Neutral Citation Number: [2002] EWHC 861 (Ch)
Case No 4919 of 2001
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand
London WC2A 2LL
Date: 26 February 2002
Before:

MR LESLIE KOSMIN Q.C.
(sitting as a Deputy Judge of the Chancery Division)
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BETWEEN:

IN THE MATTER OF COVER EUROPE LIMITED (FORMERLY KNOWN
AS OLD SAXONS LIMITED) (IN MEMBERS VOLUNTARY LIQUIDATION)

KVAERNER MASA-YARDS INC
Applicant
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PAUL BARRETT
(Liquidator of the above-named Cover Europe Limited)
(Formerly known as Old Saxons Limited) (in Members Voluntary Liquidation)
Respondent
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Ms FELICITY TOUBE (instructed by Messrs Watson Farley & Williams) appeared on behalf of the Applicant.
Mr IAN LAMACRAFT (instructed by Mr Claudio Del Giudice) appeared on behalf of the Respondent.

Hearing: Wednesday 6.2.2002 – Thursday 7.2.2002
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JUDGMENT

Mr. Leslie Kosmin Q.C.:

1. 	This is the trial of a number of preliminary issues which arise on an Originating Application dated 13th August 2001 brought by the Applicant (“Kvaerner”) against the Respondent, Mr Paul Barrett, who participates in these proceedings in his capacity as the Liquidator of Cover Europe Limited (“the Company”). The Company, which was formerly known as “Old Saxons Limited”, carried on business as an insurance company in Italy. It entered members voluntary liquidation in England on 23 February 1999 when Mr Barrett was duly appointed as liquidator.

2. 	The Originating Application is brought by Kvaerner under Section 112 of the Insolvency Act 1986 and seeks directions 

(1)   that the Liquidator should admit a proof of debt submitted by Kvaerner in the liquidation of the Company; alternatively 

(2)   as to whether or not the Liquidator should admit the proof submitted by Kvaerner for the whole amount claimed or for part of that amount and, if part of that amount, as to how much should be admitted. 

(3)   such other directions as the Court shall think fit. 

The proof is for the sum of 1,325,000,000 Italian Lire arising out of a guarantee for that sum allegedly provided to Kvaerner by the Italian branch office of the Company on 3 February 1998 in support of a shipbuilding contract between Kvaerner and Athanor S.r.l. (“Athanor”), an Italian company, dated 25 September 1997. The guarantee was one of three guarantees obtained by Athanor which were intended to secure the performance by Athanor of its payment obligations under the shipbuilding contract. The contract was to be performed in Finland by Kvaerner, which is a Finnish company based in Turku, Finland.

3.	Kvaerner claims that Athanor defaulted and is liable under the shipbuilding contract, which it terminated on 12 May 1999. Kvaerner then claimed the whole of the 1.325M Lira from the Company under the guarantee, on the basis that the amount of the damages arising from the breach of contract would exceed the limit on the guarantee. It appears that Athanor, which is now itself in liquidation in Italy, disputes the claim made against it by Kvaerner and has urged the Company not to pay under the guarantee. It is to be noted that when the Company commenced members voluntary liquidation on 23 February 1999 the Declaration of Solvency filed under Section 89(3) of the Insolvency Act 1986 did not include any reference to the guarantee, whether under the heading “contingent liabilities” or otherwise. The estimated surplus of assets in the liquidation after paying all debts in full was shown as £1,238,903.00. I have been informed by Counsel that the approximate amount of the guarantee in Sterling is about £600,000.

4.	In relation to the substantive claim the dispute between the parties concerns the validity and form of the guarantee that was signed by Kvaerner. Briefly, it is allegedby the Company that the guarantee which it signed and delivered to Kvaerner in Finland was a two page document containing a number of contractual conditions. It is contended by Kvaerner that it refused to accept these conditions but agreed to sign the first page only, which thereafter constituted the contract of guarantee. The Company maintains that it did not agree to this alteration but that the purported consent was given by the representative of Athanor, a Mr Borgioli, who was present in Finland at the time. The guarantee was not returned to the Company but was retained by Kvaerner. It is argued that the guarantee is also invalid because the parties did not meet the requirements of Article 7 on the second page, which, it is claimed, had the effect of imposing as a condition precedent to the Company’s liability thereunder the provision of security for the guarantee. It should also be noted that there is a dispute between the parties as to the law governing the guarantee. None of these substantive matters are to be decided on the present application.

