COURT OF APPEAL. In re HARRODS (BUENOS AIRES) LTD. Authoritative version at: [1992] Ch. 72

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1 COURT OF APPEAL In re HARRODS (BUENOS AIRES) LTD. Authoritative version at: [1992] Ch. 72 COUNSEL: Michael Briggs for Ladenimor. Alan Boyle for Intercomfinanz. George Bompas for the company. SOLICITORS: Bower Cotton & Bower; Frere Cholmeley; Clifford Chance. JUDGES: Harman J. Dillon, Stocker and Bingham L.JJ. DATES: 1990 April 2, 3, 4, 5, Nov. 29, 30; Dec. 19; 1991 Feb. 6, 7, 8; March 13 HARMAN J. On 7 July 1989 a petition was presented to this court in the matter of a company called Harrods (Buenos Aires) Ltd. The petition was presented by a company incorporated in Switzerland, called Ladenimor S.A. It specifies that the company was incorporated in September 1913 in England. Its registered office is at Royex House, an address very well known in this court. Its nominal capital is 5,457,000 sterling. Ladenimor holds a large percentage, 49 per cent., of the issued shares of the company. The object of the company is: to carry on, in Buenos Aires, in the Argentine Republic and elsewhere in South America, the business of a universal supply company and general stores in all its branches. The remainder of the company s shares, other than those held by Ladenimor are held by the first respondent, Intercomfinanz S.A., which is a Swiss company that has a controller or beneficial owner named Gibertoni. The petition sets out allegations as to relationships between Mr. Gibertoni and the individuals behind Ladenimor. It alleges that in September 1979 they made an agreement in principle to acquire the shares in the company, and at that date its only activity was the running of a large department store in Florida Street, Buenos Aires. The share capital was acquired and the very substantial price was paid by instalments between November 1979 and December Mr. Gibertoni ran the company and had complete de facto control of it with the agreement of Ladenimor. In 1985, Mr. Gibertoni and the Italian family behind Ladenimor fell out, and various matters then took place in regard to the company s business. Amongst other matters the company was advised by the formerly well known firm of Clifford Turner, the solicitors for the company, as to how distributions might be made by the company, which had a lack, according to English law then applicable, of distributable reserves, so that it was unable to pay a dividend. Upon advice, a structure of loans was created but, according to the allegation in the petition, Ladenimor did not receive the alleged part of the loans intended to be for its 49 per cent. of the interest in the company. Further, the petition alleges that the company had its activities diversified into cattle breeding, but that that cattle breeding was remarkably unsuccessful in that, throughout the period September 1984 to March 1986 there were according to the records no calves at all born of the company s cattle. It is alleged that that leads to an inference that [*77] the affairs of the cattle were being manipulated in a way that disadvantaged the company. It is further alleged that other transactions took place in a sort of bond issued in Argentina called a Bonex, which were disadvantageous to the company compared with the loans also made by the company to another Argentine company controlled by Mr. Gibertoni. Another allegation concerns the acquisition of shares from a further company in Argentina controlled by Mr. Gibertoni, at a grossly excessive price and so on, leading to the conclusion, in paragraphs 41 and 42 of the petition: 41. In the premises the affairs of the company have been, are being and for as long as the same remain under the control of Mr. Gibertoni will be conducted in a manner which is unfairly prejudicial to the interests of the petitioner. 42. Further or alternatively it is just and equitable that the company should be wound up. Upon a winding up of the company, a substantial surplus would be distributable to its members. 1/28

2 The prayer seeks in paragraph 1 that Intercomfinanz S.A. be ordered to purchase Ladenimor s shares on a particular valuation basis; there is a temporary order sought in paragraph 3 and, alternatively, in paragraph 4 an order for the winding up of the company under the Companies Act The petition was to be served upon the company at its own registered office at Royex House, and upon Intercomfinanz at Lugano. That was followed by an application made ex parte which sought leave to serve the petition out of the jurisdiction, pursuant to R.S.C., Ord. 11; presumably, I do not think I have seen the actual application, pursuant to Ord. 11, r. 1(1)(a). By that provision service out is permissible because in the action, so called, begun by writ, so called (those words apply to an application to the court by petition) relief was sought against a person domiciled within the jurisdiction. Plainly, that would have been the appropriate case because the company is a person within the jurisdiction subject to the petition, and the service on Intercomfinanz is on a person outside the jurisdiction. The application to serve out was supported by a somewhat exiguous two page affidavit, by an assistant solicitor, which was severely, and in my view justifiably criticised by Mr. Boyle for the applicant in this summons. He did so on the ground that the affidavit was in breach of the golden rule, sometimes referred to as the rule in The Hagen [1908] P. 189, sometimes referred to as the rule in Rex v. Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 K.B. 486, but in any event the rule that on all ex parte applications full and frank disclosure of any matter that may influence the judge in exercising his discretion ex parte must be made by the person applying. In my view the golden rule plainly was not satisfied. The order was in fact made by Mr. Registrar Buckley, and service eventually took place after a long time. Thereupon, this summons was issued on 20 November The summons by Intercomfinanz sought an order from the registrar, now adjourned to me, seeking to set aside the order giving leave to serve out and an order that service be set aside; the summons also sought an order that the petition and all [*78] proceedings thereunder be stayed. Those are, in a sense, quite separate applications. Paragraphs 1 and 2 are based upon the golden rule, and would not bring the proceedings to an end. They would simply result in the order and the service being set aside and the petitioner being left to start again if it could properly manage to do so. Paragraph 3 is an order effectively driving the petitioner from this judgment seat. On the matter being argued before me Mr. Briggs, in a most cogent argument, submitted to me that Ord. 11, r. 1 was not in fact applicable to this matter, and leave to serve the respondent was not necessary. He made that submission by reference to the rules which govern these sorts of proceedings. Firstly, the Insolvency Rules 1986 (S.I No. 1925), which provide in relation to a petition, by rule 4.22(4): The petitioner shall, at least 14 days before the return day, serve a sealed copy of the petition on the company. That is the only requirement for service in the Insolvency Rules 1986 at that point. That was complied with. That results in the service on the company being effective. Rule 4.23(1) provides: On the return day the court shall give such directions as it thinks appropriate with respect to the following matters as to service and other matters, including, under rule 4.23(2), whether any of the persons in rule 4.10 is to be served with the petition. By rule 12.12(1), Order 11 does not apply in insolvency proceedings. The result is that the code for insolvency proceedings is in the Insolvency Rules 1986 and Order 11 has nothing to do with petitions seeking the winding up of the company, whether by a creditor for debt, or by a contributory upon the just and equitable ground. Rule 12.12(3) provides: Where for the purposes of insolvency proceedings any process or order of the court, or other document, is required to be served on a person who is not in England and Wales, the court may order service to be effected within such time, on such person, at such place and in such manner as it thinks fit Thus, the insolvency court is in control of the method, time and so forth of service, and there is no requirement for leave to serve out, nor does the provision of Ord. 11, r. 4(2), that no leave shall be granted unless it is made to appear to the court that the case is a proper one for service out of the jurisdiction, which throws a burden upon the person seeking leave to show a prima facie case, apply to insolvency proceedings. All that seems to me extremely obvious and natural. An English company, being an artificial person created pursuant to this very statute, subject to the jurisdiction inevitably of this court, must plainly be properly brought before this court, and the fact that other persons outside the jurisdiction may need also to be heard is sufficiently covered by the power and requirement to give directions about service on them. Thus, if this petition were simply a petition for a just and equitable winding up there could be, in my judgment, no doubt that Order 11 would have nothing to do with the matter at all. 2/28

3 The Insolvency Rules 1986, however, do not necessarily apply to petitions under section 459. To them, the Companies (Unfair Prejudice Applications) Proceedings Rules 1986 apply. These were made, as was pointed out, 10 days later than the Insolvency Rules, in November [*79] These are rules applying to petitions presented under Part XVII of the Act of 1985 which, of course, includes section 459 of that Act. Rule 2(2) provides: Except so far as inconsistent with the Act and these Rules, the Rules of the Supreme Court apply to proceedings under Part XVII of the Act with any necessary modifications, but rule 4(1) provides: The petitioner shall, at least 14 days before the return day, serve a sealed copy of the petition on the company and, under rule 4(2): In the case of a petition based upon section 459 of the Act, the petitioner shall also, at least 14 days before the return day, serve a sealed copy of the petition on every respondent named in the petition. Thus, there are mandatory directions in these rules requiring services on the company, which must be a company having a place for service within the jurisdiction and, therefore, there is no question of service out under rule 4(1) and, under rule 4(2), a mandatory requirement for every respondent named to be served. It would seem curious if the rule mandatorily obliged the petitioner to serve respondents named in the petition, but also required the petitioner to get leave to make such service. There would be, to my mind, an inevitable conflict between those two rules. Mr. Boyle observed correctly that these rules do not, unlike the Insolvency Rules 1986, specifically exclude Order 11 but, in my judgment, service is sufficiently dealt with by rule 4, in the two paragraphs there set out, plus the provisions under rule 5(a), enabling the court on the return day to give directions for service of the petition on any person that it thinks fit. Those provisions seem to me to amount to a code for service of company petitions, bearing in mind the provisions of rule 2(2), so that it would be inconsistent with these rules for Order 11 to apply also to section 459 petitions. In my judgment, despite Mr. Boyle s extremely elegant reasoning upon the point, Mr. Briggs argument is undoubtedly correct. In my judgment, there is no requirement in respect of petitions, either under the Insolvency Rules 1986 or under the Companies (Unfair Prejudice Applications) Proceedings Rules 1986, requiring leave for service out of the jurisdiction under Order 11. Further, it is to be noticed that Ord. 11, r. 1(2) itself provides: Service of a writ which in this context includes a petition out of the jurisdiction is permissible without the leave of the court provided that each claim made by the writ the prayers in the petition, I suppose, is the proper way to read that is (b) a claim which by virtue of any other enactment the High Court has power