DILLON L.J.:
[1] This matter came before the Court on an application for leave to
appeal, with a direction that the hearing of the appeal would follow if
leave were granted. In fact, we granted leave at the end of the argument,
and I now give judgment on the appeal. The appellants are the plaintiffs
in the action and the appeal is against anorder of Mantell J. given on 28
May 1993. The respondents are the first, fourth and fifth defendants, who
are the only defendants now concerned in the proceedings.
[2] The matter arises in the course of the progress of an inquiry as to
damages, which was directed by Wright J., by an order made by consent
of the parties on 5 March 1990, actually the first day of the trial of the
action. The inquiry is due to be resumed by Mantell J. next Monday for
a lengthy hearing, and this judgment is therefore delivered in some
haste and without the time for consideration I would have preferred. The
relevant part of the order of 5 March 1990 is paragraph 6, as follows:
6. That the following inquiry be taken, namely an inquiry as to the
damages suffered by the defendants by reason of the following orders,
namely the order of Mr Justice Evans dated 28th February 1989, the order
of Mr Justice Henry, dated 12th April 1989, and the order of Sir Peter
Pain dated 17th May 1989, which the plaintiffs ought to pay under their
respective cross-undertakings in those orders.
The orders referred to are interlocutory orders made in the action on
ex parte applications by the plaintiffs. By each order an injunction was
granted against the respondents or some of them and, as a condition of
obtaining that injunction, and in accordance with the usual practice, the
plaintiffs gave the usual cross-undertaking in damages.
[3] The order of Evans J. of 28 February 1989, which has been referred
to as "the property order" because it related, and related only, to two
commercial properties in Paris, provided as follows:
IT IS ORDERED that the defendants and each of them be restrained until
trial or further order from (i), making use of any confidential information
obtained by any defendant from and/or owned by any plaintiff, concerning
the commercial premises known as S. Tax-free L. G. (?), Paris, France and
…, Paris, France; and (2) obtaining or seeking to obtain by negotiations
or otherwise any interest in either of the said premises and/or having any
contact with any owner thereof or any person interested therein, whether
directly or through any servant or agent.
[4] The Order of Henry J. of 12 April 1989, which has been referred to
as "the first Mareva", granted a Mareva injunction restraining the first
and fourth defendants from removing from the jurisdiction or otherwise
disposing of or dealing with their assets within the jurisdiction of the
Court; that is to say, in England and Wales.
[5] Both the property order and the first Mareva were discharged by
consent by an order of French J. on 21 April 1989. Neither of them was
therefore in force for any long time.
[6] The order of Sir Peter Pain of 17 May 1989 has been referred to as
"the second Mareva". It was made when the fifth defendant was added
as a party to the action. It restrained the first defendant from disposing
of his shares in the fourth and fifth defendants, and restrained the fourth
and fifth defendants from removing their assets from the jurisdiction of
this Court and from otherwise disposing of or dealing with their assets,
save in the ordinary course of business conducted within the jurisdiction
of this Court.
[7] So far as it affected the fourth and fifth defendants, the second
Mareva was discharged by Savill J. two days later. The balance of the
order, binding only on the first defendant, was discharged by consent by
the order of Wright J. of 5 March 1990.
[8] The application for the property order was founded on evidence by
affirmation of a Mr Zacky Mohammed Z. ("Mr Z.") to the effect that the
plaintiffs were in negotiation with the owners to acquire interests in the
Paris properties referred to in order to open branches there, and the
defendants were taking advantage of confidential information in order to
cut out the plaintiffs and acquire interests in the same properties for the
defendants' rival business.
[9] The plaintiffs run a chain of Bureaux de Change. The first, second
and third defendants are ex-employees of the plaintiffs, and the fourth
defendant, "M. GB", is an English company set up by some of the
individual defendants to run a rival Bureau de Change business. The fifth
defendant was acquired off the shelf on 29 March 1989, as the holding
company to hold the shares of M. GB.
[10] The claim that the defendants had misused confidential information
in relation to the two Paris properties was abandoned by the plaintiffs
under the order of Wright J. of 5 March 1990.
[11] The trial of the action which began before Wright J. on 5 March 1990
continued only on a wholly different issue, namely, that the defendants'
business plan for their rival business was said to have been derived from
confidential information as to exchange rates, and calculations as to
currency dealings contained in the plaintiffs' Blue Book.
[12] On that issue, the plaintiffs completely failed at the trial and after
judgment on 11 April 1990, Wright J. dismissed the action. That left the
inquiry as to damages under the order of 5 March 1990 still on foot. By
a summons of 20 November 1991, replacing one originally issued on 27
September 1991, the plaintiffs asked that the statement of contentions of
the respondents on the inquiry under the order of 5 March 1990, and the
claim for damages under the inquiry, be struck out either as an abuse of
the process of the court, or as the subject of issue estoppel or as being
in breach, contrary to or precluded by Article 26 or Article 21 of the E.C.
Judgments Convention. That application was dismissed by Mantell J. on
28 May 1993; hence this appeal. On any view, as I see it, there is no
question of the entirety of the claims on the inquiry being struck out.
[13] The plaintiffs' claims of issue estoppel, under Articles 21 and 26 of
the Convention, are founded on proceedings in France in the Tribunal du
Commerce in Paris. To understand these it is necessary to refer to M. Sarl,
"M. France". M. France was incorporated in France on 20 March 1989, as a
wholly owned subsidiary of M. GB. That was, of course, after the property
order and, so far as material, the first Mareva had been made. M. France
was never a party to these proceedings, but it was plainly bound by the
property order. That is because, apart from other reasons. M. GB could
not conceivably have evaded its obligations under the property order by
bringing in its wholly owned subsidiary, M. France, to do those things
in France which M. GB itself was prohibited from doing by the property
order.