5.	Before turning to the legal issues which now arise I should refer in some detail to the procedural history of this matter. After Kvaerner had written to the Italian branchof the Company to make its claim under the guarantee it received no response. It thenundertook a company search and discovered that the Italian branch had ceased to operate on 23 February 1999 on which date, unknown to Kvaerner, the Company had entered members voluntary liquidation. Upon discovering that this was the case, on 25 May 2000 a firm of Finnish attorneys instructed by Kvaerner wrote to the Liquidator, informing him of its claim and requesting immediate payment of the guaranteed sum. The evidence before this Court includes a letter from the Liquidator dated 26 June 2000 in which he responded that he had sought information from the Company’s principal director, who had already assured him that “there are no legitimate claims outstanding”, but that he would write again when he received a reply from the director. There was then a gap until 11 September 2000 when Kvaerner’s solicitors, Watson Farley and Williams (“Watson Farley”), came on the scene.  In a letter to the Liquidator they reiterated the details of the claim and enclosed a copy of the guarantee, the letter to Athanor dated 12 May 1999 terminating the shipbuilding contract and the letter of demand to the Company that followed. They noted the inaccuracy of the Declaration of Solvency and that there were sufficient assets to meet the claim. The letter concluded with a request for a proof of debt form and confirmation that the Liquidator would accept the claim.

6.	Unfortunately, there followed a very lengthy period of delay while the Liquidator sought a definitive response from an unidentified Italian director of the Company. However, the Liquidator gave an assurance that no funds would be disbursed to anyone until the claim had been resolved. In a letter to the Liquidator dated 20 October 2000 Kvaerner’s solicitors referred to the delay and pointed out that they were advising their client on making an application to the Court to have its claim determined and that they would seek their costs as a liquidation expense. There was no substantive reply from the Liquidator until 28 March 2001 when he referred to advice 	from an Italian lawyer stating that the guarantee was void and that “legal proceedings are already pending in this matter”. In fact no such proceedings were pending at that time. This was pointed out to the Liquidator by Watson Farley in a fax sent on 9 May 2001.

7. 	After further delay, by a letter to the Liquidator dated 29 May 2001 Watson Farley complained that despite having considered the matter for eight months the Liquidator had not explained why Kvaerner’s claim could not be admitted for proof in the liquidation. They repeated their request for a formal proof of debt form or confirmation that sufficient information had been provided for a decision to be made. The letter referred to the procedures under Rule 4.83 of the Insolvency Rules (under which a creditor whose proof is rejected by a liquidator can appeal to the Court) and concluded that the solicitors had instructions to proceed with such an application once the Liquidator had expressed his reasons for the anticipated rejection of the proof (under Rule 4.82(2)).

8. 	There then followed further confusion over whether Court proceedings had already begun in Italy concerning the enforceability of the guarantee. A suggestion to this effect was made in a letter from the Liquidator’s solicitor Dr Claudio Del Giudice of 1 June 2001 and corrected by Watson Farley in a letter dated 12 June 2001. That letter not surprisingly requested an immediate decision from the Liquidator on Kvaerner’s claim so that it could take the steps necessary to enforce it. This was clearly intended to be a reference to an appeal against rejection of the proof under Rule 4.83. Further delay followed while Dr Del Giudice obtained instructions from Italy. Eventually, on 30 July 2001 Dr Del Giudice wrote to Watson Farley and informed them that legal proceedings involving the Company, Athanor and Kvaerner had now started in Italy. The letter enclosed a copy of a writ (Atto di Citazione) issued by the Tribunale Civile di Roma which was “being served” on Athanor and Kvaerner. The copy writ asks for a declaration that the guarantee given to Kvaerner be declared null and void and of no legal effect.

9.	Kvaerner’s reaction to the information from the Liquidator’s solicitor that proceedings had been commenced by the Company against them in Italy was to issue and serve the present proceedings under Section 112 of the Act on 13 August 2001. The Applicant’s evidence includes an affidavit of service from Mr Malcolm Robert Clarke sworn on 14 August 2001. The Italian proceedings (“the Rome proceedings”) were in 	fact not issued until 27 August 2001. They were served on Athanor on 8 September and on the Applicant on 25 September 2001. The question which therefore now arises is which Court has jurisdiction over this dispute under the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1968 (“the Brussels Convention”).

