England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand. London, WC2A 2LL
		11/07/2008

Mr Justice Beatson :

1. At the case management conference of this action last Thursday I granted an application by the claimants that, save for paragraph 48 and the first sentence of paragraph 49, the first defendant's counterclaim be stayed. The ground of that application was that the claims in the counterclaim arise under an Advisory Services Agreement ("ASA") entered into on 8 November 2006 between ACP Capital Ltd and IFR Capital plc which contains an exclusive jurisdiction clause in favour of Jersey. I now give my reasons for that decision. As well as the forum challenge, there were a number of other applications before me. Some had been filed very shortly before the hearing and were issued on the understanding that they would only be dealt with if time permitted. They form part of the background, and the issues used by some of them overlap with those in the forum challenge. I refer to them later in this judgment. Another, and important, part of the background is that, at a hearing on 21 May, Aikens J ordered expedition of the claim, and the matter was set down for a 4 day trial commencing on 28 July.
2. In considering these matters I have been greatly assisted by the submissions and skeleton arguments by Mr Beazley QC on behalf of the claimants, Mr Graham QC on behalf of the first defendant, IFR Capital plc ("IFR"), and Mr Onslow QC on behalf of the second defendant ING Bank NV ("ING").

The dispute

3. The first claimant, ACP Capital Ltd. ("ACP Capital"), is a company registered in Jersey. It is the holding company of the ACP group of investment companies. ACP Mezzanine Ltd. ("ACP Mezzanine") is a collective investment fund. ACP Capital acts as its investment manager. The first defendant, IFR, is the parent company of a number of companies in the food industry. The dispute between the claimants and IFR concerns ACP Capital's entitlement to exercise a "market flex" clause in a Syndication Strategy Letter ("SSL") dated 20 December 2007 whereby the margin under a second lien loan facility known as facility D, can be increased by up to 2.5%. The SSL was part of the arrangements between ACP Capital and IFR, under which ACP Capital refinanced IFR's substantial debts. This was done by a Senior Facilities Agreement ("SFA") entered into on 17 December 2007. ACP Capital and ACP Mezzanine are both original lenders under the SFA. ACP Capital arranged both its and ACP Mezzanine's commitments under the SFA. ACP Mezzanine is a lender in respect of facility D. ACP Capital is not. The second defendant, ING, was involved in the SFA inter alia as a lender. In that capacity, it entered into a Lender's Syndication Strategy Letter ("LSSL") with ACP Capital. ACP Capital considered that the SSL and the LSSL would facilitate the successful syndication of IFR's debts.
4. Before the refinancing effected by the SFA, there had been other financing arrangements between the ACP group and IFR or its subsidiaries. These included a number of agreements forming part of €217 million bridge financing arrangements for six months entered into on 3 July 2007, and what is referred to as the Homann Acquisition Commitment Letter, entered into on 30 May 2007 by ACP Capital, IFR and IFR Deutschland GmbH. This concerned the acquisition of Homann Chilled Food GmbH ("Homann") by IFR.
5. The claimants maintain that ACP Capital validly exercised the market flex clause on 19 March 2008. They seek inter alia an injunction requiring IFR to consent to a change in the pricing of facility D and damages. Expedition was ordered in the light of their submission that the increase in margin is necessary to enable a successful syndication of their participation in facility D and that they are being seriously damaged by being prevented from syndicating. Their case is that the market flex provisions can be exercised having regard to the prevailing conditions in the debt market where it considers this advisable in order to ensure a successful syndication. The claim against ING is that ING was in breach of its obligations under the LSSL by failing to provide all reasonable assistance to effect a pricing change to facility D and to confirm its consent to the exercise of the market flex clause. There is a substantial overlap between the claims against the two defendants but no injunctive relief is now sought against TNG because on 29 April it confirmed that it did not object to the exercise of the market flex clause.
6. There is also a substantial overlap between the defences of the two defendants. IFR and ING dispute ACP Capital's right to exercise the market flex clause on broadly similar grounds. These are that the market flex clause can only be exercised where the particular change sought is objectively justified by reference to prevailing conditions in the debt markets and that the increase sought at the time ACP Capital purported to exercise the clause was not so justified. IFR also claims that ACP Capital was in breach of fiduciary obligations which it owed to IFR "pursuant to" the ASA to which I have referred: Defence and Counterclaim, paragraph 33. ING has also raised a "no loss" defence. Although the claimants seek damages against TNG, no particulars of the loss alleged are given in the particulars of claim. ING awaits a response to a part 18 request in relation to the damages claim which the claimant has been ordered to serve by 7 July. At present, ING's position is that the claimants have no claim for substantial damages against it.