to hear and determine notwithstanding that the person against whom the claim is made is not within the jurisdiction of the court or that the wrongful act, neglect or default giving rise to the claim did not take place within its jurisdiction. In my judgment, were it necessary to go back to Order 11, which I do not believe it is as I read the two sets of rules applicable to this petition, [*80] that second limb of rule 1(2)(b) would apply because the claim here would be a claim by virtue of an enactment, viz. the Companies Act 1985, which the High Court undoubtedly has power to hear. That must be so because this is a petition which falls precisely, in my judgment, within the opening words of section 459, which provides: A member of a company and note there are no restrictions whatever as to residence, nationality or other qualification, save that the applicant be a member (i.e. a shareholder or a person entitled to be entered on the register of members of the company) may apply to the court by petition for an order under this Part... That plainly, then, gives the court jurisdiction to hear and determine that petition, and that is so notwithstanding, in my view, the fact that the wrongful act, neglect or default giving rise to the petition did not take place within this court s jurisdiction. Thus, in my view, there can be no doubt at all that leave to serve this petition out was never required. On that basis the application for leave to serve out was misconceived. It was wholly unnecessary and the defective affidavit, which would, in my view, have been in breach of the golden rule and would have led me at least to set aside the order for service out without more ado on the ground that it had been obtained without proper disclosure, was all a wholly wasted exercise and gave rise to no consequences at all. I shall, therefore, pay no further attention to paragraphs 1 and 2 of the summons now before me, on the ground that the order of Mr. Registrar Buckley was an unnecessary order and the application was an unnecessary application. There was a right to serve and, therefore, no question of the inadequacy of the affidavit has any material bearing upon this case. 3/28

4 I turn to the matter which is really the substance of this application, and that is the question whether the court should make an order for a stay. The foundation for Mr. Boyle s extremely interesting and intelligent argument is, of course, Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460, particularly Lord Goff of Chieveley s speech. I cannot resist observing that on one part of the Spiliada case it is demonstrable that the views of the House of Lords are wholly out of touch with reality. Lord Templeman, at p. 465F, observed that he hoped that in future the judge will be allowed to study the evidence and refresh his memory of the speech of his noble and learned friend, Lord Goff, in the quiet of his room without expense of the parties. He will not be referred to other decisions on other facts, and submissions will be measured in hours, not days. An appeal should be rare and the appellate court slow to interfere. This matter came on before me at 2 o clock on Monday. I am delivering judgment at a quarter to four on a Thursday afternoon. I do not regard any minute of the time that has been taken before me as having been wasted. The matter is, in my view, difficult. I have been assisted by extremely able arguments from all three of the counsel before me, to each of whom I am greatly indebted. Lord Templeman s observations bear no relation to any conceivable way in which this matter could have been conducted. Where I should have found the time to read the evidence, which runs in the exhibits to some hundreds of [*81] pages and in the affidavits alone to 134 pages, I cannot imagine. The result is that Lord Templeman s wishes are wholly incapable of performance and have not been performed. The matter that is of importance, however, is Lord Goff s speech, which is obviously extremely well known. It is very important, however, to remember that even a speech by so very able a lawyer as Lord Goff undoubtedly is, assented to expressly by other members of the House, so that it constitutes the unanimous view of the House, must not be construed as if it were a statute. Every word is not to be taken as literally applying to every other case. It is to be taken as setting out his Lordship s reasoning in reaching the principles which he expressed and to which his brethren assented. The principle is one which is of fairly recent development. The Spiliada case itself is under four years old, and the decisions before it, which led up to it, are mostly, I think, within the last decade. The doctrine is commonly called forum non conveniens, although it is very important to remember, as Lord Goff specifically pointed out, that conveniens is not adequately translated as convenient. It is used in the sense in which lawyers use the word convenience, as in the phrase balance of convenience in cases when the court is deciding whether or not to grant an injunction. In such cases what the court is trying to do is achieve a balance of justice, or a balance of fairness between the parties, upholding existing rights and not upsetting matters which later will have to be undone, preserving the status quo so far as is reasonably possible. That is not convenience in the sense of what is nice and easy for the parties in any proper sense, and nor here do the words forum non conveniens mean the most handy court into which to pop. The phrase means, and it is clearly laid out as a matter of principle by Lord Goff, where he cited, Lord Keith of Kinkel in The Abidin Daver [1984] A.C. 398, 415, where he had referred to the natural forum as being that with which the action had the most real and substantial connection and Lord Goff said [1987] A.C. 460, 478A: it is for connecting factors in this sense that the court must first look. Lord Goff, it must be remembered, was dealing with a case from the Commercial Court concerning the shipping of a cargo, I think sulphur it does not really matter in a ship from Canada