Seven Licensing Company Sarl & Anor v FFG-Platinum SA & Ors

The Licence provided:

“18.8

Governing Law. This agreement shall be governed by, and construed in accordance with, the laws of London, England without regard to conflict of laws provisions.

18.9

Dispute Resolution. The Parties expressly agree that all disputes arising out [sic] or in connection with this Agreement shall be submitted to the Courts of London, England.”

I refer to these provisions together as “the English Governing Law and Jurisdiction Agreements”.

The MOA contained the English Government Law and Jurisdiction Agreements at clauses 18 and 19.

Clause 3 of the Side Agreement provided:

“It is agreed that FFG-IP may and hereby does designate FFG-DH as its nominee to effect, on its behalf, for its benefit and account, (a) the payment and delivery to SLC of any one or more of the instalment payments of the Purchase Price required to be paid to SLC or its nominee pursuant to the MOA, and (b) the issuance and delivery to SLC (or its nominee) of one or more of the BG’s (hereinafter defined) required to be paid to SLC or its nominee pursuant to the MOA. All payments made and BG’s delivered by FFG-DH shall be treated as if made/delivered by FFG-IP pursuant to the MOA.”

The Side Agreement contained the English Governing Law and Jurisdiction Agreements at clauses 11 and 12.

The First Bank Guarantee and the Second Bank Guarantee (but not the underlying liabilities which they were meant to secure) were subject to Greek law and the jurisdiction of the Greek courts, as the evidence showed was usually the case, as a matter of Greek banking practice.

The Security Agreement contained the English Governing Law and Jurisdiction Agreements at clauses 13 and 14.

Clause 9 of the Settlement Agreement reads:

“Amendment: No amendment, modification or alteration of this Agreement shall be valid unless it shall be in writing and signed by all parties hereto. No course of conduct or method of doing business shall modify or amend the terms hereof.”

The Settlement Agreement contained the English Governing Law and Jurisdiction Agreements at clauses 11 and 12.

Article 28 of the Regulation provides that:

“(1)

Where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings.

(2)

Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.

(3)

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 risk of irreconcilable judgements resulting from separate proceedings.”

The relevant approach was not seriously in dispute between the parties. Thus, it was common ground that Article 28 was the provision which applied where, as here, the English court was the court second seised, but the conditions for the application of Article 27 (same cause of action and same parties) were not met. The application of Article 28 pre-supposes that Article 27 does not apply - namely that there are not extant proceedings before another member state between the same parties involving the same cause of action. It was also common ground that Article 28, in the present context gives the English court the power, not the obligation, to stay the current proceedings, if they are related.

It was held in The Tatry [1994] ECR I-5439; [1999] QB 515 that actions are related for the purpose of what is now Article 28 if they would involve the risk of conflicting decisions, without necessarily involving the risk of giving rise to mutually exclusive legal consequences: see Opinion at paragraph 30 and Judgment at paragraphs 53 and 58.

Another useful guide to the principles governing the exercise of the discretion is the Opinion of Advocate General Lenz in Owens Bank Ltd v Bracco [1994] (Case C-129/92) QB 509 a case under what is now article 28 of the Regulation . At paragraphs 75- 79 ibid , he said:

“75.

The decision required in the context of article 22 of the Convention is a discretionary decision. It goes without saying that the circumstances of each individual case are particularly important here. The national courts must bear in mind that … the aim of this provision is ‘to prevent parallel proceedings before the courts of different contracting states and to avoid conflicts between decisions which might arise therefrom.’ It would therefore be appropriate in case of doubt for a national court to decide to stay its proceedings under article 22: see in this regard the judgment of the High Court (Ognall J) of 31 January 1990 in Virgin Aviation Services Ltd v CAD Aviation Services [1991] ILPR 79 in which the court held that there was a strong presumption in favour of allowing an application for a stay (see at page 88: ‘Commentary on the Jenard Report on article 22 signifies the strong presumption where an application is made for a stay, lies in favour of the applicant.’)

76.

