B e f o r e :
MRS JUSTICE MOULDER
|| KMG INTERNATIONAL NV
||- and -
||MELANIE ANNE CHEN
CHIPPER MANAGEMENT LIMITED
Alain Choo Choy QC, Anna Dilnot and Sophie Weber (instructed by PCB Litigation LLP) for the Claimant
Elspeth Talbot Rice QC and Graeme Halkerston (instructed by Penningtons Manches LLP) for the Defendants
Hearing dates: 18 and 19 April 2018
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
Mrs Justice Moulder:
- This is the first defendant's application, dated 27 February 2018, to stay the proceedings on the basis that England is not the most appropriate forum for the determination of the claimant's claim. The second defendant, Chipper Management Limited ("Chipper") applies to set aside the permission granted by Andrew Baker J to serve it out of the jurisdiction.
- The claimant's application to continue the worldwide freezing injunction will be determined following this decision on the defendants' applications.
- In these proceedings the claimant, KMG, a Dutch company, seeks compensation from the defendants in respect of the alleged unlawful dissipation (the "Dissipation") of assets, shares in a German company, Novero GmbH ("Novero") owned by a Dutch company, Novero Investments BV ("NIBV"). Novero was owned indirectly, through intermediate companies, by DP Holding SA ("DPH"), a Swiss company (together with its subsidiaries, the "DP group").
- KMG asserts that the Dissipation was orchestrated and/or facilitated by the first defendant ("Ms Chen") and/or Chipper (amongst others) in order to enrich themselves and/or to remove the Novero asset from the DP group with the aim of preventing KMG from being able to collect under an arbitral award (the "Arbitral Award") of $200m against DPH.
- The Dissipation according to KMG involved the transfer of shares in Novero through a number of entities and ultimately to Laird plc ("Laird"), an English quoted company.
- The first transfer out of the DP group is disputed. For present purposes however it is sufficient to note that the shares in Novero were transferred (on the defendants' case) to a Bahamian trust, the Oscul Settlement, in September 2014 and then it appears on the claimant's evidence, transferred to a Bahamian company, Oscul Investment Limited in June 2015 and then to a St Lucian company, Donares Limited, in November 2015 and then to a Barbadian company, Geranium International Limited ("Geranium"), in December 2015 and then to a Luxembourg subsidiary of Geranium, Novero Luxembourg sarl. Laird purchased Geranium and thus indirectly acquired the shares in Novero, the acquisition being completed on 20 January 2016 (I note the submission of counsel for the defendants that only the first transfer out of the DP group is relevant in these proceedings and deal with this below).
- Until August 2014 DPH was owned by Mr Patriciu and after his death by his estate (the "Estate"), of which the beneficiaries include his daughters, Ana Patriciu ("AP") and Maria Patriciu.
- In the period 2007-09 KMG acquired from DPH the shares in a Dutch company, The Rompetrol Group NV ("TRG"), and the Arbitral Award which gave rise to these proceedings arose from a dispute between KMG and DPH and the Estate arising out of that acquisition.
- The defendants' case is that the following background is also relevant to the applications before the Court: DPH through its Dutch subsidiary, Arch Industries NV (at that time owned by Mr Patriciu) and RIAMO Holdings GmbH (a German company beneficially owned by Mr Olosu) entered into a joint venture (through a company called Rotendo Invest BV) through which Mr Olosu and Mr Patriciu each had a 50% indirect interest in the Novero Group. A dispute arose between the parties (with numerous sets of proceedings being brought by Mr Olosu), and ultimately Mr Patriciu bought the Novero Group on 31 October 2013 (through NIBV) under a supervised Court process in the Netherlands and subject to an independent valuation by an expert valuer, Mr Scheepers.
- Ms Chen, joined DPH in 2009 having acted as a consultant on the acquisition of TRG. It is KMG's case that Ms Chen was a key decision maker in DPH and with AP, continues to control DPH.
- Chipper is a BVI incorporated company. It is KMG's case that Ms Chen is a director of and controls Chipper. Chipper was a director of Novero but was not appointed until after the transfer in June 2015, being appointed on 25 June 2015.
- Personal service of the claim form was effected on Ms Chen on 14 December 2017. Leave to serve proceedings on Chipper out of the jurisdiction was granted by Andrew Baker J on 15 December 2017.
- Ms Chen does not dispute the validity of service on her and I proceed on that basis to consider the issue of forum.
- It was common ground before me that the following principles apply to an application for a stay on the grounds of forum non conveniens (as set out in the judgment of Lord Goff in Spiliada Maritime Corporation v Cansulex Ltd  AC 460 at 476):
"In my opinion, having regard to the authorities (including in particular the Scottish authorities), the law can at present be summarised as follows."
(a) The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice.
(b) As Lord Kinnear's formulation of the principle indicates, in general the burden of proof rests on the defendant to persuade the court to exercise its discretion to grant a stay (see, e.g., the Société du Gaz case, 1926 S.C.(H.L.) 13 , 21, per Lord Sumner; and Anton, Private International Law (1967) p. 150). It is however of importance to remember that each party will seek to establish the existence of certain matters which will assist him in persuading the court to exercise its discretion in his favour, and that in respect of any such matter the evidential burden will rest on the party who asserts its existence. Furthermore, if the court is satisfied that there is another available forum which is prima facie the appropriate forum for the trial of the action, the burden will then shift to the plaintiff to show that there are special circumstances by reason of which justice requires that the trial should nevertheless take place in this country (see (f), below).
