LORD GOFF OF CHIEVELEY
My Lords,
I have had the advantage of reading a draft of the speech prepared by
my noble and learned friend Lord Saville. For the reasons he gives, I too
would allow this appeal.
LORD LLOYD OF BERWICK
My Lords,
I have had the advantage of reading a draft of the speech prepared by my
noble and learned friend Lord Saville. For the reasons he has given, I too
would allow this appeal.
LORD HOPE OF CRAIGHEAD
My Lords,
I have had the advantage of reading a draft of the speech prepared by my
noble and learned friend Lord Saville. For the reasons he has given, I too
would allow this appeal.
LORD CLYDE
My Lords,
I have had the advantage of reading a draft of the speech of my noble
and learned friend Lord Saville. For the reasons he has given, I too would
allow this appeal.
LORD SAVILLE
My Lords,
The respondent is a Spanish company carrying on the business of
manufacturing and marketing cardboard in Spain. In February 1991
it agreed to sell its special paper business (including certain factory
premises) to a company called T. S.A. This company was a subsidiary of
G. T. S.A. as were two other companies called respectively P. Immobiliara
S.A. and E. Agricolas S.A. All these four companies were also Spanish.
Under the agreements for this sale (to which G. T. was a party as well as
T.) part of the consideration consisted of a payment of Ptas. 36,600m.
into a bank account, out of which the respondent would immediately use
Ptas. 29,600m. to acquire shares in T., E. and P.. However the respondent
was given a put option (which it later exercised) to require G. T. to buy
from it the shares in T. and to pay for them in three instalments spread
over the following three years.
In December 1992 G. T. went into "suspension de pagos“(a form
of insolvency procedure) leaving substantial amounts unpaid under
the exercised put option. Two months later the respondent started
proceedings in Spain against the appellant and others in which it claimed
that the appellant (a Kuwaiti legal entity) was liable for these amounts.
The claim is based upon allegations that the appellant (who was indirectly
the majority shareholder in G. T.) was the "decision centre“of this
company, that there was a "confusion of assets“between them, and that
the appellant undercapitalised this company and wrongfully abused its
legal entity, causing damage to its creditors. It appears to be common
ground that if the respondent can establish these matters, then as
a matter of Spanish law it will be entitled to recover the amounts in
question from the appellant. In an endeavour to do so, the respondent
has made detailed allegations relating not only to the general corporate
structure of G. T. and its subsidiaries, but also to how and by whom on
behalf of the appellant and others it is said that the negotiations for the
sale of the special paper business were conducted.
While these Spanish proceedings were pending the respondent also
started English proceedings against the appellant, claiming damages for
negligent misrepresentations alleged to have been made on its behalf
to the respondent during the course of these negotiations, which the
respondent contends induced it to enter into the sale. In essence the
respondent alleges that in those negotiations the appellant misstated the
value and prospects of P. and also falsely asserted that its clear policy was
to stand behind its investments and provide funding where necessary. The
respondent relies, among other things, upon the subsequent disastrous
fall in the price of both the P. and the E. shares, upon the insolvency of
G. T. and upon what it says is the self-evident failure of the appellant to
stand behind its investment in these companies as demonstrating the
falsity of the representations.
The appellant resisted these English proceedings on a number of
procedural grounds. One of these, and the only one which is of relevance
to this appeal, is the submission that the proceedings fall within the
provisions of article 22 of the amended Brussels Convention, incorporated
into our law by the Civil Jurisdiction and Judgments Act of 1982.
Article 22 is in the following terms:-
"Where related actions are brought in the courts of different contracting
states, any court other than the court first seised may, while the actions
are pending at first instance, stay its proceedings.
"A court other than the court first seised may also, on the application of
one of the parties, decline jurisdiction if the law of that court permits the
consolidation of related actions and the court first seised has jurisdiction
over both actions.
"For the purposes of this article, actions are deemed to be related where
they are so closely connected that it is expedient to hear and determine
them together to avoid the risk of irreconcilable judgments resulting from
separate proceedings."
It is common ground that if these two actions are related then the
Spanish court is to be regarded as the court "first seised“for the purposes
of this article. The essential dispute between the parties is whether
the actions are related, and the debate has concentrated on whether
there is a risk of irreconcilable judgments resulting from the two sets of
proceedings. Mance J. in the Commercial Court considered that there was
and stayed the English proceedings. The Court of Appeal (Evans, Peter
Gibson and Brooke L.JJ.) took the opposite view and lifted the stay. The
matter now comes before your Lordships.
In his judgment in the Court of Appeal (reported at [1997] 1 Lloyd's Rep.
