Surrey (UK) Ltd v Mazandaran Wood & Paper Industries [2014] EWHC 3165 (Comm)

[2014] EWHC 3165 (Comm)Case No 2013 Folio 914
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 6 October 2014
Before
MR JUSTICE EDER
Between
Surrey (UK) LtdClaimantMazandaran Wood & Paper IndustriesDefendant
Mr Ali Reza Sinai (instructed by Kingsley Napley LLP) for ClaimantMr Nathan Pillow (instructed by Eversheds LLP) for DefendantHearing Hearing dates: 10 & 11 September 2014
Judgment

Introduction

[1]This is an application by the defendant (“MWPI”) to set aside the order of Flaux J dated 4 July 2013 granting the claimant (“Surrey”) leave to serve these proceedings out of the jurisdiction and other related relief.[2]As set out in its Points of Claim, Surrey advances certain claims in relation to contracts allegedly entered into between Surrey (as seller) and MWPI (as buyer) for the sale and shipment from Russia, China and Chile to Iran of wood products (i.e. woodchips, logs and wood pulp) for the manufacture of paper at MWPI’s paper mill in Sari, northern Iran. In particular, as set out in the Particulars of Claim, Surrey claims(i) monies allegedly due in the sum of approximately €105,000 and(ii) damages in respect of alleged repudiatory breaches by MWPI totalling approximately €880,000. In addition, Surrey claims a very large sum by way of interest and also costs. The total claims amount to approximately €3,300,000. MWPI denies any liability to pay the sums claimed inter alia on the basis that (i) Surrey was not party to any contract and therefore does not have title to sue; (ii) there are no sums due or outstanding; and(iii) MWPI was entitled to cancel the orders because the material delivered was not of the agreed specification (and indeed that some of it, for which it paid, was never delivered to Iran at all).[3]The original application for permission to serve out of the jurisdiction was supported by the first witness statement of Ms Caroline Buchan, a direct public access barrister acting on behalf of Surrey (“Buchan 1”). As set out in that statement, Surrey sought to rely upon three main grounds (“gateways”) in support of the application for permission to serve out viz(i) contract(s) made within the jurisdiction: CPR 6BPD para 3.1(6)(a);(ii) contract(s) governed by English law: CPR 6BPD para 3.1(6)(c); and(iii) breach committed within the jurisdiction: CPR 6BPD para 3.1(7). In the course of the present hearing, Mr Sinai on behalf of Surrey abandoned reliance upon this last “gateway”. In addition, I should mention that although Mr Sinai initially raised an argument that MWPI had submitted to the jurisdiction, this point was also abandoned in the course of the present hearing.[4]MWPI now seeks to set aside the order of Flaux J on the following grounds: i) Surrey breached its duty to be full and frank in the presentation of its ex parte application for permission to serve out; ii) Surrey failed to serve the proceedings validly pursuant to CPR Part 6 and/or as a matter of Iranian law; iii) Surrey lacks title to sue because the contract(s) was/were concluded between MWPI and Mr Afkhami (a.k.a. “James Wilson”) under the trading style “Lignum”, without any mention ever having been made of Surrey; and iv) in any event, the English Court: a) does not have jurisdiction to hear Surrey’s claims; or b) should not exercise any jurisdiction it may have because Surrey (which bears the burden) cannot show that England is clearly or distinctly the appropriate forum (because Iran is).[5]MWPI’s application was issued on 28 October 2013 and was supported by a statement of Mr Kamran Mohseni Yekta, who is the Commercial Deputy Managing Director of MPWI and Professor Amir Hosseinabadi, a former judge in Iran and an expert on Iranian law. Thereafter the parties have exchanged a very considerable amount of factual evidence and also evidence on Iranian law.[6]In this mass of evidence, there is much in dispute which cannot be resolved on this application. For present purposes, it suffices to note that Surrey is a company incorporated in England and Wales on 31 July 2002. It was dormant until June 2004, during which time its sole director was Mr Ali (Alex) Afkhami. He was born in Iran and is of Iranian nationality although it is said that he is the holder of a UK passport. He is married to Ms Tracy McCarthy, now Surrey’s sole director. In correspondence with MWPI at the material times, Mr Afkhami used the pseudonym “James Wilson”. Mr Pillow submitted that the role played by Mr Afkhami is central to the issues of contract negotiation and formation and that, as far as MWPI was concerned, he was to all intents and purposes the face of “Lignum” in their dealings together. Surrey asserts that Mr Yekta knew that “James Wilson” was Mr Afkhami; but this is denied by Mr Yekta. MWPI also asserts that Ms McCarthy corresponded for Lignum with MWPI under the pseudonym “Jane Allen”, never revealing that she was (as is the case) the sole director of Surrey.