The applications since 17 June

7. IFR served its defence and counterclaim on 9 June and the claimants served their reply to the defence on 17 June. The claimants did not plead to the counterclaim which they maintain should be stayed on grounds of forum non conveniens. They notified IFR of this on receipt of the counterclaim and their application challenging the forum was filed on 18 June. Since then there have been 6 further applications.
8. On 23 June IFR made an application that the claimants' claim for privilege over certain documents held by Mishcon de Reya, the claimants' solicitors, be rejected and for inspection of those documents. The ground for this application, which the claimants strongly resist, is that Mishcon de Reya was jointly retained.
9. I concluded that this issue needed to be resolved before the trial and that the nature of the dispute ~ as to a conversation between Luke Morris (the partner concerned at Mishcon de Reya) and Dr Bauwens of IFR ~ would involve hearing witnesses. It would have been possible for a one day hearing to take place before 28 July, but the parties did not consider it feasible to complete the determination of this matter within a day. In the light of the substantial nature of the dispute and the need for the court to hear the cross examination of at least three witnesses apart from Mr Morris and Dr Bauwens, it was considered that two days would be required. Accordingly, it is not possible to start the trial on 28 July. The court ascertained that the case could be listed from 18 August and I ruled that the privilege application should be heard on 28 and 29 July and the case listed for trial either in the week of 18 August or the following week. The application notice also contained an application for specific discovery of like documents created or dated after 20 December 2007.
10. On 26 June there were 2 applications concerning an action brought by Homann and another of IFR's subsidiaries, Nordsee GmbH ("Nordsee"), against ACP Capital and ACP Mezzanine. Nordsee and Homann applied for permission to serve ACP Capital and ACP Mezzanine out of the jurisdiction in Jersey and for consolidation of that claim with this action. IFR also applied for consolidation of the two sets of proceedings.
11. On 27 June IFR filed its case management information sheet ("CMIS"). The CMIS referred to the applications made the previous day and stated that the claimants' refusal to plead to most of IFR's counterclaim made it impossible for the issues raised by that counterclaim to be tried at the trial due to take place between 28 and 31 July. Paragraph 8 of the CMIS states that either the issues raised by the IFR's defence and paragraphs 47 and 48 of its counterclaim should be tried as preliminary issues or the trial should be adjourned to the Michaelmas term to enable all issues in the action and the action proposed by Nordsee and Homann to be tried at the same hearing. It was not, however, suggested in the CMIS that it would be inappropriate to deal with the defence and paragraphs 47-48 of IFR's counterclaim as preliminary issues. IFR's position on that was at that time neutral.
12. Notwithstanding their June 26 application, on 1 July Nordsee and Homann applied for a declaration that their claim was one to which CPR 6.19(l)(a) applied so that they did not need permission to serve ACP Capital and ACP Mezzanine out of the jurisdiction. The basis of that application was a jurisdiction clause in the relevant agreements which meant that Article 23 of Regulation (EC) 44/2001 gave the English court jurisdiction. It was not possible to deal with these two applications. The considerations relevant to their determination substantially overlap with those in the forum challenge and I bore them in mind when considering that.
13. Finally, also on 1 July, IFR applied for inspection pursuant to CPR 31.14 of the structured sale and repurchase transaction confirmation between ACP Mezzanine and Deutsche Bank AG and the committed leverage facility, and for associated specific disclosure of documents relating to the transfer of ACP Mezzanine's commitments to Deutsche Bank. I was able to deal with part of that application.
14. A substantial part of the hearing was concerned with whether the trial listed for 28-31 July should be adjourned until the Michaelmas term to enable the counterclaim to be heard together with the defence to the claim. It was submitted by Mr Graham QC that there is a substantial overlap between the issues that arise in IFR's defence and those raised in the counterclaim. He stated that IFR had reconsidered its position because, since the claimants had not pleaded to the counterclaim, there is a risk that the same witnesses will have to be called twice if there are separate hearings. It was common ground that the counterclaim would not be ready for trial by 28 July. On behalf of the claimants, however, it was submitted that IFR's reversal of the position it had taken as recently as 27 June was opportunistic and too late. The main dispute as to the legitimacy of the exercise of the market flex clause needed to be decided urgently as Aikens J recognised when ordering expedition. ING was neutral on many of the issues between the claimants and IFR as a result of the applications but supported the claimants' submissions that any trial of IFR's counterclaim and the Nordsee claim should be separate from the trial listed for 28 July.
15. It was not necessary for me to determine this issue in this context. This was because of the need to stand out the trial listed for 28 July to enable a hearing to take place to determine IFR's application for inspection of documents held by Mishcon de Reya for which privilege is claimed. There was, however, an overlap between the submissions on that application and those on the forum issue.

