Crown Copyright ©
Lord Justice Lawrence Collins:
I Introduction
1.This is a dispute about forum. Rodette Commerce Ltd and Taplow
Ventures Ltd ("the appellants") and the respondent Kolden Holdings
Limited ("Kolden") are companies which are owned by opposing Russian
interests. But, no doubt for reasons connected with rates of taxation for
non-resident companies, and other benefits conferred on international
business companies, each of them is incorporated in the Republic of
Cyprus.
2.At the heart of the commercial dispute between the parties are
allegations concerning breach of agreements about the transfer of shares
in a Russian company. The agreements are expressly governed by English
law, and contain a submission to the non-exclusive jurisdiction of the
English court. There is no connection with Cyprus except for the fact that
the companies involved are incorporated there.
3.In February 2007 the appellants commenced proceedings in Cyprus
for declarations that (inter alia) they are not liable to Kolden and other
companies from which it took an assignment of rights in the contracts out
of which the dispute arises.
4.The appellants claim that their Cyprus proceedings should have priority
over English proceedings commenced in July 2006. Kolden claims that
the English proceedings should have priority. Kolden is an assignee of
the original claimants in the English proceedings and was substituted as
claimant in those proceedings after the commencement of the appellants'
Cyprus proceedings. The point of law which arises on this appeal is
whether the parties to the English proceedings and the parties to the
Cyprus proceedings are the "same parties" for the purposes of Article 27
of the Council Regulation 44/2001 (EC) on jurisdiction and the recognition
and enforcement of judgments in civil and commercial matters ("the
Judgments Regulation"), which gives priority to the courts of the Member
State which is first seised.
5.The proceedings in Cyprus are for negative declarations. For the
purposes of Article 27 of the Judgments Regulation (and its predecessor,
Article 21 of the Brussels Convention) the European Court has held that
an action for a negative declaration involves the "same cause of action"
as a claim to establish liability: Case 144/86 Gubisch Maschinenfabrik v
Palumbo [1987] ECR 4861. In that case the proceedings for the negative
declaration were not the first in time, and the ruling meant that the
substantive proceedings had priority. But in Case C-405/92 The Tatry
[1994] ECR I-5436 the reasoning was applied to give priority to the action
for a negative declaration which was commenced first.
6.When I asked Mr Bernard Eder QC, who appeared for the appellants,
what possible advantage his clients might obtain from having the
proceedings in Cyprus, not only was he without instructions, but he was
unable to suggest any possible advantage they might have from suing in
Cyprus.
7.About 20 years ago Kerr LJ said that claims for negative declarations,
in particular, "must be viewed with great caution in all situations involving
possible conflicts of jurisdictions, since they obviously lend themselves
to improper attempts at forum shopping": The Volvox Hollandia [1988]
2 Lloyd's Rep. 361, at 371. Although that is not always the case (see
Messier Dowty Ltd v Sabena SA [2000] 1 WLR 2040, para 36), it is hard
to resist the conclusion that the present case is one of the use of a claim
for negative declarations to wrest jurisdiction from the natural forum.
8.There was a one day hearing before Aikens J in June 2007, and he gave
judgment in July 2007. He gave permission to appeal, and there was a
one day hearing before this court in December 2007. It is apparent from
the costs schedules presented to this court that the legal costs for these
hearings have been, in aggregate, at least £400,000.
II The litigation
1 The parties
9.Kolden is or was beneficially owned by Russia Partners Company LP
("Russia Partners"), a limited partnership incorporated in Delaware. It
is an investment fund which specialises in investments in Russia. Russia
Partners incorporated companies in Cyprus to act as special purpose
vehicles for its investments in Russia. Three of them were Amherst
Capital Investments Ltd ("Amherst"), Hensher Enterprises Ltd ("Hensher")
and Conway Holdings Ltd ("Conway"). In addition to Kolden, another
associated company is relevant to the present proceedings, Serpell
Holdings Ltd ("Serpell"). Russia Partners was at one stage the beneficial
owners of all these companies.
10.Amherst, Hensher and Conway between them held 38.71% of the
shares of OAO Maltsovsky Portlandcement ("Maltsovsky"), a joint stock
company incorporated under Russian law. Kolden and Serpell are the
owners of shares in another Russian company called OAO Eurocement,
which is also known and referred to as JSC Eurocement ("JV"). It is one
of the largest cement producing companies in Russia. In 2004 Russia
Partners indirectly held a minority stake of 44.4% of the shareholding of
Eurocement.
11.The appellants are companies incorporated in Cyprus. Kolden claims
the ultimate beneficial owner of the appellants is Mr Filaret Galchev, who
is said to be the ultimate beneficial owner of the majority shareholding in
JV.
2 Sale Agreements: March 18, 2004
12.On March 18, 2004 Amherst, Hensher and Conway entered into four
Agreements for the sale of their combined shareholding in Maltsovsky to
the appellants. All the contracts are in the form of a Securities Sale and
Purchase Agreement (the "SPAs") and all are on the same terms. Each of
the contracts specifically provides, by clause 9, that it shall be governed
and construed in accordance with the laws of England. The same clause
also provides:
"Any dispute arising under and in connection with this Agreement which
cannot be mutually resolved shall be submitted to the non-exclusive
jurisdiction of the Courts of England, or any other Court of competent
jurisdiction."
13.Each of the SPAs provides that the seller companies, as owners of an
identified parcel of the Maltsovsky shares, will sell them to the appellants.
There are four SPAs because Hensher entered into one SPA to sell some
shares to Rodette and another SPA to sell some shares to Taplow. The
third SPA was between Amherst and Taplow and the fourth was between
Conway and Rodette.
14.Clause 2.1 of each of the SPAs states that the purchaser will take
all steps necessary for re-registration of the shares in the name of the
purchaser or a nominee within one business day of the date of the SPA.
Clause 6.2(d) of each of the SPAs provides:
"6.2 The purchaser hereby represents and warrants as of the date of this
Agreement and on a continuing basis hereafter that:..........
(d) the purchaser is acquiring the securities in a private transaction
for the purchasers' own account for purposes of further immediate
distribution thereof to JSC "Eurocement" only........"
15.Kolden claims that the appellants were therefore the middle party
in what was envisaged as a series of transactions under which the
Maltsovsky Shares would move from Amherst, Hensher, and Conway to JV
via the appellants.
16.The total purchase price under the four SPAs was approximately US
$3,350,000. That figure corresponded to the price that Amherst, Hensher,
and Conway had themselves paid to acquire the Maltsovsky shares in
2002. It is alleged that this price was far below the market value of the
Maltsovsky shares either in 2004 or now.
17.The appellants allegedly did not transfer the Maltsovsky shares to JV
as clause 6.2(d) of the SPAs allegedly contemplated, but instead were
either retained by the appellants or transferred by them to other parties.
The allegation, therefore, is that Mr Galchev's companies took the whole
benefit of the value of the Maltsovsky shares, and not that which would be
attributable to his interest in JV.
