England and Wales High Court (Commercial Court) Decisions

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

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		17 May 2016

MR JUSTICE WALKER:

A. Introduction

1. The original claimants in these proceedings were an English limited liability partnership, Perella Weinberg Partners UK LLP, and a Guernsey limited partnership, Perella Weinberg Partners (Europe) LLP. They form part of the Perella Weinberg Partners Group, a global advisory and asset management firm.
2. I have today made a consent order, under which the Guernsey limited partnership ceases to be a party to these proceedings. In its place there is substituted Perella Weinberg Partners Europe (Cayman) LDC, in its capacity as general partner of the Guernsey limited partnership. This substitution is necessary in order to comply with Guernsey law. It makes no change to the substantive position.
3. I shall refer to the two claimants simply as "Perella". The proceedings brought by Perella are said by them to involve two sets of claims. The first set comprises claims as to what was done or should have been done in 2014 and subsequent years following the retention of Perella by the defendant, which I shall refer to as "Codere". That retention was the subject of a contractual agreement set out in a letter of engagement ("the letter of engagement") dated 18 April 2013 and effective 23 May 2013. Perella refers to these claims as the "limb (i) claims".
4. The second set comprises claims by Perella in respect of Spanish proceedings which they say were wrongfully commenced and continued by Codere in respect of the first set of claims. The Spanish proceedings are, according to Perella, in breach of a jurisdiction clause contained in the letter of engagement. In addition, Perella say that they are entitled under the letter of engagement to insist that Codere indemnify Perella so that Perella are held harmless against the Spanish proceedings and all losses, liabilities, costs, charges and expenses arising from the Spanish proceedings as they are incurred. Perella refer to this second set of claims as the "limb (ii) claims".
5. Codere is a Spanish company. It encountered financial difficulties in 2013. It sought assistance from Perella in relation to the restructuring of its finances. It was for this purpose that Codere retained Perella pursuant to the letter of engagement. Codere says that in February 2014 Perella ceased performing its duty under the letter of engagement. In that regard, Codere filed proceedings against Perella in Spain on 3 September 2015. In those proceedings Codere sought a declaration that Perella had repudiated the letter of engagement and that its obligations were extinguished. It also sought damages. On 16 October 2015, Perella lodged a challenge in the Spanish court to the exercise of jurisdiction by that court.
6. In its challenge Perella said that the letter of engagement provided that all disputes needed to be resolved exclusively in England. On 21 December 2015, Perella brought the present proceedings as described at the start of this judgment. On 18 April 2016 the Spanish court decided to stay the Spanish proceedings, pending the determination by the this court of (among other things) an application by Codere in this court ("the February Jurisdiction application").

B. The applications and the initial issues

7. The February Jurisdiction application is the first application before the court today. It was the subject of an application notice issued by Codere on 10 February 2016. Consistently with what had been said by Codere in its acknowledgement of service, the application contested this court's jurisdiction. It sought an order staying these proceedings so as to enable the Spanish court to decide relevant issues. Alternatively, it sought an order declaring that this court does not have jurisdiction over these proceedings.
8. There are other applications ("the additional applications") issued by Perella and by Codere. I shall say more about those applications shortly.
9. Returning to the February Jurisdiction application, the jurisdictional issues arise under regulation (EU) 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast). I shall refer to this regulation as "the recast regulation". The particular provisions I am concerned with are in articles 25, 29 and 31 of the recast regulation.
10. Section 7 of the recast regulation is concerned with prorogation of jurisdiction. It comprises article 25, which is concerned with agreement as to jurisdiction, and article 26, which is concerned with jurisdiction arising because a defendant has entered an appearance.
11. As regards article 25, the material provisions are in article 25.1:

"1. If the parties, regardless of their domicile, have agreed that a court or the courts of a member state are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that member state. Such jurisdiction shall be exclusive unless the parties have agreed otherwise ...".

12. Section 9 of the recast regulation is headed "Lis pendens – related actions". It comprises articles 29 to 34. Relevant for present purposes is article 29.1:

"1. Without prejudice to article 31(2), where proceedings involving the same cause of action and between the same parties are brought in the courts of different member 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."