Furthermore, there are three factors which may be relevant to the exercise of the discretion vested in national courts by virtue of article 22, but this does not mean that other considerations may not also be important. Those three factors are (1) the extent of the relatedness and the risk of mutually irreconcilable decisions; (2) the stage reached in each set of proceedings; and (3) the proximity of the courts to the subject matter of the case.

77.

Clearly, the closer the connection between the proceedings in question, the more necessary it would appear for the court second seised to stay its proceedings. If other factors are of some relevance to the proceedings pending before the court first seised, it may be appropriate for the court second seised not to stay its proceedings …. The more the proceedings are related, however, and the greater the risk of the courts arriving at irreconcilable decisions, the more likely it will be that the court second seised should stay it proceedings in accordance with article 22.

78.

… it is also legitimate for the court second seised to have regard, when reaching its decision regarding a possible stay, to the stage reached in the parallel proceedings. The proceedings before the court first seised should of course have reached a more advanced stage than the proceedings before the court subsequently seised of a related action. Where this is not the case, however, and where there is no prospect of a decision in the first set of proceedings, there is nothing to prevent the court subsequently seised from taking account of this when arriving at its discretionary decision. (emphasis added)

79.

Finally, it goes without saying that in the exercise of such discretion regard may be had to the question of which court is in the best position to decide a given question ….” (emphasis added).

Notwithstanding the comments at paragraph 75 in the above citation, the burden of proof remains on the applicant to show that it is appropriate for a stay to be granted. The point was considered by Rix J (as he then was) in Centro Internationale Bank AG v Morgan Grenfell Trade Finance Limited [1997] CLC 870 at 891–2, where he said: “… there is no presumption in favour of a stay” and that “the burden of proof or persuasion is on the applicant” where the preconditions for the Article 28 power have been satisfied.

In Sarrio SA v. Kuwait Investment Authority [1999] 1 AC 32 at 71 Lord Saville’s preference was for a simple and wide test to be applied on a case by case basis. The test of “relatedness” is straightforward in principle and Article 28(3) applies an autonomous test. As Lord Saville says at pp 38H and 41F:

“The essential debate between the parties is whether the actions are related, and the debate is concentrated on whether there is a risk of irreconcilable judgments relating from the two sets of proceedings…” and

There should be a broad commonsense approach to the question whether the actions in question are related, bearing in mind the objective of the article … and refraining from an over-sophisticated analysis of the matter”.

Further guidance to the question of relatedness is provided by the Court of Appeal in Research in Motion UK Ltd v Visto Corporation [2008] EWCA Civ 153, [2008] 2 All ER (Comm) 560 at paragraphs 36-37, where the Court said:

“[i]ts effect [i.e. of article 28] is not entirely mechanical. It requires an assessment of the degree of connection, and then a value judgment as to the expediency of hearing the two actions together (assuming they could be so heard) in order to avoid the risk of inconsistent judgments. It does not say that any possibility of inconsistent judgments means that they are inevitably related. It seems to us that the Article leaves it open to a court to acknowledge a connection, or a risk of inconsistent judgments, but to say that the connection is not sufficiently close or the risk is not sufficiently great, to make the action related for the purposes of the Article. Mechanics do not, for once, provide a complete answer.

This was applied by Mummery LJ in the recent case of Stribog Limited v FKI Engineering Limited, FKI Limited[2011] EWCA Civ 622 at paragraph 48, where he said:

‘Article 28, under which a stay is discretionary, looks to the current position and to matters that post-date the onset of the proceedings to consider the relationship between actions that are pending to see if they are related and if there is a risk of irreconcilable judgments. Actions are compared to see if they are related rather than claims compared to see if they are the same. See Research in Motion UK Ltd v Visto Corporation [2008[ EWCA Civ, [2008] 2 All ER (Comm) 560 at ]35] [36] and [40].’”

