransportunternehmen (L.T.U.) G.m.b.H. & Co. K.G.
v. Eurocontrol (Case 29/76) [1976] E.C.R. 1541, 1551-1552; Kalfelis v.
Schréder, Miinchmeyer, Hengst and Co. (Case 189/87) [1988] E.C.R.
5565; O'Malley and Layton, European Civil Practice, pp. 334, 336-337,
paras. 13.16, 13.19 and the Schlosser report, Official Journal 1979 No.
C. 59/71, pp. 97-98, para. 78. Intercomfinanz’s approach, however, is
that the Convention may or may not apply, depending on whether or
not there is an inter-member state dispute. That effectively means that a
plaintiff deciding where to sue cannot simply look at the Convention but
must investigate the private international law rules of several states. It is
not appropriate to resort to a convention which provides for jurisdiction
for a set of rules for resolving conflicts.
Since Harrods (Buenos Aires) Ltd. is unquestionably domiciled in
England for the purposes of the Act of 1982 (see section 42), the
question whether it has one or two seats is irrelevant. [Reference was
made to The Deichland [1990] 1 Q.B. 361, 384-385, 387.] The company
is an essential defendant to the petition and the petition cannot be
severed as between that company and Intercomfinanz. The discretion to
stay proceedings under the forum non conveniens doctrine can only
properly be applied by having regard to all the parties, since the
purpose is to find a forum suited to the best interests of all the parties.
If the position is settled in relation to Harrods (Buenos Aires) Ltd., the
article 2 defendant, that is determinative of the jurisdiction issue as
regards all parties. If, however, it is in theory possible to sever the
petition as between that company and Intercomfinanz, the jurisdiction to
entertain an application to stay only as against Intercomfinanz, which is
not domiciled in a contracting state, cannot be exercised consistently
with the principles laid down in Spiliada Maritime Corporation v.
Cansulex Ltd. [1987] A.C. 460, 474p, 475a, 476c and the judgment of
Hoffmann J. in Arab Monetary Fund v. Hashim (No. 3) [1991] 2 A.C.
114.
Boyle in reply. As to Ladenimor’s argument on the Preamble, see
O'Malley and Layton, European Civil Practice, pp. 328-334, paras.
13.09, 13.11, 13.12, 13.15. Kalfelis v. Schréder, Miinchmeyer, Hengst
and Co. (Case 189/87) [1988] E.C.R. 5565 is merely an example of
purposive construction leading to a restrictive interpretation in particular
circumstances.
It is true that under the Convention the contracting states wished to
choose a common source of jurisdiction as between themselves, but the
Convention does not bind a party not domiciled in a contracting state.
There is nothing in article 4, whose purpose is explained in the Jenard
report, Official Journal 1979 No. C. 59/1, pp. 20-22, inconsistent with
Intercomfinanz’s reading of article 2.90
In re Harrods (Buenos Aires) Ltd. (C.A.) [1992]
Article 27(5) simply deals with cases where judgment has been
obtained in a non-member state. As to articles 57 and 58, the point is
that the Convention is not to prevent member states from entering into
treaties with other states. Ladenimor’s argument about uniformity is
beside the point since the present case has no E.E.C. element. The
passages cited from the textbooks consist of general exegesis, and the
authors are not there considering whether there is a limitation on the
scope of the Convention. On the facts, there is in any event a discretion
to stay the proceedings against Intercomfinanz. Harrods (Buenos Aires)
Ltd. is a necessary party to the proceedings, but that is only one factor
among many others. The exercise of the discretion should be left to a
later stage in the proceedings.
The company, Harrods (Buenos Aires) Ltd., did not appear and was
not represented.
Cur. adv. vult.
19 December 1990. The following judgments were handed down.
Ditton L.J. This case comes before this court on appeal from a
decision of Harman J. in the Chancery Division of 5 April 1990.
The proceedings in which the appeal is brought are entitled “In the
matter of Harrods (Buenos Aires) Ltd.” That company (“the company”)
was incorporated in England in 1913 under the Companies Acts 1908
and 1913, and its registered office is and has always been in England.
But its business is and has always been exclusively carried on in
Argentina and its central management and control is exercised in
Argentina; its principal activity is to carry on a department store or
general store in Buenos Aires.
Since 1979, the company has had two shareholders only, both of
which are companies incorporated in Switzerland and whose central
management and control is exercised in Switzerland, viz., the present
appellant Intercomfinanz $.A., which owns 51 per cent. of the issued
share capital of the company and the present respondent, Ladenimor
S.A., which owns the remaining 49 per cent.
The present proceedings were commenced on 7 July 1989 by the
presentation by Ladenimor in the Companies Court of a petition under
the Companies Act 1985 and the Insolvency Act 1986. The primary case
put forward by Ladenimor is that the affairs of the company have been
and are being conducted by the present management in a manner which
is unfairly prejudicial to Ladenimor within the meaning of section 459 of
the Companies Act 1985, and the primary relief sought is an order that
Intercomfinanz purchase Ladenimor’s shares in the company at a price
representing 49 per cent. of the value of the company and upon the
basis that there be added back to the value of the company such loss as
may be found to have been caused to the company by the matters
complained of in the petition. In the alternative, however, it is submitted
in the petition that it is just and equitable that the company should be
wound up, and a compulsory winding up order is sought under the
Insolvency Act 1986. It is not in doubt that the company is solvent.91
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Dillon L.J.
Under the relevant statutory rules, the company was a necessary
party to the proceedings, whether the relief sought was a winding up
order, or merely an order against Intercomfinanz under section 459 of
the Act of 1985, and there was of course no difficulty in serving the
company at its registered office in England. In addition, on ex parte
application Ladenimor obtained from Mr. Registrar Buckley on 12 July
1989 an order under R.S.C., Ord. 11, giving leave to Ladenimor to
serve the petition on Intercomfinanz out of the jurisdiction.
‘The upshot of that was that Intercomfinanz, by its English solicitors,
issued a summons of 20 November 1989 claiming (1) an order that the
order of Mr. Registrar Buckley giving leave to serve the petition on
Intercomfinanz be set aside; (2) an order that the service of the petition
on Intercomfinanz be set aside; and (3) an order that the petition and all
proceedings thereon be stayed, on the grounds that there was another
forum (namely Argentina) having competent jurisdiction which was the
appropriate forum for the trial of the issues raised by the petition.
That summons came before Harman J. and.by his order now under
appeal he dismissed it. He held, in effect, first, that leave under Order
11 to serve the petition out of the jurisdiction was never required, on a
true appreciation of the statutory position—with the consequence that
any lack of proper disclosure in the affidavit which was put before Mr.
Registrar Buckley was immaterial—and secondly, that the English court,
and not the Argentine court, was the appropriate forum for the trial of
the issues raised by the petition.
Harman J. refused Intercomfinanz leave to appeal against his order,
but leave to appeal was granted by Nicholls L.J. on 14 June 1990. He
commented:
“Although the company was incorporated in England, and although
a decision on whether or not to grant a stay is a matter of discretion
for the judge, Intercomfinanz S.A. has a seriously arguable case on
the application of the Spiliada principles [Spiliada Maritime
Corporation v. Cansulex Ltd. [1987] A.C. 460] in the unusual
circumstances present here.”
In this court a preliminary issue of importance has been taken on
behalf of Ladenimor. It is submitted that as the result of the Brussels
Convention on Jurisdiction and the Enforcement of Judgments in Civil
and Commercial Matters 1968 between the original member states of the
E.E.C., to which the United Kingdom, Denmark and Ireland acceded in
1978 after joining the E.E.C., the English court has no jurisdiction to
refuse on the grounds of forum non conveniens to decide the issues
raised by the petition or to stay the petition, since the company is for
the purposes of the Convention domiciled in England (albeit also
domiciled in Argentina).
The terms of the Convention are set out in Schedule 1 to the Civil
Jurisdiction and Judgments Act 1982, and under section 2 of that Act,
the Convention has the force of law in the United Kingdom. The
Preamble to the Convention sets out the genesis of the Convention in
the following terms:lon LJ. In re Harrods (Buenos Aires) Ltd. (C.A.) [1992]
“The high contracting parties to the Treaty establishing the European
Economic Community, desiring to implement the provisions of
article 220 of that Treaty by virtue of which they undertook to
secure the simplification of formalities governing the reciprocal
recognition and enforcement of judgments of courts or tribunals;
anxious to strengthen in the Community the legal protection of
persons therein established; considering that it is necessary for this
purpose to determine the international jurisdiction of their courts,
to facilitate recognition and to introduce an expeditious procedure
for securing the enforcement of judgments, authentic instruments and
court settlements; have decided to conclude this Convention .. . ”
The scope of the Convention is prescribed in article 1 in Title I.
With exceptions which are immaterial to the present case it is to apply
in civil and commercial matters whatever the nature of the court or
tribunal. Title Il, comprising articles 2 to 24, is headed “Jurisdiction.”
Section 1 of the Title, comprising articles 2 to 4, is headed “General
provisions.” Article 2 provides:
“Subject to the provisions of this Convention, persons domiciled in
a contracting state shall, whatever their nationality, be sued in the
courts of that state..." .
That is the article fundamental.to the preliminary issue.
It is not in doubt that the company is domiciled in the United
Kingdom, although also domiciled in Argentina, and that Intercomfinanz
and Ladenimor are domiciled in Switzerland: see section 42(3) and (6)
of the Act of 1982.
Article 3 of the Convention provides that persons domiciled in a
contracting state may be sued in the courts of another contracting state
only by virtue of the rules set out in articles 2 to 6 of Title II. The
second paragraph of article 3 then lists particular provisions of the laws
of the various contracting states including the United Kingdom which
are not to be applicable as against persons domiciled in other contracting
states; the details are not relevant.
Article 4 then provides:
“If the defendant is not domiciled in a contracting state, the
jurisdiction of the courts of each contracting state shall, subject to
the provisions of article 16, be determined by the law of that state.
As against such a defendant, any person domiciled in a contracting
state may, whatever his nationality, avail himself in that state of the
tules of jurisdiction there in force, and in particular those specified
in the second paragraph of article 3, in the same way as the
nationals of that state.”
There are then further articles setting out detailed provisions, many
of which in various respects qualify article 2. I shall have to refer to
some of these later. There are also, under Title III, detailed articles
from 25 to 49 dealing with the recognition and enforcement of judgments.
It is in particular to be noted that the doctrine of forum conveniens
under English and Scottish law, as elaborated by Lord Goff of Chieveley
in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460, is93
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Dillon L.J.
not a recognised basis for jurisdiction under any of the articles of the
Convention where the contest is between the jurisdiction of contracting
states. As between the contracting states the general principle of the
Convention is that the court first properly seised of a cause of action
under the Convention shall exercise jurisdiction. Thus articles 21 and 23
provide:
“21. Where proceedings involving the same cause of action and
between the same parties are brought in the courts of different
contracting states, any court other than the court first seised shall of
its own motion decline jurisdiction in favour of that court. . . .
“23. Where actions come within the exclusive jurisdiction of
several courts, any court other than the court first seised shall
decline jurisdiction in favour of that court.”
Against that background section 49 of the Act of 1982 provides that
nothing in the Act shall prevent any court in the United Kingdom from
staying, sisting, striking out, or dismissing any proceedings before it on
the ground of forum non conveniens or otherwise where to do so is not
inconsistent with the Convention. It is implicit in that section, in my
judgment, that the court cannot stay or strike out or dismiss any
proceedings on the ground of forum non conveniens where to do so
would be inconsistent with the Convention, and that covers all cases
where the defendant in proceedings in England is domiciled in England
and the conflict of jurisdiction is between the jurisdiction of the English
court and jurisdiction of the courts of some other contracting state.
The crucial question in the present case is whether the English court
can stay, strike out or dismiss proceedings on the ground of forum non
conveniens, where the defendant in the English proceedings is domiciled
in England, but the conflict of jurisdiction is between the jurisdiction of
the English court and the jurisdiction of the courts of a state which is
not a contracting state, no other contracting state being involved.
That question came before the Commercial Court in S. & W.
Berisford Plc. v. New Hampshire Insurance Co. [1990] 2 Q.B. 631. In
that case the second plaintiff, which was the relevant plaintiff, was an
American company based in New York. The defendant was an American
insurance company domiciled in New Hampshire, but the disputes arose
out of the operations of the defendant's London branch, and consequently
the defendant was deemed, for the purpose of the Convention, to be
domiciled in the United Kingdom. It was held by Hobhouse J. in those
circumstances (a) that since the parties had not agreed that the courts of
any other contracting state should have jurisdiction, article 2 of the
Convention required that the defendant should be sued in the United
Kingdom, (b) that to stay the proceedings on the ground of forum non
conveniens—viz., that the courts of New York were the more appropriate
forum—would be inconsistent with the Convention, and (c) that,
accordingly, the English court had no jurisdiction under section 49 of
the Act of 1982 to stay the action.
