Brave Bulk Transport Ltd v Spot On Shipping Ltd [2009] EWHC 612 (QB)

[2009] EWHC 612 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Venue Royal Courts of JusticeDate Wednesday, 18 February 2009
Strand
London WC2A 2LL
Before
THE HONOURABLE MR JUSTICE BURTON
Between
2008 Folio 289ClaimantBRAVE BULK TRANSPORT LTDClaimantSPOT ON SHIPPING LTDDefendant2008 Folio 955ClaimantZHANGGANG SHIPPING LTDClaimantBRAVE BULK TRANSPORT LTDDefendant
Digital Transcript of Wordwave International, a Merrill Communications Company190 Fleet Street, London EC4A 2AGT: +44 (0) 20 7404 1400 F: +44 (0) 20 7404 1424 E: mlstape@merrillcorp.com
MR NIGEL JACOBS QC and MR PAUL TOMS (Instructed by HFW) appeared for ClaimantMR JONATHAN NASH QC (Instructed by Berwin Leighton & Paisner) appeared for Defendant
Judgment
[1]There have been before me five application notices. Three of these have been brought by Zhanggang Shipping Limited, ZSL, whom I shall call the Applicant, in Action 2008 Folio 289. By these notices the Applicant seeks to intervene in that action in which Brave Bulk Transport Limited (“BBT”), whom I shall call the Respondent, obtained judgment in default on 20 May 2008 against the Defendant in these proceedings, Spot On Shipping Limited (“SOS”), for the sum of US$1,169,589.60 plus interest and costs (“the Judgment Debt”). This debt had arisen in respect of monies due by SOS to the Respondent under a Forward Freight Swap Agreement between them dated 26 February 2007, (“the FFA”). This default judgment has not been set aside and is not the subject of any challenge.[2]The Applicant also seeks in Folio 289 to obtain an anti-suit injunction against the Respondent in respect of attachment proceedings brought by the Respondent in United States District Court (Southern District of New York) (“the New York proceedings”) under Supplemental Rule B of the Federal Rules of Civil Procedure Supplemental Rules for Certain Admiralty and Maritime claims, (“Rule B”).[3]The other two applications are made in a fresh action brought by the Applicant against the Respondent, 2008 Folio 955, one application by the Applicant as an alternative to that in Folio 289, in case its application to intervene in that action is not successful, for an anti-suit injunction in respect of the New York proceedings, and one brought by the Respondent to dispute this court’s jurisdiction and to set aside the claim form and its service upon them.[4]The real nub of the argument, and the purpose of the Applicant, has related to the preventing or inhibiting by the Applicant of the New York proceedings by which the Respondent seeks to enforce the Judgment Debt against the Applicant as alleged alter ego of SOS, in which proceedings there is presently a freezing order, that is a Rule B Maritime attachment, in respect of assets of the Applicant. This order remains, despite the stay of the New York proceedings which has been granted by Judge McMahon in New York, pending the outcome of these proceedings.[5]This debate has been based upon the three most recent applications: the third in Folio 289 and the two in Folio 955. The first two applications in Folio 289 have not been pursued before me by the Applicant. They were somewhat unusual in form. They were brought by the Applicant, severally on 29 May and 4 June 2008, for leave to intervene in that Action simply for the purpose of deleting or correcting the third sentence in paragraph 2 of the Particulars of Claim. The action had, by the time of the issue of the first such application, already ended on 20 May in the default judgment against SOS, the only Defendant, entered by the Respondent. The sentence read:
“The Defendant [SOS] changed its name to Clayton Star Company Ltd on 17 April 2007, and may now trade as Zhanggang Shipping Ltd.”
