LORD JUSTICE STUART-SMITH:
INTRODUCTION
This action was begun by writ issued on 14th April 1993 in the Commercial Court. The First Plaintiff, Grupo Torras SA (Grupo Torras) is a Spanish company; the Second Plaintiff, Torras Hostench London Ltd. (Torras London), is its English subsidiary. The Plaintiffs claim damages for fraudulent conspiracy, monies alleged to be due under constructive trust, and damages for breach of duty by directors of the Plaintiff companies. The personal Defendants are officers of or professional advisers to the Plaintiff companies; they are said to have engineered or facilitated the frauds. The 15th to 20th Defendants are offshore companies provided by the professional advisers for the purpose, it is said, of carrying out the frauds. All but one of the Defendants (the Fourth Defendant, Walid Edmond Moukarzel) challenged the jurisdiction of the Court, seeking to set aside or stay the proceedings under RSC Order 12, rule 8 or pursuant to the inherent jurisdiction. The central question is where should the Plaintiffs' claims be tried, in England, as the Plaintiffs contend, or in Spain, as the Defendants contend. Mr Justice Mance rejected the challenge of all the Defendants, save in the case of the claim of Grupo Torras against Coll & Company Ltd. where the proceedings have been stayed pursuant to an arbitration clause. Save for the Second Defendant, Richard Robinson, they have all appealed against the decision of the Judge.
The Parties:
The Kuwait Investment Office {'KIO') is a branch of the Kuwait Investment Authority established in Kuwait and has as its function the management of investment of funds belonging to the Government of Kuwait. KIO is based in London. It has a number of subsidiary companies in various parts of the world, including, through the medium of holding companies, Koolmees Holdings BV ('Koolmees') and Kokmeeuw Holdings BV ('Kokmeeuw'), both Dutch companies which owned shares in Grupo Torras.
Grupo Torras is incorporated in Spain and is indirectly controlled by KIO. Through subsidiary companies it operated in various sectors of the Spanish economy. Since 10 December 1992 it has been in a state of suspension of payments under Spanish law. Torras London is a wholly owned subsidiary of Grupo Torras; at the material time it was substantially managed from Spain.
The First Defendant, Sheikh Fahad Mohammed Al Sabah was until 8 April 1992, the chairman of KIO. Until 26 May 1992 he was the chairman of Koolmees and Kokmeeuw and a director and President of Grupo Torras. He was served with the proceedings under RSC Order 11 in the Bahamas; but the Judge held that he was domiciled in England and could have been served in England. He was represented both before Mance J. and in this Court by Mr. McCaughran.
Messrs de la Rosa, Soler, Nunez, de Mir and Pique were together referred to as the 'Spanish Defendants', being domiciled in Spain. At the [material time, Mr de la Rosa was a director and vice-President of Grupo Torras, and was alleged to have been the most senior and active individual controlling Grupo Torras and Torras London's business. Mr Soler was Director of Finance of Torras London. Mr. Nunez was the Managing Director of Grupo Torras. Mr de Mir was a director of Grupo Torras and is said to have worked closely with Mr de la Rosa. Mr Pique is a lawyer who was the company secretary of Grupo Torras until 26 May 1992. Before Mance J. the 'Spanish Defendants' were represented by Lord Irvine QC and Mr Briggs QC and on appeal to this Court by Mr Briggs.
Mr Robinson, Mr Jaffar and Mr Moukarzel were domiciled in England. Mr Jaffar was Deputy Chairman and General Manager of KIO until 20 April 1990, a director of Koolmees and Kokmeeuw until 15 March 1990, and at all material times Vice-President and a director of Grupo Torras. He was not separately represented on the appeal, but adopted the submissions of the other appellants.
Mr Folchi is a Spanish lawyer domiciled in Spain. He is said to have been a director of Grupo Torras and signatory to its bank accounts from about 1 October 1990. He became secretary to the Board of Grupo Torras on 1 May 1992. His position is on all fours with that of the 'Spanish Defendants'. Mr Coll is an accountant of British nationality who lives in Spain. His services are said to have been supplied to Grupo Torras through Coll & Company Ltd. ("Coll & Co."), an English company. Mr Russell is also an accountant; he lives in Jersey and practices as a partner of Russell Limebeer. The remaining corporate Defendants were provided by the various professional advisers. Croesus International Ltd and Wantley Developments Ltd are Gibraltar companies provided by Mr Coll. Wardbase Developments Ltd (an English company), Oakthorn Ltd (a Jersey company), Westow Ltd and Anslow Ltd (both Isle of Man companies), were provided by or associated with Mr. Russell. Coggia 1 BV and Riquel BV are Dutch companies apparently provided by Mr. Folchi and Russell Limebeer. These Defendants were collectively referred to as the Lawrence Graham Defendants, after the name of their solicitors. They were represented by Mr. Onions.
For jurisdiction purposes the Defendants fall into three groups -
(A) Those domiciled and served within the jurisdiction in accordance with Article 2 of the Convention Scheduled to the Civil Jurisdiction & Judgments Act 1982 as amended by the Civil Jurisdiction & Judgments Act 1982 (Amendment) Order 1990 (SI 1990 No. 2591) , the Brussels Convention. This group included Mr Robinson, Mr Jaffar, Mr Moukarzel, Coll & Co. and Wardbase. They were all served on 15 April 1993.
(B) Those domiciled in other Contracting States under the Convention. These included the 'Spanish Defendants' and Mr Folchi and Mr Coll, who were served on various dates between 21 June and 1 October 1993. It also included Coggia and Riquel, served in June 1993.
(C) Those domiciled outside the jurisdiction of any of the Contracting States (the 0.11 Defendants). This group included the remainder of the Lawrence Graham Defendants and Sheikh Fahad. Leave to serve was granted on 29 April 1993 under 0.11 r.l(l)(f) - "claim founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction" - and under 0.11 r.l(l)(c) on the basis that they were necessary and proper parties to the claim brought against Defendants within the jurisdiction.
The Plaintiffs' Claims:
The Plaintiffs' claims relate to four separate but interrelated transactions. It is unnecessary to describe these transactions in detail. In outline they were as follows:
1. Croesus:
In May 1988 Us $27.4 million at the request of Mr de la Rosa and Mr Jaffar was transferred by KIO to Grupo Torras. The money was transferred through KlO's subsidiaries, including Kokmeeuw, to the Republic National Bank of New York for "the account of Merrill Lynch Bank Suisse" to a numbered account. From there the money disappeared without trace. The Judge described it as the first 'black hole'. It is alleged that this payment was not for the benefit of the Plaintiffs.
In September 1989, Banco Santander, at the request of Torras London, transferred US $25 million to Kokmeeuw in 'partial repayment' of the transfer of US $27.4 million to the Republic National Bank. It is then alleged that the payment was concealed by a series of sham documents and transactions, notably a sham loan agreement by Torras London to Croesus, with extensions, a guarantee of the 'loan' signed by Mr Nunez on behalf of Grupo Torras. It is said that finally the 'loan' was accounted for by way of intercompany set-off between Grupo Torras and Torras London, and then written off in the Grupo Torras 1990 profit and loss account.
The balance of the US $27.4 million, plus interest, was covered by a payment of US $2,576,707 by Torras London and later reimbursed by Grupo Torras to Torras London. This is alleged to have been concealed by a sham invoice from Wantley to Torras London claiming payment for services which Wantley never did or could provide.