10.	In the light of these events, on 15 October 2001 Evans-Lombe J ordered the trial of the following six preliminary issues in this Originating Application:

Issue 1: Are the English Proceedings proceedings (a) involving the same cause of action and (b) between the same parties as the Rome Proceedings issued by Cover Europe	Limited, acting by its Liquidator, within the meaning of Article 21 of the Brussels Convention?

Issue 2: If the answer to Issue 1 is yes, is the English High Court the court “first seised”, or is the Rome Court the court “first seised”, within the meaning of Article 21 of the Brussels Convention, and should the English High Court retain jurisdiction?

Issue 3: If the answer to Issue 1 is no, are the English Proceedings and the Rome Proceedings related actions within the meaning of Article 22 of the Brussels convention?

Issue 4: If the answer to Issue 3 is yes, is the English High Court the court “first seised”, or is the Rome Court the court “first seised”, within the meaning of Article 22 of the Brussels Convention, and should the English High Court retain jurisdiction?

Issue 5: If the answer to Issue 2 and/or Issue 4 is yes, is it relevant to the question of the jurisdiction of the English High Court whether the English Proceedings are an appropriate means of establishing Kvaerner’s debt?

Issue 6: If the answer to Issue 5 is yes, are the English Proceedings an appropriate means of establishing Kvaerner’s debt?

THE BRUSSELS CONVENTION

11. 	Both parties accept that these proceedings are governed by the Brussels Convention which forms Schedule 1 to the Civil Jurisdiction and Judgments Act 1982.  The Convention has the force of law in the United Kingdom by section 2 of that Act. It applies in civil and commercial matters whatever the nature of the dispute or tribunal. However, there are a number of express exceptions where the Convention does not apply. Paragraph 2 of Article 1 expressly excludes the application of the Convention to “proceedings relating to the winding-up of insolvent companies compositions and analogous proceedings”. The Company is of course in members voluntary liquidation and is solvent, and will remain so even if Kvaerner’s proof is admitted. This is therefore not the winding-up of an insolvent company. Moreover, the submission of the parties that the Convention applies is in line with the decision of Rimer J in UBS A.G. v Omni Holding A-G. (in liquidation) [2000] 1 WLR 916 where he held, when dealing with the identical wording in the Lugano Convention, that for the exception to apply the claim must be derived directly from the winding up. Rimer J cited the decision of the European Court of Justice in Gourdain v Naidler (Case 133/78)[1979] E.C.R. 733 and expressed the view that a claim by a liquidator to recover debts due to the company would not be within the paragraph (2) exception. Equally, a claim by a creditor challenging a decision by a liquidator as to the amount of a proof that would be admitted is not one which derives directly from the winding up. It is one which was capable of arising quite apart from such winding up or the insolvency.

12. 	A number of provisions of the Brussels Convention are relevant to this application and have been cited by counsel. Article 2 of the Convention provides:

“Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that state.”

Article 52 provides: 

“In order to determine whether a party is domiciled in the Contracting State whose courts are seised of a matter the court shall apply its own internal law.” 

Article 53 provides: 

“For the purposes of this Convention, the seat of a company or other legal person or association of natural or legal persons shall be treated as its domicile. However, in order to determine that seat, the court shall apply its rules of private international law.”

During the course of her submissions Ms Toube for Kvaerner also made reference to Articles 5(1) (a person domiciled in a contracting state may be sued in another contracting state in matters relating to a contract in the courts for the place of performance of the obligation in question) and 16(2) (proceedings relating to decisions of the organs of a company etc). In the event she acknowledged that neither of these provisions was relevant to this application.

13.	In addition to the provisions of the Brussels Convention, regard must also be had to Section 41(2) of the 1982 Act which states that an individual is domiciled in the United Kingdom if and only if he is resident in the United Kingdom and the nature and circumstances of his residence indicate that he has a substantial connection with the United Kingdom. Section 42 provides that for the purposes of the Act the seat of a corporation shall be its domicile. By subsection (3)(a) a corporation has its seat in the United Kingdom if and only if it was incorporated or formed under the law of part of the United Kingdom and has its registered office or some other official address in this country.

14. 	It is apparent from these provisions that both the Liquidator (by virtue of his residence) and the Company ( which is incorporated in England and has its registered office in England) are domiciled in the United Kingdom and that England is prima facie the proper jurisdiction in which Kvaerner should bring proceedings against the Liquidator. However, these Articles are subject to the other provisions of the Convention, namely Articles 21 and 22, which are at the centre of the argument on this application. These are as follows: 

Article 21:   “Where proceedings involving the same cause of action and between the same parties are brought in the courts of different contracting states, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. 

Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.” 

Article 22   “Where related actions are brought in the courts of different contracting states, any court other than the court first seised may, while the actions are pending at first instance stay its proceedings. 

A court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the law of that court permits the consolidation of related actions and the court first seised has jurisdiction over both actions.  

For the purposes of this article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”

15.	The scheme of the Convention is to require the second court to decline jurisdiction in the situations covered by Article 21 and gives the second court a discretionary power to stay its proceedings where related actions are brought in two relevant jurisdictions under Article 22. As Bingham LJ stated in Dresser U.K. Ltd v Falcon Gate Freight Management Ltd [1992] 1 Q.B. 502 at 514 C-D:

“Articles 21 to 23 provide a code for resolving contests of jurisdiction 	between the courts of different contracting states where both the courts or all the courts involved are prima facie bound or entitled to accept or exercise jurisdiction under the Convention. Some tie-break rule was necessary, and that adopted by the Convention was a simple test of chronological priority. Priority was given to “the court first seised”...”

In that case the Court of Appeal laid down the rule that for the purposes of English law a court does not become seised of a matter until the writ or process has been served. The decision was followed by the Court of Appeal in Neste Chemicals SA v DK Line SA “The Sargasso” [1994] 3 All ER 180 where it was held that an English court became definitively seised of proceedings for the purposes of Article 21 of the Convention on the date of service of the writ, at which point it had jurisdiction over the merits of the dispute. At page 184d-e Steyn LJ stated that the framers of the Convention had “put their faith in the simplicity, certainty and predictability of a rule of chronological priority.”

16.	 In the light of these provisions I now turn to deal with each of the preliminary issues.

Issue l: Are the English Proceedings proceedings (a) involving the same cause of action and (b) between the same parties as the Rome Proceedings issued by Cover Europe Limited, acting by its Liquidator, within the meaning ofArticle 21 of the Brussels Convention?

(a)   The same cause of action?

17. 	As mentioned above the Rome proceedings seek a declaration as to the invalidity of the guarantee provided to Kvaerner, whereas the English proceedings under Section 112 of the Insolvency Act 1986 are framed by reference to the proof of debt submitted by Kvaerner in the voluntary liquidation. The test as to whether proceedings involve the same cause of action has been considered by the European Court of Justice in Owners of cargo lately laden on board the ship Tatry v Owners of the ship Macie Rats (“The Tatry”) (Case C-406/92) (Note) [1999] Q.B. 515 where the following principles were established:

“39.   For the purposes of article 21 of the Convention, the “cause of action” comprises the facts and the rule of law relied on as the basis of the action ....

41.   The “object of the action” for the purposes of article 21 means the end the action has in view.”

The Court of Justice then went on to consider the application of these rules to the facts of that case and concluded:

“42. The question accordingly arises whether two actions have the same object when the first seeks a declaration that the plaintiff is not liable for damage as claimed by the defendants, while the second, commenced subsequently by those defendants, seeks on the contrary to have the plaintiff in the first action held liable for causing loss and ordered to pay damages.

43.   As to liability, the second action has the same object as the first since the issue of liability is central to both actions. The fact that the plaintiff’s pleadings are couched in negative terms in the first action whereas in the second action they are couched in positive terms by the defendant, who has become the plaintiff, does not make the object of the dispute different...

44.....

45.   In those circumstances, the answer to the fifth question is that, on a proper construction of article 21 of the Convention, an action seeking to have the defendant held liable for causing loss and ordered to pay damages has the same cause of action and the same object as earlier proceedings brought by that defendant seeking a declaration that he is not liable for that loss.”

18.	In my view, as a matter of substance there is no material distinction in this case between the relief sought in the Rome proceedings, which seek a declaration as to the invalidity of the guarantee, and that sought in the English proceedings, which relates to the admission of Kvaerner’s proof of debt based on the guarantee. The proceedings involve the same facts, raise the same issues and will involve the same witnesses. Indeed, one of the arguments advanced by the Liquidator is that this court should 	decline jurisdiction because the Rome Court is better suited to determine the question which is at issue in these proceedings. The two proceedings have the same end in view, namely the resolution of Kvaerner’s claim under the guarantee and the determination of the size of the debt (if any) owed by the Company. Accordingly, I consider that the two proceedings involve the same cause of action within the meaning of Article 21.

(b)   The same parties?