[7]According to the evidence, it appears that Surrey was struck off the company register and dissolved in 2011 but restored shortly afterwards. Its registered office is now in Upper Richmond Road in London although it is MWPI’s case that this is no more than a “mailbox” or “brass plate” above a shop in that road; that, at the time, whilst that address was given on Lignum’s notepaper and emails etc., Surrey’s registered office was an apparently residential address in Farnborough; that the other UK addresses associated with it in the evidence are similarly just mailboxes in shops on other London high streets; that although Surrey asserts that “Lignum” is its “registered” trading name, its “registration” with a commercial provider of business services is of no legal status or significance; and that in any case this “registration” was not communicated to or known of by MWPI.[8]MWPI is a private company incorporated in Iran which has since 1997 run a paper mill in Sari, in northern Iran, producing a variety of paper products using two industrial paper machines. Its turnover is above US$50 million p.a. According to Mr Yekta, it regularly concludes international supply contracts; and it has not previously been subject to any international court proceedings nor held to have been in default of any of its payment obligations.[9]What appears to be uncontroversial is that in the course of 2008-2009, Mr Afkami (or his alter ego Mr Wilson) trading using the style “Lignum” entered into one or more contract(s) with MWPI, pursuant to which MWPI placed orders to purchase from “Lignum” viz(i) 12,000mt of woodchips (the “Woodchip Order”), to be procured from a supplier in Singapore/China and shipped to MWPI in Iran;(ii) 25,000m³ of logs (the “Logs Order”), to be procured from a supplier in Russia and shipped to MWPI in Iran; and(iii) in substitution for the Logs Order, 5,500mt of unbleached softwood Kraft wood pulp (the “Pulp Order”), to be procured from a supplier in Chile and shipped to MWPI in Iran. Although Surrey’s pleaded case appears to be that there were three separate contracts, Ms McCarthy’s own evidence is that the second and third orders (for logs and pulp respectively) “were essentially repeat orders or a continuation of the existing contractual relationship”. On MWPI’s side, it is said that there was a single “framework” contract whose essential elements were agreed in telephone calls between Mr Afkhami and Mr Yekta whilst they were both in Iran in late 2007 or early 2008 and that even if further details needed to be worked out at a later stage, they were sufficient to conclude a contract: see e.g.Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601. There was some debate about the true nature of the contract(s) – in particular whether they were properly characterised as CFR contract(s). However, I did not understand Mr Sinai to dispute that the contract(s) involved at least certain obligations with regard to physical delivery of the goods in Iran; and, for present purposes, this point does not appear to be crucial.[10]In any event, it appears to be largely common ground that seven shipments of woodchips (totalling just 2,054mt) and one shipment of pulp (2,000mt) were indeed delivered to Iran and paid for by MWPI against Lignum’s invoices. Two further shipments of woodchips (supposed to total 1,100mt) were paid for by MWPI (following Lignum’s presentation of a bill of lading consigned to MWPI’s order and confirmation that they had been despatched and were en route) but were never in fact delivered to MWPI. The documents show that following delivery of certain of these shipments, MWPI raised various complaints with regard to quality and, on that basis, made certain deductions. Subsequently, MWPI refused to accept certain further shipments and, in effect, cancelled the outstanding shipments. In broad summary, that is the background to the present disputes.[11]Against that background, I turn to consider the main issues which arise on the present application – although it is convenient to address them in a slightly different order to that set out above.

