England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		COMPANIES COURT
		2 July 2015

David Donaldson QC:

Nature of the proceedings and essential background

1. This matter comes before me as a jurisdictional dispute in respect of two actions commenced by the Claimant ("Mr Blomqvist") on 14 April 2015 seeking relief under section 996 and 125 of the Companies Act 2006^[1] concerning Zavarco plc ("the company"), a company in which he is registered as the holder of 100 million shares. Formed on 29 June 2011 under the then name of Vasseti (UK) plc, it owns, controls and/or has direct or indirect interests in a number of Malaysian, Thai and Singapore companies involved in the provision of telecommunications and internet broadband services in South East Asia.
2. In essence, Mr Blomqvist claims in these two actions

(1) a declaration (under section 996) that a notice dated 16 March 2015 served by him calling a general meeting of the company under section 305 to consider removing and replacing the directors, following the refusal of the directors themselves to call such a meeting in response to a notice dated 20 February 2015 served under section 303, was valid and effective (action no. 2692 of 2015); and

(2) an order (under section 125) deleting an entry in the company's register of members showing Open Fibre Sdn Bhd ("OFSB") as the holder of 7 billion shares (action no. 2693 of 2015).

3. On 16 March 2015, the same day as Mr Blomqvist's notice under section 305, the company commenced an action in the Malaysian High Court of Justice in Kuala Lumpur against five former directors of the company and Mr Blomqvist: it includes an allegation that Mr Blomqvist's request for a general meeting was "invalid and/or unlawful". On 23 April 2015 the company applied to stay both English actions on the ground of lis alibi pendens and/or forum non conveniens.
4. The company's initial share capital of 1.2 billion shares of €0.10 each was subscribed on its formation by the two initial shareholders, Ranjeet Singh Sidhu ("Mr Sidhu") and Syed Mohd Yusof Bin Tun Syed Nasir ("Mr Nasir"). These shareholdings were recorded as fully paid. On 3 August 2011 the board of directors resolved to increase the authorised share capital to 1.5 billion shares of €0.10. This was apparently to meet the requirements of the Frankfurt Stock Exchange ("FSX") on which the shares were listed on 23 August 2011^[2]. All of the 1.5 billion shares were recorded in the first annual return as at 29 June 2015 and in the next two annual returns as both issued and fully paid, a statement repeated in all annual filed accounts.
5. Mr Blomqvist is a Swedish citizen who lived full time in England from 1993 until 2010, since when he has divided his time between England and Malaysia. Starting in mid-2012 he has built up a holding in excess of 100 million shares by over 150 purchases on and off market. He says that he had been initially impressed by the pedigree of the then directors and the premium which the shares had achieved above the original listing price. In the course of 2013 changes took place in management and at board level followed by a sharp decline of some 95% in the share price. All his shares were held by nominees until February 2015, when he procured the transfer into his own name of 100 million of them for the purpose of his request for a general meeting. The share certificates in respect of those shares record^[3] the shares as fully paid. They constituted some 6.667% of the issued share capital of 1.5 billion shares shown in the share register at 20 February 2015, comfortably above the 5% required under section 303(2)(a) of the Act for such a request..
6. On 20 February 2015 Mr Blomqvist served his request under section 303 together with the required details of resolutions to be considered at the meeting to remove the existing directors and replace them with himself and four others. He identified himself as the holder of 100 million ordinary fully paid shares in the company: the need for the shares of the requesting member to be paid up forms part of section 303(2)(a). Under section 304 a request under section 303 requires the directors to call a meeting within 21 days (to be held within 28 days thereafter). Instead, the company through Malaysian solicitors shortly rejected the request on the grounds that "the shares purportedly held by you are in fact unpaid shares". Failure by the directors to comply with section 304 entitles the requesting member himself under section 305 to call the meeting, and on 16 March 2015 Mr Blomqvist gave the required notice for this purpose^[4]. On 30 March 2015 English solicitors for the company informed Mr Blomqvist's English solicitors that as of 17 March 2015 7 billion additional shares had been issued and allotted to OFSB, reducing Mr Blomqvist's shareholding to 1.17% of the total. Despite requests, the company has not produced a copy of any resolution authorising the issue of these additional shares or disapplying the pre-emption rights of other members as regards their allotment.
7. The position adopted by the company on these two questions was said to have been based on the circumstances surrounding the formation of the company in mid-2011 as recently reviewed by forensic accountants commissioned by the company. They are addressed in witness statements served on behalf of both sides with extensive accompanying documentation.
8. Matters began with a company called V Telecoms Bhd, a telecommunications company licensed in Malaysia to provide network facilities and services, 91% (or 1,046,000,000) of whose shares were owned by OFSB, and of which 396,000,000 were paid up. Under a share swap agreement dated 13 December 2010 OFSB sold all those paid-up shares to Vasseti Bhd in return for 3,960,000 shares issued by the latter at RM100. This resulted in some 96.3 % of the shares in Vasseti Bhd being held by OFSB, 2.4 % by Mr Sidhu, 0.97 % by Mr Nasir, and the vestigial remainder by two other minimal shareholders.