The ratio of the judgment of Hobhouse J. is to be found in the
passage at pp. 643c-645p. The crux is, in my judgment, to be found,
where the judge said, at p. 645:94
Dillon L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) 11992)
“It is clear that the Convention is designed (subject to article 4) to
achieve uniformity and to ‘harmonise’ the relevant procedural and
jurisdictional rules of the courts of the contracting states. The
Convention leaves no room for the application of any discretionary
jurisdiction by the courts of this country; the availability of such a
discretion would destroy the framework of the Convention and
create lack of uniformity in the interpretation and implementation
of the Convention.”
That decision of Hobhouse J. was followed by Potter J. in Arkwright
Mutual Insurance Co. v. Bryanston Insurance Co. Ltd. {1990] 2 Q.B.
649. In that case the plaintiff, an American insurance company, had a
claim on London reinsurers who disputed the claim on the ground that
the loss was not covered by the policy. The reinsurers commenced
proceedings against the plaintiff in New York for a declaration that they
were not liable. The plaintiff then commenced an action in London
against the reinsurers claiming payment, and the reinsurers applied to
stay the English proceedings on the ground of forum non conveniens
and lis alibi pendens. They contended that the New York court was the
more appropriate court to decide the issue. The arguments in favour of
a stay were summarised by Potter J. under eight heads, at pp. 660-661.
Heads (1) to (6) read:
“(1) The Convention, being concerned, or principally concerned,
to govern relations between contracting states, which thereby
adopted mutual obligations and accepted regulation of their own
potentially competing jurisdictions, should not readily be construed
as operating so as to deprive or inhibit non-contracting states in
relation to cases where the jurisdiction of such states would
otherwise plainly be most appropriate for determination of the
dispute in question. The Convention being concerned to decide
which of the contracting states should assume jurisdiction in cases
of competition inter se, no violence is done or inconsistency effected
by one contracting state staying proceedings in its courts in favour
of a non-contracting state.
“(2) The general rule as to domicile imposed by article 2 is not
to be regarded as so overwhelming or all-pervading as to preclude
stay in all cases where it is not expressly required or permitted by
the Convention. The rule of domicile is the prima facie rule only,
within a sophisticated framework of provisions which recognise a
“number of exceptions in individual situations, the most logical and
compelling of which are those dealt in articles 5 to 6A (special
jurisdiction), article 16 (exclusive jurisdiction) and article 17 (foreign
jurisdiction clauses).
“(3) Any English court should be slow so to construe the
Convention as to inhibit the valuable and important jurisdiction of
stay on grounds of forum non conveniens, which is designed to
promote comity, to encourage efficiency in the resolution of
disputes, to prevent duplication of time and cost of litigation, and
to avoid inconsistent judgments in two jurisdictions.95
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Dillon L.J.
“(4) Albeit articles 21 to 23 constitute a more limited and rigid
scheme for allotment of jurisdiction than that achieved by application
of a general principle of forum non conveniens they are concerned
to give effect to the network of provisions in articles 2 to 20 and to
avoid the risk of inconsistent judgments in two or more contracting
states, by requiring dismissal or stay of actions in favour of the
court of the contracting state first seised. If there is no jurisdiction
for a contracting state in which a defendant is domiciled or
otherwise properly sued to decline jurisdiction, or to stay, in favour
of the courts of a non-contracting state, that creates the remarkable
situation whereby the Convention determines the appropriate forum
(according to its own provisions) for the competing jurisdictions of
contracting states, but requires entertainment of suit in the domicile
of the defendant (without the application of any test of
appropriateness) where a non-contracting state is concerned.
“(5) Even if the Berisford case is right in respect of the broad
principle of forum non conveniens, it need and should not be
applied in respect of the more limited case of lis alibi pendens, the
very ground of stay contemplated by article 21 in respect of
contracting states.
“(6) Given that the purposes of the Convention are avoidance
within the courts of the Community of inconsistent judgments and
simplification of enforcement of judgments within those courts
neither purpose will be disturbed by the exercise of a jurisdiction to
stay on grounds of forum non conveniens and/or lis alibi pendens in
favour of the courts of a non-member state.”
These arguments, however, though recognised, at p. 661, as “powerful,”
were rejected by Potter J. on the ground that he agreed with the
decision of Hobhouse J. in the Berisford case [1990] 2 Q.B. 631 and
preferred the logic of the Berisford case.
The answer to the question depends on the true construction of the
Convention and that is a matter of European law. The Court of Justice
of the European Communities has jurisdiction to give rulings on the
interpretation of the Convention under the Protocol on the interpretation
of the Convention of 1968 by the European Court, signed at Luxembourg
in June 1971. The text of the Protocol of 1971 is set out as Schedule 2 to
the Act of 1982, and that specifies the courts which may request the
Court of Justice to give preliminary rulings on questions of interpretation;
they include the courts of the contracting states when they are sitting in
an appellate capacity.
In addition the Act of 1982 provides by section 3(1) that
“Any question as to the meaning or effect of any provision of the
[Convention] shall, if not referred to the European Court in
accordance with the Protocol of 1971, be determined in accordance
with the principles laid down by and any relevant decision of the
European Court.”
It is further provided that in ascertaining the meaning or effect of
any provision of the Convention the courts may consider the reports of
Mr. P. Jenard and Professor Peter Schlosser, Official Journal 1979 No.96
Dillon L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) [1992]
C. 59/1 and 59/71, and shall give them such weight as is appropriate in
the circumstances. These reports are both referred to in the judgments
of Hobhouse J. in the Berisford case and of Potter J. in the Arkwright
case and in this court we have had copious citation from both reports.
For my part, I find it difficult to give much weight to the reports in
relation to the question with which we are concerned because I do not
think that Mr. Jenard or Professor Schlosser had that question in
contemplation. There are general statements in the reports which can be
used as pointers either way, without themselves solving the question in
issue. Moreover at the time even of the Schlosser report, the English
doctrine of forum conveniens was considerably less fully developed than
it is now; the decision in The Abidin Daver [1984] A.C. 398 and even
more, Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460,
came later.
As I see it the starting point in approaching the construction of the
Convention must be article 220 of the E.E.C. Treaty, since the Preamble
to the Convention shows as the starting point the desire of the parties to
implement that article. The object of article 220 was to secure the
simplification of formalities governing the reciprocal recognition and
enforcement of judgments of courts or tribunals between the member
states of the Community.
To achieve such recognition and enforcement it was evidently decided
that the contracting states should have a common basis of international
jurisdiction—or jurisdiction in the international order—in the matters
which fall within the scope of the Convention. But the common basis of
jurisdiction envisaged does not apply worldwide since under article 4, if
a defendant is not domiciled in a contracting state the jurisdiction of the
courts of each contracting state is to be determined by the national law.
The desideratum expressed in Professor Schlosser’s report, Official
Journal 1979 No. C. 59/71, p. 97, para. 78, that
“A plaintiff must be sure which court has jurisdiction. He should
not have to waste his time and money risking that the court
concerned may consider itself less competent than another.”
is thus very obviously not met where the defendant is not domiciled in a
contracting state. Indeed the following passages in paragraph 78 appear
to show that the Professor was only concerned in the paragraph with the
protection of persons domiciled in the contracting states and with
choices, which should not be on the ground of forum conveniens,
between the courts of several contracting states having jurisdiction. That
is in line with references in the Jenard report, e.g. the reference in
Official Journal 1979 No. C. 59/1, p. 7, to “an autonomous system of
international jurisdiction in relations between the member states” and
the statement on p. 15 that
“the purpose of the Convention is also, by establishing common
rules of jurisdiction, to achieve, in relations between the six and in
the field which it was required to cover, a genuine legal
systematisation which will ensure the greatest possible degree of
legal certainty.”o7
ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Dillon LJ.
For the English court to refuse jurisdiction, in a case against a
person domiciled in England, on the ground that the court of some non-
contracting state is the more appropriate court to decide the matters in
issue does not in any way impair the object of the Convention of
establishing an expeditious, harmonious, and, I would add, certain,
procedure for securing the enforcement of judgments, since ex hypothesi
if the English court refuses jurisdiction there will be no judgment of the
English court to be enforced in the other contracting states. Equally and
for the same reason such a refusal of jurisdiction would not impair the
object of the Convention that there should, subject to the very large
exception of article 4, be a uniform international jurisdiction for
obtaining the judgments which are to be so enforced.
But if the English court as a result of article 2 of the Convention
does not have the power to decline jurisdiction to entertain an action
against a person domiciled in England on the ground that the courts of a
non-contracting state are the more appropriate forum, the English court
must equally have no power to refuse to entertain such an action on the
ground of lis alibi pendens, if the lis is pending in the courts of a non-
contracting state. Articles 21 and 22 of the Convention are only
concerned with the position where proceedings involving the same cause
of action and between the same parties, or where related actions, are
brought in the courts of different contracting states. There is nothing at
all in the Convention to deal with the situation where there is one lis
pending in a court of a contracting state against a person domiciled in
that state and another, and possibly earlier, lis pending, in proceedings
involving the same cause of action or in a related action, in the courts of
a non-contracting state.
Again article 17 of the Convention provides that if the parties have
agreed that the courts of a particular contracting state shall have
exclusive jurisdiction to settle any disputes which may arise in connection
with a particular legal relationship, then the courts of that state shall
have exclusive jurisdiction to settle such disputes. There is nothing at all
in the Convention to deal with the situation where the parties have
agreed that the courts of a non-contracting state shall have exclusive
jurisdiction to resolve their disputes. But if article 2 has the full
mandatory effect which Hobhouse J. in the Berisford case [1991] 2 Q.B.
631 thought it has, the English courts would be bound to hear and
decide an action against a person domiciled in England even though
both parties to the action had agreed that the courts of some non-
contracting state—be it New York or Argentina—should have exclusive
jurisdiction.
Such results would, in my judgment, be contrary to the intentions of
the Convention. Since the Convention is merely an agreement between
the contracting states among themselves, I do not agree with Hobhouse
J. that the framework of the Convention would be destroyed if there
were available to the English court a discretion to refuse jurisdiction, on
the ground that the courts of a non-contracting state were the appropriate
forum, in a case with which no other contracting state is in any way
concerned. I do not accept that article 2 has the very wide mandatory98
Dillon L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) [1992]
effect which Hobhouse J. would ascribe to it where the only conflict is
between the courts of a single contracting state and the courts of a non-
contracting state.
Respectfully differing, therefore, from the rulings of Hobhouse J.
and Potter J. in S. & W. Berisford Plc. v. New Hampshire Insurance
Co. [1990] 2 Q.B. 631 and Arkwright Mutual Insurance Co. v. Bryanston
Insurance Co. Ltd. [1990] 2 Q.B. 649, 1 would reject the preliminary
issue raised by Ladenimor, and I would hold that the English court has
jurisdiction to stay or dismiss the petition on the grounds of forum non
conveniens if the English court holds that the courts of Argentina are
the more appropriate forum to decide the issues.
I would add that it is not appropriate, in my judgment, for this court
to request the Court of Justice of the European Communities to give a
ruling on this issue.
Stocker L.J. I have read the judgments of Dillon and Bingham
L.JJ., which I agree with, and I have nothing to add.
BINGHAM L.J. Before the judge it was common ground that he had
a discretion to stay Ladenimor’s proceedings against the company on the
ground of forum non conveniens if he was of the opinion that, applying
the Spiliada test (Spiliada Maritime Corporation v. Cansulex Ltd. [1987]
A.C. 460) in this rather novel situation, good reason for doing so
existed. The question in issue was whether the judge should exercise
that discretion in favour of the Argentinian court on the ground that it
was the appropriate forum for trial of the proceedings.
In this court Mr. Briggs for Ladenimor contended that the judge had
no such discretion. He based this argument on the Civil Jurisdiction and
Judgments Act 1982 and the Conventions to which that Act gave the
force of law in the United Kingdom. His submission was, in brief, that
since the company was, by virtue of section 42 of the Act of 1982,
domiciled here, the Conventions required the English court to accept
jurisdiction and forbade it to decline jurisdiction in favour of the
Argentinian court whether that was judged to be the appropriate forum
or not. Mr. Briggs accepted that, despite the Act and the Conventions,
the judge retained a discretion to stay Ladenimor’s proceedings against
Intercomfinanz, which is not on any showing domiciled here, but he
submitted that Intercomfinanz’s application to stay had to be judged on
the basis that the proceedings against the company would continue in
any event. The argument thus raised is of some obvious general
importance.