2. Oakthorn:
This operation related to two payments made to Oakthorn by Torras London of US $55 million in July 1989 and US $50 million in June 1990. The Plaintiffs assert that these 'loans' were never intended to be repaid; they were again covered by a series of sham documents, purporting to show genuine loans and guarantees. For the most part the money has vanished in the second 'black hole'; but the Plaintiffs have succeeded in tracing some of the money. Of the US $55 million, $7.5 million is said to have been traced to an account in Mr Jaffar's name in a Bank in Zurich; smaller sums to companies associated with Mr Russell. As to the US $50 million, $10 million is said to have been traced to Mr Jaffar's Zurich Bank, $22.5 million to an account controlled by Sheikh Fahad in a bank in London and $15.49 million to the account of a company in Jersey of which Mr Russell is a signatory and whose address is the same as Russell Limebeer.
3. Pincinco:
Under a Fiduciary Agreement dated 2 October 1990, Torras London through Banco Santander (Suiza) SA deposited US $300 million with Bankers Trust AG, Geneva and the latter agreed for a fee/commission of $2.1 million to make, and did an 3 October 1990 make, a loan of US $300 million to Pincinco at Torras London's risk and expense. Pincinco is a Jersey company now in liquidation of which Mr Russell was company secretary and now a liquidator. The US $300 million was funded by an agreement dated 1 October 1990 between Mr Folchi for Koolmees and Mr de la Rosa for Grupo Torras, pursuant to which Koolmees agreed to lend, and on 4 October 1990 did advance, Ptas. 40 billion to Grupo Torras. This advance was capitalized in July 1991. Grupo Torras was thus able to transfer some US $410 million to Banco San-tander for value date 5 October 1991, out of which the US $300 million was paid to Pincinco. As to the remainder $107 million was returned to Grupo Torras on 24 October 1990. The US $300 million was not intended to be repaid by Pincinco from its own funds and was not paid to Pincinco for the benefit of Grupo Torras or Torras London. It represents the third 'black hole'.
An extremely complex cover up scheme is alleged to have been set up to conceal the true nature of this arrangement. It is unnecessary to say more than that again the 'loans' or 'transactions' are said to be sham. Since the hearing before Mance J. the Plaintiffs claim to have traced US $105 million of the Pincinco money to an account owned and controlled by Mr de la Rosa.
4. Wardbase:
On 26 May 1992 Ptas. 2 billion was transferred by Grupo Torras to Torras London in Barcelona and then by Torras London to an account in the name of Wardbase in London. On the same day Wardbase transferred Ptas. 1.96 billion (on the evidence via Oakthorn) to Anslow in the Isle of Man. This constitutes the fourth 'black hole'. The payment of Ptas. 2 billion is said not to have been for the benefit of Torras London or Grupo Torras. It is said to have been made pursuant to a purported invoice dated 24 April 1992 from Wardbase to a subsidiary of Grupo Torras called Torraspapel SA, of which Messrs de la Rosa and Folchi were officers, referring to a purported agreement of 4 September 1989, both of which are said to have been sham. The Plaintiffs are alleged as a result to have suffered a loss of Ptas. 2 billion.
It is unnecessary to set out the parts played by each of the personal Defendants in these various transactions. Not all were involved in all four transactions. Sheikh Fahad is said to have been central to all of them. The case against the personal Defendants is that they each played a part in securing or facilitating payments which they knew were not for the benefit of the Plaintiffs and in the cover up operations, either as officers or employees of either or both of the Plaintiffs or as their professional advisers. The corporate Defendants, other than Coll & Co., were either the recipients of the payments, the vehicles through which they were made or were otherwise used by those controlling them to conceal the truth by a web of false documentation. The Plaintiffs' claim is based on conspiracy to injure, constructive trust and breach of duty by directors and officers of the Plaintiffs.
The Proceedings before Mance J.:
The proceedings before Mance J. lasted 25 days and led to a judgment extending to 174 pages in which the Judge carefully went through the points which had been argued before him. Much of the time was taken up by submissions on behalf of the Defendants that there were no serious issues to be tried. Save in respect of the claim of Torras London in the Wardbase transaction, where the Judge held that Torras London had no arguable claim to have been the victim of a conspiracy or to have suffered loss, he rejected those submissions. We find it difficult to see how it could properly have been argued at such length that there was no serious issue to be tried: (See Seaconsar v. Bank Markasi [1994] 1 AC 438 at p.455, where Lord Goff of Chieveley indicated that the issue of the merits should net be debated at length). It was also contended on behalf of the Defendants that there had been material non-disclosure on the part of the Plaintiffs in obtaining leave under Order 11. Again the Judge rejected these submissions. Neither of these two aspects of the case formed any part of the appeal.
The issues which are relevant to this appeal arose from the arguments of the Defendants under the Brussels Convention and Order 11. Under the Convention the Defendants advanced three arguments:
First, they argued that the "object" of the proceedings was the "decisions of [the] organs" of Grupo Torras and that Article 16(2) of the Convention required that the courts of Spain, being the Contracting State in which Grupo Torras has its seat, have exclusive jurisdiction. If this argument succeeded, the English court would wholly have to decline jurisdiction.
Secondly they argued that the proceedings involved "the same cause of action" and were "between the same parties" as proceedings which were pending before the Spanish courts and that Article 21 of the Convention required the English court to decline, or at the least defer, jurisdiction in favour of the Spanish courts as the English court was not the court "first seized". At the time that Mance J had to give his decision the European Court of Justice had not delivered its judgment in The Maciej Rataj (C-406/92: 6th December 1994, [1994] EUECJ C-406/92). It is accepted that the effect of that judgment is that Article 21 only applies to the extent that the parties before the respective courts are the same and "it does not prevent the proceedings from continuing between the other parties", (para.34)
The Defendants sought to rely alternatively or cumulatively upon two sets of Spanish proceedings. One was begun by a querella filed by Grupo Torras on 8th January 1993. These proceedings are primarily criminal but, in common with some other continental jurisdictions, it is open to the court under Spanish procedural law within the ambit of those proceedings to give a civil judgment for compensation to be paid to a person who has suffered loss or injury as a result of conduct which the court has adjudged to be criminal. There are various ways in which criminal proceedings may be instituted before the Spanish courts; the querella is a form of complaint which is consistent with the court in due course exercising the power to give a civil judgment in favour of Grupo Torras. It is however possible for the complainant to reserve the civil claim to be exercised separately. The Defendants argued that, for the purposes of Article 21, the parties to these Spanish criminal proceedings included Sheikh Fahad and messrs Jaffar, de la Rosa, de Mir, Nunez, Folchi and Soler. They submitted that the English court should decline jurisdiction as between Grupo Torras and all these Defendants.
The other set of Spanish proceedings were the civil action originally filed by a Spanish company called Quail Espana SA in June 1992 against Grupo Torras. Quail was owned and controlled by Messrs de la Rosa and de Mir and had a service agreement with Grupo Torras. It took the form of a jactitation action alleging injurious falsehood on the part of Grupo Torras in relation to the performance of the agreement. On 19th May these proceedings were amended to add as plaintiffs messrs de la Rosa, de Mir, Nunez, Folchi and Soler and to claim declarations of regularity in relation to (among other things) the four transactions which by then were the subject of the English action. This action has, for convenience, been referred to as the 'Quail' action. The Defendants submit that the English court should also, as between Grupo Torras and the Quail Plaintiffs, decline jurisdiction in favour of the Spanish court.