9. The next step was the creation of a UK holding company to be floated on the FSX. To this end, the company was incorporated on 29 June 2011 with an initial share capital of 1.2 billion shares subscribed and issued to Mr Sidhu as to 840 million shares and Mr Nasir as to 360 million shares, and recorded as fully paid up. By a Share Purchase Agreement ("the SPA") dated the same day all the shareholders in Vasseti Bhd jointly agreed to sell the entirety of the shares to the new UK company in return for the issuance of 1.5 billion ordinary shares of that company with a par value of €0.10, with completion to take place on 23 July 2011. The 1.5 billion shares were to "be issued to the persons named in Schedule 2, which will be made available to the [company] by the 23 July 2011 or such other dates to be agreed", suggesting that the shares would or might be allotted other than in proportion to the shareholdings in Vasseti Bhd, which were shown in Clause 1.1 of the SPA. Schedule 2 was to consist of detailed particulars of the names and allotment of the 1.5 billion shares.
10. A written resolution of the shareholders, Mr Sidhu and Mr Nasir, dated 29 June 2011 approved the acquisition of the shares in Vasseti Bhd and the distribution of the company's shares in accordance with the SPA, as did a similar resolution of the directors, also dated 29 June 2011. Email exchanges indicate that, notwithstanding their ostensible date of 29 June 2011, the SPA and the two resolutions were not in fact concluded or passed before 3 August 2011, the date of a directors' resolution and a shareholders' resolution (a) to increase the number of shareholders from two to meet FSX requirements and the authorised share capital to 1.5 billion shares of €0.10 and (b) – in the case of the directors' resolution - to transfer the shares "as per the Share Sale Agreement and list dated 23 July 2011".
11. Though in their report the investigating accountants commented that they had not seen a copy of such a list, a document purporting to be a Schedule 2 list has been produced by the company. It shows 35 separate proposed allottees, of which OFSB is the largest at 1.395 billion shares (= 93 %), with Mr Sidhu at 36.5 million shares (=2.43%), Mr Nasir at 17,598,540 shares (= 1.17%) and 30,353,860 shares (=2.02%) "to be held in trust as Treasury Shares … by any board member for purpose of Employee Subscription and for other future cash investors as per board of directors approval". It bears no signatures to indicate that it was agreed or authorised by the numerous parties making up the vendors, and its authenticity is in dispute. It is also unclear how any such allotment could ever have been implemented, given that 1.2 billion of the shares had already been issued to Mr Sidhu and Mr Nasir on formation of the company on 29 June 2011. The record of these two original shareholdings remained unchanged in the first annual return as at 29 June 2012, which also recorded that the additional 300 million shares were held almost entirely (as to just over 294 million shares) by Vidacos Nominees Limited with the small remainder split between four other nominee companies. There is no doubt that all the shares in Vasseti Bhd were transferred to the company, and indeed I understand the assets and business of Vasseti Bhd and its subsidiaries to have formed the core of the business activity of the group ever since.
12. Over time there have been significant movements in the shareholdings, often in the name of individuals rather than nominees, suggesting that the market – whether on FSX or off-exchange - has been far from inactive. The company has however been able to carry out an exercise which demonstrates, as it plausibly claims and I shall assume, that all the 100 million shares currently registered in Mr Blomqvist's name can be traced through different routes back to the 840 million initial holding of Mr Sidhu.
13. The contention of the company is that all those shares were unpaid in the hands of Mr Sidhu and therefore, it submits, derivatively of Mr Blomqvist. In a witness statement Mr Sidhu has taken the position that they were paid for by transfer of the shares in Vasseti Bhd sold jointly by all the shareholders under the SPA, in circumstances where he claims to have had an (indirect) interest in OFSB. Mr Sidhu's position would have to be somehow reconciled with the fact that his shareholding in the company arose at the time of its incorporation on 29 June 2011 as a result of his subscription and thus independently of the SPA, which moreover would appear to have been concluded some weeks later. At the same time, in the light of the undoubted receipt by the company of all the Vasseti Bhd shares the submission of counsel for the company that it did not receive the agreed consideration under the SPA for the shares is not easy to understand and has somehow to be reconciled with the record in the registration document, all annual returns, and the share certificates that all 1.5 billion shares were and are paid up^[5].
14. As regards the 7 billion shares, the company contends that it remained in March 2015 under a contractual obligation to issue and allot them to OFSB under the SPA, having not done so in 2011 at the time of completion. Even assuming the Schedule 2 list produced by the company to be an authentic document agreed by all the vendors, the obligation under the SPA was however only to allot to OFSB 93 % of 1.5 billion shares, a far cry from 7 billion. The company says that the much larger figure is necessary in order to produce the same proportionate relationship to the (original) holdings of Mr Sidhu and Mr Nasir, but has so far failed to explain how this could create an obligation beyond the 1.5 billion shares with which the SPA was concerned. A further, as yet also unaddressed, difficulty is that there was (and is) apparently no authorisation for an increase in share capital beyond the 1.5 billion shares, and that was used up by at latest mid-2012.

