Kolden Holdings Ltd v Rodette Commerce Ltd and another [2007] EWHC 1597 (Comm), [2007] All ER (D) 50 (Jul)
Queen’s Bench Division (Commercial Court)
Mr Justice Aikens
4 July 2007
A valid legal assignment of the rights under a contract may render the assignee the same party as the assignor for the purposes of Art 27 of Council Regulation (EC) 44/2001 (the Brussels Regulation) when determining which court was first seised of an action.
Mark Howard QC and David Wolfson (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the claimant.
Bernard Eder QC and Jeremy Brier (instructed by Steptoe & Johnson) for the defendant.
The proceedings concerned enforcement of a set of securities sale and purchase agreements (SPAs), all of which were on the same terms. The sellers issued proceedings in London in July 2006, seeking inter alia a declaration that under the SPAs each of the defendants was obliged to transfer shares. In November 2006, the sellers as assignors concluded a deed of assignment with the claimant, Kolden, as assignee, transferring the rights in the SPAs. In February 2007, the defendants issued proceedings in Cyprus seeking the mirror image of the contract cause of action pleaded by the sellers in England.
The English court later gave permission to Kolden to be substituted as claimant in place of the sellers in the English action and the claim form was reissued with Kolden as the sole claimant. The defendants challenged the English court’s jurisdiction, contending that Cyprus was the jurisdiction first seised with the action for the purposes of Art 27 of the Brussels Regulation. The defendants accepted that the English court was first seised until the assignment. They submitted, however, that Kolden was a different legal entity from the three assignor companies. When the Cypriot action was issued then, as between the defendants and Kolden, the Cypriot court was the one first seised.
AIKENS J:
Article 27 provided:
“1. Where proceedings involving the same cause of motion and between the same parties are brought in the courts of different member states, any court other than the court first seised shall of its own action stay its proceedings until such time as the jurisdiction of the court first seised is established. 2. 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.”
There were only two relevant cases: Maciej Rataj, The Tatry (cargo owners) v Maciej Rataj (owners):
C-406/92 [1994] ECR I-5439, [1995] All ER (EC) 229 and Drouot Assurances SA v Consolidated Metallurgical Industries and others: C-351/96, [1998] ECR I-3075, [1998] All ER (D) 220.
The Drouot case established that two legal entities could be regarded as “the same party” for the purposes of what was Art 21 of the European Convention on Human Rights (the Convention) and was now Art 27 of the Brussels Regulation. Second, whether that was so in any particular case would be a matter for the national court to decide.
Third, the national court had to look at the facts of the case concerned and, in particular, “the subject matter of the two disputes” in the two relevant proceedings to see if the two legal entities were to be regarded as “the same party” for the purposes of Art 21/27.
Fourth, the test that the national court had to apply was: whether or not the interests of the two legal entities involved in the two disputes were identical to and indissociable from one another in relation to the subject matter of the two disputes concerned. Fifth, one way of demonstrating that identity of interest was by asking whether a judgment against one legal entity in respect of the subject matter of the two disputes would have the force of res judicata against the other legal entity.
In In Re Cover Europe Ltd [2002] BCLC 61, [2002] All ER (D) 359 (Feb) the deputy judge held that, in relation to the subject matter of the proceedings, the liquidator and the company were to be regarded as “the same party” for the purposes of Art 21 of the Convention. He held that this issue had to be “...decided as a matter of substance, not form” and that fine distinctions made in English insolvency law between the position of the company in liquidation and the liquidator should not apply to the question that arose under Art 21. His Lordship respectfully agreed with that approach.
His Lordship was satisfied that Kolden had a good arguable case that the assignment was valid as a legal assignment under s 136 of the Law of Property Act 1925.
That being so, the next question was whether the interests of the two legal entities concerned were identical to and indissociable from one another in relation to the subject matter of the English and Cyprus actions.
In his Lordship’s view, Kolden fulfilled the tests for being regarded as the same party as the assignor companies for the purposes of Art 27. From the moment the defendants received notice of the assignment, the legal transfer of the rights covered by the assignment was complete. All rights passed to Kolden. Its interest in the SPAs and any rights of action arising out of them were identical to those formerly possessed by the assignor companies; neither greater nor smaller. The interests of Kolden, as legal assignee, were indissociable from those of the assignor companies because the rights of Kolden were only those of the assignors and no more and no less.
The nature of the identity of the interests of the three assignor companies and Kolden could be tested by asking whether or not a judgment on the contract cause of action issue in an action involving the former would bind the latter. If, as his Lordship had concluded, they had an identity of interest, then a decision of a court of competent jurisdiction on the merits of the contract cause of action against the one had to be res judicata as against the second.
It followed that the English court was the court first seised of the action; it had been seised since July 2006.