19. 	It is apparent that the English proceedings under Section 112 are between the Kvaerner and the Liquidator of the Company, whereas the Rome proceedings are involve (1) the Company, albeit acting by the Liquidator, (2) Athanor, in its capacity as principal debtor, and (3) Kvaerner. Ms Toube points out that in fact no substantive relief is sought against Athanor in the Rome proceedings but acknowledges that it is not a party to the English proceedings. Mr Lamacraft, who appears on behalf of the Liquidator, does not seek to argue that the Liquidator and the Company acting by the Liquidator are different persons for the purposes of Article 21. I myself have been troubled by this point because in insolvency litigation and under the Insolvency Act 1986 a distinction is often made between proceedings that can be taken by a liquidator (in respect of which he will be personally liable for the costs if he fails e.g. under sections 214, 238 and 239 of the Insolvency act 1986) and those brought by him in the name of the company (where the defendant can seek an order for security for his costs under section 726 of the Companies Act 1985). In view of the fact that the point goes to the jurisdiction of the Court I would have taken this point myself regardless of the views of counsel had I considered it to be relevant.

20.	However, on balance and in the light of the purpose for which Article 21 exists, namely the need to prevent parallel proceedings before the courts of different contracting states and to avoid the conflicts between the decisions that might result therefrom ( see The Tatry [1999] Q.B. 515 at paragraph 32), I consider that this issue must be decided as a matter of substance and not form. I do not believe that the fine distinctions made in English insolvency law between the position of the liquidator and that of the company in liquidation should apply in this area of the law. In substance there is no distinction between the Liquidator as a respondent to this application and the Company acting by the Liquidator as claimant in the Rome proceedings. Both proceedings seek to resolve the same issue between these particular parties.

21. 	However, it not possible simply to ignore the separate status of Athanor, which has not been joined to this application as of yet. The European Court of Justice in The Tatry [1999] Q.B. 515 at paragraphs 29 to 36 had to deal with this very question where some but not all of the parties to two sets of proceedings are the same. Whilst emphasising that Article 21 must be understood as requiring as condition of the obligation of the second court seised to decline jurisdiction, that the parties to the two actions be identical, the Court held (at paragraph 36):

“ ...on a proper construction of article 21 of the Convention, where two 	actions involve the same cause of action and some but not all of the parties to the second action are the same as the parties to the action commenced earlier in another contracting state, the second court seised is required to decline jurisdiction only to the extent to which the parties before it are also parties to the action previously commenced; it does not prevent the proceedings from continuing between the other parties.”

22.	In this case it is the Rome proceedings which have the additional party, but that does not affect the application of this principle. If this case falls under Article 21 the Rome Court will be obliged to decline jurisdiction as between Kvaerner and the Company, but could, if it so decides, allow the Rome proceedings to continue between the Company and Athanor. Alternatively, Athanor might be joined as a party to the English proceedings. It should be noted that in argument Mr Lamacraft conceded that Athanor was not a necessary party to these proceedings but stated that it would be desirable if they were present before the court determining the matter. However, that procedural issue is not one which this court need be concerned with on this application and at this stage.

23. 	Accordingly, in answer to Issue 1(b) I consider that the English proceedings and the Rome proceedings do constitute proceedings between the same parties for the purposes of Article 21 of the Brussels onvention.

Issue 2: If the answer to Issue 1 is yes, is the English High Court the court “first seised “or is the Rome Court the court “first seised ", within the meaning of Article 21 of the Brussels Convention, and should the English High Court retain jurisdiction?

24. 	There can be no doubt that this Court has jurisdiction under the Brussels Convention, being the court of the country in which both the Liquidator and the Company in liquidation are domiciled. In UGIC v Group Josi Reinsurance Co (Case C-412/98) [2001] QB 68 at paragraph 55 the European Court of Justice stated that the Convention “enshrines the fundamental principle that the courts of the contracting state in which the defendant is domiciled or established are to have jurisdiction”.  However, Mr Lamacraft points out that Athanor is an Italian company and in that sense rightly sued by the Company in Italy.

25. 	Article 21 was introduced as a means of resolving these questions. As the Court of Appeal made clear in both Dresser U.K. Ltd v Falcongate Freight Management Ltd [1992] 1 Q.B. 502 at 514 C-D and Neste Chemicals SA v DK Line SA “ The Sargasso” [1994] 3 All ER 180 the English Court is definitively seised of a matter on service of the originating process. (These two cases were reviewed by the House of Lords in Canada Trust Co v Stolzenberg (No.2) [2002] 1 AC 1, a case concerning the effect of Articles 2 and 6 of the Lugano Convention, but both Lords Steyn and Hoffmann, whose remarks were obiter, declined to comment on the correctness of the decisions.)

