Vitol SA v Capri Marine Ltd & Ors (No. 2) [2010] EWHC 458 (Comm)

[2010] EWHC 458 (Comm)Case No 2001 Folio 39
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 9 March 2010
Before
THE HON. MR JUSTICE TOMLINSON
Between
VITOL S.A.Claimant(1) CAPRI MARINE LIMITEDDefendants(2) GERASSIMOS KALOGIRATOSDefendant(3) IOANNIS KALOGIRATOSDefendant(4) MARIA VIAGGINIDefendant(5) NIKOLAOS KOUTSOKOSTASDefendant
Luke Parsons QC, Poonam Melwani and Claudia Wilmot-Smith(instructed by Messrs Stephenson Harwood) for ClaimantStephen Hofmeyr QC and John Bignall(instructed by Messrs Hill Dickinson) for DefendantsHearing Hearing dates: 22 February 2010
Judgment
[1]Capri Marine Limited, the First Defendant in this action, is a judgment debtor. The Second to Fifth Defendants are directors/former directors of Capri who were joined to the action in June 2008 for the purpose of the Claimant, Vitol SA’s application for a third party costs order against them. The Fifth Defendant is now, sadly, dead. Judgment was given against Capri on 6 April 2005 in favour of the Claimant, Vitol, in the sum of US$6,793,518.28. Of that amount only US$1,000,000 has been recovered. The judgment itself recited that Vitol was to give credit against the judgment sum for the amount of US$500,000 paid to Vitol in February 2001. In fact this sum was I think paid in April or May 2001. A further US$500,000 was paid into Court in November 2002. No further sum has been recovered since judgment. Capri is a Maltese company which in its own name probably only ever owned one asset, the tanker Alambra whose admitted unseaworthiness caused Vitol, who chartered her in 2000 to carry a cargo of petroleum products from Tallinn, Estonia to Singapore, the loss and damage in respect of which this action was brought.[2]Capri was managed from Greece by Starlady Marine Limited. Starlady is in the same beneficial ownership as Capri. In May 2001 the Alambra was apparently sold to a Marshall Islands company, Aurora Maritime Inc. Aurora is likewise managed from Greece by Starlady and, as is now known, is also in substantially the same beneficial ownership as Capri. In fact Aurora was set up in order to facilitate the sale of the vessel for scrap. The vessel was sold for scrap later in 2001. The proceeds of the latter sale were about US$3.4 million. It seems likely that the proceeds of sale are now exhausted. It is said that they have been used to discharge liabilities of Capri.[3]In 2008, in an effort to find out what had become of those proceeds and more generally about Capri’s assets, Vitol applied for orders pursuant to CPR 71.2 with a view to requiring the Second and Third Defendants, Mr Gerassimos Kalogiratos and Mr Ioannis Kalogiratos, father and son, to attend court to provide information and to be examined about Capri’s assets. For convenience I shall refer to these two gentlemen hereafter as “GK” and “IK”. GK is a director of Capri and IK was likewise a director until shortly before judgment was given against Capri in April 2005. The application under CPR 71.2 came before the court in January 2008 – see [2009] Bus LR 271. It was held that the court had no power to permit service of such an order upon GK and IK in Greece.[4]Now the matter comes back before the court in the context of continuing efforts by Vitol to enforce its judgment. On 23 December 2009 Vitol obtained a Rule B attachment in Baltimore, Maryland over the vessel “Thor”. Thor is in the registered ownership of Spartacus Navigation Corporation, a Marshall Islands company. It is managed by Primerose Shipping Co. Ltd, another Marshall Islands company with a place of business in Piraeus. Vitol however asserts that, pursuant to the law there applicable, the assets of Spartacus will be treated by the Maryland court as held in common with those of Capri and thus available for execution of the judgment against Capri. The “Thor” is it says “in Kalogiratos Group ownership”. The starting point for that contention is information published by Lloyd’s Maritime Intelligence Unit in 2008 to the effect that the “Kalogeratos (sic) Group” includes Capri, Starlady, Aurora, Spartacus and Primerose. Capri says that that information is incorrect and that Spartacus and Primerose form no part of the “Kalogiratos Group”. Capri also says that it would be of no significance even were Spartacus (and Primerose) part of the “Kalogiratos Group”. The judgment debtor is Capri. Capri has no assets.[5]Two questions now arise for decision. The first is whether Capri can restrain Vitol from pursuing one issue in the proceedings in Maryland because on its true construction a “Law and Litigation” clause in the charterparty contains Vitol’s agreement that that issue should be determined only in this court and in accordance with English law. The second is whether the court should permit Vitol to use in the proceedings in Maryland documents disclosed by Capri pursuant to orders made by the English court. One such order, it is said, was made ancillary to the grant of world-wide freezing injunction relief, and the question arises whether the court should permit use of the documents for what is said to be a different purpose. In order to place the second question into its proper context it is necessary that I set out a little more of the background against which the orders for disclosure were made.[6]The underlying claim arose as long ago as September 2000. By a charterparty in Asbatankvoy Form dated 9 August 2000 Vitol chartered from Capri the MT Alambra of Maltese registry and 1977 build to carry a cargo of dirty petroleum products from, in the event, Tallinn, Estonia to Singapore. The charterparty contained a “Law and Litigation” clause which, so far as relevant, provided:
“This Charter shall be construed and the relations between the parties determined, in accordance with the Laws of England. Any dispute arising out of or in connection with this Charter, involving amounts in excess of US$50,000, … shall be subject to the jurisdiction of the English High Court.”
