Catalyst Investment Group Ltd v Lewinsohn & Ors [2009] EWHC 1964 (Ch)

[2009] EWHC 1964 (Ch)Case No HC08C03158
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 31/07/2009
Before
THE HONOURABLE MR JUSTICE BARLING
Between
HC08C03158ClaimantCatalyst Investment Group LimitedClaimantMax Lewinsohn (1)DefendantsMaximillian & Co (a firm) (2)DefendantMicropower Global Limited (3)DefendantHC08C03241ClaimantsCatalyst Investment Group Limited (1)ClaimantTim Roberts (2)ClaimantMax Lewinshon (1)DefendantsMaximillian & Co (a firm) (2)DefendantHC08C03618ClaimantARM Asset-Backed Securities SAClaimantMax Lewinsohn (1)DefendantsMaximillian & Co (a firm) (2)Defendant
Anthony De Garr Robinson QC with Camilla Bingham (instructed by Forsters LLP) for Claimants of HC08C03158 & HC08C03241David Wolfson QC with Henry Forbes Smith (instructed by Fulbright & Jworski International LLP) for Claimants of HC08C03618David Phillips QC with Hefin Rees (instructed by Mark Taylor & Co) for Defendants in all actionsHearing Hearing dates: 19 - 22 May 2009
Judgment

Introduction

[1]There are before me five applications in three separate claims. One of the applications, which is not opposed, is for joinder of additional claimants in one of the claims, pursuant to CPR Rule 19.2(2). The remaining four applications are contentious. I heard them over four days, with an additional day for reading. Each is a Part 11 application seeking, in effect, to stay the relevant claim. At the end of the hearing Mr de Garr Robinson QC, who appeared for two of the three respondents to the applications, stated that it would be helpful if in due course I felt able to give an indication of the outcome of the applications in advance of my providing a reasoned judgment. This request was renewed in a letter dated 16 June 2009 which was copied to leading counsel for the other parties. None of those parties raised any objection. Accordingly I indicated by letter dated 25 June 2009 that, subject to the appropriate caveat, I proposed to dismiss all the Part 11 applications, for reasons which I would set out in a judgment to be delivered in due course. This judgment contains the reasons.[2]All the Part 11 applications are based on forum conveniens grounds, reliance being placed in particular upon the existence of corresponding proceedings between the same parties in another jurisdiction (Utah, USA). Each application raises amongst other issues an important question of law, namely whether this court has power to decline jurisdiction or to grant a stay on such grounds in favour of the courts of a non-EU country in respect of proceedings of which this court is admittedly properly seised under Article 2 of Council Regulation (EC) No 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (“the Regulation”). This question involves an examination of whether the decision of the Court of Justice of the European Communities (“ECJ”) in Case C-281/02 Owusu v. Jackson [2005] QB 801, applies to a case such as the present ie. where there is a lis alibi pendens. In that decision the ECJ held that, where a court which is subject to what is now the Regulation (for convenience “an EU court”) is properly seised of proceedings under Article 2 of the Regulation, the EU court cannot decline its jurisdiction on forum non conveniens grounds in favour of the courts of a non-EU country. In the specific case before the ECJ there was no lis alibi pendens and the ECJ expressly declined to answer the national court’s question as to whether its ruling applied in such a case.[3]The Part 11 applications fall into two groups. The first group consists of the defendants’ application in claim HC08 CO3241 and the defendants’ parallel application in claim HC08 C03618. The claimants in the first of these actions are Catalyst Investment Group Limited (“Catalyst”) and Mr Tim Roberts (“Mr R”). The claimant in the second is ARM Asset-Backed Securities S.A. (“ARM”). In both these actions the defendants are Mr Max Lewinsohn (“Mr L”) and Maximillian & Co. Throughout the hearing counsel referred to these two actions collectively as “the Declaratory Proceedings”. I will adopt the same approach. Where it is necessary to refer to them separately I will use “the Catalyst Declaratory Proceedings” or the ARM Declaratory Proceedings” as the case may be.[4]The second group of Part 11 applications consists of two applications in action HC08 C03158, namely the application by two of the defendants (Mr L and Maximillian & Co) and a corresponding application by the third defendant Micropower Global Limited (“Micropower”). The sole claimant in this action is Catalyst. This action was called “the Noteholder Proceedings” during the hearing.

Background

[5]Although the Declaratory Proceedings and the Noteholder Proceedings concern different circumstances and issues, and are likely to be subject to separate trials, a good deal of the factual background to both sets of claims is common, and the main players are to a large extent the same. In order to deal with the applications before me it is necessary to set out this background in some detail. I was asked to read virtually all the witness statements lodged in relation to these applications (some twenty or so). Some of this material is argumentative, and it is clear that there is, to put it mildly, a good deal of bad feeling and mistrust between the main parties. Notwithstanding this, much of the factual background relevant to these applications is not really in dispute, and those matters which are disputed have little if any bearing on the issues which I have to decide. The summary account which I now give (and which is not by any means exhaustive of the history of the unhappy relationship between the main protagonists) is intended to be non-controversial, at least so far as these applications are concerned, save where I indicate otherwise. I should not be taken to be making any findings of fact in respect of any disputed matters.[6]Catalyst is a company incorporated in England & Wales which provides financial services and Mr R is its beneficial owner and chief executive. Both Catalyst and Mr R are domiciled in England.[7]Mr L is also domiciled in England and lives in Sussex. Maximillian & Co is a trading name which Mr L uses, and is for all relevant purposes his alter ego. Except where the context otherwise requires I shall refer to Mr L as including also Maximillian & Co (“Maximillian”).[8]ARM is a Luxembourg entity whose financial products are distributed by Catalyst.[9]Micropower is a company registered in the British Virgin Islands.[10]Eneco Inc (“Eneco”), which is now defunct, was a Utah corporation. For a good many years Mr L was involved in the management of Eneco. Mr L was one of the Noteholders to which I refer below.[11]Prior to 2006 Eneco had wished to raise working capital for its research and development activities, and to that end had entered into a series of secured loan agreements (“the Secured Loan Agreements”) by which the lenders agreed to advance funds to Eneco in exchange for promissory notes issued by Eneco (“the Notes”). The Notes, which were issued between 2003 and 2006, bore interest at the rate of 12% and their transfer was subject to certain restrictions under Utah securities laws. The Secured Loan Agreements and the Notes were expressly governed by Utah law. They also contained jurisdiction agreements in favour of the Utah courts.[12]Eneco’s repayment obligations under the Notes were secured against Eneco’s reversionary interest in certain international patents registered in Eneco’s name (“the IP Rights”). By clause 4 of the Secured Loan Agreement Eneco granted its lenders a security interest in “all the Collateral” on the terms set out in two agreements, namely a “Security Agreement” and an “Intercreditor Agreement”. Under the Security Agreement, which was expressed to be between Eneco and “Christopher P Baker, as collateral agent (the “Collateral Agent”), acting as agent for holders of [the Notes]…” Eneco granted a security interest in the IP Rights “in favour of the Collateral Agent for the benefit of” the holders of the Notes (“Noteholders”). Upon Eneco’s default the Collateral Agent was to be entitled to realise the IP Rights and apply the proceeds of sale in accordance with the terms of the agreement, including in the discharge of Eneco’s obligations to the Noteholders.[13]The relationships between the Collateral Agent and the Noteholders, and between the Noteholders themselves, were governed by the Intercreditor Agreement. By the terms of that agreement the Noteholders appointed the Collateral Agent as their agent with respect to, in effect, enforcement of the security interest in the IP Rights. The Collateral Agent was empowered “but shall not be obligated” to take enforcement action under the agreement “that it deems necessary or advisable to preserve its rights in the Collateral.” Any action taken was binding on the Noteholders. The Collateral Agent was required to act in “a commercially reasonable manner” in the exercise of his rights, powers and duties, and the Noteholders undertook to reimburse certain expenses reasonably incurred by him on their behalf in connection with the enforcement of their rights under the Intercreditor Agreement or the Security Agreement.[14]The Security Agreement and the Intercreditor Agreement were expressly governed by Utah law. However, both these agreements omitted the jurisdiction clause that was included in the Notes and the Secured Loan Agreements.[15]In the spring of 2006 Catalyst was engaged by Eneco to assist Eneco in raising funds. The written agreements between Catalyst and Eneco (“the Catalyst Agreements”) were expressly governed by English law and each included an exclusive jurisdiction clause in favour of the courts of England and Wales. The Declaratory Proceedings arise out of Catalyst’s performance of the Catalyst Agreements, and in particular out of the contents of two letters to Eneco dated 22 December 2006 written by Mr R on behalf of Catalyst (“the December Letters”).[16]In one of the December Letters Catalyst stated that it had “firm commitments to invest in Eneco in excess of U.S $5 million”. In the other it stated that “it has committed $2.3million to the C3 Corporate Bond….” and “These funds will become available for your use…” upon certain events occurring.[17]It is contended by Catalyst that one or both of the December Letters were drafted by Mr L himself, following discussion between Mr L and Mr R in England, and that at Mr L’s request Mr R signed and returned them to Mr L, also in England. Mr L then apparently passed them on to Eneco, which circulated them among the Noteholders, who were located in different parts of the world.[18]At some point after the despatch of the December Letters the Noteholders, including Mr L, agreed to the discharge of the Notes and their conversion into equity in Eneco. It is not in dispute that investment in Eneco in anything like the amounts referred to in the December Letters did not materialise, and in September 2007, Eneco agreed with the Noteholders, including Mr L, that the transaction converting the Notes into equity would be reversed and the Notes reinstated. In November 2007 Mr L was appointed Collateral Agent for the Noteholders. In January 2008 Eneco filed a Chapter 11 bankruptcy petition in Utah which was converted to a liquidation thereafter. The Noteholders, including Mr L, established their secured claims under the Notes in Eneco’s liquidation.