Title to sue

[12]In summary, Mr Pillow on behalf of MWPI submitted that MWPI never entered into any contracts with Surrey. This issue is potentially relevant for two reasons. First, it is relevant to the first “gateway” relied upon by Surrey i.e. if Surrey never entered any contracts with MWPI, then it cannot show any relevant contract having been “made” by Surrey. Second, it is relevant to the question as to whether Surrey has established a serious issue to be tried. These two aspects overlap. In any event, as to this issue, it is common ground that in order for Surrey to succeed on this application, the burden lies on it to show that it has a “good arguable case”; that this connotes more than a serious issue to be tried or a real prospect of success, but not as much as balance of probabilities; and that, in other words, Surrey must show that it has the “better argument” that it was the contracting party with MWPI.[13]On behalf of Surrey, Mr Sinai submitted that there could be no doubt that “in practice”, the contracting party with MWPI was indeed Surrey since it had registered Lignum as a trading name, processed the orders, paid suppliers, arranged delivery, received payments into its bank accounts and included its sales in the company’s statutory accounts for the year end 2009; and Surrey’s accounts for 2012 and 2013 state that it continues to pursue a claim against the client for lost revenue and breach of contract. Further, Mr Sinai relied on the evidence of Ms Buchan and Ms McCarthy that in November 2008, Surrey sent to MWPI its printed standard terms and conditions (“T&Cs”) which referred specifically to Surrey. In addition, Mr Sinai submitted that Mr Yekta’s own evidence makes plain that he negotiated the contracts with Mr Afkhami in the latter’s capacity as representative and “owner” of a limited liability family company controlled by Mr Afkhami and his wife, Ms McCarthy; that such evidence leaves no room for arguing that he (Mr Yekta) was misled into believing that he was contracting with Mr Afkhami personally; that in circumstances where MWPI’s own evidence is that all the contractual terms were agreed orally during telephone conversations, the conflict in the evidence cannot be resolved on a summary paper application; that MWPI’s case that it did not contract with Surrey needs to be tested at trial; and that the highly divergent evidence must be resolved by oral evidence.[14]As to these submissions, I readily accept that the Court should not seek to resolve disputed issues of fact on this application. However, as Mr Sinai accepted, the burden remains on Surrey to show, at the very least, that it has the “better argument”. Here, Mr Pillow submitted that Surrey failed to satisfy that burden. In support of such submission, Mr Pillow relied, in particular, on the following points: i) The question is ultimately an objective one: see the Court of Appeal’s decision in Muneer Hamid (t/a Hamid Properties) v Francis Bradshaw Partnership [2013] EWCA Civ 470, in which Jackson LJ set out the principles as follows (at §57): “…ii) In determining the identity of the contracting party, the court’s approach is objective, not subjective. The question is what a reasonable person, furnished with the relevant information, would conclude. The private thoughts of the protagonists concerning who was contracting with whom are irrelevant and inadmissible. … iv)Where the issue is whether a party signed a document as principal or as agent for someone else, there is no automatic relaxation of the parol evidence rule. The person who signed is the contracting party unless(a) the document makes clear that he signed as agent for a sufficiently identified principal or as the officer of a sufficiently identified company, or(b) extrinsic evidence establishes that both parties knew he was signing as agent or company officer….” ii) The name “Surrey (UK) Limited” – or even any less complete or accurate version of it – appears nowhere in any of the documents admittedly sent and received between the parties, at least prior to Ms Buchan’s involvement in the dispute in January 2013, long after the contract(s) had been formed and come to an end. If Surrey were in truth the contracting party as it now claims, both it and its director, Ms McCarthy, have committed a series of criminal offences under sections 349 and 351 of the Companies Acts 1985 and sections 83 and 84 of the Companies Act 2006 by failing to give its name and relevant particulars on its commercial documents, website etc. iii) In any event, neither Surrey’s own evidence nor the contemporaneous documents begin to prove to the requisite standard that Surrey, the English limited company, was MWPI’s contracting counterparty (or indeed that Mr Afkhami, whether in his own name or as Mr Wilson, was authorised to act for that company, e.g. when ‘signing’ letters or invoices). Instead Lignum’s contemporaneous documents are on notepaper headed simply “Lignum” or in emails with signatures referring to “Lignum” or “Lignum Group”, in each case bearing the address of Unit 260, 210 Upper Richmond Road, SW15 (which was not Surrey’s registered address at the material times). Although some of the pro-forma invoices (but not the first) purport to come from Mr “Wilson” of “Lignum Company”, the commercial invoices simply refer to and are signed on behalf of “Lignum”; and there is no mention of anyone being a “director” of any entity until August 2010, when Ms McCarthy referred to herself as a director (albeit of “Lignum”) when sending a summary of the claim to MWPI. iv) Particularly notable in this regard are the following factors: a) First, nowhere was it said in Buchan 1 when, how, or by whom MWPI was told of the existence of Surrey, or that it was the party that MWPI was being invited to contract with – and despite having now served lengthy evidence from Ms McCarthy (and Mr Afkhami’s statements), it is still not said by Surrey that its existence, or the fact that Mr Afkhami/Wilson was supposedly acting for it, was told to MWPI. b) Second, on Surrey’s own evidence, its existence and name appeared for the first time in the T&Cs, claimed to have been sent to MWPI in November 2008. This is hotly disputed by MWPI; but, in any event, Mr Pillow submitted that, even on Surrey’s own case, the main contract(s) were made earlier than this date. c) Third, even the first letter before action, written by Lignum’s then English solicitors, M. Taher & Co., identified “Lignum” as their client and made no reference to Surrey. It was only in the first letter from Ms Buchan, dated 9 January 2013, that it was asserted that Surrey was the claimant. d) Fourth,Surrey was struck-off and dissolved in November 2011 when, the Court is now told, it had a multi-million € claim against MWPI. This is hardly consistent with a belief at that time that Surrey had really been the contracting party. e) Fifth, Surrey’s contemporaneous statutory accounts do not include any reference to moneys being owed under the contracts now sued upon (the amount stated to be owed to the company by its debtors is far lower, and remains virtually static throughout); and the explanation given by Ms McCarthy is inadequate.[15]Although Mr Sinai appeared at one stage of the argument to accept that the test was an objective one, he submitted that the decision of the Court of Appeal in Hamid was distinguishable; that there was sufficient in the evidence before the Court to show that Surrey had the “better argument” that both as a matter of objective intention and authority, Mr Afkhami was not acting personally but acting on behalf of a limited company; that “Lignum” was obviously a trading name for Surrey; that Surrey was therefore properly to be regarded as the contracting party; and that, at the very least, the relevant test was satisfied even if Surrey had never been mentioned as such during the relevant period and regardless of the T&Cs.[16]As to these submissions, I do not consider that Mr Sinai gains much, if any, assistance by the evidence submitted on behalf of Surrey that the T&Cs referring to Surrey were sent to MWPI in November 2008. In particular, it is important to note that the T&Cs as allegedly sent to MWPI at that time refer to Surrey’s “registered office” as being at 210 Upper Richmond Road. However, the company records show that that was not Surrey’s registered office at that time and that it was only much later i.e. on 17 June 2010 that this address became the registered office of Surrey. This is inconsistent with the T&Cs having been sent to MWPI in November 2008. Further, although the consignment note of the package sent to MWPI in November 2008 specifically identifies certain documents, it does not refer to any T&Cs. All of this strongly undermines the evidence submitted on behalf of Surrey. Although, of course, I cannot determine this issue on this application, it seems to me that, at the very least, Surrey falls far short of showing that it has the “better argument” with regard to the T&Cs.[17]If that is right and in the light of Hamid and the fact (as was common ground) that there was never any reference to Surrey which “crossed the line”, the conclusion I have reached is that Surrey has failed to show the “better argument” that it was a contracting party. This conclusion is fatal to Surrey’s position on this application. However, in the event I am wrong, I turn to consider the other issues.