In my opinion, the burden resting on the defendant is not just to show that England is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the English forum….
d) Since the question is whether there exists some other forum which is clearly more appropriate for the trial of the action, the court will look first to see what factors there are which point in the direction of another forum. These are the factors which Lord Diplock described, in MacShannon's case  A.C. 795 , 812, as indicating that justice can be done in the other forum at "substantially less inconvenience or expense." Having regard to the anxiety expressed in your Lordships' House in the Société du Gaz case, 1926 SC (HL) 13 concerning the use of the word "convenience" in this context, I respectfully consider that it may be more desirable, now that the English and Scottish principles are regarded as being the same, to adopt the expression used by my noble and learned friend, Lord Keith of Kinkel, in The Abidin Daver  A.C. 398 , 415, when he referred to the "natural forum" as being "that with which the action had the most real and substantial connection." So it is for connecting factors in this sense that the court must first look; and these will include not only factors affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the relevant transaction (as to which see Crédit Chimique v. James Scott Engineering Group Ltd., 1982 S.L.T. 131 ), and the places where the parties respectively reside or carry on business." [Emphasis added]
- I have before me the particulars of claim and a draft amended particulars of claim. Since the defendants are disputing jurisdiction no consent has been sought by KMG for the proposed amendments, however in determining this application I shall proceed on the basis that the claim is as set out in the draft amended particulars of claim as I did not understand counsel for the defendants to object to this course.
- The claim is advanced on 2 bases: firstly a claim in tort under the Dutch Civil Code and secondly a claim under English law asserting an unlawful means conspiracy. The claim under Dutch law is on the basis that under the Rome II Regulation the damage occurred in the Netherlands. The claim under English law would arise if it is clear from all the circumstances of the case that the tort is manifestly more closely connected with England (Article 4(3) of the Rome II Regulation).
- The case advanced by KMG is that the shares in Novero were transferred out of NIBV into the name of the various offshore entities which were owned and/or controlled and/or associated with Ms Chen and/or AP. KMG asserts that Ms Chen and AP have "done all they can to conceal their wrongdoing" by dissolving Oscul and Donares (among other things). KMG further asserts that DPH's conduct to resist enforcement is "part and parcel of the strategy devised" by Ms Chen to ensure no substantial funds or assets are left within the DP group against which the Arbitral Award might be enforced.
- The approval or procurement of the Novero Dissipation by Ms Chen/Chipper is alleged to be a misappropriation of a substantial asset of NIBV and in breach of their duties, acting either as de facto or actual directors of NIBV. KMG alleges that Ms Chen and Chipper are liable to KMG, as a creditor of the parent company pursuant to Article 6.162 of the Dutch Civil Code (either as directors/de facto directors or as an ordinary person). Article 6:162 provides:
6:162.1 a person who commits a wrongful act against another person that can be attributed to him, must repair the damage that this other person has suffered as a result thereof.
6:162.2 as a wrongful act is regarded as a violation of someone else's right (entitlement) and an act or omission in violation of a duty imposed by law or of what according to unwritten law has to be regarded as proper social conduct, always as far as there was no justification for this behaviour.
6:162.3 a wrongful act can be attributed to the person committing the wrongful act if it results from his fault or from a cause for which he is accountable by virtue of law or generally accepted principles.
- Counsel for KMG submitted that:
i) most of the relevant facts and matters have little connection with the Netherlands and are truly international in nature and referred in particular to the various companies through which the shares in Novero were passed;
ii) KMG and NIBV are Dutch registered companies. However Novero, the relevant asset, is a German company. NIBV is not the defendant. Neither Ms Chen nor Chipper has any material connection with the Netherlands;
iii) neither the witnesses nor the documents are based in the Netherlands: Mr van der Ven (a witness identified by the defendants) who is based in the Netherlands, is a peripheral witness, if relevant at all;
iv) the claim is concerned with the dissipation of Novero from the DP group and not the historic acquisition of Novero by the DP group which involved a court supervised sale in the Netherlands - the history is no answer to the case against them and the pre-2014 history of the acquisition of NIBV by the DP group is irrelevant;
v) the value of Novero is based on the pleaded case that Laird was willing to pay €65 million for Novero in January 2016 and that negotiations with Laird had commenced at the time of the 2014 transaction. Ms Chen's reliance on Mr Scheepers' valuation of 19 June 2015 or the evidence from the Dutch proceedings is irrelevant;
vi) the governing law may be an important factor in assessing the question of the appropriate forum but liability in this case will be driven by the factual enquiry and analysis. The only significant disagreement between the Dutch law experts is the issue whether the higher threshold of "severe reproach" applies to claims against de facto directors; and
vii) an alternative claim of unlawful means conspiracy is advanced under English law.
- Counsel for the defendants submitted that:
i) service of these proceedings on Ms Chen was fortuitous;
ii) the place of the tort is the starting point under the authorities and as Dutch law is the governing law, the Dutch courts are the most appropriate forum;
iii) this is particularly so where there are complicated issues of Dutch law and the principles would be unfamiliar to an English corporate lawyer;
iv) determination of the issues by the Dutch courts would allow for the possibility of an appeal whereas findings on foreign law by an English court would be findings of fact which are more difficult to appeal;
v) the authorities support the view that where the internal management of the company is concerned, the appropriate forum is the place of incorporation of the company;
vi) the facts are in dispute but the only relevant transfers are the transfer out of the DP group of NIBV in 2014 or June 2015, the subsequent transfers are irrelevant; and
vii) the value of Novero is disputed, in particular it is to be noted that the value attributed by Laird in its accounts involves a significant figure attributable to goodwill and intangible assets. Therefore the court will be concerned with the background to the Novero group, including the court proceedings in the Netherlands and it will be more appropriate for the Dutch courts to deal with this claim given their prior knowledge.
Factors which point in the direction of the Dutch courts
- Following the principles in The Spiliada set out above, I therefore look to see the factors which point in the direction of the Dutch courts.
1. Place of tort
- The claimant's primary case (paragraph 27 of the draft amended particulars of claim) is on the basis that the damage occurred in the Netherlands and pursuant to article 4 (1) of the Rome II Regulation, the applicable law to a claim in tort is the law of the country in which the damage occurs. Counsel for the defendants therefore submitted that the place of the tort is the Netherlands and submitted that "the starting point" is therefore that the appropriate court is the Netherlands.
- In support of this proposition counsel for the defendants referred me to the paragraphs in the judgment of Lord Mance in VTB Capital plc v Nutritek International Corpn and others  UKSC 5 dealing with the Albaforth line of authority at :
"18 The Albaforth line of authority is no doubt a useful rule of thumb or a prima facie starting point, which may in many cases also prove to give a final answer on the question whether jurisdiction should appropriately be exercised."