3 Proceedings in England: July 13, 2006
18.On July 13, 2006 Amherst, Hensher and Conway issued proceedings
in the Commercial Court ("the English Action"), in which the present
application was made. In these proceedings, Amherst, Hensher and
Conway sought a declaration against the appellants that:
".....On the true construction of [the SPAs] each of the first and second
defendants was obliged immediately, alternatively as soon as reasonably
practicable to transfer [the Maltsovsky shares] to [JV]......".
19.As an alternative, Amherst, Hensher and Conway sought rectification
of clause 6.2(d) of each of the SPAs in the following terms:
".....in order to carry out the common intention of the parties, so as to
incorporate into each [SPA] an obligation on the relevant [purchaser]
immediately or alternatively as soon as reasonably practicable, to transfer
[Maltsovsky shares] to [JV]".
20.There was also a claim for damages for breach of contract.
21.The particulars of claim in the English Action were not served until
after Aikens J gave judgment. But it should be noted at this stage
(because this played some part in the argument before this court) that
the particulars claimed as loss and damage the difference between the
purchase price under the SPAs ($3,350,000) and the present value of the
shares, alternatively their value at such time as they were sold by the
appellants to an independent and bona fide third party, or alternatively
the difference between the purchase price and the value at the time of
the SPAs. Paragraph 37(g) pleaded that the sellers, and Kolden, had a
legitimate interest in preventing the appellants from profiting from their
breach of obligation.
4 Conspiracy proceedings in Cyprus: August 3, 2006
22.On August 3, 2006 Amherst, Hensher and Conway and three other
claimants began an action in the Cyprus court: Action No 5166/2006. The
other three claimants named are Kolden, Serpell and Russia Partners.
In that action the claimants seek damages against the appellants and
against OAO Eurocement Group and Mr Galchev. The endorsement on
the claim form asserts that the claimants are entitled to "compensation
for conspiracy aiming at fraud" and compensation for alleged inducement
to commit a breach of the four SPAs by OAO Eurocement Group and Mr
Galchev. Those proceedings were served on the appellants on August 8,
2006, who entered appearances on August 31, 2006.
5 Assignment and Notice of Assignment: November 15 and November 20,
2006
23.On November 15, 2006, Amherst, Hensher and Conway, as assignors,
concluded a Deed of Assignment ("the Assignment") with Kolden as
assignee. This Deed provides for the assignment of rights in the SPAs and
rights arising from them. The assignment clause provides:
"Assignors hereby unconditionally and absolutely assign to the Assignee
any and all of their rights, claims and causes of action, whether vested
in them jointly or individually without limitation existing or arising from
the acquisition, ownership or alienation of the shares of OAO "Maltsovsky
Portlandcement" ("Maltsovsky") and rights arising from any agreement
with third parties associated with Maltsovsky ("the Rights"). For the
avoidance of doubt the Rights include all rights, claims and causes of
action whether arising directly or indirectly from the [four SPAs]."
24.The Assignment also provides that the assignors would execute
Notices of Assignment in a specified form and deliver those Notices to
the counterparties to the four SPAs. The Assignment expressly states
that it is governed by English law and that any dispute arising out of or in
connection with the Deed of Assignment would be settled by arbitration
before the London Court of International Arbitration in London.
25.Notices of Assignment were received at the registered office of the
appellants on about December 20, 2006.
26.On January 29, 2007, Skadden, Arps, Slate, Meagher & Flom (UK) LLP
("Skadden Arps"), solicitors for Kolden, wrote to Steptoe and Johnson,
solicitors for the appellants, indicating that Skadden Arps had applied to
the English court to substitute Kolden as claimant in the English Action in
the place of Amherst, Hensher and Conway, because the latter companies
had assigned to Kolden their rights as against the appellants under the
Assignment.
6 Second and Third Cyprus proceedings: February 5 and February 14,
2007
27.No doubt in response, on February 5, 2007, the appellants issued
proceedings in Cyprus (Action No 851/2007) claiming, against Amherst,
Hensher, Conway and Kolden, declarations that the assignments made
by virtue of the Deed of Assignment were invalid and without legal
effect, and also damages for breach of express or implied terms as to
confidentiality and non-assignability in the SPAs. These proceedings were
discontinued on February 20, 2007, and are not material on this appeal.
28.On February 14, 2007, the appellants issued fresh proceedings in
Cyprus (Action No 1067/2007, "the Cyprus Action") against Amherst,
Hensher, and Conway and against Kolden. The relief sought is in
summary:
(a) against Amherst, Hensher, and Conway: a declaration of non-liability
under the SPAs, which is the mirror image of that sought by Amherst,
Hensher and Conway in the Commercial Court, i.e. the contract cause of
action. The appellants claim a declaration that they, as purchasers of the
Maltsovsky shares under the four SPAs were not at any time obliged to
transfer those shares to JV;
(b) against all four defendants: a declaration that the Assignments are
invalid because they were in breach of express or implied terms of the
SPAs and/or were champertous and/or contrary to public policy;
(c) against Kolden: a declaration that it has no rights under the
Assignments, including the right to sue; and alternatively, if that should
be wrong, a declaration of non-liability in the same terms as that sought
against Amherst, Hensher, and Conway;
(d) against all four defendants: damages.
7 Kolden substituted as claimant in the English Action: February 20, 2007
29.On February 16, 2007, Tomlinson J gave permission, ex parte, to
Kolden to be substituted as claimant in place of Amherst, Hensher and
Conway (to whom I shall now refer as "the original claimants") in the
English Action. On February 20, 2007 the claim form in the English Action
was re-issued with Kolden substituted as the sole claimant.
III Judgment of Aikens J
30.The proceedings in the English Action were served on the appellants on
September 11, 2006. They filed acknowledgments of service indicating an
intention to contest the jurisdiction, and subsequently issued applications
for stays under Articles 27 and 28 of the Judgments Regulation, which
provide:
"Article 27
1. Where proceedings involving the same cause of action and between
the same parties are brought in the courts of different Member States,
any court other than the court first seised shall of its own action stay its
proceedings until such time as the jurisdiction of the court first seised is
established.
2. Where the jurisdiction of the court first seised is established, any court
other than the court first seised shall decline jurisdiction in favour of that
court.
Article 28
1. Where related actions are pending in the courts of different Member
States, any court other than the court first seised may stay its
proceedings.
2. Where these actions are pending at first instance, any court other than
the court first seised may also, on the application of one of the parties,
decline jurisdiction if the court first seised has jurisdiction over the actions
in question and its law permits the consolidation thereof.
3. 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."
31.The judge dismissed the applications. His reasoning can be
summarised as follows.
32.The key question was whether, at the time the Cyprus proceedings
were begun on February 14, 2007, there were then in existence two sets
of proceedings involving the same cause of action and between "the same
parties" within the meaning of Article 27 of the Regulation.