Contract(s) made within the jurisdiction

(s) made within the jurisdiction

[18]I confess that I found this part of Surrey’s case particularly difficult to understand.[19]In essence, Mr Sinai submitted that the contract(s) relied upon were all “made” in England because that is the place where “acceptance” was received by Surrey. In that context, he relied upon the decision of the Court of Appeal held in Entores Ltd v Miles Far East Corp [1955] 2 QB 327 (CA) that where a contract is made by instantaneous communication (such as by telephone, fax or e-mail), the contract is complete only when the acceptance is received by the offeror. The decision was approved by the House of Lords in Brinkibon v Stahag Stahl und Stahlwarenhandels GmbH [1983] 2 A.C. 34. For present purposes, Mr Pillow was prepared to accept that this principle applied to the communications in the present case.[20]Relying upon this principle, Mr Sinai then carried out a detailed analysis of the various “instantaneous communications” in the present case. Mr Pillow submitted that such analysis was, in significant part, inconsistent with the original Points of Claim and the Part 18 Replies served by Surrey. Be that as it may, as set out in his skeleton argument, Mr Sinai submitted that the contractual relationship between the parties commenced with the order for woodchips; that Surrey as offeror sent its pro-forma invoice of 1 April 2008 which expressly stated that it looked forward to receiving MWPI’s favourable reply; that MWPI communicated its “acceptance” by fax and e-mail inter alia on 17 April 2008, 11, 16, 23 and 24 June 2008, 6 September 2008 and 19 October 2008; and that “acceptance” of the contracts for the supply of logs and pulp were also communicated to Surrey in London respectively on 29 October 2008 and 11, 12 and 15 December 2009. This analysis was further expanded by Mr Sinai in the course of his oral submissions. However, even ignoring for present purposes that none of these communications was on their face with Surrey and the evidence submitted on behalf of MWPI, I do not consider that this analysis ultimately assists Mr Sinai. I do not propose to set out in detail the exercise carried out by Mr Sinai. For present purposes, it is sufficient to state that although certain of the communications relied upon by Mr Sinai were indeed received in England, none of such communications can, in my view, properly be regarded as an “acceptance” in any legal sense. At best, such communications were either “invitations to treat” or “counter-offers”. It is fair to say that in some instances it is not entirely clear to me exactly how, when or where the contract(s) were ultimately “made”. However, I am unpersuaded that Surrey has the “better argument” that any of the instantaneous communications received in England and relied upon by Mr Sinai constituted an “acceptance” of any contract. It follows that, in my view, Surrey has failed to establish that it has the “better argument” that any of the contracts relied upon in these proceedings were “made” in England.