- The reference to "the Albaforth line of authority" in that paragraph refers to paragraph 14 where Lord Mance cited Robert Goff LJ in The Albaforth  2 Lloyd's Rep 91, where he said that:
"where it is held that a court has jurisdiction on the basis that an alleged tort has been committed within the jurisdiction of the court, the test which has been satisfied in order to reach that conclusion is one founded on the basis that the court, so having jurisdiction, is the most appropriate court to try the claim, where it is manifestly just and reasonable that the defendant should answer for his wrongdoing. This being so, it must usually be difficult in any particular case to resist the conclusion that a court which has jurisdiction on that basis must also be the natural forum for the trial of the action. If the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the courts of that jurisdiction are the natural forum. Certainly, in the present case, I can see no factors which could displace that conclusion." [Emphasis added]
- In this case it cannot be said, on the alleged facts, that "the substance" of the alleged tort is committed within the Netherlands: pursuant to the Rome II regulation it is the law in which the damage occurs, but this is not a case where, in my view, it can be said that as a result of the damage arising in the Netherlands, "the substance" of the alleged tort is committed in the Netherlands. The tort consisted of the transfer of shares in a German company, which as a matter of English conflicts of law would mean that German law was the relevant jurisdiction. Further, as discussed below, it involved various other jurisdictions both in terms of the location of the defendants and, on the claimant's case, the various intermediate companies through which the shares were passed, leading ultimately to the acquisition by the English company, Laird. Further it is clear from the discussion in that section of the judgment, that there is no presumption arising out of the place where the tort was committed; the court must consider all the circumstances, as stated in paragraph 18:
"But the variety of circumstances is infinite, and the Albaforth principle cannot obviate the need to have regard to all of them in any particular case. The ultimate over-arching principle is that stated in The Spiliada, and, if a court is not satisfied at the end of the day that England is clearly the appropriate forum, then permission to serve out must be refused or set aside." [Emphasis added]
2. Dutch law
- Counsel for the defendants submitted that this is a claim in tort under Dutch law and on the authorities it is preferable that a case should be tried in the country whose law applies. Counsel submitted that this is particularly so where the case involves the internal management of a company and where the issues are complicated.
- Both counsel referred to Lord Mance in VTB Capital at 
"46 The governing law, which is here English, is in general terms a positive factor in favour of trial in England, because it is generally preferable, other things being equal, that a case should be tried in the country whose law applies. However, that factor is of particular force if issues of law are likely to be important and if there is evidence of relevant differences in the legal principles or rules applicable to such issues in the two countries in contention as the appropriate forum…" [Emphasis added]
- Counsel for the defendants submitted that a claim by a creditor of a holding company against a person who was not formally appointed a director of the sub-sub-subsidiary of that holding company would be unknown to an English corporate lawyer and ignored the separate corporate identities of the companies in the chain.
- Counsel for the claimant stressed the words "other things being equal" in the dictum of Lord Mance and the need to consider whether there was "evidence of relevant differences in the legal principles" applicable to the issues in the two countries. Counsel submitted that the concept of "de facto director" was a concept which would be familiar to the English courts and that the alleged breach of directors' duty was one which would be recognised as such in any jurisdiction.
- Counsel for the defendants also relied on Brandon J in The Eleftheria  P. 94:
"I further regard, of substantial importance the circumstance that Greek law governs, and is, in respects which may well be material, different from English law. "
"I recognise that an English court can, and often does, decide questions of foreign law on the basis of expert evidence from foreign lawyers. Nor do I regard such legal concepts as contractual good faith and morality as being so strange as to be beyond the capacity of an English court to grasp and apply. It seems to be clear, however, that in general, and other things being equal, it is more satisfactory for the law of a foreign country to be decided by the courts of that country. That would be my view, as a matter of common sense, apart from authority. But if authority be needed, it is to be found in The Cap Blanco  P 130 per Sir Samuel Evans P. at p. 136 and in Settlement Corporation v. Hochschild  Ch. 10, per Ungoed-Thomas J., at p. 18..." [Emphasis added]
- Counsel for the defendants also referred to the advantage identified by Brandon J in relation to the position on appeal:
"Apart from the general advantage which a foreign court has in determining and applying its own law, there is a significant difference in the position with regard to appeal. A question of foreign law decided by a court of the foreign country concerned is appealable as such to the appropriate appellate court of that country. But a question of foreign law decided by an English court on expert evidence is treated as a question of fact for the purposes of appeal, with the limitations in the scope of an appeal inherent in that categorisation. This consideration seems to me to afford an added reason for saying that, in general and other things being equal, it is more satisfactory for the law of a foreign country to be decided by the courts of that country. Moreover, by more satisfactory I mean more satisfactory from the point of view of ensuring that justice is done." [Emphasis added]
- In relation to the authorities, where the internal management of the companies is concerned, counsel for the defendants relied on the decision of Lawrence Collins J in Konamaneni And Others v Rolls Royce Industrial Power (India) Ltd  1 WLR 1269 in support of the submission that where issues of internal management are concerned, the place of incorporation of the foreign company is the most appropriate forum.
" It is clear that in the normal case the starting point must be the identification of the issues which are likely to arise. In section IV I expressed the view that it was for the claimants to establish that England was clearly the more appropriate forum for the determination of the issues not only in relation to the bribery allegations but also in relation to the question of their standing to sue, even if that question is resolved without any form of trial or oral evidence. In my judgment the courts of the place of incorporation will almost invariably be the most appropriate forum for the resolution of the issues which relate to the existence of the right of shareholders to sue on behalf of the company." [Emphasis added]
- That conclusion however must be read in the light of the earlier discussion in Section IV to which reference is made in that paragraph. In section IV Lawrence Collins J referred to the decision in Pergamon Press v Maxwell where it was argued that Maxwell had been in breach of his fiduciary duty to the company by procuring the alteration of the bye-laws of a company ("Incorporated") and that he should be ordered to use his power as a director of Incorporated to convene a meeting to restore the position. But it was held that, because his power under the bye-laws of Incorporated to convene a special meeting was a fiduciary power of a discretionary nature invested in him as president of Incorporated, the only proper court in which to seek to control the exercise of that power was the New York court, and that an English court could not control the exercise of a fiduciary power arising in the internal management of a foreign company.