26.	Ms Toube contends that the proven facts as to service of the Originating Application show beyond doubt that this Court was seised with this matter before the service of the Rome proceedings. Mr Lamacraft, on the other hand, argues on behalf of the Liquidator that the earlier decisions in Dresser and Neste Chemicals (as well as that in	 Canada Trust) concerned the service of a writ where there is no question of the Court having a discretionary jurisdiction. He contrasts that situation with the one in this case, where the Originating Application seeks directions from the Court under Section 112 of the Insolvency Act. That section provides: 

“(1)   The liquidator or any contributory may apply to the court to determine any question arising in the winding up of a company, or to exercise, as 	respects the enforcing of calls or any other matter, all or any of the powers which the court might exercise if the company were being wound up by the court. 

(2)   The court, if satisfied that the determination of the question or the required exercise of the power will be just and beneficial, may accede wholly or partially to the application on such terms and conditions as it thinks fit, or may make such other order on the application as it thinks just.”

27. 	It is clear from the wording of subsection (2) that the Court has a discretion whether to exercise its powers under this section. It may refuse to permit proceedings under the section where some other procedure is more appropriate: see Re Stetzel Thomson & Co Ltd (1988) 4 BCC 74. Mr Lamacraft says that as the Court has power under the section to refuse to make any order unless it is satisfied that the determination of the question will be just and beneficial, its jurisdiction will not arise and it will not be seised with the matter unless and until it has reached that decision. In support of this argument he referred to a passage in the judgment of Slade J in Re Burrows (Leeds) Ltd (in liquidation) [1982] 1 WLR 1177 at 1181 E-F dealing with an application under section 307(2) of the Companies Act 1948, the predecessor of Section 112: “However, in view of the wording of section 307(2) of the Act of 1948, the 	court, if it is to exercise the power to stay proceedings in a voluntary winding 	up, must first be satisfied that the required exercise of the power would be “just and beneficial.” Subject to this point, which I think must go to jurisdiction, it is not disputed that the court would have jurisdiction to stay the 	proceedings which are in the Leeds Magistrates Court, and that, in deciding whether or not it should do so in the exercise of its discretion, it should apply mutatis mutandis the same principles as it would apply if this were a compulsory winding up.”

28.	As that passage makes clear the Court in that case was faced with an application by a liquidator in a voluntary liquidation for a stay of proceedings after the start of the winding up; in fact magistrates court proceedings concerning a possible offence 	by the company under the Social Security Act 1975. The passage relied upon shows the exercise by the court of its discretion under the section. An order can only be made where the court considers that it will be just and beneficial for the winding up. The reference by Slade J to “jurisdiction” must not be read literally as implying that the court had no jurisdiction even to hear the matter until it had made that determination. Section 112(1) is unambiguous in its terms and provides a means of access	to the court for the liquidator and any creditor or contributory. The section does not involve a two stage process. Subsection (2) simply imposes a restraint on the exercise by the court of its powers it must first be satisfied that such an exercise will be “just and beneficial” for the winding up.

29.		In further support for his argument Mr Lamacraft referred me to the decision of the Court of Appeal in Grupo Torras S.A. v Sheikh Fahad Mohammed Al-Sabah [1996]	 1 LI Rep 7 which concerned an application by defendants for English proceedings to be set aside or stayed in favour of proceedings in Spain. The defendants contended that there were proceedings in Spain (the “Quail” proceedings and Spanish criminal proceedings) of which the Spanish court were first seised and that the English court should either decline jurisdiction or stay the English proceedings under Article 21 of the Convention. There was also a similar argument under Article 22. The Court of Appeal considered the requirements of Spanish law for an action to be definitely pending and ascertained that it had to be filed, accepted and served. Until that stage had been reached the action has a provisional character and cannot be relied upon as a lis pendens. The Court therefore concluded on the facts that for the purposes of Articles 21 and 22 the Spanish courts did not become seised of the Spanish civil proceedings as between the relevant parties until after the date on which the English court had become seised. The Court reached a similar conclusion as to the provisional nature of the Spanish criminal proceedings.