33.The answer was to be found in the principles in the ruling in Case
C-351/96 Drouot Assurances SA v Consolidated Metallurgical Industries
[1998] ECR I-3075, which established: (a) as a matter of the independent
interpretation of Article 21 of the Brussels Convention (and now Article 27
of the Regulation) two legal entities could be regarded as the same party;
(b) whether that was so in any particular case would be a matter for the
national court to decide; (c) the national court must look at the facts
of the case concerned and, in particular, the subject matter of the two
disputes in the two relevant proceedings to see if the two legal entities
were to be regarded as the same party; (d) the test that the national
court must apply was whether the interests of the two legal entities
involved in the two disputes were identical to and indissociable from one
another in relation to the subject matter of the two disputes concerned;
(e) one way of demonstrating this identity of interest was by asking
whether a judgment against one legal entity in respect of the subject
matter of the two disputes would have the force of res judicata against
the other legal entity.
34.Kolden had a good arguable case that the Assignment was a valid legal
assignment. When the Cyprus proceedings were begun on February 14,
2007 Kolden fulfilled the tests for being regarded as "the same party"
as the assignor companies. From the moment the appellants received
notice of the Assignment, all rights passed to Kolden, and its interest in
the SPAs and any rights of action arising out of them were identical to
those formerly possessed by the assignor companies. The interests of
Kolden, as legal assignee, were indissociable from those of the assignor
companies because the rights of Kolden were only those of the assignors.
35.Consequently, when the Cyprus proceedings were started on February
14, 2007, the English court was the court "first seised" of the "same
cause of action" (the contract cause of action) between "the same
parties". The English court had been seised of that cause of action since
July 13, 2006. The original claimants were "the same party" as Kolden. It
was irrelevant to take into account any defences that the appellants might
have been able to advance against the claims of the original claimants on
the contract cause of action as at February 14, 2007.
36.Accordingly the appellants' application for an order to stay the English
Action pursuant to Article 27 of the Regulation was dismissed. The judge
added that on his findings Article 28 could not be relevant, because it was
only directed at courts other than the court first seised.
IV The appeal
37.The appellants appealed on the basis that the judge erred: (1) in
failing to hold that Kolden only became a party to the English Action
after February 14, 2007 on which date the Cypriot court became first
seised of proceedings between Kolden and the appellants in respect of
the same cause of action for the purposes of Article 27 of the Judgments
Regulation and thus no lis pendens arose on February 14, 2007; (2)
in holding that Kolden was to be regarded as the "same party" as the
original claimants, the three assignor companies, for the purposes of
Article 27; (3) in applying a "good arguable case" test to determine
whether the interests of the parties were identical or indissociable; (4) on
the assumption that there was a good arguable case that the Assignment
was valid, in holding that he had to assume that it was effective and
that the interests of the parties were identical and indissociable; (5) in
holding that there was a good arguable case that the Assignment was
valid; (6) in failing to take account of these matters: (a) the amended
claim form in the English Action fails to identify a cause of action by
Kolden against the appellants; (b) the original claimants can continue to
influence proceedings involving Kolden by being added as claimants (e.g.
in response to the contention that the Assignment is invalid), or being
added as defendants by counterclaim.
38.At the outset of the hearing before this court Mr Eder QC made it clear
that he was not pursuing at this stage any questions on the validity of
the assignment (or the application of the jurisdiction clause to Kolden,
which he had raised in his skeleton argument). In particular he accepted
that the judge (and this court) could proceed on the basis that there was
an arguable case that there was a valid assignment, and that the only
question was whether or not Kolden were the same parties as the original
claimants for the purposes of Article 27.
39.It is common ground that the contract claim in the English Action and
the claim in the Cyprus Action for a declaration that the appellants are not
in breach are the "same cause of action" for the purposes of Article 27.
Indeed that is the basis of the appellants' application.
40.The main point on this appeal is the application of the principles
underlying the rulings in Case C-405/92 The Tatry [1994] ECR I-5439
and Case C-351/96 Drouot Assurances SA v Consolidated Metallurgical
Industries [1998] ECR I-3075 on "the same parties" in Article 21
of the Brussels Convention. The Brussels Convention has now been
superseded by the Judgments Regulation. I have set out Articles 27 and
28 in paragraph 30 above. Article 21 of the Brussels Convention is in
substantially the same terms as Article 27 of the Judgments Regulation.
Article 28 of the Judgments Regulation differs somewhat from Article 22
of the Brussels Convention, and Article 30 of the Judgments Regulation
introduces an autonomous definition of when a court is "deemed to
be seised" of an action. None of these differences is material for the
purposes of this appeal.
41.The principal questions which arise on this appeal are these: First,
what is the critical date for determining whether "proceedings … between
the same parties are brought in the courts of different Member States",
and does Article 27 apply where the assignee has become a party to
the first set of proceedings only after the second proceedings have
been commenced? Second, does the "good arguable case" test apply
to determine whether parties are "the same parties" for the purpose of
Article 27, and, if so, how should it be applied? Third, when, if at all, is an
assignee to be regarded as the same party as an assignor?
1 The critical date
42.The appellants' argument is as follows: no lis pendens arose on
February 14, 2007, when the Cyprus court was seised because Kolden
only became a party to the English Action after February 14, 2007,
and the judge erred in applying a "relation back" principle which treats
Kolden as a party to the English Action at a date prior to the date of the
assignment; the issue of when Kolden became a "party" to the English
proceedings is a matter of English law and procedure; proceedings cannot
be regarded as pending "between" the "same parties" for the purposes of
Article 27 unless and until the relevant entities are parties in both relevant
sets of proceedings (Kinnear v. Falconfilms N.V [1996] 1 W.L.R 920) and
the English court is seised of the new claimant's claim as from the time of
its joinder into the proceedings: WPP Holdings Italy SRL v Benatti [2007]
EWCA Civ 263, [2007] 1 WLR 2316, para 28.
43.Kolden's response is that the relevant date of seisin for the English
Action is July 13, 2006, when the claim form was issued. The substitution
of Kolden does not result in a new date of seisin as far as the English
court is concerned and does not deprive the English court of jurisdiction
which it originally had. There is, and has always been, only one English
Action. There is no reliance by Kolden on the "relation back" doctrine,
nor is it relevant that as a matter of English law Kolden only became
party to the English Action when it was substituted. But in any event an
added party becomes a party from the date of the proceedings: Yorkshire
Regional Health Authority v Fairclough Building Ltd [1996] 1 WLR 210, at
217-8 and 221.
44.I agree with the judge's conclusion that the critical question is
whether, at the time the Cyprus proceedings were begun on February
14, 2007, there were then in existence two sets of proceedings involving
the same cause of action and between "the same parties" within the
meaning of Article 27 of the Regulation. If on February 14, 2007 there
were two sets of proceedings involving the same cause of action and the
same parties, then the subsequent substitution of Kolden for the original
claimants would not matter.
45.The fact that as a matter of English law Kolden only became party
to the English Action when it was substituted is irrelevant. The relevant
question is whether Kolden and the original claimants are to be regarded
as the "same party" for the purposes of Article 27. If they are, then the
English court was and remains first seised of the proceedings between the
original claimants (and later, by substitution, Kolden) and the appellants.
46.There is nothing in Kinnear v. Falconfilms N.V [1996] 1 W.L.R 920 or
WPP Holdings Italy SRL v Benatti [2007] EWCA Civ 263, [2007] 1 WLR
2316 which is inconsistent with this conclusion. Each case contemplated
the addition of different parties involving different causes of action
being added after the date proceedings were first issued. In Kinnear
v. Falconfilms N.V Phillips J (as he then was) was concerned with new
third party claims: see at p 930. WPP Holdings Italy SRL v Benatti was
concerned in the relevant aspect with the addition of a new claimant with
its own cause of action: see paras 27, 28.