The applications

15. In each of the two actions the company has applied for a stay on the basis of forum non conveniens and/or lis alibi pendens founded on the pendency of the action in Kuala Lumpur.
16. As a company domiciled in the United Kingdom Article 4 of the current EU Regulation confers on the English court primary jurisdiction over any action against it. Until the Regulation was recently revised (or, in current jargon, recast), that – and indeed any other jurisdiction assigned by it - could not be declined on grounds of forum conveniens or lis alibi pendens in favour of the courts of a non-Member State: see the decision of the European Court of Justice in Owusu v Jackson [2005] QB 801. Under the Recast Regulation – Council Regulation No. 1215/ 2012, effective from 10 January 2015 - that iron prohibition has been eroded by a qualified discretionary power to stay under Article 34. Mr Blomqvist relies however primarily on Article 24 of the Regulation, which creates an exclusive jurisdiction in favour of England for two categories of proceedings. Article 34 has no application where jurisdiction is assigned by Article 24, and it is therefore convenient to address the latter first.

(a) Do the actions fall within Article 24?

17. Article 24 of the Recast Regulation provides:

The following courts of a Member State shall have exclusive jurisdiction, regardless of the domicile of the parties:

(1)…..

(2) in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law;

(3) in proceedings which have as their object the validity of entries in public registers, the courts of the Member State in which the register is kept;

…"

18. Since Article 24, where applicable, overrides the default principle that jurisdiction should be assumed by the courts of the defendant's domicile under Article 4 (though in the present case the two would not collide in result), all its sub-paragraphs are to be given a restrictive interpretation determined by their purpose: see Sanders v van der Putte [1977] ECR 2383 at 2390, Reichert v Dresdner Bank [1990] ECR I-27 at I-24, and most recently Berliner Verkehrsbetriebe v JP Morgan Chase Bank (C-144/10) [2011] 1 WLR 2087 at [40], [42] and [47]. In the case of Article 24(2) it should in consequence only be held applicable where the proceedings are "so closely connected with matters of local company law and internal corporate decision-making in respect of one particular company that the proceedings should not be tried anywhere but in the courts of the state of the company's seat" (per Mance J in Grupo Torras SA v Al Sabah [1995] 1 Lloyds Rep 374 at 403, endorsed in Berliner Verkehrsbetriebe v JP Morgan Chase Bank [2012] QB 176 at [88]).

(i) Case No. 2692 of 2015 (convocation of general meeting)