The Utah Fraud Proceedings

[19]On 8 October 2008, Mr L and two other Noteholders, Mr Harry Reed and Mountainland Buildings Inc (respectively an individual and a corporation, both resident in Utah) issued proceedings against Catalyst and ARM in the Third Judicial District Court of the State of Utah (“the Utah Fraud Proceedings”). By the Utah Fraud Proceedings, Mr L and his co-plaintiffs allege that the December Letters amounted to a fraudulent, alternatively a negligent, misrepresentation and seek damages, including punitive damages, in respect of “substantial attorneys fees and costs, as well as other consideration, to successfully assert their secured claims in Eneco’s bankruptcy.” The claim is unquantified. In brief, the contention is as follows. As Noteholders Mr L and the other plaintiffs relied on the December Letters and believed that Catalyst had succeeded in raising not less than $5 million of working capital for Eneco. So believing they agreed to convert the secured promissory notes issued to them by Eneco into equity in Eneco. Although that equity was in due course re-converted into secured debt the plaintiffs incurred legal expenses in establishing their status as secured creditors in Eneco’s subsequent liquidation, by reason of the temporary conversion of their debt to equity.[20]Although not a signatory to, nor even mentioned in, the December Letters, ARM has been sued on the basis that, in signing the letters, Mr R was acting on its behalf. This allegation is strongly contested by ARM.[21]The Utah Fraud Proceedings do not appear to be very far advanced. All three of the defendants in those proceedings have filed Answers disputing the jurisdiction. Further, during the hearing before me Mr Phillips QC, who appeared on behalf of Mr L, Maximillian and Micropower, accepted that he was not in a position to demonstrate that ARM had yet been served. This formed the basis of a discrete submission by ARM in opposition to the Part 11 application relating to ARM’s claim (claim HC08 C03618). However, following the hearing I was informed by letter from ARM’s solicitors dated 16 June 2009 that service upon ARM has since been effected, with the result that the submission based on non-service was no longer being maintained.

The Declaratory Proceedings

[22]The Catalyst Declaratory Proceedings were issued in this Court on 17th November 2008. The relief claimed is not restricted to negative declarations in respect of the allegations by Mr L in the Utah Fraud Proceedings (although the relief also covers this). In addition Catalyst and Mr R seek declarations to the effect that there was no breach by Catalyst of its contractual obligations to Eneco under the Catalyst Agreements, and no fraudulent or negligent misrepresentations by Catalyst to Mr L. Alternatively they seek declarations that Eneco suffered no loss as a result of any such breach or misrepresentation. The reason for these additional claims is as follows.[23]In September 2008 following Eneco’s entry into bankruptcy, Mr L (as Maximillian) contracted to purchase from Eneco’s trustee in bankruptcy certain causes of action said to be vested in Eneco, including causes of action against Catalyst and ARM. This sale was approved by order of the Bankruptcy court for the District of Utah dated 7 November 2008 and the bill of sale executed pursuant to the purchase contract is dated 18 November 2008. The agreement for sale was expressed to be to Maximillian “or its designees”. In the event the purchaser’s designee was a British Virgin Islands company called Energy Claims Limited, and Eneco’s trustee in bankruptcy executed the bill of sale in favour of that company.[24]As for the nature of the Eneco causes of action, in January 2008 Messrs Mischon de Reya, solicitors, purportedly on behalf of an English subsidiary of Eneco known as Eneco Europe Plc (“Eneco Europe”), threatened action against Catalyst in the English courts in respect of the allegations of fraud and negligence referred to above. In addition it was alleged that, in performing its retainer, Catalyst had breached several requirements of the Financial Services Authority and recourse to that body was also possible. Catalyst’s alleged misconduct was said to have given rise to substantial losses on the part both of Eneco and of Eneco Europe. Catalyst states that it was in the light of the potential pursuit of these claims of Eneco and Eneco Europe that the Catalyst Declaratory Proceedings included claims for declaratory relief as to Catalyst’s liability (if any) to Eneco.[25]Catalyst further states that at the time when the Catalyst Declaratory Proceedings were issued on the 17 November 2008 it appeared that Mr L/Maximillian was the beneficial owner of Eneco’s causes of action against Catalyst, he having entered into a contract to purchase them from Eneco’s trustee in bankruptcy. It was only the day after the issue of these proceedings that Mr L arranged for the causes of action to be transferred to his “designee”, Energy Claims Limited. Catalyst complains that despite being asked to identify his “designee”, Mr L refused to do so. The copy bill of sale produced by Mr L was redacted so as to delete the name of the assignee. As Mr Jefferson Gross (a US lawyer acting for Mr L) explains in his witness statement dated 19 January 2009 served in the Catalyst Declaratory Proceedings, this redaction was because it was believed that, once the assignee’s identity was revealed, Catalyst and Mr R would join the assignee as a defendant in the Catalyst Declaratory Proceedings “in a distant and inconvenient forum” (see paragraph 19). This fear was justified, as now that Mr Gross has exhibited to a further witness statement an unredacted copy of the bill of sale revealing the identity of the assignee, Catalyst and Mr R have indeed indicated that they will apply to join Energy Claims Limited as a defendant at the earliest opportunity.[26]It is to be noted that the Declaratory Proceedings are not brought against all the plaintiffs in the Utah Fraud Proceedings: only Mr L and Maximillian are made defendants; Mr Reed and Mountainland Buildings Inc have not been joined.[27]On 17 December 2008, ARM commenced the ARM Declaratory Proceedings against Mr L and Maximillian. Like Catalyst, ARM seeks a negative declaration that it is not liable to Mr L (or his trading name) in relation to the December Letters, whether as alleged in the Utah Fraud Proceedings or at all.[28]Thus the Catalyst Declaratory Proceedings and the ARM Declaratory Proceedings relate to the same subject-matter and seek essentially the same relief. Subject to the exceptions already referred to, the Declaratory Proceedings and the Utah Fraud Proceedings are largely mirror images of each other, involving the same parties, the same claims and the same subject-matter.

The Noteholder Proceedings and the Utah Noteholder Proceedings

[29]It is now necessary to retrace our steps a little in order to explain how the Noteholder Proceedings arose.[30]I have already referred to the fact that in about November 2007 Mr L was appointed Collateral Agent for the Noteholders, replacing Mr Baker. In the same month Mr L, as Collateral Agent, gave Eneco notice of default under the Notes, and in December 2007 he gave Eneco notice of the intended sale of the IP Rights which secured repayment under the Notes. That resulted in proceedings between Eneco and Mr L aimed at preventing such a sale, but in January 2008 Eneco entered into Chapter 11 bankruptcy and ultimately, in June 2008, liquidation.[31]Catalyst states that in July and August 2008, it took assignments of approximately 37% in value of the Notes from ten parties who were variously based in Switzerland, Gibraltar, Florida, Texas and Massachusetts (“the Assignors”). The fact of these assignments is not disputed by Mr L, but he does not accept their validity as a matter of law.[32]Between June and November 2008 what can only be described as a struggle for control of the IP Rights took place. The main protagonists were Catalyst and Mr L, each of whom made offers and counter-offers to Eneco’s trustee in bankruptcy. The struggle was won by Mr L who, in September 2008, reached agreement with Eneco’s trustee in bankruptcy to buy the IP Rights. In so doing, Mr L, in his capacity as Collateral Agent, “credit bid” the Notes in part consideration for the sale, the balance being provided by other investors. Under the agreement the IP Rights were to be transferred to Mr L in full satisfaction of the Notes and the claims of the Noteholders. Thus, it seems, the Notes were discharged and the Noteholders ceased to be creditors of Eneco under the Secured Loan Agreements.[33]The sale required the approval of the bankruptcy court for the District of Utah (“The Utah bankruptcy court”) and Catalyst objected to the trustee’s motion. Catalyst’s objection was not successful, and on 21 October 2008 the Utah bankruptcy court declared that the Notes were valid and enforceable against Eneco, and were a lien on the IP Rights, and that Mr L as Collateral Agent had authority to bind the Noteholders and to credit-bid the Notes in part consideration for the purchase of the IP Rights. On 6 November 2008 that court approved the sale of the IP Rights to Mr L. The court’s order dated 7 November includes the following at paragraph 20:
“The Purchaser is acquiring the Assets for the benefit of the Collateral Agent,….and the other entities who have contributed to the purchase price, pro rata to the amounts of their respective contributions, and, upon any subsequent transfer of the Assets to a new company or entity, the Purchaser shall undertake to ensure that all such parties who have contributed to the acquisition of the Assets, including, but not limited to the Collateral Agent, receive appropriate consideration in such new entity, pro rata to the amounts of their respective contributions.”
[34]On the same day, 7 November 2008, Catalyst’s solicitors wrote to Mr L and the Noteholders to the effect that, in using the property of the Noteholders, namely their Notes, in order to purchase the IP Rights Mr L acted as a fiduciary and/or trustee and as such was obliged to exercise his rights as Collateral Agent exclusively for the benefit of the Noteholders; that he was in breach of his duty in a number of respects, including by failing to recognise Catalyst’s status as a Noteholder and therefore as having an interest in the IP Rights, by using his position as Collateral Agent to advance his own interests and those of others connected with him, and by surrendering Catalyst’s interest in the Notes and in the security for those purposes. The letter went on to assert that Mr L held the IP Rights as trustee for Catalyst and others, and that any entity to which he sought to transfer the Rights would similarly hold them as constructive trustee.[35]Further to that letter, and on the same day, Catalyst commenced the Noteholder Proceedings in this Court, making Mr L and Maximillian defendants, alleging breaches of contractual, fiduciary and trust duties owed by virtue of the defendants’ position as Collateral Agent, and seeking relief including declarations that Catalyst was the rightful holder of certain of the Notes, that the defendants had acquired the IP Rights on behalf of Catalyst in proportion to the latter’s entitlement under the Notes, and that the defendants held the IP Rights and any profits made from them on trust for Catalyst in the appropriate proportion.[36]At the time these proceedings were issued Catalyst was unaware that Mr L/Maximillian was in the process of transferring the IP Rights to Micropower. Pursuant to an agreement dated 7 November 2008 between Maximillian and various investors, including Mr L and some other Noteholders, Maximillian agreed to transfer the IP Rights to Micropower in exchange for redeemable preference shares in that company. In the agreement Maximillian undertook to hold the shares “for and on behalf of” persons identified in schedule 4 to the agreement. These did not include Catalyst. The agreement was expressed to be governed by the law of Bermuda and to be subject to the exclusive jurisdiction of the courts of that country.[37]To complete the litany of events which took place on the 7 November 2008, I must now refer to what can be called “the Utah Noteholder Proceedings”.[38]A few hours after the Noteholder Proceedings were commenced in England, and no doubt in response to Catalyst’s solicitors’ 7 November letter, a mirror action was launched by Maximillian against Catalyst in the Utah State court covering more or less the same ground as the Noteholder Proceedings, and seeking declarations that Maximillian had not breached any duties owed to the Noteholders and that Catalyst was not a legal holder of any of the Notes. On 12th November 2008, the Utah Noteholder Proceedings were amended and expanded somewhat, although neither party suggests that anything turns on these amendments. The amended claim also added the Assignors as defendants.[39]Thus as between the Noteholder Proceedings and the Utah Noteholder Proceedings, the former was first in time.[40]When, in December 2008, Catalyst became aware that Mr L was transferring the IP Rights, it obtained an interim injunction from this Court in the Noteholder Proceedings prohibiting Mr L/Maximillian and Micropower from dealing in or disposing of the IP Rights otherwise than on 21 days’ notice to Catalyst. (Thereafter Mr L and Micropower volunteered undertakings in lieu of the injunction until trial.) At the same hearing, Catalyst was also granted permission to amend its Claim Form and Particulars of Claim in the Noteholders Proceedings so as to join Micropower as a necessary and proper party to the proceedings and to serve Micropower at its registered office in the British Virgin Islands.[41]Further skirmishing then took place in the Utah courts. Mr L made a number of applications to those courts as follows.[42]First, on 28th January 2009 Mr L applied to the Utah State court for a temporary restraining order to prevent pursuit of the Noteholder Proceedings on the ground that those proceedings were in breach of a forum selection and exclusive jurisdiction clause which, it was alleged, applied to the Intercreditor Agreement. That application was refused on the grounds that Mr L had not alleged damage amounting to immediate and irreparable injury and therefore the application ought to have been made on notice to Catalyst.[43]Next, in February 2009 Mr L applied to the Utah bankruptcy court for an order that the Noteholder Proceedings represented a contempt of that court’s order approving the sale of the IP Rights to Mr L. On 6 March 2009 the Utah bankruptcy court rejected the motion, holding that the Noteholder Proceedings had no real impact upon Eneco’s trustee or upon the estate. The learned bankruptcy judge also indicated that the issues between the parties could easily be resolved in the English courts, stating:
“The rights that are asserted in the English litigation appear to be easily litigated in their forum. The parties can assert their rights and remedies using this Court’s order as a basis. It can be subject to any types of – number of types of motions, but I don’t see why this Court needs to put its oar in the water further than what it has already in issuing the sale order.”
[44]Finally, on 9th April 2009, the Utah State court heard what appears to be a renewal, this time inter partes, of the application by Mr L for an anti-suit injunction in respect of the Noteholder Proceedings. Once more the basis of the application was that those proceedings had been brought in breach of the exclusive jurisdiction clause in favour of the Utah courts in the Secured Loan Agreements and the Notes. It was accepted on behalf of Mr L that the Intercreditor Agreement did not contain a jurisdiction clause but it was argued that the jurisdiction clauses in the Secured Loan Agreements and in the Notes were applicable on the basis that all the agreements formed part of an integrated whole. Judge Lindberg rejected the application, holding that the applicant had failed to satisfy the burden of demonstrating that it was “likely to prevail on the merits of its claim” that the relevant jurisdiction agreement was applicable to the claims made in the Noteholder Proceedings.