113), Evans L.J. (with whom the other members of the court agreed)
considered the approach of the European Court (including the opinion
of the Advocate General) in The Maciej Rataj [1994] E.C.R. I-5439 and
concluded that the issues which must be considered in order to decide
whether or not there was a risk of irreconcilable judgments were:
"the issues of fact or law which have to be decided in order that the court
can reach its judgment in the particular case. These can be described as
'primary' issues and they are limited to those facts which are necessary
to establish a cause of action.... The court's decisions on these primary
issues represent the process of 'reasoning' upon which its judgment is
based, but they do not include, in my view, other issues of fact which the
court may or may not decide and which are not essential to its conclusion
in this way."
On this basis Evans L.J. concluded that the primary issues of fact in
the English proceedings were distinct from any raised in the Spanish
proceedings and that accordingly there was no risk of irreconcilable
judgments.
I cannot accept that article 22 should be interpreted or applied in this
way.
In the first place, I can find nothing in the opinion of the Advocate
General or the judgment of the European Court in The Maciej Rataj
(supra) which lends support to the suggestion that a distinction should be
drawn between those facts necessary to establish a cause of action and
other facts and matters on which conflicting decisions might arise. On the
contrary it seems to me that the case leads to the opposite conclusion.
Both the Advocate General and the European Court were at pains to
emphasise that the objective of article 22 is to improve co-ordination
of the exercise of judicial functions within the Community and to avoid
conflicting and contradictory decisions, thus facilitating the proper
administration of justice in the Community (see paragraph 28 of the
opinion of the Advocate General and paragraphs 32, 52 and 55 of the
judgment). On this basis the court rejected the argument that the
phrase "irreconcilable judgments“should be interpreted so as to confine
it to cases where the decisions would have mutually exclusive legal
consequences, as Hoffmann v. Krieg [1987] E.C.R. 645 had decided was
the case under article 27(3). As the court pointed out, the objective of
article 27(3) is different from the objective of article 22. Thus the court
concluded (in paragraph 53 of the judgment) that:
"In order to achieve proper administration of justice, that interpretation
must be broad and cover all cases where there is a risk of conflicting
decisions, even if the judgments can be separately enforced and their
legal consequences are not mutually exclusive."
This reasoning does not suggest that the phrase "irreconcilable
judgments“in article 22 should be given a limited meaning. Indeed, to
limit the application of article 22 to cases where there is a potential
conflict between so-called "primary“issues, so far from giving the article
a broad interpretation, comes dangerously close to the argument
rejected in The Maciej Rataj (supra). If there are only to be irreconcilable
judgments where one or more of "the facts which are necessary to
establish a cause of action“are potentially in conflict, then at least in cases
where the parties are the same, the article will be likely to be confined to
situations where there is a risk that the legal consequences will be legally
exclusive.
In the second place, it seems to me that the words of the article itself
militate against the suggested limitation. The actions, to be related, must
be "so closely connected that it is expedient to hear and determine them
together“to avoid the risk of irreconcilable judgments resulting from
separate proceedings. To my mind these wide words are designed to
cover a range of circumstances, from cases where the matters before the
courts are virtually identical (though not falling within the provisions of
article 21) to cases where although this is not the position, the connection
is close enough to make it expedient for them to be heard and determined
together to avoid the risk in question. These words are required if
"irreconcilable judgments“extends beyond "primary“or "essential“issues,
so as to exclude actions which, though theoretically capable of giving rise
to conflict, are not sufficiently closely connected to make it expedient for
them to be heard and determined together. The words would hardly be
necessary at all if the article was to be confined as suggested. Indeed,
in that event, it seems to me that quite different words would have been
used.
In the third place, it seems to me that to adopt the suggested
limitation would in truth be to give the phrase "related actions“a special
"English“meaning, which would be contrary to what the court decided
in The Maciej Rataj (supra), where it was pointed out (at paragraph
52) that since that phrase did not have the same meaning in all the
member states, it was necessary to give it an independent interpretation.
Evans L.J. defined "primary“issues as those necessary to establish a
"cause of action,“and, it would seem, distinguished what he described as
"secondary“or "non-essential“issues by reference to the principles of issue
estoppel to be found in our common law. However, those who framed
article 22 can hardly be suggested to have had in mind our English
concepts of "cause of action“or "issue estoppel“when using the phrase
"irreconcilable judgments“any more than courts in other Community
countries faced with interpreting or applying article 22.