13. Also relevant is article 31. Within article 31 are contained articles 31.1 and 31.2:

"1. Where actions come with the exclusive jurisdiction of several courts, any court other than the court first seised shall decline jurisdiction in favour of that court.

2. Without prejudice to article 26, where a court of a member state on which an agreement as referred to in article 25 confers exclusive jurisdiction is seised, any court of another member state shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement."

14. The jurisdiction clause which Perella alleged to have been breached by Codere comprises a single sentence of clause 9.1 of the letter of engagement. That sentence states:

"[Codere] agrees for the benefit of [Perella] that the courts of England will have non-exclusive jurisdiction to settle any dispute which may arise in connection with this engagement."

15. After considering the papers yesterday evening, it seemed to me that before hearing argument on the additional applications, and indeed before hearing full argument on the February Jurisdiction application, it was desirable at the outset to establish the position on two fundamental points ("the initial issues").

(1) The first fundamental point was to decide the true meaning of the relevant part of clause 9.1 of the letter of engagement.

(2) The second fundamental point was to establish what was meant by "exclusive jurisdiction" for the purposes of article 31.2.

16. At the hearing this morning Mr Andrew Stafford QC and Mr Timothy De Swardt appeared for Codere. Mr Andrew Scott appeared for Perella. I am indebted to all those involved on each side for the help that I have received today, including the detailed and careful written skeleton arguments and oral submissions.
17. Both sides were content with my proposal that the fundamental points identified earlier should be argued first. In the course of argument it became clear that, subject to one proviso, there was no dispute on the second of the initial issues. The proviso was this: in the Spanish proceedings Codere has noted that Perella's arguments on jurisdiction, and indeed Codere's own arguments as to the meaning of clause 9.1, give rise to an asymmetry. On either view Perella have a benefit, and it is a benefit which Codere does not enjoy. It was accordingly submitted by Codere to the Spanish court that a clause involving such asymmetry, because it identifies a special position for Perella, could not constitute an exclusive jurisdiction clause for the purposes of article 31.2.
18. This morning, after telling me about that proviso, Mr Stafford did not seek to press the argument before me. He was plainly right not to do so. So far as article 31.2 is concerned, there is, as it seems to me, good commercial reason to focus upon the question whether party seeking to bring proceedings in a court of "another member state" has agreed that the dispute in question is to be subject to the exclusive jurisdiction of a court or the courts of another member state. Nothing in article 31.2 requires that the party relying upon the exclusive jurisdiction clause must itself be under a symmetrical obligation. In those circumstances, I did not call upon Mr Scott to respond to what was said in relation to this suggested proviso.
19. On the footing that the suggested proviso can be disregarded, both sides agreed as to what it is that article 31.2 requires. What it requires is that the agreement not only confers jurisdiction upon the court of a member state, but also that it debars the restricted party from invoking the jurisdiction of courts of other member states.
20. Thus the argument this morning has concerned the true meaning of the relevant sentence in clause 9.1. In this judgment I deal with that question. I observe, at the outset, that I have been much assisted by the observations of Professor Adrian Briggs in the sixth edition of Civil Jurisdiction and Judgments. Among other things, Professor Briggs states in paragraph 4.51:

"The question whether the bringing of a particular set of proceedings is or is not a breach of contract raises a question of construction: to determine precisely what the parties promised to do, and when, and where, they promised that it would be done; to determine what the parties agreed that they would not object to if it were done; and to determine what the parties promised would not be done, or would be brought to an end if it had already been begun. A task of such complexity cannot be discharged simply by applying the labels of exclusive or non-exclusive to a jurisdiction agreement and making mechanical deductions from the label applied to the clause: the conclusions which follow from finding a choice of court agreement to be non-exclusive are not of the kind where two sizes fit all. The question is one of substance, not of appearance; of construction, not of characterisation."