The Part 11 applications

[45]Each of the Part 11 applications seeks an order that this Court should not exercise any jurisdiction in the relevant proceedings “as the most appropriate forum is the Utah Court USA”, and an order that the relevant claim form should be set aside or stayed. Exceptionally the application notice dated 13 February 2009 issued on behalf of the third defendant (Micropower) in the Noteholder Proceedings seeks, in addition, an order declaring that the English court “has no jurisdiction”. (An earlier notice dated 21 January 2009 was issued in the same matter on behalf of the first two defendants in those proceedings.) This additional wording may be connected with the fact that at one point there was an intention to raise a number of separate arguments in relation to Micropower, based on the fact that it is not domiciled in an EU Member State. For example it was said that Catalyst failed to discharge its duty of full and frank disclosure on the ex parte application at which permission to serve outside the jurisdiction was granted and that service of the proceedings on Micropower should be set aside on that ground.[46]However by the time the applications came on for hearing before me these discrete points were no longer being pursued by Micropower, and it was accepted that if the Noteholder Proceedings were to continue against Mr L/Maximillian then Micropower would be a proper party to them. In other words Micropower’s Part 11 application stands or falls with that of Mr L/Maximillian.[47]The issues which I have to determine were further narrowed in the course of the hearing. It is common ground that the Regulation applies to both the Noteholder Proceedings and the Declaratory Proceedings. Article 2 provides:
“Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.”
[48]Mr Phillips accepted that the effect of Article 2 is that Mr L/Maximillian must be sued in this jurisdiction, subject to the other provisions of the Regulation. At the start of the hearing he submitted in relation to the Noteholders Proceedings, in addition to other arguments, that the effect of Article 23 of the Regulation was that an exclusive jurisdiction clause in an agreement prevailed over what would otherwise be the mandatory provisions of Article 2, even where the exclusive jurisdiction was that of the courts of a non-EU country. For this submission he relied upon a number of authorities and certain passages from Dicey, Morris & Collins on The Conflict of Laws (14th edition). It followed that in relation to the Noteholder Proceedings it would be necessary for me to decide whether the parties had agreed that the disputes in that action were to be subject to the exclusive jurisdiction of the Utah courts, and if so whether this Court had the power to stay these proceedings on that ground, and finally whether I should exercise my discretion to stay the proceedings so as to give effect to that agreement. The first of these questions would have required me to decide whether the Intercreditor Agreement, which is central to the issues in the Noteholder Proceedings but which does not contain an exclusive jurisdiction clause in favour of the Utah courts, should nevertheless be construed as a whole with the Secured Loan Agreements and the Notes, which do contain such a clause. This was the question with which Judge Lindberg grappled in the anti-suit injunction application in the Utah State court to which I have referred. She found that Mr L had not satisfied her that he was “likely” to succeed in establishing that the exclusive jurisdiction clause was incorporated in the Intercreditor Agreement. However, at the beginning of the second day of the hearing Mr Phillips indicated that he was no longer seeking to establish or rely upon the existence of an exclusive jurisdiction clause in the Intercreditor Agreement and that therefore I did not need to determine this issue. Nevertheless, as will be seen, in putting forward his remaining arguments based on Article 27 of the Regulation Mr Phillips sought some support from Article 23.[49]Article 27 provides:
“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 motion 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.”
[50]Mr Phillips’ submissions can be summarised as follows. Just as, by analogy with Article 23 of the Regulation, the English court may stay proceedings otherwise properly founded on Article 2 in order to give effect to an exclusive jurisdiction clause in favour of the courts of a non-EU country, so Article 27 (which on its face only has effect as between Member States) applies by analogy so as to enable the English court to decline jurisdiction or stay its proceedings where the same issues are pending in proceedings between the same parties in a non-EU country ie on lis alibi pendens grounds. This was referred to as a “reflexive” application of Article 27, and was said not to be precluded by the decision of the ECJ in Owusu because that decision did not cover a case where there was a lis pendens in the non-EU country. Mr Phillips acknowledged that it was necessary for him to get home on this part of his argument if the Part 11 applications were to have any chance of success. For if Article 2 could not be disapplied by reference to this argument its mandatory provisions would prevail and the stay applications were doomed to failure.[51]Mr Phillips argued that it was necessary to consider two alternative approaches. His primary submission was that where there was a lis pendens in a non-EU country, the appropriate “reflexive” application of Article 27 was for this Court to apply its national rules on forum conveniens in order to decide whether to stay proceedings in favour of the non-EU court on the basis that the latter was the more appropriate or natural forum for the dispute. Such an approach, he submitted, gave effect to the scheme and purpose of Article 27 in avoiding concurrent proceedings and the risk of conflicting judgments, which could well arise on an application of Article 2. Nor was this approach in any way inconsistent with the Regulation or its overall aims.[52]In his oral submissions, as opposed to in his skeleton arguments, Mr Phillips seemed to put forward his primary submission as applying whether or not this Court was the court first seised. If this Court was first seised the forum conveniens principles came into play because, according to the argument, the court first seised must decide by analogy with Article 27 whether its jurisdiction “is established”. Mr Phillips argued that this Court should make that decision by applying its own rules of forum conveniens.[53]If, in the light of Owusu or for other reasons, this Court was not able to apply the forum conveniens criteria then Mr Phillips’ alternative, “fallback”, submission was that one should apply the analogy of Article 27 more strictly, and simply give effect to its preference for the court “first seised”.[54]On the assumption that his primary submission was correct and the forum conveniens criteria were applicable, Mr Phillips submitted that under the Spiliada principles the natural and appropriate forum for both the Declaratory Proceedings and the Noteholder Proceedings was not in England but in the Utah courts where the corresponding proceedings were now in train. He accepted, however, that his clients’ case for a stay on forum conveniens grounds was stronger in the Noteholder Proceedings than in the Declaratory Proceedings. He also acknowledged that if the alternative stricter approach to the Article 27 analogy were the right one, he was bound to lose in relation to the Noteholder Proceedings as these were commenced before the Utah Noteholder Proceedings. But by the same token he should succeed in the applications relating to the Declaratory Proceedings, which were commenced after the Utah Fraud Proceedings.[55]Mr de Garr Robinson QC, appearing for Catalyst and Mr R, and Mr Wolfson QC appearing for ARM, submitted that in neither the Declaratory Proceedings nor the Noteholder Proceedings does this Court have the power to stay proceedings or decline jurisdiction on these grounds; alternatively they submitted that if contrary to their primary submission forum conveniens grounds (with lis alibi pendens) can in principle be relied upon by the defendants, those grounds have not been established in relation to any of these proceedings so as to justify this Court granting a stay in favour of the Utah courts.

Does the Court have the power to stay the proceedings here?