[6]The FFA contained by clause 16, which cross-referred to the Master Agreement of the International Swap Dealers Association Inc, a submission by the parties, the Respondent and SOS, to the exclusive jurisdiction of the High Court of Justice in London, England, “with respect to any suit, action or proceedings relating to this Agreement”. Hence the subsequent proceedings brought in this court by the Respondent against SOS. However, it is apparent that, not long after the debt became due and unpaid, it became clear to the Respondent that there would be difficulties in recovery against SOS. The Verified Complaint in the New York proceedings, issued for the purpose of obtaining attachment pursuant to Rule B on 30 May 2007, recited, in paragraphs 5 and 6, that SOS had notified the Respondent:
“on or about March 30, 2007 by email that its name had changed and that Spot On Shipping Ltd (“The Company”) has been acquired at 100% equity by PEHW Asset Management Limited, which is a subsidiary company under PEHW Fund Limited. So the operation of The Company should be named as PEHW Asset Management Limited afterwards, which is also the official name for the purpose of FFA contract ... PEHW Asset notified the [Respondent] on or about May 7, 2007, by email, that the name and contact details of Spot On Shipping Limited BVI had been changed to “Clayton Star Company Limited”
. As such Clayton Star is a name by which Spot On is also known.”[7]The Complaint alleged that PEHW Asset was the alter ego of SOS. It was issued against the following, collectively referred to as “the Defendants”:
“Spot On Shipping Ltd aka Spot On Shipping Ltd BVI aka Spot On … aka Clayton Star Company Ltd, aka Clayton Star … and PEHW Asset Management Limited, aka PEHW Asset Management Ltd.”
The Complaint was amended (“the Amended Complaint”) on 9 July 2007, which for the first time joined the Applicant, alleging that the Applicant too is the alter ego of SOS. On the basis of the Amended Complaint, an attachment order was made against the Applicant, by Judge McMahon, on 10 July 2007. Proceedings to set aside that attachment were issued by the Applicant, which were, in the first instance, successful, but were then reconsidered as a result of additional evidence filed by the Respondent and the issue on 31 October 2007 of a Second Amended Complaint, which resulted in the Order for Attachment against the Applicant, which is presently extant, being made on 2 November 2007.[8]I should set out the relevant paragraphs of the Second Amended Complaint, excluding the references which are made in the course of the document to the underlying evidence:
“22. Upon information and belief, Zhanggang is the alter ego of Spot On, because it dominates and disregards Spot On’s corporate form to the extent that Zhanggang is actually carrying on Spot On’s business and operations as if same were its own. 23. Upon information and belief, Zhanggan and Spot On have a common address and place of business at: Suites 1818-23, 18th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong … 24. Upon information and belief, this is also the address of “Spot On (Hong Kong) Group Corporation Limited” (“Spot On HK GCL”) which is another alter ego of “Spot On Shipping Ltd” (“Spot On”). 25. Upon information and belief, Zhanggang and Spot On share a common email address: shipping@spoton-hk.com … 26. The corporate research conducted on these companies includes an Infospectrum Report and a Lloyd’s MIU report. No information was uncovered that shows that Zhanggang is owned by an entity which is a Chinese government-owned enterprise. 27. On the contrary, Zhanggang is a joint venture between Spot On and Zhangdian Steel Mill of China … 28. Upon information and believe, Lloyd’s MIU telephoned Zhanggang and were told that Zhanggang is a “ship charterer.” 29. Contrary to the false assertions made by Zhanggang, Spot On and Zhanggang do share common ownership. Specifically, upon information and belief, both Spot On HK GCL and Zhanggang are owned and run by the Zhang family. Madam Wei-Lu Zhang reported to be the president of Zhanggang is also a principal director of Spot On HK GCL … 30. Further, Zhanggang’s chartering manager is Ms Sammy Yu. Ms Sammy Yu was also the contact between ICAP Hyde Derivatives Limited and Spot On in drafting the February 26, 2007 FFA … 31. Sammy Yu’s name appears on the first page of the FFA between Spot On and Brave Bulk as the “contact” for Spot On … 32. Upon information and belief, Spot On and Zhanggang’s names are used interchangeably in the industry. 33. Upon information and belief, Defendant Zhanggang is an alias, or agent of Defendant Spot On and/or Spot On is an alias, or agent of Zhanggang. 34. Upon information and belief, Defendants Zhanggang and Spot On are commonly beneficially owned, and commonly managed, controlled and dominated, by the same individuals, including Mrs Wei-Lu Zhang and Ms Sammy Yu, and used to carry on such individuals’ own business. 35. Upon information and belief, Defendant Zhanggang has no separate, independent identity from Defendant Spot On as they use their names interchangeably with design to fraudulently avoid payment of just debts to their creditors. 36. In the alternative, Defendant Zhanggang is merely a shell corporation through which Spot On conducts its business. 37. In the further alternative, Defendants Zhanggang and Spot On are partners and/or are joint venturers. 38. In the further alternative, Defendants Zhanggang and Spot On are affiliated companies such that the Defendant Zhanggang is now, or will soon be, holding assets belonging to Defendant Spot On and vice versa.”