19. The claim in this action founds on Mr Blomqvist's allegation that the company has failed to comply with its obligation under section 304 to call a meeting at the request of a member registered as the holder of more than 5% of the paid-up shares so as to enable consideration of resolutions to replace the directors, thus entitling him to convene such a meeting himself. Mr Jupp, counsel for the company, rightly does not suggest that viewed simply as a claim this would not fall squarely within the wording and purpose of Article 24. His argument is that the court is obliged to view matters more widely and in particular focus on the defence that the shares were not paid up, which he suggests is the only real matter in dispute and turns solely on whether the terms of the SPA were complied with, a matter outside Article 24.
20. This argument is not easy to square with the logic and scheme of the Regulation. In the words of its preamble, the rules of jurisdiction "should be highly predictable" and both the claimant and the court should be able to assess from the outset whether the court can be seised. On the face of it one would expect this to be determined by the nature and basis of the claim rather than of the defences which may or may not in due course emerge once jurisdiction has been assumed and the defendant has been required to specify the grounds on which the court will be invited to reject the claim. To classify the action by reference to the disputes which may then crystallize, some or all of which may not have been intimated or even be predictable at the moment when the court is seised, would be to create in the meantime a potential state of uncertain limbo as to whether jurisdiction exists or not. Such an approach would also mean that there could be no basis for classification under Article 24 where the defendant has no intention of contesting the claim substantively, so that there is no dispute. It would further enable a defendant to avoid seisure of a court under Article 24 by invocation of a bogus or manifestly unsustainable defence, since a court is precluded from assessing substantive merits when determining jurisdiction under the Regulation (per Aikens LJ in Aeroflot v Berezovsky [2013] 2 CLC 206 at [107]).
21. The company's argument proceeds from earlier interpretation, based on the Jenard report (at page 34), of the words "which have as their object" in Article 24 as meaning "principally concerned with": per Mance J in Grupo Torras at 403 and JP Morgan Chase Bank v Berliner Verkehrsbetriebe [2012] QB 176 at [83]. Grupo Torras involved multiple claims, and the formula was used to ascertain which of them should be regarded as reflecting, overall and on balance, the centre of gravity of the proceedings. In the present case, the court is however concerned with a quite different situation where a single claim within Article 24(2) involves the determination of a question which is purely contractual and on its own would not fall within that Article.
22. I was not referred to any decided case raising that question, and am unaware of any. The reverse situation, where an Article 24 issue is pleaded as a defence to a non-Article 24 claim, was addressed briefly in the Jenard report (at page 39) with the comment that the court is not required to relinquish jurisdiction over a claim brought under (e.g.) Article [4]^[6] "if an issue which comes within the exclusive jurisdiction of another court is raised only as a preliminary or incidental matter." It also had to be considered by the ECJ in Berliner Verkehrsbetriebe v JP Morgan Chase Bank (C-144/10) [2011] 1 WLR 2087 on a preliminary reference by the German court seised of parallel proceedings to those in England.
23. In the Berliner Verkehrsbetriebe litigation a claim to enforce a credit swap agreement was brought by a bank against the Berlin company ("BVG") in the English court pursuant to an English jurisdiction clause. BVG contended that the agreement was void on the basis that it was outside the powers of its management and supervisory boards. It also alleged that it had been given incorrect advice about the swap transaction and its effect by representatives of the bank. It sought a stay under Article [27] on the basis that the German courts had exclusive jurisdiction under Article [24(2)]. The English Court of Appeal held that given the existence of several issues an overall assessment had to be made which came down in favour of regarding the enforcement of the contract as the principal concern of the proceedings. Though the court derived its test primarily from the judgment of Mance J in Grupo Torras, this was unnecessary since Article [27] in terms required the court to negate jurisdiction of its own motion if "seised of a claim which is principally concerned with a matter over which the courts of another Member State have exclusive jurisdiction under Article 24".
24. After the commencement of the English action by the bank, BVG brought proceedings in Germany against the bank in Berlin seeking a declaration that the swap contract was void for ultra vires, and in the alternative release from the contract or payment of damages by reason of the incorrect advice given by the bank. The bank sought a stay under Article [29] on the basis that the German court was second seised, but that required the court to determine whether a stay was precluded on the basis that the action fell within Article [24] and hence was subject to the exclusive jurisdiction of the German courts, where BVG had its seat. The Kammergericht in Berlin referred to the ECJ the question whether Article [24(2)] applies to proceedings "in which a company pleads that a contract cannot be relied upon against it because a decision of its organs which led to the conclusion of the contract is supposedly invalid on account of infringement of its statutes". That reference was pending when the English Court of Appeal gave judgment and the decision was delivered just over a year later^[7]. The ECJ answered the question in the negative, ruling that invocation as a defence of an Article [24] matter does not affect the contractual or non-Article [24] nature of the proceedings. It is clear that the decision was not based on any overall evaluation of multiple claims or issues but simply on the basis (see paragraph 23) that the plea of corporate invalidity was a collateral or preliminary issue in a claim relating to a contract.
25. I can see no reason why the same result should not obtain in the converse situation with which the present case is concerned. It is true that the ECJ was concerned with excluding from the reach of Article 24 a contractual claim to which questions of corporate governance were advanced by way of defence. It is however equally important not to remove from its ambit a claim seeking redress for failures of corporate governance on the basis of a defence which is purely contractual.
26. I would therefore reject the company's argument even if, as it assumed, the question for decision were simply whether payment had been made for the shares. The assumption is however unjustified. The true question is rather whether in all the circumstances, including the fact that the company registered the shares as paid-up, continued so to record them in its annual returns, and/or issued certificates in the same terms, it must or can treat them otherwise in the context of a request under section 303. That raises an issue of corporate governance which would itself be within Article 24, and in which actual payment is at best a sub-issue which may never need to be decided. To describe the proposed defence as contractual rests therefore on a misanalysis.
27. Even if one were to separate out the question of actual payment as a discrete issue, I would conclude that this action is principally concerned with Article 24 matters if it were appropriate to apply the test of an overall evaluation of the issues. Even if (which is open to serious doubt) the decision of the ECJ in the Berliner Verkehrsbetriebe case, whose logic I have sought to follow, does not require revision of the approach and views of the English Court of Appeal in its earlier decision in the same litigation, I would therefore reach the same ultimate conclusion that the English court has exclusive jurisdiction over Case No. 2692 under Article 24(2).