- Lawrence Collins J cited Pennycuick J in that case that:
"the power [to call a meeting of the New York subsidiary in his capacity as President]… is a fiduciary power of a discretionary nature, vested in the defendant in the capacity of an officer of Incorporated. It follows that the defendant is bound to exercise that power in good faith in the interest of Incorporated as a whole. There is no suggestion that the law of New York is different in this respect from that of England. That being the position, it seems to me, in the first place, that the court of New York is the only proper tribunal in which the members of Incorporated could seek to control the exercise of this discretionary power. It cannot be open to an English court to control the exercise of a fiduciary power arising in the internal management of a foreign company." [Emphasis added]
- Lawrence Collins J continued:
" Two points are being made by Pennycuick J. The first is that the extent of the duties of the director of a foreign company is governed by the law of that company's, the place of incorporation. The second is that the courts of that place are "the only proper tribunal" in which the members can seek to control the exercise of that power. The first point is unexceptional and indeed obvious, but it may be that the second proposition goes too far, in allocating exclusive responsibility to the courts of the place of incorporation for making orders controlling the exercise of discretionary powers. The decision predates the development of the modern forum non conveniens principles from later in the 1970s: see The Atlantic Star  AC 436 , and was given at a time when the prevailing view was that if the English court had jurisdiction, there was not normally a discretion to refuse to exercise it. If a similar point were to arise for decision today, I consider that the correct approach would be to say that the courts of the place of incorporation are very likely indeed to be the appropriate forum, but not so overwhelmingly that they will necessarily be the exclusive forum. So understood Pergamon Press Ltd v Maxwell  1 WLR 1167 confirms that questions of internal management are governed by the law of the place of incorporation, and that the courts of that place are best suited to give decisions on the control and extent of the powers of the management." [Emphasis added]
- I note that in the Maxwell case the claimant was seeking an order from the English courts to direct the use of the directors' powers which is not the case here where damages are sought for breach of the directors' duties. Further the action being considered by Lawrence Collins J was a derivative action brought by shareholders. A derivative action is brought in representative form, and the company is joined as a defendant. This is not a derivative action and the company (on the currently pleaded case) is not a party whereas in the Rolls Royce claim it was a "necessary element" and the Indian connections were "overwhelming" (para 188).
The issues of law in dispute
- Counsel for the claimant submitted it was important to identify the issues and that the question of appropriateness of the forum is in substance a question as to where the issues may be tried most suitably in the interests of all parties and the ends of justice: Clarke LJ in 515 Limit (No. 3) Ltd v PDV Insurance Co  EWCA Civ 383:
"72 I agree that this appeal should be dismissed for the reasons given by Auld LJ. I wish to add a comment on a very narrow aspect of the forum conveniens part of the case. It is to my mind important that, in general, where a defendant wishes to set aside an order for permission to serve out of the jurisdiction on the basis that the action involves or may involve issues which it would be appropriate should be tried in a court or courts outside the jurisdiction, it is incumbent upon him, so far as possible to identify the issues concerned and to state as clearly as possible how they arise or may arise in the proceedings. That is so even though, on such an application, the burden of proving that England is the more appropriate forum for the trial of the action is on the claimant. It is not appropriate for a defendant merely to speculate as to the issues which might arise."
- Counsel for the defendants submitted there are difficult Dutch law issues on which there is divergent expert evidence and therefore better dealt with by the Dutch courts: Lawrence Collins J in Rolls-Royce at :
"170 [The applicable law] is not a factor of great significance in this case because there is no evidence of any difference between English law and Indian law on the relevant matters. But the case does involve some developing and controversial areas of law such as the scope of the right to bring derivative actions and the law of bribery. I have expressed the view that the question of the right to bring a derivative action is governed by Indian law, and it is likely that the bribery issues are governed by Indian law: Arab Monetary Fund v Hashim  1 Lloyd's Rep 543 , affirmed on this aspect in  1 Lloyd's Rep 589 . To the extent that there are controversial issues it would be better for them to be decided by the court which can authoritatively rule on them, and whose judgments are subject to appeal. But since there is no evidence of any differences, and since the application of foreign law is an everyday occurrence in English courts, this is not a significant pointer to India as the proper forum." [Emphasis added]
- Further, counsel for the defendants submitted that the Dutch law cause of action is novel in English law. The question therefore for this court is what are the issues in this case and whether it would be better for them to be decided by the Dutch courts. In reaching that conclusion, the court should consider in particular the differences between the experts as to Dutch law and whether those differences are controversial such that, as stated above, it would be better for them to be decided by the court which can authoritatively rule on them, and whose judgments are subject to appeal.
- The court has before it reports from:
i) Mr Tjeenk of de Brauw Blackstone Westbroek dated 23 November 2017;
ii) Mr van Maanen of BarentsKrans N.V. dated 27 February 2018 ("Van Maanen 1") and 29 March 2018 ("Van Maanen 2"); and
iii) Professor Veder of Resor N.V. dated 20 March 2018.
- It is common ground between the experts that the non-contractual liability of directors is based on the general tort provision of article 6:162 of the Dutch Civil Code (para 5.8 of Van Maanen 1).
- The experts appear to agree that therefore there must be a "wrongful act" and in the circumstances of directors' liability to third parties the wrongful act within article 6.162.2 (set out above) is based on the violation of a duty which according to unwritten law has to be regarded as proper social conduct (para 5.10 of Van Maanen 1, para 60 of Veder).
- The experts also agree that liability to creditors is only imposed on a director where his actions justify "serious reproach" (para 5.10 of Van Maanen 1, para 42 of Veder).
- However a director can be held liable for dissipating assets if he knew he would thereby cause prejudice and the dissipation satisfies the threshold (para 5.26 of Van Maanen 1). Mr van Maanen appears to accept that if KMG proves that the defendants intended to prejudice the interests of KMG by the Dissipation that would meet the threshold of serious reproach (para 5.52 of Van Maanen 1).