The third argument of the Defendants was that the totality of the English action and the two Spanish proceedings were "related" actions, that is to say, "actions which are so closely related that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments", and the English court, not being the court first seized, should therefore apply Article 22 and stay the whole of the action. This argument potentially applied to the whole of the action without making any distinction between the parties but, like Article 21, only applies if the English court is not the court "first seized".
The other points taken by the Defendants before the Judge were based upon Order 11 or the inherent jurisdiction. Thus it was argued that England was not an appropriate forum and that Spain was the appropriate forum. The Court should refuse to exercise its discretion under 0.11 and should stay the remainder of the proceedings.
The length of the proceedings before Mance J was further added to by the parties adducing extensive oral evidence from Spanish lawyers who were examined and cross-examined over a number of days. The decision of the Judge was as we have said to reject (subject to an immaterial qualification) the applications of the Defendants. He held that Article 16(2) did not apply. He held that for a number of reasons neither of the Spanish proceedings came within the terms of Article 21. He held that the English court was the court first seized. He accordingly held that Article 22 did not apply. He held that England was in all the circumstances the appropriate forum for the trial of the various disputes raised by the action.
The Issues on the Appeal:
The arguments which are advanced on this appeal by the Defendants are -
(1} That the Court should decline jurisdiction under Article 16(2).
(2) That Che Court should decline jurisdiction under Article 21 in relation to the common parties on the basis of -
(a) The Querella proceedings,
(b) The Quail action.
(3) That the Court should stay the action under Article 22.
(4) That, if the Court accedes to the application under Article 21, or only accedes in part to the applications under Articles 16(2) or 22, the Court should decline to exercise its discretion under O.li, or should stay, the remainder of the action.
The Appellants did not therefore seek to challenge the exercise of the Judge's discretion, if he was right about Articles 16(2), 21 and 22. They argued that, if the result of the -application of those Articles was that any part of this litigation should be referred to Spain, then it was appropriate that the whole of the litigation should go there. They were prepared to submit to the jurisdiction of the Spanish court where that was necessary.
The Article 16(2) point is free-standing. The Article 21 and 22 points are inter-related as they both raise the question whether the English court was the court first seized. This is a question partly of European law (the Convention), partly of English procedural law (when was the English court seized of the action?) and partly a question of fact when under Spanish procedural law the Spanish courts became seized of the proceedings before them.
As a preliminary in this Court, the Appellants submitted that the Court should refer suggested questions of the construction of the Convention to the European Court for their opinion. They also submitted that the Court should adjourn the appeal so that the Spanish courts could, in some unspecified way, give a decision upon what the Appellants submitted were the issues of Spanish law necessary to the determination of this appeal. We declined to accede to either of these submissions until we had heard further argument from the parties upon the Appeal; having heard full argument, we are of the opinion that nothing on this appeal turns upon any question of the construction of the Convention not covered by the Judgments already given by the European Court nor upon any question of Spanish law which is not clearly covered by the evidence already adduced. We have therefore not acceded to either submission. There were further in any event serious objections to acceding to the application in relation to Spanish law.
ARTICLE 16{2) Article 16 provides:
"The following courts shall have exclusive jurisdiction, regardless of domicile:
1(a) in proceedings which have as their object rights in rem in immovable property or tenancies ...., the courts of the Contracting State in which the property is situated;
(b) ......
2. In proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural c-r legal persons, or the decisions of their organs, the courts of the Contracting State in which the company, legal person or association has its seat.
3. In proceedings which have as their object the validity of entries in public registers ......., the courts of the Contracting State where the register is kept.
4. [patents etc] ...
5. [judgments] ..."
Before Mance J, the Defendants submitted that a broad and purposive construction should be given to the Article, and in particular that the word 'validity' did not govern the words 'decisions of their organs'. They said that the proceedings were principally concerned with the decisions of Grupo Torras, its officers and shareholders, and consequently the Spanish Courts should have exclusive jurisdiction. Mance J- did not accept their submissions. On the question of the construction of the Article; he preferred to follow Knox J. in Newtherapeutic Ltd v Katz [1991] Ch. 226. But he also held that, even adopting the Defendants' broad construction, the case did not come within Article 16 (2).
It is accepted that the words "proceedings which have as their object" in this Article mean "proceedings which have as their subject-matter" or "proceedings which are principally concerned with". This approach to Article 16 is well established and is illustrated by such decisions as Rossler v Rottwinkel (241/83, [1985] EUECJ R-241/83) [1986] QB 33 and Webb v Webb (294/92, [1994] EUECJ C-294/92) [1994] ECR 1717.
There has, however, been debate about how the remainder of Article 16(2) should be read: whether it is concerned with proceedings which have as their subject-matter "the decisions of their organs" or "the validity of ... the decisions of their organs". The grammar of the English text suggests the former, but the French, German and Italian texts all point unequivocally to the latter, and the Dutch text has been similarly interpreted by an academic writer. The narrower interpretation is supported by Dicey and Morris Conflict of Laws 12th. ed. Vol 1 p. 383; O'Malley and Layton European Civil Practice p. 533; the explanation of the Article given in the Jenard Report (the preceding paragraph merely reproduces the text of the English version and is without significance); and the decision of Knox J in New-therapeutics v Katz Ltd [1991] Ch. 226.
We doubt that this question is of any real significance, partly because the correct approach to the interpretation of the Convention is purposive rather than textual, and partly because we doubt that the word "validity" is to be narrowly construed so as to exclude consideration of the meaning and effect of decisions of the relevant organs. We are, however, satisfied that it is not necessary for us to resolve the question on this appeal; we agree with the Judge that on either reading of the Article the present case clearly falls outside it.
The paragraphs of Article 16 constitute a series of exceptions to the basic jurisdictional rules established by the Convention. The objective of Article 16(2) is to confer exclusive jurisdiction to decide questions concerning the constitution and internal management of a company on the courts of the Contracting State in which the company has its seat. It is generally accepted as a matter of private international law that the law of the place of incorporation determines the capacity of the company, the composition and powers of the various organs of the company, the formalities and procedures laid down for them, the extent of an individual member's liability for the debts and liabilities of the company, and other matters of that kind. The objective of Article 16(2) is to confer exclusive jurisdiction to determine all such questions on the courts of the state where the company has its seat. The other paragraphs of the Article follow a similar logic.
The Appellants submit that Article 16(2) governs all questions which are concerned with the internal management of a company, and that this extends to all disputes which arise out of the relationship between the company and its officers or shareholders or between its shareholders and officers, and possibly even between its shareholders inter se. This submission is far too wide. Whether an action falls within Article 16(2) depends upon its subject matter - the nature of the dispute - not upon the relationship between the parties. A claim by an officer of a company for wrongful dismissal, for example, does not fall within the Article, though a claim that the decision to dismiss him had been taken by a meeting of the board which was inquorate would do so.
In Newtherapeutics Ltd v Katz Knox J drew a distinction between validity and propriety. He was concerned with an action in which it was alleged that officers of the company had acted in excess of their powers (i) because they had acted without the authority of a properly convened and quorate board meeting and (ii) because the transaction to which they had committed the company was so detrimental to the interests of the company that no reasonable board of directors could properly have assented to it. Knox J held that the first of these issues fell within Article 16 (2) but that the second did not. We agree with him that the first issue plainly fell within the scope of the Article, but we should wish to reserve for future consideration the correctness of his decision that the second did not. The powers of directors and other officers of a company are limited not only by formal or procedural requirements but also by the general principle that officers of a company must act .bona fide in the interests of the company. Allegations of the kind made in Newtherapeutics Ltd v Katz are essentially allegations of want of authority, and there is much force in the contention that they fall within the scope of Article 16(2).