Contract(s) governed by English law

(s) governed by English law

[21]In support of this “gateway”, Mr Sinai relied upon two main arguments.[22]First, Mr Sinai submitted that the contract(s) were expressly governed by English law by virtue of the T&Cs. It is right that the T&Cs expressly provide for English law. However, for the reasons stated above, Surrey has failed to show that it has the “better argument” that the T&Cs were incorporated in the contract(s).[23]Second, Mr Sinai relied upon Article 4 of the Rome Convention 1980, implemented in the UK by the Contracts (Applicable Law) Act 1990. In particular, Mr Sinai, submitted, in summary, as follows: i) In the absence of choice, Article 4 in effect provides in material part that the contract shall be governed by the law of the country with which it is most closely connected; that it is presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a corporate body, its central administration. However, if the contract is entered into in the course of that party’s trade or profession, that country shall be the country in which the principal place of business is situated. ii) The policy behind the rule was explained in the Report on the Convention prepared by Professors Giuliano and Lagarde and is set out in Dicey, Morris & Collins on The Conflict of Laws, 14th Edition (“Dicey”) para 32-113. The characteristic performance is not the obligation to pay, but the service for which payment is made (Dicey, para 32-116). In international sale of goods, the Claimant as supplier performs the obligation which is characteristic of the contract; this is reflected in Rule 213 of Dicey (paras 33-112 & 33-113). At the time when the contract was concluded, Surrey’s registered office, central administration and principal place of business were in the UK. iii) This presumption can be displaced if the circumstances as a whole indicate that the contract is more closely connected with another country. As explained in Dicey (32-125), the circumstances must clearly show the existence of connecting factors with another country. In particular, as stated by the Court of Appeal in Samcrete Egypt Engineers and Contractors SAE v Land Rover Exports Ltd [2002] CLC 533 [45], the presumption should only be disregarded in circumstances which clearly demonstrated the existence of connecting factors which justified disregarding the presumption. iv) In the present case, Surrey performed the contract in the UK where it has its place of business. It is important to note that the obligations to take delivery of the goods or to pay are not presumed to be characteristic of sale of goods contracts. To displace the presumption on the basis thereof, without more, would defeat the policy of the Convention set out in statute. In any event, it is common ground that the agreed place of payment was in the UK.[24]Mr Pillow disputed these submissions on two main grounds.[25]First, Mr Pillow submitted that Surrey has only a ‘brass plate’ presence here and that its real management was located wherever Mr Afkhami and his laptop or Blackberry happened to be at any particular moment. Mr Pillow may be right in that submission. However, for present purposes, I propose to assume in favour of Surrey that its central administration is in England. It follows that for present purposes I accept that the effect of Article 4.2 is to create a presumption that the contracts in question here are most closely connected with England.[26]Second, Mr Pillow submitted that, in any event, the presumption does not apply by virtue of Article 4.5 which provides, in effect, that the presumption in Article 4.2 shall be “…disregardedif it appears from the circumstances as a whole that the contract is more closely connected with another country.” In particular, Mr Pillow submitted that the contract(s) here were more closely connected with Iran for the following reasons: i) The real substance of the contracts – which had been negotiated between Iranians (Yekta/Afkhami) – consisted in the sale and shipment of goods from Russia, China or Chile in each case for delivery to Bandar Abbas in Iran. This has nothing to do with England at all. ii) As set out in Fawcett, Harris and Bridge, International Sale of Goods in the Conflicts of Laws (OUP, 2005) (“Fawcett”) – at §4.124:
“….[U]nder the Rome Convention when it comes to determining the applicable law in the absence of choice by the parties, the place of delivery is the most important factor…”
This point is repeated at §13.129 at footnote 293 in particular in the context of the situation where the obligations of the parties are to be performed in different states, citing Benaim v Debono [1924] AQC 514 and NV Handel Maatschappij J Smits v English Exporters (London) Limited [1955] 2 Lloyd’s Rep 317. iii) Equally, if (as is sometimes said) the essence of CFR sales such as those in the present case is the tendering of the shipping documents for payment, then this would also unequivocally point to Iran because there can be no doubt that Lignum’s obligation was to tender the documents to MWPI in Iran. iv) On the other hand, the only connections to England are technical and insubstantial, such as the place of incorporation of Surrey, its brass plate mailboxes, and its bank account. v) This case is therefore comparable to Definitely Maybe (Touring) Ltd v Marek Lieberg Konzertagentur GmbH [2001] 1 WLR 1745, in which the claimant was the party who effected characteristic performance and was located in England, raising the presumption of English law in Article 4(2); but the real performance (a concert by the band represented by the claimant) was to occur in Germany, and the only connections with England were the location of the claimant and the place of payment. The “centre of gravity” of the case was held to be in Germany, to which the contract was therefore most closely connected.[27]These submissions were hotly disputed by Mr Sinai. In particular, Mr Sinai submitted that the views expressed in Fawcett were based on the old common law and gave insufficient weight to the basic presumption under Article 4.2. It is fair to say that no modern authority is cited by the editors of Fawcett to support the views there expressed; and I readily accept Mr Sinai’s submission that in accordance with the approach stated by the Court of Appeal in Samcrete, the presumption should only be disregarded in circumstances which clearly demonstrate the existence of connecting factors which justify disregarding the presumption. Further, it seems to me inappropriate to lay down any general rules: each case must turn on its own facts. However, having regard to the circumstances of the present case viewed as a whole as referred to above, it is my conclusion that these contracts are more closely connected with Iran than with England. It follows that in the particular circumstances of the present case, the conclusion I have reached is that in accordance with Article 4.5, the presumption in Article 4.2 is to be disregarded and that pursuant to Article 4.1, the contracts are not governed by English law but by the law of Iran. For the avoidance of doubt, I have reached this conclusion as a matter of English law applying the Rome Convention. Whether or not the courts of Iran would reach the same view, I do not know. However, both Mr Sinai and Mr Pillow agreed that this was not relevant.[28]For these reasons, it is my conclusion that Surrey does not bring itself within this gateway.[29]Given that I have also rejected the only other gateway now relied upon by Surrey, it follows that I would set aside the original order granting permission to serve out. However, if I am wrong, I go on to consider the related questions of forum conveniens and discretion.

