Are the English Courts hiding behind an EU Veil?

Case: Antonio Gramsci Shipping Corporation and others v Lembergs [2013] EWCA Civ 730 (19 June 2013)

Background

The ‘Brussels Regulation’ is an EU instrument that determines jurisdiction where a Defendant is domiciled in a member state of the EU.  In particular Article 2 sets out the general rule that a person domiciled in a member state shall be sued in that state though special rules apply to contract law and tort.  Article 23 of the Regulation provides that if the parties to a claim have agreed that the courts in a member state shall have jurisdiction to settle any dispute with a particular legal relationship then those courts shall have jurisdiction, though whether an individual consents to such jurisdiction under Article 23, is an autonomous question of EU law and the parties consent must be clearly and precisely demonstrated.

In limited circumstances English law allows a victim of fraud to claim directly against an individual who had used a company he controls to commit the fraud though a court can only pierce the corporate veil when “a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control”.

Facts

The claimant in this case was the owner of vessels who chartered to various companies supposedly controlled by a wealthy businessman (the defendant).  Unknowingly the charterparties entered into a fraudulent scheme set up by the defendant and others which unlawfully diverted profits from the claimant to enable them to use those profits to purchase shares in the claimant’s parent company.

The claimant brought proceedings in England against the relevant companies as the charterparties contained an exclusive English jurisdiction clause and obtained judgment.  The claimant also argued that it could pierce the corporate veil and make the defendant liable for the lost profits.

The claimant’s argument that the controller of a corporate body who has used the corporate body as a device or facade to conceal wrongdoing by entering into a contract with another containing an English jurisdiction clause could be regarded as having consented to jurisdiction under Article 23 of the Brussels Regulation was rejected by Teare J as such consent could not be inferred unless the controller had indicated that claims against him could be brought in England.

Decision

The appeal was dismissed by the Court of Appeal.  In his Judgment, Beatson LJ, said consent on jurisdiction must be established “clearly and precisely” though there was a measure of flexibility and in some cases an oral agreement can suffice where agreement is later confirmed in writing.  In terms of piercing the corporate veil, English authority only allows this in limited circumstances and it was not justifiable to deem the defendant to have consented to the jurisdiction clause in this case.