- Van Maanen is of the view that the standards applying to directors also apply to quasi directors (para 5.42 of Van Maanen 1). However he doubts whether KMG can show that the defendants were quasi directors of NIBV as a matter of fact (para 5.51 of Van Maanen 1).
- Van Maanen also questions whether KMG can prove that the norm would protect KMG against a reduction in recourse at the level of DPH as a great grandparent of NIBV (para 5.51 of Van Maanen 1). His starting point is that the creditor of the ultimate parent would normally fall outside the ambit of the interest that the director of the subsidiary further down the chain must take into account. He says (paragraph 5.55 of Van Maanen 1):
"I do not consider there is a credible basis to assert such claim, unless exceptional circumstances apply."
However he then says that (paragraph 5.56 of Van Maanen 1):
"such exceptional circumstances could exist, in my view, if KMG can demonstrate that the transfer of Novero GmbH by NIBV in June 2015 was detrimental to the interests of KMG and actually intended by directors of NIBV at the time of the transaction to cause prejudice to KMG as creditor of the ultimate parent DPH SA."
- Thus the first issue which the court will have to decide on Mr van Maanen's approach is whether the defendants as a matter of fact were quasi directors. Mr van Maanen states that (paragraph 5.49 of Van Maanen 1):
"this is a person whose conduct, demeanour and decisions resemble that of a formal director although the person lacks that formal capacity…"
- The second issue (assuming the first is established) is whether as a matter of Dutch law, the defendants have breached the standard of liability. If KMG can establish as a matter of fact that the transfer of Novero was intended by the defendants to cause prejudice to KMG as creditor of DPH, it appears on the basis of Mr van Maanen's report that the standard of "serious reproach" will have been met.
- The third issue is whether there is sufficient proximity between the defendants and KMG as creditor of the ultimate parent company. Again, applying Mr van Maanen's report, if the facts are established, it will amount to what he referred to as "exceptional circumstances" so as to establish liability.
- Although therefore in other circumstances, the issue of what amounts to "serious reproach" may be a difficult one as a matter of Dutch law, it would not appear to be an issue giving rise to any difficulty on the alleged facts of this case. Further although Mr van Maanen states that the Dutch case law requires a sufficient level of proximity between the company and the party making the tort claim against the director, it would appear from his report that, this element is satisfied, if KMG can establish the case on the facts as it alleges, based on a deliberate intention to prejudice KMG.
- Professor Veder takes the view that the term "quasi director" is a Dutch corporate bankruptcy law term. He suggests that the terms are incorrectly "mixed up" in the van Maanen report (para 83 of Veder). In Professor Veder's opinion, any liability on Ms Chen under Dutch law would be as an ordinary person and not a director (para 50 of Veder).
- According to Professor Veder, ordinary persons do not benefit from the higher liability threshold developed for directors. Ms Chen was not a director and therefore is not liable as a director (Para 47, 51 - 52 of Veder). Accordingly in his view, if Ms Chen is liable for any role or involvement in the transaction she is not protected by the higher liability threshold, even if she acted as a quasi director.
- If Professor Veder is correct, KMG would not have to establish that Ms Chen's behaviour met the threshold of serious reproach. Although Professor Veder states that the question of whether an act falls within the scope of breach of a duty of proper social conduct requires a subjective approach whereby all circumstances of the case are relevant, this is a "very fact specific exercise" and wrongfulness is a "sliding scale" (Paras 60 - 61 of Veder), he concludes that in his view Ms Chen's conduct (on the assumption Ms Chen controlled the DP group entities that were involved, procured the entities to enter into the transaction and intended to prejudice KMG) qualified as wrongful as a matter of Dutch law (para 64 of Veder).
- Thus, although in Professor Veder's opinion, liability would attach not as a quasi director but as an ordinary person, on the alleged facts, liability still arises under the same provision of the Dutch Civil Code, article 6:162. Whilst the test of what constitutes a wrongful act appears at first sight to be an unfamiliar concept for the English courts to apply, it appears from Professor Veder's report that on the facts of this case (assuming they were established) there would be no issue as to whether the norm had been breached.
- I note at this point that counsel for the defendants submitted that the claim asserted by KMG could be founded on a negligent act and she referred to paragraph 31.1.2 of the draft amended particulars of claim. In my view, this paragraph merely sets out the law as to what can constitute "severe reproach" and does not constitute KMG's case, which, as referred to above, is clearly stated to be on the basis of a deliberate and intentional act to transfer the assets and prejudice KMG.
- Accordingly, although the experts take a different approach to the potential liability of Ms Chen under article 6:162, on close examination of the differences between them, the issues which arise are ones which could be resolved by the English courts: firstly, if Mr van Maanen is correct and liability depends (in part) on establishing that the defendants were quasi directors, whether as a matter of fact the defendants were quasi directors. There is a not dissimilar concept of shadow director under English law and there is no reason, in my view, why the English courts should not be able to find the facts and apply those facts to the Dutch test. Secondly, and possibly in the alternative, whether as a quasi director or as an ordinary person, on the facts, the defendants committed a wrongful act and their conduct fell below the requisite standard. On the case advanced by KMG, the question of whether the conduct fell below the requisite standard does not appear to give rise to any difficulty as a matter of Dutch law. Proximity for the reasons stated above would also not appear on the basis of evidence of the experts to give rise to any difficulty as a matter of legal principle, on the facts of this case.
- An English court is used to having to deal with conflicts between experts on issues of foreign law and in the particular circumstances of this case, it would appear to make no difference to the outcome, that is the imposition of liability on the defendants, whether Mr van Maanen or Professor Veder is correct as to the nature of the liability, if KMG can establish its factual case that the defendants acted with the intention to prejudice KMG. In the circumstances therefore I do not accept the defendants' submission that this involves issues in a developing and controversial area of law. Liability will be driven by the factual enquiry and can be determined by the English court without having to resolve controversial issues of Dutch law.
3. Location of the parties
- The places where the parties respectively reside or carry on business was identified as a potential connecting factor by Lord Goff in The Spiliada.
- Counsel for the defendants relied on the following dictum of Lord Goff in The Spliada (at 476):
"I may add that if, in any case, the connection of the defendant with the English forum is a fragile one (for example, if he is served with proceedings during a short visit to this country), it should be all the easier for him to prove that there is another clearly more appropriate forum for the trial overseas."