[14] The French proceedings began with an application by the plaintiffs
in the French courts in March 1989 for an injunction to restrain M. France
from acquiring any interest in premises in Paris, on the ground of unfair
competition by the misuse by M. France of information about those
premises which was confidential to the plaintiffs. The application for an
injunction, which was an interlocutory application, was rejected by the
president of the French Tribunal du Commerce.
[15] M. GB and M. France then countered by issuing their own
proceedings in the French courts on 19 May 1989 against the plaintiffs.
The claims put forward in those proceedings by M. GB were concerned
with dealings between the plaintiffs and a firm of Paris estate agents, A.
T., which are at best peripheral to this appeal, but it was alleged that the
plaintiffs were, by unfair means, attempting to prevent M. GB from setting
up business in France.
[16] The claim of M. France was that the bringing of the French
proceedings by the plaintiffs against M. France was unfair competition and
an abuse of process, because the allegations in the French proceedings
were ill-founded, and there had been no unfair competition or misuse of
confidential information on the part of M. France or M. GB.
[17] It is set out in the claim, as the basis of the C. Group's liability
towards M. France:
Whereas M. France wishes to acquire the leasehold interests in several
premises in Paris to carry on its business, in doing so it has not engaged
in any unfair competition towards the C. Group whereas on the contrary in
starting proceedings against M. France the C. Group attempted adversely
to affect free and fair competition.
Whereas in effect all the C. Group's claims are revealed to be without
foundation and serve only to prove the group's bad faith.
Whereas in fact the C. Group has only one aim, to prevent M. from
establishing itself in Paris.
To reinforce this assertion one only needs to re-read the terms of the
interlocutory summons served by the C. Group on M. France. This was
aimed purely and simply at depriving M. France of the best sites in Paris
from which to carry on its business. Whereas such action only illustrates
the abusive nature of the proceedings brought against M. France. Then it
is alleged that C. has acted maliciously knowing perfectly well that M. was
looking for banking partners at the time that the C. Group commenced
the English and French proceedings and, even if its allegations had been
held to be without foundation, M. GB could have been refused the finance
necessary to start up business and its efforts to do so rendered abortive.
Consequently, there were claims for damages.
[18] In response, the plaintiffs claimed initially that under Article 21 of
the E.C. Judgments Convention the claims of M. France and M. GB ought
to be stayed in favour of the English courts because of these English
proceedings, but that was abandoned after the judgment adverse to the
plaintiffs of Wright J. of 11 April 1990.
[19] The plaintiffs also, in effect, counterclaimed for a declaration that the
M. Group, that is M. GB and M. France, were acting in bad faith and that
their claims were unjustified and groundless, and that there had been acts
of unfair competition committed by the M. Group against the plaintiffs.
They also claimed damages.
[20] The decision of the French courts on these various issues was
handed down on 26 September 1990, that is, after the final judgment
of Wright J. The French court held that none of the claims of any party
had been made out. In particular, it held that there was no substantial
evidence which tended to establish that the plaintiff had acted by malice
or in bad faith, or that its action in law had thus degenerated into the
wrongful behaviour which could justify an award for damages. The court
also found that M. France and M. GB had not justified their claims for
damages. There was an appeal by M. France and M. GB against that
decision of the French court, but the appeal has been abandoned and the
decision is final and binding. It is not disputed that the court was one of
competent jurisdiction. There was also an appeal by the plaintiffs against
the decision against them in the French court's decision of 26 September
1990. That appeal may still be outstanding, but it is irrelevant for the
purposes of this appeal.
[21] However, Wright J., in his judgment of 11 April 1990, had a certain
amount to say about the conduct of the plaintiffs and their principal
witnesses. The judgment is reported at 505, and Wright J. said this:
This last finding effectively disposes of the action, but I think I should also
add that I have come to the clear conclusion for the reasons set out at
some length in this judgment that whatever the nature of the information
in the Blue Book and however sensitive and worthy of protection the
plaintiffs may at any stage have thought it to have been, I am satisfied
that the plaintiffs' motivation in mounting this litigation against the
defendants was not to protect their legitimate business interests as
enshrined therein. I have come to the very clear conclusion that, as Mr C.
(who was one of the plaintiffs' witnesses) ultimately was forced to admit
at a late stage in his cross-examination, and upon his recall to the witness
box, the true motivation behind the plaintiffs' conduct was an attempt,
and a determined attempt at that, to strangle this infant competitor at or
shortly after birth. It is unnecessary for me to point out that this is not an
aim to which the Court will lend its aid.
Earlier the judge had said
It will be apparent from the foregoing that I have found both Mr C. and
Mr Z. thoroughly unsatisfactory and unconvincing witnesses. So far as
Mr C. is concerned, I was surprised when he asserted in the teeth of the
evidence that he was not responsible for the activities or operations of
any of the subsidiary companies in the I. T. Group. But when he tried
to explain away his motives in launching the onslaught of litigation
which I have described I came to the conclusion he was simply not
trying to tell me the truth. So far as Mr Z. is concerned, making all
appropriate allowance for his becoming unwell and the fact that his
evidence was not completed. I nevertheless formed an unfavourable
impression of him as a witness. He had great difficulty in explaining the
basis upon which the plaintiffs had seen fit to launch proceedings against
the defendants in respect of the Paris sites, as I have already briefly
described, and this may well explain why this part of the litigation has
been so unceremoniously abandoned.
All in all I am satisfied that I must approach the evidence of both these
witnesses with great caution and reserve.