I shall refer to these paragraphs as “the Alter Ego pleading.”[9]The defence of the Applicant was, as summarised by its director and shareholder Mr Zhang, in a declaration dated 22 August 2007, that the allegations of an “alter ego status” were “categorically false”. The parties came under an obligation for disclosure, and on 21 January 2008 a First Request for Production of Documents was served on the Applicant by the Respondent. Without complying with disclosure, the Applicant issued on 4 March 2008 a fresh motion to dismiss the Second Amended Complaint, on grounds of forum, relying upon the paragraph (originally 12 in the unamended Complaint, but becoming paragraph 13 in the Amended and Second Amended Complaints (“Paragraph 13”), whereby the Respondent had pleaded that it was “currently preparing to commence litigation against the Defendants in the English High Court on its claims as described here and above” being the claim that SOS was in breach of the FFA).[10]Before this motion was heard, the Folio 289 proceedings were issued in this court, on 26 March 2008, by the Respondent against SOS, which, after leave to serve out was given by David Steel J on 11 April 2008, based on the jurisdiction clause in the FFA referred to above, concluded in the default judgment, by order of Flaux J on 20 May 2008, resulting in the Judgment Debt.[11]Judge McMahon refused the Applicant’s motion to dismiss on 13 May 2008, on the ground that the Applicant was “in default on numerous discovery obligations”, and in the light of a motion by its lawyers for leave to withdraw, which would place the Respondent, being a corporate defendant which required to appear by counsel, in technical default.[12]Fresh lawyers appear to have come on the scene shortly thereafter, Messrs Chalmers O’Connor and Duffy (“COD”) and, by letters dated 3 and 11 June 2008 to Judge McMahon, COD now sought a stay of the New York proceedings pending the outcome of the applications in London. At that stage there were simply the two applications to intervene -- which I have referred to above -- neither of them involving the consideration of any substantive question, but merely the removal of the sentence in paragraph 2 of the Particulars of Claim set out above. The particulars set out in the second of those applications were that the Respondent’s “Particulars of Claim incorrectly state that [SOS] may now trade as the Applicant and the Applicant wishes to intervene to put before the court full details of its relationship with [SOS] to refute the allegation so made and to strike out such allegation”.[13]Of the two letters by COD to Judge McMahon, the first requested that “this Court stay further proceedings in this action pending the outcome of [the Applicant’s] application to intervene in London. The Commercial Court in London is the proper forum to rule on any discovery requests and to discover whether under English law any of the defendants, but particularly [the Applicant], is liable to [the Respondent], it being accepted that the attachment would remain in place pending the outcome of the London proceedings”. In its second letter, COD asserted that the allegation in the sentence in the Particulars of Claim in the now terminated action Folio 289, of which they made complaint, is “essentially the same allegation made against [the Applicant] here in the Verified Second Amended Complaint [at] paragraphs 22 - 38. By its application to intervene, [the Applicant] seeks to challenge that allegation. The basis for [the Respondent’s] claim in both London and New York is an alleged breach of contract by [SOS]. If there is no breach of contract then the “alter ego” issue is a moot point. That contract calls for English law in jurisdiction. As such, the Commercial Court in London is the proper forum to determine not only whether the contract in question was breached, but if so, whether [the Applicant] should be held liable for such breach”.[14]There was further correspondence in which Mr Tisdale of the Respondent’s attorneys wrote to Judge McMahon on 13 June 2008, that “the action has been concluded and no application to vacate the default has been filed. [The Applicant’s] application to intervene in the London proceedings is, at best, a request to “correct the pleadings” to remove the reference to [the Applicant]. [The Applicant] does not seek to adjudicate the merits of the alter ego issue in London, nor does [the Respondent]”.