2 Good arguable case
47.The way the point was put in the notice of appeal was that the judge
erred in applying the "good arguable case" standard to determine whether
the interests of parties were identical or indissociable. Before this court,
it was argued that where there is a possibility of the assignment being
invalid, it cannot be concluded that the interests of the purported assignor
and those of the purported assignee are identical and indissociable. The
court must form its own view on the balance of probabilities: Drouot, para
23; WPP Holdings Italy SRL v Benatti [2007] EWCA Civ 263, [2007] 1
WLR 2316.
48.I am satisfied that there is nothing in this point for two reasons. First,
Mr Eder QC accepted for the purposes of this hearing that there was
an arguable case that the assignment was valid. He did not invite the
court to decide a preliminary issue on the validity of the assignment.
There is therefore no reason for the court not to proceed on the basis
that there was a valid assignment, subject to Mr Eder's other points on
the application of Article 27. Secondly, the "good arguable case" test is
of sufficient flexibility to ensure that the English court performs its task
under the Judgments Regulation.
49.Jurisdictional issues ought generally to be dealt with quickly, and
without oral evidence or mini-trials: Canada Trust Co v Stolzenberg (No
2) [2002] 1 AC 1 at [13], per Lord Steyn. Consequently jurisdictional
issues are normally resolved on the basis that the person asserting that
the English court has jurisdiction or should retain jurisdiction as a result
of a jurisdictional requirement in the CPR (formerly RSC Order 11) or the
Brussels/Lugano Conventions or the Judgments Regulation must show a
"good arguable case": see, e.g. Seaconsar Far East v Bank Markazi Iran
[1994] 1 AC 438; Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR
547, at 553-559, affd [2002] 1 AC 1 at [13]; Bank of Tokyo-Mitsubishi Ltd
v Baskan Gida Sanayi [2004] 2 Lloyd's Rep 395, paras 193-194; Konkola
Copper Mines plc v Coromin Ltd [2006] EWCA Civ 5, [2006] 1 Lloyd's Rep
410.
50.The "good arguable case" test is a flexible one, depending on the
issue: Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547, at
558, per Waller LJ. That is a lower threshold than proof on a balance
of probabilities: ibid. In Bols Distilleries BV v Superior Yacht Services
Ltd [2006] UKPC 45, [2007] 1 WLR 12 (a case involving a disputed
jurisdiction agreement) Lord Rodger of Earlsferry agreed with Lord Steyn
in endorsing the approach of Waller LJ in Canada Trust Co v Stolzenberg
(No 2), and said that (at para 28) "in practice, what amounts to a 'good
arguable case' depends on what requires to be shown in any particular
situation in order to establish jurisdiction."
51.Despite the appellants' reliance on WPP Holdings Italy SRL v Benatti
[2007] EWCA Civ 263, [2007] 1 WLR 2316 there is nothing in the decision
which is inconsistent with this approach. The point on "good arguable
case" arose in relation to two issues in that decision. The first issue was
whether the contract at issue was an "individual contract of employment"
for the purposes of the special regime for such contracts in section 5 of
the Judgments Regulation. On that issue Toulson LJ (at para 41) dealt
with the question on the flexible "good arguable case" approach.
52.The second issue in WPP Holdings Italy SRL v Benatti was whether
the Italian court had been seised prior to the English court. On that issue
Toulson LJ said (at para 62) that that issue was a procedural issue of a
quite different kind from the question whether the court otherwise had
jurisdiction: although the parties were agreed that the defendant in the
English proceedings had the burden of showing a good arguable case that
the Italian Court was first seised, he was not sure that that was correct.
Article 27 required a court of its own motion to stay its proceedings if
another court had been first seised of the same cause of action between
the same parties. He went on: "At first sight, this would seem to require
a court, if it is aware that another court has arguably been first seised
of the same cause of action between the same parties, to form its own
view which court has been first seised under the test laid down in art 30.
However it makes no difference in the present case and I would reserve a
final opinion on the point." What Toulson LJ said must be read in the light
of the fact that this issue depended on a question of construction of the
provision in Article 30 as to when a court is seised. If a question of law
arises it would not be appropriate to decide it on a "good arguable case"
basis. That was why Buxton LJ agreed (at para 89) that for the reasons
given by Toulson LJ (at 62) the issue was not to be determined by the
burden of proof.
53.Nor does the statement in Drouot (para 23) that "it is for the national
court to ascertain whether this [namely, whether the interests can be
considered to be identical and indissociable] is in fact the case" affect
this conclusion. The European Court is leaving it to the national court
to decide the question, but it is not imposing a uniform rule as to the
appropriate standard.
3 The same parties
54.The appellants say that the interests of a (purported) assignor and
(purported) assignee are neither "identical" nor "indissociable." First, a
valid assignment operates merely to transfer the benefit of a contract
or the rights arising thereunder but it does not operate to transfer the
burden. Second, the assignor continues to remain primarily liable to the
obligor for the non-performance of its outstanding contractual obligations.
Third, the assignors can influence proceedings involving the assignees.
Kolden is suing in its own name and there is nothing to prevent the
original claimants from becoming parties to the proceedings again, either
by being added as claimants (e.g. in response to the contention that the
assignment is invalid) or by being added as defendants by counterclaim.
55.The appellants also say: (1) The particulars of claim (especially
paragraph 37(g), to which I referred at paragraph 21 above, and
which pleaded that the sellers, and Kolden, had a legitimate interest in
preventing the appellants from profiting from their breach of obligation)
showed that Kolden was claiming damage to itself. If Kolden had
simply taken the Assignment and not been substituted, the appellants
would have filed proceedings in Cyprus (as they have done at present)
challenging the validity of the alleged assignment, and this could have
caused any subsequent English proceedings to be stayed pursuant to
Article 28 of the Judgments Regulation. (2) The amended claim form
is fundamentally flawed in that it fails to identify any cause of action
by Kolden against the appellants. It does not plead the (purported)
assignment and thus does not disclose any cause of action in favour of
Kolden, contrary to CPR 16.2. Kolden's purported rights derive from an
alleged unpleaded assignment and not from any alleged breach nor the
SPAs themselves.
56.Kolden says that the original claimants and Kolden are the same
parties. First, judgment against Kolden would constitute res judicata
against the original claimants, and vice versa: Gleeson v J Wippell & Co
Ltd [1977] 1 WLR 510. Second, as regards (a) the rights of the assignee
and assignor, and (b) the claims brought on the basis of those rights by
the assignee and assignor, there is an identity of interest in the precise
sense that there is only one interest. That is in the nature of assignment:
there is only one right, and there are successive owners of that one right.
Third, after the assignment, the original claimants cannot influence the
proceedings.