- Counsel for the defendants submitted that, because Ms Chen was served during only a "short visit" to the United Kingdom, service in the jurisdiction was "fortuitous" rather than substantive.
- Counsel for KMG relied upon the fact that Ms Chen is a British citizen and has a "substantial" property in Woking as one of the factors demonstrating a significant connection between the claim and England.
- Counsel for the defendants submitted that, whilst Ms Chen does own a house in the jurisdiction, the vast majority of the beneficial interest in that house is held for her daughter.
- Ms Chen was born in, is a citizen of, and is domiciled and resident in Trinidad and Tobago. She is also a citizen of the United Kingdom, where she was domiciled prior to March 2016 (though not for tax purposes).
- Ms Chen's evidence is that she owns a house in Woking, Surrey which, by virtue of a declaration of trust dated 24 March 2016, has been placed into trust 90% for the benefit of her daughter and 10% for Ms Chen's own benefit. Ms Chen's daughter resides in the United Kingdom, where she is at boarding school. Although Ms Chen, in her Third Affidavit, states that she moved back to Trinidad in March 2016 and since that time her base has been in Trinidad, she has spent 40 days in the UK in the year to 5 April 2017 and 38 days in the UK for the period 6 April 2017 to 27 February 2018. She is a British citizen, although not tax resident here, and she retains a property here, albeit that it is beneficially owned largely by her daughter. In the circumstances I do not accept that her links to the UK are "fragile" or that KMG obtained jurisdiction fortuitously. In any event this is not a case where her domicile connects her to the Netherlands. This factor does not therefore support a finding that the Dutch courts are the more appropriate forum. The fact that she is a British citizen, regardless of her tax status, and her links with the UK would suggest that the English courts are a more appropriate forum.
- KMG is a Dutch registered company. NIBV is also a Dutch company but is not a defendant. Although KMG reserves its right to add NIBV as a party, it is not currently a party (and would not be a party on the draft amended particulars of claim) and KMG's claim (supported by the expert reports) does not require it to be a party in order to succeed. Novero is German but as the subject matter of the transfer, its place of incorporation is of little relevance to the key issues of control of NIBV and intention on the part of the defendants.
- Chipper has no material connection with the Netherlands so far as these proceedings are concerned. Chipper was incorporated in the British Virgin Islands and Chipper's case is that it became a director of NIBV only after the transfers in June 2015.
- It was submitted by counsel for the defendants that only the first transfer out of the DP group (which the defendants say took place in September 2014) was relevant and that the other companies to which the shares were subsequently transferred were not relevant. However, at this stage it seems to me that KMG's pleaded case relies on these transfers to the other companies and I therefore take the location of these companies into account. As stated above, the companies were not based in the Netherlands, but in the Bahamas, Saint Lucia, Barbados and Luxembourg. The minutes of meetings and records of these companies would therefore appear to be of potential relevance. Laird is a UK incorporated company.
4. Location of the witnesses
- The defendants would intend to call Ms Chen, AP and Mr Van der Ven. As described above, Ms Chen is currently based in Trinidad for part, but not all of the time. AP is understood to be based in Switzerland or Cyprus: she gave a Swiss address in her witness statement dated 26 February 2018 but in an earlier affidavit in 2016 she gave a Cypriot address. Mr Van der Ven, who as a supervisory director of NIBV appointed by the Dutch courts was involved in the court supervised sale of Novero, is based in the Netherlands. Counsel for KMG submitted that any evidence which he may give is peripheral. I cannot determine the relevance of his evidence at this stage, but if required to give evidence it seems to me that he could travel to give evidence to the English courts. The other witnesses who may be regarded as the principal witnesses do not point to the Dutch courts.
- KMG suggest that they may call witnesses from Laird, which is a UK incorporated company, in particular in relation to the due diligence carried out by Laird on the acquisition of the Novero group. Although there is no evidence before the court as to where witnesses from Laird are located, it is not unreasonable to assume that the relevant individuals may well be based in the UK. KMG also propose to call Mr Olosu (based in Germany), Mr Henke (based in Romania) and Mr Golovin (based in Romania).
5. Location of documents
- Given that KMG's case is not based on the defendants being actual directors of NIBV, the relevant documents will not necessarily be with NIBV in the Netherlands, but may be with DPH in Switzerland, with Ms Chen in England or Trinidad or with AP in Switzerland or Cyprus. As referred to above, it is likely, but unclear whether any documents relating to the due diligence carried out by Laird are in England (I deal below with documents relating to the background matters before the Dutch courts).
6. English law claim
- An alternative claim of unlawful means conspiracy is advanced under English law. This may mean that, depending on which jurisdiction is found to be the more appropriate forum in this application, the relevant court at trial may have to consider foreign law. Counsel for KMG accepted that, in so far as the conspiracy alleged under English law is based on the alleged unlawful act as directors of a Dutch company, Dutch law is also relevant to the English law claim. However as discussed above, the scope of liability attaching to a director is unlikely to be an issue which gives rise to any difficulty as a matter of Dutch law on the alleged facts.
7. Confidentiality issues in the Netherlands
- Counsel for the defendants submitted that there are issues regarding the confidentiality of documents and correspondence related to the earlier dispute under Dutch law, which are substantially different to English law and therefore a Dutch court is better equipped to understand and deal with such issues.
- In particular, Counsel relied upon: (a) Mr Henke's evidence that communications between Dutch attorneys are confidential under Dutch law (even if that correspondence is not of a without prejudice nature); and (b) AP's evidence that the valuation report of Mr Scheepers used in the Dutch litigation is subject to a confidentiality restriction.
- Mr Scheepers' report was ordered by the Dutch Court and valued the Novero Group at EUR 25 million as at 31 October 2013. Counsel for KMG submitted that no issues arise as to what Mr Scheepers' valuation was: the present proceedings will require a different valuation exercise, either as at the date of the transfer to the Oscul Settlement in September 2014 or to Oscul Investment in June 2015. Counsel for KMG submitted that the substance of Mr Scheepers' report has been referred to multiple times in correspondence and that there is now a series of Dutch judgments (though these have not been translated into English in their entirety). Further, counsel for KMG submitted that, in any event, there should be no reason why the English Court is unable to make provision for a suitable confidentiality regime or to otherwise preserve the confidentiality in the relevant documents.