[15]However, on 8 July 2008 Judge McMahon ruled that the New York proceedings were stayed until the London law suit is concluded. On 17 September the third application notice in Folio 289 was issued, now seeking intervention for the purpose of applying for an anti-suit injunction to restrain the New York proceedings, and on 18 September the claim in Folio 955 was issued. This sought declarations that the Applicant is not a party to the FFA, and is not liable to the Respondent under the FFA and/or in respect of any breach of the FFA, and an anti-suit injunction to the same effect as that claimed in Folio 289, asserting the existence of jurisdiction by reference to the jurisdiction clause in the FFA, to which they asserted they were not a party, accompanied by the Application Notice for such an anti-suit injunction.[16]The Respondent issued its application challenging the jurisdiction, to which I have above referred, on 5 December 2008, asserting that the jurisdiction clause in the FFA is of no relevance, and that, insofar as the Applicant has any claim at all, it is not one which falls within it.[17]A large number of authorities was produced by the Counsel for the Applicant, Nigel Jacobs QC and Paul Toms, which have not, in the event, fallen for consideration. They ranged across issues such as the jurisdiction of this court to deal with declarations of non-liability, questions relating to anti-suit injunctions, to abuse of the process, to joinder, interventions and estoppel. In the event, and in the light of the persuasive skeleton argument served by Jonathan Nash QC on behalf of the Respondent, Mr Jacobs QC accepted that the issue before me was in a very narrow compass. I sent a note to Counsel after pre-reading the papers and before the start of the hearing, with the content of which neither side in the event took issue, which read as follows:
“If [the Respondent] is alleging in the New York proceedings that [the Applicant] is the contracting party liable to the Respondent under the FFA then: 1. They cannot, having sued and obtained judgment against SOS. Abuse is not necessary - election would suffice - see Kendall v. Hamilton [1879] 4 AC 504 especially at 515; 2. Such a disputed assertion would (arguably) fall within the jurisdiction clause and (arguably) found jurisdiction in the UK for an anti-suit injunction to restrain its pursuit. But [the Respondent] asserts that it is not so alleging in the New York proceedings. The issue whether [the Respondent is or is not so alleging] seems to me to be the only issue to resolve, on the present applications and evidence.”
[18]My reference to the ‘present applications and evidence’ was by virtue of the inclusion amongst Mr Jacobs’ authorities of the decision of David Steel J in the Selby Paradigm [2004] 2 Lloyds Rep 714, which made it plain that there can be jurisdiction to allow intervention by a third party after judgment as between a claimant and defendant in an action to which the third party is not a party, where that third party, such as, in the Selby Paradigm case, an underwriter who might, if the insurance were valid, become liable to pay the judgment debt, wishes to intervene for the purpose of setting aside the judgment and defending it on its merits. That, as Mr Jacobs immediately accepted, is not the case here. Neither is there any application to set aside the judgment nor, is it suggested that there could be any basis to do so.[19]Two matters appear to have been underlying the Applicant’s thought processes in pursuing these applications. The first is the wording in paragraph 2 of the Particulars of Claim as between the Respondent and SOS, set out above, to whose removal the first and second applications in Folio 289, now not pursued, were dedicated. It is perhaps not surprising that these words were included in the pleading, given the pre-existence of the attachment against the Applicant in the New York proceedings, which had by then been extant for some months. But strictly the averment in the paragraph is entirely immaterial to the case as between the Claimant and the Defendant, certainly once default judgment had been entered. It seems on the one hand to have been a marker being laid by the Respondent, no doubt with an eye on the New York proceedings, that they were in no way abandoning their alter ego claim there made. On the other hand, it certainly seems to have been used as a peg upon which the Applicant could hang its forum arguments which it brought before Judge McMahon, first in March when its application for dismissal was made, which was subsequently dismissed in May and then in June, when it made its application for a stay.