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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Vitol SA v Capri Marine Ltd & Ors (No. 2) [2010] EWHC 458 (Comm) (09 March 2010) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2010/458.html Cite as: [2010] EWHC 458 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
VITOL S.A. |
Claimant |
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- and - |
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(1) CAPRI MARINE LIMITED (2) GERASSIMOS KALOGIRATOS (3) IOANNIS KALOGIRATOS (4) MARIA VIAGGINI (5) NIKOLAOS KOUTSOKOSTAS |
Defendants |
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(No.2) |
____________________
(instructed by Messrs Stephenson Harwood) for the Claimant
Stephen Hofmeyr QC and John Bignall
(instructed by Messrs Hill Dickinson) for the Defendants
Hearing dates: 22 February 2010
____________________
Crown Copyright ©
Mr Justice Tomlinson :
"This Charter shall be construed and the relations between the parties determined, in accordance with the Laws of England.
Any dispute arising out of or in connection with this Charter, involving amounts in excess of US$50,000, … shall be subject to the jurisdiction of the English High Court."
"The Applicants will not without the permission of the court use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in England or Wales or in any other jurisdiction, other than this claim."
"31.22 – (1) a party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where—
(a) the document has been read to or by the court, or referred to, at a hearing which has been held in public;(b) the court gives permission; or(c) the party who disclosed the document and the person to whom the document belongs agree."
"1. The Applicant is permitted to take steps in the US seeking a maritime attachment and seeking recognition of the judgment of Mr Justice Cresswell dated 6 April 2005 against the first Defendant, for the purpose of enforcing the said judgment.
2. The Applicant is permitted to use documents obtained from the First Defendant or otherwise incidental to these proceedings after 22 March 2005 specifically:
(i) All witness statements and affidavits served on behalf of the First Defendant after 22 March 2005 (including exhibits); and
(ii) All non-privileged correspondence between Stephenson Harwood and the First Defendant/their solicitors from 22 March 2005 up to the date of this Order,
(iii) All Court orders made herein from and including 22 March 2005 to date
for the purpose of enforcing the judgment of Mr Justice Cresswell dated 6 April 2005 (in this action) in proceedings in the United States."
The significance of 22 March 2005 is that that is the date upon which Capri's then solicitors indicated that Capri's funds were exhausted and that Capri would no longer be represented in the action. It is the order of Blair J which Capri now seeks to set aside.
"There is, in my judgment, nothing 'collateral' or 'alien' about enforcement of the court's order in the action in which discovery is obtained and I do not entertain any doubt at all that documents disclosed on discovery in the action can perfectly properly be used for the purpose of taking such a step without in any way infringing the implied undertaking and without the necessity of obtaining the prior leave of the court."
Notwithstanding the different context to which Lord Oliver was referring, enforcement of the judgment obtained on the substantive claim in the proceedings is I should have thought an a fortiori case. These conclusions, if well founded, would not however foreclose the argument in the present case because Mr Hofmeyr suggests that what Vitol is attempting to do is to use the documents for the purpose of enforcing the judgment against a third party which is not party to the present action in which the documents have been disclosed. He submits that that falls outside the scope of the purpose for which the disclosure was ordered and that it should not be permitted by the court. In order to put that submission into context I must say a little more about the Baltimore proceedings.
"62. When considering whether or not to permit the piercing of the corporate veil, I am informed that the US Court would normally consider a number of tests or factors. I would like to draw the Court's attention to the helpful discussion of the legal position in the United States in cases involving alter ego by District Judge Fisher in the US District Court decision in Sabine Towing & transportation Co. Inc. v. Merit Ventures Inc., 575 F. Supp. 1442, 1446 (E.D.Tx. 1983):
'A trial court should pierce the corporate veil and require a parent corporation to answer for the debts of a subsidiary when the subsidiary conducts business in a manner that clearly indicates that the parent is an alter ego of the subsidiary. Markow v Alcock, 356 F.2d 194 (5th Cir.1966). To find an alter ego relationship the evidence must disclose a pattern of domination of a corporation by an individual or corporation, and that this domination was used to support a corporate fiction … It will be appropriate to disregard a corporate entity when it appears a corporation was organized for fraudulent or illegal purposes… [or] when it will prevent manifest injustice to third parties…'
63. District Judge Fisher then goes on to list some 15 non-exhaustive factors which the court will consider in order to find that there is an alter ego relationship. The factors listed by Judge Fisher are consistent with factors considered in other US jurisdictions. For example, the United States Court of Appeals for the Second Circuit held in Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131 (2d Cir. 1991) that the following factors tend to show that an alter ego relationship may be present:
(i) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like;
(ii) inadequate capitalization;
(iii) whether funds are put in and taken out of the corporation for personal rather than corporate purposes;
(iv) overlap in ownership, officers, directors, and personnel;
(v) common office space, address and telephone numbers of corporate entities;
(vi) the amount of business discretion displayed by the allegedly dominated corporation;
(vii) whether the related corporations deal with the dominated corporation at arms length;
(viii) whether the corporations are treated as independent profit centers;
(ix) the payment or guarantee of debts of the dominated corporation by other corporations in the group;
(x) whether the corporation in question had property that was used by other of the corporations as if it were its own.
64. Mr Kahn informs me that no one factor is controlling, and it is not necessary to demonstrate every factor. Rather, the Court will weigh the evidence to determine whether these or similar factors demonstrate the necessary level of 'domination and control' by one entity over the other, or fraud.