(ii) Case No. 2693 of 2015 (rectification of register as regards 7 billion shares)

28. In this action Mr Blomqvist seeks an order under section 125 deleting the entry in the company's register of members showing OFSB as the holder of 7 billion shares.
29. Counsel for the company accepts that viewed simply as a claim this falls within Article 24(3), it having been long established that a register of a company's members, being open to public inspection, is a "public register" (Re Fagin's Bookshop plc [1992] BCLC 118^[8]. He suggests however that the real matter in issue is the company's proposed defence that it was, and remained, contractually obliged under the SPA to issue these shares to OFSB. Even if this were correct, for similar reasons to those I set out in paragraphs 20 to 25 this would be a preliminary question which cannot affect the essential nature of the action as one relating to rectification of the register.
30. In any event, counsel for the company has again misanalysed the nature of the question which would fall for consideration, which is whether the issue of these shares was authorised, and if not the legal consequences. That is a clear matter of corporate governance within Article 24(2), and if viewed as the essential question in the proceedings would have vested exclusive jurisdiction in the English court under that sub-paragraph^[9]. Questions as to the obligation of the company under the SPA, whether it was performed in 2011, and if not whether it has somehow changed into an obligation to issue a far larger number of shares to OFSB, would only come in at the end of the line if the question of authorisation were first resolved in the company's favour. On the alternative approach or basis of an overall evaluation of this action, I would in all the circumstances conclude that it was principally concerned with matters within the exclusive jurisdiction of the English court under Article 24: it would matter not in my view that they are distributed between two separate sub-paragraphs of Article 24, where the court identified is the same, though if forced to choose between them I would identify Article 24(3) as reflecting the principal concern. I also repeat the last sentence of paragraph 27 mutatis mutandis.
31. I accordingly rule that this court has jurisdiction over both actions under Article 24, so that Article 34 is inapplicable to either of them. In deference to the extensive arguments of counsel, I will however also address the position on the alternative basis that jurisdiction in respect of both or one of these actions arises only under Article 4.

(b) If jurisdiction arises from Article 4 alone, can and should the actions be stayed under Article 34 ?

32. Article 34 of the Recast Regulation provides:

1. Where jurisdiction is based on Article 4 or on Articles 7, 8 or 9 and an action is pending before a court of a third State at the time when a court in a Member State is seised of an action which is related to the action in the court of the third State, the court of the Member State may stay the proceedings if:

(a) it is expedient to hear and determine the related actions together to avoid the risk of irreconcilable judgments resulting from separate proceedings;

(b) it is expected that the court of the third State will give a judgment capable of recognition and, where applicable, of enforcement in that Member State; and

(c) the court of the Member State is satisfied that a stay is necessary for the proper administration of justice.

2. The court of the Member State may continue the proceedings at any time if:

(a) it appears to the court of the Member State that there is no longer a risk of irreconcilable judgments;

(b) the proceedings in the court of the third State are themselves stayed or discontinued;

(c) it appears to the court of the Member State that the proceedings in the court of the third State are unlikely to be concluded within a reasonable time; or

(d) the continuation of the proceedings is required for the proper administration of justice.

3. …

4. …"

33. Some guidance is given as to the application of Article 34(1)(c) in Recital 24 of the preamble to the Regulation:

"When taking into account the proper administration of justice, the court of the Member State concerned should assess all the circumstances of the case before it. Such circumstances may include connections between the facts of the case and the parties and the third State concerned, the stage to which the proceedings in the third State have progressed by the time proceedings are initiated in the court of the Member State and whether or not the court of the third State can be expected to give a judgment within a reasonable time."