[20]The reality seemed to me, when I saw this paragraph, that it was, in fact, of no assistance to any case, sought to be developed by the Applicant, that by reference to it it could be said (as the Applicant was asserting the Respondent was saying), that the Applicant was a party to the FFA. The words are quite clear, and the date of the FFA of 26 February 2007 must be borne in mind, namely that the (immaterial) averment is that, on dates subsequent to the FFA, namely 17 April 2007 SOS changed its name and now (i.e. at the date of the Particulars of Claim, 26 March 2008), it may trade as Zhanggang Shipping Limited. It may be that the presence of the word “now” had not been appreciated by those advising the Applicant, but when I drew this to Mr Jacobs QC’s attention he no longer pursued the point. He indeed fully accepts that if and insofar as the Respondent is alleging that at any stage subsequent to the FFA the Applicant is the alter ego of SOS, or vice versa, he can make no complaint of that and such an allegation cannot and does not fall within the jurisdiction clause. He could not, therefore, base on it any case for an anti-suit injunction to prevent its pursuit in the New York proceedings.[21]The second matter is the pleading in the New York proceedings to which I have referred above, namely Paragraph 13. In paragraphs 7 and 10 of the earlier, and paragraphs 8 and 11 of the later, pleading it is pleaded that the Defendant, SOS, made agreement by the FFA with the Respondent and was in breach of it. As I have set out above, in the original Complaint another Defendant, PEHW Asset Management Limited was joined as a Defendant, and various aliases for both the two Defendants were spelt out, and the apparent history of acquisition or transfer of shareholding and names as between the two Defendants was recited. Paragraph 13, as I have set out above, reads: “the plaintiff is currently preparing to commence litigation against the Defendants in the English High Court on its claims as described here and above”.[22]When the Respondent was joined to the Amended Complaint, as an additional Defendant, the definition of “Defendants” was expanded to include the new Defendant. Substantial additional paragraphs were added, later in the pleading (and more in the Second Amended Complaint), in respect of the Respondent’s case that the Applicant was the alter ego of SOS. Paragraph 13 remained the same. The Applicant, consequently, once it came to make its forum applications in March 2008 and onwards understandably relied upon, and referred to, the assertion that the Respondent was preparing to commence litigation in London, not only against SOS, but also against it, which it was asserted must mean that the Respondent was concluding that there was jurisdiction in London to found a case against it; that the Applicant was thus a party to the FFA and that the alter ego arguments would be litigated in London.[23]In the event as I have described, when the proceedings were commenced in London they were only against SOS. The Applicant cannot therefore, say that the alter ego arguments are proposed to be or are being litigated in London - indeed they are not. Nothing is presently being litigated in London, since the only claim that there was, namely a simple contractual claim under the FFA against SOS has come to an end, and no application is to be made to set aside the default judgment.[24]What is asserted is that it is an abuse for the Respondent not to have litigated such case as they apparently said they were going to do. The Respondent’s answer is, apart from asserting the irrelevance of all this, to which I shall return, that the pleading was in error. Whereas originally it was indeed intended as a possibility that there would be an action in London, not only against SOS, but also against the other Defendant, PEHW, which it appeared might have become a party to the FFA by assignment and/or novation, so that the pleading in Paragraph 13, as at the time of the original Complaint, was accurate. It was never intended to bring proceedings on the alter ego basis in London as against the Applicant, and the fact that the when the complaint was amended to include the Applicant, and the definition of “Defendants” was thereby automatically expanded, the impact on the unchanged pleading in Paragraph 13 was unappreciated and unintended. It was one of those mindless overlooked errors which can occur where there are consequential amendments to a pleading, as Mr Tisdale explains. Whether that is so or not, and it was an explanation which to me, with many years experience of pleading at the Bar, rings true, in any event the fact is that proceedings were not issued in London against anyone other than SOS.[25]I do not conclude that there is any relevance in this to the matters now before me:(i) If, in fact, as a result of information which had now become available to it, the Respondent was, in March 2008, in a position to have alleged that SOS was agent, in entering into the FFA, for an undisclosed principal, namely the Respondent, then it is all the clearer that by issuing the proceedings only against SOS it elected to sue the agent on the contract, and could not now thus sue the undisclosed principal on the contract - see Kendall v. Hamilton referred to above. This only emphasises what, in my judgment, would have been the case in any event, in the light of the House of Lords authority.