[7]Either during or after loading the vessel leaked oil from a hole in the vessel’s shell plating into the sea, causing pollution and loss of cargo. The vessel was detained under arrest in the Estonian port of Muuga at the instance of various parties, including the Republic of Estonia. The cargo had to be transhipped onto another vessel for onward carriage, causing further loss to Vitol.[8]Vitol brought the present proceedings in this court in January 2001. The claim was of the order of US$7 million. Unseaworthiness was denied and the exercise of due diligence asserted.[9]Capri, not unnaturally, was anxious to secure the release of the vessel from arrest and to divest itself of what nominally was its sole asset. In April 2001 Vitol agreed to facilitate the achievement of this end. By a confidential agreement made in that month Capri agreed that upon the vessel being released from arrest by all claimants in Estonia and having sailed from and beyond Estonian territorial waters, Capri would make a non-refundable payment to Vitol of US$500,000 in respect of Vitol’s claim. The payment was to be made on a without prejudice basis, without admission of liability. In consideration thereof Vitol agreed, relevantly, not to arrest, attach, injunct or otherwise detain the vessel for the purpose of obtaining security for its claims and not to interfere with, prevent, delay or hinder the sale of the vessel by Capri or arrest, attach, injunct or otherwise detain the proceeds of such a sale.[10]Payment was duly made pursuant to this agreement. Mr Stephen Hofmeyr QC, for Capri, suggests that in the light of this agreement any sympathy for Vitol’s current predicament as an unsatisfied judgment creditor should be muted. Vitol contracted with a one ship company and accepted US$500,000 as the price for abandoning what was on the face of it the company’s sole physical asset as a potential source of security for its claim. He adds that in due course Vitol declined to pursue a possible recovery from hull underwriters. I have little doubt that this agreement represented a shrewdly judged commercial benefit for both parties. The agreement expressly preserved the ability of Vitol to take other action to obtain security for its claims. Unsurprisingly the agreement did not preclude Vitol from taking lawful measures in an attempt to enforce against Capri any judgment which it might in due course obtain.[11]The action in this court proceeded. Disclosure was given but, as is not unusual, Vitol believed that it had been inadequate and applied for the disclosure of specific documents or classes of documents. One hour before that application was due to be heard by the court in October 2002 Capri suddenly admitted liability, although not the quantum of the claim. Recently disclosed correspondence suggests that there may have been some sensitivity arising out of inaction in the light of reports of earlier perforation of the hull structure.[12]The trial on quantum issues was set to take place in November 2002. A few days before the hearing was due to take place the parties were able to agree the quantum of Vitol’s claim at US$6.1 million inclusive of interest. However at the same time as concluding this agreement Capri on 27 November 2002 obtained the permission of the court to amend its Defence so as to introduce an allegation that, albeit no allegation of impropriety or involvement was made against Vitol, the charterparty was nonetheless void or voidable on account of a bribe of about US$45,000 allegedly paid to an employee of Capri by an employee of brokers involved in the transaction. Capri issued a Part 20 (Third Party) Claim against the brokers and against the personal representatives of one of the individuals allegedly involved. The court imposed as a condition of permitting Capri to amend its Defence and to advance this claim the provision of security for Vitol’s claim in the shape of a payment into court of US$500,000. Payment into court of this amount was duly made.[13]At this stage therefore, November 2002, all that stood in the way of Vitol having an enforceable judgment against Capri for US$6.1 million was the unresolved issue of the alleged bribe and its effect on the charterparty. The action therefore continued. In due course the trial of the outstanding issue and of the Third Party proceedings was fixed to begin on 5 April 2005.[14]On 22 March 2005 Vitol received a letter from Capri’s then solicitors to the effect that Capri’s funds were exhausted and that in consequence Capri would not attend the trial to pursue its allegations. There was thus no further impediment to Vitol obtaining judgment against Capri. On the same day Vitol applied for and obtained from Colman J a worldwide freezing injunction against Capri restraining removal or dissipation of up to US$7.6 million. There was a requirement in standard form for Capri to provide information concerning the whereabouts of its assets. Vitol gave the following undertaking, again in standard form:
“The Applicants will not without the permission of the court use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in England or Wales or in any other jurisdiction, other than this claim.”