Want or excess of authority, however, is one thing, abuse of authority is quite another. Honest but misguided directors who faithfully record their actions and purpose and, conducting themselves openly as the appropriate organ of the company, commit the company to a transaction which they mistakenly believe to be for its benefit, may be liable for acting beyond the scope of their authority if the transaction is not and could not reasonably be thought to be in the company's interest. But that is not the present case.
The Plaintiffs allege that the Defendants, or those of them who were in a position to do so assisted by the others, misappropriated enormous sums of the Plaintiffs' money by procuring sums to be paid into offshore bank accounts set up to disguise the identity of the recipients, without the Plaintiffs receiving any benefit from the payments, and that they arranged for the true nature of the transactions to be concealed from the Plaintiffs and their auditors by a series of complicated but sham accounting transactions. As a result of interlocutory proceedings, the destination of some of the money has been identified. Very large sums have found their way to the First, Third and Fifth Defendants or offshore companies controlled by them, and substantial sums have been expended by them on maintaining luxurious lifestyles or funding private business enterprises of their own.
Such a case has nothing whatever to do with any decisions of the Plaintiffs' organs. If the Plaintiffs' allegations are true (and on an earlier interlocutory application Steyn LJ has acknowledged that they are supported by prima facie evidence of a sophisticated fraud), those of the Defendants who were officers of the Plaintiffs were not acting openly and honestly as organs and for the benefit of the Plaintiffs, but secretly and dishonestly for their own personal benefit and in fraud of the Plain tiffs. Had such Defendants been only some of the persons who composed the organs of the Plaintiffs, it would have been clear beyond argument that in misappropriating the Plaintiffs' money they were not acting as organs of the Plaintiffs but in fraud of those organs. What would have been in issue would have been, not the decisions of the organs, but the deceit of the Defendants in procuring those decisions to be made. This does not cease to be the case because all the persons who together constitute the organs of the Plaintiffs are charged with responsibility for the misappropriations.
The Appellants insist that the individual responsibilities of the principal Defendants consist in large measure of duties owed to Grupo Torras by its officers under Spanish law; the Plaintiffs have alleged the breach by the director defendants of their duties as directors. But this still does not make the subject matter of the action the decisions of organs of Grupo Torras. The action is concerned with the Defendants' alleged misappropriation of the company's money. Grupo Torras's only role was to be the victim of the alleged conspiracy; it is impossible to accept the proposition that in misappropriating its money the alleged conspirators were acting as its agents or organs, let alone that "decisions" of its organs were involved.
It was contended before Mance J, but only faintly before us, that the questions whether the Plaintiffs suffered any loss and whether the Defendants' acts were authorised, ratified and financed by the ultimate controlling shareholders involve questions of Spanish company law and fall within .Article 16(2). They advanced an argument that the Plaintiffs had not suffered any loss on at least three of the transactions because the relevant money had originated from loans by Koolmees to Grupo Torras and in July 1991, at an extraordinary shareholders meeting of Grupo Torras, it was resolved to capitalise the loans by issuing additional share capital to Koolmees in satisfaction for the liability to repay the loans. The Defendants argued that this capitalisation made good to Grupo Torras the loss it would otherwise have suffered on the Croesus, Oakthorn and Pincinco transactions and notwithstanding that the Defendants had (on the Plaintiffs' case) fraudulently deprived the Plaintiffs of the money advanced by Koolmees. The submission is not only inconsistent with the decision of this Court in re The Anglo-French Co-operative Society, ex parte Pelly (1882) 21 Ch.D. 292 but is inherently absurd. The provision of loan capital and its conversion into share capital are self-contained commercial transactions in which the company gives and receives value. By themselves they are incapable of mitigating or avoiding the loss which the company sustained by the theft of its funds.
The Appellants have also asserted that their defalcations were authorised and ratified by the controlling shareholders. But they have put forward no case of authorisation or ratification beyond alleging that what they did was done with the knowledge and approval of the First Defendant, whose own complicity in the fraud is evidenced by a substantial volume of material. It cannot seriously be suggested that there was any informed approval or ratification by the Plaintiffs of the payments, the true nature of which was concealed from the Plaintiffs and their auditors throughout and which has been pieced together only by the most laborious and time-consuming investigations in the course of the present litigation.
The subject matter of this action remains the frauds which it is alleged that the Defendants have practised on the Plaintiff companies. The object of these proceedings is not decisions of the organs of Grupo Torras (nor, for that matter, of Torras London).
Accordingly, even on the construction of Article 16(2) contended for by the Defendants, the present proceedings clearly fall outside it. Article 16(2} does not debar the English courts from assuming jurisdiction in respect of the present action.
ARTICLE 21
Articles 21 and 22 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 stay its proceedings until such time as the jurisdiction of the court first seised is established.
Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.
22. Where related actions are brought in the courtB of different Contracting States, any court other than the court first seised may, while the actions are pending at first instance, stay its proceedings.
A court other than the court first Eeised may also, on the application of one of the parties, decline jurisdiction if the law of that court permits the consolidation of related actions and the court first seised has jurisdiction over both actions.
For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the riek of irreconcilable judgments resulting from separate proceedings."
Chronology
As previously stated, the application of these Articles requires that the court determine whether or not it is the court first seized, it is therefore helpful at the outset to list the dates upon which steps were taken in the relevant actions, this action in England and the criminal, guerelJa, proceedings and the Quail action in Spain.
| 9/6/92 |
Original Quail proceedings filed |
| 26/1/33 |
Judge Moreiras orders the no-admission of the criminal proceedings on the application of Mr de la Rosa) |
| 19/2/33 |
Judge Moreiras confirms non-admission of the criminal proceedings ("after further intervention by Sheikh Fahad and Mr Jaffar |
| 14/4/93 |
English writ issued |
| 15/4/93 |
English writ served within jurisdiction on Jaffar, Robinson, Moukarzel, Coll & Co. and Wardbase |
| 7/5/33 |
Missing documentation lodged by Quail in original Quail proceedings |
| 12/5/33 |
Original Quail proceedings admitted |
| 17-8/5/93 |
English writ served on Anslow, Westow, Croesus, Wantley, Russell, Limebeer and Oakthorn |
| 1P/5/93 |
Quail proceedings amended by adding de la Rosa, de Mir, Nunez, Folchi and Soler |
| 21/5/93-15/6/93 |
English writ served on Russell, Sheikh Fahad, Riquel and Coggia |
| 18/6/93 |
Amended Quail proceedings admitted |
| 21/6/93 |
English writ served on de la Rosa, de Mir, Soler, Coll and Folchi |
| 3/7/93 |
Criminal proceedings again not admitted |
| 1/10/93 |
Amended Quail proceedings served on Grupo Torras |
| 1/10/93 |
English writ served on Pique |
| 15/11/93 |
English writ served on Nunez |
| 11/2/34 |
Audiencia National orders that the criminal proceedings be admitted |
| [29/4/34 |
Judge Foncillas stays the Quail proceedings pending the resolution of the criminal proceedings] |
The Expert Evidence of Spanish Law:
A vast amount of evidence of Spanish law was adduced before the Judge. On behalf of the Defendants, Professor Rifa gave evidence in relation to the criminal/civil proceedings and Dr. Carreras in relation to the Quail proceedings; their written opinions and reports extend to 170 pages and their oral evidence extended over five days. In reply, Professor Ramos gave evidence on behalf of the Plaintiffs. His reports extend to 190 pages and his oral evidence took four days. It is evident that the Judge was greatly concerned at the inordinate time and expense involved in deciding the question of fact, when would the Spanish Courts consider that the criminal/civil proceedings and the amended Quail proceedings were definitively pending for the purpose of Article 21 of the Convention? But he found himself powerless to control the exuberance of the parties. This question is not one that has so far confronted the Spanish Courts, although they are familiar with the concept of lis alibi pendens for the purpose of domestic law.