In interpreting the Act of 1982 our task is, as always, to ascertain the
intention of Parliament and give effect to it. But in so far as the Act is
intended to give legal effect to the Conventions and to implement the
United Kingdom’s international obligation to give legal effect to the
Conventions, we must assume—in the absence of a clear indication to
the contrary, which is not to be found here—that Parliament intended
the Conventions to be incorporated into English law so as faithfully to
reflect the international consensus embodied in them. The Conventions
themselves are in part set out in Schedules to the Act, but it cannot be99.
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Bingham L.J.
doubted that in interpreting them we are required to consider first the
objectives and scheme of the Conventions, and secondly the general
principles which stem from the corpus of the national legal systems of
the contracting states: L.T.U. Lufttransportunternehmen G.m.b.H &
Co. K.G. v. Eurocontrol (Case 29/76) [1976] E.C.R. 1541. For this
purpose we must adopt an international and communautaire, not a
national and chauvinistic, approach. Although these Conventions do not
expressly provide, like article 18 of the Rome Convention on the law
applicable to contractual obligations (see the Contracts (Applicable
Law) Act 1990 and Schedule (1) thereto), that
“In the interpretation and application of the preceding uniform
rules, regard shall be had to their international character and to the
desirability of achieving uniformity in their interpretation and
application,”
it is plain that that is the basis upon which we should act.
As the Preamble to the Convention of 1968 and the Jenard report,
Official Journal 1979 No. C. 59/1, p.1 et seq., make clear, that
Convention was negotiated pursuant to the obligation undertaken by the
original member states in article 220 of the E.E.C. Treaty to
“enter into negotiations with each other . . . with a view to securing
for the benefit of their nationals the simplification of formalities
governing the reciprocal recognition and enforcement of judgments
of courts or tribunals and of arbitration awards.”
When instigating the negotiations which led to the Convention of
1968, the Commission of the E.E.C. observed:
“As jurisdiction in both civil and commercial matters is derived
from the sovereignty of member states, and since the effect of
judicial acts is confined to each national territory, legal protection
and, hence, legal certainty in the common market are essentially
dependent on the adoption by the member states of a satisfactory
solution to the problem of recognition and enforcement of
judgments:” Jenard report, Official Journal 1979 No. C. 59/1, p.
If member states were to recognise and enforce each others’
judgments virtually on the nod, it was plainly desirable, so far as
possible, to agree on a common basis for accepting jurisdiction, so as to
minimise the number of occasions on which state A would have to
recognise and enforce a judgment given by state B in circumstances
where state A would not itself have accepted jurisdiction. Given the
reference in article 220 to “the benefit of their nationals,” one might
have expected the common basis of jurisdiction to be founded on
nationality, as the Jenard report, Official Journal 1979 No. C. 59/1,
p. 14, acknowledges. But instead the common basis of jurisdiction was
firmly founded on the domicile of the defendant. The Jenard report, at
p. 13, explains the intentions of the original negotiators:
“Underlying the Convention is the idea that the member states of
the European Economic Community wanted to set up a common
market with characteristics similar to those of a vast internal market.100
Bingham L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) [1992]
Everything possible must therefore be done not only to eliminate
any obstacles to the functioning of this market, but also to promote
its development. From this point of view, the territory of the
contracting states may be regarded as forming a single entity: it
follows, for the purpose of laying down rules on jurisdiction, that a
very clear distinction can be drawn between litigants who are
domiciled within the Community and those who are not.”
The domicile of the Community-based defendant is not in all cases a
determinative test. It was necessary to make special provision for
agreements conferring exclusive jurisdiction on a specific court, a matter
which became of greatly increased importance on the accession of the
United Kingdom “owing to the frequency with which jurisdiction is
conferred upon United Kingdom courts in international trade” (Schlosser
report, Official Journal 1979 No. C. 59/71, p. 124, para. 177), and cases
of dual domicile (discussed in the Schlosser report, at pp. 96-97, para.
75; p. 120, para. 162, and p. 125, para. 181): see articles 17 and 21 of
the Convention of 1968. But for the Community-domiciled defendant
the state of domicile is the state upon which jurisdiction is primarily
conferred. For that reason Ireland and the United Kingdom cannot
found jurisdiction on service during temporary presence in the country
nor Scotland on the grounds listed in sub-paragraphs (b) and (c) of the
second paragraph of article 3: see article 3 and paras. 85 and 86 of the
Schlosser report, at pp. 99-100. Further:
“the jurisdiction of English courts in respect of persons domiciled in
the Community can no longer be based on the ground that the
claim concerns a contract which was concluded in England or is
governed by English law:” Schlosser report, p. 100, para. 87.
As the extract from p. 13 of the Jenard report quoted above makes
clear, however, there is a clear and fundamental distinction between the
position of the Community-domiciled defendant and the defendant
domiciled elsewhere. In respect of the latter, contracting states may, by
virtue of article 4 of the Convention of 1968, continue to apply their
traditional rules: the French may assert their exorbitant jurisdiction
under articles 14 and 15 of the Civil Code (Jenard report, pp. 19-20),
the Scots on the bases specified in sub-paragraphs (b) and (c) of the
second paragraph of article 3, the English on the basis of service during
temporary residence or because the contract was made here or was
governed by English law. Thus in the present case, Intercomfinanz being
domiciled in none of the contracting states, it would not violate the
letter or the spirit of the Conventions if the English court were to
assume jurisdiction over it on any of the traditional grounds, however
exorbitant. For purposes of recognition and enforcement no distinction
is drawn between judgments against defendants domiciled within and
judgments against defendants domiciled outside contracting states. While,
therefore, the Conventions reduce the number of cases in which state A
will have to recognise and enforce judgments given by state B in
circumstances where state A would not itself have accepted jut
they do not eliminate such cases altogether.101
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Bingham L.J.
In contending that the English court was not only entitled but bound
to accept jurisdiction in Ladenimor’s proceedings against the company,
Mr. Briggs relied in particular on the wide, unambiguous and mandatory
language of article 2. He also relied on the third recital in the Preamble
to the Convention of 1968 as showing that the purpose of the Convention
was to determine the international jurisdiction of the courts of the
contracting states. It is, however, plain, adopting the approach to
interpretation which I have outlined above, that article 2 must be
interpreted so as to reflect the purpose and scheme of the Convention as
a whole. The reference to “international jurisdiction” in the Preamble
is, in my view, intended to make clear that the Convention is in no way
concerned with the national jurisdiction of the courts of the contracting
states, i.e. with cases lacking any international element: Jenard report,
Official Journal 1979 No. C. 59/1, p. 8.
Mr. Boyle for Intercomfinanz accepted that, since the company is
domiciled here, and since there is no exclusive jurisdiction clause, and
since no proceedings had been first started in another contracting state,
the English court would have to accept jurisdiction if the alternative
forum alleged to be appropriate were, instead of Argentina, the court of
any other contracting state. In any choice of jurisdiction between the
courts of contracting states, he accepted that the Conventions provide a
mandatory and comprehensive code. But he submitted that the
Conventions were directed and directed only to control of relations
between contracting states among themselves. If this court were to
decline jurisdiction in favour of the Argentinian court, how could that
possibly prejudice any Community interest which the Conventions were
designed to protect or promote? If, as he contended, the answer was
that it could not, since the enforceability of an Argentinian judgment in
any contracting state would depend on bilateral arrangements between
Argentina and that state and it was very unlikely that an Argentinian
judgment would be more readily enforceable than an English judgment,
that was a sure sign that the Conventions were not intended to apply in
such a situation.
Both parties made references to excerpts from the Jenard and
Schlosser reports, while urging us to read more extensively in the
reports. I think there is an obvious danger in seizing on occasional
passages here and there in these long and closely-reasoned reports to
support one view or the other when it is acknowledged that the present
question was never squarely addressed. I have read the reports much
more extensively than the reasonable bounds of oral argument permitted
to counsel and am in the result of opinion that the thrust of the reports
gives much niore support to Mr. Boyle’s argument for Intercomfinanz
than to Mr. Briggs’ for Ladenimor. I give one example. Both reports
consider in detail the existence of earlier bilateral or trilateral conventions
between contracting states, some of which are indeed listed in article 55
of the Convention of 1968. Yet, save for an isolated—and I think
irrelevant—reference to a convention between France and Switzerland
on p. 14 of the Jenard report, there is (so far as I can trace) no
reference to any convention between any contracting state and any non-
contracting state. On Mr. Boyle’s argument this is understandable: in
Ch. 1992-5102
Bingham L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) 11992)
the absence of any conflict or potential conflict of jurisdiction between
contracting states, the Conventions have no role. If, however, the
Conventions govern relations between a contracting state and a non-
contracting state even when there is no conflict or potential conflict
between contracting states, one would expect all conventions to fall for
consideration and examination.
Mr. Briggs was able to rely on two recent authorities as supporting
his submission. The first, a reserved decision of Hobhouse J., was S. &
W. Berisford Plc. v. New Hampshire Insurance Co. [1990] 2 Q.B. 631.
In that case the effective plaintiff was a New York company and the
defendant, although a New Hampshire company, carried on business
and was served at an office in the City of London. The defendant sought
a stay, contending that New York was the appropriate forum. The
plaintiff resisted, contending that by virtue of the Act and the
Conventions the court had no discretion to grant a stay and that in any
event the grounds for granting a stay were not made out. The judge
agreed with the plaintiff on both these points. The argument addressed
to us by Intercomfinanz, if correct, would have ensured the defendant's
success on the first of these points, but the argument was not put. Thus
the judge did not have to rule on it expressly. But the tenor of his
judgment strongly suggests that if he had had to rule on it he would
have rejected it.
Such was the inference drawn, in my view rightly, by Potter J. in the
second case, Arkwright Mutual Insurance Co. v. Bryanston Insurance
Co. Ltd. [1990] 2 Q.B. 649. In those proceedings, the plaintiff was a
Massachusetts insurer and the defendants were English reinsurers
resisting a claim under policies of reinsurance. Before the English
proceedings began, the reinsurers had issued proceedings against the
insurer in New York for a declaration that they were not liable to
the insurer. After issue of the proceedings here the reinsurers asked the
court to stay them in the exercise of its discretion on the grounds of
forum non conveniens and lis alibi pendens. The insurer, relying on the
Act of 1982 and the Conventions, contended that the court no longer
had such a discretion to exercise. Counsel for the reinsurers took issue
with that proposition on a number of grounds which are quoted in the
judgment of Dillon L.J., ante, pp. 94p-95p.
The judge, in a reserved judgment [1990] 2 Q.B. 649, rejected the
reinsurers’ submission and upheld, at pp. 662-663, the insurers’
submission founded on the decision of Hobhouse J.:
“that, for the English court to retain its former widé discretion in
respect of the doctrine of forum non conveniens would be
inconsistent with the Convention.”
I do not however think that the judge specifically addressed himself to
counsel’s arguments which I have quoted, which seem to me powerfully
persuasive.
Ladenimor’s argument is of course strengthened by these two first
instance judgments which, although not binding on us, are entitled to103
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Bingham L.J.
respect. They have, however, provoked a critical note bearing the very
considerable authority of Mr. Lawrence Collins in (1990) 106 L.Q.R.
535. I would for my part adopt his conclusion, at pp. 538-539:
“When the European Court comes to consider the application of
the Convention to non-contracting states, it should seek the answer
in treaty interpretation, and ultimately in public international law.
The Convention was intended to regulate jurisdiction as between the
contracting states. Thus the Convention provides that in principle
domiciliaries of a contracting state should be sued in that state,
subject to important and far-reaching exceptions, and not in other
contracting states. Once a court in a contracting state has jurisdiction
it is entitled, vis-a-vis other states, to exercise that jurisdiction and
other courts cannot. But the states which were parties to the
Convention had no interest in requiring a contracting state to
exercise a jurisdiction where the competing jurisdiction was in a
non-contracting state. The contracting states were setting up an
intra-Convention mandatory system of jurisdiction. They were not
regulating relations with non-contracting states.”
Section 49 of the Act preserves the power of the English court to
stay or dismiss any proceedings before it, on the ground of forum non
conveniens or otherwise, where to do so is not inconsistent with the
Convention of 1968. The ultimate question, therefore, is whether
exercise of the discretionary power here in issue in the present situation,
where the only alternative forum is in a non-contracting state, is
inconsistent with the Convention of 1968. I conclude that it is not and
accordingly accept the argument of Intercomfinanz on this point.
Since preparing this judgment I have had the advantage of reading in
draft the judgment of Dillon L.J., with which 1 am in full agreement.
Like him, I do not think it necessary to request the Court of Justice of
the European Communities to rule on the question of interpretation of
the Convention of 1968 raised in this case to enable this court to give
judgment on it.
Ruling against Ladenimor on
preliminary question.