(ii) Given that the Respondent is not in terms suing the Applicant as a party to the contract (and because of Kendall and Hamilton could not do so), the question remains whether the pursuit of the alter ego case must or can be tried in London, which is the issue now before me. I do not conclude that that is in any way affected by what the Respondent may or may not have said it was intending to do in the New York pleadings.[26]I turn to two other matters, which I do not consider material, but which have been raised in the one case by Mr Jacobs QC and in the other by Mr Nash QC:(i) The effect of Judge McMahon’s order. Mr Jacobs QC submitted that there were some implications to be drawn from the fact that, although refusing to dismiss the proceedings, Judge McMahon granted the stay pending the outcome of the London proceedings, that the New York judge considered that there was some case that the London court, and not the New York court, had jurisdiction over the alter ego issue. I am entirely satisfied that this is not so, and that all that she did was, while keeping the attachment in place, hold the ring while these proceedings were resolved. Mr O’Connor of COD in his witness statement in these proceedings of 19 January 2009 does not, in fact, say anything other. In paragraphs 7 and 10 of that statement he records that Judge McMahon has: “deferred to this court to decide whether it should accept and rule on these alter ego allegations.”(ii) Mr Nash QC points out that the Applicant’s jurisdictional arguments are very much an afterthought and he also points to the fact that they came at a time when the Applicant was in default in giving disclosure, which might have damaged its case on the issue of alter ego, and he might also have pointed out that they were raised at a time when the two applications upon which the Applicant is actually now running its argument in this court had not yet been issued, and the two that had been issued were, in the event, not to be pursued. He accepted, however, in the event, that all these were, as Mr Jacobs put it, ‘jury points’. No issue of waiver arises and if the argument is a good one, then it would prevail.[27]The assertion by Mr Jacobs QC is that the Respondent is asserting in the New York proceedings that the Applicant was a party to the FFA, and that this issue should therefore be litigated in London. The straightforward assertion in this regard can be traced back to a Memorandum by the Applicant’s previous lawyers in support of their rejected motion to dismiss dated 4 March 2008, averring that “in the case at bar [the Respondent] seeks security for damages under a ... FFA, to which [the Respondent] claims [the Applicant] is bound as a purported corporate ‘alter ego’ of the signatory.” In these proceedings it surfaces in Mr O’Connor’s first witness statement, at paragraph 2, where he takes issue with the Applicant’s case that the enforcement proceedings in New York are distinct from the English proceedings, because they deal with entirely separate issues, “on the basis that the English court is [seised] of the issue as to whether [the Applicant is party] to the [FFA] and [is] liable under the [FFA]” and again in his second witness statement, at paragraph 14, where he states that the Applicant is “not attempting to ‘forum shop’. They are merely attempting to have the issue of their own contractual liability under the FFA determined in the proper (contractual) forum”.[28]Mr Nash QC says that the Respondent is making no such assertion. It has a judgment debt against SOS, and is seeking to enforce that otherwise irrecoverable judgment debt by asserting that the Applicant has SOS’s assets, by reference to one or other of the alter ego routes set out in the New York proceedings.[29]Mr Tisdale explains the concept of alter ego in the law applicable in the New York proceedings in paragraphs 11 to 24 of his witness statement in these proceedings, in a passage with which the Applicant took no issue, and it appears that there are many similarities with the approach to alter ego in these courts:
“16. An alter ego is defined under Federal common law as an interconnected organisation which was utilised to perpetrate a fraud, or where one entity or individual(s) so dominated another that it was, in effect, carrying on the principal’s business … In such cases, the corporate form will be ignored and liability imposed on another corporate entity or the principals.”