to England. The connection of the case with England was not particularly obvious. It was a case in the Commercial Court to which many international cases are brought, and where the rights of the parties are frequently dependent upon express provisions that English law shall apply in the contract. The rights are almost always rights to sums of money by way of damages for some breach of contract or perhaps, although more rarely, in tort, and the matters are all matters of true litigation inter partes. None of the phrases in Lord Goff s observations naturally and easily apply to cases such as the Chancery Division is so commonly concerned with, where a party applies to it for assistance and guidance and it may be for a discharge of liabilities. For example, if English trustees beset by conflicting claims from beneficiaries come to the court to have determined what their duty may be; if trustees of pension funds come to a court and surrender any [*82] discretion they may have to choose as to who shall be the recipient of surplus funds, so that the court, acting on proper principles and considering the terms of the pension fund trust deed, can decide where the moneys should go. Those matters are very much matters which are not matters of a lis inter partes, with rights to damages one way or the other and where, above all, the person seeking relief from the court, can effectively only get relief from the court being the English High Court here in London. That is so because a trustee can be sued by a beneficiary to account for the trust property at any time, and it is only if the trustee has 4/28

5 an order of the court confirming the administration that he is safe from future action. Thus, the trustee has to be protected and is entitled to be protected. That is miles from a claim by one corporate owner of a ship against another corporate owner of cargo for damages for mis shipping the relevant substance. Here in this present case, again, one has a matter which is very far from the formulations adopted by Lord Goff. Here one has an application by a member of an English company, pursuant to an express right given by an English statute, in respect of a matter where the English law gives a particular remedy by section 461 of the Act of 1985 as a matter of discretion, enabling it to effect what Mr. Briggs rather neatly described as corporate divorce. The order made requires a buy out by one side of the other, and it may be by the petitioner of the respondent, or by the respondent of the petitioner, or it may in many cases be by the company of the petitioner. That will alter the future conduct of the affairs of the company, which will affect many people other than the two major protagonists in their future rights and entitlements. All such matters are plainly matters where the English law applies to the English artificial entity which has been created. None of that has much resemblance to a lis inter partes in the Commercial Court. Nonetheless, in my judgment the Spiliada propositions about trying to assess what is the most appropriate forum do apply in the sense that, so far as they lay down principles, those are universal principles of English law. The question whether a stay should be granted is answered by applying the following test, according to Lord Goff, at p. 476: 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 have, therefore, to say: what is the appropriate forum for the trial of this action? To answer that question I have to pose another: what is this action? This action is a petition, in my judgment, for relief against the conduct of the company s business in a manner unfairly prejudicial to some part at least of its members, including Ladenimor. The court will hear a whole series of instances of things that have been done, acts that have been committed, and it will have to decide whether the allegation that this or that was done is true or false. But in the end what the court, in my judgment, has to do in these matters is reach an overall conclusion: has Ladenimor suffered by reason of the conduct of the [*83] company s affairs in such a manner as to be unfairly prejudicial to it? That is a general conclusion, but it is the essential conclusion and the foundation for the jurisdiction. Section 461 says that the court may not make any order, unless it is so satisified. Mr. Boyle submitted to me that the question was not properly formulated as to what was the issue in this petition by making that conclusion. He submitted that that was not the issue in the petition. The issue in the petition was whether the substantive complaints his phrase the particular acts complained of, I would say, had been committed. Here it is quite clear that what the petitioner alleges is a whole series of acts committed in Argentina. There is no doubt that all the principal witnesses are Argentinian. There is no doubt that the books of the company are in the Argentine. There is no doubt that the company, although an English company, and although it has its annual general meetings here, has its accounts in sterling, has its minute book of general meetings kept here, yet the residence for tax purposes of the company is Argentina and not England. Nonetheless, as it seems to me, the question must always be: How is this company properly to be regulated? When one is looking at a company incorporated in England, which has its life and being only by virtue of the act of the English law creating this artificial person, it is to my mind extremely difficult to see that it can be appropriate to hold that the forum appropriate to decide that sort of matter is any forum other than the forum of the English court. It is, as Mr. Briggs submitted, in my view blindingly obvious what the answer to the question is once the question is posed. Mr. Boyle submitted that that was not a proper approach to the matter, and I have to start with even scales and put into the balance on each side the various possible factors which Lord Goff listed. In my view, I do have to start with even scales, and I do have to consider what factors effect the matter, but when I find, when I am asked, to stay a petition and drive from the English seat of justice a person entitled by English statute to a remedy which it is conceded is not available anywhere else, it is impossible, that being a relationship governed by English law, for one to come to a conclusion that another forum will be the better or the more appropriate forum. It seems to me quite wrong to say that the issues that have to be decided are the particular factual issues as to what has been done. Those are steps, facts that have to be proved along the way to deciding the eventual issue, and the same, in my judgment, applies to the question whether the company should be wound up upon the equitable ground or not. 5/28