[15]On 6 April 2005 the trial took place before Cresswell J. Capri was unrepresented. The amended Defence and Counterclaim and the Third Party proceedings were struck out. Vitol proved its case against Capri, although this must have been something of a formality since there was, as I have already indicated, no further impediment to entry of judgment upon the admission of liability for the agreed sum. Interest from 27 November 2002 until 6 April 2005 was assessed as a further US$693,518.28. Vitol was required to give credit for the amount of US$500,000 which it had received pursuant to the confidential agreement in 2001. The further sum of US$500,000 paid into court pursuant to the order of 27 November 2002 was directed to be paid out to Vitol together with accrued interest.[16]On the same day, 6 April 2005, Cresswell J continued the worldwide freezing injunction, albeit in the reduced sum of US$6.25 million to reflect the recoveries mentioned above. He also made an order for further specific disclosure to be verified by an affidavit from GK. The specific disclosure so ordered consisted largely of material concerning the sale of the vessel and the disposition of the proceeds of sale by Capri, Starlady and Aurora. Vitol gave the same standard undertaking as before concerning the use to which the information obtained might be put.[17]Pursuant to the order of Colman J, GK produced an affidavit with exhibited documents on 31 March 2005. Pursuant to the order of Cresswell J GK produced a further affidavit with exhibited documents on 21 April 2005.[18]On 30 August 2005 Andrew Smith J on an ex parte application made an order, in fact formalised on 8 September 2005, pursuant to CPR 71 requiring GK, as an officer of the judgment debtor Capri, to attend court to provide information about Capri’s assets and any other information needed to enforce the court’s judgment in favour of Vitol. GK was further required by that order to produce certain specific documentation.[19]GK responded to this order by preparing a witness statement dated 2 December 2005 which again exhibited documents. Unlike his earlier two affidavits this witness statement was prepared with the benefit of legal advice and assistance. Without going into unnecessary detail I agree with Vitol that it is a legitimate criticism of this witness statement that it sought to give the impression that the sale of the vessel to Aurora was an arm’s length transaction between companies in different beneficial ownership. In that regard the description in paragraph 5(r) of “co-operation of Aurora”, and of Starlady “managing” to maintain access to the vessel and providing in return “all necessary assistance” to Aurora is particularly egregious.[20]On 18 January 2008, when setting aside the permission granted to serve GK out of the jurisdiction with the order referred to in paragraph 18 above, the court directed Capri to find and/or obtain further specified documents and to provide the same to Vitol. Again the process was to be verified by an affidavit to be sworn by GK. GK duly swore a further affidavit on 14 March 2008 exhibiting certain further documents. This affidavit contained a more complete description of the nature of the transaction between Capri and Aurora. In her Third Witness Statement Maria Moisidou, Capri’s current solicitor, suggests that this explanation would have been forthcoming earlier had Vitol proceeded with its applications with greater speed. This does not detract from the fact that the earlier explanation was misleading.[21]The documents use of which in Maryland is resisted were as I understand it for the most part, and perhaps exclusively, provided by Capri either pursuant to the order of Cresswell J of 6 April 2005 or pursuant to my order of 18 January 2008, being the order to which I have just referred in paragraph 20 above. The order of Cresswell J was subject to the usual undertaking in standard form to which I have already referred as to the use of information obtained. The order made by me was I am told made in terms which were very largely agreed before the hearing. I assume however that it was made in exercise of the court’s jurisdiction under section 37(1) of the Supreme Court (now Senior Courts) Act 1981. I assume also that in relation to any document disclosed pursuant thereto Vitol was subject to the restraint contained in CPR 31.22. That provides, so far as relevant:
“31.22 – (1) a party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where— (a) the document has been read to or by the court, or referred to, at a hearing which has been held in public; (b) the court gives permission; or (c) the party who disclosed the document and the person to whom the document belongs agree.”
[22]The current application has proceeded upon the acceptance by Vitol for present purposes that it requires the permission of the court to use in the Maryland proceedings the documents provided by Capri pursuant to the orders for disclosure to which I have referred. Vitol sought such permission on application without notice to Capri before Blair J on 18 December 2009. Blair J gave permission in these terms:
“1. The Applicant is permitted to take steps in the US seeking a maritime attachment and seeking recognition of the judgment of Mr Justice Cresswell dated 6 April 2005 against the first Defendant, for the purpose of enforcing the said judgment. 2. The Applicant is permitted to use documents obtained from the First Defendant or otherwise incidental to these proceedings after 22 March 2005 specifically: (i) All witness statements and affidavits served on behalf of the First Defendant after 22 March 2005 (including exhibits); and (ii) All non-privileged correspondence between Stephenson Harwood and the First Defendant/their solicitors from 22 March 2005 up to the date of this Order, (iii) All Court orders made herein from and including 22 March 2005 to date for the purpose of enforcing the judgment of Mr Justice Cresswell dated 6 April 2005 (in this action) in proceedings in the United States.”