[56]It is common ground that each of the proceedings constitutes a “civil” or “commercial matter” within the meaning of Article 1 of the Regulation, and that accordingly the Regulation applies. As seen, the Regulation’s general rule, in Article 2, is that a defendant must be sued in the courts of the state in which he or she is domiciled. Article 3 then provides:
“1. Persons domiciled in a Member State may be sued in the courts of another Member State only by virtue of the rules set out in Sections 2 to 7 of this Chapter.”
[57]Thus claimants in civil and commercial matters can only institute proceedings other than in the courts of the defendant’s domicile if they can point to an exception within the Regulation itself. Absent such exception Article 2 prevails. The question here is whether Article 2 is capable of being displaced by the existence of proceedings pending in the courts of a non-EU country.[58]Mr Phillips recognised that his opponents would place considerable reliance on the decision of the ECJ in Owusu. This wasa reference by the Court of Appeal for a preliminary ruling under Article 234 of the EC Treaty. Mr Owusu had brought a claim in England against Mr Jackson and certain Jamaican companies in respect of injuries which he had suffered at a holiday villa in Jamaica which he had hired from Mr Jackson and which was owned by one of the Jamaican companies. Both Mr Owusu and Mr Jackson were domiciled in England. The defendants asked the English court to decline jurisdiction in favour of the Jamaican courts on forum conveniens grounds. The court refused and the defendants appealed to the Court of Appeal. In its reference to the ECJ the Court of Appeal asked two questions relating to the interpretation of the Regulation’s predecessor, namely the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (as amended) (“the Brussels Convention”). Other than a difference in some of the numbering the Brussels Convention is, for present purposes, materially indistinct from the Regulation. I shall therefore refer to the Brussels Convention and the Regulation interchangeably.[59]The questions posed by the Court of Appeal were:
‘1. Is it inconsistent with the Brussels Convention … , where a claimant contends that jurisdiction is founded on Article 2, for a court of a Contracting State to exercise a discretionary power, available under its national law, to decline to hear proceedings brought against a person domiciled in that State in favour of the courts of a non-Contracting State: (a) if the jurisdiction of no other Contracting State under the 1968 Convention is in issue; (b) if the proceedings have no connecting factors to any other Contracting State? 2. If the answer to question 1(a) or (b) is yes, is it inconsistent in all circumstances or only in some and if so which?’
[60]The ECJ answered the first question as follows: In the light of all the foregoing considerations, the answer to the first question must be that the Brussels Convention precludes a court of a Contracting State from declining the jurisdiction conferred on it by Article 2 of that Convention on the ground that a court of a non-Contracting State would be a more appropriate forum for the trial of the action even if the jurisdiction of no other Contracting State is in issue or the proceedings have no connecting factors to any other Contracting State.[61]The ECJ declined to answer the second question on the ground that it was aimed at circumstances other than those which pertained to the instant case, including circumstances where identical or related proceedings were pending before a court of a non-contracting state, and that it was not the function of the preliminary ruling procedure for the ECJ to give advisory opinions on hypothetical questions. In other words, because there were no relevant proceedings pending in the Jamaican courts the second question was not pertinent to the effective resolution of the dispute between the parties.[62]Mr Phillips relies upon the fact that in the present case there are pending proceedings in Utah, and upon the ECJ’s failure to answer the second question, in order to argue that Owusu is not an obstacle to his submissions. Mr de Garr Robinson and Mr Wolfson submit that Owusu precludes a court from declining jurisdiction upon forum conveniens grounds in cases where jurisdiction is founded on Article 2 of the Regulation, and that lis alibi pendens is not a free-standing doctrine but merely one of the factors relevant to a forum conveniens assessment. Accordingly, they argue, the reasoning in Owusu applies equally in the present case, with the result that this Court cannot decline jurisdiction founded on Article 2.[63]It is therefore necessary to examine the reasoning in Owusu. In its judgment the ECJ first decided that Article 2 was applicable where the relevant relationship was between the courts of a single contracting state and the courts of a non-contracting state. Then the Court went on to consider the main issue and said:37. It must be observed, first, that Article 2 of the Brussels Convention is mandatory in nature and that, according to its terms, there can be no derogation from the principle it lays down except in the cases expressly provided for by the Convention (see, as regards the compulsory system of jurisdiction set up by the Brussels Convention, Case C-116/02 Gasser [2003] ECR I-0000, paragraph 72, and Case C-159/02 Turner [2004] ECR I-0000, paragraph 24). It is common ground that no exception on the basis of the forum non conveniens doctrine was provided for by the authors of the Convention, although the question was discussed when the Convention of 9 October 1978 on the Accession of Denmark, Ireland and the United Kingdom was drawn up, as is apparent from the report on that Convention by Professor Schlosser (OJ 1979 C 59, p. 71, paragraphs 77 and 78).38. Respect for the principle of legal certainty, which is one of the objectives of the Brussels Convention … would not be fully guaranteed if the court having jurisdiction under the Convention had to be allowed to apply the forum non conveniens doctrine.39. According to its preamble, the Brussels Convention is intended to strengthen in the Community the legal protection of persons established therein, by laying down common rules on jurisdiction to guarantee certainty as to the allocation of jurisdiction among the various national courts before which proceedings in a particular case may be brought (Besix, paragraph 25).40. The Court has thus held that the principle of legal certainty requires, in particular, that the jurisdictional rules which derogate from the general rule laid down in Article 2 of the Brussels Convention should be interpreted in such a way as to enable a normally well-informed defendant reasonably to foresee before which courts, other than those of the State in which he is domiciled, he may be sued (GIE Groupe Concorde and Others, paragraph 24, and Besix, paragraph 26).41. Application of the forum non conveniens doctrine, which allows the court seised a wide discretion as regards the question whether a foreign court would be a more appropriate forum for the trial of an action, is liable to undermine the predictability of the rules of jurisdiction laid down by the Brussels Convention, in particular that of Article 2, and consequently to undermine the principle of legal certainty, which is the basis of the Convention. ………………………………………………………... 43. Moreover, allowing forum non conveniens in the context of the Brussels Convention would be likely to affect the uniform application of the rules of jurisdiction contained therein in so far as that doctrine is recognised only in a limited number of Contracting States, whereas the objective of the Brussels Convention is precisely to lay down common rules to the exclusion of derogating national rules.[64]Similarly Advocate General Leger in his Opinion had concluded: “… by allowing the court seised the opportunity to decline – in a purely discretionary manner – to exercise the jurisdiction which it derives from a provision of the Convention, such as Article 2, the doctrine of forum non conveniens seriously affects the predictability of the effects of the jurisdiction rules laid down by the Convention, in particular the rule in Article 2. As already pointed out, that predictability of the jurisdiction rules constitutes the only way of ensuring observance of the principle of legal certainty and ensuring greater legal protection for people established in the Community, in accordance with the objectives pursued by the Convention. Any impact of that kind on the predictability of the jurisdiction rules laid down by the Convention, in particular in Article 2 (which is a general jurisdiction rule) thus ultimately detracts from the effectiveness of the Convention.” (Paragraph 263)[65]Thus, principles of legal certainty and uniform application of the rules of jurisdiction were decisive, and, as the ECJ went on to indicate, outweighed any “negative consequences” both practical and procedural which it conceded might well ensue as a result of the English court being required to accept jurisdiction in a case relating to an accident which had taken place in Jamaica, and with some of the defendants being domiciled in Jamaica.[66]It has not been suggested that the position under the Regulation would be any different. Recital 11 to that instrument states:
“The rules of jurisdiction must be highly predictable and founded on the principle that jurisdiction is generally based on the defendant’s domicile and jurisdiction must always be available save in a few well-defined situations in which the subject-matter of the litigation or the autonomy of the parties warrants a different linking factor.”
[67]It is generally accepted, and is common ground between the parties in this case, that the effect of Owusu was comprehensively to overrule the decision of the Court of Appeal in Re Harrods (Buenos Aires) [1992] Ch 72. In that case the Court of Appeal, itself overruling two first instance decisions, had held that the Brussels Convention was only concerned with the position as between contracting states, and did not preclude the grant of a forum non conveniens stay in favour of a non-contracting state.[68]Mr Phillips submits that the existence in the present case of parallel proceedings in the non-EU jurisdiction in question takes us outside Owusu. Mr Phillips does not, at least in his primary submission, rely upon lis pendens in Utah as a free-standing ground for a stay. Rather he argues that because of the existence of those parallel proceedings Article 27, interpreted “reflexively”, triggers this Court’s ability to apply conventional, discretionary, forum conveniens principles. In other words, provided only that one of the factors in a case is the existence of such parallel proceedings, this Court can exercise its discretion to stay proceedings of which it is properly seised under Article 2, by applying conventional forum conveniens criteria.[69]This seems to me to be too heavy a weight to place on Article 27. It is a bold step to seek to import into the Regulation a wide forum conveniens discretion, which has been held by the ECJ to be inimical to the fundamental aims of the Regulation, and to seek to do so on the back of a mechanistic (timing-based) rule for establishing the hierarchy where different courts, all bound by the Regulation, are seised of the same dispute. In his Opinion Advocate General Leger emphasised the profound difference between Article 27 In fact he was speaking of the Brussels Convention version of Article 27, which is materially identical. and the forum conveniens doctrine: “Furthermore, as the Court recently held in paragraph 47 of Gasser, that procedural rule ‘is based clearly and solely on the chronological order in which the courts in question are seised’. It does not therefore leave room for any discretion as to whether one of the courts seised is better placed than the other to deal with the substance of the case. It follows that, contrary to the view sometimes put forward, the mechanism provided for by the Convention in relation to lis pendens reflects a logic profoundly different from that associated with the doctrine of forum non conveniens since, as we have seen, the latter implies a discretion enjoyed by the court seised as to whether a foreign court would be a clearly more appropriate forum for dealing with the substance of the case.”(Paragraph 250 of his Opinion)[70]I did not understand Mr Phillips to contest the submission of Mr de Garr Robinson and Mr Wolfson that under the forum conveniens principles the fact of proceedings already pending in another jurisdiction was no more than a factor relevant to the determination of the appropriate forum. In that connection I was referred to Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1987] AC 460, The Abidin Daver [1984] AC 398, and to the following passage in Dicey, Morris & Collins at paragraph 12.036:
“Although it was once thought that there were special factors in cases of lis alibi pendens, it is now clear that the existence of simultaneous proceedings is no more than a factor relevant to the determination of the appropriate forum. … [T]he principles enunciated in Spiliada Maritime Corp v Cansulex Ltd apply whether or not there are other proceedings already pending in the alternative forum: …… the foreign proceedings may be of no relevance at all, for example, if one party has commenced them for the purpose of demonstrating the existence of a competing jurisdiction, or if the proceedings have not passed beyond the stage of initiating process. But if genuine proceedings have been started and have had some impact on the dispute between the parties, especially if it is likely to have a continuing effect, then this may be a relevant (but not necessarily decisive) factor when considering whether the foreign jurisdiction provides the appropriate forum.”
[71]Although Mr Phillips submits that a reflexive use of Article 27 so as to import a forum conveniens discretion would be perfectly consistent with the aims of the Regulation, that submission is difficult to maintain in the light of the reasoning relied upon by the ECJ and the Advocate General in Owusu. It is hard to see how conventional forum conveniens criteria would assume a different character, so as no longer “seriously [to affect] the predictability of the effects of the jurisdiction rules laid down by the Convention”, simply because they had been imported via Article 27. It seems to me that the ECJ’s reasoning would equally apply to the situation envisaged by Mr Phillips’ primary submission, namely where one of the relevant factors in the application of the standard forum conveniens test is the existence of parallel proceedings in the non-Regulation country. If Mr Phillips were right the defendants in Owusu could have bypassed the effect of that decision, and activated the court’s power to stay on forum conveniens grounds, by the simple expedient of commencing proceedings in Jamaica at any time.[72]The problems with Mr Phillips’ primary submission are thrown into high relief in a case where the EU court is the court first seised of the relevant dispute. In such a case the only question for that court applying the Article 27 analogy would be whether its “jurisdiction….is established”. But this is a question that can only be determined by reference to the Regulation, and in particular by reference to the provisions which objectively establish jurisdiction in accordance with criteria which are not discretionary. In neither Article 27 nor Article 28 is the court first seised entitled to stay its proceedings or decline jurisdiction in favour of another EU court. Yet Mr Phillips’ primary submission would require the relevant decision to be made by reference to criteria (forum conveniens) which are not only absent from the Regulation but which are discretionary and have been found by the ECJ to be inimical to the Regulation’s aims. If the courts of each Member State applied their own private international law rules in deciding whether, as the court first seised, its jurisdiction was “established” for the purposes of an Article 27 analogy, the result would obviously not be the harmony and predictability of approach intended by the Regulation, but quite the reverse. The same result would ensue where the EU court was second seised: on the proposed approach instead of the obligatory stay in favour of the court first seised required by Article 27, some courts would be applying discretionary forum conveniens criteria, and others would apply different national rules.[73]I do not think that too much should be read into the fact that the ECJ declined to answer the second question posed by the Court of Appeal. The Advocate General had advised that that question was inadmissible as being hypothetical, which seems to have been the case. The ECJ, like most courts, is understandably reluctant to resolve questions that do not arise in the case before it.[74]In fact, as I have already mentioned, Advocate General Leger, in the course of his long and careful analysis of the Brussels Convention, touched on the nature and purpose of the provision which is now Article 27. As well as pointing out the profound differences between the nature of that provision and forum conveniens principles, the Advocate General drew attention to the fact that neither that provision nor what is now Article 28 could be applied unless the parallel or related proceedings had been commenced before the courts of different contracting states. (See paragraphs 247-256.) He underscored this point by postulating a scenario where related proceedings brought by another holidaymaker who had suffered a similar accident to Mr Owusu’s were continuing in Jamaica: he stated that because those proceedings were before the courts of a non-contracting state Article 28 could not be applied so as to enable the defendants to apply for a stay in favour of the Jamaican proceedings (paragraph 254). Logic requires the same analysis in respect of Article 27 (see paragraph 146). If the learned Advocate General considered that those Articles could nevertheless be applied by analogy in the case of proceedings pending in a non-contracting state, one would have expected him to say so in the context of his wide-ranging advisory Opinion.[75]Nor does Mr Phillips derive any support for his primary submission from the English case-law. Although the question does not seem to have been considered in this jurisdiction since the judgment in Owusu, reliance is placed by Mr de Garr Robinson and Mr Wolfson upon, in particular, the judgment of Potter J (as he then was) in Arkwright Mutual Insurance Co v. Bryanston Insurance Co Ltd [1990] 2 QB 649. In that case it was argued that what are now Articles 27-30 of the Regulation were “signposts” indicating that the grant of a stay in favour of a non-EU court on grounds of lis alibi pendens was legitimate. It was contended that although on their face Articles 27-30 only dealt with parallel actions pending as between contracting states, those Articles were evidence that the Regulation was concerned with avoiding inconsistent judgments and the expense of parallel proceedings. Accordingly the court should assume that the power to stay for lis alibi pendens in non-contracting states was authorised by the Regulation notwithstanding that the broader power to stay for forum non conveniens had been abolished.[76]Potter J dismissed these arguments. He first referred to the decision of Hobhouse J in S & WBerisford plc v New Hampshire Insurance Co [1990] 2 QB 631. In that case, which did not involve any parallel proceedings, the learned