The Judge made findings in relation to Spanish law and on the question of when the proceedings would be regarded as definitively pending. The Appellants challenge his findings in relation to both the criminal/civil proceedings and also the amended Quail proceedings. They also criticised the basis on which he had made his findings of fact regarding Spanish law. They submitted that he had not had regard to the fact that Doth the content of the foreign law and how the foreign court would interpret and apply it were matters of evidence. They said that he had substituted his own view for those of the expert witnesses and had been over-influenced by English authority.
Questions of foreign law are questions of fact which must be proved to the satisfaction of the Judge. If the evidence of expert witnesses conflicts, it is the Judge's duty to resolve these differences in the same way as he must in the case of other conflicting evidence of fact: (Bumper Corporation v Commissioner of Police of the Metropolis [1991] 1 WLR 1362, p.l368F-G). The Judge is free to scrutinise the witness and what he says as cm any other issue of fact and can use his common sense to reject the evidence of an expert witness if what he says is patently absurd or inconsistent with the rest of his evidence. However, where the evidence of an expert witness on foreign law is not contradicted, the Judge should be reluctant to reject it: (Sharif v Azad [1967] 1 QB 605 per Diplock LJ at p.616B). The Court of Appeal should in appropriate cases be more ready to question the judge's conclusions on an issue of foreign law than it is on other questions of fact. But it should be extremely reluctant to substitute its own views where questions of credibility are concerned, since the Judge has had the benefit of seeing and hearing the witnesses: (Parkasho v Singh [1968] P 233 at p.250; Dalmia Dairy Industries Ltd v National Bank of Pakistan [1978] 2 Lloyds 233 per Megaw LJ at p.286). There was a conflict of evidence before the Judge; he was not obliged to accept the evidence of any witness in its entirety; the findings which he made do not disclose an improper approach to the expert evidence. Although it will be necessary to consider the correctness of one of his findings, we do not accept the criticisms which have been made of the Judge's treatment of the expert evidence of Spanish law.
The Decision of Mance J
As previously stated, Mance J had to give his decision without the benefit of the Judgment of the European Court in Maciej Rataj. His decision on the question whether, for the purposes of Article 21, the proceedings were between the same parties was therefore, on any view, reached on the wrong basis and must be reconsidered. He set out his reasons for not applying Article 21 separately in relation to the Spanish criminal proceedings and in relation to the Quail action.
In relation to the criminal proceedings he said (p.101):
" (i) civil proceedings are pending within the scope of the Spanish criminal proceedings;
(ii) they were not definitively pending before their admission on llth February 1994;
(iii) it follows from conclusion (ii) that there is no basis for applying Article 21 or 23 since the present action was the first action definitively pending;
(iv) the Spanish civil proceedings are not between the same parties (or, if this be the test, between substantially the same parties) as the present English action within the meaning of Article 21 - this follows from my general conclusion that the two sets of proceedings should be compared overall;
(v) (a) the Spanish civil proceedings do not involve the same (or substantially the same) cause of action as the present English action;
(b) if they had done, I would have been prepared to allow Grupo Torras to make a reservation in respect of the four transactions in the Spanish criminal proceedings;
(vi) apart from conclusion {ii), conclusions (iii) and (iv) would still make Article 21 inapplicable."
It is accepted that his reason under (iv) cannot stand and that it is still necessary to consider as between the parties common to both the criminal proceedings and the English action - Grupo Torras, Sheikh Fahad and Messrs de la Rosa, de Mir, Nunez, Folchi and Soler - whether Article 21 applies.
In relation to the Quail action he said [at p.124);
" (i) the original and amended Quail proceedings fall to be regarded as separate proceedings for the purposes of Articles 21 and 22;
(ii) the original Quail proceedings became definitively pending upon their admission on 12th May 1993; the amended Quail proceedings became definitively pending when admitted on 18th June 1993;
(iii) both such dates post-date the English court's definitive seizure of the present action on 15th April 1993, applying the view which I take of definitive seizure under English law;
(iv) Neither the original nor the amended Quail proceedings is between the same or (substantially the same) parties as the present action - again this follows from my conclusion that the two sets of proceedings fall to be compared overall;
(v) on an overall comparison .... there is no identity of causes of action .... if it were right to look solely at the position as between GT and the co-plaintiffs to the amended Quail proceedings, the amended Quail proceedings would in this respect involve the same cause of action between the game parties."
It is thus the amended Quail proceedings that are directly relevant. As Mance J has held, they are to a certain extent between the same parties and involve the same cause of action. The critical question therefore becomes which court was first seized.
The Convention:
As stated in its preamble, the primary purpose of the Brussels Convention is to give effect to Article 220 of the Treaty of Rome and "secure the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals" in Contracting States. The provisions for the recognition and enforcement of judgments are contained in Title III of the Convention. Article 26 provides:
"A judgment given in a Contracting State shall be recognised in the other Contracting states without any special procedure being required."
Article 27 contains certain exceptions to this principle which broadly correspond to recognised aspects of private international law. Paragraph 3 provides:
"If the judgment is irreconcilable with a judgment given in a dispute between the same parties in the State in which recognition is sought."
There is a similar provision in paragraph 5 for res judicata arising from an earlier judgment of a non-contracting state.
Title II of the Convention deals with jurisdiction. This is a necessary corollary of Title III. In particular, provision is required to reduce the risk of conflicting judgments being given in different Contracting States and so raising problems for the mutual recognition of judgments. Title II acknowledges that it is possible for the courts of more than one State to have jurisdiction in relation to a given matter and that an action may properly be commenced in the courts of more than one State. Under Article 6, a defendant maybe joined in an action properly commenced in one Contracting State even though that defendant is domiciled in another State (para.l); third party proceedings and counterclaims are permitted (paras.2&3}. It is therefore possible that there may at one time be pending in the courts of more than one State actions which will give rise to the risk of inconsistent judgments, either in the strict conflicts sense of res judicata or in a looser sense. These are the subject of Articles 21 and 22 in Section 8, which is headed: "Lis pendens - related actions".
Whilst the problem of conflicting judgments with which these two articles are dealing is the same, the subject matter of the two articles is different. Article 21 applies to "proceedings involving the same cause of action and between the same parties"; Article 22 applies to "related actions", that is to say actions which, whether or not they involve any of the same parties or causes of action, should sensibly be tried together so as to avoid the "risk of irreconcilable judgments". It is only Article 21 which directly corresponds with article 27.3. This relationship was emphasised in Gubisch Maschinenfabrik KG v Giulio Palumbo. (144/86) [1987] ECR 4861; the court stressed that Article. 21 was concerned with lis pendens as defined in the article, not as previously understood in the domestic law of any individual Contracting State.