The significance of 22 March 2005 is that that is the date upon which Capri’s then solicitors indicated that Capri’s funds were exhausted and that Capri would no longer be represented in the action. It is the order of Blair J which Capri now seeks to set aside. (i) All witness statements and affidavits served on behalf of the First Defendant after 22 March 2005 (including exhibits); and (ii) All non-privileged correspondence between Stephenson Harwood and the First Defendant/their solicitors from 22 March 2005 up to the date of this Order, (iii) All Court orders made herein from and including 22 March 2005 to date for the purpose of enforcing the judgment of Mr Justice Cresswell dated 6 April 2005 (in this action) in proceedings in the United States.”[23]Before Blair J Vitol expressly asked to be released from its undertaking given to Cresswell J not to use any information obtained for the purpose of proceedings “other than this claim”. However in its skeleton argument prepared for the hearing Vitol also referred Blair J to a passage in Crest Homes v Marks [1987] AC 829 at 860 where Lord Oliver discussed the circumstances in which the court would release or modify the implied undertaking, as it then was, given on discovery not to use documents disclosed other than for the purpose of the proceedings in which they had been so disclosed. That undertaking is of course now enshrined in CPR 31.22 which so far as relevant I have set out above. In the affidavit sworn in support of the application Mr Peter Reid, Vitol’s solicitor, said that it was Vitol’s primary contention that using the disclosure overseas as a means to enforce the judgment “in this claim” would not be in breach of the undertaking given to Cresswell J. I do not have to decide this point. Nevertheless, given the context in which the undertaking was given, in aid of a disclosure order made after judgment had been given on the substantive claim, I am inclined to think that Vitol’s primary contention is right and that in principle the court’s permission was not required. A freezing order is not itself an instrument of enforcement since it is not designed to confer upon the applicant any proprietary or other interest in the property or chose in action which is frozen. A freezing order granted after judgment is however given with a view to assisting in the process of enforcement of the judgment. It is difficult to see for what other purpose it is given. I would be similarly inclined to the view that in principle use of the documents for the purposes of enforcement of the judgment is use for the purpose of the proceedings in which they were disclosed. Crest Homes was concerned with the use of documents disclosed for the purpose of taking proceedings against the disclosing party for contempt of court, and it was in that context that Lord Oliver used the expression “enforcement of the court’s order” in the following passage from his speech at page 860G:
“There is, in my judgment, nothing ‘collateral’ or ‘alien’ about enforcement of the court’s order in the action in which discovery is obtained and I do not entertain any doubt at all that documents disclosed on discovery in the action can perfectly properly be used for the purpose of taking such a step without in any way infringing the implied undertaking and without the necessity of obtaining the prior leave of the court.”
Notwithstanding the different context to which Lord Oliver was referring, enforcement of the judgment obtained on the substantive claim in the proceedings is I should have thought an a fortiori case. These conclusions, if well founded, would not however foreclose the argument in the present case because Mr Hofmeyr suggests that what Vitol is attempting to do is to use the documents for the purpose of enforcing the judgment against a third party which is not party to the present action in which the documents have been disclosed. He submits that that falls outside the scope of the purpose for which the disclosure was ordered and that it should not be permitted by the court. In order to put that submission into context I must say a little more about the Baltimore proceedings.[24]Vitol obtained a “Rule B” attachment over the vessel Thor in Baltimore on 23 December 2009. Thor is a Panamax bulker in the registered ownership of Spartacus and management of Primerose to which I have already referred. The Thor is mortgaged to secure a loan in the sum of US$62 million. Not unnaturally she is under time charter and the evidence is that the charter hire is used to make payments due under the mortgage. It would not be surprising if the mortgagee is an assignee of the charter hire. In these circumstances the suggestion made by Mr Reid that were Capri to be given notice of the application to Blair J on 18 December 2009 when the vessel was proceeding towards Baltimore in order to load a cargo of coal it would have taken steps to avoid the attachment of the vessel such as “changing the vessel’s ownership, using a chartered vessel to lift the cargo etc” was I think somewhat fanciful. On the other hand a corporation can I am told easily render itself immune from Rule B attachment, which is permitted only in respect of the property of a person who cannot be found within the district in which the attachment is sought. I am told that it is commonplace for companies incorporated outside the US to appoint within US ports representatives such as local stevedoring companies, thereby establishing a presence within the local jurisdiction and rendering the Rule B attachment procedure unavailable. Whatever the potential ramifications of this procedure might be, and whatever the likelihood that Capri and/or Spartacus would have availed themselves of it, I would not in the circumstances be critical of Vitol for making its application without notice to Capri, unconvincing though I find the reasons which at the time it gave for proceeding in that manner.[25]In his affidavit to support the application before Blair J Mr Reid explained exactly what it was that Vitol intended to do and he explained in detail the nature of the jurisdiction which would be invoked. He explained that Vitol sought to pierce the corporate veil in order to attach assets “in Kalogiratos Group ownership”. He went on: “62. When considering whether or not to permit the piercing of the corporate veil, I am informed that the US Court would normally consider a number of tests or factors. I would like to draw the Court’s attention to the helpful discussion of the legal position in the United States in cases involving alter ego by District Judge Fisher in the US District Court decision in Sabine Towing & transportation Co. Inc. v. Merit Ventures Inc., 575 F. Supp. 1442, 1446 (E.D.Tx. 1983): ‘A trial court should pierce the corporate veil and require a parent corporation to answer for the debts of a subsidiary when the subsidiary conducts business in a manner that clearly indicates that the parent is an alter ego of the subsidiary. Markow v Alcock, 356 F.2d 194 (5th Cir.1966). To find an alter ego relationship the evidence must disclose a pattern of domination of a corporation by an individual or corporation, and that this domination was used to support a corporate fiction … It will be appropriate to disregard a corporate entity when it appears a corporation was organized for fraudulent or illegal purposes… [or] when it will prevent manifest injustice to third parties…’ 63. District Judge Fisher then goes on to list some 15 non-exhaustive factors which the court will consider in order to find that there is an alter ego relationship. The factors listed by Judge Fisher are consistent with factors considered in other US jurisdictions. For example, the United States Court of Appeals for the Second Circuit held in Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131 (2d Cir. 1991) that the following factors tend to show that an alter ego relationship may be present:(i) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like;(ii) inadequate capitalization;(iii) whether funds are put in and taken out of the corporation for personal rather than corporate purposes;(iv) overlap in ownership, officers, directors, and personnel;(v) common office space, address and telephone numbers of corporate entities;(vi) the amount of business discretion displayed by the allegedly dominated corporation;(vii) whether the related corporations deal with the dominated corporation at arms length;(viii) whether the corporations are treated as independent profit centers;(ix) the payment or guarantee of debts of the dominated corporation by other corporations in the group;(x) whether the corporation in question had property that was used by other of the corporations as if it were its own. 64. Mr Kahn informs me that no one factor is controlling, and it is not necessary to demonstrate every factor. Rather, the Court will weigh the evidence to determine whether these or similar factors demonstrate the necessary level of ‘domination and control’ by one entity over the other, or fraud. 