Costs reserved.
Solicitors: Frere Cholmeley; Bower Cotton & Bower.
M.I.H.
6 February 1991. ‘The substantive appeal was restored for hearing.
Alan Boyle for Intercomfinanz. The applicable principles are set out
in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460. The
fundamental question is whether the interests of all the parties and the
ends of justice require that the case be tried in another tribunal of
competent jurisdiction. The court will look to see what factors there are
which point in the direction of another forum as the “natural forum,”
namely, “that with which the action had the most real and substantial104
In re Harrods (Buenos Aires) Ltd. (C.A.) {1992}
connection:” see The Abidin Daver [1984] A.C. 398, 415. Thus, the
court must first look for connecting factors, such as convenience,
expense, the law governing the relevant transactions and the places
where the parties respectively reside or carry on business.
If the court concludes that there is no other forum more appropriate
for the trial of the action, it will ordinarily refuse a stay. But if it
concludes that there is such a forum it will ordinarily grant a stay, unless
in the circumstances justice requires that a stay should nonetheless not
be granted. The question is whether substantial practical justice will be
done in that forum, notwithstanding that the plaintiff will be deprived of
some advantage which he would otherwise enjoy
Harman J. regarded the fact of incorporation in England as conclusive
and therefore did not consider the factors which pointed towards
Argentina as being the more appropriate forum. He thus failed to apply
the Spiliada principles which required him to consider not only the
factors which connect the action to England but also the factors which
connect the action with Argentina, namely, that the business of the
company was exclusively in Argentina; that the events complained of
occurred in Argentina; that the residence of the witnesses was in
Argentina; the existence of other proceedings in Argentina; and the
unenforceability of an English judgment in Argentina.
The answer to the question “which laws govern the affairs of this
company?” depends on whether the proceedings are carried on in
England or Argentina. The fact that English law will apply if the
proceedings are carried on in England cannot determine the question
whether the proceedings should be carried on in England. In the
circumstances it is open to the Court of Appeal to exercise its discretion
by concluding that Argentina is the more appropriate forum for the trial
of the action.
The fact that the remedies of the foreign jurisdiction may not be as
extensive as those of our courts does not of itself demonstrate that
substantial justice will not be done in the foreign jurisdiction. The court
should therefore not refuse a stay of proceedings simply because the
plaintiff will derive an advantage from invoking the English jurisdiction:
see de Dampierre v. de Dampierre [1988] A.C. 92.
Substantial justice will generally be done in the foreign forum if the
courts there are independent of the executive; if there will be a fair
hearing, a fair opportunity for the parties to be heard, a fair set of
procedures and a right of appeal; if there is a developed system of the
relevant law (i.e. company and commercial law) applicable to the case;
and there is a set of remedies which will substantially right the wrongs
established on the evidence. All these criteria are amply satisfied by the
Argentina court.
Harman J. was wrong to exclude R.S.C., Order 11 on the basis of
the Companies (Unfair Prejudice Applications) Proceedings Rules 1986.
There is in those rules no express exclusion of Order 11, as there was in
the Insolvency Rules 1986. Had it been intended to exclude Order 11
for unfair prejudice applications the rules would have been framed so as
to do so expressly. Ord. 11, r. 1(2)(b) does not apply since the
Companies Act 1985 is not an Act which gives the High Court power to
G105
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.)
hear the claim notwithstanding that the person against whom the claim
is made is not within the jurisdiction of the court. The Act of 1985 does
not address the question whether the court has the power to hear unfair
prejudice petitions against those not within the jurisdictign so as to
override the requirements of Order 11. As Order 11 does apply to the
present case the burden lies on Ladenimor to show that England is
clearly the more appropriate forum rather than on Intercomfinanz to
show that Argentina is.
An affidavit in support of an ex parte application for leave to serve
iction must make full and fair disclosure of all material
ire to make such full and fair disclosure justifies the court in
discharging the order, even though the applicant might afterwards be in
a position to make another application: see The Hagen [1908] P. 189.
The affidavit in support of the application did no more than verify the
facts stated in the petition but there were other facts which were clearly
material to the application and they should have been disclosed.
Similarly, the existence of pending civil and criminal litigation in
Argentina overlapping with the issues raised in the petition ought to
have been disclosed.
Michael Briggs for Ladenimor. The appeal concerns the application
of the Spiliada principles [1987] A.C. 460 to litigation of a type different
from the straightforward adversarial contest between parties to a contract
or between the perpetrator and victim of a tort. In the typical Spiliada
case the court is merely the arbiter in a private dispute between litigants.
In litigation about trusts or the estates of deceased persons, however,
the courts’ jurisdiction is supervisory, and it is primarily a means of
regulating the subject matter of the dispute.
Where an English statute or the common law confers a supervisory
jurisdiction over a particular subject matter, such as a company
incorporated in England, and thus confers on the English court
jurisdiction to make orders of a type which a competing forum (applying
its own law) has no jurisdiction to make, that is a powerful indication
that the litigant invoking the court’s supervisory jurisdiction will not
obtain substantial justice if forced instead to rely upon the lesser
jurisdiction of the competing forum.
On the true construction of the Companies (Unfair Prejudice
Applications) Proceedings Rules 1986, the Insolvency Rules 1986 and
R.S.C., Ord. 11, r. 1(2), Ladenimor does not require the leave of the
court under Ord. 11, r. 1(1) to serve the petition on Intercomfinanz out
of the jurisdiction. The Insolvency Rules 1986 (S.I. 1986 No. 1925)
clearly apply to a winding up petition, but rule 12.12 of those Rules
expressly disapplies R.S.C., Ord. 11. If the petitioner requires directions
so as to be able to effect service on a necessary or proper party outside
the jurisdiction, rule 12.12(3) and (4) supply the necessary procedure.
Further, the Companies (Unfair Prejudice Applications) Proceedings
Rules 1986, which apply to the petition to the extent that it seeks relief
under Part XVII of the Companies Act 1985, do not expressly exclude
the application of R.S.C., Ord. 11 but the provisions of Order 11 are
inconsistent with those rules. [Reference was made to rules 4(2) and
(5)(a) of the Companies (Unfair Prejudice Applications) Proceedings
Rules 1986.]106
In re Harrods (Buenos Aires) Ltd. (C.A.) {1992}
The weight to be given to factors bearing upon the appropriateness
of a particular forum is pre-eminently a matter for the judge: see
Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460, 484r-
486c. Harman J. treated the Spiliada case as laying down universal
principles which applied to the different facts of the case before him. As
appears from the Spiliada case, at p. 478a, factors affecting convenience
or expense are relevant because they constitute “connecting factors”
between the action and the appropriate forum but convenience is not to
be regarded as an end in itself or the object of the process of choice
between competing fora: see Société du Gaz de Paris v. Société Anonyme
de Navigation “Les Armateurs Frangais,” 1925 S.C, (H.L.) 13 and Sim
v, Robinow (1892) 19 R. 665. In the typical case of a breach of contract
or tort where the dispute has no natural or inherent connection with any
forum, questions of convenience and expense may well be decisive. In
the case where the nature of the claim, the identity of the subject
matter, the identity of the central question in dispute and the origin of
the jurisdiction invoked all have a natural or inherent connection with
English courts, questions of convenience or expense take second place.
The connecting factors between the proceedings and this jurisdiction
are overwhelming. The proceedings concern the relationship between
the company and its shareholders, and between the shareholders inter
se. The proceedings are not concerned with the company’s relations with
persons other than shareholders, such as its suppliers, customers or even
employees, albeit that certain issues of fact raised by the petition
appertain to those relationships. The relationship between the company
and its present shareholders and that between the shareholders inter se
arose as the result of a written agreement between them to ensure
proper compliance with all aspects of English law relating to the
subsequent conduct of the company’s business and affairs. The
performance of that agreement brought Ladenimor and Intercomfinanz
into a new contractual relationship as shareholders in the company, the
terms of that contract being constituted by the memorandum and articles
of association of the company. Those terms are of fundamental
importance to any analysis of the question whether the conduct of the
affairs of the company, or Intercomfinanz’s role in controlling and
directing the company’s affairs, is or is not prejudicial to the interests of
Ladenimor, or otherwise warrants a just and equitable winding up: see
In re Westbourne Galleries Ltd. [1973] A.C. 360 and In re A Company
(No. 004377 of 1986) [1987] 1 W.L.R. 102. The construction of those
terms can only be carried out by reference to English company law
pursuant to which those articles were made and from which they are
derived and take their substance. [Reference was made to In re H. R.
Harmer Ltd. [1959] 1 W.L.R. 62 and Scottish Co-operative Wholesale
Society Ltd. v. Meyer (1959] A.C, 324.]
Tf Harman J. was correct in holding that leave was not required
under R.S.C., Ord. 11 then he was entitled to require Intercomfinanz to
discharge the burden of proving that there was another jurisdiction more
appropriate for determining the proceedings than England.
Although the Spiliada case [1987] A.C. 460 lays down a general rule
that the loss of a mere advantage occasioned by being obliged to have107
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.)
recourse to a different jurisdiction will not be a conclusive answer to the
challenge to the English jurisdiction, the examples there given, at
pp. 482E-483c, of advantages derived from invoking the English
jurisdiction suggest that there is a distinction to be drawn between
advantages and the deprivation of entire remedies. Where a party to a
contract which expressly provided for the application of English law
asserted that another forum (for example, Argentina) was more
appropriate for the determination of proceedings arising from an alleged
breach of that contract, the application of English law by the Argentinian
court might be a disadvantage. If, on the other hand, the Argentinian
court applied different provisions of Argentinian law to the contract, so
as to produce a different outcome, then substantial justice would not
have been done.
Boyle replied.
Cur. adv. vult.
13 March. The following judgments were handed down.
Ditton L.J. The background to this appeal, down to the granting
of leave to appeal by Nicholls L.J., is set out in my judgment, handed
down on 19 December 1990, ante, pp. 90D et seq., on a point argued as
a preliminary issue in the appeal. I do not need to repeat it here.
We are now concerned with the substantive issue on the appeal, viz.
the decision of Harman J. that the English court and not the Argentine
court was the appropriate forum for the trial of the issues raised by the
petition. This led him to dismiss Intercomfinanz’s summons of 20
November 1989 whereby Intercomfinanz had claimed to have the order
of Mr. Registrar Buckley giving leave to serve the petition on
Intercomfinanz, and the consequent service, set aside and had claimed
also to have the petition and all proceedings thereon stayed on the
ground that the Argentine court was the appropriate forum for the trial
of the issues raised by the petition.
Any question which of two countries’ courts is the appropriate forum
for the trial of proceedings has to be decided according to Spiliada
principles: see Spiliada Maritime Corporation v. Cansulex Ltd. [1987]
A.C. 460. The question is therefore to be decided at the discretion of
the judge at first instance, and it is well known that the grounds on
which the appellate court may interfere with the exercise of the judge’s
discretion are very limited. Lord Templeman in the Spiliada case
stressed, at p. 465c, that in such a case an appeal should be rare and the
appellate court should be slow to interfere. The question whether this
court is entitled to interfere is to my mind the most difficult question on
the appeal.
As I see it, in the context of this particular case what we have to
consider first, if there is to be any possibility of this court interfering
with the decision of Harman J., is whether the judge asked himself the
right questions. That involves considering (a) what he should have asked
himself and (b) what he actually asked himself, and comparing the two.
If he did not ask himself the right questions, we have to consider what
the consequence is.108
Dillon L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) [1992]
Before I turn to that, I can dispose of one subsidiary point. In
Spiliada Maritime Corporation v. Cansulex Lid. [1987] A.C. 460 Lord
Goff of Chieveley devotes a section of his speech to considering how the
principle of the Spiliada case is applied in cases where the court
exercises its discretionary power under R.S.C., Ord. 11. It so happens
that the applicability of Order 11 to this petition raises a question of
some difficulty to which I shall have to come. Ladenimor’s solicitors
applied to Mr. Registrar Buckley for, and obtained, leave under Order
11 to serve the petition on Intercomfinanz out of the jurisdiction. But
Ladenimor accepts that there was material non-disclosure to the court
on its part on that application. Harman J. held that on the true
construction of the various rules in issue the leave sought under Order
11 was not needed, and so the non-disclosure was immaterial. But he
also said that, had leave been needed, the defects in the affidavit in
support of the application under Order 11 would have led him at least
to set aside the order for service out without more ado on the ground
that it had been obtained without proper disclosure. In this court, many
months later, neither side asks us to take such a summary course which
would merely lead to a fresh application for leave. Both parties have put
in all their evidence, and both ask us to decide the substantive issue on
that evidence.