Article 22 involves the exercise of a discretion; in contrast, the provisions of Article 21 are mandatory and require the relevant court to "decline jurisdiction" either immediately or ultimately. But both articles adopt a common approach and apply the game criterion. They apply a criterion of temporal priority and use the phrase "the court first seized". The court which is first seized is not affected and is entitled to proceed; any other court is required to observe the requirements of the articles. The meaning of the phrase "the court first seized" was considered in Zelger v Salinitri. (129/83) [1984] ECR 2397. In different Contracting States different criteria existed for when an action became pending and submissions were made, supported by the Advocate-General, that the Court should state at what point any action was to be considered to be pending for the purposes of Articles 21 and 22, for instance, the moment the proceedings were served. The Court reviewed the comparative material that had been placed before it and continued:
"13. It follows from the comparison of the legislation mentioned above that a common concept of lis pendens cannot be arrived at by a rapprochement of the various relevant national provisions, A fortiori, therefore, it is not possible to extend to all the contracting parties, as is proposed by the plaintiff in the main action, a concept which is peculiar to German law and which, because of its characteristics, cannot be transposed to the other legal systems concerned.
14. It may properly be inferred from Article 21, read as a whole, that a court's obligation to decline jurisdiction in favour of another court only comes into existence if it is established that proceedings have been definitively brought before a court in another State involving the same cause of action and between the same parties. Beyond that, Article 21 gives no indication of the nature of the procedural formalities which must be taken into account for the purposes of considering whether or not to recognise the existence of such an effect. In particular, it gives no indication as to the answer to the question whether a lis pendens comes into being upon the receipt by a court of an application or upon service or notification of that application on or to the party concerned.
15. Since the object of the Convention is not to unify those formalities, which are closely linked to the organisation of judicial procedure in the various States, the question as to the moment which the conditions for definitive seisin for the purposes of Article 21 are met must be appraised and resolved, in the case of each court, according to the rules of its own national law. That method allows each court to establish with a sufficient degree of certainty, by reference to its own national law, as regards itself, and by reference to the national law of any other court which has been seised, as regards that court, the order or priority in time of several actions brought within the conditions laid down by the Convention.
16. The answer to the question raised by the Oberlandes-gericht Munchen is therefore that Article 21 of the Convention must be interpreted as meaning that the court "first seised" is the one before which the requirements for proceedings to become definitively pending are first fulfilled, such requirements to be determined in accordance with the national law of each of the courts concerned."
Thus the Court declined the invitation to lay down any particular time at which any action would become pending. In the final sentence of paragraph 14, the Court accepted that the Convention does not preclude the possibility that the receipt by a court of an application may be the moment at which a lis pendens comes into being. It left the question to the national law of each of the courts concerned. But it stated that the test which the Convention requires the national court to apply is:
"the court 'first seized' is the one before which the requirements for proceedings to become definitively pending are first fulfilled".
It is this test which in our judgment is decisive of the questions which arise in the present case. It is also to be noted that the Zelger judgment expressly recognises that a court considering an .Article 21 or 22 question will have not only to consider the pendency of the action before it under its own national law but also the pendency under the national laws of other States of any relevant actions pending before the courts of the other States, (para.15) Thus it recognises that the courts of one State will have to reach a decision regarding the pendency of an action before the courts of another State notwithstanding that the question involves the national law of that other State.
In Dresser UK v Falcongate Freight Management [1991] 2 Lloyds 557, followed in Neste Chemicals v D.K.Line tl994] 2 Lloyds 6, the Court of Appeal has held that in English procedural law an action becomes definitively pending upon the service of the writ, not upon its mere issue. This is authority binding upon us, as it was on Mance J, that the present action was not definitively pending - that the English court was not seized of this action - until the writ had been served.
Prior to the Judgment of the European Court of Justice in The 'Maciej Rataj' (406/92), delivered on 6th December 1994, no judgment had had to address the question of multiple parties. That case concerned the carriage on the vessel, the "Tatry", of various consignments of soya bean oil which had been discharged at Rotterdam and Hamburg contaminated, it was said, by diesel oil. Various actions and cross-actions, in rem and in personam, were commenced by or against three different groups of cargo owners by or against the carriers or one or other of their vessels in various courts in The Netherlands and England. The questions referred to the Court by the English Court of Appeal included the question of the breadth of the phrases "same cause of action" and "related actions"; one question directly raised the question how the phrase "between the same parties" in Article 21 was to be understood and applied. The Court again linked the use of that phrase in Article 21 with its use in Article 27(3) and emphasised the need to construe the two provisions together. The Court held:
"33. In the light of the wording of Article 21 of the Convention and the objective set out above, that article must be understood as requiring, as a condition of the obligation of the second court seised to decline jurisdiction, that the parties to the two actions be identical.
34. Consequently, where some of the parties are the same as the parties to an action which has already been started, Article 21 requires the second court seised to decline jurisdiction only to the extent to which the parties to the proceedings pending before it are also parties to the action previously started before the court of another Contracting state; it does not prevent the proceedings from continuing between the other parties.
35. Admittedly, that interpretation of Article 21 involves fragmenting the proceedings. However, Article 22 mitigates that disadvantage. That article allows the second court seised to stay proceedings or to decline jurisdiction on the ground that the actions are related, if the conditions there set out are satisfied.
36. Accordingly, the answer to the first question is that, on a proper construction of Article 21 of the Convention, where two actions involve the same cause of action and some but not all of the parties to the second action are the same as the parties to the action commenced earlier in another Contracting State, the second court seised is required to decline jurisdiction only to the extent to which the parties to the proceedings before it are also parties to the action previously commenced; it does not prevent the proceedings from continuing between the other parties."
Thus the Court held that a party by party approach must be adopted: to the extent that any of the parties in the relevant actions are the same, then Article 21 applies to those actions insofar as those actions are between those parties and not otherwise. The Court also recognised that this has the result that litigation may become fragmented. A court may have to decline jurisdiction as between some parties but allow the action to continue as between others. An Article 22 question will then almost certainly arise and have to be addressed by the court (or courts) to which that article applies.
The Court in the Maciej Rataj was not as such asked, and therefore did not express a view about, how the question which court was first seized was to be answered under Article 21 when there were multiple parties. This point was keenly debated before us. The Appellants argued that Article 21, as construed in the Zelger and Maciej Ratal judgments, requires the question of definitive pendency to be answered party by party. The subject matter of the article is the lis between the relevant pairs of parties; when did that lis become definitively pending? The answer that the question will receive will depend upon which lis one is asking about. The logical force of this submission is compelling and it is clearly supported by the authorities. The Respondents on the other hand argued for a more pragmatic approach. They pointed out that part of the purpose of the Convention was the simplification of procedures. They argued that .Articles 22 and 21 should be construed together and that the court should always ask itself as a threshold question which court was first seized; it is only after that question has been answered that the court second seized need consider under .Article 21 the extent to which the action before it involves the same cause of action and is between the same parties. Hence, they argue that the relevant date for Article 21 (and Article 22) is the first date upon which it can be said that any defendant has been served.
Both of the rival arguments sought to draw assistance from the Dresser judgment: the Appellants argued that the combination of a party by party approach and the test of date of service made their argument irresistible; the Respondents argued that the Dresser service date approach would produce an impossibly fragmented approach and therefore cannot be applied. However the Dresser judgment was not concerned with multiple parties; it was merely concerned to carry through into English procedural law the effect of the construction of Article 21 of the Convention upon which the European Court has spoken in Zelger. The Court's judgment in Maciej Rataj now requires a party by party approach.