Forum Conveniens/Discretion

[30]In this context, the applicable principles were agreed viz the over-arching principle was that stated in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460, 475-478, namely:
“… to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice ... The burden of proof rests on the [claimant] to persuade the court that England is the appropriate forum for the trial of the action, but he has to show that this is clearly so.”
Thus, if the Court is not satisfied at the end of the day that England is clearly the appropriate forum, then permission to serve out must be refused or set aside: see VTB Capital plc v Nutritek International Corpn [2013] 2 AC 337 at [18] and CPR 6.37(3).[31]In support of Surrey’s case that England is clearly the appropriate forum, Mr Sinai relied in particular upon the following factors as set out in his skeleton argument and elaborated in his oral submissions: i) England is Surrey’s domicile, the place where Surrey was contacted and orders placed, where the contracts were concluded and performed by Surrey, and where payment was made by MWPI. ii) All the contractual documentation as well as the contemporaneous communications between the parties are in English and are located in England. All the relevant employees of MWPI speak English and wrote to Surrey at the time in English. Their witness statements served as part of this application have not been translated. If the case is tried in Iran, all of the correspondence and contractual materials will have to be translated into Farsi from its original language. The amount of contractual and contemporaneous documentation placed before the Court at this interlocutory hearing gives an indication of the amount of translations which will have to be produced. iii) According to the evidence of MWPI’s own expert, there is a chance that English law is applicable to the contract under Iranian conflict rules and will have to be proven by way of expert evidence. There are therefore real prospects that the Iranian Courts will have to resolve complicated questions of English law relating to sale of goods law, formation of contracts etc., including statutory and common law rules with which as a civil system they are not familiar. It is also not clear how much experience of commercial law the relevant Iranian courts have; Surrey’s evidence is that MWPI’s mill is located in a small rural coastal area historically concerned with fishing and agriculture. It is obviously preferable for English law to be applied by an English Judge. iv) Surrey and its officers will also lose two juridical advantages presented to them by the English system if the case is stayed in favour of Iran: a) First, MWPI’s expert accepts that the cost of issuing the claim in Iran is 2% of the claimed amount. This is a substantial figure which does not have to be paid in England and this right will be lost by Surrey. The Court may refuse to stay the English proceedings if the same costs advantages are not available in the foreign forum (for example where costs are not awarded on a realistic basis: The Vishva Ajay [1989] 2 Lloyd’s Rep. 558); b) Second, MWPI has stated that it intends to pursue personal claims against Surrey’s officers as part of any Iranian proceedings. Given that the United Kingdom has no international treaty on jurisdiction and the enforcement of judgments, Surrey’s officers have a common law right not to submit to the jurisdiction of the Iranian Courts. This right will be lost if Surrey’s officers are subjected to the jurisdiction of the Iranian Courts as part of proceedings pursued by Surrey. v) According to Mr Yekta, MWPI is the largest manufacturer of paper from pulp in the Middle East and its annual turnover since 1997 has consistently been above USD 50m. Unlike Surrey (which, I was told has no or only limited assets), MWPI therefore has very significant resources which can be deployed for the purposes of conducting litigation in this country, which is the place where it chose to place orders. There is no evidence suggesting that MWPI’s witnesses are unable to travel to England for the trial, and in any event this Court can make reasonable adjustments such as obtaining evidence via video link. vi) There are no good reasons why this case cannot be tried in England, or alternatively is better tried in Iran. MWPI’s response evidence seeks to strengthen this limb of its application with reference to the alleged breach in providing defective goods and the need to obtain evidence from 6 witnesses. However it is not said why evidence is required from these witnesses and what they intend to say. On the contrary, the evidence of Mr Mehdi Yousefian is that he has been able to compile evidence from contemporaneous results and reports prepared by these persons. Mr Yousefian is a former Production Manager and at the relevant time, he was the Managing Director of Industrial Affairs. There is no reason to believe that Mr Yousefian (who has served an untranslated witness statement) lacks personal knowledge of the issues and cannot give all the relevant evidence including matters reported to him by persons under his supervision. vii) Furthermore, MWPI processed all the goods in its mills. The only available evidence is the alleged contemporaneous notes and reports prepared by MWPI itself. It is not explained (and is difficult to see) what useful further oral evidence 6 other junior employees can give about events that occurred 6 years ago. The fact that all the goods have been processed is an important point. MWPI’s case in respect of the defective goods, and any counterclaim that it wishes to pursue, will have to be tried (whether in Iran or in the UK) solely on the basis of the available documents/results and expert’s reports. Importantly, these results have already been translated by MWPI and served as part of its response evidence. The only other person who might have some peripheral evidence to given in respect of the array of issues raised by MWPI is the third party called Mr Ali Ghamsari. However he appears to have had no involvement with the substantive issues, other than acting as an introducer. MWPI does not state that any evidence will be required from Mr Ghamsari. In fact, Mr Yekta’s own evidence is that Ghamsari does not want to give evidence. There is also nothing to suggest that Mr Ghamsari cannot attend an English trial. viii) MWPI’s expert on Iranian law appears to accept that the pace of litigation in Iran is hampered by a substantial number of court holidays, some of which are unannounced. Surrey’s expert also states that delaying tactics through dilatory measures is a feature of Iranian litigation, and this is not expressly rejected by Professor Hosseinabadi. Indeed, given that he does not appear to have as much current experience of day to day litigation, he is not in a position to contradict the evidence of Surrey’s expert. The Court may refuse to grant a stay if there is substantial evidence indicating that trial in the foreign forum may be delayed for many years: The Vishva Ajay [1989] 2 Lloyd’s Rep. 558. ix) On all accounts, MWPI is a major player in Iran with a large market share in its field and powerful shareholders. The Court is being asked to refuse jurisdiction, notwithstanding that it has been properly seized by an English supplier, in favour of a country which has strained relations with the international community, a legal system with which this country is not very familiar, has no international agreement on civil litigation with the UK and no current diplomatic relations.[32]I should deal with this last point first in particular because it proceeds on a premise which, in my view, is fundamentally false viz it is quite wrong to say that this Court is being asked to refuse jurisdiction when the jurisdiction of this Court has been properly seized. On the contrary, the question currently before the Court is whether or not it should exercise jurisdiction over a foreign party; and, consistent with the Spiliada, this Court will only exercise such jurisdiction if England is clearly the appropriate forum for the trial of the action.