65. The most important factors for the purposes of this application are: (i) Financing of the subsidiary corporation by the parent; (ii) The parent’s use of the subsidiary’s property and assets as its own; (iii) The nature of intercorporate loan transactions; (iv) Decisions-making for the subsidiary made by the parent and its principals; and (v) The existence of, wrong-doing or injustice to third parties. 66. In order to try to establish in the US Court that Capri is simply the alter ego of the wider Kalogiratos Group, Vitol will need to adduce evidence which would go to make out the abovementioned factors. Because the disclosures already obtained in support of these actions provides the needed evidence, Vitol seeks to be released from the Undertakings (to the extent that they can be interpreted as restricting this intended use).” ‘A trial court should pierce the corporate veil and require a parent corporation to answer for the debts of a subsidiary when the subsidiary conducts business in a manner that clearly indicates that the parent is an alter ego of the subsidiary. Markow v Alcock, 356 F.2d 194 (5th Cir.1966). To find an alter ego relationship the evidence must disclose a pattern of domination of a corporation by an individual or corporation, and that this domination was used to support a corporate fiction … It will be appropriate to disregard a corporate entity when it appears a corporation was organized for fraudulent or illegal purposes… [or] when it will prevent manifest injustice to third parties…’ (i) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like; (ii) inadequate capitalization; (iii) whether funds are put in and taken out of the corporation for personal rather than corporate purposes; (iv) overlap in ownership, officers, directors, and personnel; (v) common office space, address and telephone numbers of corporate entities; (vi) the amount of business discretion displayed by the allegedly dominated corporation; (vii) whether the related corporations deal with the dominated corporation at arms length; (viii) whether the corporations are treated as independent profit centers; (ix) the payment or guarantee of debts of the dominated corporation by other corporations in the group; (x) whether the corporation in question had property that was used by other of the corporations as if it were its own. (i) Financing of the subsidiary corporation by the parent; (ii) The parent’s use of the subsidiary’s property and assets as its own; (iii) The nature of intercorporate loan transactions; (iv) Decisions-making for the subsidiary made by the parent and its principals; and (v) The existence of, wrong-doing or injustice to third parties.[26]In broad outline it appears to be the case that in the United States, as in many other jurisdictions, the corporate veil will fairly readily be pierced when the corporate form has been used to practise fraud on third parties. No-one suggests that that is this case. However in the United States the corporate veil will on occasion albeit less readily be pierced when an individual so conducts his business as to ignore corporate separation. The touchstone of the availability of such relief appears to be its necessity to enforce a paramount equity. The paramount equity is to be found, as I understand it, not in an examination of the position of the unsatisfied judgment creditor but in an examination of the extent to which there has been “disregard for the corporate fiction” – see Residential Warranty Corporation v. Bancroft Homes Greenspring Valley Inc. 728 A.2d 783, a decision of the Court of Special Appeals of Maryland in 1999.[27]On the hearing of the application I had the benefit of written evidence as to the law which will be applied by the Maryland court from Mr Lawrence J Kahn of Messrs Freehill Hogan & Mahar for Vitol and from Mr Michael Chalos of Messrs Chalos, O’Connor and Duffy LLP for Capri. There were naturally differences of emphasis in their evidence. For example, they were not agreed as to the catalogue of factors which the court will examine, but this is as it seems to me of little moment as the factors inevitably overlap. There is agreement as to the core factors. More particularly, they are in disagreement as to the extent to which the Maryland court will on this issue apply the general maritime law if and to the extent that that is at variance with Maryland state law. Mr Chalos says that the Maryland court has never in fact made a finding of alter ego based on “paramount equity” in the absence of fraud. I am sure that he is right about this but I would respectfully note the perceptive comment of Mr Kahn that “the purpose of establishing a legal test is not to set the bar so high that the standard can never be achieved” and that whilst it will of course be difficult for Vitol to discharge the burden of proof, “past unsuccessful efforts by litigants in Maryland is not evidence that Vitol is not likely to succeed”.[28]More fundamentally however I am quite satisfied that it would be wholly inappropriate for me to embark upon an examination of Vitol’s prospects of success in Maryland. That would be to usurp the function of the Maryland court and moreover to conduct an exercise for which this court is obviously less well equipped than is that court. In Sybron Corporation v. Barclays Bank plc [1985] Ch 299 on an application to use documents disclosed in one action in another, albeit not in a different jurisdiction, Scott J said, at page 326:
“… I do not think it can be right, on an application such as the present, for the court to undertake an examination of the strength of the proposed action in which it is sought to use the documents. I accept that it must be open to the respondent to resist leave on the ground that the proposed action would represent an abuse of process or for one reason or another was bound to fail or ought to be struck out. The court would always I think refuse leave if persuaded that the proposed action was of that character. But that apart, I feel great doubt whether it could ever be appropriate to try to gauge the strength of the proposed action in order to decide whether or not to give leave to use discovered documents for the purposes of that action. If a proposed action is not shown to be an abuse of process or obviously unsustainable then prima facie a plaintiff is entitled to prosecute it. Whether leave to use discovered documents for the purposes of such an action should be granted should depend in my view on the nature of the first action, the circumstances in which discovery was given and the nature of the proposed new action. There may be some cases in which for the purposes of an application for leave to use discovered documents some assessment of the strength of the case should be attempted, but where, as here, the case is of complexity I do not think it represents the right approach.”