6 The evidence as to Argentine law, which would be relevant if one were in doubt as to the matter and were considering whether or not substantial justice could be obtained in the other forum, is interesting and curious. It is quite plain that Argentine law provides fairly extensive protection to shareholders in companies against wrongdoings by those managing the companies. It is clear that the Argentine law can provide for the winding up of Argentine companies. The oddity lies in the apparent provisions of Argentine law. Argentine law, by article 118 of what, I think, is the Companies Law it is defined in the affidavits as [*84] C.L., and I hope I have not misunderstood it provides that a branch of a foreign company is required to be registered in Argentina according to certain particular laws. This company, Harrods (Buenos Aires) Ltd., registered itself as a branch of the English company, stating that the branch had no capital of its own, stating that the company had a capital of 5\4m. odd sterling, stating that the company, not the branch, had objects of very wide extent and plainly complied in all respects with article 118. So much one would expect, and so much would be similar to our own company practice requiring foreign companies to give notice to the registrar under the relevant sections when they seek to set up a place of business here. If a company is registered in accordance with article 118 then Argentine law provides that the law of the place of incorporation shall govern the fundamental points as to the company s existence and so forth. If that article were applicable English law would apply to this matter if tried in Argentine courts. That would make it plainly desirable that the English court try the case, because the English court is likely, in general terms, to be better at applying English law than a foreign court acting on expert evidence, however able. Despite the provisions of article 118, Argentine law goes on in article 124 to provide I read from what is called a free translation: A company incorporated abroad which has its seat in the Republic, or whose principle corporate purpose is sought to be accomplished in the same, shall be considered as a local corporation in relation to the accomplishment of its incorporation and modification and the control of its performance. I have had shown to me a textbook by an Argentine academic, a professor who was formerly a member of the Court of Appeal in Argentina, on this very subject. The evidence is really not in controversy before me that a foreign company which has its seat, its principal office, I suppose, is the best English equivalent to seat, in the Republic is treated in the Argentine courts as an Argentine company. Such a company is taken out of article 118 which treats it as a foreign company which has registered a branch in Argentina. And alternatively, if a foreign company s principal corporate purpose, limiting the word principal to mean only corporate purpose being its business, is carried on in the Argentine, then again the Argentine law, as it were, adopts and takes over the company. That seems to me to be an unusual form of provision. There is no such provision in English law, and I know of no such provision in such other systems of continental company law as those with which I have any familiarity. Nonetheless, that is what the law is. The result in the case of this company, which has its whole business carried on within Argentina, has its main directing office in Argentina, whose directors live, meet and have their daily lives and being in Argentina, is that it would probably be held to have its seat in Argentina. Alternatively, it would certainly, even within the restrictive understanding of the word [*85] principal, be held to carry on business exclusively within Argentina. The result would be that Argentine law would apply and the English law would be ousted. The result of that would be that Ladenimor could not obtain, according to the undoubted and uncontroverted evidence before me, the remedy which it primarily seeks, the corporate divorce or buy out. It could, perhaps, obtain a winding up on grounds that seem not at all dissimilar to a just and equitable winding up, but the petition is quite plainly aimed, and Mr. Briggs asserted justifiably that it was, primarily at obtaining a buy out on the proper basis of valuation, giving Ladenimor all the value which it was entitled to. That, in Argentina, cannot be obtained. That, by English standards applying to this English company, is a right that Parliament has granted. That right I would be defeating if I were to grant a stay in this case. It seems to me that that right being defeated, the fact that another right, which is the fall back position in this country of a just and equitable winding up, would be available in Argentina by way of a winding up and sale of the assets so that the parties would be separated, is not enough to ensure that substantial justice would be done. It is notorious in England that, upon a winding up, less is obtained from assets in a sale by a liquidator than is obtained by some other form, for example by an administrator appointed by the court under the Insolvency Act 1986 or, even better, by a receiver appointed by a 6/28