30.	Mr Lamacraft argues by analogy with that case and the uncertainty of the Spanish proceedings that proceedings under Section 112 are of a provisional nature unless	 and until the court reaches a determination under subsection (2) that the making of a determination will be just and beneficial. He says that the matter cannot be “definitely pending” when the Court may say that it does not want to hear it. As there has been no such determination yet made the Rome Court is, in his submission, the court first seised of the matter for the purposes of Article 21. For the reasons already stated I cannot accept this argument. The decision by the Court whether or not to exercise its jurisdiction under the section is on proper analysis a question of discretion not jurisdiction. The English Court became seised with this matter when the Originating Application was served.

31.	Accordingly, I would answer Issue 2 in the affirmative. The English Court was the court first seised of this matter by reason of the earlier service of the Originating Application on the Liquidator. Furthermore, for the reasons I shall explain below the Court should retain jurisdiction.  

Issue 3: If the answer to Issue 1 is no, are the English Proceedings and the Rome Proceedings related actions within the meaning ofArticle 22 of the Brussels convention? 

32. 	Having reached the decision that this case is governed by Article 21 of the Brussels Convention this Issue does not arise. However, in case this matter goes further I should express the view that if I am wrong in my finding on Issue 1 I am firmly of the opinion that the two sets of proceedings are “related actions” within the meaning of Article 22. The purpose of Article 22 is to avoid the risk of conflicting judgments and to facilitate the administration of justice in the countries of the European Union - see The Tatry [1999] Q.B. 515 at paragraphs 51 to 53. The phrase must be given a broad interpretation and cover all cases where there is a risk of conflicting decisions. Such a risk clearly exists in this case. The issues which arise in the two sets of proceedings are the same and there is a real danger of there being conflicting judgments.

33.	I would rely in this context on Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32 where the House of Lords held, when applying Article 22 to an application to stay English proceedings, that the question whether actions are “related” should be determined in a broad commonsense manner bearing in mind the objective of the Article and the width of its terms. At page 40 C-E Lord Saville of Newdigate stated: 

“The actions, to be related, must be “so closely connected that it is expedient to hear and determine them together” to avoid the risk of irreconcilable 	judgments resulting from separate proceedings. To my mind these wide words are designed to cover a range of circumstances, from cases where the matters before the courts are virtually identical (though not falling within the provisions of article 21) to cases where although this is not the position, the connection is close enough to make it expedient for them to be heard and determined together to avoid the risk in question.”

34.	Accordingly, if contrary to the view I have reached on Issue 1, the English proceedings are not proceedings involving the same parties and the same cause of action as the Rome proceedings, these proceedings are related actions within the meaning of Article 22 of the Brussels Convention.

Issue 4: If the answer to Issue 3 is yes, is the English High Court the court “first seised,” or is the Rome Court the court “first seised”, within the meaning of Article 22 of the Brussels Convention, and should the English High Court retain jurisdiction?

35.	Again, for the reasons I have given in answer to Issue 2 above I consider that the English High Court was the court first seised of this matter within the meaning of Article 22 of the Brussels Convention. The test is the same under both Articles 21 and 22. If, contrary to my earlier finding, Article 22 applies the Rome Court will have a discretion to stay its proceedings.

Issue 5: If the answer to Issue 2 and/or Issue 4 is yes, is it relevant to the question of the jurisdiction of the English High Court whether the English Proceedings are an appropriate means of establishing Kvaerner’s debt?

36. 	Where the Brussels Convention applies there is no longer any scope for argument under the established principles of forum conveniens. This is apparent from the judgment of Dillon LJ in In re Harrods (Buenos Aires) Ltd [1992] Ch 72 at 92H to 93E. Section 49 of the 1982 Act provides that nothing in that Act shall prevent. any court in the United Kingdom from staying, sisting, striking out, or dismissing any proceedings before it on the ground of forum conveniens or otherwise where to do so is not inconsistent with the Convention. Dillon LJ concluded:

“It is implicit in that section, in my judgment, that the court cannot stay or 	strike out or dismiss any proceedings on the ground of forum conveniens 	where to do so would be inconsistent with the Convention, and that covers all cases where the defendant in proceedings in England is domiciled in England 	and the conflict of jurisdiction is between the jurisdiction of the English court and jurisdiction of the courts of some other contracting state.”