judge had said:

“It is clear that the Convention is designed (subject to art 4) to achieve uniformity and to 'harmonise' the relevant procedural and jurisdictional rules of the courts of the contracting states. The Convention leaves no room for the application of any discretionary jurisdiction by the courts of this country; the availability of such a discretion would destroy the framework of the Convention and create lack of uniformity in the interpretation and implementation of the Convention.”
[77]Hobhouse J therefore held, in a prescient foreshadowing of the ECJ’s Owusu judgment, that the exercise of a forum non conveniens power to stay proceedings properly brought in England and to which the Brussels Convention applied, would be inconsistent with the mandatory provisions of that Convention.[78]Having referred to that judgment Potter J then stated that in his view its logic applied equally where there was a lis alibi pendens, and that the effect of the Brussels Convention was to remove the power to grant a stay also where that factor was present, except in cases involving only the courts of contracting states, where what is now Article 27 applied. In an important passage for present purposes (in which I have replaced Brussels Convention article numbers with the Regulation’s numbering) he said:
“I do not consider that [Article 27] is to be regarded in a similar light to [Articles 22 and 23] as 'signposts' in favour of a discretion to stay. In the case of [Articles 22 and 23] the Convention deals with particular features of the action concerned in respect of which it recognises as a matter of principle that (a) the status and/or nature of the subject matter of the action and (b) the free agreement or consent of the parties as to forum, transcend the otherwise mandatory system and structure of the Convention founded on the defendant's domicile and make it appropriate for one particular jurisdiction only to hear the case. In the case of [Article 27] (lis pendens) the Convention does not identify the peculiar suitability of any particular court to hear the action by reference to its subject matter or the choice of the parties; nor does it identify any discretion based on cost, convenience or 'real connection'. It simply requires any Community court to decline jurisdiction or stay an action where another Community court is already seised of it. This seems to me no more than a simple order of priority, imposed as a necessary aspect of the certain and orderly regime of jurisdiction and enforcement in and between the courts of the Community. It does not seem to me a persuasive reason for holding that the Convention contemplates or legitimises an additional and discretionary power, based largely on cost and convenience, to stay in favour of a non-Community court against a plaintiff who has come to a court within the Community to try his dispute in accordance with a right apparently given and a requirement apparently imposed by the Convention on the basis of the defendant's domicile. In this respect I construe the Convention as less concerned with comity than with certainty. Given the view of the English courts, and of the Schlosser report, that lis alibi pendens is to be regarded as no more than one aspect or feature of the forum non conveniens doctrine, and that it appears that the continental members of the Community did not (in general at least) prior to the Convention, enjoy discretion under their domestic laws to decline jurisdiction, I do not consider that [Article 27] can be read as more than a circumscribed and necessary component of the scheme of the Convention to simplify enforcement in relation to judgments of the courts of contracting states, rather than as a signpost to an exception to the provisions of that scheme.”
[79]The learned judge then went on to deal with a further argument raised by the defendant that what is now Article 34(4) was a further signpost to the existence of a discretion to stay on this ground in favour of a non-contracting state already seised of the dispute, in order to avoid the risk of later inconsistent judgments. Potter J held that that provision did not support a power to grant a stay: it was simply an acknowledgement of the widely recognised doctrine of res judicata which arises once a cause of action has actually been determined between the same parties in a forum to which they have submitted their dispute. It should not be regarded as indicating that the Convention had a wider purpose of authorising discretionary stays in order to avoid the situations to which Article 34(4) was directed.[80]Although Arkwright along with Berisford was overruled by the Court of Appeal in Harrods, the latter has itself now been overruled by Owusu. It was submitted by Mr de Garr Robinson and Mr Wolfson that in those circumstancesPotter J’s reasoning now stands restored, and that I should follow it unless satisfied that it is clearly wrong. Whatever the precise position in terms of precedent, far from being satisfied that the reasoning of Potter J is wrong, I find it compelling and agree with it.[81]Although, so far as I am aware, there has been no post-Owusu case on the point in this jurisdiction my attention was drawn by counsel to Goshawk Dedicated Ltd v. Life Receivables Ireland Ltd [2008] IEHC 90, a case in which the Irish Commercial Court (Clarke J) has recently grappled with the issue. The context was an action brought in Georgia, USA for misrepresentations, and subsequent mirror image declaratory proceedings brought in Ireland. The defendant in the Irish action applied for a stay in favour of the earlier US proceedings arguing either(1) that Owusu did not preclude a discretionary stay based on lis alibi pendens, or alternatively(2) that a stay was possible or even obligatory where (a) the non-EU country’s court was first seised and (b) the judgment of that court was such that it would be recognised in the EU state on the basis of the Regulation. In each case Article 27 was prayed in aid by analogy.[82]By the close of the hearing before Clarke J the first argument appears to have been all-but abandoned by the defendant. The learned judge therefore confined himself to commenting that, given the clear statements in Owusu as to the impermissibility of broad discretionary powers for the purpose of declining jurisdiction otherwise properly founded under Article 2: “Having regard to Owusu, I am not satisfied that any doctrine of lis alibi pendens which retained a significant discretion on the part of the courts, is sustainable as being consistent with the Brussels Regulation.” (paragraph 5.5 of the judgment)[83]Clarke J then turned to consider what he called the “more automatic” alternative form of the defendant’s argument – an argument which is strikingly similar to Mr Phillips’ “fallback” submission, which I shall examine later in this judgment. Referring to Articles 27 and 34(4) he accepted that there was acknowledgment in the Regulation of both the principle of lis alibi pendens and the appropriateness of affording precedence to an earlier judgment of a non-EU state which satisfied the international law requirements of the Member State of recognition. However in relation to the latter he distinguished priorities as between judgments from priorities as between pending proceedings; the real question, he said, was whether the fact that those matters were acknowledged in the Regulation was sufficient to warrant a departure from what he regarded as the clear mandatory language of Article 2 as interpreted in Owusu. He considered that one obstacle to such a departure was the clear statement by the ECJ in a number of cases to the effect that deviations or derogations from the underlying provisions of the Regulation must be found in the Regulation itself, which enumerates exhaustively the cases in which a person may be sued outside the State in which he is domiciled.[84]He went on to state:
“There is, however, in my view, an even greater difficulty with what is proposed. In the lis pendens regime specified in Article 27, the court first seized of a case has to consider whether it has jurisdiction in accordance with the terms of the Regulation itself. Thus, within the EU, issues concerning priority are determined on a uniform basis. The court first seized decides whether it has jurisdiction in accordance with the Regulation. If that court does not have jurisdiction, then the court second seized may activate litigation commenced before it, provided that the second court itself does have jurisdiction in accordance with the terms of the Regulation. Priority is determined by reference to the commencement of proceedings, but also by reference to whether any competing litigation is properly within the jurisdiction of the court concerned in accordance with the terms of the Regulation rather than in accordance with the private international law of the country concerned. This could not be the case where any competing jurisdiction is a non Member State. In that eventuality the non Member State would consider whether it has jurisdiction in accordance with its own principles of private international law. If, therefore, the courts of the competing Member State have to stay proceedings pending a decision by the courts of a non Member State as to whether that court has jurisdiction, the courts of the Member State concerned will, in effect, be staying its proceedings in circumstances where the decision as to whether the proceedings should be conducted in the non Member State will be determined, not in accordance with the provision of the Regulation, but rather in accordance with the terms of the private international law of the non Member State concerned. Thus, in my view, the analogy with Article 27 is just not available in the case of a non Member State, because that non Member State will not be bound by the terms of the Regulation in its consideration of whether it has jurisdiction.”
[85]On 30th January 2009, the Irish Supreme Court gave judgment in an appeal from Clarke J’s decision. It did not criticise Clarke J’s reasoning in any respect, or indeed express any provisional view on the rival arguments other than to indicate that it did not regard the issue as acte clair. On that basis it decided to refer an appropriate question to the ECJ for a preliminary ruling. However it now seems that the request was not in fact sent to the ECJ. In the course of the hearing before me I was told that the matter had been resolved.[86]Mr Phillips does, however, receive some support for his submissions from the distinguished authors of two leading textbooks in this field, namely Dicey, Morris and Collins on The Conflict of Laws (14th edition), to which I have already referred and of which Sir Lawrence Collins (now Lord Collins of Mapesbury) is the General Editor, and Civil Jurisdiction and Judgments (4th edition) by Professor Adrian Briggs, edited by Peter Rees. At paragraph 12-021 of Dicey, Morris and Collins, after a reference to the ECJ’s unanswered question in Owusu, the following is written: “Where the dispute before the court concerns a question of title to land in a non-Convention State or a non-Regulation State, or concerns the validity of companies which have their seat in a non-Regulation State, or the validity of their organs, or concerns a public register in a non-Regulation State or the validity of certain forms of intellectual property right conferred under the law of a non-Regulation State, or arises from a contract which contained a jurisdiction agreement for a non-Regulation State, or is already the subject of proceedings before the courts of a non-Regulation State, it is most improbable that an English court, seised with jurisdiction on the basis of Article 2, is obliged to exercise it if the defendant applies for a stay on the ground that a non-Regulation State is the forum conveniens.” (My emphasis)[87]The learned author goes on to state that in relation to these cases Owusu is not of assistance, and that it is a matter of “plain commonsense” that a stay should be permissible. Two further reasons are put forward in support of the existence of a power to stay on forum conveniens or equivalent grounds. First, the ECJ in Case C-387/98 Coreck Maritime GmbH v Handelsveem BV [2000] ECR I-9337 (paragraph 19) had approved the principle that a court may give effect to an agreement conferring jurisdiction on the courts of a non-Convention State if the agreement is valid under the law of the court seised in breach of contract. Second, a learned jurist, Dr Georges Droz, had asserted as far back as 1972 and had reiterated more recently, that where there was a connection with a non-Convention State which in all other respects was equivalent to those in what is now Article 22 of the Regulation, or where a matter involved an exclusive jurisdiction agreement in favour of a non-Convention State, it was open to a court to give a “reflexive effect” to the corresponding provisions of the Brussels Convention so as to enable the court to give jurisdictional relief. Why (Dr Droz is reported as asking rhetorically), if a French judge was incompetent to adjudicate on a German patent or German land, should he be better equipped to adjudicate on an Argentine lease or a Japanese patent?