As I understand the speech of Lord Goff of Chieveley in the Spiliada
case, what the court had to look for is the forum, having competent
jurisdiction, in which the case may be tried more suitably for the
interests of all parties and for the ends of justice; see the test of Lord
Kinnear in Sim v. Robinow (1892) 19 R. 665. To that end—if questions
of onus and the effect of Order 11 are for the moment left to the side—
the court looks first for the appropriate or “natural” forum, being that
with which the action has the most real and substantial connection: see
the Spiliada case [1987] A.C. 460, 478.
It is therefore natural to ask what the case or action is, as Harman J.
did. At this point I have reservations about Harman J.’s approach. He
seems to have accepted a submission from Mr. Briggs for Ladenimor
that proceedings within the trust or company jurisdiction of the Chancery
Division were to be distinguished from proceedings in the Commercial
Court which were truly litigation inter partes. Thus Harman J. sets out
in his judgment, ante, p. 81F-G, that cases in the Commercial Court, to
which many international cases are brought, are all matters of true
litigation inter partes. But he then goes on ante, pp. 81G-82a, to
contrast applications by trustees in the Chancery Division for directions
in relation to their trust. His conclusion seems to be, at p. 82a, that only
the English High Court here in London can regulate the affairs of an
English trust. In line with this approach and with Mr. Briggs’ argument,
Harman J. when he comes, at p. 83c, to formulate the crucial question,
says that the question must always be “how is this company properly to
be regulated?”
In my judgment, however, the petition in the present case bears no
resemblance whatsoever to an application to the court by trustees for
directions or guidance. It is litigation inter partes, between Ladenimor
and Intercomfinanz, just as much as any action in the Commercial
Court.109
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Dillon L.J.
In considering the connection of the proceedings with each forum,
the court is plainly not limited to factors of convenience in the
preparation for and conduct of a trial. But equally the court must not
ignore such factors. It must also consider any issues of law that arise in
the case, and any special factor independent of the parties which may
make trial in one forum rather than the other more appropriate such as
the “Cambridgeshire” factor in Spiliada Maritime Corporation v. Cansulex
Ltd. [1987] A.C. 460.
So far as factors of law are concerned the fundamental point to my
mind in this case is that this company has a twofold position.
On the one hand it was incorporated in England and so is subject to
the winding up jurisdiction of the English court under the Insolvency
Act 1986, and subject to the general jurisdiction of the English court
under the Companies Act 1985. It has made all returns to the Companies
Registry here that are required by United Kingdom law, has a registered
office here and has regularly held its annual general meetings here,
albeit for formal business only since the shares were acquired by
Ladenimor and Intercomfinanz in 1979. Its accounts continue to be
made up in accordance with the requirements of United Kingdom law as
to the payment of dividends; in particular on the advice of English
solicitors it abstained from paying dividends out of current trading
profits at a time when it still had accumulated trading losses from past
years.
On the other hand, the company’s business has always been carried
on in Argentina and nowhere else. It has a registered office in Argentina
and complies with all requirements of Argentina law. It is common
ground that under article 124 of the Argentine Company Law the
company falls to be considered as a local company formed and registered
in Argentina; it is thus subject to the winding up jurisdiction of the
Argentine court. There is nothing surprising in this; if the roles were
reversed and the company had been incorporated in Argentina but had
always carried on all its business activities in England, it would have had
to have had an office for service of process here and would have been
subject to the winding up jurisdiction of the English court as well as to
that of the Argentine court.
The case put in the petition is that it is alleged by Ladenimor
(1) that the affairs of the company have been, are being and for as long
as the same remain under the control of a Mr. Atilio Gibertoni (who, it
is alleged, beneficially owns and controls Intercomfinanz) will be
conducted in a manner which is unfairly prejudicial to the interests of
Ladenimor and further or alternatively (2) that it is just and equitable
that the company should be wound up. The matters of fact relied on in
support of that case are almost entirely concerned with the management
of the company in Argentina, and with what has happened in Argentina.
It is said, for instance, that under Mr. Gibertoni’s control and by his
procurement the following matters took place.
(i) The company entered into the business of cattle breeding in
Argentina. The herds owned by the company have been mixed with the
herds owned by other Argentine companies which Mr. Gibertoni
controls, and all calves born to the mixed herds have been attributed to110
Dillon L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) (1992)
those other Argentine companies to the exclusion of the company. Thus
the company’s share of the profits of the cattle-breeding has been
diverted to Mr. Gibertoni’s other companies. (ii) From 1984 to the
present time the company has made loans to Argentine companies
owned or controlled by Mr. Gibertoni which (a) were not made for the
benefit of the company and detracted from the company’s ability to
develop its primary department store business or (b) fell short of the
best commercial investment of any capital surplus to the company’s
working requirements then reasonably obtainable within Argentina and
(c) were in several cases made in favour of companies with deteriorating
balance sheets representing a risk of default. (iii) The company in
October 1983 and again in 1987 acquired, from Argentine companies
owned or controlled by Mr. Gibertoni and at vastly excessive prices,
shares constituting a minority interest in another Argentine company,
Timbo S.A., which was in the majority ownership and control of Mr.
Gibertoni and (iv) when it was decided that because the company could
not, under United Kingdom law, lawfully pay dividends out of its
trading profits, loans should be made to their shareholders in proportion
to their shareholdings, the amounts attributable to Ladenimor’s shares
were not paid to Ladenimor but, it would seem, to a bank account in
Lugano which it is said was under the control of Mr. Gibertoni.
It is also said that the Miserocchi family, who were Italian and
control Ladenimor, have been excluded by Intercomfinanz/Mr. Gibertoni
from all participation in the management of the company. It follows that
all contemporary documents relating to the matters which will have to
be investigated at the trial of the issues raised in the petition will have
been written in Spanish, or possibly, in the case of correspondence with
the Miserocchi’s, in Italian and will have to be translated into English if
the trial is in England. Moreover most of the witnesses will be Spanish
speaking people who do not know English and will have to give
evidence through interpreters if the trial is in England. That would
necessarily make it more difficult for a judge to assess the truthfulness
and honesty of witnesses. Mr. Briggs rightly pointed out that the extent
to which oral evidence would be needed at the trial would depend on
how far it was possible for the parties to agree the facts after exchange
of witness statements. But he conceded that if the trial of the petition
took place in England it would be in his words, “a pretty ghastly trial.”
There is a further minor factor that, as I understand the position,
there have been other proceedings launched by Ladenimor or the
Miserocchi family in relation to other Argentine companies, in which
allegations similar to those raised in the petition have been made.
Mr. Briggs urges that the relationship between the shareholders in
the company is governed by the memorandum and articles of association
which are governed by English law. But the allegations in the petition
do not depend on the construction of the memorandum and articles. He
also seeks to place some reliance on the fact that when Intercomfinanz
and Ladenimor bought the share capital of the company in 1979, they
bought from an English bank, Grindley Brandt’s, under a contract
which is governed by English law. Nothing turns, however, on their
obligations qua Grindley Brandt’s. Though they of course knew that1
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Dillon L.J.
they were buying the share capital of a company incorporated in
England, they also knew that it was a company whose whole business
was in Argentina and was subject to Argentine law.
Harman J. plainly appreciated that the factual issues in dispute
favoured trial in Argentina. He commented, ante, p. 83s, that there is
no doubt that all the principal witnesses are Argentinian—an
overstatement in that the Miserocchis are Italian. But in considering
which was the more appropriate forum he seems to have put the factual
issues to one side, and concentrated only on the fact that the remedies
sought by Ladenimor by the petition were remedies made available by
English statutes in respect of a company incorporated in England. Thus
he says, at p. 83c, putting what he saw as the crucial question:
“Nonetheless, as it seems to me, the question must always be: ‘How is
this company properly to be regulated?’” He then goes on, ante, p. 83:
“When one is looking at a company incorporated in England, which
has its life and being only by virtue of the act of the English law
creating this artificial person, it is to my mind extremely difficult to
see that it can be appropriate to hold that ‘the forum’ appropriate
to decide that sort of matter is any forum other than the forum of
the English court. It is, as Mr. Briggs submitted, in my view
‘blindingly obvious’ what the answer to the question is once the
question is posed.”
With every respect to the judge, the answer is only “blindingly
obvious” to him because of the premises which are built into the way he
has posed his question. These are in part, as I read the judgment as a
whole, his analogy of an application to the English court for directions
in respect of an English trust. But more seriously in my judgment he has
failed to keep in mind at this crucial stage in his judgment that this
company is by Argentine law to be considered as a local, Argentinian
company. I do not regard it as at all blindingly obvious that relief for
the dishonest management of an Argentinian company in Argentina
should be granted by a court other than the Argentinian court. That
illustrates that the question formulated may by limiting the premises on
which it is formulated dictate the answer. That is in my respectful view
what the judge has done here, instead of concentrating on the question
as put in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C.
460.
One can test the matter further by an analogy. Let it be assumed,
contrary to the fact, that the only relief claimed in the petition is a
compulsory winding up order on just and equitable grounds. (I fully
appreciate that that is very far from being Ladenimor’s preferred
alternative, since a winding up order would not, without subsequent
misfeasance proceedings, compensate Ladenimor for the wrongs which,
if Ladenimor is right, it has suffered from Mr. Gibertoni’s management
of the company). The evidence of Argentine law before this court is
scanty but not disputed. It consists of an affidavit by a Dr. Bomchil, a
partner in a Buenos Aires law firm who has been a practising lawyer in
Argentina since 1973 and is one of the three directors of the company,112
Dillon L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) [1992]
and an affidavit by a Mr. Seitun, who was enrolled as an advocate in
Argentina in 1985 and has for several years advised Mr. Gibertoni and a
number of the companies referred to in the petition.
It appears from their evidence that under article 94(4) of the
Argentine Company Law, a company can be wound up by the Argentine
court if the fulfilment of the corporate object is impossible. Dr. Bomchil
states that this applies in companies and partnerships where disagreement
between the members on how the entity's business should be conducted
has turned the fulfilment of its object into an impossible achievement.
He continues:
“In the case of companies there have been several cases in which
the courts have considered the ‘affectio societatis’ (the willingness
of the shareholders to do business together) to be an essential
element of the company’s continued existence, particularly in
companies with small numbers of shareholders, and consequently
have ruled that a lack of the same justifies an order winding up the
company.”
That approach seems to bear resemblances to the position on “just and
equitable” winding up petitions which the English courts reached by the
decision of the House of Lords in Jn re Westbourne Galleries Ltd. [1973]
A.C. 360 after an earlier divergence of judicial opinion. Since Ladenimor
has not troubled to put in any relevant evidence of Argentine law, I do
not think that we can at this stage reject the evidence of Dr. Bomchil
and Mr. Seitun because they have not spelt out in detail how the
jurisprudence in Argentina has developed on a topic which the English
courts, before the Westbourne Galleries case, found difficult.
Accordingly, accepting their uncontradicted evidence for present
purposes, I would have no doubt that, if the only relief sought by the
petitioner were a winding up of the company on just and equitable
grounds, the Argentine court would be the court with which the
action/dispute had the most real and substantial connection, and the
Argentine court would be the court in which the case would be tried
more suitably for the interests of all parties and for the ends of justice.
This is perhaps underlined by the fact that the evidence raises a doubt
whether a winding up order made against the company by the English
court would be recognised by the Argentine courts; as the assets are in
Argentina a winding up order made by the English court would be of
very limited use if it was not recognised in Argentina.
The crucial factor in the present appeal is therefore that the primary
relief which Ladenimor seeks is the order under section 459 and 461 of
the Companies Act 1985 that Intercomfinanz purchase Ladenimor’s
shares in the company at a price representing 49 per cent. of the value
of the company and upon the basis that there be added back to the
value of the company such loss as may be found to have been caused to
it by the matters complained of in the petition.
It is clear from Mr. Seitun’s affidavit that a compulsory acquisition of
Ladenimor’s shares such as that sought in the petition is not available in
Argentina. What is available in Argentina is, as I understand the
evidence, firstly a winding up order, which would lead to the realisation113
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Dillon L.J.
of the remaining assets of the company and distribution of the net
proceeds among the shareholders, and secondly and additionally a claim
for damages under article 54 of the Argentine Company Law.
In Mr. Seitun’s translation, article 54 provides:
“The partners or controlling entities who fraudulently or with
negligence cause damages to a company are jointly and severally
liable to repair such damages, and cannot pretend to compensate
with the profit that they may have generated in other business. The
partner or controlling entity that applies funds of the company to
his own use or business or that of third parties must bring to the
company any resulting profit, but he will bear any loss. Any
company activity that hiddenly procures objectives foreign to the
company, that is just a way to violate the law, the public order or
to frustrate rights of third parties, will be directly attributable to the
members or controlling parties who made it possible, who will
respond jointly and severally and without limitation for damages
caused.”