57.Kolden also says that the fact that an assignment only passes the
benefit and not the burden of a contract (and that the assignor remains
primarily liable to the obligor for the non-performance of its outstanding
contractual obligations) is irrelevant. There are no "outstanding
contractual obligations" on the part of the original claimants. It is the
appellants who continue to have an obligation under the SPAs to transfer
the Maltsovsky Shares immediately onwards to JV (or to pay damages for
breach of that obligation).
58.I come to my conclusions on this aspect of the appeal. The rulings in
Case C-305/92 The Tatry [1994] ECR I-5439 and Case C-351/96 Drouot
Assurances SA v Consolidated Metallurgical Industries [1998] ECR I-3075
are very fact-specific, and it is necessary to deal with the rulings in some
detail to extract the principles.
Case C-405/92 The Tatry [1994] ECR I-5439
59.The facts may be summarised as follows. A cargo of soya bean oil
was contaminated with diesel on a voyage from Brazil to Rotterdam
(for part of the cargo) and Hamburg (for the rest) in the vessel Tatry.
In November 1988, before any other proceedings had commenced, the
shipowners brought an action in the Rotterdam District Court against the
cargo owners (other than Philip Brothers Ltd –"Phibro" – who owned part
of the cargo carried to Rotterdam under separate bills of lading), claiming
a declaration that they were not liable for the alleged contamination.
60.The cargo owners brought two Admiralty actions in rem (one of
them by Phibro) in the Admiralty Court ("the cargo actions") against a
sister-ship of the Tatry, the Maciej Rataj. Those actions were begun on
September 15, 1989, when the Maciej Rataj was arrested. The vessel was
subsequently released from arrest against the provision of a guarantee.
The claims in the Admiralty actions in rem were for damages for the
contaminated cargo, i.e. the same subject matter as the cause of action
as in the shipowners' action.
61.The shipowners then brought an action in Rotterdam against Phibro
for a declaration of non-liability. In October 1990 the shipowners brought
proceedings in the Netherlands to limit their liability as against all the
cargo interests.
62.The Admiralty Court refused an application by the shipowners to stay
the English proceedings under Article 21. It held that the cargo actions
and the shipowners' action did not involve the same parties or subject
matter. The English Court of Appeal made a reference to the European
Court on the question (inter alia) whether a claim brought in rem involved
the same parties and the same cause of action for the purposes of Article
21 as an in personam action: The Maciej Rataj [1992] 2 Lloyd's Rep 552.
63.The European Court ruled: (a) the term "the same parties" had an
autonomous meaning; (b) Article 21 must be understood as requiring that
the parties to the two actions be identical; (c) re-affirming Case 144/86
Gubisch Maschinenfabrik v Palumbo [1987] ECR 4861, the question of
whether the parties were the same did not depend on the procedural
position of each of them in the two relevant proceedings; (d) the rules
set out in Articles 21 and 22 (now 27 and 28) were designed to preclude,
as far as possible, the possibility of the non-recognition of a judgment on
account of its irreconcilability with a judgment given in a dispute between
the same parties in the state in which recognition was sought.
64.For present purposes, the only relevant part of the ruling in The Tatry
is that which held that the fact that English admiralty procedure regarded
an action in rem against a ship as different from an action in personam
against an owner or other interested party was irrelevant:
"46. The national court's second question is whether a subsequent action
has the same cause of action and the same object and is between the
same parties as a previous action where the first action, brought by
the owner of a ship before a court of a Contracting State, is an action
in personam for a declaration that that owner is not liable for alleged
damage to cargo transported by his ship, whereas the subsequent action
has been brought by the owner of the cargo before a court of another
Contracting State by way of an action in rem concerning an arrested ship,
and has subsequently continued both in rem and in personam, or solely in
personam, according to the distinctions drawn by the national law of that
other Contracting State.
47. In Article 21 of the Convention, the terms 'same cause of action'
and 'between the same parties' have an independent meaning (see
Gubisch Maschinenfabrik K.G. v Palumbo ….) They must therefore be
interpreted independently of the specific features of the law in force in
each Contracting State. It follows that the distinction drawn by the law of
a Contracting State between an action in personam and an action in rem
is not material for the interpretation of Article 21.
48. Consequently, the answer to the second question is that a subsequent
action does not cease to have the same cause of action and the same
object and to be between the same parties as a previous action where
the latter, brought by the owner of a ship before a court of a Contracting
State, is an action in personam for a declaration that that owner is not
liable for alleged damage to cargo transported by his ship, whereas the
subsequent action has been brought by the owner of the cargo before a
court of another Contracting State by way of an action in rem concerning
an arrested ship, and has subsequently continued both in rem and in
personam, or solely in personam, according to the distinctions drawn by
the national law of that other Contracting State."
Case C-351/96 Drouot Assurances SA v Consolidated Metallurgical
Industries [1998] ECR I-3075
65.In this case a barge sank in Netherlands waters. The hull insurer,
Druout Assurances SA ("Druout"), acting on its own behalf, paid for the
barge to be refloated. In December 1990 Druout brought proceedings
in Paris ("the French proceedings") against the cargo owner and cargo
insurer for a contribution in general average.
66.But in August 1990 the owners of the cargo and the cargo insurers
(together "the cargo interests") had brought proceedings in the
Rotterdam District Court ("the Dutch proceedings") against the owner of
the barge. The cargo interests claimed a declaration that they were not
liable to contribute in general average, on the ground that the vessel was
unseaworthy at the start of her voyage because of overloading.
67.In the French proceedings the cargo interests raised an objection of lis
alibi pendens in the form of the Dutch proceedings.
68.The Cour de cassation considered that the case raised a question on
the scope of the phrase "the same parties" in Article 21 of the Brussels
Convention and referred the matter to the European Court. The issue
referred was whether the owner of the barge, which was impleaded in the
Dutch proceedings was, for the purposes of Article 21 and on the facts of
this case, to be regarded as "the same party" as the hull insurers of the
barge, viz. Druout, who were impleaded in the French proceedings.
69.Fennelly A-G's view was that the wording of Article 21 and the
European Court's judgments in Gubisch v Palumbo and The Tatry required
that a strict interpretation be given to the words "the same parties". He
concluded:
"29. My view, therefore, is that the concept of 'same parties' is to be
interpreted literally and strictly. The Court has used the word 'identical'.
This means that not only just the parties to the two actions be the same
in the literal sense of the same natural or legal person, but also that
they must appear in the same right. In particular, a person suing in his
own right and for his own benefit is obviously not to be equated with the
same person suing or being sued in a purely representative capacity, for
example, as the legal personal representative of a deceased person or
a person under a disability, or in any of the wide range of cases where
a person may, in law, be named to represent corporate bodies or their
creditors in cases of insolvency.
…
31. I share the concerns expressed... that a more flexible approach to
the application of the condition that the parties must be the same in
order for an obligation to decline jurisdiction to arise under Article 21 of
the Convention could seriously imperil the right to a fair hearing and, in
some cases, even the efficient administration of justice". He concluded,
therefore, that the barge owner and the hull insurers, Druout, were
not the "same parties" in the French and Dutch proceedings for the
purposes of Article 21. Accordingly, there could be no stay of the French
proceedings."