34. The clear purpose of Article 34 is to liberate the court from the constraint imposed by the Regulation in earlier versions, exemplified in Owusu, as regards stay in favour of the courts of non-Member States. It is therefore concerned only to lay down the conditions which must be cumulatively satisfied before such a stay can be ordered, not to dictate the circumstances in which once those conditions are satisfied the action should be stayed. That second stage is left to the discretion of the national court ("the court may stay the proceedings"). There may therefore – if perhaps rarely - be factors which the court can take into account which are not necessarily included in those to be considered, even as part of "all the circumstances of the case before it", in evaluating what "the proper administration of justice" requires.

Article 34(1)(a)

35. The premise of the first pre-condition is that the actions are related in the sense that they may result in irreconcilable judgments if allowed to proceed in parallel. Though that may arise from findings of fact as well as decisions of law (see Gascoine v Pyrah [1994] I.L. Pr. 82 at [42], they would have to be points which would or might form an essential part of the basis of the judgments, effectively part of their res judicata effect, absent which they would not be irreconcilable. It is therefore necessary to look at the content of the Malaysian proceedings.
36. The first two defendants to the claim brought by the company are Mr Sidhu and Mr Nasir. The third to fifth defendants were directors, like Mr Sidhu and Mr Nasir, until their resignation in 2013. Mr Blomqvist is the sixth defendant. The claim founds on an allegation that the 1.2 billion shares allotted to Mr Sidhu and Mr Nasir were unpaid and wrongly entered in the company's records as fully paid, and that those shares were unlawfully and/or negligently and/or fraudulently issued and allotted, disposed of, dealt with and/or distributed by the first five defendants in breach of their fiduciary duties as directors. As regards Mr Blomqvist, the Statement of Claim, having averred that his shares derived from the original 1.2 billion shares alleged to have been falsely recorded as paid, alleges that he was party to an unlawful means conspiracy by all the defendants to siphon (sic) the share capital of the company for their respective benefit. In this context, the pleading refers to Mr Blomqvist's request dated 20 February 2015 for a general meeting to replace the current directors. It alleges that the request was invalid because the shares were not paid up, and that the real intention and/or motive behind the request was to take control of the company in order to stifle a number of legal actions filed by the company in Malaysia against the first, third and fourth defendants and others. The relief, in so far as relevant to Mr Blomqvist, is an account of ill-gotten gains from the conspiracy; the disgorgement of all profits and/or the unjust enrichment from the conspiracy; payment of the par value of the shares held by him; an injunction to restrain him from transferring, disposing, or dealing with the shares held by him or exercising any rights in relation to them; and damages. No defence has yet been served by Mr Blomqvist.
37. The issue of the 7 billion shares to OFSB is not mentioned at all in the claim. Nor do I have any reason to assume that it would (or indeed could) be raised as part of any defence by Mr Blomqvist requiring a finding or ruling by the Malaysian court as an integral part of its reasons for judgment. I therefore discern no basis on which the Malaysian judgment might be irreconcilable with a decision by the English court in Case No. 2693. The first precondition in Article 34(1)(a) is therefore not satisfied in respect of that action, which is in itself sufficient to preclude a stay.
38. The question whether the 1.2 billion original shares were paid is by contrast explicitly raised in the Malaysian action and in a manner calculated to produce a finding of fact essential to the court's judgment. That leads to a further question raised by the somewhat problematic requirement of Article 34(1)(a) that it should be "expedient to hear and determine the related actions together" to avoid the risk of irreconcilable judgments. This phrasing is copied from Article 8(1), enshrined in all earlier Regulations (and the predecessor Brussels Convention), which provides for jurisdiction over a person domiciled in a Member State "where he is one of a number of defendants, in the courts where one of them is domiciled, provided that the claims 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." This is concerned with the assumption by a single court of claims against more than one defendant and their subsequent trial by that court. Article 34 is however concerned with a quite different scenario, where the claims have already been brought in two different jurisdictions, and the Member State court has no power to require the claim before it to be determined by the foreign court. That might with some contortion be viewed as the result of a stay, if the foreign action were an exact mirror-image duplicating in reverse the English action, but otherwise it is hard to see how the actions could in practice ever be heard and determined together and hence how such a course could ever be expedient. This result can, as I see it, only be avoided by a purposive construction which treats the words "is expedient" as equivalent to "would have been expedient", and since in my view it cannot have been intended that the ambit of Article 34 should be emptied of practical application or even restricted to mirror-image actions pending before the two courts, I will proceed on this basis. I rule accordingly that the precondition in Article 34(1)(a) is satisfied as regards Case No. 2692.
39. Article 34(1)(b) is also satisfied as regards Case No. 2692: I can see no reason why a Malaysian judgment should not be capable of recognition in England. The same would also be true of Case No. 2693, if (contrary to my ruling) sub-paragraph 1(a) were satisfied.
40. Article 34(1)(c) requires that the stay should be "necessary for the proper administration of justice". I will address this separately for each of the two actions.