That was not in itself an issue which was before Wright J. as an issue
for decision. It was an assessment of the credibility and good faith of
the plaintiffs and their principal witnesses, however, which assisted him
in determining the facts on the issue he did have to decide, as to the
M. business plan and the plaintiffs' Blue Book. In their statement of
contentions in the inquiry as to damages under the order of Wright J. of 5
March 1990, the respondents assert in paragraph 15:
The orders were obtained by the plaintiffs; (i) on the basis of spurious
allegations and (ii) in the course of a concerted and deliberate campaign
by the plaintiffs to prevent or inhibit competition by the defendants. The
defendants contend in consequence that upon the hearing of the inquiry
any and all uncertainties should be resolved in favour of the defendants.
Further, the defendants claim aggravated or exemplary damages.
Then in paragraphs 17 and 18 it is asserted that the affirmations made by
Mr Z. in support of the applications for the three orders were false. There
are also allegations that the claim about the Blue Book was concocted
in January to March 1990. There are then claims for damages alleged to
have been suffered by each of the respondents, from what is referred to
as the "use and abuse of each of the three orders".
[22] We are told that an application will be made next week to amend the
statement of contentions. We have been shown a draft of the proposed
amendments; I do not see that the amendments affect the issues with
which we are concerned.
[23] The sum claimed in total by the plaintiffs, several million pounds,
which seems enormously high having regard to the duration of the
injunctions, arises from adding consequential loss to initial loss assumed
to have been established. But that is not relevant for the present
purposes.
[24] It is said for the respondents, and it was my first reaction, that a
claim for aggravated or exemplary damages on an inquiry as to damages
is a novelty; that is a matter to be determined by the judge who tries
the inquiry and not by us. We were referred by Mr Hobbs to a decision
of Scott J. in Columbia Pictures Industries v. Robinson, where at first
instance aggravated damages for abuse of process were awarded under a
cross-undertaking in damages. Mr Jacob submitted however, conversely,
that a corporation has no feelings and cannot suffer aggravated damages,
and that the phrase in the order of 5 March 1990, "damages suffered",
cannot include exemplary damages which are not compensatory. He
submitted also that damages under a cross-undertaking in damages are
assessed on contractual principles and on an assessment of damages on
contractual principles, exemplary damages cannot be recovered. Those,
however, are all matters for the judge who takes the inquiry and not for
us.
[25] The plaintiffs' case is put on Articles 21 and 26 of the E.C. Judgments
Convention, and issue estoppel. Article 21 is in Title II of the Convention
which is headed "Jurisdiction". Article 21 has a cross heading "lis
pendens-related action". It reads:
Where proceedings involving the same cause of action 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, stay its
proceedings until such time as the jurisdiction of the Court first seised is
established. 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.
[26] I agree with the provisional view of Mantell J. that that Article
only applies where there are proceedings pending in the courts of two
different Contracting States, including where that would be so unless one
state's court declined jurisdiction. Therefore, Article 21 does not apply
directly in the present case, since the only pending proceeding is the
claim in the English court under the inquiry as to damages. The French
proceedings have been concluded by the judgment of 26 September
1990 which is no longer under appeal. But the case law under Article
21 is relevant, in my judgment, in indicating the broad approach of the
European Court to achieving the objectives of the convention. I refer to
the case of Gubisch Maschinenfabrik v. Giulio Palumbo. The facts of that
case were that a German company had contracted to sell certain goods
to an Italian purchaser. The German company had brought proceedings
in Germany to enforce the contract, and the Italian purchaser applied, in
the Italian court, to have the contract set aside or rescinded. It was held
under Article 21 that, there being two pending proceedings, the German
proceedings, as the proceedings in the court first seised, should proceed.
The points taken and decided are directed to the link that there needs to
be between the two sets of proceedings.
[27] I can turn to the judgment of the European Court, starting at
paragraph 8:
8. According to the preamble which incorporates in part the terms
of Article 220: the convention seeks in particular to facilitate the
recognition and enforcement of the judgments of courts or tribunals
and to strengthen in the Community the legal protection of persons
therein established. Article 21, together with Article 22 on related actions
is contained in section 8 of Title II of the Convention; that section is
intended, in the interests of the proper administration of justice within the
Community, to prevent parallel proceedings before the courts of different
Contracting States, and to avoid conflicts between decisions which might
result therefrom. Those rules are therefore designed to preclude in so far
as is possible and from the outset, the possibility of a situation arising
such as that referred to in Article 27(3), that is to say the non-recognition
of a judgment on account of its irreconcilability with a judgment given in a
dispute between the parties in the State in which recognition is sought.
9. Moreover, in a judgment of 30 November 1976 in Case 42/76, De Wolf
v. Cox, the Court acknowledged the importance of those objectives of
the Convention even outside the narrow field of lis pendens, holding that
it would be incompatible within the meaning of Article 26 et seq. on the
recognition of judgments to accept the admissibility of an application
concerning the same subject matter and brought between the same
parties as an application upon which judgment has already been delivered
by a court in another Contracting State.
10. Furthermore, the concept of lis pendens is not the same in all the
legal systems of the Contracting States and as the Court has already held
in its judgment of 7th June 1984 in zelger v. salinitri a common concept of
lis pendens cannot be arrived at by the combination of relevant provisions
of national law.
11. Having regard to the aforesaid objectives of the Convention and to
the fact that Article 21 instead of referring to the term lis pendens as
used in the different national legal systems of the Contracting States,
lays down a number of substantive conditions as components of a
definition, it must be concluded that the terms used in Article 21, in order
to determine whether a situation of lis pendens arises, must be regarded
as independent.
Then I can pass to paragraph 14:
14. It must be observed first of all that according to its wording Article 21
applies where two actions are between the same parties and involve the
same cause of action and the same subject matter; it does not lay down
any further conditions. Even though the German version of Article 21 does
not expressly distinguish between the terms 'subject matter' and 'cause
of action' it must be construed in the same manner as the other language
versions all of which make that distinction.