[88]On this basis the learned author of Dicey, Morris and Collins concludes that the argument for attributing such reflexive or analogous effect to what are now Articles 22 and 23 of the Regulation is overwhelming. Moreover, in such cases as occur under Articles 22 and 23 an English court should not apply the analogy slavishly, nor regard itself as bound to grant a stay, but should exercise its discretion in the ordinary way in the absence of guidance from the ECJ. Further, if that was right there could be no objection to an English court applying the forum conveniens doctrine where there was a lis alibi pendens in a non-Regulation State. Therefore Articles 27 and 28 could be applied by analogy as well.[89]Although I say so with some trepidation given the very distinguished source of the views expressed, it seems to me that the propositions which I have underlined in the quotation from the textbook, and which are encapsulated in the last two sentences of the previous paragraph, do not fully reflect the decision in Owusu nor represent the current state of the law. I say nothing about what the law ought to be. I am well aware that the decision in Owusu has been the subject of considerable comment, and that the result is capable of giving rise in certain circumstances to practical and procedural difficulties some of which were acknowledged by the ECJ itself as being in its view the price which had to be paid for the benefits of legal certainty and uniform application of the jurisdictional rules (see for example paragraphs 44 and 45 of the judgment in Owusu). It is also well known that there have been voices calling for amendment to the Regulation to remedy some of the perceived problems.[90]I have already explained why I consider that the logic of the reasoning in Owusu covers a case such as the present, and why it is hard to conceive that, consistently with its judgment, the ECJ would regard the application of a forum conveniens discretion permissible provided there were parallel proceedings pending in a non-EU state.[91]It is true that in Coreck (above) the ECJ confirmed that, when faced with an exclusive jurisdiction clause in favour of the courts of a non-EU state, a Member State should “assess the validity of the clause according to the applicable law, including conflict of laws rules, where it sits” and referred to paragraph 176 of the report by Professor Schlosser on the Convention of 9 October 1978 on the Accession of Denmark, Ireland and the UK to the Brussels Convention. In that paragraph of his report Professor Schlosser comments that the Brussels Convention neither validates nor invalidates such clauses, and that an EU national court seised of proceedings brought in breach of the clause must decide on the validity of the clause, which deprives it of jurisdiction, in accordance with its own rules (lex fori). If, when these are applied, the clause is invalid “then the jurisdictional provisions of the [Brussels Convention] become applicable.” The assumption of Schlosser appears to be that if the clause is valid according to local rules then jurisdiction under the Convention is displaced. In the light of this, English courts have understandably concluded that there is no objection to the national court not only determining validity but also where appropriate giving effect to such a clause, including by granting a stay. (See, for example, Arkwright (above), Konkola Copper Mines plc v Coromin [2005] EWHC 858 (Comm), and Winnetka Trading Corporation v Julius Baer International Limited and another [2008] EWHC 3146 (Chy).[92]However, as we have seen, there is no support in the authorities for adopting a similar approach where there is a lis alibi pendens in a non-Regulation country. Moreover it seems to me, for much the same reasons as those expressed by Potter J in Arkwright (see paragraph 78 above), that the fact of the parties having agreed that the courts of a particular state should have exclusive jurisdiction over any dispute between them is a ground for granting a stay of proceedings which is sufficiently distinct in its nature from a case where there is a lis alibi pendens, for there to be no compulsion in logic to assume that because the Regulation permits a stay in the one, it should be taken also to authorise it in the other.[93]Further, in suggesting that enforcement of a jurisdiction clause was permissible in favour of the courts of a non-contracting state, neither the ECJ in Coreck nor Professor Schlosser appeared to be relying upon a reflexive or analogous interpretation of the corresponding provision relating to contracting states in the Convention (now Article 23 of the Regulation).[94]In a case where there is a jurisdiction agreement the claimant has commenced proceedings in breach of the agreement to litigate elsewhere. It is a more or less universal principle that people should be held to their compacts, freely entered into. A rule requiring a court to entertain proceedings brought in breach of a valid agreement to sue in a different jurisdiction could be seen as making the court complicit in a breach of contract or even in an abuse of its own procedure. To enable the court to give effect to such an agreement in the case of a non-Regulation state does not compromise the legal certainty and uniform application of the jurisdictional rules, which are at the heart of the Regulation. Rather it enhances legal certainty by holding the parties to their agreement.[95]So, too, there are different, but equally compelling, reasons for allowing a court to stay proceedings in order to enable disputes with very specific subject matter, widely acknowledged as such, to be litigated in the courts of the relevant jurisdiction. Therefore the availability of a stay enabling a dispute with subject matter of the kind described in Article 22 of the Regulation to be resolved in the non-Regulation state to which the dispute relates, would not in my view assist the argument for a “reflexive” interpretation of Article 27 of the Regulation in relation to lis alibi pendens. (See also Konkola Copper Mines (above) per Colman J at paragraphs 86–101, and Winnetka Trading Corporation (above) per Norris J at paragraphs 22-26.)[96]As to the views of Dr Droz referred to in Dicey, Morris and Collins, I was not shown any of the original material recording those views. In any event, so far as one can glean from the references in the textbook, they appear to have been restricted to the possibility of interpreting reflexively what are now Articles 22 and 23 of the Regulation, and do not touch at all on what is now Article 27 or lis alibi pendens. As such they do not take the matter much further.[97]As to Briggs & Rees, it is to be noted that although the learned author is of the view that a stay of proceedings is permissible if the same dispute has been commenced at an earlier point in time and is still pending before the courts of a non-Regulation state, that view is expressed more tentatively than in Dicey, Morris and Collins. Whilst the author discounts Owusu as not pointing clearly to the right answer, the availability of a power to stay proceedings brought in a court with Article 2 jurisdiction on grounds of lis alibi pendens is “less immediately clear” than in the case of an exclusive jurisdiction agreement or of a dispute relating to title to land and the other special subject matter cases. It is only “on balance” that the author’s conclusion in favour of the existence of a power to stay is reached, and possibly only where the proceedings pending in the non-Regulation state are “well advanced”. (See paragraph 2.226.)[98]The author does not make it explicit that the English court would apply the normal forum conveniens criteria once it had ascertained that earlier proceedings were pending in a non-EU state. Presumably this is implicit. In the corresponding discussion in Dicey, Morris and Collins it is expressly so stated. There is a tension here, in that under forum conveniens principles the ultimate test is the natural and appropriate forum; whether the foreign court was first or second seised would not normally be decisive. Yet the authors of both textbooks consider that the power to stay is only available where the foreign proceedings are first in time.[99]Notwithstanding this support for the availability of a power to grant a stay in these circumstances, for the reasons already given it seems to me that Mr Phillips’ primary submission must fail, and that it is not open to me to interpret and apply Article 27 reflexively so as to enable me to exercise a discretion to stay proceedings which have been properly founded on Article 2, on the grounds that the same dispute is pending between the same parties in the Utah courts and that the latter and not this Court is the natural and appropriate forum. Such an interpretation would introduce the wide forum conveniens discretion by the back door, contrary to the ruling of the ECJ in Owusu. In my view the submission fails whether this Court is the first or second seised.[100]I should say that Mr Wolfson accepted (and I did not understand Mr de Garr Robinson to demur) that neither the Regulation nor Owusu affects the discretion which has long existed at common law to stay proceedings which are vexatious or oppressive or otherwise an abuse of process. One example of such a case would be where a person submitted to or participated in foreign proceedings and then sought to re-litigate the dispute in this jurisdiction. Such a claim might well be dismissed as an abuse. However I understand it to be common ground that the mere fact of a lis alibi pendens would not normally be sufficient to found such an application. In any event, in the present case none of the stay applications is based on an allegation of abuse.[101]I now turn to Mr Phillips’ fallback submission, namely that Article 27 should be applied reflexively so as to authorise, or indeed require, this Court to grant a stay in favour of a court in a non-EU state where the latter court is the court first seised of the dispute. As I indicated earlier, Mr Phillips acknowledges that even if correct this submission cannot assist him so far as the Part 11 applications in the Noteholder Proceedings are concerned, as this Court rather than the Utah State Court is the court first seised in relation to that dispute. It could however assist the applications in the Declaratory Proceedings where this Court is second seised.[102]As I understand it, the argument envisages that where the EU court is the court second seised it would be required to stay its proceedings to allow the non-EU court to decide whether it has jurisdiction. Mr Phillips acknowledges, as he must, that in so deciding the non-EU court will not pay any attention to the jurisdictional provisions of the Regulation, but will determine its jurisdiction in accordance with its own national rules. These rules could, for example, include forum conveniens. In such a case the ultimate ability of the EU court to adjudicate on the dispute would be determined by a non-EU court upon the basis of criteria which have been held by the ECJ to be impermissible. In any event the jurisdictional rules to be applied by the non-EU court first seised would not be predictable nor of uniform application, as they are when Article 27 is applied directly as between the courts of two or more competing EU states. A surrender of Article 2 jurisdiction in application of Article 27 does not compromise those principles because there is certainty that the court favoured by the surrender would then also apply the Regulation rules in order to determine its own jurisdiction.[103]There is the additional problem that, on a strict analogy with the Article 27 approach, an EU court may be constrained to defer to the courts of a foreign state where justice is likely to be unavailable or impaired. Mr Phillips answered this last point by indicating that in such a case there would be some residual discretion to refuse a stay, by analogy with the duty to refuse recognition of judgments in certain cases under the Regulation. But this answer again demonstrates the gap between his proposed approach and the legal certainty and uniform application of the jurisdictional rules for which the Regulation strives. Given that, in my view, those aims would be significantly compromised by Mr Phillips’ fallback argument, it too falls foul of the reasoning in Owusu.[104]For these reasons I agree with Clarke J in Goshawk that the parallel with Article 27 which the fallback argument seeks to draw is not valid. That provision cannot therefore be applied in the way suggested where the competing court is not subject to the Regulation. Its mechanisms can achieve their purpose only as between competing courts of different Member States. I believe that this was also the view being expressed by Advocate General Leger in the passages to which I have referred at paragraph 74 above.[105]It follows that this Court does not have power to stay the Declaratory Proceedings or the Noteholder Proceedings on the grounds relied upon.