Forensically, each advocate sought to extend his argument from one of the articles, 21 or 22, to the other. The Respondents' argument had obvious force where the question is which of the two courts was first seized of one of the related actions to which Article 22 applies; they then, with less conviction and little loyalty to Maciej Ratal and Zelger or the wording of Article 21, sought to apply the same approach to Article 21. The Appellants, by contrast, sought to argue that the court first seized for the purpose of certain parties under Article 21 should necessarily be treated as the court first seized also for the purpose of Article 22, disregarding both the different subject matter and wording of Article 22 and the reductio ad absurdum to which this argument could give rise. In country 'X', A & B sue C, D, E & F; in country 'Y', C & D sue A, B & G. The 'X' proceedings are served on D, E & F before any of the 'Y' proceedings have been issued or served, but C is served later. Country 'X', under Article 21, declines (or suspends) jurisdiction in favour of country 'Y' of the action as between A & B and C; and country 'Y' will be under an obligation under Article 21 to decline jurisdiction in favour of country 'X' of the action as between D and A & B. The Appellants' extension of their argument suggests that country 'X', having given effect to Article 21, should then go on and treat itself as second seized for the purposes of Article 22 even though, as regards all the remaining parties and the totality of the litigation now before it, country 'X' is manifestly the country first seized and country 'Y' is clearly, on a party by party basis, the second seized (A & B and D) or not seized at all (A & B and E & F). The same applies to country 'Y': having retained the action as between C and A & B but not as between D and A & B, the question for country 'Y' becomes which country was first seized of litigation involving the common cause of action which gives rise to the risk of irreconcilable judgments - the Article 22 question. The answer must be country 'X'. These arguments therefore provided a strong indication of the correct application of Articles 21 and 22 and to what extent the arguments on each side were soundly based.
Mance J had to reach his decision without the assistance of the European Court's judgment in Maciej Ratal. He did not adopt a party by party approach; he found it difficult to reconcile with what he regarded as the rational aims of the Convention. He held (p.98) that:
"The interpretation 'which best matches the context and purpose of the Convention' is in my judgment one which gives a single date of definitive pendency for each action by taking the date of first service on any defendant in a case of multiple defendants."
He therefore accepted the argument of the Plaintiffs that the English courts were first seized when the first defendant was served; he gave the same answer under Article 21 as under Article 22. Although it is accepted that the reasoning of Mance J cannot, as such, stand with the judgment of the Court in Maciej Rataj, the arguments of the Respondents before us are substantially to the same effect and would, if accepted, lead to the same conclusion. The Respondents, relying upon the arguments to which we have referred, submitted that the date upon which the English court became seized of the present action was still, for the purposes of Article 21, 15th April 1993, the date upon which the first batch of Defendants were served. But it is not necessary for us to rule upon this submission since in our judgment the English court was the first seized whether the 15th April is the correct date or some later date down to the end of June by which time, on either side's submissions, all the relevant Defendants save Mr. Nunez had been served with the English writ.
The Application of Article 21, the Quail Action:
For the purposes of Article 21, the proceedings which are relevant are, in England, the present action and, in Spain, the 'Quail' proceedings. (We will leave on one side for the time being the criminal proceedings; we consider that the Judge was clearly correct in his conclusion that they could not assist the Defendant's case on Article 21.) After the amendment of the Quail action, the parties who are common to the English action and to the amended Quail action are Grupo Torras and messrs de la Rosa, de Mir, Nunez, Folchi and Soler. It is accepted for present purposes that the causes of action as between these parties are the same in the two actions. Approaching the matter on a party by party basis, as contended for by the Appellants, and applying Dresser, the date at which the English courts first became seized as between these parties was 21st June 1993, with the exception of Mr. Nunez who was not served until 15th November 1993.
On this assumption, the relevant question is whether the Spanish courts became seized as between these parties before 21st June 1993. Mance J held that they did because he held that the Spanish courts became seized on 18th June 1993, the date upon which the amended Quail proceedings were admitted. Before us both sides challenge this conclusion. The Respondents submit, by their amended Respondents' Notice, that the Judge should have found that the Spanish courts were not seized until 1st October 1994, the date upon which Grupo Torras was served with the amended Quail proceedings; if this submission is right, the English proceedings would take priority whichever of the rival interpretations of Article 21 was to be preferred, save in the case of Mr. Nunez. When the draft judgments in this appeal were handed down the exceptional position of Mr. Nunez was not appreciated by the Court, since the argument had proceeded on the basis that all the added Quail Plaintiffs could be treated similarly. It was then pointed out that this was not so. The matter was adjourned so that the Plaintiffs could decide whether they wished to continue the action against Mr. Nunez, in which case the Court would have to resolve the dispute as to the interpretation of Article 21 to which we have adverted. In the result the Plaintiffs discontinued the action against him and accordingly, if the Respondents are right that the Spanish Courts were not seized of the Quail proceedings until 1st October 1993, we do not have to resolve this question. We should add that at the same time the Plaintiffs' discontinued against Mr. Pique; he is not a party to the Quail proceedings, but a question in relation to Article 22 might have arisen in his case, but for the discontinuance.
The Appellants submit that the correct finding is that the Spanish Courts were seized before 21st June 1993. They put their case in a number of alternative ways;
(1) The Spanish courts became seized on 9th June 1992 because once the Quail proceedings had been amended (on 18th May 1993) the amendment related back under Spanish procedural law to the original date of filing and the date of filing is the date upon which a Spanish court becomes under Spanish procedural law seized of an action. This way of putting their case would, if accepted, also make the Article 21 interpretation dispute academic; 9th June 1992 precedes any possible date for the English proceedings.
(2) Alternatively, if the date of admission not filing is to be taken, the Spanish courts became seized on 12th May 1993, the date on which the original Quail proceedings were admitted.
(3) Alternatively, the date of filing the amendment of the Quail proceedings, 18th May 1993, is the date upon which the Spanish court became seized of the amended Quail proceedings.
(4) Alternatively, if the date of admission not filing is to be taken, the relevant date is then, as the Judge found, 18th June 1993.
Therefore the critical questions become whether the Respondents are right that the date upon which civil proceedings become definitively pending under Spanish procedural law is the date of service and whether the Appellants are right that they can rely upon the principle of relation back recognised by Spanish procedural law. These questions are in fact inter-related because the Appellants use the relation back argument to support their argument in support of taking the filing date.
As previously stated the Appellants criticised the way the Judge approached the issues of Spanish law as fact and the use he made of the Dresser judgment. They submit that he sought to arrive at his own conclusions about Spanish law without sufficient regard to what the expert witnesses said was its effect. In particular, they criticised his rejection of the filing date as the critical date under Spanish law and his adoption of the date of admission as being the relevant date.
The Judge's finding that admission was the critical date for civil proceedings was contrary to the views of both side's experts. It has been submitted to us that he failed to make a necessary distinction between what was involved in the admission of ordinary civil proceedings (like the Quail action) and the admission of criminal proceedings started by querella. He said (at p.133):
"As in the criminal context, the decision by a Spanish civil court whether or not to admit represents the process by which the court determines whether it will seize itself [of] proceedings which up to that point have merely been the subject of a claim formulated by a claimant. Admission is the key to pursuit of the matter. It involves the Spanish court taking a positive view as to the regularity of the proceedings both procedurally and substantively. After admission the court automatically effects service."
It was accepted before us that the effect of the expert evidence was that in ordinary civil proceedings the step of admission was a purely administrative exercise, checking the documents filed by the plaintiff to see that they comply with the formal requirements and are complete. Unlike the position in the procedural law governing Spanish criminal proceedings, admission does not involve any decision by the court or any determination that the court seize itself of the proceedings. Put at its highest, it is merely the stage at which the papers are accepted as fit for service. Therefore we accept the primary submission of both parties that, on the evidence, the date of admission cannot be taken as the date on which the Spanish court became seized of the Quail or amended Quail action.