Dr. Bomchil says, and it has not been challenged, in relation to
article 54:
“Any shareholder may sue other shareholders based on. this
provision. In effect article 54 makes the controlling shareholders
liable for a negligent or unlawful handling of the company’s
business.”
We do not know how the Argentine jurisprudence has developed in
relation to article $4, and Mr. Briggs submits that it is very far from
clear that Ladenimor would be able to recover damages against
Intercomfinanz under article 54 in respect of Ladenimor’s losses
occasioned by the matters alleged in the petition, assuming them to be
established. He says additionally that article 54 could not compensate
Ladenimor for the loss it would suffer if as a result of the matters
complained of in the petition there is a winding up order and a forced
sale by the liquidator of the company’s remaining assets. As I see it, any
sale by a liquidator of the company’s main asset, the department store,
would be likely to be a sale of it as a going concern, unless a higher
price could be achieved by a sale for redevelopment, and not a sale on a
break-up. But a sale by the liquidator of the department store as a going
concern might yet be a forced sale in that the liquidator might not be
selling at the best time; one cannot usefully speculate.
Before considering how the claim for relief under section 459 of the
Companies Act 1985, and that difference in that field between English
and Argentinian relief, affects the application in this case of Spiliada
Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460 principles I find
it appropriate to consider the position under R.S.C., Ord. 11, since in
the Spiliada case Lord Goff stated, at p. 480H, that in the Order 11
cases the burden of proof rests on the plaintiff whereas in the forum non
conveniens cases that burden rests on the defendant.
Under the Companies Act 1948, the same statute contained both the
provisions for the compulsory winding up of a company on just and114
Dillon L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) 11992)
equitable grounds on the petition of a contributory, and, in section 210,
a provision rather more limited in its scope than the present section 459
of the Act of 1985 for relief against oppression. Applications under
either head were governed by the same set of rules, the Companies
(Winding up) Rules 1949 (S.I. 1949 No. 330 (L.4)). Those Rules
required the petition to be served on the company, but do not appear to
have required service on anyone else. The practice which developed—
probably inevitably in view of the way section 210 was drafted—was that
a petitioner, who wanted his shares to be bought from him under
section 210 by, e.g., an oppressive majority, would ask in the one
petition in the alternative for a purchase order under section 210 or a
winding up order on just and equitable grounds.
Section 210 of the Act of 1948 was replaced by provisions in the
Companies Act 1980 in the same terms as those now to be found in
sections 459 and 461 of the Companies Act 1985. But while those
provisions, relating to what are for convenience called “unfair prejudice
applications” remain in a Companies Act, the Act of 1985, the statutory
provisions for the winding up of companies, including the winding up of
a solvent company on a contributory’s petition on just and equitable
grounds, are now to be found in a different statute, the Insolvency Act
1986. The consequence is that where, as here, a petitioner combines in
one petition an application for relief for unfair prejudice under section
459 and an application for a winding up order on just and equitable
grounds, there are two different sets of rules applicable to the alternative
applications. These are the Companies (Unfair Prejudice Applications)
Proceedings Rules 1986 and the Insolvency Rules 1986.
Both these sets of rules were made under the same statutory
provision, namely section 411 of the Insolvency Act 1986 (as to which
see section 461(6) of the Companies Act 1985 as amended), by the same
rule-making authority, namely the Lord Chancellor with the concurrence
of the Secretary of State after consulting the Insolvency Rules Committee
referred to in section 413 of the Insolvency Act 1986. They were made
within the same month, though not on the same day, and came into
operation/force on the same date, 29 December 1986. But it is far from
clear that they have the same effect in relation to Order 11.
In the Insolvency Rules 1986, which cover a very wide range of
matters in detail, it is expressly provided in rule 12.12 that Order 11 and
the corresponding County Court Rules 1981 do not apply in insolvency
proceedings. “Insolvency proceedings” are defined in rule 13.7 as
meaning any proceedings under the Insolvency Act 1986 or the
Insolvency Rules. In lieu it is provided by rule 12.12(3):
“Where for the purposes of insolvency proceedings any process or
order of the court, or other document, is required to be served on a
person who is not in England and Wales, the court may order
service to be effected within such time, on such person, at such
place and in such manner as it thinks fit . . .”
By contrast, in the Companies (Unfair Prejudice Applications)
Proceedings Rules 1986, which are a very short set of rules, there is no
reference to Order 11. But it is provided in rule 2(2):115
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Dillon L.J.
“Except so far as inconsistent with the Act and these Rules, the
Rules of the Supreme Court and the practice of the High Court
apply to proceedings under Part XVII of the Act in the High
Court”
with an appropriate alternative provision in relation to county courts.
The Act here is the Companies Act 1985 and Part XVII of it includes
sections 459 and 461.
Harman J. held that R.S.C., Ord. 11 nonetheless did not apply to an
application under sections 459 and 461. He reached that conclusion for
two reasons. One was that he held that the position was covered by
R.S.C., Ord. 11, r. 1(2)(6) and service out of the jurisdiction without
leave of the court was thereby permitted. Rule 1(2) provides:
“Service of a writ out of the jurisdiction is permissible without the
leave of the court provided that each claim made by the writ is
either:—(a) ... or (6) a claim which by virtue of any other
enactment”—sc. other than the Civil Jurisdiction and Judgments
Act 1982—‘the High Court has power to hear and determine
notwithstanding that the person against whom the claim is made is
not within the jurisdiction of the court or that the wrongful act,
neglect or default giving rise to the claim did not take place within
its jurisdiction.”
As to that, we have had the advantage, which Harman J. did not
have, of research by counsel into the antecedents of the rule. It was first
introduced in, for practical purposes, its present form, by paragraph 5 of
the Rules of the Supreme Court (No. 2) Order 1963 (S.I. 1963 No. 1989
L. 16). It seems plain that the reason for its introduction was the
enactment of the Civil Aviation (Eurocontrol) Act 1962. That Act was
enacted to give effect to an international Convention concluded at
Brussels and section 7(3) provides:
“A court in any part of the United Kingdom shall have jurisdiction—
(a) to hear and determine a claim for charges payable to the
minister by virtue of regulations under section 4 of this Act,
notwithstanding that the person against whom the claim is made is
not resident within the jurisdiction of the court; (b) to hear and
determine a claim against the organisation for damages in respect of
any wrongful act, neglect or default, notwithstanding that that act,
neglect or default did not take place within the jurisdiction of the
court or that the organisation is not present within the jurisdiction
of the court: Provided that a court shall not have jurisdiction by
virtue of paragraph (b) of this subsection in respect of damage or
injury sustained wholly within or over a country to which this Act
does not extend.”
That is the wording picked up in Ord. 11, r. 1(2)(b).
It appears, however, that rule 1(2)(b) may have been intended to
have a wider scope than only applying where its actual wording has been
used in a statute, as in section 7(3) of the Civil Aviation (Eurocontrol)
Act 1962. There are some Acts, such as the Carriage by Air Act 1961
and the Carriage of Goods by Road Act 1965, which were enacted to116
Dillon L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) 11992)
make the terms of certain international Conventions to which the United
Kingdom had acceded part of United Kingdom law. Actions brought
under these Acts were at one time listed in Ord. 11, r. 1(1) as among
the cases in which leave to serve out of the jurisdiction could be
obtained under Order 11. But they are no longer so listed. It may have
been thought that as the jurisdiction provisions of the Conventions,
laying down in what courts proceedings can be brought, are now part of
the statutes and have force in this country by virtue of the statutes,
leave under Order 11 is not necessary because of Ord. 11, r. 1(2)(b) and
so these statutes should not be listed in Ord. 11, r. 1(1).
But in my judgment to be within Ord. 11, r. 1(2)(b) an enactment
must, if it does not use the precise wording in the rule, at least indicate
on its face that it is expressly contemplating proceedings against persons
who are not within the jurisdiction of the court or where the wrongful
act, neglect or default giving rise to the claim did not take place within
the jurisdiction. It is not enough, in my judgment, that the enactment,
like the Companies Act 1985, gives a remedy in general cases—against
“other members of the company”—without any express contemplation
of a foreign element. Indeed if the judge's reasoning on this point were
right it would seem that any proceedings to claim an injunction could be
brought, without leave under Order 11, against a person who is not
within the jurisdiction of the court and could proceed to trial without
any such leave because under an enactment, section 37 of the Supreme
Court Act 1981, the High Court has power by order (whether
interlocutory or final) to grant an injunction in all cases in which it
appears to the court to be just and convenient to do so.
Harman J.’s alternative reason for holding that an application under
Order 11 was not necessary where it was desired to serve a petition
under section 459 of the Companies Act 1985 on a person who was not
within the jurisdiction of the court was founded on rule 2(2) of the
Companies (Unfair Prejudice Applications) Proceedings Rules 1986. He
considered that it was inconsistent with the Companies Act 1985 and
those Rules that Order It should apply to such a petition. He considered
in particular that service was comprehensively dealt with by rule 4 of the
Rules of 1986, which required service of a petition under section 459 of
the Act of 1985 on every respondent named in the petition as well as on
the company. He considered that it would be curious if the rule
mandatorily obliged the petitioner to serve respondents named in the
petition, but yet the petitioner had to get leave to effect such service; he
concluded that there would be an inevitable conflict between the two
rules.
I am afraid that I do not agree. It is a commonplace that a plaintiff
has to serve all the defendants ied in his proceedings but if
defendants are not within the jurisdiction of this court he has to get
leave under Order 11 to do so, so that it can be tested whether the
foreigner should be brought before this court. I do not therefore see any
inconsistency or inevitable conflict.
1 do not know why it was thought fit to “disapply” Order 11 in the
Insolvency Rules 1986 and not, at any rate in plain terms, in the
Companies (Unfair Prejudice Applications) Proceedings Rules 1986.Ei
17
ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Dillon L.J.
Indeed I do not know if anyone ever gave conscious attention to that
question. But the provision in rule 2(2) of those Rules and the practice
of the High Court applicable to proceedings under Part XVII of the
Companies Act 1985 in the High Court has the effect, in my judgment,
that Ladenimor needed to obtain leave under Order 11 before it could
serve the petition on Intercomfinanz in so far as the petition claimed
relief against Intercomfinanz under sections 459 and 461 of the Act of
1985.
Consequently the burden of showing that relief should be sought
here rather than in Argentina rests on Ladenimor.
Against this background, somewhat lengthily set out, my view is that
Harman J. misdirected himself as to the nature of these English
proceedings by petition in the Companies Court and partly for that
reason asked himself the wrong question at the crucial stage in his
judgment, ante, p. 83c. That led him directly to the answer to the
answer he gave to the summons before him. He also misdirected himself
in relation to Order 11, but since he did not decide the case on onus
that was not material to his conclusion.
My own view is that in all the circumstances, and even in the light of
the claim for relief under sections 459 and 461 of the Companies Act
1985, the Argentine court is the court with which the dispute has the
most real and substantial connection. Even so, it remains to consider
whether Ladenimor can nonethel show that the loss of the procedural
benefit in this country of the availability as a form of relief of a purchase
order under sections 459 and 461 of the Act of 1985 is so serious that
leave to proceed in this country should be given and the service under
Order 11 should be allowed to stand because in the absence of that form
of relief substantial justice will not be done in the appropriate forum,
viz. Argentina: see Spiliada Maritime Corporation v. Cansulex Ltd.
[1987] A.C. 460, 482r.
Protecting ordinary shareholders against aggression by the majority
has always been a problem in company law. See the turgid history of the
minority shareholders’ action, apart from the problems of a “just and
equitable” winding up petition before in re Westbourne Galleries Lid.
[1973] A.C. 360. Section 210 of the Companies Act 1948 was therefore
when introduced a significant step forward. But in England, as opposed
to Scotland, difficulty was experienced in applying the section.
Jenkins L.J. recorded in In re H.R. Harmer Lid. [1959] 1 W.L.R. 62,
75, that there was no English case before the Harmer case on which an
order had been made under the section. He then referred to Scottish
decisions, including a decision in the House of Lords in Scottish Co-
operative Wholesale Society Ltd. v. Meyer [1959] A.C. 324, which had
pointed the way forward. Even so, however, for several years before the
enactment of the Companies Act 1980 which introduced the provisions,
now to be found in sections 459 and 461 of the Companies Act 1985, it
was generally known that more extensive provisions than section 210 of
the Act of 1948 had been introduced by legislation in other English
speaking jurisdictions where the company law had been derived from
English company law and, ultimately, from the Companies Act 1862 (25118
Dillon L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) {1992}
& 26 Vict. c. 89). I therefore regard sections 459 and 461 of the Act of
1985 as very desirable safeguards for shareholders against a very real
wrong.
in Spiliada Maritime: Corporation v. Cansulex Ltd. [1987] A.C. 460,
483, Lord Goff suggested that in some cases it may be possible to
reconcile the procedural advantages available to one party under one of
the competing jurisdictions with the closer ties between the case and the
other jurisdiction by imposing conditions on a grant of leave to bring
proceedings here or on a stay of proceedings here. In the present case,
however, I cannot see any possible reconciliation; conditions imposed by
the English court cannot give the Argentine court jurisdiction to make a
purchase order against Intercomfinanz of Ladenimor’s shares.