I respectfully agree with the approach of Scott J. In the present context it applies to an evaluation of the legal principles to be applied by the Maryland court as much to an evaluation of the prospects of Vitol succeeding in discharging whatever is the content of the burden cast upon them.

The application for an anti-suit injunction

[29]I turn first to Capri’s reliance upon the Law and Litigation clause. Mr Hofmeyr submits that the effect of the proceedings brought in Maryland is that other parties, in particular Spartacus and Primerose, are sought to be held liable in respect of the judgment against Capri on the basis of a system of law other than English law. He submits that since the relevant clause provides that the relations between the parties are to be determined in accordance with the laws of England, this ought not to be permitted. The issue whether one or more of the defendants in the Maryland proceedings is or are an alter ego of Capri should be decided in England according to English law, as Vitol had agreed.[30]The Complaint issued in Maryland names a number of corporations as well as GK and IK and Maria Viaggini. It has not as I understand it been p any parties other than Spartacus and Primerose although in accordance with US procedure all defendants have been provided with the pleadings and asked to waive formal service. Spartacus and Primerose have put up cash security in the sum of US$ 9.3 million in order to obtain the release of the vessel from arrest. Spartacus and Primerose have invoked the procedure under Rule E(4)(f) pursuant to which at a forthcoming hearing the burden will be on Vitol to demonstrate why the attachment should not be vacated. It is Capri alone which has applied to this court for an anti-suit injunction.[31]The Complaint asserts, at paragraph 37:
“Based on the foregoing, as well as other activities, the Defendants should be considered a single economic unit with no corporate distinction between or among any of them, rendering each liable for the debts of the other, and all assets of Defendants together should be susceptible to attachment and/or restraint for the debts of Capri.”
Furthermore, the Plaintiff’s Memorandum in support of attachment cites a passage from one of the leading US cases in the field to the following effect:
“… If the plaintiff in this case can prove the defendants are in fact the alter egos of developers, defendants’ jurisdictional objection evaporates because the previous judgment is then being enforced against entities who were, in essence, parties to the underlying disputes; the alter egos are treated as one entity.”
See William Passalacqua Builders, Inc v. Resnick Developers, Inc, 933 F.2d 131, 141 (2d Cir. 1991). However that may be, it is not as I understand it Vitol’s case that either Spartacus, incorporated only in April 2008, or Primerose, incorporated only in February 2001, were parties to the charterparty dated August 2000 out of which Capri’s liability to Vitol has arisen. Rather the assertion is that the assets of Spartacus and Primerose will be treated as held in common with those of Capri and thus available for execution of the judgment against Capri.[32]I do not consider that on its true construction the Law and Litigation clause in the charterparty extends to the determination of Vitol’s assertion in Maryland as against Spartacus and Primerose. The issue in Maryland is not the establishment of a relationship between Vitol and Spartacus/Primerose. Vitol’s assertions against Spartacus and Primerose are not in any event based upon the charterparty. They are based upon the judgment against Capri. No question therefore arises as to the construction of the charter or as to the relations between the parties thereto. Furthermore the claim in Maryland has not given rise to a dispute arising out of or in connection with the charter. Rather it has given rise to a dispute arising out of or in connection with Vitol’s judgment against Capri.[33]None of this is surprising. The rights and obligations which were once governed by the charter have merged into the judgment. Vitol and Capri would have known that any judgment which the one obtained against the other was unlikely to be capable of enforcement in England, in which neither of them had a corporate presence. It is most unlikely that they intended that matters concerning the enforceability of any judgment obtained the one against the other should be governed by the laws of England or be subject to the exclusive jurisdiction of the English court. They would rather have expected that any question as to enforcement would be dealt with in the courts of the forum in which was found an asset against which enforcement was attempted and determined according to the applicable local law. See generally Dicey, Morris and Collins, The Conflict of Laws, 14th Edition, paragraph 7-008. I agree with Mr Luke Parsons QC for Vitol that this cardinal principle underpins the observations to be found in a number of the English cases and underpins also the Brussels Convention and Regulation and the European jurisprudence.[34]It follows that I regard Capri’s reliance on the Law and Litigation clause as misplaced. I am comforted to find that this is precisely the conclusion to which Burton J came in Brave Bulk Transport Ltd v. Spot On Shipping Ltd [2009] 2 Lloyd’s Rep. 115. That was a case concerned with a clause conferring exclusive jurisdiction upon this court “with respect to any suit action or proceedings relating to this Agreement”. At page 122 Burton J said this:
“… I conclude that the attempt by the respondent in the light of an unsatisfied judgment to recover the judgment debt in proceedings against another party, based on the alter ego doctrine as understood in New York law, is not a claim which falls within the jurisdiction clause in the FFA. It does not relate to the FFA, however broadly construed (Fiona Trust and Holding Corporation v. Privalov [2008] 1 Lloyd’s Rep. 254.”