15. In the procedural situation which has given rise to the questions
submitted for the preliminary ruling the same parties are engaged in two
legal proceedings in different Contracting States which are based on the
same 'cause of action', that is to say, the same contractual relationship.
The problem which arises, therefore, is whether those two actions have
the same 'subject matter' when the first seeks to enforce the contract,
and the second seeks its rescission or discharge.
Then finally in paragraph 18, the Court referred to the dangers for a
party seeking enforcement that it might be said under Article 27(3) that
a judgment should not be recognised. The Court therefore applied as the
test of "same subject matter" the test whether the decision in one court
would be inconsistent with a decision in the court of the other Contracting
State.
[28] I cannot see that Article 21 applies here, as I have said, but I pass
to Articles 26 and 27, which are in Title III, which is headed "Recognition
and enforcement". Article 26 provides that:
A judgment given in a contracting state shall be recognised in the other
contracting states without any special procedure being required.
Article 27 provides that a judgment shall not be recognised in certain
events. Subheading (iii) is:
If the judgment is irreconcilable with a judgment given in a dispute
between the same parties in the state in which recognition is sought.
Recognition as I see it must mean recognition as having conclusive effect.
Furthermore, where under Article 21 the proceedings are between the
same parties and involve the same cause of action and the same subject
matter, a judgment must in my judgment be binding under Order 26
between all those parties.
[29] Because the property order bound M. France as I have indicated, I
would regard the French proceedings brought by M. GB and M. France
and this action as being for all material purposes between the same
parties. On the one hand there are the plaintiffs; A. T. is concerned with
an irrelevant issue and can be disregarded. On the other hand there are
M. GB and M. France; the other defendants in the English proceedings can
be disregarded, especially as the sixth and seventh defendants were not
concerned with France at all.
[30] In the context of this case I would regard it as wholly unreal to
separate M. France, the wholly owned subsidiary acquired by M. GB,
as being a wholly separate company with the result that the parties
are different because M. France has never been formally a party to this
action.
[31] The crucial question then, in my judgment, is whether the cause of
action and the subject matter are the same.
[32] It is said for the respondents that the subject matter of the French
proceedings brought by the M. companies was whether the French
proceedings started by the plaintiffs were an abuse of process, and not
whether the commencement of the English proceedings and the obtaining
of the property order and the Mareva injunctions were an abuse of
process. It is said further for the respondents that the English proceedings
only came into the French proceedings by way of background or possibly
evidence. That I would accept. Moreover, the French court would never
take on itself to decide that the commencement of proceedings in the
English court or the making of an application in the English court was an
abuse of the process of the English court.
[33] But to consider whether the French proceedings were an abuse
of process the French court necessarily had to consider the underlying
question. To give a more narrow interpretation of the French proceedings
which ignored the underlying question would be contrary to the guidance
in interpreting the Convention afforded by the Gubisch case. The
underlying question on whether the claim that M. had been trading
unfairly by misusing, for its own ends, confidential information as to the
Paris properties was a genuine claim, or a spurious claim put forward
for the by-purpose of preventing M. from setting up in business in Paris.
That is precisely what is urged in paragraph 15 of the plaintiffs' statement
of contentions on the inquiry in relation to the obtaining of the property
order and it is that issue which led to the conclusion of the French court
which I have already set out, that there was no substantial evidence
which tended to establish that C. had acted by malice or in bad faith, or
that its action in law had thus degenerated into wrongful behaviour.
[34] Mr Hobbs, for the respondent, asks us to adopt a different approach.
He refers to Article 16(5) of the Convention. This provides that:
In proceedings concerned with the enforcement of judgments, the courts
of the contracting state in which the judgment has been or is to be
enforced shall have exclusive jurisdiction.
He then refers to the definition of judgment in Article 25, which is:
For the purpose of this Convention 'judgment' means any judgment given
by a Court or tribunal of a contracting state whatever the judgment may
be called, including a decree, order, decision or writ of execution as well
as the determination of costs or expenses by an officer of the Court.
Mr Hobbs submits that the three orders which granted the injunction
upon the cross-undertakings being given--the property order and first
and second Marevas--were themselves judgments within the meaning of
Article 25, because they were orders of the court. Likewise, the order of
5 March 1990, which directed the inquiry as to damages, was a judgment
within Article 25. With that last proposition I would agree. But I do
not find it necessary to decide whether the orders which granted the
injunctions were, vis-a-vis the cross-undertakings, judgments.
[35] As the order of 5 March 1990 directing the inquiry as to damages
was made by consent of all parties, Mr Hobbs relies also on Article 17 of
the Convention as showing that the English court has by that route also
exclusive jurisdiction to settle any disputes which may arise in the course
of the inquiry. Article 17 provides that:
If the parties, one or more of whom is domiciled in a contracting state,
have agreed that a Court or the Courts of a contracting state are to have
jurisdiction to settle any disputes which have arisn or which may arise in
connection with a particular legal relationship, that Court or those Courts,
shall have exclusive jurisdiction.
That too I would accept as an alternative to the submission under Article
16(5). That is fine so far as jurisdiction is concerned. Indeed, no court but
the English court is making any claim to assume jurisdiction to decide the
inquiry as to damages directed by the order of 5 March 1990. But I do
not see that it necessarily follows that the English court, in deciding the
inquiry, must ignore the order of the French court.
[36] It is to be noted that the plaintiffs were the first to invoke the
jurisdiction of the French courts by their unsuccessful interlocutory
application. M. GB and M. France then avidly espoused the same
jurisdiction and the plaintiffs, having first protested the jurisdiction under
Article 21, abandoned their protest and submitted to it. I do not see how
the M. companies, or either of them, could now assert that the French
court did not have jurisdiction to make the decision it did.