It is, therefore, a question of weighing the extent by which the
remedy for oppression available in England under section 459 of the Act
of 1985 is better than the combined remedies of a winding up order and
an award of damages under Argentine law against the very close ties
between the case and Argentina and the huge advantages of having the
trial in Argentina. I personally regard the remedy under section 459 as
significantly preferable to the combination of remedies in Argentina.
Indeed, it was because the remedies previously available in England,
which would have included a combination of a winding up order and
subsequent misfeasance proceedings in the liquidation, were unsatisfactory
that the predecessor of sections 459 and 461 of the Act of 1985 was
enacted in the Companies Act 1980. I therefore personally find the
balancing exercise difficult. I could not say that the conclusion the judge
reached, by whatever route, was, as a conclusion, obviously wrong.
Is the result that Ladenimor has failed to discharge the onus on it in
an Order 11 case of showing not merely that England is the appropriate
forum for the trial but that this is clearly so? (See Spiliada Maritime
Corporation v. Cansulex Lid. [1987] A.C. 460, 481z.) Or is the result
that for this court to decide the balancing exercise in favour of Argentina
would simply be for this court to form a different view of the weight to
be given to the factors which the judge had in mind and so would not be
a permissible course for an appellate court? (See the Spiliada case, at
p. 486c-p.)
After some hesitation, | have formed the view that the latter is the
correct assessment of the position, and that, though | disagree with the
route by which the judge reached his conclusion, this court cannot
interfere with that conclusion.
Accordingly, I would dismiss this appeal.
Stocker L.J. I have had the benefit of reading in draft the
judgments of Dillon and Bingham L.JJ. They reach different conclusions,
although in agreement that in some respects the judge seems to have
incorrectly applied the principles enunciated in the House of Lords in
Spiliada Maritime Corporation v. Cansulex Ltd. (1987] A.C. 460. Both
are in agreement with regard to the construction of R.S.C., Ord. 11,
r. 1(2)(b) and of the Insolvency Rules 1986 and the Companies (Unfair119
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Stocker L.J.
Prejudice Applications) Proceedings Rules 1986, and I do not propose
in this judgment to add any comment of my own on these matters, save
to say that I agree with their views.
I therefore confine this judgment to the question whether or not the
judge correctly applied the principles of the Spiliada case to the facts of
this case, and if he did not whether this court is entitled to interfere
with the judge’s exercise of his discretion. It seems to me that it was
mainly upon the resolution of the latter question that Dillon and
Bingham L.JJ. reached different conclusions as to the outcome of this
appeal.
Prime basic principle enunciated by Lord Goff of Chieveley in Spiliada
Maritime Corporation v. Cansulex Lid. [1987] A.C. 460 appears at
p. 476:
“In my opinion, having regard to the authorities (including in
particular the Scottish authorities), the law can at present be
summarised as follows. (a) The basic principle is that a stay will
only be granted on the ground of forum non conveniens where the
court is satisfied that there is some other available forum, having
competent jurisdiction, which is the appropriate forum for the trial
of the action, i.e. in which the case may be tried more suitably for
the interests of all the parties and the ends of justice.”
As to the proper method by which a court should apply this basic
principle in cases of stay of proceedings, Lord Goff, at p. 478a, cited
Lord Keith of Kinkel in The Abidin Daver [1984] A.C. 398, 415: “the
‘natural forum’ as being ‘that with which the action had the most real
and substantial connection.’” Lord Goff continued [1987] A.C. 460, 478:
“So it is for connecting factors in this sense that the court must first
look; and these will include not only factors affecting convenience
or expense (such as availability of witnesses), but also other factors
such as the law governing the relevant transaction ... and the
places where the parties respectively reside or carry on business.
If however the court concludes at that stage that there is some
other available forum which prima facie is clearly more appropriate
for the trial of the action, it will ordinarily grant a stay unless there
are circumstances by reason of which justice requires that a stay
should nevertheless not be granted. In this inquiry, the court will
consider all the circumstances of the case, including circumstances
which go beyond those taken into account when considering
connecting factors with other jurisdictions. One such factor can be
the fact, if established objectively by cogent evidence, that the
plaintiff will not obtain justice in the foreign jurisdiction . . .”
These are principles of general application.
The questions, as it seems to me, which arise on this appeal are:
() Did the judge correctly apply these principles in reaching his
If he did not, was his discretion correctly exercised
i) If it was not, is this court entitled to substitute its own
discretion for that of the judge? (iv) If so, what is the consequence of
the exercise of that discretion by this court?120
Stocker L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) [1992}
The first question involves examination of the approach adopted by
the judge. He cites Lord Goff's dictum already cited that “the natural
forum [is] that with which the action had the most real and substantial
connection,” and his further statement “It is for connecting factors . . .
that the court must first look.” Thus far, it would appear that the judge
had the Spiliada approach to the problem in mind. However, he does
not then proceed to consider the connecting factors. In fact, he goes on
to draw a distinction between the type of action with which the Spiliada
case was concerned and non-adversarial proceedings in the Chancery
Division, and seems to have found that different principles may be
appropriate in such circumstances, for he says, ante, p. 82:
“Here in this present case, again, one has a matter which is very far
from the formulations adopted by Lord Goff. Here one has an
application by a member of an English company, pursuant to an
express right given by an English statute, in respect of a matter
where the English law gives a particular remedy by section 461 of
the Companies Act 1985 as a matter of discretion, enabling it to
effect what Mr. Briggs rather neatly described as ‘corporate divorce.’
The order made requires a buy-out by one side of the other, and it
may be by the petitioner of the respondent, or by the respondent of
the petitioner, or it may in many cases be by the company of the
petitioner. That will alter the future conduct of the affairs of the
company, which will affect many people other than the two major
protagonists in their future rights and entitlements. All such matters
are plainly matters where the English law applies to the English
artificial entity which has been created. None of that has much
resemblance to a lis inter partes in the Commercial Court.”
Harman J. has not at that stage considered the connecting factors in
deciding what is the most appropriate forum, but having posed this
question to himself, answers it by reference to the question “what is this
action?” and he answers his question as follows, ante, pp. 82-83:
“I have, therefore, to say: what is the appropriate forum for the
trial of this action? To answer that question I have to pose another:
what is this action? This action is a petition; in my judgment, for
relief against the conduct of the company's business in a manner
unfairly prejudicial to some part at least of its members, including
Ladenimor. The court will hear a whole series of instances of things
that have been done, acts that have been committed, and it will
have to decide whether the allegation that this or that was done is
true or false. But in the end what the court, in my judgment, has to
do in these matters is reach an overall conclusion: has Ladenimor
suffered by reason of the conduct of the company’s affairs in such a
manner as to be unfairly prejudicial to it? That is a general
conclusion, but it is the essential conclusion and the foundation for
the jurisdiction.”
This answer seems to me to beg the question, and I agree with the
comment of Bingham L.J. that the question the judge posed to himself
cannot properly be answered by reference to the relief claimed. This121
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Stocker LJ.
seems to be an error compounded by the fact that I cannot agree that
the proceedings with which this court is concerned are of non-adversarial
type which the judge suggests they are. The whole issues which the
court of trial will have to resolve turn upon the resolution of disputed
issues of fact requiring lengthy and complicated investigation of these
facts. The issue before the parties, so far as the “buy-out” relief under
sections 459 and 461 of the Companies Act 1985 is concerned is, at least
in this case, essentially adversarial, and the Spiliada principles are very
relevant and the starting point ought to have been consideration of the
connecting factors in order to ascertain the most appropriate forum.
The judge then makes a short, if not cursory, reference to the fact that
the issues before the court at trial will involve “investigation of a whole
series of acts committed in Argentina,” but does not otherwise at this
stage analyse what will be involved in such an investigation. Indeed, he
seems to discount the difficulties involved in this process. He then poses
to himself the question “How is this company properly to be regulated?”
a question which seems to me to pre-empt the conclusion, having regard
to the judge’s general approach to the problem. He answers the question
as follows, ante, p. 83:
“When one is looking at a company incorporated in England, which
has its life and being only by virtue of the act of the English law
creating this artificial person, it is to my mind extremely difficult to
see that it can be appropriate to hold that ‘the forum’ appropriate
to decide that sort of matter is any forum other than the forum of
the English court. It is, as Mr. Briggs submitted, in my view
‘blindingly obvious’ what the answer to the question is once the
question is posed. ... when I am asked, to stay a petition and
drive from the English seat of justice a person entitled by English
statute to a remedy which it is conceded is not available anywhere
else, it is impossible, that being a relationship governed by English
law, for one to come to a conclusion that another forum will be the
better or the most appropriate forum.”
In my view, the approach of the judge with regard to the first stage laid
down by Lord Goff in the Spiliada case was seriously flawed,
I will not set out in detail the multifarious issues which will arise,
and which point to a very strong connection with Argentina. They
appear from the terms of the petition, which has been set out in the
judgment of Dillon L.J. All the witnesses will have to give their
evidence in Spanish. All the documents and relevant books of account,
not only of this company, but other companies, the consideration of
which may be involved, are in Argentina. The evidence of the documents
will require them to be translated. The relevant events all took place in
Argentina. The difficulties of a trial in this country are such that it is not
easy to see how such a trial is to be conducted. At the very least, it will
present a formidable task for a trial judge.
For these reasons, I would, without hesitation, reach the conclusion
that at the end of the first stages of the Spiliada test the appropriate
forum would be Argentina. At this point the second stage of the
Spiliada test fell to be considered, that is to say that even if the122
Stocker L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) {1992}
connecting factors indicate that the appropriate forum would be
Argentina, if there are circumstances by reason of which justice requires
that a stay should nevertheless not be granted, i.e. that it can be
established by cogent evidence that the plaintiff will not obtain justice in
a foreign jurisdiction, then a stay should not be granted. This is an
overriding consideration, so that even if the judge is in error with regard
to the appropriate forum, he will nevertheless have reached the correct
conclusion in the exercise of his discretion if he made a reasonable
appraisal of the factors and drew a conclusion from that appraisal which
could properly be supported. The judge did not specifically consider this
aspect of the matter as the second stage of the Spiliada test. He
expressed his conclusion in these terms, ante, p. 85:
“The result of that would be that Ladenimor could not obtain,
according to the undoubted and uncontroverted evidence before
me, the remedy which it primarily seeks, the corporate divorce or
buy-out. It could, perhaps, obtain a winding up on grounds that
seem not at all dissimilar to a just and equitable winding up, but
the petition is quite plainly aimed, and Mr. Briggs asserted justifiably
that it was, primarily at obtaining a buy-out on the proper basis of
valuation, giving Ladenimor all the value which it was entitled to.
That, in Argentina, cannot be obtained. That, by English standards
applying to this English company, is a right that Parliament has
granted. That right I would be defeating if I were to grant a stay in
this case.” a
In my view the proper test is whether or not Ladenimor can obtain
justice in Argentina. There is no requirement that it should be able to
obtain the identical relief. Lord Goff of Chieveley said in de Dampierre
v. de Dampierre [1988] A.C. 92, 110:
“... 1 find it impossible to conclude that, objectively speaking,
justice would not be done if the wife was compelled to pursue her
remedy for financial provision under such a regime in the courts of
a country which provide, most plainly, the natural forum for the
resolution of this matrimonial dispute.”
It is true that the Argentine courts cannot make a “buy-out” order
under section 459 of the Companies Act 1985. This is not, in my view,
decisive of the matter as the judge considered that it was. The judge did
not consider whether the remedy—damages—was such as to provide
Ladenimor with “substantial justice,” even though the cause of action by
which this was to be obtained differed from the statutory provision
available in this country. The Argentine courts can make a winding up
order on the equivalent of a just and equitable ground, and such an
order might be advantageous to Ladenimor since a winding up order
obtained in this country might not be recognised in Argentina. Argentine
law with regard to the scope of the remedy in damages was
uncontroverted for the purpose of this application before the court, and
would seem to be apt to include compensation for any loss sustained
through the fact of winding up, and consequent sale of the assets or of
the business as a going concern if this was due to the conduct of the123,
ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Stocker L.J.
majority shareholder. It was not, in my mind, established that
the remedy available in Argentina was significantly of less value than the
remedy available in this country under section 459 of the Act of 1985.