Forum conveniens

[106]That conclusion is sufficient to deal with all the Part 11 applications. However in case the matter goes further it is appropriate for me to express my conclusions on the merits of the forum conveniens (including lis alibi pendens) arguments put to me. In view of my decision on the Court’s powers I propose to deal with this relatively briefly.[107]It is common ground that the burden lies on the defendants, in accordance with the principles of The Spiliada (above), to demonstrate that: “there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice.” (Per Lord Goff at page 476)[108]Lord Goff went on to indicate the nature of the factors which the court should take into account in exercising its discretion to stay proceedings. He said: “Since the question is whether there exists some other forum which is clearly more appropriate for the trial of the action, the court will look first to see what factors there are which point in the direction of another forum. These are the factors which Lord Diplock described, in MacShannon's case [1978] 1 All ER 625 at 630, [1978] AC 795 at 812, as indicating that justice can be done in the other forum at 'substantially less inconvenience or expense'. Having regard to the anxiety expressed in your Lordships' House in the Société du Gaz case 1926 SC (HL) 13 concerning the use of the word 'convenience' in this context, I respectfully consider that it may be more desirable, now that the English and Scottish principles are regarded as being the same, to adopt the expression used by Lord Keith in The Abidin Daver [1984] 1 All ER 470 at 479, [1984] AC 398 at 415 when he referred to the 'natural forum' as being 'that with which the action has the most real and substantial connection'. So it is for connecting factors in this sense that the court must first look; and these will include not only factors affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the relevant transaction (as to which see Crédit Chimique v James Scott Engineering Group Ltd 1982 SLT 131), and the places where the parties respectively reside or carry on business.” (See pages 477-8)[109]I have already referred to the relevance of a lis alibi pendens in the courts of the competing jurisdiction when determining whether that jurisdiction is a more appropriate forum for the dispute (see paragraph 70 above). As seen, the effect if any of this factor upon the outcome of a stay application will depend upon the particular circumstances, ranging from almost no impact at all, to very significant impact. Amongst the matters to be considered in this regard is how far advanced the foreign proceedings are.[110]Mr Phillips submitted that in assessing the parties’ respective arguments I should not become immersed in the minutiae of the assertions and counter assertions set out in the witness statements and skeleton arguments, but should look at the “big picture”. This is a suggestion I readily accept. Much of that “big picture” is not in dispute and I have already set it out in some detail earlier in the judgment.

The Declaratory Proceedings

[111]The key points raised by the parties in the course of argument are now briefly discussed.[112]Domicile of the parties: All the parties to the Declaratory Proceedings are English domiciliaries, with the exception of ARM which is a Luxembourg entity. The domicile of ARM is at worst neutral and at best would seem to favour England as opposed to Utah as a forum, given that Catayst, an English company, is alleged to have acted as ARM’s agent in regard to the representations in question, and there is a possibility that any agency relationship would be governed by English law. It would certainly not be governed by Utah law. Also ARM wishes to have the issue of its liability adjudicated in England.[113]Witnesses: The two principal witnesses of fact and the main protagonists - Mr R and Mr L - are based in England. Any witnesses from ARM would be in Europe and therefore closer to England than to Utah. A potential witness, Dr Lew Brown, is based in Utah. It appears to be common ground that the Utah courts would co-operate in obtaining the testimony of any witness based there if compulsion were required. However, it may be that in the 21st century the residence of witnesses does not perhaps have the significance as a factor it once had, in view of the greater speed and ease of travel, as well as advances in telecommunications.[114]Subject matter of dispute: The representations of which Mr L complains were contained in letters said by Catalyst to have been drafted by Mr L in England, signed by Mr R in England and received by Mr L there, following discussions between Mr L and Mr R which also took place in England. The representations were about work done by Catalyst in England to raise money from potential investors who were mainly in England.[115]Although any loss caused to Mr L by reason of the representations would probably be said to have taken place, at least in part, in Utah where the legal expenses for which he claims recompense would have been incurred and paid, this is a matter of causation and quantification, which can easily be resolved in England.[116]Relevant law: The representations were made in the course of Catalyst’s performance of a contractual relationship (between Eneco and Catalyst) which, by express provision in the Catalyst Agreements, was agreed to be subject to English law and to the exclusive jurisdiction of the English courts.[117]The question of Catalyst’s and/or ARM’s liability (if any) in tort for alleged fraudulent or negligent misrepresentations in the December Letters is a question which may well also be governed by English law. Mr Phillips accepted in argument that it was “very arguable” that the relevant law is English, such that, if the Utah Fraud Proceedings were to proceed in Utah, the Utah Court may need to receive expert evidence of English law. (See below.) In the (perhaps less likely) event that the English court decided it must apply Utah law, the nature of the basic issue – liability for fraudulent or negligent representation – is such that English law and Utah law are unlikely to be very different. I cannot imagine that this would pose a difficulty for the English court, or indeed for the Utah court in the reverse situation.[118]In the defendants’ evidence some reliance was placed on the fact that the Notes were governed by Utah law. But the Declaratory Proceedings do not concern the rights attaching to the Notes, and the law governing them has no bearing on these proceedings as far as I can see. Other than in terms of some shared background and dramatis personae the Utah Fraud Proceedings are quite separate from the Noteholder Proceedings and the Utah Noteholder Proceedings and from the issues raised in the Eneco’s bankruptcy.[119]Lis alibi pendens: The Utah Fraud Proceedings were commenced 5 or 6 weeks before the Catalyst Declaratory Proceedings, which mirror them to some extent. They are not well-advanced, and Catalyst, Mr R and ARM are all said to be challenging the Utah jurisdiction. Therefore the existence, indeed the earlier existence, of this action in Utah, although relevant as a factor in the exercise which I have to perform, is not a factor which bears decisive or near decisive weight.[120]As I have said, the Utah Fraud Proceedings mirror some but not all of the matters raised in the Declaratory Proceedings. The latter also cover the claims intimated against Catalyst on behalf of Eneco, which were assigned to Mr L by Eneco’s trustee (see paragraphs 23-25 above). Assuming that the Eneco contractual claims were added by amendment to the Utah Fraud Proceedings (despite the exclusive jurisdiction clause in favour of England contained in the Catalyst Agreements) if the Catalyst Declaratory Proceedings were to be stayed, those claims, being almost certainly subject to English law (as well as jurisdiction), would require evidence of English law to be put before the Utah court. There is a suggestion that even as the claim stands the Utah court may need to receive expert evidence of English law. (See the report of Professor Mabey at paragraphs 10-14, and the contrary views of Mr Gross, in his second witness statement, paragraph 19.) On any view, if the Utah Fraud Proceedings go ahead there may be substantial argument about whether English law should apply to the claim. However, in view of the nature of the issues which are likely to arise in the case I do not think that the courts of either jurisdiction would encounter much difficulty in the event of needing to apply the law of the other.[121]There are additional parties in the Utah Fraud Proceedings – Mr L’s co-plaintiffs, Mr Reed and Mountainland Inc. Mr Phillips suggested that there was a possibility that even if the Declaratory Proceedings were to continue the co-plaintiffs may wish to continue their action in Utah, notwithstanding that it is an unquantified claim for legal expenses. The claimants contend that this is unrealistic, and that those parties have no independent interest of their own in pursuing the proceedings and are merely jurisdictional makeweights who, if their claims were genuine, could join these proceedings in England with no difficulty.[122]I have no means of ascertaining the motives of those parties for their participation in the litigation. Their claim, unlike that of Mr L, is likely to depend upon their receipt of the December Letters alone, and their evidence is likely to be straightforward. Mr L’s claim, on the other hand, is likely to entail close consideration of discussions which are alleged to have taken place between Mr L and Mr R. All in all I do not consider that Mr Reed’s and Mountainland Inc’s being co-plaintiffs in Utah greatly affects the question whether Utah has been shown to be a distinctly more appropriate forum for the particular dispute than England.[123]Mr L is seeking punitive damages in the Utah Fraud Proceedings. In English law strict limits are imposed upon recovery of punitive or exemplary damages as a matter of public policy. Such damages would almost certainly not be available in England in a case such as this. Mr de Garr Robinson and Mr Wolfson submitted that if the issues in question were to be adjudicated in Utah, this would deprive their clients of a legitimate juridical advantage that would be available to them in England. Whilst not making any concession as to the weight to be given to the point, Mr Phillips did not dispute the basic distinction between the competing jurisdictions. The point may have some significance. It would seem at first sight a little perverse to stay proceedings, which are properly brought in this jurisdiction, in favour of a jurisdiction where relief is being claimed which would be regarded as contrary to public policy in this jurisdiction. To make this point is not to imply any criticism of the other jurisdiction. One system is not necessarily wrong: they are simply different. Nor would the existence of punitive damages in a competing jurisdiction necessarily prevent that jurisdiction being considered the more appropriate forum for a particular dispute. But it seems to me that the point would certainly not be irrelevant, and could be significant particularly where a case was evenly balanced. In the present case however this factor is not “make or break”. I would have reached the same conclusion even if punitive damages were not being claimed or were not available in Utah.