[37] Mr Hobbs then relies, however, on Article 28 of the Convention. That
provides:
Moreover, a judgment shall not be recognised if it conflicts with the
provisions of Sections 3, 4 or 5 of Title II or in a case provided for in
Article 59. In its examination of the grounds of jurisdiction referred to
in the foregoing paragraph, the Court or authority applied to shall be
bound by the findings of fact on which the Court of the state in which the
judgment was given based its judgment.
Article 17 is not in section 3, 4 or 5, but Article 16 is. The point, as
I understand it, is that it is said that the English court has exclusive
jurisdiction, under Article 16(5), to decide the inquiry and any issue that
is raised in the course of the inquiry and it is said that it would be in
conflict with that if, once the inquiry has begun, the court of a different
state, albeit with the acquiescence of both parties, decides such an issue,
and so the judgment should not be recognised. But that to my mind is to
turn Article 28 upside down. The mischief at which Article 28 was directed
was that of recognising and enforcing a judgment of a court which did
not have jurisdiction under section 3, 4 or 5. It was not concerned with
whether the foreign court had jurisdiction and reached a decision on an
issue which would otherwise have subequently falled to be decided by
the English court. Therefore I see no conflict in the present case, and no
application of Article 28.
[38] There is a further point taken by Mr Jacob in that he submits that
the words in Article 16(5) "proceedings concerned with the enforcement
of judgments," have a limited meaning and do not refer to such matters
as the holding of an inquiry as to damages pursuant to an order of
the court. He refers to the commentary of Professor Jenard which is
conveniently set out in the judgment of Kerr L.J. in Babanaft International
v. Baserine as follows What meaning is to be given to the expression
'proceedings concerned with the enforcement of judgment?' It means
those proceedings which can arise from 'recourse to force, constraint
or distraint on movable or immovable property in order to ensure the
effective implementation of judgments and authentic instruments'.
Problems arising out of such proceedings come within the exclusive
jurisdiction of the courts for the place of enforcement.
Professor Jenard adds:
Provisions of this kind appear in the internal law of many member states.
The commentator then cites the position in France whereby French
courts have exclusive jurisdiction over measures for enforcement which
is to take place in France (preventive measures, distress levied on
tenant's chattels, writs of attachment and applications for enforcement
of a foreign judgment) over distraint levied on movable or immovable
property, and over proceedings concerned with the validity of measures
for enforcement.
[39] I do not find it necessary to express any view on this submission of
Mr Jacob.
[40] It follows that I would allow this appeal, and would hold that the
respondents are precluded by issue estoppel in the context of Article 26
from maintaining to the full the case that has been put forward in the
statement of contentions and in particular paragraph 15.
STUART-SMITH L.J.:
[41] I agree with my Lord, that the appeal should be allowed in part, and
for the reasons which he has given. I only add some words of my own
because we are differing from the learned Judge.
[42] In my judgment there is no question here that the whole inquiry as
to damages should be struck out on the basis that it is inconsistent with
the decision of the French court, if for no other reason than that Wright J.
on 11 July 1990 refused to stay the order for the inquiry on the grounds
of estoppel, and on the ground that the decision of the French courts
created an estoppel. To my mind that decision of Wright J. itself acts as an
estoppel against the appellants in this case. But it should be noted that at
that particular time Wright J. was concerned only with the straightforward
inquiry as to damages. The statement of contentions had not been filed at
that stage by the defendants, and there was no claim for abuse of process
or abuse of proceedings. Therefore, that claim was not the subject matter
of Wright J.'s decision on that date.
[43] To my mind, the crucial issue in this appeal is whether the decision
of the French court given on 26 September 1990 created an issue of
estoppel, such that M. were precluded from contending that they are
entitled to exemplary and/or aggravated damages for abuse of process in
obtaining the injunction in the English proceedings.
[44] It is not necessary in this appeal to decide whether, on an inquiry as
to damages to ascertain what damage a party has sustained as a result of
the grant of an injunction, a claim for aggravated or exemplary damages
can be brought at all, but I am bound to say that in my opinion M. face
formidable difficulties in law in so asserting. It seems to me at the very
least that M. have to establish the ingredients of the tort of the abuse of
process, which is a separate tort in English law. There must be malice and
absence of reasonable and probable cause in bringing the proceedings.
[45]Indeed, that is what M. allege in their amended statement of
contentions; namely, that the injunctive relief was sought for the
improper and collateral purposes of stifling a competitor and not because
they had any genuine and bona fide belief that they were entitled to the
relief claimed. If the question whether C. had any such improper and
collateral purpose, and whether they were acting maliciously and not
in bona fide pursuit of relief to which they believed they were entitled
in obtaining the injunctive relief in England, was decided in the French
proceedings, then, in my view, this establishes an issue of estoppel in
favour of C., and M. cannot pursue, in the inquiry due to start next week,
a claim for exemplary and aggravated damages, even assuming that such
a claim is otherwise maintainable.
[46] What then did the French court decide? I am bound to say I have
found this a difficult question. But the judge concluded that the issue
in the French court related only to bad faith in issuing the summary
proceedings in France. If that is right, then it creates no issue estoppel
in this country. Mr Hobbs has submitted that it is right. He submits,
first, that there can be malicious proceedings here but not in France
and, secondly, that M. were only relying on the English proceedings as
evidence of bad faith in bringing the French summary proceedings.