In the fourth place, I take the view that to attempt to analyse actions
so as to distinguish between different kinds of issues would be likely to
add to the complexity of applications under article 22 and thus to the
expense and delay in dealing with them. Instead of simply considering
whether the actions were so closely connected that it was expedient
that they should be heard and determined together to avoid the risk of
conflicting decisions, the parties and the court would have to embark
upon a sophisticated and difficult exercise of legal analysis, made more
complicated by the fact that the court would be dealing not with actual
judgments, but with what judgments yet to be given would be likely to
contain. It must be borne in mind that a article 22 is concerned not with
the substantive rights and obligations of the parties, but with the ancillary
and procedural question as to where in the Community those rights and
obligations should be heard and determined. There is nothing in the
Convention that suggests that it is in the interests of the Community
that litigation on this question should be made more expensive and time-
consuming than is necessary. If, for example, the difficulties encountered
by our courts in trying to apply our sophisticated law of issue estoppel
are anything to go by, and such concepts are used for the purpose of
article 22 applications, this would in my view be calculated to make such
applications a peculiarly complicated kind of what the Lord Chief Justice
has described as "satellite litigation,“for what in my view would be no
good reason.
Finally, it is noteworthy that Evans L.J. drew attention to the fact that in
The Maciej Rataj (supra) the Advocate General (in paragraph 28 of his
opinion) said that:
"The court second seised should therefore be able to have recourse to the
machinery envisaged by that provision [article 22] whenever it considers
that the reasoning adopted by the court hearing the earlier proceedings
may concern issues likely to be relevant to its own decision."
Evans L.J. considered that since the opinion referred to issues which
arise in the earlier proceedings the word "reasoning“should be read
accordingly; and then seems to have relied on this when drawing the
distinction between "primary“and other issues to which I have already
referred. In the Italian in which the Opinion was actually written, however,
the word used is "questioni“and though "issues“is doubtless a perfectly
acceptable translation, it would not appear that the Advocate General was
using the words he did in any special legally technical sense.
For these reasons, I am of the view that there should be a broad
common-sense approach to the question whether the actions in question
are related, bearing in mind the objective of the article, applying the
simple wide test set out in article 22 and refraining from an over-
sophisticated analysis of the matter. It seems to me that this was the
approach adopted by Mance J., who concluded that the allegations
(common to both proceedings) in relation to whether the negotiations
leading to the sale were conducted by or on behalf of the appellant,
as well as the circumstances of the G. T. group in Spain and the
appellant's relationship with it, raised a risk of irreconcilable judgments in
circumstances where the two actions were so closely related that it was
expedient that they should be heard and determined together to avoid
that risk. In particular Mance J. drew attention to the fact that one of the
persons alleged in Spain to have been acting on behalf of the appellant
in the negotiations and otherwise was the same individual who is alleged
in the English action to have made the misrepresentations on behalf of
the appellant in the same negotiations, in circumstances where these
allegations are hotly denied in both sets of proceedings.
There remains the question whether the English action should be stayed
or whether the court here should decline jurisdiction, since it seemed
clear to Mance J. that the Spanish court permits the consolidation of
related actions and that that court has jurisdiction over both actions.
Mance J. decided that the English action should be stayed, with liberty
to apply. However, he did so in circumstances where the stance adopted
by the respondent was that if it failed in its contention that article 22
was inapplicable, then it would seek to advance the misrepresentation
claim in the Spanish proceedings; and sought only a stay until that was
done, being apparently content that when that happened the English
court should decline jurisdiction. This was what Mance J. decided to
do. However, the respondent has not applied to the Spanish court and
the stance adopted by it has changed, for it is now submitted that the
correct course would be for the English Court to stay the action here
until judgment is given in Spain. The point made is that in view of the
time that has passed since the judgment at first instance, to seek to
consolidate the actions now would, even assuming that it is still possible,
be likely to lead to considerable delay in getting judgment in Spain.
To my mind it is clear that had the respondent taken up this position
before Mance J. or later taken up the liberty to apply in order to make
this submission, the outcome would have been that the Judge would
have declined jurisdiction. The respondent submits that it can hardly be
blamed for changing its mind, in circumstances where it exercised its right
to appeal and indeed succeeded before the Court of Appeal. However,
it seems to me that Mr. Chambers Q.C. (counsel for the appellant) gave
the answer to this in his reply. When exercising its right to appeal the
appellant must have had in mind that it might not (or ultimately might
not) succeed and accordingly assumed the risk that delays might ensue.
To stay the English action now only until judgment in the Spanish action
would in truth allow the respondent to win despite having failed on the
main issue between the parties. In these circumstances, to alter the order
made by Mance J. to one declining jurisdiction is merely to do what the
judge would have done had he been faced with the new stance adopted
by the respondent and accordingly does not amount in any real sense
to interfering with the discretion vested in the judge to choose between
staying the action or declining jurisdiction.
In conclusion I should make clear that I entertain no doubt at all about
the proper interpretation or application of article 22 in this case and
accordingly to my mind there is no question of referring the matter to the
European Court.
For the reasons that I have given I would allow the appeal and vary the
order made by Mance J. to one declining jurisdiction under the second
paragraph of article 22.