Conclusion

[124]Having carefully considered all the points put to me, of which those specifically mentioned above were the main ones, the defendants in the Declaratory Proceedings have not satisfied me that Utah is distinctly a more appropriate and natural forum for the adjudication of the relevant disputes than this Court. I have reached this conclusion in both the Catalyst Declaratory Proceedings and the ARM Declaratory Proceedings. It is not a borderline case. It seems to me that the more appropriate and natural forum in both cases is clearly in England rather than in Utah. The most significant factors in favour of allowing the matter to proceed in England are that it is essentially a dispute between two protagonists who are resident and domiciled in England, where the main events alleged to give rise to liability of the one to the other took place. The fact that any liability seems more likely than not to be determined by reference to English law also carries some weight, particularly given the other factors I have mentioned: there is obviously an advantage in a court applying its own rather than foreign law. The other factors discussed, including the existence of the Utah Fraud Proceedings, are not in my view such as to tip the scales in favour of Utah as the natural and appropriate forum.[125]In the light of this, even if I had concluded that I had the power, I would not have ordered either the Catalyst Declaratory Proceedings or the ARM Declaratory Proceedings to be stayed on forum conveniens (including lis alibi pendens) grounds.

The Noteholder Proceedings

[126]Here too I propose to concentrate on the matters which the parties emphasised in their oral submissions, and on the “big picture”.[127]Domicile of the parties: The key parties and main protagonists are essentially the same as in the Declaratory Proceedings. The only difference is that in addition to Mr L/Maximillian, Catalyst has also joined Micropower as a defendant, the latter having become the repository of the IP Rights when the Rights were transferred to it by Mr L/Maximillian. Micropower is, of course, a company registered in the British Virgin Islands, but there has been no suggestion that this is likely to have any real impact on the natural forum for this litigation.[128]Witnesses: Neither side submitted that the residence of the potential witnesses of fact was likely to be a decisive factor so far as the natural forum for this dispute is concerned. Both Mr R and Mr L would obviously be involved, and that, for what it is worth, would favour this jurisdiction on grounds of expense and convenience. Mr Phillips did however place emphasis on the questions of Utah law which he said would arise and on the need for expert evidence to deal with those matters if the case continued in this jurisdiction. I will return to this below.[129]Subject matter of dispute: At the heart of the proceedings are the IP Rights, and Mr L’s obligations to Noteholders by virtue of his position as Collateral Agent. The IP Rights are worldwide patents now held by a company registered in the British Virgin Islands. Catalyst’s complaint is that, in breach of his duties, Mr L has:(1) refused to recognise Catalyst’s interest as a Noteholder (Mr L argues, on the other hand, that the assignments executed in Catalyst’s favour by the Assignors fell foul of Utah securities laws);(2) refused to recognise his own status as trustee of the IP Rights for the Noteholders; and(3) sought inflated expenses from the Noteholders. Catalyst seeks, amongst other relief, a declaration that Mr L (and now Micropower) holds the IP Rights as trustee for Catalyst and others, an inquiry as to what has become of the IP Rights and an account of the fees and expenses for which it is properly liable to Mr L.[130]Relevant law: Mr Phillips relies heavily upon the involvement of the Utah bankruptcy court, and the relevance of Utah law to the issues in contention. He submits that the whole dispute revolves around Eneco: from about January 2008 Catalyst and Mr L had been litigating in the Utah bankruptcy court in relation to that company, and in particular about the ownership of the IP Rights. Catalyst was still involved in proceedings in the bankruptcy court. The order of that court on 7 November 2008 approving the sale of the IP Rights to Mr L, and in particular the meaning and effect of paragraphs 9 (as to the transfer being “free and clear of all liens”), and 20 (as to which see above at paragraph 33), would be important issues in the present dispute. He submitted that those matters would have a clear bearing on the legal consequences of Mr L/Maximillian having parted with ownership of the IP Rights to a third party, Micropower. This transfer, together with Mr L’s actions at the time (eg obtaining an independent valuation and the consent of a proportion of the Noteholders), Mr L’s rights and duties under the Intercreditor Agreement, and his liability to the Noteholders (including Catalyst or the Assignors as the case may be), would all have to be examined from the perspective of Utah law.[131]The Intercreditor Agreement was, of course, expressly governed by Utah law. There could also be an issue as to whether the IP Rights were sold subject to a lien. In addition there was the disputed effect of the assignment of some of the Notes to Catalyst. The legal effect would, he argued, be determined by reference to Utah law, as the Notes too were expressly governed by such law. In English law terms the allegations of the claimants raised questions of fiduciary duties, constructive trusteeship, good faith etc. There was no evidence as to how different (if at all) English and Utah law were in relation to such matters. On any view there would need to be expert evidence of Utah law on all the matters identified, which would add to the expense of a trial here. Although he accepted that English courts were used to applying foreign law to such questions, he contended that this was still a powerful factor in favour of Utah as the more appropriate forum.[132]It seems to me that the proceedings in the Utah bankruptcy court, whilst no doubt forming important background to the Noteholder Proceedings, are not really a strong pointer to Utah as the natural forum. It is of course true that there was activity between the parties in the Utah bankruptcy court prior to the order of that court approving the sale. It is also the case that since then there has been further skirmishing in that court, initiated by Mr L. As I have already mentioned (paragraph 43), in February this year Mr L unsuccessfully sought an order that the Noteholder Proceedings represented a contempt of the Utah bankruptcy court’s order approving the sale of the IP Rights to Mr L.[133]However, the bankruptcy court not only held that the Noteholder Proceedings had no real impact upon Eneco’s trustee or upon the company’s estate, but also indicated that the issues between the parties could easily be resolved in the English courts, using the bankruptcy court’s order as a basis. Indeed Mr L’s reliance upon the issues fought out in the bankruptcy of Eneco seems misplaced. The contest as to forum is between this Court and the Utah State court, not the bankruptcy court. Catalyst is seeking to protect the interest which it claims in the IP rights and to hold Mr L to the duties which it contends are owed by him in his capacity as Collateral Agent acting for and using the property of the Noteholders to buy the IP Rights. Catalyst’s claim is not made under the Notes or the Secured Loan Agreements, which Catalyst accepts have been discharged. Moreover Mr de Garr Robinson denies that the Noteholder Proceedings call into question in any way the orders of the Utah bankruptcy court. But, as Judge Lindberg herself stated, even if they do there is no reason why this Court cannot deal with that question.[134]Mr Phillips is in my view on his strongest ground when relying upon the role likely to be played by Utah law in the various issues which may fall to be determined. Mr de Garr Robinson does not dispute that the Intercreditor Agreement is governed by Utah law. This agreement will undoubtedly be of some importance: in particular it will be necessary for the court to decide upon the nature and extent of Mr L’s obligations as Collateral Agent thereunder, including whether that agreement excludes any fiduciary duty. He also accepts that one of the main issues in the case, namely whether Catalyst and the other Noteholders have an interest in the IP Rights themselves or merely in the preference shares issued by Micropower, will be determined in accordance with Utah law. On this point it seems that the meaning and effect of the Utah bankruptcy court’s relevant orders may well need to be considered.[135]On the other hand the question of the validity from the perspective of Utah securities rules of the assignment to Catalyst of some of the Notes, whilst also governed by Utah law, is unlikely to be an issue of substance; the Assignors have applied (an application which is unopposed) to join these Proceedings, on the basis that if Catalyst is not in a position to enforce any rights as Noteholder because the assignment is invalid as against Eneco and its successors, then the Assignors must be so entitled. I did not understand Mr Phillips strongly to dispute that the issue of the assignment’s validity might well fall away in these circumstances.[136]I recognise that expert evidence on Utah law will almost certainly be needed in this Court on the legal issues described above in paragraph 134. However, these are relatively narrow issues, and there is some evidence that Utah law as to the fiduciary status of an agent in the position of Mr L is not very complex (see the report of Professor Mabey at paragraphs 35 to 45 and Mr Gross’s second witness statement at paragraph 62). In any event, as I have said, this Court has a good deal of experience in receiving evidence of foreign law and applying it.[137]Lis alibi pendens: As with the Utah Fraud Proceedings, the Utah Noteholder Proceedings are not well-advanced. I do not consider that their existence carries very much weight in the assessment I have to make.

Conclusion

[138]The question of whether Utah is distinctly the more natural and appropriate forum for this dispute is more finely balanced than was the case with the Declaratory Proceedings. In particular, the questions of Utah law which are going to have to be considered will require this Court to receive expert evidence. This will add to the expense. However, giving all due weight to those considerations, I do not consider that they are sufficient to discharge the burden of showing that Utah is clearly a more appropriate forum than here. This is essentially a dispute between two English entities about the duties one owed and owes to the other, and about the ownership and control of worldwide intellectual property rights currently in the hands of a British Virgin Islands company, having been transferred to that entity by one of the English protagonists. In these circumstances I would not have stayed the Noteholder Proceedings had I been able to exercise a discretion.

Conclusion

[139]For these reasons all the Part 11 applications are dismissed.[140]As already indicated, I grant the unopposed application to join the Assignors as co-claimants in the Noteholder Proceedings.

Cited in 15 later judgments

and 6 more of the most senior