C. Stance of the parties on the meaning of clause 9.1

21. Codere submits that the crucial sentence in clause 9.1 looks like it is giving something to Perella. That something is an ability to invoke the jurisdiction of the English courts. It omits any words of obligation so far as Codere is concerned and omits wording of exclusivity. Simply put, it does not prevent points being taken as to some other court being the appropriate forum or as to the existence and effect of proceedings in other jurisdictions. It makes express reference to "non-exclusive jurisdiction" indicating that there is no bar to parallel proceedings.
22. Perella, by contrast, submit that the words "for the benefit of Perella" entail much more than this. Relying upon what was referred to as the "rebuttable presumption" in article 25, it was submitted that the relevant sentence constituted an exclusive jurisdiction clause, in the sense that Perella was entitled to sue in England and elsewhere but Codere could not sue anywhere else. I shall deal with the precise arguments advanced in the next section of this judgment.

D. Analysis

23. I must apply English principles of construction. It is not suggested that there is any overriding European principle as to how a court should go about establishing the true meaning of a jurisdiction provision. Applying English principles of construction, I adopt the approach identified by Lord Clarke JSC in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900. The language used in the letter of engagement is to be given the meaning that it would have conveyed to a reasonable person possessed of all the background information reasonably available to the parties when the letter of engagement was concluded. Where there are two possible constructions the court is entitled to prefer the construction which is more consistent with "business common sense" if that can be ascertained.
24. Applying those principles, I have regard to the factual matrix. Two features seem to me to be particularly important. They are:

(1) the effect of what the parties agreed was highly likely to be governed by the recast regulation; and

(2) the parties on each side were sophisticated business entities which no doubt were familiar with the recast regulation, it having come into existence in December of the year preceding the letter of engagement.

25. The starting point, as it seems to me, for sophisticated parties considering the effect of the recast regulation is the express provision about prorogation of jurisdiction found in article 25. I am content, for present purposes, to adopt Perella's description of the second sentence of article 25 as constituting a "rebuttable presumption". What is made plain in that sentence, however, is that any presumption that jurisdiction shall be exclusive will not have effect if "the parties have agreed otherwise".
26. As noted earlier, what the parties have agreed includes an express reference to there being "non-exclusive jurisdiction". Codere observed that in relation to article 25 it would be impossible to imagine a more direct way of ensuring that a presumption of exclusivity was rebutted than by using the words "non-exclusive".
27. While I suppose it may possible to use more words in order to convey the idea that the jurisdiction in question is not exclusive, this seems to me to be a particularly strong point. In my view both an ordinary reader and, indeed, the sophisticated reader, familiar with article 25, would attach significance to the absence of any reference to exclusivity and to the presence of an express reference to non-exclusive jurisdiction.
28. The significance of this feature is made all the stronger when one has regard to well-known boilerplate provisions. Codere drew my attention to two such provisions, each of them designed to achieve the result for which Perella contends in the present case. In each of them the wording used is that the chosen court or courts shall have exclusive jurisdiction over any dispute or claim, adding, in one case, that the party in the equivalent position of Perella shall retain the right to bring proceedings against the other party in any other court which has jurisdiction. That is the formula used in the Encyclopaedia of Forms and Precedents. The formula used in the other boilerplate is to add that that nothing in the clause shall limit the right of the party in the position of Perella to take proceedings against the party in the position of Codere in any other court of competent jurisdiction. As Codere pointed out, the wording used in these boilerplates would, in large part, be mere surplusage if Perella's assertions as to the meaning of the relevant sentence in clause 9.1 were right.
29. Thus, it seems to me, the starting point is that there is no obvious clue that the letter of engagement seeks to prevent Codere from bringing parallel proceedings. On the contrary, words are used which point to there being a lack of concern about parallel proceedings and there is an absence of the words normally to be expected when exclusivity is sought.
30. Perella's argument, in my view, rightly focused on the analysis of what was to be inferred from the use of the words "for the benefit of [Perella]" in clause 9.1. It was said that for this reason it is no answer to Perella's construction to rely upon the express provision for non-exclusive jurisdiction. The key question is the extent to which it does so. It does not appear to me that, taken on its face, the language indicates that the benefit to be conferred upon Perella is an entitlement to insist that Codere must regard itself as bound by the exclusive jurisdiction of the English courts. It would have been simplicity itself to state so.
31. I turn to the position if there is a need to distinguish between two possible constructions, and to prefer the construction which is most consistent with "business common sense", if that can be ascertained. This appears to me to be one of those cases where a party such as Perella is asserting that "business common sense" will give it the maximum possible benefit that can possibly be wrung out of the contractual stipulation in question. It is, to my mind, at least equally consistent with "business common sense" that Perella, with a base in London, wished to be able to invoke the jurisdiction of the English courts on a non-exclusive basis and that Codere was content to give Perella that benefit.
32. Codere drew attention to observations by Lord Justice Toulson, as he then was, in Deutsche Bank AG v Highland Crusader Partners LP [2009] EWCA Civ 735, [2010] 1 WLR 1023. At paragraph 105 Toulson LJ said:

"The starting point for considering the effect of a non-exclusive jurisdiction clause must be the wording of the clause. In terms of contract law, I cannot see how a party could ordinarily be said to be if breach of a contract containing a non-exclusive jurisdiction clause merely by pursuing proceedings in an alternative jurisdiction. It is conceivable that a jurisdiction clause which is not fully exclusive may nevertheless be drafted in such a way as to have the effect of barring parallel proceedings in certain circumstances, but that is a matter of individual contractual interpretation."

33. Perella accepted that this passage rightly described the general principles which apply. I am, of course, bound by this description of general principles, it having been adopted by both other members of the Court of Appeal. Applying what is said by Toulson LJ, nothing in the relevant sentence in clause 9.1 carries any indication that the benefit to Perella is to go beyond enabling them to invoke the non-exclusive jurisdiction of the English courts. Nothing in that sentence indicates that it is intended to have the effect of barring parallel proceedings by either side. In these circumstances I apply the principles identified by Professor Briggs (see section B above) in the passage cited earlier, along with relevant factual matrix considerations. There is a clear and obvious purpose, on the face of the words used, to give a benefit to Perella. On the face of the words used, that benefit is an ability for Perella to invoke the jurisdiction of the English courts, but those words contain no hint that they are intended to prohibit Codere from invoking the jurisdiction of other courts. The inference, as it seems to me, from what is said in clause 9.1 is that if one side objects to the bringing of proceedings by the other in a particular member state, then the validity of that objection will depend upon the application of the recast regulation.
34. What, it seems to me, is insufficiently taken account of in Perella's submissions in this regard is that the relevant sentence in clause 9.1 undoubtedly confers upon Perella the benefit of being able to invoke the English court's jurisdiction. In the absence of that sentence there could be no certainty that Perella could invoke the jurisdiction of the English courts under parts of the recast regulation not concerned with prorogation of jurisdiction.
35. Next, Perella drew attention to the wording which states that the agreement on jurisdiction is to apply to "any dispute which may arise in connection with this engagement". It does not seem to me that this advances the argument. The question of the scope of application of a jurisdiction or arbitration clause is one which will be at the forefront of the minds of those who are drafting or negotiating such clauses. That is a different and distinct question from the question as to what precise benefit is given to Perella by the clause. Here too, it seems to me, the argument of Perella takes insufficient account of the fact that, on its face, the conferral of non-exclusive English jurisdiction gives Perella a real benefit.
36. For these reasons I am not persuaded by Perella's assertion that the true nature of the benefit intended to be conferred by clause 9.1 is two-fold. Insofar as Perella's construction is said to reflect the presumption of exclusivity under article 25.1, this makes insufficient allowance for not merely the absence of any reference to exclusivity, but also the express reference to "non-exclusive jurisdiction". Insofar as Perella assert that there was a limited extent to which the parties agreed to depart from the presumption of exclusivity, as I have indicated earlier, the argument appears to me to give insufficient recognition to the undoubted benefit which Perella gained from Codere's acceptance that Perella could invoke the non-exclusive jurisdiction of the English court.
37. In support of its main arguments on construction, Perella added that Codere itself had drawn attention to a flaw in its own submissions. Codere had asserted that it would be entitled under clause 9.1 to sue Perella in any court in which it could establish jurisdiction under applicable rules. Perella pointed out that in the light of article 29, the effect of Codere's construction would be that it could deprive Perella of "the very benefit that it contracted to provide", by commencing proceedings in another member state.
38. This seems to me to be a bootstraps argument. If, as appears on the face of the clause, the benefit was that Perella would be able to invoke the non-exclusive jurisdiction of the English court then that would, as Codere rightly observes, be subject to provisions of the recast regulation. It follows that agreement on Codere's part to non-exclusive English jurisdiction Codere does not constitute agreement that it will not rely on the recast regulation. Here, too, I conclude that there is no lack of business common sense in Codere's construction, essentially for the reasons I have given earlier.
39. Finally, in his submissions this morning, Mr Scott advanced a fallback argument as to the true meaning of clause 9.1. Drawing my attention to the decision of the Court of Appeal in Sabah Shipyard v Pakistan [2002] EWCA (Civ) 1643, [2003] 2 Lloyd's Reports 571, it was said on behalf of Perella that even if clause 9.1 did not debar Codere from bringing proceedings in Spain, it nonetheless required Codere to desist from those proceedings once Perella had invoked the English court's jurisdiction.
40. To my mind there is simply no good reason to arrive at such a conclusion. All the pointers towards Codere's construction as identified earlier in this judgment remain equally valid in relation to this fall-back position. The arguments in favour of such a fallback position appear to me to be considerably less strong than the arguments which I have already rejected in favour of Perella's main submission.