Thus, the question for this court is whether or not the discretion
exercised by the judge should be set aside on established grounds, since
it cannot this court cannot interfere or exercise its own discretion afresh.
The judge did not correctly apply the Spiliada Maritime Corporation v.
Cansulex Ltd. [1987] A.C. 460 test in order to ascertain the appropriate
forum, and in my view, in failing to do so, he reached a manifestly
wrong conclusion. He did not apply the correct test as to whether or not
substantial justice could be obtained in Argentina. These matters seem
to me to be so fundamental to the proper exercise of discretion that this
court is entitled to set that discretion aside and exercise its own
discretion. In the exercise of that discretion, I would, for my part, grant
a stay. I do so for the reasons I have given, and for those expressed by
Bingham L.J
Accordingly, I would allow this appeal.
Bincuam L.J. On the construction of R.S.C., Ord. 11, r. 1(2)(b),
the Insolvency Rules 1986 and the Companies (Unfair Prejudice
Applications) Proceedings Rules 1986 I am in complete agreement with
the judgment of Dillon L.J., which I have had the benefit of reading in
draft. Although we are differing from the judge, there is nothing I can
usefully add. It follows that our approach to onus must also differ from
that of the judge. But it is common ground that the outcome of this
appeal cannot turn on fine questions of onus. The judge did not rule
against Intercomfinanz because it had failed to discharge the onus which
(as he held) lay on it, but because the greater appropriateness of the
English forum was in his judgment “blindingly obvious.” The substantial
issue on the appeal is whether that judgment is shown to be wrong. I
am therefore content to approach the case as if the burden lay on
Intercomfinanz, although in truth it lay on Ladenimor.
Before applying the Spiliada Maritime Corporation v. Cansulex Lid.
[1987] A.C. 460 test, the judge posed the question: “What is this
action?” That was a very pertinent question. One cannot decide where a
matter should be most appropriately and justly tried without being clear
what is to be tried. But I do not think the question should be answered
simply by reference to the relief claimed, since in an English action the
relief claimed will almost inevitably be framed in English terms,
particularly where it is statutory. An English pleader will not claim
triple damages or dommage-intérét, appropriate as such relief may be
elsewhere. Thus when the judge answered the question by quoting part
of the language of section 459 of the Companies Act 1985 he was
unconsciously building in a bias towards the choice of an English forum.
I regard this case as one in which the minority shareholder complains
that the majority shareholder, through Mr. Gibertoni, has abused its
power as majority shareholder and caused the company to pursue
objects outside its corporate objects, to lend money to and invest in
companies connected with Mr. Gibertoni, to divert money which should
have been advanced to the minority shareholder and to deny board124
Bingham L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) [1992]
representation to the minority shareholder, in each case to the prejudice
of the company and the minority shareholder. The minority shareholder
seeks an order that the majority shareholder buy its shares at a price
uplifted to make good the depreciation which the majority shareholder’s
conduct has caused to the actual value of the shares. Thus the minority
shareholder seeks severance of its relations with the majority shareholder
and the company with full compensation for the majority shareholder’s
wrongdoing. Alternatively, the minority shareholder seeks an order that
the company be wound up. This is all relief which the English court can
give if the minority shareholder makes good its complaints.
It is no doubt true, as the judge pointed out, that the Spiliada test
must be applied having due regard to the nature of the proceedings in
question, and in Spiliada Maritime Corporation v. Cansulex Ltd. [1987]
A.C. 460 itself the House may well have had ordinary adversarial
litigation primarily in mind because that is what it was dealing with and
what most of the antecedent cases were concerned with. ‘The principles
laid down by Lord Goff in the Spiliada case were, however, entirely
general in their terms and de Dampierre v. de Dampierre [1988] A.C. 92
makes plain that their application is not limited to ordinary adversarial
litigation. The essential test remains the same, as the judge recognised
when he set out to apply it.
The starting point must be the basic principle formulated by Lord
Goff in the Spiliada case [1987] A.C. 460, 476:
“that a stay will only be granted on the ground of forum non
conveniens where the court is satisfied that there is some other
available forum, having competent jurisdiction, which is the
appropriate forum for the trial of the action, i.e. in which the case
may be tried more suitably for the interests of all the parties and the
ends of justice.”
The words ! have emphasised make clear, as does the reference to
justice, that a broad overall view must be taken: the primary task is not
to decide which forum is advantageous or disadvantageous to any
particular party. The court should look first to see what factors there
are, taking this broad overall view, which point in the direction of
another forum (see p. 477c); at that stage it is connecting factors
(including convenience, expense, availability of witnesses, governing
law, place of residence and place of business) which must be considered:
see p. 478a-B. If it is shown that there is some other available forum
which prima facie is clearly more appropriate for the trial of the action a
stay will ordinarily be granted unless on a consideration of all the
circumstances justice requires that a stay should not be granted: see
p. 478c-p. If a plaintiff can show that he will not obtain justice in the
foreign jurisdiction, that is of course a powerful reason for refusing a
stay (p. 478), since in such a case the foreign forum can scarcely be a
more suitable forum for the interests of all the parties and for the ends
of justice.
It is common ground that the factors connecting this action with the
Argentine forum are strong and obvious. All the economic, logistical
and management considerations which loom large in any substantial125
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Bingham L.J.
action point strongly towards Argentina. The company carried on
business, and the acts complained of were done, there not here. The
witnesses are there, not here, and in the main speak Spanish, not
English, a significant matter in an action where credibility is very much
in issue. The documents and records are there, not here, and are in
Spanish, not English. The court there would bring to the evaluation of
factual evidence a familiarity with local conditions which a court here
would necessarily lack. Expert evidence would be needed here which
would not be needed there. The court there would be much better
placed to assess the significance of related proceedings which have
already taken place there. While an English court called on to try this
case would no doubt do so as best it could, the difficulties would in my
view be such as to make the reliability of the outcome problematical.
The factor which is relied on as connecting this action with England
is the incorporation of the company here. This has certain formal
consequences inasmuch as it has a registered office here, annual meetings
are held here, the company’s local accounts are translated into sterling
and the minute book of general meetings is kept here. It has also had
certain practical consequences: the evidence shows that legal advice was
taken in London to ensure that English company law rules were not
infringed when a distribution to shareholders was to be made. But the
point which Mr. Briggs, for Ladenimor, stressed in argument, and which
I think impressed the judge, was that the relationship of the three
parties involved in this action (Ladenimor, Intercomfinanz and the
company) is by virtue of the company’s English corporation an
English law relationship. The company’s constitution, contained in its
memorandum and articles, is framed with reference to English ‘company
law, which accordingly governs the rights and obligations of the parties
among themselves. Now, when it is alleged that the relationship has
broken down, the English court is said to be the obvious forum to
resolve the dispute as the forum most familiar with the governing law
and practice.
These are not negligible considerations. The only question is whether
they can bear the preponderant weight which the judge gave to them. I
am of opinion that they cannot and for two main reasons: (1) While we
know little or nothing of the history of the company before 1979, it
seems highly improbable that the present shareholders, if promoting the
company today (or in 1979) would choose or have chosen to incorporate
it in England. It is hard to think of a reason why they should wish to
incorporate the company in a place so far removed geographically,
economically and culturally from its commercial base and management.
If this is so, the English incorporation of the company may fairly be
regarded as an anomalous historical survival. The situation is not closely
analogous with that in which parties to a contract deliberately choose to
subject their bargain to the provisions of a given law. (2) In parallel
with its somewhat ghostly legal existence in England the company has a
legal, in addition to a robust corporeal, existence in Argentina. That the
effect of Argentine law is to treat the company as if it were an
Argentine corporation is no longer in controversy. Thus while English
law treats the company as English, Argentine law treats the company as126
Bingham L.J. In re Harrods (Buenos Aires) Ltd. (C.A.) {1992]
Argentine. In a case where nothing appears to turn on the details of the
company’s constitution, the ultra vires rule being apparently the same in
both jurisdictions, these considerations seem to me to deprive the
company’s English incorporation of almost all the force it might
otherwise have.
At the first stage of the Spiliada Maritime Corporation v. Cansulex
Ltd. [1987] A.C. 460 test, I reach a conclusion almost as strong as that
of the judge but to the opposite effect. It seems to me clear on the
evidence that the Argentine court has jurisdiction to entertain this
action (although the relief it can give is different, as considered below)
and that it is the forum in which the action may be tried much more
suitably for the interests of all the parties and the ends of justice.
The judge was powerfully impressed by the fact that the Argentine
court cannot afford the buy-out relief claimed by the minority shareholder
under section 459 of the Companies Act 1985. As I understand him, he
regarded this as a very weighty factor connecting this action with the
English forum. I think this matter more properly falls for consideration
at the second stage of the Spiliada test when (the greater appropriateness
of another forum having been established) it is necessary to consider
whether justice requires that a stay should not be granted and whether it
appears that one party cannot obtain justice in the foreign forum. In
applying this test it cannot of itself be enough that some difference
exists between English law or procedure and those of the foreign forum
because such will always be the case (and was, for example, in de
Dampierre v. de Dampierre [1988] A.C. 92). The test must be applied as
one of substance, not legal technicality.
If I have correctly characterised the substance of this action, it seems
to me exaggerated to hold that the minority shareholder cannot obtain
substantial justice in Argentina. If successful, it will not obtain an order
for purchase of its shares by the majority shareholder at a price uplifted
to take account of loss caused by the majority shareholder’s conduct.
Uncontradicted evidence of Argentine law does, however, establish that
the minority shareholder may if successful recover against the majority
shareholder damages for loss caused by the majority shareholder's deceit
or negligence. The majority shareholder is directly liable for negligent or
unlawful handling of the company’s business. There is nothing in the
evidence to suggest that the damages recoverable by the minority
shareholder would not include compensation for loss sustained on sale
of the company’s business or assets during winding up, even though the
minority shareholder had asked for the company to be wound up, if the
request for winding up were shown to be a direct result of the majority
shareholder’s conduct. Nor, as it seems to me, is there evidence to
support the judge’s proposition (however true in this country) that sale
of a company’s assets by a liquidator would be likely to produce a
depreciated price in Argentina; much might turn on an Argentine
liquidator’s power to continue the company’s business until it could be
profitably sold as a going concern. On the facts of this case, I can see no
reason why the relief obtainable in England is significantly better than
the relief obtainable in Argentina and the evidence falls far short of
showing that it would be unjust to confine the majority shareholder to127
Ch. In re Harrods (Buenos Aires) Ltd. (C.A.) Bingham L.J.
its remedies in Argentina. The alternative relief sought by the minority
shareholder: in its petition, the winding up of the company, may be
granted in either forum; the only difference is that an English order will
be ineffective in Argentina (where it matters) whereas an Argentine
order will be effective there. And an Argentine winding up order will of
course sever the minority shareholder's relations with the majority
shareholder and the company.
Assuming, as the judge held, that the onus of showing that a stay
should be granted lay on the majority shareholder, I consider that it has
comfortably discharged that onus. But the Court of Appeal must be
very slow to interfere, and to reach a different conclusion is not good
ground for doing so in a discretionary field unless the judge’s exercise of
discretion can be impugned on the familiar grounds. I consider it can. In
posing as the question to be answered “How is this company properly to
be regulated?,” the judge did not direct himself in accordance with
Spiliada Maritime Corporation v. Cansulex Lid. [1987] A.C. 460 and
moreover put the question in a way which pre-empted the answer, since
he plainly regarded the Spiliada test as not altogether apt where a case
fell within the supervisory jurisdiction of the Companies Court or the
Chancery Division. In my view, this is in all essentials adversarial
litigation (as evidenced by the fact that the company has not been
represented before us) and the judge erred in regarding it otherwise, as
he did in finding any analogy with the administration of a trust. I do not
think the judge attempted to weigh (although he did briefly mention)
the factors connecting this action with Argentina, nor did he pay due
regard to the company’s legal as well as factual existence in Argentina.
He did not adequately consider how, in substance, the relief available to
the minority shareholder in Argentina fell short of the relief available
here, and made no mention of the minority shareholder's right to
damages, a very important feature of the relief available in Argentina
In short, the judge clearly felt that only the Companies Court could be
the proper forum in which to resolve a dispute of this kind involving an
English company. That approach may be understandable, but it is not in
my view the approach laid down by the Spiliada case [1987] A.C. 460.
I accordingly conclude that Harman J. misdirected himself and that it
is for this court to exercise its discretion afresh. Doing so, I would allow
the appeal and grant Intercomfinanz the stay it seeks.
Appeal allowed with costs.
Proceedings under petition stayed.
Leave to appeal.
Solicitors: Frere Cholmeley; Bower Cotton & Bower.
[Reported by Nice J. Mason Eso., Barrister]