7 debenture holder. I have no reason to suppose that that general proposition, that a forced sale by a liquidator tends to produce a worse price, is not true in Argentina as in England. It is, in fact, a proposition of elementary commercial sense. That being so, there is plainly a serious disadvantage to Ladenimor if the petition were to be stayed on the ground, which I do not accept, that the Argentine court was the more appropriate forum. It would still result in Ladenimor being deprived of substantial justice, as I see the case, and upon that ground also I would not conclude that there should be any stay. For those reasons, I have reached a clear conclusion that paragraph 3 of this summons is not justified, and no stay should be ordered. Application dismissed. INTERLOCUTORY APPEAL from Harman J. Pursuant to leave granted by Nicholls L.J. on 14 June 1990, Intercomfinanz appealed by a notice dated 25 June 1990, on the grounds, inter alia, that the judge had failed properly to apply the principles laid down in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460, that the remedies available in proceedings brought in Argentina were such as to enable practical justice to be done should the factual basis for the complaints made in the petition be established, that by [*86] reason of factual circumstances specified in the notice Argentina was the more appropriate forum, and that for those and other reasons the judge had erred in his decision. Cur. adv. vult. 19 December The following judgments were handed down. DILLON L.J. This case comes before this court on appeal from a decision of Harman J. in the Chancery Division of 5 April The proceedings in which the appeal is brought are entitled In the matter of Harrods (Buenos Aires) Ltd. That company ( the company ) was incorporated in England in 1913 under the Companies Acts 1908 and 1913, and its registered office is and has always been in England. But its business is and has always been exclusively carried on in Argentina and its central management and control is exercised in Argentina; its principal activity is to carry on a department store or general store in Buenos Aires. Since 1979, the company has had two shareholders only, both of which are companies incorporated in Switzerland and whose central management and control is exercised in Switzerland, viz., the present appellant Intercomfinanz S.A., which owns 51 per cent. of the issued share capital of the company and the present respondent, Ladenimor S.A., which owns the remaining 49 per cent. The present proceedings were commenced on 7 July 1989 by the presentation by Ladenimor in the Companies Court of a petition under the Companies Act 1985 and the Insolvency Act The primary case put forward by Ladenimor is that the affairs of the company have been and are being conducted by the present management in a manner which is unfairly prejudicial to Ladenimor within the meaning of section 459 of the Companies Act 1985, and the primary relief sought is an order that Intercomfinanz purchase Ladenimor s shares in the company at a price representing 49 per cent. of the value of the company and upon the basis that there be added back to the value of the company such loss as may be found to have been caused to the company by the matters complained of in the petition. In the alternative, however, it is submitted in the petition that it is just and equitable that the company should be wound up, and a compulsory winding up order is sought under the Insolvency Act It is not in doubt that the company is solvent. [*91] Under the relevant statutory rules, the company was a necessary party to the proceedings, whether the relief sought was a winding up order, or merely an order against Intercomfinanz under section 459 of the Act of 1985, and there was of course no difficulty in serving the company at its registered office in England. In addition, on ex parte application Ladenimor obtained from Mr. Registrar Buckley on 12 July 1989 an order under R.S.C., Ord. 11, giving leave to Ladenimor to serve the petition on Intercomfinanz out of the jurisdiction. The upshot of that was that Intercomfinanz, by its English solicitors, issued a summons of 20 November 1989 claiming (1) an order that the order of Mr. Registrar Buckley giving leave to serve the petition on Intercomfinanz be set aside; (2) an order that the service of the petition on Intercomfinanz be set aside; and (3) an order that the petition and all proceedings thereon be stayed, on the grounds that there was another forum (namely Argentina) having competent jurisdiction which was the appropriate forum for the trial of the issues raised by the petition. 7/28

8 That summons came before Harman J. and by his order now under appeal he dismissed it. He held, in effect, first, that leave under Order 11 to serve the petition out of the jurisdiction was never required, on a true appreciation of the statutory position with the consequence that any lack of proper disclosure in the affidavit which was put before Mr. Registrar Buckley was immaterial and secondly, that the English court, and not the Argentine court, was the appropriate forum for the trial of the issues raised by the petition. Harman J. refused Intercomfinanz leave to appeal against his order, but leave to appeal was granted by Nicholls L.J. on 14 June He commented: Although the company was incorporated in England, and although a decision on whether or not to grant a stay is a matter of discretion for the judge, Intercomfinanz S.A. has a seriously arguable case on the application of the Spiliada principles [Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460] in the unusual circumstances present here. In this court a preliminary issue of importance has been taken on behalf of Ladenimor. It is submitted that as the result of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 between the original member states of the E.E.C., to which the United Kingdom, Denmark and Ireland acceded in 1978 after joining the E.E.C., the English court has no jurisdiction to refuse on the grounds of forum non conveniens to decide the issues raised by the petition or to stay the petition, since the company is for the purposes of the Convention domiciled in England (albeit also domiciled in Argentina). The terms of the