70.The European Court did not follow the opinion of the Advocate
General. It reaffirmed the view expressed in The Tatry that "the terms
used in Article 21 of the Convention in order to determine whether a
situation of lis pendens arises must be regarded as independent": para.
16.
71.The European Court re-stated the requirement in The Tatry (para 33)
that Article 21 required the parties in the two actions to be "identical",
and continued:
"19. It is certainly true that, as regards the subject-matter of the two
disputes, there may be such a degree of identity between the interests
of an insurer and those of its insured that a judgment given against
one of them would have the force of res judicata as against the other.
That would be the case, inter alia, where an insurer, by virtue of its right
of subrogation, brings or defends an action in the name of its insured
without the latter being in a position to influence the proceedings. In
such a situation, insurer and insured must be considered to be one and
the same party for the purposes of the application of Article 21 of the
Convention.
20. On the other hand, Article 21 cannot have the effect of precluding
the insurer and its insured, where their interests diverge, from asserting
their respective interests before the courts as against the other parties
concerned.
21. In the present case, CMI [cargo-owners] and Protea [insurers] made
clear at the hearing that, in the Netherlands action, they seek to have Mr
Velghe [the owner] declared exclusively liable for the foundering of the
Sequana. As the insurer merely of the hull of the vessel, however, Drouot
takes the view that it cannot be held liable for the fault of its insured, and
thus has no interest in the Netherlands action.
22. It appears, moreover, that in the French action, Drouot has been
not acting in its capacity as the representative of its insured, but in its
capacity as a direct participant in the refloating of the Sequana.
23. Thus in this case it does not appear that the interests of the insurer
of the hull of the vessel can be considered to be identical to and
indissociable from those of its insured, the owner and charterer of the
vessel. However, it is for the national court to ascertain whether this is in
fact the case.
…
25. The answer to the question raised must be that Article 21 of the
Convention is not applicable in the case of two actions for contribution to
general average, one brought by the insurer of the hull of a vessel which
has foundered against the owner and the insurer of the cargo which the
vessel was carrying when it sank, the other brought by the latter two
parties against the owner and the charterer of the vessel, unless it is
established that, with regard to the subject matter of the two disputes,
the interests of the insurer of the hull of the vessel are identical to and
indissociable from those if its insured, the owner and the charterer of that
vessel".
72.Several other cases were relied on by the parties, but none of them
takes the matter much further. The only cases which deal directly with
the effect of assignment on the question of the "same parties" are two
German appellate decisions which come to opposite conclusions.
73.In Case 9 U125/99, Regional Court of Appeal, Stuttgart, November
24, 1999, the claimant company undertook four transactions on the
London Stock Exchange with Union CAL Ltd which resulted in losses,
and as a result Union CAL Ltd had claims for about £26,000. Union
CAL Ltd assigned its claim to Union Discount Co. Ltd, which brought an
action for payment in England. After the proceedings became pending
in London, the individual brought an action in Germany against both
Union CAL Ltd and Union Discount Co. Ltd for a negative declaration and
a declaration that Union CAL Ltd was obliged to reimburse it in respect of
all losses which exceeded the payments already made to it, and it sought
a declaration against Union Discount Co. Ltd that it had no liability arising
under the assignment. The court stayed the proceedings under Article
22 because the second action was related, but refused a stay under
Article 21 of the proceedings against Union CAL Ltd because the claim
against Union CAL Ltd was not between the same parties as the London
proceedings because only Union Discount Co. Ltd was the claimant in
London. There is no elaboration of this conclusion.
74.In Case 16 U 110/02, Regional Court of Appeal, Cologne, September
8, 2003, a Greek distributor purchased condensed milk and other
milk products from a German supplier, but failed to pay the price. The
distributor brought proceedings against the German supplier in the Greek
courts, for damages which were said to be greater than the price claimed.
The German supplier assigned its claim to the claimant, whose liquidator
brought proceedings in Germany for payment. The distributor contested
the jurisdiction of the German courts on the basis of Article 27 of the
Judgments Regulation. The claimant assignee argued that Article 27 had
no application as the proceedings in Greece (distributor v supplier) and in
Germany (assignee v distributor) were not between the same parties. The
Regional Court of Appeal at Cologne found that Article 27 did apply, and
that as the German court was second seised, it had no jurisdiction.
75.Article 27 was held to apply even though the supplier and his assignee,
were not the same party. The court held that both under German
procedural law (which appears to have been the main basis of the
decision) and also under the Judgments Regulation (as interpreted in
Drouot) there was identity of parties because res judicata effect extends
to an assignee who can therefore plead lis alibi pendens (para 5(a)-(c)).
76.Berkeley Administration Inc v McClelland [1995] ILPr 201 and Turner
v Grovit [2000] 1 QB 345 each concerned businesses controlled by Mr
Felix Grovit, who has made a rich contribution to English and European
jurisprudence: see also Berkeley Administration Inc v McClelland [1990] 2
QB 407; Case C-68/93 Shevill v Presse Alliance [1995] 2 AC 18; Shevill v
Presse Alliance [1996] AC 959; Grovit v Doctor [1997] 1 WLR 640; Grovit
v Nederlandsche Bank [2007] EWCA Civ 953.
77.But I do not consider that either of these cases is of substantial
assistance. In Berkeley Administration Inc v McClelland [1995] ILPr 201
the English proceedings were by Berkeley Administration Inc who ran a
chain of bureaux de change. The defendants were ex-employees, and
the fourth defendant Maccorp GB was an English company set up by
some of the defendants to run a rival bureaux de change business. In the
course of that action an order was made against the defendants relating
to commercial premises in Paris.
78.In France Berkeley applied to restrain Maccorp France (a wholly owned
subsidiary of Maccorp GB) from acquiring any interest in premises in
Paris, and then Maccorp GB and Maccorp France countered by issuing
their own proceedings in France claiming that Berkeley were by unfair
means attempting to prevent Maccorp GB from setting up business in
France. The claim of Maccorp France was that the bringing of the French
proceedings by Berkeley against Maccorp France was unfair competition
and an abuse of process and for a declaration that there had been no
unfair competition or misuse of confidential information on the part of
Maccorp France or Maccorp GB. Berkeley claimed initially that under
Article 21 the claims of Maccorp France and Maccorp GB ought to be
stayed in favour of the English courts, but that was abandoned after the
judgment adverse to Berkeley on the substance of the matter in April
1990. The French courts decided that none of the claims of any party had
been made out.
79.The decision therefore concerned Article 27(3) which provides that
a judgment will not be recognised if it is irreconcilable with a judgment
given in a dispute between "the same parties" in the State in which
recognition is sought. Dillon LJ said (at para 29) that because the
English order relating to premises in Paris was made against Maccorp
GB. Maccorp France was formed after the order was made, but Dillon LJ
considered that it was bound by the order (para 13). Consequently he
said (para 29) that because the order made in England against Maccorp
GB bound Maccorp France, he would regard the French proceedings
brought by Maccorp GB and Maccorp France and the English action "as
being for all material purposes between the same parties." He went on
(para 30) "in the context of this case I would regard it as wholly unreal
to separate Maccorp France, the wholly owned subsidiary acquired by
Maccorp GB, as being a wholly separate company with the result that the
parties are different because Maccorp France has never been formally
a party to this action." Consequently the parties were the same even
though Maccorp France was not in English procedural terms a party.