The forum challenge

16. Paragraph 35 of Mr Beazley's skeleton argument attempted to deal with what he acknowledged was the somewhat unsatisfactory position of matters being litigated both in Jersey and in this country. It did so by offering, without prejudice to the forum challenge, to agree that claims under and in connection with the ASA should be tried in this country. The offer was subject to a number of conditions, in particular that this would have no impact on the timing or resolution of the existing claims and defence. In the event the parties were unable to agree on this and I had to deal with the forum challenge.
17. The evidence in support of the claimants' application is contained in two witness statements by Rebecca Reeder of Mishcon de Reya, the claimants' solicitor, made on 18 June and 2 July. The evidence in support of the rejection of the application is contained in two statements by Christopher Stothers of Milbank Tweed Hadley and McCloy, IFR's solicitor.
18. Mr Beazley relies on the fact that the Part 20 claims are for financial compensation arising out of alleged breaches of fiduciary duty which are pleaded as having arisen out of or in connection with the ASA. Clause 18 of the ASA confers exclusive jurisdiction on the courts of Jersey in relation to "any disputes or claims which may arise out of or in connection with this agreement". In response to Mr Graham's submission based on the English jurisdiction clauses in a number of the other agreements made in 2007 under which there was a relationship of lender and borrower as between the claimants and IFR or one or more of its subsidiaries, Mr Beazley submitted that the jurisdiction clauses in those other agreements between different parties cannot have been intended to qualify or detract from the ASA jurisdiction clause.
19. Both Mr Beazley and Mr Graham relied on the Fiona Trust case in which it was said that jurisdiction and arbitration clauses in international commercial contracts should be liberally construed because of, in the case of an arbitration clause, the presumption in favour of "one stop" arbitration: see Longmore LJ ([2007] 2 Lloyd's Rep 267 at [18-19]) and Lord Hoffmann ( [2007] UKHL 40 [2008] 1 Lloyd's Rep 254 at [7] and [12]). Mr Beazley relied on the case to show that claims for breach of fiduciary duty as well as claims for breach of contract fell within the clause in the ASA. Mr Graham relied on it to show the court should incline to reach a result which enables a dispute to be dealt with in a single jurisdiction.
20. I have referred to the financing agreements between ACP and IFR and its subsidiaries in 2007, entered into after the ASA. Mr Graham submits that the English jurisdiction clauses in those agreements in effect superseded the Jersey jurisdiction clause in the earlier ASA.
21. Mr Graham relied on English jurisdiction clauses in the following agreements: the Homann Acquisition Commitment Letter date 30 May 2007, the ACP Bridging loan agreements, (the Amendment Agreement, the Senior Term Facility Agreement between Homann and ACP Capital, and the Mezzanine Term Facility Agreement between Homann and ACP Mezzanine) all dated 3 July 2007, and the SFA dated 17 December 2007. He also relied on clause 3(d)(i) of the Homann Acquisition Commitment Letter which provides that the IFR parties "waive any objection to the English courts on the ground of inconvenient forum or otherwise as regard to proceedings", and on clause 42 of the SFA which confers exclusive jurisdiction on the courts of England to settle any dispute "arising out of or in connection with" the SFA and providing "the parties agree that the courts of England are the most appropriate and convenient courts to settle disputes and accordingly no party will argue to the contrary".
22. He submitted that it is plain that the parties' intention was that, where a dispute arose out of or in connection with one or more of these specific agreements under which there was a legal relationship of lender and borrower between the claimants and IFR, or its subsidiaries, the intention of the parties was that the agreements as to jurisdiction in those agreements should to that extent supersede the jurisdiction clause in the earlier ASA. Paragraph 14 of his skeleton argument gives three reasons in support of this:

"(1) ... [F]irstly because the 2007 loan agreements were made later and the jurisdiction clause in them must be presumed, in the absence of express wording to the contrary, to have been intended to cut down the ambit of the clause in the earlier ASA in the event that a dispute arose which appeared prima facie, to be covered by both jurisdiction clauses;

(2) Secondly, where as here, there is an existing dispute in connection with one or more of the 2007 loan agreements proceeding in the English courts then the parties can be presumed to have intended that another, related, dispute which appeared, prima facie, to be covered both by a jurisdiction clause in favour of the English courts in one or more of the 2007 loan agreements and clause 18.2 of the earlier ASA, should be treated as being covered by the English jurisdiction clause and not the Jersey one.

(3) This construction makes commercial sense since the parties can be presumed to have wanted all related disputes to be tried together in the same forum, if possible."

23. On this issue I accept Mr Beazley's submissions. Notwithstanding the clear advantages in having a "one stop shop" whether it be for arbitration or litigation, I do not consider that the jurisdiction clauses in the later contracts can abrogate or qualify the clause in favour of Jersey in the ASA contract.
24. In the present case, unlike the Fiona Trust case, the issue is not the construing of the ambit of a single clause. It is the effect of a number of clauses in a series of contracts carefully drafted with the assistance of lawyers. The later contracts are loan agreements. The ASA is an advisory agreement. The later contracts are entered into with different parties. They do not purport to amend the jurisdiction clause in any earlier agreement including the ASA.
25. To accept Mr Graham's submission is to accept the proposition that jurisdiction choices carefully made in a contract are impliedly abrogated by a different jurisdictional choice in another contract of a different type. The proposition could lead to startling results. For example, in relation to the SFA, the "one stop shop" could change every time a new loan agreement is made if the parties agreed a different jurisdiction clause. A powerful lender might insist on a different choice of law clause and prevail. Although Mr Graham's submissions gain colour from the fact that all the loan agreements contained English jurisdiction clauses, his submission was primarily a temporal one and did not depend on the fact that the other clauses had chosen England and English law. Moreover, in relation to the SFA, clause 42 was for the benefit of the Financial Parties and Secured Persons only (see clause 42.1.3) and so, as Mr Beazley observed, on Mr Graham's submission, while IFR and its subsidiaries might have given up the benefit of clause 18, the claimants did not. Clause 42.1.3 provides that "No Finance Party or Secured Party shall be prevented from taking proceedings relating to a Dispute in any other Courts with jurisdiction." Although Mr Graham did not accept that his submission involved construing the ASA by reference to the subsequent conduct of the parties to it, that in substance is what his submission amounts to.
26. Accordingly, I do not consider that Article 23 of Regulation 44/2001 applies so that the forum non conveniens principles are therefore excluded: see Owusu v Jackson [2005] QB 801. I therefore turn to the submissions on forum non conveniens.
27. Mr Graham submitted that England is plainly the forum conveniens because there is substantial overlap between the issues that arise in IFR's defence to the claim brought and those raised in IFR's counterclaim. He submitted that the allegations of breach of fiduciary duty in the counterclaim are not very different from those in the defence. The court will, therefore, have to consider the background to the Senior Facilities Agreement entered into in December 2007 in both trials. That background includes the bridge financing for 6 months with "cram down" rights. He submitted that since, as a result of the forum challenge, the claimants have not pleaded to the counterclaim, there was a risk that the same witnesses would have to be called back to deal with the same issues and would have to do so once in the Jersey courts.