In Cooper Tire & Rubber Company Europe Limited & Ors v DOW Deutschland Inc and Others [2010] EWCA Civ 864 (at paragraph 54) the Court of Appeal made clear that it is often important when exercising the discretion to consider when the respective courts might make a decision. The Court held in dismissing the appeal against the refusal of the Judge (Teare J) to grant a stay under Article 28:

“54

The only substantive argument of Mr Rabinowitz which needs to be addressed is his submission that the judge was wrong to take into account the time when a decision was likely to be reached, in considering the stage which the proceedings had reached at the time of the application to the English court. He submitted that the judge was impliedly criticising the Italian court system by saying that it was unlikely a decision would be reached until September 2012. (In fact we now know that the next hearing in the appeal on the outright dismissal of the claim will not occur until January 2014).

55

But there is no such implied criticism. The fact that it may take different periods of time for similar proceedings to come to a conclusion in different jurisdictions, for whatever reasons, is not a criticism; it is merely a fact of life to which a judge cannot be expected to close his eyes.

56

The judge could, moreover, have referred to authority in addition to that of Advocate General Lenz in Owens Bank Ltd v Bracco . At an earlier stage in Owens Bank Ltd v Bracco Ms Barbara Dohmann QC made a similar submission to the Court of Appeal to that which Mr Rabinowitz made to us. In the judgment of the court delivered by Parker LJ it was said that the judge had been entitled to take into account the fact that a decision was not imminent, see [1992] AC 443, 474. In the Centro case moreover Rix J took into account the fact that a decision in an Italian action might well not be heard before a decision would be reached in England, [1997] CLC at page 893D.”

The Defendants contend, in the English Proceedings and in the Greek Proceedings, that SLC and FFG-IP, as the parties to the MOA, together with Seven and FFG-DH, had agreed to a “Revised Schedule Agreement” in relation to the second and subsequent instalments. They contend that this was evidenced by an email dated 16 November 2009. They further contend that FFG-DH did not take any step to exercise its right to extend the payment due date by one year for the second instalment because it believed the Revised Schedule Agreement was binding; and that accordingly, the Claimants are estopped from demanding payment or calling upon the Second Bank Guarantee, on the basis of the old schedule of payment; that Seven wrongly refused to sign the formal document evidencing the Revised Schedule Agreement; and that Seven knew that it was not entitled to make a demand on the Second Bank Guarantee because of the terms of the Revised Schedule Agreement.

As a separate complaint, the Defendants contend that Seven submitted a demand for payment of the second instalment under the Second Guarantee including a document called a “Certificate of Closing and Recognition” purportedly signed on behalf of FFG-DH by Josep Sfez, a legal representative of Seven but not FFG-DH; that Mr Sfez had no authority to sign the Certificate of Closing and Recognition on behalf of FFG-DH; and that, accordingly, Seven was not entitled to payment of the second instalment of the purchase price under the Second Guarantee and that Seven and Mr Sfez have each engaged in “anti-contractual” conduct against FFG-DH. As a result, FFG-DH and FFG-IP have suffered losses because of damage to their financial reputations, which they will seek to recover by counterclaim in the English Proceedings.

Mr. Jeffrey Chapman QC, counsel for the Defendants submitted as follows:

Largely for the reasons put forward by Mr. David Cavender QC, in his submissions on behalf of the Claimants, I concluded that the two actions are not so closely related that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments.

My reasons for reaching this conclusion may be summarised as follows.

First, although the proceedings are theoretically connected, in that some of the issues that arise for determination in the Greek Proceedings are the same as those that arise in the English Proceedings, the connection cannot be characterised as so close that it is expedient to hear them together.

Thus not only are the issues with which the Greek court is concerned narrow (since they related to the obligation to pay the second instalment), but the parties to those proceedings are the relevant banks (Proton Bank S.A. and National Bank of Greece S.A.) and FFG-DH. FFG-IP, the primary defendant in the English proceedings, is not a party to the Greek Proceedings. Nor are the Claimants presently engaged in those proceedings although the Second Claimant, Seven, did support the application by the Banks and has been made a nominal party. SLC (the First Claimant) is not involved in the Greek Proceedings in any capacity.

Accordingly, even if the Greek court were to make relevant findings as to the underlying obligations under the MOA and the Revised Schedule Agreement point, such findings would not bind SLC or FFG-IP. The only jurisdiction where all the parties are present and involved is in these proceedings in this jurisdiction.