80.In Turner v Grovit [2000] 1 QB 345 Mr Grovit was the guiding mind,
controller and ultimate owner of Harada (an Irish company) and CSA
(a Spanish company). Mr Turner was employed as group solicitor, and
moved to the group's Madrid office. He commenced proceedings in the
Employment Tribunal in London against Harada. Subsequently CSA issued
proceedings against him in Madrid for damages for breach of a contract
of service. In the Court of Appeal he was granted an injunction to restrain
the Spanish proceedings on the basis that they had been brought to
harass and oppress him. In support of the application for an injunction it
was argued on his behalf that the Employment Tribunal was the court first
seised and consequently the Spanish court would be obliged by Article 21
to decline jurisdiction. Laws LJ said (at 363-4) that even though Harada
and CSA were distinct legal entities:
"... for the purposes of article 21... I do not consider that Mr. Supperstone
[counsel for Grovit] can be heard to say that there is no identity of
parties. Here the argument overlaps for that relating to abuse: the
deployment of C.S.A., a Spanish company, as claimant in Madrid is
nothing but a device to confer putative jurisdiction on the Spanish
court. That is not only in the circumstances of the case abusive upon
ordinary principles of our domestic law. In addition, for this court to treat
it as reality rather than the sham and pretence which it plainly is, and
accordingly to deny what is otherwise the clearly established jurisdiction
of the tribunal under article 21, would in my judgment tend to undermine
what Lord Goff of Chieveley has called in Airbus Industrie GIE v Patel
[1999] 1 AC 119, 132B, 'the primary purpose of the Convention [viz.] to
ensure that there should be no clash between the jurisdictions of member
states of the Community.'
Moreover, there is jurisprudence of the Court of Justice to show that the
issue of identity of parties, in the context of article 21, is to be regarded
pragmatically, just as is that of identity of cause of action…"
and he went on to quote paragraphs 19 and 20 of Drouot, and to conclude
that for the purposes of Article 21 the cause of action, subject matter and
parties were the same, and it was therefore beyond argument that the
employment tribunal was the court first seised.
81.But subsequently ([2001] UKHL 65, [2002] 1 WLR 107) the House
of Lords referred to the European Court the question whether it was
consistent with the Brussels Convention to grant anti-suit injunctions to
restrain proceedings in other Contracting States, and received an answer
in the negative: Case C-159/02 Turner v Grovit [2004] ECR I-3565,
[2005] 1 AC 101. Consequently the judgment of the Court of Appeal lost
its substratum. Nevertheless what Laws LJ said about identity of parties
being regarded pragmatically accords with the rulings of the European
Court.
82.In Sony Computer Entertainment Limited v RH Freight Services
Limited [2007] EWHC 302 (Comm) proceedings were commenced in the
Netherlands, and subsequently in England. The claimant in the English
proceedings was not a party to the Dutch proceedings, but the plaintiff
in the Dutch proceedings sought a stay of the English proceedings on the
ground that the fact that the claimant's insurer was a party to the Dutch
proceedings made the two sets of proceedings between the same parties
for the purposes of article 27. It was held that they were not the same
parties because a judgment in the Dutch proceedings as to the amount of
damages recoverable would not be determinative (because, in particular,
the claim for damages was over and above the insured sum).
83.Finally, in Re Cover Europe Ltd [2002] EWHC 861 Mr Leslie Kosmin
QC, sitting as a Deputy High Court Judge in the Chancery Division,
had to consider whether a liquidator of a company, appointed under
the Insolvency Act 1986, could be regarded as the same party as the
company for the purposes of Article 21 of the Brussels Convention.
CEL gave a guarantee to Kvaerner (the well known Finish construction
company) to secure the performance by an Italian company of its
payment obligations to Kvaerner which had agreed to build a ship for it.
The Italian company defaulted and subsequently went into liquidation
in Italy. CEL went into members' voluntary liquidation in England,
and Kvaerner submitted a proof in the liquidation in respect of CEL's
liability under the guarantee. The liquidator challenged the validity of the
guarantee, but instead of rejecting Kvaerner's proof, it indicated that it
would issue proceedings in Rome to determine whether the guarantee
was valid. Kvaerner issued an application under the Insolvency Act
1986 in England to seek a direction from the Companies Court that the
liquidator should admit its proof. Subsequently the liquidator caused CEL
to issue proceedings in Rome against Kvaerner and the Italian company
seeking a declaration that the guarantee was invalid.
84.The Companies Court directed a trial of preliminary issues to
determine whether Kvaerner's application in England should be stayed in
favour of the Rome proceedings, and one of the questions was whether
the two sets of proceedings involved the same cause of action and/or the
same parties within the meaning of Article 21. The deputy judge found
that although the proceedings in Rome had been issued in the name
of CEL acting by its liquidator and the application in England had been
made in the name of the liquidator, for the purpose of construing Article
21 the issue "must be decided as a matter of substance and not form".
There was no relevant distinction between the liquidator as respondent
in making his application in England for directions and CEL acting by
its liquidator as claimant in the Rome proceedings. Accordingly both
proceedings were between "the same parties" within the meaning of
Article 21.
85.The starting point is that these general propositions can be derived
from The Tatry and Drouot. First, the object of Article 27 is to prevent
parallel proceedings in different Member States and to avoid conflicts
between decisions and irreconcilable judgments: The Tatry, para 32;
Drouot, para 17. Second, the term between "the same parties" has
an independent or autonomous meaning: The Tatry, para 47. Third, in
considering whether two entities are the "same party" for the purposes
of applying the regulation, the court looks to the substance, and not the
form: The Tatry. Fourth, although the parties must be "identical" (The
Tatry, para 33; Drouot, para 18), this identity is not destroyed by the
mere fact of there being separate legal entities involved: in The Tatry
in the English proceedings the party was the sister-ship, and in the
Dutch proceedings was the shipowner; in Drout the barge owner and
the hull insurer were held to be capable of being the "same parties."
Fifth, whether they are identical for this purpose may depend on whether
there is such a degree of identity between the interests of the entities
that a judgment given against one of them would have the force of res
judicata as against the other (Drouot, para 19). Sixth, it will also depend
on whether the interests of the entities are identical and indissociable,
and it is for the national court to ascertain whether this is in fact the case:
Drouot, para 23. In the context of a subrogated claim the Court also
emphasised that the insured would not be in a position to influence the
proceedings: Drout, para 19.
86.How are these principles to be applied to the present case? If there
has been an effective legal assignment of the rights of the original
claimants under the Assignment, then (section 136(1) of the Law of
Property Act 1925) the assignment is effective to transfer (from the date
of notice to the "debtor"), the legal right in the thing in action transferred,
all legal and other remedies for the thing in action and also "... the power
to give a good discharge for the same without the concurrence of the
assignor." As the judge said (para 69 of the judgment), the effect of this
is that the assignee becomes the owner of the thing in action. He can sue
the debtor in his own name without joining the assignor: In re Westerton:
Public Trustee v Gray [1919] 2 Ch 104. The assignor has no further
interest in the right in action: see Compania Colombiana de Seguros v
Pacific Steam Navigation Co [1965] 1 QB 101, 121.