[47] The judge preferred the evidence of Professor Heron and Maitre
Lazarus to that of Maitre Vaisse, the French expert on behalf of C.. But
in my judgment the judge's reasoning is flawed in that he appears to
have thought that there was no correspondence between the two sets of
proceedings in point of subject matter. And he relied on paragraph 12 of
Professor Heron's affidavit in reaching this conclusion. He said this:
Professor Heron's opinion that there was no correspondence between the
two sets of proceedings at any rate in point of subject matter as he put in
paragraph 12 of his affidavit.
I do not think it is necessary for me to read that. I incorporate paragraph
12 of Professor Heron's affidavit.
[48] M. brought two different claims in the French proceedings. It is only
the first with which we are concerned. It is quite clear that the second
claim that M. GB were bringing alleged conspiracy with Mr T. and C.,
and had nothing to do with the claims for abuse of process or unfair
competition. It is no answer therefore to say that the second claim by
M. in the French proceedings does not have the same subject matter as
the claim for abuse of process in the English proceedings. The question is
whether the first claim in the French proceedings covers the same subject
matter.
[49] The answer is to be found, it seems to me, by a consideration of
those proceedings. My Lord has already referred to the claim in the writ of
summons made by M., and I do not need to read that, save to add this:
that at page 17 of the bundle it is said, as part of M.'s claim, that:
Through its warlike attitude and bad faith the C. Group has seriously
prejudiced the commercial credit of M. France and caused it substantial
intangible loss and has acted maliciously knowing perfectly well that
M. was looking for banking partners at the time but that the C. Group
commenced the English and French proceedings and even if its allegations
had been held to be without foundation M. GB could have been refused
the finance necessary to start up business and its efforts to do so
rendered abortive, whereas as a result.
Then it is alleged that M. France sustained intangible losses in the sum of
500,000 FF. and tangible losses provisionally assessed at one franc.
[50] In their reply M. France asserted that "the liability of the C. Group to
M. France..." and then they refer to the unfair conduct, and in particular
say this:
Whereas in fact these proceedings against M. France are part of a course
of conduct amounting to unfair competition, e.g. bringing various sets of
proceedings in Great Britain in order in other words to prevent M. from
setting up in business, attempts to intimidate M. personnel.
And I think I can go to the bottom of the page:
Whereas bad faith and malicious intent on the part of the C. Group were
thus apparent whereas in any event, even if the Court does not find that
the interlocutory proceedings taken against M. France constitute abuse
of conduct the Court is invited to consider that the conduct to which the
C. Group had vigorous recourse in order to compete unfairly with M. is
reprehensible.
[51] Then turning to the judgment of the French court, it seems to me
plain that the French courts understood that the English proceedings
were part of the matters being relied upon. At page 71 the contentions
are set out. At page 75, the court turns to deal with the question under
the heading concerning the proceedings issued by the C. Group against
the M. Group, and no distinction is made in this part of the judgment
between M. France and M. GB. It is said that: "M. denies the validity of
the accusations made by C., and in particular, argues that...", and then
the court says this:
M., for its part thus asserts that it did not compete unfairly and that the
different claims brought by C., whether in London or in interlocutory
proceedings before this Court, or by the criminal complaints in the
Tribunal de Grande Instance are groundless and that the sole aim of those
proceedings is to prevent M. from setting up in Paris or at least to prevent
it from obtaining the best sites in the city.
Then in stating its conclusions it says this:
Whereas nevertheless C. could reasonably have supposed that it had
suffered damage as a result of M.'s conduct and that there was a valid
basis for instituting proceedings, whereas there is no substantial evidence
which tends to establish that C. has acted by malice or in bad faith, that
its action in law has thus degenerated into wrongful behaviour which
could justify an order for damages, the Court finds that M. France and M.
GB have not justified their claim for damages for 500,000 FF for intangible
loss or damages for one franc for tangible loss and reject the said claims.
Whereas as stated above it has not been proved that M. France or M. GB
have been guilty of unfair competition. The Court has held that the C.
Group has not justified its claim for damages for one franc in this respect
and dismisses the claim.
[52] Mr Jacob submits that amongst other things M. Finance, M. GB is
a company that has never traded and has no assets. Secondly, that the
whole basis of the claim for damages in the inquiry relates to the loss
due to the inability to operate in France through M. France. Thirdly, that
it is inconceivable that substantial claims for damages in the French
proceedings were brought on the basis of the unsuccessful interlocutory
process in France which cannot have caused any loss. In my view, the
passages cited which I have just referred to show that M. decided upon
both the proceedings in England and in France as constituting the attempt
to stifle the unlawful competition in France, and these were based on
malice and a lack of bona fide belief in the subject matter of the action.
[53] I would therefore allow the appeal to the extent indicated by my
Lord.
HOBHOUSE L.J.:
[54] I would dismiss this appeal. Like my Lord, Dillon L.J., I express my
regret that we should be having to consider this appeal as a matter of
urgency when the judgment was given as long ago as 28 May of last year.
…
[56] The complications in the present case have been of the defendants'
making. First, they have claimed exemplary damages in the United
Kingdom proceedings, when it seems to me that there is no proper legal
basis for any such claim. However, that is not a matter for this Court,
because the striking out application is made solely on the basis of the
Convention, and the issue of estoppel point. …
[61] I agree with My Lords that what view is to be taken of the decision of
the French court is in reality decisive of the point we have to consider. …
[65] The plaintiffs' application is either for the inquiry to be struck out in
its entirety on the ground of what one might call cause of action estoppel
or for limited parts of it to be struck out on the basis of issue estoppel. It
is the latter application which has been accepted by my Lords.
[66] For either of those purposes one has to consider who were the
parties to the relevant proceedings, what were the issues, and what was
the decision. Also, depending upon what view one takes of the decision of
the issues, there may be questions of the incompetence of one or other of
the courts under the E.C. Judgments Convention. For my part I propose
not to enter upon the other matters but to confine my observations to the
question of identifying the issues, that is, the issues which were before
the Paris court and the decision of the Paris court upon them.