37. 	Mr Lamacraft accepted in his skeleton argument that mere matters of forum non conveniens ought not to override the application of Articles 21 and 22. However, he contends that the exercise of the Court’s discretion under Section 112(2) goes to jurisdiction and claims that if the proceedings are an inappropriate means of establishing Kvaerner’s debt it cannot be said that the court has become seised of the proceedings. In his address to the court he referred to a number of factors which pointed to the Rome Court being a more suitable forum to hear this dispute, on forum conveniens grounds. These included the convenience of witnesses, the position of Athanor, the law applicable to the guarantee (which he contended was Italian law, a matter which is in dispute) and the possibility of further investigations by the Italian authorities.

38.	In my view these arguments do not arise where the Brussels Convention applies. It is strictly irrelevant to the question of whether the English Court has jurisdiction under the Convention whether the English proceedings are “an appropriate means” of establishing Kvaemer’s debt. (In fact, for the reasons set out below under Issue 6 I consider them to be entirely appropriate.) I have already rejected	 the contention that it is only when the court decides under Section 112(2) that it is just and beneficial to determine the question that it becomes seised of the matter for the	 purposes of Articles 21 and 22. I would therefore answer Issue 5 in the negative. I will deal with the appropriateness of the English proceedings under Issue 6.

Issue 6: If the answer to Issue 5 is yes, are the English Proceedings an appropriate means of establishing Kvaerner’s debt?

39.	Strictly speaking this Issue does not arise in the light of my previous findings, but I consider that it is important that this matter be addressed in view of the respective submissions of counsel on this point.

40.	Kvaerner has brought the English proceedings in order to obtain a determination by the Court of its proof of debt in the liquidation of the Company. It has been waiting for a determination since May 2000. Had this winding up proceeded in the normal way the Liquidator would have decided under Rule 4.82 of the Insolvency Rules 1986 to either admit or reject the proof in whole or in part. However, for the reasons set out in his affidavit sworn on 2 October 2001 Mr Barrett decided to do neither but to have the dispute determined by the Rome court. He states (at paragraphs 2 and 3) that he would reject any proof from Kvaerner as presently advised because of the dispute over the validity of the guarantee. In the light of these remarks it remains something of a mystery as to why he did not simply reject the proof under Rule 4.82 and leave it to Kvaerner to appeal against that decision under Rule 4.83. Such an appeal must be made by application within 21 days of receiving the liquidator’s written statement of his reasons for the rejection. It is only because the Liquidator did not take a decision under Rule 4.82 that this matter comes before the Court as an application for a determination under Section 112 of the Insolvency Act.

41. 	Mr Lamacraft has submitted that this type of application is really no more than a criticism of the Liquidator and a misconceived attempt to resolve this dispute by a summary procedure. I do not share that view. There is no doubt that this Court can resolve complex issues of fact or law on an appeal against a rejection of a proof of debt under Rule 4.83. An example is to be seen in the decision in Park Air Services plc [1996] 1 WLR 649 (Ferris J) and [1997] 2 BCLC 75 (Court of Appeal). It is clear from the judgments in that case that the application before Ferris J was brought by way of appeal against the rejection of the applicant’s proof under Rule 4.83 and for a determination under Section 112 as to the admission of the proof and as to how much should be admitted. The appeal lasted four days and rival expert valuers gave evidence before the learned judge.

42.	Where there are important disputes of fact or law the Court can give directions for the parties to serve detailed statements of case, including particulars of claim and defence and witness statements. There is provision for this under Rule 7.10(2) and (3). Subject to the further submissions of counsel, in my view if this matter is to continue before this Court it is essential that such directions be made and that a strict procedural timetable be laid down for the future conduct of this matter. There can then be a full trial of all the issues. I would add that it is not unusual for this Court to be asked to determine difficult questions which arise in the voluntary winding up of an English company. Indeed, that is the very purpose of the Section 112 procedure.

CONCLUSION

43.	I would therefore answer the preliminary issues as follows:

(1)   The English proceedings involve the same cause of action and are between the same parties as the Rome proceedings, within the meaning of Article 21 of the Brussels Convention.

(2)   The English High Court is the court “first seised” within the meaning of Article 21 of the Convention and should retain jurisdiction.

(3)   If the answer to Issue 1 is incorrect, then the English proceedings and the Rome proceedings are related actions within the meaning of Article 22 of the Brussels Convention.

(4)   On any basis the English High Court was the court first seised within the meaning of Article 22 of the Convention.  

(5)   It is not relevant to the question of jurisdiction of the English High Court whether the English proceedings are an appropriate means of establishing Kvaerner’s debt.

(6)   In any event, the English proceedings are an appropriate means of establishing Kvaerner’s debt.