[35]By the end of the hearing Capri did not I think seriously assert that it could obtain an anti-suit injunction save in reliance on the Law and Litigation clause. For the avoidance of doubt however I should indicate that I do not consider that Capri can demonstrate that pursuit by Vitol of the proceedings in Maryland against Spartacus and Primerose is vexatious or oppressive – cf per Lord Goff in Société Nationale Industrielle Aerospatiale v. Lee Kui Jak [1987] AC 871 at 896. In my view Capri lacks the necessary standing to bring an application on this basis. The only standing which Capri asserts is that its director and beneficial owner GK is embarrassed that property which is, as he and they assert, in the beneficial ownership of his friends Mr Velliades and Mr Diamantis has been arrested by Vitol in an attempt to enforce a judgment which has been given against Capri. Embarrassment is not however a sufficient basis upon which an applicant can show that his legal rights have been invaded. There is as against Capri nothing vexatious or oppressive in Vitol seeking to enforce its judgment against the assets of Spartacus or Primerose. Neither Spartacus nor Primerose have agreed to submit to the jurisdiction of the English court or to be bound by any finding made by this court as to the availability of its assets for execution of the judgment given against Capri. Finally on this point the court is unlikely to wish to exercise its discretion in favour of Capri. Capri is a judgment debtor which asserts exhaustion of its assets with which to meet the judgment yet plainly has available to it funds sufficient to mount this application. The reality is that GK chooses to make funds available to meet Capri’s liability to pay its own lawyers but declines to contribute those same resources to the partial satisfaction of Vitol’s judgment. Such conduct is unsurprising and it is no part of this court’s role to censure it but it is an unpromising position from which to seek a discretionary remedy designed to frustrate the search for further assets amenable to enforcement.[36]The essential thrust of Mr Hofmeyr’s sustained submission was that the court will only in special circumstances allow documents to be used for a purpose collateral to that for which they were disclosed, and then only if such use will not occasion injustice to the party who has given disclosure. In that regard he naturally relied on the well known line of authority including Crest Homes v Marks, above, and in particular per Lord Oliver at page 860; Prudential Assurance Co. v. Fountain Page Ltd [1991] 3 All ER 878 in particular per Hobhouse J at page 886, and Riddick v. Thames Board Mills [1977] 1 QB 881. What are the interests of justice, Mr Hofmeyr asked rhetorically, which require the English court to prefer the interests of a judgment creditor to those of a third party which, in the eyes of the English court, could not properly be regarded as either the judgment debtor or the alter ego thereof? Why should the court lend its positive support by requiring a judgment debtor to provide documents for use by a judgment creditor for the purpose of enforcing against a third party its judgment obtained against the judgment debtor?[37]To these submissions there are I think a number of answers but the principal answer is that enforcement of the judgment is not collateral to the purpose for which disclosure was given or ordered. On the contrary, it is in support of enforcement of the judgment that the disclosure was ordered to be given. I do not accept Mr Hofmeyr’s submission that the disclosure ordered by Cresswell J was ancillary only to the world-wide freezing injunction as being required in order that the court could ensure that the injunction was observed. At that post-judgment stage the disclosure ordered plainly had a dual purpose, both to assist in the identification or ascertainment of the location of assets which were subject or potentially subject to the freezing order and to assist the judgment creditor to locate assets against which enforcement could be sought. That this is so is perhaps particularly borne out by paragraph 6 of Schedule C, which listed the further disclosure required from Capri. Paragraph 6 required disclosure of:
“All documents regarding any claims or potential claims against the Respondent’s insurers (including but not limited to P&I cover or club cover) resulting from the incident at Tallinn and subsequent litigation.”
The court enjoys a free-standing power derived from section 37(1) of the Supreme Court (now Senior Courts) Act 1981 to order disclosure after judgment in order to render the judgment effective, in the sense of capable of enforcement – see Maclaine Watson & Co. Ltd v. International Tin Council (No.2) [1989] 1 Ch 286 at page 303F per Kerr LJ. As Kerr LJ also observed at page 301, “it is the policy of the law to assist persons in the position of the plaintiffs to obtain the fruits of their judgments”. Further guidance as to the position post judgment is to be found in Babanaft & Co. S.A. v. Bassatne [1990] 1 Ch 13 at pages 27G-28A, 32F and 34BE per Kerr LJ. Furthermore, as Nicholls LJ pointed out in that case at pages 42G-43D, in the post judgment regime where the judgment creditor is at liberty to attach assets of the judgment debtor in execution of the judgment a freezing order may often be ancillary to a disclosure order – for the obvious reason that the disclosure order is needed in order to ascertain the whereabouts of assets which may be attached but a freezing order may be necessary in order to prevent an unscrupulous judgment debtor from removing those assets from an identifiable location before attachment can be effected. Colman J made the same point in Gidrxslme Shipping Co. Ltd v. Tantomar-Transportes Maritimos LDA [1995] 1 WLR 299 at 310F:
“Where, by contrast, one has the position that a judgment has been already obtained or an award made and where a Mareva injunction in aid of execution is justified, the jurisdiction to make a disclosure order arises both as a power ancillary to and in support of the injunction and independently of the injunction as a power in support of the execution of the judgment or award.”