If admission is not to be adopted as the stage at which the Spanish civil court is to be treated as seized of the action for the purposes of the Convention, the choice lies between the date of filing and the date of service. In our judgment, the choice does not depend upon determining any contentious question of Spanish law: the difference between the parties depends upon how the question ought to be approached as a matter of the implementation of the Convention.
The evidence is that Spanish law has, like many other continental jurisdictions, a well established doctrine of lis pendens which can give rise to a procedural defence, litispendencia. Its statutory basis is to be found in article 533(5) of the Spanish Code of Civil Procedure which allows a defendant to raise as an "exception" "the lis pendens in the same or another court with jurisdiction". The exception litispendencia has the character of a procedural defence. Its validity is determined upon a basis of priority. The prior action has the status of being pending; it is treated as being the 'master' and the second action must defer to it. The exception of litispendencia having been raised in the second action and upheld, the judge has -various procedural powers to ensure that the relevant matters are all determined in the first action. It was the view of the Spanish witnesses, at least on the Defendants' side, that Article 21 of the Convention was an implementation of the same principle of procedural law.
The Defendants' expert accordingly reasoned that the application of Article 21 simply involved the application of the domestic Spanish law and asking what date would the Spanish court take for the purpose of assessing the priority to be given to the Quail action if an exception of litispendencia was raised in it by Grupo Torras. They said that the Spanish court would take the date of the issue of the proceedings. They have the clearest support for this view of the domestic Spanish law. In October 1992 the Supreme Court of Spain (civil appeal No.7557) had to decide which of two actions should be treated as the prior. One action had been filed first but the proceedings were not served until after the proceedings in the other had been both filed and served. The Supreme Court held that priority should be given to the action which had been filed first; the exception of litispendencia could not be raised in that action.
However it is also clear, and it is accepted by the Appellants before us, that the exception cannot be taken until the proceedings in the action alleged to be the pending action (the lis pendens) have not only been filed but also admitted and served. The Judge found:
"They [the witnesses] were on common ground that an exceptio could not be relied on without service of the allegedly earlier proceedings. Dr Carreras' view was that once there had been such service, the order of filing would govern." (p.130)
Dr Carreras was the Defendants' expert.
"Thus under Spanish law the priority of two sets of civil proceedings will be determined by their dates of filing, assuming both to have been not only admitted but also served when the exceptio litispandencia is raised." (p. 133)
The Appellants accepted, and relied upon, these findings.
It is now necessary, using these findings, to apply the test laid down in Zelger.
"Article 21 of the Convention must be interpreted as meaning that the court "first seized" is the one before which the requirements for proceedings to become definitively pending are first fulfilled, such requirements to be determined in accordance with the national law of each of the courts concerned." {para.16)
On the findings which the Appellants accept, it is clear that the requirements of Spanish law for an action to become definitively pending are that it has been filed, accepted and served. Until all those requirements have been met, it cannot be relied upon as a - lis pendens; it merely has a provisional character. The Appellants' case confuses the test for pendency with the procedural rule which applies in Spanish law once pendency has been established. But it is the Convention, as interpreted in Zelger which lays down what the consequences of pendency are to be; Zelger confines the role of the domestic law to answering the question when were the requirements of that law for the action to have become definitively pending first fulfilled. It follows that for the purposes of Articles 21 and 22 of the Convention the Spanish courts did not become seized of the Quail proceedings as between the relevant parties until 1st October 1993, that is to say, a date after the date upon which the English court had, on any view, became seized of the present action as between the relevant parties, which no longer includes Mr. Nunez and Mr. Pique because of the discontinuance of the action against them.
The Appellants had a related argument which, they said, led to the conclusion that the date of filing {whether of the original Quail proceedings or of the amendment) should be taken as the date of definitive pendency. They said that the evidence justified the conclusion that an amendment, once allowed, was treated as relating back to the time of the filing of the proceedings so that any claim or party was to be treated as if included from the start. Similarly, they said that once the question of litispendencia had been properly raised, Spanish law treated the action as having been pending since the time of filing. There was evidence to support both these submissions as a matter of Spanish law. But they still did not advance the Appellants' case under the Convention. The test laid down in Zelger is a chronological test. It requires a moment in time to be identified. When were the requirements first fulfilled? A doctrine of relation back cannot alter the answer to be given to this question. Under Spanish law, the requirement for pendency was not fulfilled until the proceedings were served on Grupo Torras in October 1993. Again, the argument of the Appellants confuses the fulfilment of the requirement with the consequences of that fulfilment in the domestic procedural law.
Accordingly the ground of appeal which was founded on the submission that as between Grupo Torras and the Quail Plaintiffs, other than Mr. Nunez, that is to say, de la Rosa, de Mir, Folchi and Soler, the Spanish court was the first seized, fails. The English court was the court first seized under Article 21.
The Criminal (Querella) Proceedings;
The problems for the Defendants in their reliance upon the Spanish Querella proceedings were substantial. Although such proceedings included within them proceedings which could give rise to a civil judgment, the civil aspect was ancillary to and dependant upon the criminal proceedings. The proceedings are started by the filing of a guerella but that is followed by a substantive decision whether the proceedings are to be admitted. The Judge's finding about the significance of admission was accurate in relation to the criminal procedure. If not admitted the proceedings can proceed no further. If the proceedings are admitted, the matter is then referred to an investigating judge who will carry out his own investigations. These are not limited to the matters or persons referred to in the querella. If at the conclusion of his investigations, he considers that any criminal charges should be brought against any person, he passes the file to another judge who prepares the provisional qualification, qalificacion provisional'. It is at this stage that the charges will be formulated. It is after this that oral evidence is taken, a final qualification is settled and the matter proceeds to trial. Who will be tried and for what will depend upon the formulation of the charges and the terms of the qualification. It is at the conclusion of the resultant trial that a finding of civil liability can be made.
It will be appreciated that this procedure means that it will be difficult to satisfy the Zelger test at any of the earlier stages. It may be impossible to say definitively who are going to be the parties and what are going to be the causes of action. .All these difficulties applied in the present case. But the Appellants had a further difficulty. As at the end of June 1993, by which time all the relevant Defendants had been served with the -writ in the English action and the English action was on any view definitively pending, the status of the Spanish criminal proceedings was that Judge Moreiras had ruled that they should not be admitted. It was not until February 1994 that they were finally admitted by an appellate court. (Currently the investigating judge is still carrying out his investigations.) Unless the Appellants can rely upon some principle of relation back, they on any view cannot succeed on this ground of appeal. But as is clearly stated in Zelger, the criterion to be applied is a chronological one. When were the requirements for the criminal proceedings to become definitively pending first fulfilled? The date when these requirements were satisfied could not on the evidence be earlier than February 1994.
Accordingly this ground of appeal fails as well.
ARTICLE 22, ORDER 11 and FORUM NOM-CONVENIENS:
The grounds of appeal relating to Article 22, forum conveniens and Order 11 leave all postulated that the appeal under Article 21 would succeed and that there would be at least some proceedings which under Article 21 would have to take place in Spain. The appeal under Article 21 having failed on the ground that the English court was the court first seized, the dependant appeals must fail as well. It is therefore unnecessary for us to enter upon any consideration of what would have been the potential impact of Article 22 upon related proceedings in this country and Spain.
CONCLUSION:
It follows that these appeals must be dismissed.