- In relation to the communications between attorneys, Mr Henke was referring in his evidence to KMG's efforts to enforce in the Netherlands so it is not directly relevant to the issues. Mr Henke was able, for the purposes of his evidence, to summarise the correspondence and counsel for the defendants has not established how any such rule of confidentiality between attorneys would prevent an English court from dealing fairly with the issues in these proceedings.
- Whilst the issue of the value of the Novero group is likely to be an issue for trial, it is unclear at this stage whether a valuation obtained at least a year prior to the Dissipation is relevant. The value placed on Novero by Mr Scheepers has already been disclosed in the correspondence (letters of 22 June 2015 and 14 February 2018 from Mr Van De Ven to NIBV and Ms Chen, respectively). To the extent that any further detail is required and is relevant, AP in her witness statement, suggests that the valuation report could be disclosed if permission was sought from Mr Scheepers.
- Accordingly neither of the issues raised appear to be matters which point to the Dutch Courts being a more appropriate forum.
8 . History of the Novero Group before the Dutch courts; Involvement of Mr Olosu-Ittu
- KMG will rely on the evidence of Mr Olosu: in particular, Mr Olosu's evidence that he received offers for the Novero Group prior to the court supervised sale; and that after the sale, he was aware of other offers and understands that Laird had commenced its due diligence into Novero by around September or October 2014.
- Ms Chen disputes Mr Olosu's evidence about the offers received for the Novero group, which had been assessed by the Dutch Courts. She relies on the judgments in the Dutch courts as explaining why, in her view, the offers were implausible and not viable.
- Counsel for the defendants submitted that this factual background is material to the Claimant's present claim for two reasons: (a) it affects the value of the Novero Group, as the valuers will inevitably have regard to it when assessing the value of the Novero Group in either September 2014 or June 2015; and (b) Mr Olosu is one of the Claimant's witnesses, and therefore the background is material to his credibility.
- In response, counsel for KMG submitted that the Dutch litigation involving Mr Olosu is nothing more than purely historical; it does not relate to the validity of the 2014 and 2015 transfers. Insofar as Mr Olosu will be a witness at trial, counsel for KMG submitted that counsel for the defendants could cross-examine him on the Dutch materials if they wish to do so and there is nothing to suggest that the deployment of these materials would be better done in the Netherlands than England.
- In my view, to the extent that this factual background has any relevance to the valuation issue, Mr Olosu is based in Germany and has provided a witness statement in English and there is no apparent reason why he could not be called to give evidence in the English courts.
- I do not accept the submission of counsel for the defendants that the background to this matter amounts to a "Cambridgeshire" factor as was the case in The Spiliada. In that case at 485 Lord Goff discussed the finding by the judge at first instance that proceedings in another case meant that the proceedings should be in that forum:
"But the crucial point, in the judge's view, was the Cambridgeshire factor. This was regarded, certainly by Neill L.J., as relevant; and in this I find myself to be in agreement. The criticism of the judge's view of this factor goes, therefore, to its weight, as Neill L.J. indicated  2 Lloyd's Rep. 116 , 124 when he said that it seemed to him that the judge attached far too much importance to this factor. With all respect, however, when I read the judgments of both the Lords Justices, I consider that they underrated it. I believe that anyone who has been involved, as counsel, in very heavy litigation of this kind, with a number of experts on both sides and difficult scientific questions involved, knows only too well what the learning curve is like; how much information and knowledge has to be, and is, absorbed, not only by the lawyers but really by the whole team, including both lawyers and experts, as they learn about the interrelation of law, fact and scientific knowledge, having regard to the contentions advanced by both sides in the case, and identify in their minds the crucial matters on which attention has to be focused, why these are the crucial matters, and how they are to be assessed. The judge in the present case has considerable experience of litigation of this kind, and is well aware of what is involved. He was, in my judgment, entitled to take the view (as he did) that this matter was not merely of advantage to the shipowners, but also constituted an advantage which was not balanced by a countervailing equal disadvantage to Cansulex; and (more pertinently) further to take the view that having experienced teams of lawyers and experts available on both sides of the litigation, who had prepared for and fought a substantial part of the Cambridgeshire action for Cansulex (among others) on one side and the relevant owners on the other, would contribute to efficiency, expedition and economy - and he could have added, in my opinion, both to assisting the court to reach a just resolution, and to promoting a possibility of settlement, in the present case. This is not simply a matter, as Oliver L.J. suggested, of financial advantage to the shipowners; it is a matter which can, and should, properly be taken into account, in a case of this kind, in the objective interests of justice." [Emphasis added]
- The position in this case is very different. In The Spiliada the judge at first instance had already started to hear the trial of a similar action for damages involving the same shippers in respect of another ship, the Cambridgeshire, and therefore considered, inter alia, the availability of witnesses, potential multiplicity of proceedings and the fact that the accumulated experience of counsel and solicitors derived from their participation in the Cambridgeshire action would lead to savings of time and money. I am not persuaded on the evidence before me that the background of the court supervised sale of the Novero group to the DP group or the litigation arising out of the dispute between Mr Patriciu and Mr Olosu is sufficiently relevant to the issues in these proceedings to conclude that the Dutch courts which would be seized of the proceedings would have any advantage through the background knowledge of the Dutch courts which dealt with the court supervised sale or other legal proceedings nor that there is any accumulated experience of lawyers which would point to the Dutch courts (I have already dealt with the position of Mr Van der Ven and the valuation report of Mr Scheepers).
Enforcement proceedings in the Netherlands
- In addition to the historical Dutch litigation, counsel for the defendants pointed to the relevance of ongoing enforcement proceedings in the Netherlands submitting that the claim in these proceedings "effectively formed part" of the enforcement proceedings and thus should be considered as a Cambridgeshire factor on this basis.