[67] It is necessary in order to evaluate what has happened that one
should follow the scheme of the Convention, which is what the Paris court
thought it was doing. …
[69] In my judgment the subject matter of those proceedings from the
outset, following the approach adopted by the European Court of Justice
in Gubisch, was the relationship of confidentiality between the plaintiffs
and the defendants and the questions of competition between them.
[70] As regards the date when proceedings are commenced, and when
the court was first seised of the matter, in my judgment there is no room
for any dispute following the decision of the European Court in the case
of Zelger, and the decision of the Court of Appeal, and the observations of
Bingham L.J. in the case of Dresser..
[71] Further, in my judgment, the injunctions clearly were orders for the
purposes of Article 25, and the date of the first order is, of course, 28
February. I consider also that the cross-undertaking is a term of the order.
All subsequent proceedings have arisen from this situation. There have
been further cross-undertakings given to obtain the later injunctions,
and likewise the court, if it were necessary so to hold, became seised
of those matters on those dates. But the true position is that they all,
within the Gubisch terminology, relate to the same transaction, the same
relationship.
[72] Under those circumstances, both the Paris court and Wright J. (on
11 July 1990) have considered whether or not there was some scope for
the application of Article 21 or Article 22. The upshot was that on every
occasion each of the courts has decided that there was not any relevant
overlap between the two sets of proceedings. It is a very strong inference
from that that the two courts were not going to have to rule upon the
same matters. Indeed, the decision of the Tribunal de Commerce of 26
September 1990 included a specific paragraph referring to the judgment
six months earlier of Wright J.:
By a judgment of 11th April 1990, the same High Court of Justice
dismissed the claims made by the C. Group which as it turns out do not
affect the present litigation.
The submission of the appellants before us is that that is implicitly wrong.
[73] That is the background, under Article 21, which we have to take
into account. I agree with the submission of Mr Jacob for the appellant
and with my Lords that, since the Tribunal de Commerce in Paris has now
delivered its judgment, we have passed beyond the terrain of Article 21
itself and, in so far as the appellant's application was based on Article 21,
it has been superseded.
[74] Article 26 is the material Article. It requires the courts of this country
to recognise the judgments of the courts of the other countries which are
parties to the E.C. Judgments Convention. If the subject matter of the two
proceedings is different, then that conclusion should be carried forward
to demonstrate that the judgment of the court in Paris does not provide
anything which impinges upon the proceedings in London. That is not
necessarily conclusive.
[75] Recognition includes, of course, enforcement, but it also includes
recognition for the purposes of cause of action estoppel and issue
estoppel. I reiterate that in answering the questions whether or not there
is a cause of action estoppel or an issue estoppel raised by the decision
of the Tribunal de Commerce in Paris, one should construe the French
judgment, if at all possible, as being consistent with the Convention, and
not in breach of it. I say that on ordinary principles, but I also say it with
particular confidence in this case because that clearly was the intention of
the Tribunal de Commerce.
[76] With regard to cause of action estoppel I agree with my Lords
that that is clearly inappropriate. The proceedings with which we are
concerned in London are proceedings which arise out of an undertaking
given to the Court, and that is wholly different from anything which
the Paris court considered that it was dealing with. There would also be
questions of the competence of the Paris court which would have to be
raised if one were to take any other view. Further, the parties are not in
all respects the same.
[77] So, I turn at once to the question of issue estoppel. The question
which has to be considered here is whether the same question is in issue
in the English proceedings as has already been determined in the French
proceedings. That is the test laid down in a number of cases, including
Carl Zeiss. The decision of the Paris court was not a decision on quantum
of loss, nor was it a decision on causation. It was, as stated by the expert
evidence heard by the judge (and this is also apparent from a reading of
the Paris judgment itself), a decision only on the question of liability. In
considering what that decision on liability was, one has to have regard
to the facts of the claim of M. France. That was a corporation which was
incorporated on 15 March and became a subsidiary of M. Finance on 20
March. The dates are not of critical importance, but they demonstrate
that M. France only came into existence at a date later than the date
of the first order of the English court. It is also the case that M. France
was only directly involved in proceedings when it was itself sued in the
French proceedings started on 17 March which were not the subject of a
judicial determination until 29 March. On 29 March, on the evidence, what
happened was that the Tribunal de Commerce, to which the application
of the C. parties had been made, referred the matter for a hearing on
the merits. In other words, it refused to deal with it on an ex parte or
immediate basis but referred it for a later hearing. Those proceedings
against M. France were essentially an application for something of the
nature of injunctive relief and it was based upon an allegation of misuse
of confidential information by M. France.
[79] That was the manner in which M. France became directly involved
and the subject matter of proceedings before the court in France. It
appears to me that it is those proceedings which were the subject matter
of the relevant part of the proceedings that were then subsequently
started in May by M. France against the C. companies. I leave on one side
the M. Finance claim against A. T. from which no relevant point arises
(except that it has caused difficulty in evaluating the documents in the
Paris proceedings). If M. France was seeking to do anything other than
raise a complaint in respect of the proceedings that had been commenced
against it on 17 March, M. France would clearly have been infringing
Article 21.
[80] What was the subject of the proceedings brought by M. France
was the subject of affidavit evidence given by the French lawyer acting
for them. He was not required to attend for cross-examination. Expert
witnesses were called and were cross-examined on both sides. But the
uncontradicted evidence of Maitre Lazarus in the affidavit which he swore
was in evidence before Mantell J. and accepted by him:
The C. Group's Summary Application
3. Proceedings in Paris were initiated by [the C. Group]. By a Writ of
Summons dated 17th March 1989 the four companies of the C. Group
as Plaintiffs applied to the President of the Paris Commercial Court for
a summary injunction against M. France as Defendant alleging unfair
competition by alleged misuse of confidential information relating to
leasehold premises in Paris. By an Order dated 29th March 1989 the
President refused this application on the ground that it was necessary to
investigate the merits of the dispute further and so the matter was not
within his jurisdiction. The C. Group did not lodge any appeal against this
decision and has taken no further steps in the proceedings.