Therefore, the basis upon which the case was presented to Judge McMahon in particular in the second letter of 7 June 2008, which I have cited above, is unfounded. Neither the New York court nor the Commercial Court in London is being invited by either party to decide whether the Applicant should be held “liable for such breach” of the FFA. In any event the Respondent accepts that it is not entitled to sue any party under the FFA, having obtained judgment against the only party it is alleged to be the contracting party of the FFA, namely SOS, (Kendall v. Hamilton above).[30]No doubt recognising the difficulties in this main argument, the Applicant puts its case in an alternative way. In his first witness statement at paragraph 4, Mr O’Connor submits that, upon proper analysis the allegations in the Alter Ego Pleading are “allegations in substance or effect that [the Applicant] is a party to the [FFA] or is liable under the [FFA].” In a second witness statement at paragraph 10 he says:
“... If [the Applicant] and [SOS] were connected in the ways as alleged by [the Respondent] and [the Applicant] supposedly exerted such general domination over [SOS] (and vice versa), specifically with respect to the FFA, then [the Applicant] would necessarily have been the party to the FFA and the party in breach of the same. Thus, even though the allegations are framed on the basis of ‘alter ego’, I consider that the substance of [the Respondent’s] claim in the New York proceedings is that [the Applicant was party] to the FFA.”
This is what I called in argument the “paper-clips argument” - i.e. that if the Applicant’s case succeeds, then it is, in fact, asserting that at all material times the Applicant was party to all SOS’s contracts, even a contract for the supply of paper- clips.[31]If one or other of his submissions is right, then Mr Jacobs QC contends that, the claim in the New York proceedings is one which relates to the FFA and therefore, falls within the London jurisdiction clause. If that were right, then as I see they do not need to construct the tenuous argument for a right to intervene in the now defunct SOS proceedings. They can bring a claim for a declaration as to their non-liability under the FFA (e.g. Andromeda Marine SA v. O W Bunker [2006] 2 Lloyds Rep 319) on the basis that the Respondent is implicitly, if not explicitly, asserting that the Applicant was a party to the FFA.[32]This Mr Nash QC asserts is not the case. The Respondent is not expressly or impliedly asserting that the Applicant was a party to the FFA, but is certainly not suing to enforce it or claiming under it. It has a judgment debt, which it is seeking to enforce against the assets of SOS.[33]It is I am quite satisfied, unarguable that there is an express case made in the New York proceedings, or at all by the Respondent that the Applicant was a party to the FFA. The case which I must resolve is whether there is a good arguable case, sufficient to found jurisdiction in the English courts under the exclusive jurisdiction clause, that there is an implicit such assertion on the basis that it “relates” to the FFA. This, as Mr Nash, in my judgment, rightly submitted, could only be if either(i) it was an essential or necessary part of the Respondent’s case in the New York proceedings that the Applicant was a party to the FFA or(ii) possibly (although Mr Nash made no such concession) if that were an inevitable consequence of such a case.[34]For this purpose it is necessary to analyse the Alter Ego Pleading. There was no dispute that, of the paragraphs 22 to 38, some are more important so far as averments of law are concerned, while others simply set out particulars of fact or evidence. Mr Jacobs did not dispute that there is, discernable from the paragraphs, an entirely self-standing line of case (“Line 1”), which could not conceivably be alleged to amount to one which could fall within the jurisdiction clause or be said implicitly to contain an allegation that the Applicant was a party to the FFA, because SOS was its agent or alias.[35]In line 1 the averment in paragraph 36 is central, namely that the Applicant is “merely a shell corporation through which [SOS] conducts its business”. This, like the first part of paragraph 33, in which it is alleged that the Applicant is an alias or agent ofSOS, is the reverse of a case which could be interpreted as explicitly or implicitly asserting that the Applicant was, as the undisclosed principal of SOS or otherwise, party to the FFA. Paragraphs 25, 29, 30, 31, 32, 34, 35 and to an extent 37 would then be particulars of such an unexceptionable case.