E. Conclusion.

41. For the reasons given above, I conclude that Codere's construction of clause 9.1 is correct.
42. MR STAFFORD: I'm very grateful, my Lord, not only for your judgment, but for the fact that you've been able to deliver it so speedily over the course of the day's proceedings.
43. In line with your note, you foreshadowed a conversation with us about how we and you might proceed in the light of the ruling that you have given. I'm not quite sure in what direction to take that. It may be that in the light of the ruling Mr Scott has to take instructions as to what parts, if any, of his case he still wishes to advance. There is also the question of costs of this application so far. I can see it is past 5.30 --
44. MR JUSTICE WALKER: I'm very grateful to court staff and to our stenographer for staying late. Thank you both very much.
45. What I would suggest is that the consequences of this ruling and the way forward should be discussed between the parties, with a view to fixing a further hearing and identifying the issues both as to the consequences of this ruling and as to where the matters goes from here and what will be argued at a further hearing.
46. If the parties are able to reach agreement on that then if that can be submitted to my clerk it may well be that I will agree too. If the parties find that they are deadlocked then they should please send a joint note, which sets out the rival positions and again that should be sent to my clerk and I will consider it and do what I can to identify a way forward.
47. MR STAFFORD: I'm grateful.
48. MR JUSTICE WALKER: Would that be acceptable, Mr Scott?
49. MR SCOTT: My Lord, can I say this: first, we are grateful for your judgment and the clear terms in which it was given. Its impact is that it deals with a part of my learned friend's jurisdiction application. We still have to deal with the rest of that and we would invite you to adjourn all questions consequential upon your judgment to a further judgment, including costs and permission to appeal.
50. As to when that further hearing should be, we are keen to get on with this matter, as your Lordship will appreciate. In addition to my learned friend's jurisdiction application there is the further case management stay application. That is still outstanding and there is my summary judgment application in relation not least to the question of the indemnity.
51. MR JUSTICE WALKER: May I put down a marker about the indemnity? It is simply this: I have great difficulty, as a matter of English law, in seeing that this indemnity is concerned with anything other than indemnification for what is done by third parties. I'm not by any means making a pronouncement one way or the other. But I am concerned, if all that were left were the claim under the indemnity, whether there is anything of substance to argue about. That doesn't rule out your demonstrating that there is something of substance, but it's not something which is being confronted by the parties.
52. I am, as I say, certainly not making any definitive ruling about it, but I think it's only right to put you on notice that I feel very uncomfortable about allowing proceedings to go forward in London solely on the alleged indemnity in circumstances where, at the moment, it seems to me there are very serious obstacles in the way of the assertion that the indemnity applies to proceedings in Spain, which, by definition, if my ruling is right, Codere were entitled to bring. I'm not asking for a response on that now, but I am asking that you should have it in mind.
53. I also ask you to have in mind some comments of the Court of Appeal in Baturina v. Chistyakov [2014] EWCA Civ 1134. It is not on all fours, but there are some observations by Christopher Clarke LJ, as to what this court should do when a particular claim is said to be one which can be brought as a matter of English law and the court is satisfied that there is no basis for the claim.