Convention are set out in Schedule 1 to the Civil Jurisdiction and Judgments Act 1982, and under section 2 of that Act, the Convention has the force of law in the United Kingdom. The Preamble to the Convention sets out the genesis of the Convention in the following terms: [*92] The high contracting parties to the Treaty establishing the European Economic Community, desiring to implement the provisions of article 220 of that Treaty by virtue of which they undertook to secure the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals; anxious to strengthen in the Community the legal protection of persons therein established; considering that it is necessary for this purpose to determine the international jurisdiction of their courts, to facilitate recognition and to introduce an expeditious procedure for securing the enforcement of judgments, authentic instruments and court settlements; have decided to conclude this Convention The scope of the Convention is prescribed in article 1 in Title I. With exceptions which are immaterial to the present case it is to apply in civil and commercial matters whatever the nature of the court or tribunal. Title II, comprising articles 2 to 24, is headed Jurisdiction. Section 1 of the Title, comprising articles 2 to 4, is headed General provisions. Article 2 provides: Subject to the provisions of this Convention, persons domiciled in a contracting state shall, whatever their nationality, be sued in the courts of that state. That is the article fundamental to the preliminary issue. It is not in doubt that the company is domiciled in the United Kingdom, although also domiciled in Argentina, and that Intercomfinanz and Ladenimor are domiciled in Switzerland: see section 42(3) and (6) of the Act of Article 3 of the Convention provides that persons domiciled in a contracting state may be sued in the courts of another contracting state only by virtue of the rules set out in articles 2 to 6 of Title II. The second paragraph of article 3 then lists particular provisions of the laws of the various contracting states including the United Kingdom which are not to be applicable as against persons domiciled in other contracting states; the details are not relevant. Article 4 then provides: If the defendant is not domiciled in a contracting state, the jurisdiction of the courts of each contracting state shall, subject to the provisions of article 16, be determined by the law of that state. As against such a defendant, any person domiciled in a contracting state may, whatever his nationality, avail himself in that state of the rules of jurisdiction there in force, and in particular those specified in the second paragraph of article 3, in the same way as the nationals of that state. 8/28

9 There are then further articles setting out detailed provisions, many of which in various respects qualify article 2. I shall have to refer to some of these later. There are also, under Title III, detailed articles from 25 to 49 dealing with the recognition and enforcement of judgments. It is in particular to be noted that the doctrine of forum conveniens under English and Scottish law, as elaborated by Lord Goff of Chieveley in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460, is [*93] not a recognised basis for jurisdiction under any of the articles of the Convention where the contest is between the jurisdiction of contracting states. As between the contracting states the general principle of the Convention is that the court first properly seised of a cause of action under the Convention shall exercise jurisdiction. Thus articles 21 and 23 provide: 21. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different contracting states, any court other than the court first seised shall of its own motion decline jurisdiction in favour of that court. 23. Where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall decline jurisdiction in favour of that court. Against that background section 49 of the Act of 1982 provides that nothing in the Act shall prevent any court in the United Kingdom from staying, sisting, striking out, or dismissing any proceedings before it on the ground of forum non conveniens or otherwise where to do so is not inconsistent with the Convention. It is implicit in that section, in my judgment, that the court cannot stay or strike out or dismiss any proceedings on the ground of forum non conveniens where to do so would be inconsistent with the Convention, and that covers all cases where the defendant in proceedings in England is domiciled in England and the conflict of jurisdiction is between the jurisdiction of the English court and jurisdiction of the courts of some other contracting state. The crucial question in the present case is whether the English court can stay, strike out or dismiss proceedings on the ground of forum non conveniens, where the defendant in the English proceedings is domiciled in England, but the conflict of jurisdiction is between the jurisdiction of the English court and the jurisdiction of the courts of a state which is not a contracting state, no other contracting state being involved. That question came before the Commercial Court in S. & W. Berisford Plc. v. New Hampshire Insurance Co. [1990] 2 Q.B In that case the second plaintiff, which was the relevant plaintiff, was an American company based in New York. The defendant was an American insurance company domiciled in New Hampshire, but the disputes arose out of the operations of the defendant s London branch, and consequently the defendant was deemed, for the purpose of the Convention, to be domiciled in the United Kingdom. It was held by Hobhouse J. in those circumstances (a) that since the parties had not agreed that the courts of any other contracting state should have jurisdiction, article 2 of the Convention required that the defendant should be sued in the United Kingdom, (b) that to stay the proceedings on the ground of forum non conveniens viz., that the courts of New York were the more appropriate forum would be inconsistent with the Convention, and (c) that, accordingly, the English court had no jurisdiction