and Case No 2003/101 |
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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EUROAFRICA SHIPPING LINES CO LTD |
Claimant |
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- and - |
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(1) ZEGLUGA POLSKA SA |
Defendants |
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(2) FAIRWAYS (GUERNSEY) LTD -and Between- (1) ZEGLUGA POLSKA SA -and- (1) POL-FIN SHIPPING LTD (2) EUROAFRICA SHIPPING LINES CO LTD |
Claimant Defendants |
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Michael Lyndon-Stanford QC, Mr Michael Gibbon and Mr Charles Smith (instructed by ) Middleton Potts, Solicitors, London) for Zegluga Polska and Fairlakes
Hearing dates: 25th, 26th and 27th February 2004
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Crown Copyright ©
Mr Justice Cooke :
Introduction
The Basis of the Application
"1. Euroafrica's proceedings 2001 Claim No. 783 and its defence to proceedings 2003 Claim No 101 be stayed, alternatively that the court makes such other order as it thinks fit, together with such declarations and directions as are appropriate …. .
because …
Resolutions purportedly passed by the shareholders of Euroafrica on 31 October 2002 and 30 December 2002 were and are complete nullities (and/or otherwise invalid and/or ineffective), and changes in the membership of the Supervisory Board and Management Board of Euroafrica on and after 31 October 2002 and subsequent issues of new share capital were and are ineffective, because they arose from the null (and or otherwise invalid and/or ineffective) resolutions."
i) Prior to 31 October 2002 Euroafrica's Supervisory Board consisted of Messrs Badnarski, Gora, Salamoanoewicz, Oziewicx and Wasniewski, and the Management Board consisted of Messrs Matuszewski, Wysocki, Ligierko and Szreder.
ii) On 31st October 2002 at the EGM, the authorised share capital was increased and shortly thereafter a company called Doraco became a 51% shareholder in Euroafrica. It is the leading light behind Doraco, a Mr Hass, to whom ZP and its parent PZM take objection. This is the real reason which lies behind the litigation whilst the objection is made to the change made at of that meeting to the Supervisory Board by the voting members including APEAEPR and OFR. Mr Wasniewski either resigned or was removed from the Supervisory Board and Mr Kobylinski was appointed.
iii) On 4th November 2002, the Supervisory Board which was required to have five members and, depending upon the validity or invalidity of the resignation/removal of Mr Wasniewski and appointment of Mr Kobylinski may only have had four properly appointed members, decided that the Management Board should have five members and appointed Mr Wasniewski to that Board.
iv) At an EGM on 30th December Mr Matszeuski either resigned or was removed by the Supervisory Board from the Management Board and was appointed to the Supervisory Board by resolutions on which APEAR and OFR voted whilst Mr Kobylinski was removed from the latter.
v) On 17th February 2003, Mr Ligierko was removed from the Management Board and Miss Malanowska was appointed to it by the Supervisory Board.
The Evidence of the Engagement of Richards Butler
The Donsland Decision
i) At paragraph 18 he cited a dictum of Lord Esher in Underwood Son & Piper v Lewis [1894] 2 QB 306 at page 310 where he said:-
"When a man goes to a Solicitor and instructs him for the purpose of bringing or defending …. an action, he does not mean to employ the Solicitor to take one step and then give him fresh instructions to take another step and so on; he instructs the Solicitor as a skilled person to act for him in the action, to take all the necessary steps in it, and to carry it on to the end. If the meaning of the retainer is that the Solicitor is to carry on the action to the end, it necessarily follows that the contract of the Solicitor is an entire contract – that is a contract to take all the steps which are necessary to bring the action to a conclusion."
ii) Lord Justice Tuckey referred to this as an example of "implied actual" authority which he preferred to call "necessary" or "incidental" authority in order to avoid the apparent contradiction between the words "implied" and "actual". He went on to say that the key to defining the precise scope of the authority, in the case of a Solicitor, was the Solicitor's overriding obligation to protect and preserve his client's interests.
iii) In paragraphs 24 and 27 Lord Justice Tuckey drew the distinction to which Sir Anthony Evans referred, pointing out that the company continued to exist even if for a time no-one was able to give instructions on its behalf, so that an authority once given to a Solicitor continued even during the period when there was no-one from whom to take immediate instructions.
iv) At paragraph 25, Lord Justice Tuckey concluded that, as proper instructions had originally been given in the form of a general retainer in the litigation, "the Solicitors continued to have the authority conferred on them by their general retainer". The issue therefore came down simply to whether what they did fell properly within their authority to do "what was necessary or ordinarily incidental to the conduct of the litigation for the company, having regard to their obligation to preserve and protect the company's interests as best they could."
Should there be a Stay?
i) The first answer is that it is of no consequence that the litigation may be run differently, providing that the Court ensures that proper disclosure is made, that the issues between the parties are determined and that justice is done. If Richards Butler are authorised to act until the end of the litigation, the decision which is made in any trial will be binding upon Euroafrica, regardless of the individuals who constitute its Management Board, Supervisory Board or shareholders.
ii) An analysis of the main litigation which is to be the subject of the trial in July 2004 shows that the real questions relate to the respective allegations of default by the opposing party in each action in the conjoined litigation. Regardless of the shareholdings or management of either company, the interest of Euroafrica will be exactly the same, namely to establish that ZP is in default and that Euroafrica is not, in exactly the same way as ZP will wish to establish the contrary. The identity of those giving the instructions at Euroafrica is of no consequence therefore.
i) Euroafrica have succeeded in this application on the basis of a late amendment to their case on authority.
ii) It was necessary for ZP to show a prima facie case of want of authority by reference to Polish law in order to pursue the application.
iii) The application was made with a view toon the basis of establishing that, under Polish Law, no-one had authority to act in the litigation on behalf of Euroafrica so that a permanent stay was required . whereas, bBy the first day of the hearing, ZP were seeking a stay pending the Polish proceedings on the basis that there were matters to be determined by the Polish Courts in this regard.
iv) There was therefore no need for the large volume of Polish law evidence, when a witness statement could have revealed that there were plainly arguable issues of Polish law to be resolved in relation to the resolutions at the at 31st October and 30th December 2002 EGMs.
v) An application for a stay non the basis of the Polish proceedings could have been made in October 2003 or possibly earlier, with a more limited hearing in December 2003 or January 2004.
vi) Had ZP succeeded in showing absence of authority on the part of Richards Butler, they would undoubtedly have sought indemnity costs from Richards Butler.
vii) Once the statements of Mr East and Mr Nowicki had been produced on 13th February 2003, the position was clear as a matter of analysis and the application was, in the light of the Donsland decision bound to fail.