M. France's Claims
5. M. France made two claims. The first claim was to seek a declaration
from the Court that M. France had not committed any act of unfair
competition towards the C. Group, contrary to what had been alleged by
the C. Group in its summary application.
6. The second claim was to seek a finding that the C. Group was liable in
tort to M. France. The basis for this claim was that M. France alleged that
the C. Group had brought its summary application in the Paris Commercial
Court maliciously and in bad faith, without foundation and with the object
of attempting to prevent or hinder M. France from setting up business in
France. Accordingly M. France claimed damages in the sum of:
--500,000 FF as damages for intangible loss (prejudice moral); and
--1 FF, on a provisional basis, as damages for tangible loss (prejudice
materiel). …
[81] The French proceedings of M. France were started by something
which has the equivalent function of a writ. On the second page it is
headed "Statement of Claim, facts". It sets out the parties, and then
continues:
Whereas the C. Group also claimed to be interested in these premises,
and particularly in the eighth, fifth and ninth districts and accused
M. France of unfair competition bringing unsuccessful interlocutory
proceedings against M. France. …
[82] The French proceedings against M. France, as I have pointed out and
as stated by Maitre Lazarus, were not concluded but were referred to a
hearing on the merits, and part of the purposes of the Paris proceedings
brought by M. France was to obtain a cross-declaration that there was
no foundation for the proceedings which had been brought against it, M.
France, by the C. Group. If one follows the Paris proceedings through, one
can see, when one looks at the defence and counterclaim of C. that they
are concerned with the same matters.
It can be stated, taking into account the fact that the M. Group has
willingly confused the French and English proceedings, that the English
judgment handed down on 11th April 1990 is not definitive. The High
Court of Justice has still to give judgment on...
They then list a number of points including a reference to what must be
the inquiry into damages. They continue:
In any event this Court [that is the Paris court] is only competent to give
judgment on the possible abuse of C. Group's right to issue proceedings in
relation to the civil proceedings brought before it.
That is the proceedings in the Paris courts. It continues in the same vein.
[83] In my judgment, it is clear that the subject matter of the Paris
proceedings is, as Maitre Lazarus says, the proceedings that were brought
against M. France in France. There is one indication which goes the other
way in the reply and defence to the counterclaim of C.. M. France deals
with the matters relevant to the proceedings against it in Paris but then
adds:
Whereas bad faith and malicious intent on the part of C. are thus
apparent:
Whereas, in any event even if the Court does not find that the
interlocutory proceedings taken against M. France constitute abusive
conduct, the Court is invited to consider that the conduct to which the C.
Group has had vigorous recourse, in order to compete unfairly with M. is
reprehensible.
That must be a reference which includes a reference to the English
proceedings.
[84] I accept the comments that can be made on the passage that I have
just read, but in my judgment they should not be allowed to distort or
alter the nature of the proceedings brought by M. France or dictate the
interpretation of the judgment of the Paris court given on 26 September
1990. My Lords have already read from this extensively; I will not take up
time by reading from it again.
[85] In my judgment it is clear from the judgment of the Paris court that
they were aware of the provisions of the E.C. Judgments Convention;
they were aware of pending proceedings in London which had been
started at an earlier date than the proceedings with which they were
concerned; they were aware that Wright J. had given a judgment in
the London proceedings, and it is clear that they were themselves only
dealing with the actual matters which were raised before them for their
actual decision, that is to say, in the relevant context, whether it was
abuse of process within the French concept for M. France to be sued by
the C. parties on 17 March 1989. It is quite right that they do include
reference, usually in parenthesis, to the London proceedings. But, to
adopt the approach of my Lord, Dillon L.J., to the judgment of Wright J.,
I consider that those statements by the French court were observations
upon the state of the evidence not the determination of issues. It is trite
to say that issue estopped only arises from the determination of an issue
by a court, not from observations made about evidence or about collateral
matters.
[86] If one has to choose between, on the one hand, what was said by
Wright J. and, on the other hand, what was said by the court in Paris
as to which forms part of the actual decision of issues as opposed to
observations, I unhesitatingly prefer the view that what Wright J. said
(which my Lord has read out and which I have read in summary from the
headnote) formed part of his decision, whereas the observations in the
Paris court about what had happened in London were merely observations
which were relevant but not the determination of any issue which was
actually before the Paris court.
[87] Therefore, in my judgment, the basic requirement of issue estoppel
has not been made out by the plaintiff before us.
[88] In conclusion I would point out that the appellants' submissions
which have been successful in this case lead to a remarkable paradox.
First, they lead to a position whereby the E.C. Judgments Convention
has not been followed notwithstanding the attempt of the French court
to follow it. Secondly, and more strikingly, the appellants are asking the
courts of this country to treat the defendants as being bound in English
proceedings by a statement in a French judgment, which is contrary to
and irreconcilable with an earlier statement in the judgment of a judge of
the English courts given in the very same English proceedings.
[89] In no way do I consider that can be what is intended by the E.C.
Judgments Convention. Indeed, it may be strongly argued, as it was
argued by Mr Hobbs, that that produces a situation which is contrary to
Article 27(3). But on any view it produces a situation which ought to raise
questions in the mind of any lawyer.
[90] For those reasons, speaking for myself, I would have dismissed the
appeal.
Appeal allowed.