- Counsel for KMG submitted that the Dutch enforcement proceedings concern certain shares of subsidiaries of DPH that KMG has attached, the value of those shares and KMG's attempts to obtain information from DPH; they do not involve consideration of the issues of tortious liability arising in the present proceedings.
- Whilst the enforcement proceedings are clearly linked to the dispute which has given rise to these proceedings, in my view the ongoing enforcement proceedings are entirely separate in nature. If there is evidence which is relevant, it can be adduced before the English courts but the defendants have not established that the existence of these separate proceedings amounts to a multiplicity of proceedings such as to amount to a "Cambridgeshire" factor.
Procedure in the Netherlands
- Although raised in his skeleton argument and dealt with in the expert reports, counsel for KMG did not seek to pursue the argument (rightly in my view in the light of the dictum of Lord Goff in The Spiliada at 482E-F) that there is any procedural advantage in the English courts relating to cross-examination of witnesses and disclosure which would suggest that Dutch proceedings were not the appropriate forum. Counsel accepted that he could not submit that justice would not be done in the Dutch court. Accordingly I do not intend to consider the expert reports in this regard.
- The burden resting on Ms Chen is not just to show that England is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the English forum.
- As discussed above, the "substantive" place of performance of the tort alleged cannot be said to be the Netherlands. The applicable governing law is determined under the Rome II Regulation on the sole factor of where the damage occurred and jurisdiction is said to arise on the basis that KMG, a Dutch company, cannot enforce a Dutch arbitration award against assets of NIBV, a Dutch company, ultimately held by DPH. But the acts which gave rise to damage, on KMG's case, are not limited to the Netherlands but extend over a number of jurisdictions and it is noteworthy that the claim is brought in the alternative that English law is the applicable law on the basis that the defendants' conduct is more closely connected with England.
- It was submitted for Ms Chen that the jurisdiction of the English courts over her was "fortuitous" but as discussed above, she is a British citizen with a presence in the UK, even if she is no longer making it her home. She has no material connection with the Netherlands; she was not a director of NIBV.
- There is no particular connecting factor in the location of the parties or of the witnesses or of the documents which would lead to the conclusion that the Netherlands is clearly a more appropriate forum. This dispute involves companies in many jurisdictions and there is no reason why witnesses would find it easier to travel to give evidence in the Netherlands than in England. There is no particular connection which means that overall the Netherlands is more convenient for witnesses. Equally, documents are likely to be situated in many jurisdictions, not least England, Switzerland and the Netherlands. Although counsel for the defendants submitted that the subsequent transfers are irrelevant, on the case advanced by KMG, it will also be necessary to look at books and records of the relevant companies in the Bahamas, Saint Lucia, Barbados and Luxembourg. This means that the process of reviewing documents and identifying relevant documents is likely to be carried out in a number of jurisdictions and there is no particular advantage or convenience in this respect in giving jurisdiction to the Dutch courts.
- The history of the Novero group does not in my view mean that the Dutch courts have any clear advantage in relation to the current proceedings. As discussed above, to the extent that the court supervised sale is relevant to the issue of value, the evidence can be adduced before the English courts. In any event, the central issue to be determined in these proceedings will be the issue of liability.
- The current enforcement proceedings in the Dutch courts have not been shown to be of such relevance to the issues in these proceedings, such that the two sets of proceedings should fairly be dealt with in the same courts.
- This leaves the issue of Dutch law as the governing law of the tort. Firstly, for the reasons discussed above, I have rejected the submission that the authorities on internal management mean that in this case the Dutch courts must be the more appropriate forum. Secondly, I take into account that in these proceedings an English law case is pleaded in the alternative, and although KMG accept that their primary case is under Dutch law, for present purposes I cannot assess the strength of either the primary case under Dutch law or the alternative case under English law and therefore must assume that there is a possibility that the claim will have to be resolved under English law rather than Dutch law. Thirdly, while Dutch courts are clearly best suited to determine questions of Dutch law, the English courts, and the Commercial Court in particular, are used to determining issues of foreign law on the basis of expert evidence and the court often has to resolve conflicts in such evidence to reach its determination. Looking carefully at the legal issues which will have to be determined in this case as set out in the expert reports discussed above, it seems to me that the English court could apply the facts as it finds them to the Dutch legal principles of liability under the relevant provisions of the Dutch Civil Code. As set out above, the issues of Dutch law which arise in this case on the facts as alleged by KMG, are, in my view, not likely to lead to difficult questions of liability under Dutch law. The case advanced by KMG is in essence a deliberate transfer of assets out of NIBV orchestrated by Ms Chen (and others) with the intention and effect of putting those assets out of the reach of KMG as a creditor of DPH. Accordingly, it is unlikely in my view that were such facts to be established, the English court would have any difficulty applying the Dutch law principles to determine whether a tort had been committed as a matter of Dutch law. Whatever questions may arise in theory on the scope of liability in tort under Dutch law, the facts of this case are very unlikely in my view, to stray into the developing and controversial areas of Dutch law.
- Whilst therefore I am bound to say that the Dutch courts would have an advantage over the English courts in applying Dutch law, the issue which I have to determine is whether in all the circumstances, Ms Chen has established that the Dutch courts are the forum where the case may be tried more suitably for the interests of all parties and the ends of justice.
- The burden of proof rests on Ms Chen to persuade the court to exercise its discretion to stay the proceedings. In my view, for all the reasons discussed above, Ms Chen has not established that in the circumstances of this case, England is not an appropriate forum for the trial and further that the Dutch courts are clearly or distinctly more appropriate than the English courts. Accordingly, Ms Chen's application for a stay must fail.
Application to set aside permission to serve out
- In relation to Chipper's application to set aside permission to serve out of the jurisdiction, the burden lies on KMG to establish that England is the more appropriate forum. In my view, the court having determined that England is an appropriate forum for the claim against Ms Chen, the English courts are the more appropriate forum for Chipper: it would not be in the interests of justice, particularly given the link between Ms Chen and Chipper and the case advanced by KMG against both defendants, that the issues be tried in different jurisdictions with the resulting duplication of evidence, the cost and inconvenience of the facts being investigated twice by different courts and potentially different outcomes.
- Accordingly, Chipper's application must fail.