28. IFR's defence relies on its claim that ACP Capital owed it fiduciary obligations throughout 2007 because it was acting as investment manager and financial adviser to it and its subsidiaries. It relies on the terms in the ASA stipulating that ACP Capital was to act in good faith and in the best interests of IFR and its subsidiaries and that it breached those obligations by failing to make full disclosure of facts material to IFR's decision whether or not to sign the SSL. The matters it is alleged ACP Capital was under a duty to disclose include that the SSL was not in the best interests of IFR, that its terms were unduly unfavourable from the borrower's point of view, that because ACP Capital was seeking to arrange the refinancing while acting simultaneously in a number of capacities as well as IFR's investment manager and adviser, other banks would find the prospect of participating in any syndication of the refinancing unattractive, and that the SSL sought to pass that risk to IFR.
29. Mr Graham also submitted, relying on Glencore International v Exeter Shipping [2002] EWCA Civ 529, [2002] 2 All ER (Comm) 1 that this court plainly has jurisdiction over these matters because they are counterclaims brought against foreign claimants who have invoked the jurisdiction of the English court by bringing their claim here.
30. IFR's position on this issue is linked to the applications to consolidate the Nordsee and Homann action with these proceedings. There was no time to deal with those applications. However, in the context of IFR's submissions that the substantial overlap between the claims makes England a convenient forum, it has to be observed that those claims are not about the SSL but are concerned with totally different breaches to the breaches alleged in respect of the SSL.
31. It is clear that, both in relation to the defence to the claimants' action and IFR's counterclaim, the source of the duty is the same. It is also clear that a court considering the defence will need to understand the context in which the SSL and the SFA were made and will have to determine whether the claimants were under a fiduciary duty. However, I accept Mr Beazley's submission that a distinction must be drawn between the source of the duty and the nature of the breaches alleged. In the counterclaim, the allegations are of breaches of the ASA and of agreements other than the SSL. For example, paragraphs 51 and 52 of the defence and counterclaim deal with breaches in relation to the SFA, paragraphs 54 (1) and 59-60 with breaches in relation to the Bridging Loan agreements, and paragraph 54 (3), (4) and (5) with alleged threats that are unrelated to the SSL.
32. Although there is an application to amend the pleadings, as presently pleaded, IFR accepts that contractual claims for financial compensation arising out of alleged breaches of the ASA in relation to the refinancing in December 2007 are covered by the exclusive jurisdiction clause in the ASA.
33. I also observe that, whereas IFR's defence to the claimants' exercise of the market flex clause is relevant to ING's position, the damages and equitable compensation claims advanced by IFR's counterclaim do not involve ING. ING is neutral as to whether the Nordsee claim should be consolidated and whether Nordsee and Homann need permission to serve out of the jurisdiction, and if they do, whether their application should be granted. But, as I have noted, on behalf of ING it is submitted that any trial of IFR's counterclaim should be separate from that of the claim and IFR's and ING's defences. This is also a pointer to the differences between the matters to be determined in relation to the counterclaim and those to be determined in relation to the defence.
34. It is important to bear in mind that Glencore International v Exeter Shipping was a case in which an anti-suit injunction was granted by the trial judge. The issue before the Court of Appeal was whether there was territorial or personal jurisdiction over a foreign party for the purpose of that anti-suit injunction. The court was considering jurisdiction and not discretion: see Rix LJ [2002] EWCA Civ 529 at [44]-[50]. The case was not about a foreign jurisdiction clause, the existence of which constrains the discretion of the court not to grant a stay: see the authorities cited in Dicey, Morris & Collins, The Conflict of Laws, 14^th ed, 12-128.
35. For these reasons I have concluded that the claimants are entitled to have the exclusive jurisdiction clause in the ASA respected and to have the counterclaim stayed save in respect of paragraph 48 and the first sentence of paragraph 49.