under section 49 of the Act of 1982 to stay the action. The ratio of the judgment of Hobhouse J. is to be found in the passage at pp. 643G 645D. The crux is, in my judgment, to be found, where the judge said, at p. 645: [*94] It is clear that the Convention is designed (subject to article 4) to achieve uniformity and to 'harmonise' the relevant procedural and jurisdictional rules of the courts of the contracting states. The Convention leaves no room for the application of any discretionary jurisdiction by the courts of this country; the availability of such a discretion would destroy the framework of the Convention and create lack of uniformity in the interpretation and implementation of the Convention. That decision of Hobhouse J. was followed by Potter J. in Arkwright Mutual Insurance Co. v. Bryanston Insurance Co. Ltd. [1990] 2 Q.B In that case the plaintiff, an American insurance company, had a claim on London reinsurers who disputed the claim on the ground that the loss was not covered by the policy. The reinsurers commenced proceedings against the plaintiff in New York for a declaration that they were not liable. The plaintiff then commenced an action in London against the reinsurers claiming payment, and the reinsurers applied to stay the English proceedings on the ground of forum non conveniens and lis alibi pendens. They contended that the New York court was the more appropriate court to decide the issue. The arguments in favour of a stay were summarised by Potter J. under eight heads, at pp Heads (1) to (6) read: 9/28

10 (1) The Convention, being concerned, or principally concerned, to govern relations between contracting states, which thereby adopted mutual obligations and accepted regulation of their own potentially competing jurisdictions, should not readily be construed as operating so as to deprive or inhibit non contracting states in relation to cases where the jurisdiction of such states would otherwise plainly be most appropriate for determination of the dispute in question. The Convention being concerned to decide which of the contracting states should assume jurisdiction in cases of competition inter se, no violence is done or inconsistency effected by one contracting state staying proceedings in its courts in favour of a non contracting state. (2) The general rule as to domicile imposed by article 2 is not to be regarded as so overwhelming or all pervading as to preclude stay in all cases where it is not expressly required or permitted by the Convention. The rule of domicile is the prima facie rule only, within a sophisticated framework of provisions which recognise a number of exceptions in individual situations, the most logical and compelling of which are those dealt with in articles 5 to 6A (special jurisdiction), article 16 (exclusive jurisdiction) and article 17 (foreign jurisdiction clauses). (3) Any English court should be slow so to construe the Convention as to inhibit the valuable and important jurisdiction of stay on grounds of forum non conveniens, which is designed to promote comity, to encourage efficiency in the resolution of disputes, to prevent duplication of time and cost of litigation, and to avoid inconsistent judgments in two jurisdictions. [*95] (4) Albeit articles 21 to 23 constitute a more limited and rigid scheme for allotment of jurisdiction than that achieved by application of a general principle of forum non conveniens they are concerned to give effect to the network of provisions in articles 2 to 20 and to avoid the risk of inconsistent judgments in two or more contracting states, by requiring dismissal or stay of actions in favour of the court of the contracting state first seised. If there is no jurisdiction for a contracting state in which a defendant is domiciled or otherwise properly sued to decline jurisdiction, or to stay, in favour of the courts of a non contracting state, that creates the remarkable situation whereby the Convention determines the appropriate forum (according to its own provisions) for the competing jurisdictions of contracting states, but requires entertainment of suit in the domicile of the defendant (without the application of any test of appropriateness) where a non contracting state is concerned. (5) Even if the Berisford case is right in respect of the broad principle of forum non conveniens, it need and should not be applied in respect of the more limited case of lis alibi pendens, the very ground of stay contemplated by article 21 in respect of contracting states. (6) Given that the purposes of the Convention are avoidance within the courts of the Community of inconsistent judgments and simplification of enforcement of judgments within those courts neither purpose will be disturbed by the exercise of a jurisdiction to stay on grounds of forum non conveniens and/or lis alibi pendens in favour of the courts of a non member state. These arguments, however, though recognised, at p. 661, as powerful, were rejected by Potter J. on the ground that he agreed with the decision of Hobhouse J. in the Berisford case [1990] 2 Q.B. 631 and preferred the logic of the Berisford case. The answer to the question depends on the true construction of the Convention and that is a matter of European law. The Court of Justice of the European Communities has jurisdiction to give rulings on the interpretation of the Convention under the Protocol on the interpretation of the Convention of 1968 by the European Court, signed at Luxembourg in June The text of the Protocol of 1971 is set out as Schedule 2 to the Act of 1982, and that specifies the courts which may request the Court of Justice to give preliminary rulings on questions of interpretation; they include the courts of the contracting states when they are sitting in an appellate capacity. In addition the Act of 1982 provides by section 3(1) that Any question as to the meaning or effect of any provision of the [Convention] shall, if not referred to the European Court in accordance with the Protocol of 1971, be determined in accordance with the principles laid down by and any relevant decision of the European Court. 10/28