[33]I should also deal at the outset of considering this part of Mr Sinai’s case with the suggestion that a trial in Iran would be unfair for a variety of reasons. I readily accept that this is a potentially relevant factor: see the discussion in Dicey paras 12-040 to 12-041 and the cases there cited. However, there is no independent evidence to support such suggestion; and, in my view, such evidence as there is falls far short from what would be necessary, even in general terms, to give this any real weight. As to the evidence concerning delays in the judicial system in Iran including alleged excessive “holidays”, it seems to me that such evidence is, at best, tenuous. Sad as it may seem, any system of justice inevitably involves some delays. It is perhaps noteworthy and certainly regrettable that this hearing concerning jurisdiction took place over a year after the original Claim Form was issued. On the material available, it is quite impossible to carry out a proper comparison of the likely overall timescale of court proceedings.[34]As to the two alleged “juridical advantages”, the points relied upon by Mr Sinai are, in my view, of little weight in the particular circumstances of the present case. With regard to the 2% initial fee, it is not clear to me whether this applies to the principal amount (in which case the fee would be the equivalent of approximately €20,000 or (say) £18,000) or the total amount including interest (in which case the fee would be the equivalent of approximately €75,000 or (say) £65,000). Although such size of fee would not be required on issuance of any claim in England, Mr Pillow submitted that it was not unusual. In any event, on the assumption that this constitutes a juridical advantage, it is difficult, if not impossible, to evaluate its significance without having regard to other matters e.g. other legal costs to the end of proceedings and whether or not Surrey would have to put up security for costs. If these proceedings were fought out in England, I would think that the legal costs that Surrey would incur would be substantially higher than these figures. The evidence as to the comparable costs in Iran was disputed.[35]With regard to the point that if Surrey submitted to the courts in Iran, MWPI may pursue personal claims in Iran against Surrey’s officers, Mr Pillow made plain that if the present proceedings were to continue in England, MWPI would similarly pursue personal claims against Surrey’s officers. On that basis, it seems to me that this point has little weight either way.[36]Turning then to the other specific points relied upon by Mr Sinai and at the risk of repetition, it is important to bear in mind that the essential task is to identify the forum in which the case can be suitably tried for the interests of all parties and for the ends of justice; and, in that context, I would repeat what I said in Mujur Bakat Sdn Bhd v Uni Asia General Insurance Berhad, Mujur 1 [2011] EWHC 643 (Comm), at para 9 viz that in considering whether or not England is the most appropriate forum, it is necessary to have in mind the overall shape of any trial and, in particular what are, or what are at least likely to be, the issues between the parties and which will ultimately be required to be determined at any trial.[37]Thus, the mere fact that Surrey is incorporated in England is, in my view, of little, if any significance. In any event, whatever significance it may have is, in effect, cancelled out by the fact that MWPI is domiciled in Iran.[38]Here, it seems to me plain that the main issues that will arise in any trial will be the quality of the goods supplied to MWPI and the losses and other consequences resulting therefrom including(i) diminution in value and(ii) the problems allegedly caused to MWPI’s production processes. As submitted by Mr Sinai, it is right that these matters are summarised by Mr Yousefian in his statement for the purposes of the present application. However, contrary to the underlying thrust of Mr Sinai’s submission, I do not accept that it is realistic to suppose that this is the full extent of the evidence that MWPI would wish to adduce at trial. On the contrary, although Mr Yousefian was, at the relevant time, the Deputy Managing Director for Industrial Affairs, it is his evidence that the persons whom MWPI would wish to testify at any trial in relation to the quality of the woodchips are the 6 individuals he identifies in paragraph 4 of his statement – all of whom, I should say, appear not to be “juniors” but rather to have been employed by MWPI for a considerable period. In my view, that seems unexceptionable. As Mr Yousefian also states, although these individuals speak “some English”, they would testify in Farsi. In addition, although Mr Yousefian summarises the results of certain “tests” with regard to the quality of the goods delivered in Iran, he makes plain that these are extracted from contemporaneous reports. It is not clear how extensive such documentation might be; and I accept that Mr Yousefian does not say specifically whether such documentation is in English or Farsi. However, quite apart from the documents relating to quality inspections, it is plain that the matters addressed by Mr Yousefian in paragraphs 23-32 of his statement would give rise to potentially difficult factual issues concerning MWPI’s production processes in one or more of its factories in Iran. I accept, of course, that this Court has very considerable experience of dealing with issues of this kind. However, in my view, it is quite impossible to say that England is the appropriate forum for the determination of such issues in this case – still less that it is “clearly” the appropriate forum.[39]On Surrey’s side, I accept that issues in any trial will include questions relating to title to sue and contract formation which I have already addressed above; and, in that context, I accept that Surrey may wish to call some evidence from Mr Afkhami and Ms McCarthy. However, I am very doubtful as to what, if any, evidence any of Surrey’s witnesses might give with regard to the main issues summarised above relating to quality and alleged production losses by MWPI. In particular, it does not appear that Ms McCarthy (or any other witness on Surrey’s side) would be able to give any direct evidence with regard to the quality of the goods on delivery in Iran - although Mr Sinai submitted that she would, at the very least, be able to give evidence with regard to this topic based on what she was told by Surrey’s suppliers. Mr Sinai said that Ms McCarthy could perhaps give evidence as to what Surrey were being told by MWPI at the time – although it would seem that the contemporaneous exchanges will speak for themselves. In any event, it seems to me that whatever preference or convenience there may be in Surrey’s witnesses giving their evidence in English in this Court is outweighed (or at least balanced) by the preference or convenience of MWPI’s witnesses giving their evidence in Farsi in Iran. Equally, it seems to me that any cost of having to translate documents into Farsi if the trial takes place in Iran has to be balanced against the cost of having to translate MWPI’s documents into English if the trial takes place here.[40]I accept that where English law governs the contract and issues may arise which involve any novel, complex or undecided issue of English law, this would be a significant factor pointing in favour of England as the appropriate forum. However, as stated above, I am not persuaded that Surrey has the “better argument” that English law applies. In any event, apart possibly from title to sue, the main issues are unlikely to give rise to any novel or complex issue of law – so whatever chance there may be that English law might be held to apply is, in my judgment, of rather lesser significance than might otherwise be the case.[41]Standing back and looking at all these points together, it is my conclusion that Surrey has failed to show that England is clearly the appropriate forum; and, if I am wrong on “gateways”, I would have set aside the order granting permission to serve out for this reason.