[36]Similarly, Mr Jacobs concedes that there is no benefit for his argument in paragraph 38 of the pleading, which asserts that the Applicant and SOS are “affiliated companiessuch that [the Applicant] is now, or will soon be, holding assets belonging to [SOS] and vice versa”. This is no different from, and/or is a variation of, the sentence in paragraph 2 of the Particulars of Claim in the UK proceedings Folio 289, which relates, as discussed above, to what the position is now (“the Now case”).[37]Mr Jacobs QC, however, relies upon paragraph 22, being the allegation that the Applicant is “the alter ego of [SOS], because it dominates and disregards [SOS’s] corporate form to the extent that [the Applicant] is actually carrying on [SOS’s] business and operations as if [the] same were its own”, and the allegation in the second half of paragraph 33 that SOS “is an alias or agent of” the Applicant. The same paragraphs, as set out above, namely paragraphs 25, 29, 30, 31, 32, 34, 35 and 37 would then be particulars of such a case (“Line 2”). This is a case which, Mr Jacobs asserts, has the inevitable consequence that SOS was the agent of the Applicant in entering into the FFA, and that the Applicant, in carrying on SOS’s business and operations as if the same were its own, was also so carrying on business in respect of the FFA. Mr Jacobs points out that two of the particulars, namely in paragraphs 30 and 31, which assert that Ms Sammy Yu, the chartering manager of the Applicant, was also the contact for SOS, are said to be evidenced by the fact that she was described as such contact in the first page of the FFA.[38]I have no doubt whatever that it is not an essential or necessary part of the case that the Applicant is the alter ego of SOS, and/or that SOS is the alter ego of the Applicant, which the Respondent seeks to establish in the New York proceedings, that the Applicant was an undisclosed principal, or an undisclosed partner, or joint venturer in relation to the FFA. What is required to establish alter ego is quite different, and indeed may involve the high hurdle of proving fraud, or equivalent to fraud, on the part of the Applicant and/or SOS. I accept Mr Nash QC’s submission that all that is happening is the identifying of assets which are alleged really to belong to the judgment debtor. In any event, it is quite plain that Mr Jacobs is driven to concede that many of the ways - Line 1, or the Now case - in which alter ego could be established would not involve any consideration of the FFA or of any alleged agency by SOS at all.[39]Even if I were satisfied, which I am not, that it would be sufficient to amount to a claim relating to the FFA, if it were an inevitable consequence of a finding of alter ego (by reference to Line 2 of the pleadings), that the Applicant must have been a party to the FFA:(i) The allegations even in Line 2 are very broad, and do not depend upon the FFA. The only mention of the FFA is, as set out above, as to the fact that Ms Sammy Yu appears to have carried out a function for both the Applicant and SOS, for which reference is made to the documentation of the FFA. But that is only a starting point for investigation.(ii) Significantly the pleadings upon which Mr Jacobs’ case primarily, if not wholly rests, paragraph 22 and the second half of paragraph 33, are both expressed in the present tense, as is natural in relation to an attempt to execute a judgment debt against missing assets, namely that the Applicant is the alter ego of SOS; that the Applicant is actually carrying on SOS’s business and operations and/or that SOS is an alias or agent of the Applicant.[40]I am thus not satisfied that it is an inevitable consequence of a finding of alter ego, even by reference to Line 2 in the pleading, that the Applicant was a party to the FFA because it was a party to all SOS’s contracts during any particular period. There is a simple answer to these applications, namely that 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 v. Privalov [2008] 1 Lloyds Rep 254).[41]In my judgment, the Respondent is neither expressly nor impliedly seeking to establish that the Applicant is a party to the FFA or is liable pursuant to it, nor impermissibly seeking, having elected to enforce the FFA against the contracting party, SOS, now to enforce it as against the Respondent. There is no abuse, no arguable case for jurisdiction in the English courts and no ground to restrain the New York proceedings.[42]The applications by the Applicant are consequently dismissed and that by the Respondent is granted.

Cited in 1 later judgment