At page 312EF Colman J drew the distinction between the pre and post-judgment situations and pointed out that quite different considerations apply. He pointed out that post-judgment or post-award “it is just and convenient that the judgment or award creditor should normally have all the information he needs to execute the judgment or award anywhere in the world”.[38]There remains however Mr Hofmeyr’s argument that, in terms of section 37(1) of the Senior Courts Act 1981, it is neither just nor convenient to permit the use of the documents for the purpose of enforcement against the assets of an entity which the English court would not recognise as the judgment debtor. In my judgment this submission ignores that the execution of a judgment is an exercise of sovereign authority – see per Lord Hoffmann in Société Eram Shipping Ltd v. Cie. Internationale de Navigation [2004] 1 AC 260 at paragraph 54. There may perhaps be cases in which enforcement is permitted in arbitrary and unjust circumstances where the English court would not regard it as just and convenient to lend its aid. Such considerations do not arise here. In the Brave Bulk Transport case Burton J regarded the law applicable in New York as having “many similarities with the approach to alter ego in these courts”. Whilst I would not necessarily go so far, it would be an extraordinary act of insularity or parochialism to refuse the court’s assistance to an attempt to enforce its judgment in reliance upon principles such as those which will be applied in Maryland – see per Hoffmann J in Bayer v. Winter (No.2) [1986] F.S.R 257 and per Clarke LJ in Tasarruf Mevduati Sigorta Fonu v. Demirel [2007] 1 WLR 2508 at page 2519. In the immediate context of the arrest of ships it is well known that “the question whether the corporate veil may be pierced in respect of ship owning companies is answered in different manners in the various jurisdictions” – see Berlingieri on Arrest of Ships, a Commentary on the 1952 and 1999 Arrest Conventions, Fourth Edition, at page 164. In South Africa for example a claimant may arrest an “associated ship”. An “associated ship” is “either a ship which is owned by the same person or by a person or company who controls the company or person who owned the ship in respect of which the maritime claim arose” – see at page 176 of Professor Berlingieri’s work. The alter ego doctrine applicable in the United States simply represents one position on the spectrum of approaches adopted in the major maritime jurisdictions.[39]Mr Hofmeyr has a quite separate point which is that in the light of the evidence of Mr Velliades Vitol has no prospect of success in Maryland. The second Witness Statement of Mr Velliades is to the effect that he is the holder of 55% of the shares in Spartacus and that the remaining 45% are in the ownership of his business partner Mr John Diamantis. Although this point was not discussed at the hearing I assume that no difference in meaning is intended arising out of the use of the different words “holder” and “ownership”. I will also assume that the reference to ownership is intended to be a reference to beneficial ownership. I have no direct evidence from either GK or IK to the effect that they have no beneficial interest in the Thor, although Miss Moisidou, their solicitor, says on their behalf at paragraph 26 of her Third Witness Statement that “neither the Kalogiratos family nor any of them individually shares an interest with Mr Velliades in Spartacus Navigation Corporation”.[40]I would agree that if this evidence(a) bears the meaning which I have assumed and(b) is accepted then it is difficult to see how Vitol can succeed. The evidence is however untested, and the issue to which it relates is the very issue or one of the very issues which the Maryland court has to decide. I do not consider that the English court should in such circumstances on the basis of this untested evidence alone conclude that Vitol’s case in Maryland is obviously unsustainable.[41]Both counsel took me with painstaking care through the documentary material on which Vitol proposes to rely in seeking to discharge the burden which it has assumed in Maryland, although Mr Parsons for Vitol for his part submitted that an evaluation of the evidence is not an exercise upon which the court should embark. The documentary evidence raises legitimate questions as to the involvement of both GK and IK in what are said to be business activities in which they have no beneficial interest. Explanations have been given. I do not think that it is appropriate for me to comment on those explanations. It is sufficient that I do not conclude that in the light of all the evidence which is before the court Vitol’s action in Maryland is obviously unsustainable.[42]In those circumstances it is in my judgment entirely just and convenient that the judgment creditor Vitol should be permitted to use documents disclosed by Capri after judgment had been obtained against it in an effort to demonstrate, if it can, that the Thor is properly to be regarded as an asset against which the judgment can be enforced. The third parties said to be massively inconvenienced thereby are not before the court. No doubt the Maryland court has its own procedures for ensuring that a company such as Spartacus which suffers loss in consequence of the Rule B jurisdiction being improperly invoked can be compensated by the responsible party, but in any event the third parties are not before this court. The court is not in my judgment “preferring the interests of the judgment creditor” to those of Spartacus and Primerose. The court is simply pursuing its policy that a judgment creditor should normally have all the information he needs to execute the judgment anywhere in the world – see again per Colman J in the Gidrxslme Shipping case cited above.[43]I do not understand any of the documents upon which Vitol wish to rely in Maryland to have been disclosed pursuant to the order of Colman J on 23 March 2005. However that order was made at a time when Vitol was obviously entitled to judgment, liability having been admitted, quantum having been agreed and an indication having just been given that the counterclaim would not be pursued. In my judgment similar considerations apply to these documents.[44]For all these reasons the two applications made by Capri in its Application Notice of 27 January 2010 must in my judgment be dismissed.

Cited in 3 later judgments