Second, the claims in the English Proceedings will go ahead irrespective of the Greek Proceedings, since the latter only relate to whether the banks are obliged to honour the Second Bank Guarantee in relation to the second instalment payment due under the MOA. The English Proceedings address additionally further instalments, at least one of which, in the sum of $1,000,000, on the Defendants’ own case, is already overdue.

Third, it must be legitimate to take into account, in the exercise of the court’s discretion, the fact that the Defendants’ argument in relation to whether the dates for payment under the MOA were agreed to be rescheduled (“the Revised Schedule Agreement point”) is so weak, as currently presented in the evidence on this application, as to be the likely subject of a summary judgment application.

The case put forward in this respect by the Defendants is that “.. in or around November and December 2009 the parties to the Memorandum of Agreement agreed a revised schedule for the making of payments..”. The document relied upon by the Defendants as constituting an agreement, is a single email dated 16 November 2009. As Mr. Cavender put it, that was part of a continuum of negotiations conducted by email which then continued through December 2009. By way of example, by email dated 4 December 2009 the Claimants’ US lawyer wrote to the Defendants’ US lawyer saying:

“.. with respect to the payment schedule, as of now it is still not clear what exactly FFG has in mind, and nothing has been or will be agreed until we understand the request..the fact that we have indicated a willingness to consider a request to extend the payment deadline..should not be understood in any way as a willingness to agree either concept- which as of today we do not..”.

Moreover, the Revised Schedule Agreement relied upon by the Defendants was itself superseded by a further draft sent by the Claimants’ lawyer on 2 February 2010 stating: “.. The changes are rooted in a few important concerns worth mentioning”. The attached draft containing significant tracked changes.

Thus, the documentary evidence clearly demonstrates is that there was no agreement as to the terms of any revised payment schedule in the correspondence.

Furthermore, clause 16 of the MOA required any amendments to the agreement to be in writing, and signed by each party. There is no suggestion such requirement has been fulfilled or waived. Indeed, the reverse was the case. The continuum of unsuccessful negotiations on this subject shows that both parties were adhering to this contractual requirement - and it was never met.

I accept Mr. Cavender’s submission that the Defendants’ argument on the Revised Schedule Agreement is so weak as to be incapable of creating a connection sufficiently substantial to invoke the discretion conferred on the court under Article 28.

Fourth, even on the assumption that there was a close connection, there is, in my judgment, no risk of inconsistent judgments. If this action proceeds in the normal way before the English courts, the English proceedings can be tried and judgment given prior to the hearing of the Greek Proceedings even if the latter were to be effectively tried on 22^nd November 2012, which in itself is highly doubtful on the evidence before me: see the evidence of both Vassilis Koroxenidis and Panagiotis Tsoumanis. The former suggests that the effective trial of the Greek Proceedings may well not take place until 2014. A trial in the Commercial Court could be heard in April 2012.

Fifth, the English court is in the best position to determine the underlying obligations and any issue on a Revised Schedule Agreement. This is a matter which I am entitled to take into account in the exercise of my discretion. Each of the relevant agreements which form the backbone of the dispute is governed by English law, and by an English exclusive jurisdiction clause. The underlying dispute is focused upon the non-payment of the second and third instalments of the price for the sale of the IP rights to the “Seven 7” brand due to the Claimants pursuant to clause 4 of the MOA. Payment of the second instalment is due to the Claimants from FFG-IP pursuant to clause 4 of the MOA and additionally from FFG-DH under the terms of the Side Agreement whereby it agreed to be responsible for paying, inter alia, the second instalment (see clause 3). Payment of the third instalment is due to the Claimants from FFG-IP pursuant to clause 4 of the MOA and additionally, from FFG-DH under the terms of the Side Agreement. No defence to the obligation to pay has been put forward by the Defendants. The IP rights have been transferred under the MOA and FFG-IP have signed a certificate evidencing this (This is not the certificate of closing about which there is a dispute.)