(i) Case No. 2692 of 2015

41. As regards the factors specifically mentioned in Recital 24:

(a) The claimant in this action is partly resident in Malaysia, otherwise in London, and appears to have business interests in that part of the world. On the other hand, the company was deliberately incorporated in the United Kingdom because, it appears, of the founders' wish to attract outside investors for at least part of its equity through listing on the FSX, and the fact that a later outside investor happened to have a dwelling in Malaysia as well as in London does not in my view have any real importance so far as the claim which he advances in the English action. Nor can the fact that the company is a UK public company be regarded as unimportant in the context of such a claim. I note also that the general meeting convoked by Mr Blomqvist was to take place in England. On the other hand all the events in 2011 leading to the formation of the company (other than its actual registration) and the conclusion of the SPA, and hence relating to the question whether the shares were in fact paid, took place in Malaysia and concerned Malaysian residents.

(b) I attach no significant weight to the stage to which the Malaysian action, begun on 16 March 2015, had progressed by the time the English action was commenced some four weeks later. Even now, no defence has been served.

(c) I have no evidence on which to find that the action in Kuala Lumpur would not be concluded within a reasonable time. However, given its scope and number of defendants it must be open to serious doubt whether it would be concluded earlier than the English action, even if the latter were not accorded the expedited treatment which subject to the submissions of counsel I would provisionally be minded to order.

Further relevant matters, forming part of "all the circumstances" include in my view the following:

(d) While a res judicata finding by the Malaysian court recognized in England that the shares were paid would destroy the basis of the company's defence in the English action, the reverse would not be true. The English court would still have to decide whether the company can act in contradiction of the position recorded in its register, returns, and/or the share certificates, and any stay would therefore have to be limited to permit the re-assumption of jurisdiction by it in due course. It is in my view highly questionable whether a limited stay of this nature is permissible under Article 34. Assuming this point however in favour of the company, it is in my view highly relevant that the overall time required to resolve this claim would in the nature of things be longer – and in all likelihood significantly so - than if the English action were permitted to proceed normally.

(e) A finding that Mr Blomqvist's shares are not paid would necessarily presuppose a determination that all 820 million of the shares originally allotted to Mr Nasir were not paid. On that basis a very large number of shares apart from those held by Mr Blomqvist, many of which may be or are held by investors quite unconnected with the parties to the present litigation, would be in the same situation. Plainly, the rights enjoyed by all members whose shares emanate from Mr Nasir's 820 million should be consistent, and I have no reason to assume that they could all properly or fairly be despatched to establish or vindicate these rights in Kuala Lumpur, rather than before the courts of the company's seat in England.

Having regard to, evaluating, and balancing these circumstances and factors, I am not satisfied that a stay of this action is necessary for the proper administration of justice. Sub-paragraph 1(c) is therefore not satisfied.

42. That conclusion may be reinforced by the fact that Case No. 2693 cannot in any event be stayed for the reasons I indicated earlier (or appear in the next paragraph). Since the proposed defences in both cases involve aspects of the SPA, there would be some gain in procedural efficiency if they were dealt with by the same tribunal. I consider that this is covered by the concept "proper administration of justice". It was suggested by Mr Jupp that it falls outside the words "all the circumstances of the case before it" in Recital 24 of the preamble. Such a narrow interpretation is in my view unwarranted. Moreover, while recitals can be an important aid to construction of the operative text of a Regulation, they should not be treated even in a EU instrument exactly as if they were part of that text, and in any event the words "proper administration of justice" in Article 34 neither can nor should in my view be limited in the manner suggested by reference to the four words I have underlined, and I can see no purposive reason to do so. (Moreover, the fact that Case No. 2693 will not be subject to a stay and the two actions would most efficiently be dealt with together appears to me a matter to which the court could properly have regard and treat as decisive in the exercise of its residual discretion. In the event that is however (doubly) academic.)

(ii) Case No. 2693 of 2015

43. The factors which I addressed in (a)(b) and (c) of paragraph 35 would be also relevant in the context of this action, if the question whether the SPA entitled OFSB to be issued with 7 billion shares had featured in the Malaysian action and required a finding by the Kuala Lumpur court, so as to satisfy Article 34(1)(a). Also applicable mutatis mutandis would be (d) and paragraph 36. On that basis, on an overall evaluation I would not have been satisfied, had the point arisen, that a stay would be necessary for the proper administration of justice.