65. The most important factors for the purposes of this application are:
(i) Financing of the subsidiary corporation by the parent;
(ii) The parent's use of the subsidiary's property and assets as its own;
(iii) The nature of intercorporate loan transactions;
(iv) Decisions-making for the subsidiary made by the parent and its principals; and
(v) The existence of, wrong-doing or injustice to third parties.
66. In order to try to establish in the US Court that Capri is simply the alter ego of the wider Kalogiratos Group, Vitol will need to adduce evidence which would go to make out the abovementioned factors. Because the disclosures already obtained in support of these actions provides the needed evidence, Vitol seeks to be released from the Undertakings (to the extent that they can be interpreted as restricting this intended use)."
"… I do not think it can be right, on an application such as the present, for the court to undertake an examination of the strength of the proposed action in which it is sought to use the documents. I accept that it must be open to the respondent to resist leave on the ground that the proposed action would represent an abuse of process or for one reason or another was bound to fail or ought to be struck out. The court would always I think refuse leave if persuaded that the proposed action was of that character. But that apart, I feel great doubt whether it could ever be appropriate to try to gauge the strength of the proposed action in order to decide whether or not to give leave to use discovered documents for the purposes of that action. If a proposed action is not shown to be an abuse of process or obviously unsustainable then prima facie a plaintiff is entitled to prosecute it. Whether leave to use discovered documents for the purposes of such an action should be granted should depend in my view on the nature of the first action, the circumstances in which discovery was given and the nature of the proposed new action. There may be some cases in which for the purposes of an application for leave to use discovered documents some assessment of the strength of the case should be attempted, but where, as here, the case is of complexity I do not think it represents the right approach."
I respectfully agree with the approach of Scott J. In the present context it applies to an evaluation of the legal principles to be applied by the Maryland court as much to an evaluation of the prospects of Vitol succeeding in discharging whatever is the content of the burden cast upon them.
The application for an anti-suit injunction
"Based on the foregoing, as well as other activities, the Defendants should be considered a single economic unit with no corporate distinction between or among any of them, rendering each liable for the debts of the other, and all assets of Defendants together should be susceptible to attachment and/or restraint for the debts of Capri."
Furthermore, the Plaintiff's Memorandum in support of attachment cites a passage from one of the leading US cases in the field to the following effect:
"… If the plaintiff in this case can prove the defendants are in fact the alter egos of developers, defendants' jurisdictional objection evaporates because the previous judgment is then being enforced against entities who were, in essence, parties to the underlying disputes; the alter egos are treated as one entity."
See William Passalacqua Builders, Inc v. Resnick Developers, Inc, 933 F.2d 131, 141 (2d Cir. 1991). However that may be, it is not as I understand it Vitol's case that either Spartacus, incorporated only in April 2008, or Primerose, incorporated only in February 2001, were parties to the charterparty dated August 2000 out of which Capri's liability to Vitol has arisen. Rather the assertion is that the assets of Spartacus and Primerose will be treated as held in common with those of Capri and thus available for execution of the judgment against Capri.
"… I conclude that the attempt by the respondent in the light of an unsatisfied judgment to recover the judgment debt in proceedings against another party, based on the alter ego doctrine as understood in New York law, is not a claim which falls within the jurisdiction clause in the FFA. It does not relate to the FFA, however broadly construed (Fiona Trust and Holding Corporation v. Privalov [2008] 1 Lloyd's Rep 254."
The application to set aside the order of Blair J.
"All documents regarding any claims or potential claims against the Respondent's insurers (including but not limited to P&I cover or club cover) resulting from the incident at Tallinn and subsequent litigation."
The court enjoys a free-standing power derived from section 37(1) of the Supreme Court (now Senior Courts) Act 1981 to order disclosure after judgment in order to render the judgment effective, in the sense of capable of enforcement – see Maclaine Watson & Co. Ltd v. International Tin Council (No.2) [1989] 1 Ch 286 at page 303F per Kerr LJ. As Kerr LJ also observed at page 301, "it is the policy of the law to assist persons in the position of the plaintiffs to obtain the fruits of their judgments". Further guidance as to the position post judgment is to be found in Babanaft & Co. S.A. v. Bassatne [1990] 1 Ch 13 at pages 27G-28A, 32F and 34BE per Kerr LJ. Furthermore, as Nicholls LJ pointed out in that case at pages 42G-43D, in the post judgment regime where the judgment creditor is at liberty to attach assets of the judgment debtor in execution of the judgment a freezing order may often be ancillary to a disclosure order – for the obvious reason that the disclosure order is needed in order to ascertain the whereabouts of assets which may be attached but a freezing order may be necessary in order to prevent an unscrupulous judgment debtor from removing those assets from an identifiable location before attachment can be effected. Colman J made the same point in Gidrxslme Shipping Co. Ltd v. Tantomar-Transportes Maritimos LDA [1995] 1 WLR 299 at 310F:
"Where, by contrast, one has the position that a judgment has been already obtained or an award made and where a Mareva injunction in aid of execution is justified, the jurisdiction to make a disclosure order arises both as a power ancillary to and in support of the injunction and independently of the injunction as a power in support of the execution of the judgment or award."
At page 312EF Colman J drew the distinction between the pre and post-judgment situations and pointed out that quite different considerations apply. He pointed out that post-judgment or post-award "it is just and convenient that the judgment or award creditor should normally have all the information he needs to execute the judgment or award anywhere in the world".