Breach of duty to be full and frank

[42]As set out above, Mr Pillow submitted that the order of Flaux J should be set aside because Surrey breached its duty to be full and frank in the presentation of its without notice application for permission to serve out. In particular, Mr Pillow submitted that Buchan 1 failed to mention and occasionally positively misrepresented a litany of material matters relevant to the question of title to sue, to the dispute’s many substantial connections to Iran and to whether Surrey had a good arguable case, or much the better argument, on the various jurisdictional gateways. In his skeleton argument, Mr Pillow listed, by way of example, no less than 21 instances of such conduct. In the event, I do not consider that it is necessary to consider each of these complaints in detail. For present purposes, it is sufficient to say that, in my view, most of such criticisms are valid. In particular, it seems to me that Buchan 1 was seriously deficient in a number of significant respects most notably(i) the failure properly to deal with the question of title to sue;(ii) the assertion that the shipments made prior to the receipt of the T&Cs were only “trial shipments” with the actual contracts then being “… made in England … in accordance with the [Surrey’s T&Cs] which had been delivered on 2nd November 2008 …”;(iii) the failure to disclose that the only contemporaneous “evidence” of the T&Cs being communicated to MWPI omits to list the T&Cs as being contained in the relevant package of documents and that, otherwise, Surrey was never identified as a contracting party or otherwise referred to at all during the relevant period; and(iv) the failure to explain fairly and properly the complaints raised by MWPI with regard to the quality of the goods delivered and the issues relating thereto in any trial which were highly relevant in considering whether England was clearly the appropriate forum and, therefore, the exercise of the Court’s discretion.[43]It is convenient to take this opportunity of reminding all parties and their representatives involved in litigation in this Court of the paramount importance of complying with the duty to be full and frank in all without notice applications. It important not merely for the efficient conduct of business but also to enable the Court properly to fulfil its overriding function and duty of doing justice.[44]Mr Sinai submitted that the complaints made by Mr Pillow were unjustified but that, if there had been any failure to comply with the duty of full and frank disclosure, he apologised to the Court. However, it is my conclusion that the deficiencies in Buchan 1 are so serious as to justify the original order being set aside for that reason alone. I accept, of course, that in certain cases the Court may nevertheless allow the original order to stand or make a new order granting permission to serve out. However, it is unnecessary to consider either of those possible options here because I have already concluded that the order should be set aside for one or more of the reasons already stated above.[45]In the course of argument, Mr Pillow invited me to conclude that the deficiencies in Buchan 1 were deliberate in the sense that they were deliberately intended to mislead the Court. However, I am not persuaded that it would be appropriate to express any concluded view in that regard; and I say nothing more on that point.

Invalid service

[46]As stated above, Mr Pillow raised a point that the proceedings had never been validly served in Iran. In the event, this point has fallen away and it is unnecessary to say anything more about it.

Conclusion

[47]For these reasons, it is my conclusion that the Court should refuse to grant permission to serve these proceedings out of the jurisdiction and that therefore the order of Flaux J must be set aside. Counsel are accordingly requested to seek to agree an order including costs and any other consequential matters. Failing agreement, I will deal with any outstanding issues.

Cited in 1 later judgment