87.First, as I have said, the parties must be "identical" (The Tatry, para
33; Drouot, para 18), but this does not mean that two separate legal
entities cannot be "identical" for this purpose, as is shown by the rulings
in those cases.
88.Second, a decision against one must be res judicata as against the
other. In English law res judicata estoppels operate for or against not
only the parties, but those who are privy to them in interest, and privies
include any person who is identified in estate or interest, and accordingly
"assignees will be bound as privies of the assignor" (Spencer Bower,
Turner and Handley, Res Judicata, 3rd ed. 1996, 230-231, citing Effem
Foods Pty Ltd v Trawl Industries Pty Ltd (1993) 43 FCR 510, 540-2). Sir
Robert Megarry VC said in Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510
(in a passage approved in Johnson v Gore Wood & Co [2002] 2 AC 1 at
10, per Lord Bingham of Cornhill, and applied in Powell v Wiltshire [2004]
EWCA Civ 534, [2005] QB 117):
"… it seems to me that the substratum of the doctrine is that a man
ought not to be allowed to litigate a second time what has already been
decided between himself and the other party to the litigation. This is in
the interest both of the successful party and of the public. But I cannot
see that this provides any basis for a successful defendant to say that the
successful defence is a bar to the plaintiff suing some third party, or for
that third party to say that the successful defence prevents the plaintiff
from suing him, unless there is a sufficient degree of identity between the
successful defendant and the third party. I do not say that one must be
the alter ego of the other: but it does seem to me that, having due regard
to the subject matter of the dispute, there must be a sufficient degree of
identification between the two to make it just to hold that the decision
to which one was party should be binding in proceedings to which the
other is party. It is in that sense that I would regard the phrase 'privity of
interest....' "
89.I am satisfied that there is the requisite privity of interest which would
preclude an assignor from re-litigating any finding on liability under the
contracts in a proceeding to which the assignee had been a party.
90.Third, their interests must be "identical" and "indissociable." The
word "indissociable" is very rarely used in English legal parlance except
where it has been used to translate the same French word in judgments
of the European Court of Justice and the European Court of Human
Rights, and acts of the European institutions. The point frequently arises
in the context of VAT in determining whether the supply of goods and
services is one service, or two: see, e.g. Case 353/85 Commission
v United Kingdom [1988] STC 25; Doctor Beynon and Partners v
Customs and Excise Commissioners [2004] UKHL 53, [2005] STC 55.
The European Court of Human Rights has emphasised that some of the
rights are indissociable from "a danger of arbitrary power" (Golder v
United Kingdom (1975) 1EHRR 524, para 35) or indissociable "from a
democratic society" (Kokkinakis v Greece (1993) 17 EHRR 397, para
31: see also New Testament Church of God v Stewart [2007] EWCA Civ
1004, paras 38-39). So also Council Regulation 243/2003 (Dublin II)
provides in Article 4(iii) that the situation of a minor who is accompanying
the asylum seeker and meets the definition of a family member is to be
"indissociable" from that of his parent or guardian: see AA (Somalia) v
Secretary of State for the Home Department [2006] EWCA Civ 1540.
91.In my judgment the interests are identical, because in relation to
each of the SPAs there is only one right, and there are successive owners
of that one right. It follows that the interests of assignor and assignee
are indissociable in the sense of indivisible. It does not matter that an
assignment only passes the benefit and not the burden of a contract,
nor that the assignor remains primarily liable to the obligor for the non-
performance of its outstanding contractual obligations. The interest of the
assignor and assignee in relation to the claim being advanced against the
appellants is identical. There is also force in the point made by Kolden
that the question of outstanding contractual obligations is irrelevant on
the facts, as the SPAs are executed so far as the original claimants are
concerned; they have no further obligations under the SPAs. It is the
appellants who continue to have an obligation under the SPAs, viz. to
transfer the Maltsovsky shares immediately onwards to JV (or to pay
damages for breach of that obligation).
92.Fourth, in Drouot (para 19) the European Court mentioned, in the
context of subrogation, the fact that the insured could not influence
the proceedings. I accept Kolden's answer to the point made by the
appellants that the original claimants could influence proceedings
involving assignees, because they could seek to be added to the claim,
e.g. in response to the appellants' contention that the Assignment is
invalid. The answer is that the question of "the same parties" is to be
determined by looking at the claims, and not at the subsequent defences.
93.This approach is supported by the European Court's decision on a
similar question in relation to "the same cause of action" in Article 27.
For the purposes of Article 27, the question whether the "same cause
of action" is raised before the courts of two Member States is answered
by looking at the claims made, and not at the defences raised at a later
stage to those claims: Case C-11/01 Gantner Electronic GmbH v Basch
Exploitatie Maatschappij [2003] ECR I-4207, para 30: whether the "same
cause of action" is raised in the two actions is to be determined on the
basis of "the respective claims in each of the sets of proceedings, and
not to the defence which may be raised by a defendant." For a similar
approach on whether an action is a civil or commercial matter see Case
C-266/01 Préservatrice Foncière TIARD SA v Netherlands [2003] ECR
I-4867, para 42: "In order to determine whether an action falls within the
scope of the Brussels Convention, only the subject-matter of the action
must be taken into account."
94.Nor is there anything in the appellants' points on the claim form and
the particulars of claim. The amended claim form complies with CPR 16.2,
which provides that it must contain a concise statement of the "nature of
the claim". Nor is there anything in the suggestion that the particulars of
claim, in referring to Kolden's "interest," shows that its interests do not
coincide with those of the original claimants. All the passage was doing
was responding to the allegation of champerty.
95.I also accept Kolden's submission (as indeed does Mr Eder QC) that
the appellants' approach gives rise to a number of anomalous and
arbitrary consequences. First, if Kolden's submissions are wrong, and
assignor and assignee are not the same party for the purposes of Article
27, there would be an easy way to defeat the application of Article 27 and
frustrate the purpose of the Regulation. If A sues B, and B wishes to sue A
in a reverse action in another Member State, B cannot, because B's action
against A will be second in time, and the court second seised would have
to decline jurisdiction under Article 27. However, if B assigns his claim
to C, and C sues A, C will be able to do so, because (on this hypothesis)
Article 27 will have no application as B and C are not the same parties. So
also if a claim is made in England by C1 against D, and D is warned that
C2 will take an assignment of the claim and continue it in its own name,
D may institute proceedings of its own in another Member State against
C2 in the time gap. The result would be that the English court would be
first seised only of the claim by C1, but would be second seised so far as
concerns the claim involving C2. Mr Eder's only, but insufficient, answer
was that the absurd consequences would be avoided by a stay under
Article 28.
96.I would therefore dismiss the appeal, and express the hope that the
parties (having wasted some £400,000 on this sterile exercise) will now
turn their attention to dealing with the substance of their dispute.
Lord Justice Rimer:
97.I agree.
Lord Justice Tuckey:
I also agree.