Stay under case management powers ?^[10]

44. It is clear from Reichhold Norway S.A. v Goldman Sachs [2000] 1 WLR 173 that the court has as part of its general management of the conduct of the case power to stay an action pending the resolution of a claim pending in another forum, whether a foreign court or an arbitral tribunal, albeit only to be exercised "only … in rare and compelling circumstances" (per Lord Bingham CJ at 186). Significantly, there was in Reichhold no identity of parties between the two sets of proceedings. Indeed, if there had been such identity the matter could have been dealt with under the Arbitration Act. Where the other forum is a court, appeal would most naturally be made to the doctrines of lis alibi pendens or forum conveniens. If no stay is appropriate under those well-developed powers, there would seem neither room nor warrant for imposing one on the same grounds as a matter of case-management. In such a case the court, as apparently in Reichhold, may take the view that success by A against C in the other forum may in practice have the result of making the claim in England by A against B otiose. That is quite different from deferring to a foreign court seised of proceedings between the same parties on the basis that its decision will or may create an issue estoppel on a point critical to the outcome of the English action.
45. These observations have particular pertinence where, as confirmed by Owusu, the Regulation imposes on the court an absolute obligation to assume and exercise jurisdiction as assigned by it^[11]. That obligation precludes the court in my view not only from relinquishing jurisdiction over the entire action in favour of court of a non-Member State but also from abandoning to such a court part of that jurisdiction such as the decision of an essential issue in the action. That prohibition cannot be circumvented by re-labelling the exercise as one of case management so as to "achieve by the back door a result against which the ECJ has locked the front door" (per Lewison J in Skype technologies SA v Joltid Ltd [2009] EWHC 2783 (Ch)). I add for completeness that, even if such a power had not been incompatible with the requirements of the Regulation, I would have regarded its exercise in such circumstances as entirely inappropriate.

Conclusion

46. I accordingly reject the application for a stay in both actions.

Note 1   All section references hereafter are to this Act.    [Back]

Note 2   At the request of the company the shares were suspended from the FSX on 9 April 2015 and at the time of the hearing before me were due to be delisted on 22 May 2015.    [Back]

Note 3   As required by Article 63.1.3 of the company’s Articles of Association.    [Back]

Note 4   The date specified for that meeting of 16 April 2015 has been extended by consent orders and is currently fixed as 31 July 2015.    [Back]

Note 5   In the course of oral closing submissions, counsel for the company suggested that by virtue of section 584 of the Act the entirety of Mr Sidhu’s initial shareholding had to be paid in cash. However, as counsel for Mr Blomqvist has subsequently pointed out, section 584 only applies to shares taken pursuant to an undertaking of the subscriber in the memorandum. In the present case (as perhaps typically), that undertaking appears to have been restricted to a single share, of no practical significance to the matters which I have to consider.    [Back]

Note 6   Unfortunately the recasting of the Regulation has resulted in a change in numbering. Where I, or decided cases, refer to the numbering of earlier versions I have for easier comprehension substituted the current numbering and indicated this by the use of square brackets.    [Back]

Note 7   In the meantime the Supreme Court had granted permission to appeal and itself referred questions to the ECJ, which were however withdrawn following the decision on the German reference: see the footnote to the decision of the Court of Appeal at 209.     [Back]

Note 8   I confess that but for this authority I would have considered that the validity of entries in a register maintained by a company was a matter more naturally within the ambit of Article 24(2). The examples mentioned in the Jenard Report at page 34, viz. land registers, land charges registers and commercial registers, suggest strongly that the register must be maintained by public authority, a view rejected by Harman J inRe Fagin. Since both Article 24(2) and (3) result here in exclusive English jurisdiction, the point is however academic for present purposes, save perhaps for a complication which I address in the penultimate sentence of paragraph 30 below.    [Back]

Note 9   If (though I did not understand counsel for the company so to suggest) there had been such authorisation, I anticipate that another Article 24(2) question would have arisen as to whether it could be quashed for misuse of the directors’ powers.    [Back]

Note 10   Though this did not appear to be covered by the stated grounds for the application, no objection was raised on behalf of Mr Blomqvist to the company’s alternative reliance on it.    [Back]

Note 11   Subject in the case of Article 4 but not Article 24 to a possible derogation under Article 34 which I have held not to be available.    [Back]