Antonio Gramsci Shipping Corporation & Ors v Recoletos Ltd & Ors

Summary judgment requires the claimant to establish that the defendant has no real prospect of successfully defending the claim and that there is no other compelling reason for trial. The court must avoid conducting a mini-trial, particularly where serious fraud, dishonesty, disputed facts or foreign law are involved. Strong evidence and serious misgivings about a transaction do not justify judgment where the issues are interlinked, fact-sensitive and require examination of individual transactions. A conditional order requiring security may nevertheless be appropriate where a successful defence remains realistically possible but improbable.

Thirty ship-owning companies sought summary judgment against companies alleged to have participated in a scheme involving 63 time charterparties. The claimants alleged that the arrangements diverted profitable sub-chartering opportunities from them to the defendants, benefiting shareholders associated with the Ventspils Group. They advanced claims based on want of authority, common law fraud on minority shareholders and illegality.

The defendants relied on disputed factual issues, attribution of knowledge, the defence of ex turpi causa, and the scope of Article 1415 of the Latvian Civil Code. The central question was whether the claim was sufficiently clear to be determined under CPR Part 24 or required a trial.

1. Summary judgment test. The claimant bears the overall burden of showing that the defendant has no real prospect of success and that there is no other reason for a trial. The defendant’s evidential burden is limited, but the court must not conduct a mini-trial. Particular caution is required where the claim involves serious fraud or dishonesty.
2. The Scheme. The evidence provided the claimants with a powerful and prima facie cogent case that corporate opportunities had been diverted. The interposition of the defendants, the substantial profits, the secrecy of the arrangements and the absence of a proper evidential foundation for the suggested risk-management purpose all materially supported that conclusion. Under the ship-management contracts, there was a strong case that LSC had exceeded its authority by failing to protect and promote the claimants’ interests. If so, the charters might be void under English law if the defendants knew of the want of authority.
3. Article 1415. The court preferred the claimants’ argument that Article 1415 of the Latvian Civil Code probably had a broad scope, extending beyond transactions illegal per se to transactions driven by fraudulent intent or intended to circumvent the law. However, Latvian law remained in a state of development. The meaning of “transaction”, the mental element and the effect on attribution of knowledge required fuller evidence at trial.
4. Attribution and illegality. There was at least an arguable case that the knowledge of the alleged masterminds was attributable to LSC and independently to the claimants. That created an arguable ex turpi causa defence. The proposed illegality claim was permitted to be amended, but it depended on proving common law fraud against the minority.
5. Disposition. The issues could not realistically be compartmentalised. Individual charters had not been examined, and actual dishonesty and subjective states of mind were fact-sensitive. Summary judgment was therefore declined. A conditional order under CPR Part 24.6 was made, requiring the defendants to pay a very significant sum into court, or provide equivalent security, as a condition of defending.

First-instance decision. No earlier decision is stated in the judgment.