Thus, the only points raised by the Defendants are the Revised Schedule Agreement point (which I consider to be extremely weak, and in any event goes to timing), an argument under clause 5F of the MOA for an extension of time (which goes to timing) and which in any event has been dealt with in the subsequent Settlement Agreement, clause 3 of which provided that a condition precedent for FFG-IP to exercise its rights of extension was to put in place a replacement bank guarantee covering the amount deferred, and a threatened counterclaim arising out of the attempt to trigger the guarantee in relation to the second instalment (which, for reasons it is not necessary to rehearse, is also very weak). Such disputes, arise between the Claimants and FFG-IP and FFG-DH. They are governed by English law and subject to the exclusive jurisdiction of the English courts. The enforcement of the security interest under the IP Security Agreement, and any dispute that may arise under it, are similarly governed.

It is for the English court to determine those obligations - in particular the obligation to make payment. If there are other secondary obligations such as bank guarantees in relation to such payment obligations, then such can only operate once those primary English law obligations have been determined. Only then, can the Greek court decide whether or not the demand under guarantee in relation to the second instalment is valid.

Thus, the English proceedings will continue, whatever the outcome in the Greek Proceedings. The latter proceedings are narrow in scope, as already described above. The Claimants will be entitled to claim payment of the third instalment under the MOA, whether or not the Greek court permits the Greek banks to pay under the second instalment bank guarantee.

Even if the Defendants were to be successful in arguing that the date for payment had been varied under the MOA, nonetheless, on the draft Revised Schedule Agreement the sum of US$1m has been due and outstanding since 31 December 2010. If the Greek Proceedings were to come on for hearing in November 2012, even on the Defendants’ case, a total of US$2.5m would be due and outstanding as at that date.

Moreover, the fact that English law governs the relationship between the parties is a reason for the English Proceedings to continue so that the Greek court can on 22 November 2012 (or at such later date as the Greek Proceedings are heard) consider the issues of Greek law on the guarantee as it applies to the second instalment against a background of declared rights of the parties as to their underlying obligations as a matter of English law.

A stay of the English Proceedings pending the determination of the Greek Proceedings would require the Greek court, before proceeding to determine points of Greek law under the guarantee, to determine points of English law as to the parties’ underlying obligations under the MOA and Side Agreement. But these are points of English law that the parties had agreed by contract would exclusively be determined by the English courts.

Sixth, I also take into account, in the exercise of my discretion, that the issue of non-authorisation raised in the Greek Proceedings in relation to the signing of the Certificate of Closing on behalf of FFG-DH (and in relation to which the Defendants propose to raise a counterclaim in the English Proceedings) is not only factually very weak, but also cannot be determinative of whether the English Proceedings should be stayed. The evidence makes clear: that there is no extant claim for damages by FFG-DH against either of the Claimants in respect of this matter; that such a claim could not form part of the present Greek Proceedings; and that separate Greek proceedings would need to be issued to advance such a claim. Any such claim would be entirely separate from the English proceedings. The future hearing in Greece of such a threatened action would not conflict with the issues of payment which are to be determined in the present English action. Such threatened future proceedings cannot justify the stay of the current English action.

Moreover, apart from the fact that SLC is not a party to the Greek Proceedings and Seven is only a nominal party, having intervened, any finding on the issue of authorisation by the Greek court would not be binding upon SLC and would have very little effect outside the context in which it was made.

Seventh, the Defendants have not, and could not, have brought proceedings against the Claimants in Greece arising out of the MOA, the Side Agreement, the alleged Revised Schedule Agreement or other relevant agreements because of the exclusive English jurisdiction clauses and the application of Regulation 23. The reality is that the Defendants sought to ask the English court to proceed on the basis that, by virtue of the existing claim against the banks, they had such an extant claim before the Greek courts (which they do not) and then stay the English proceedings on the back of it. In my judgment, to accede to this application would amount to the tail wagging the dog.

Accordingly, I concluded that, in the particular circumstances of this case:

For the above reasons, I dismissed the Defendants’ application to stay the English Proceedings.

I will hear argument from counsel as to any consequential matters arising from this judgment, to the extent they are not agreed or have not been dealt with in my order of 8 July 2011.