Misland (Cyprus) Investments Ltd & Amor v McKillen & Anor

The court held that the English court had jurisdiction under Article 6(1) of Council Regulation (EC) 44/2001 (the Brussels Regulation) because Coroin Limited, an English-domiciled defendant, was a real and proper "anchor defendant" with a genuine interest in the question whether Mr McKillen's Shareholder Security had become enforceable. The claims against Coroin and Mr McKillen raised the identical legal issue (whether the security was enforceable by reason of section 12(1) of the Irish Bank Resolution Corporation Act 2013) and were therefore so closely connected that it was expedient to hear them together to avoid the risk of irreconcilable judgments.

The judge agreed with Master Bowles that Coroin was not a mere nominal or neutral defendant: it had indicated an intention to contest the proceedings and the declaration sought would affect Coroin's duties under the Shareholders' Agreement and the articles. The judge also rejected the contention that the merits of the claim against the anchor defendant were determinative at the jurisdiction stage and declined to revisit Master Bowles's findings that there was no Article 5(1) jurisdiction and no case management stay; those conclusions were not appealed.

Background and parties:

• The dispute concerns control of Coroin Limited, which owns high-value London hotels. The claimants are shareholders and mortgagees with a potential controlling interest; Mr McKillen is an Irish-domiciled shareholder holding 36.21% of Coroin. The litigation follows earlier proceedings concerning control of Coroin ([2012] EWHC 2343 (Ch) summarised in the judgment).

Nature of the claim and relief sought:

• The claimants sought a declaratory judgment that Mr McKillen's Shareholder Security had become enforceable within the meaning of clause 6.6 of the Shareholders' Agreement and/or Article 5.6 of Coroin's Articles by reason of section 12(1) of the Irish Bank Resolution Corporation Act 2013, thereby triggering directors' duties to treat the shares as subject to a Transfer Notice.

Procedural posture:

• Mr McKillen applied for declarations that the English court had no jurisdiction and/or that the claims should be stayed. Master Bowles dismissed those applications on 8 May 2014, holding that Article 6(1) of the Brussels Regulation gave jurisdiction by reason of Coroin being an English-domiciled anchor defendant. Proudman J directed an oral hearing on permission to appeal, and the application was heard before His Honour Judge Behrens on 14 November 2014; judgment was handed down on 25 November 2014 ([2014] EWHC 3859 (Ch)).

Issues framed:

1. Whether the English court has jurisdiction under Article 6(1) by reason of an English-domiciled anchor defendant (Coroin) when the principal dispute appears between the claimants and a non-domiciled defendant (Mr McKillen).
2. Whether Coroin was a nominal or neutral defendant such that Article 6(1) could not be invoked.
3. Whether a declaratory remedy affecting the rights of a non-party director or shareholder can properly be granted in proceedings to which that person is not a party.
4. How authorities on Article 6(1) (including Freeport and Aeroflot) affect the test for jurisdiction, in particular whether the merits of the claim against an anchor defendant are relevant at the jurisdiction stage.

Court's reasoning and decision:

• The court concluded that the question whether Mr McKillen's Shareholder Security is enforceable directly engages Coroin because that question is the trigger for directors' powers and duties under clause 6.6/Article 5.6; Coroin therefore has a real interest and is a proper party rather than a mere nominal defendant.
• Because the claims against Coroin and Mr McKillen raised exactly the same issue, there was a plain risk of irreconcilable judgments if the claims were tried separately. That satisfied Article 6(1)’s requirement that claims be so closely connected that it is expedient to hear them together to avoid inconsistent judgments.
• The judge accepted Master Bowles’s earlier findings that there was no jurisdiction under Article 5(1) and no need for a case-management stay; those conclusions were not appealed. He considered but did not need to decide the wider question of the precise impact of Aeroflot on the role of merits review for an anchor defendant, and observed that his view did not require disturbing the Master’s conclusion that Coroin had a genuine interest.
• The judge noted the modern, pragmatic approach to declaratory relief (CPR 40.20 and the White Book) and concluded that the claim against Coroin was not bound to fail for want of a proper contradictor.

Disposition: Permission to appeal was granted but the appeal was dismissed; Master Bowles’s decision that Article 6(1) jurisdiction was established was upheld.

The appeal is dismissed. The court upheld Master Bowles's conclusion that the English court had jurisdiction under Article 6(1) of the Brussels Regulation because Coroin Limited (domiciled in England) was a proper "anchor defendant" with a real interest in the outcome; the claims against Coroin and Mr McKillen raised the same issue and there was a real risk of irreconcilable judgments if tried separately. The judge granted permission to appeal but found no error in the Master’s reasoning and did not need to decide the broader question of Aeroflot's effect on merits scrutiny.

Master Bowles dismissed Mr McKillen's jurisdictional applications on 8 May 2014. Proudman J ordered that the permission to appeal be listed for oral hearing on 6 June 2014. The oral hearing and appeal were heard before His Honour Judge Behrens on 14 November 2014, with judgment handed down 25 November 2014 ([2014] EWHC 3859 (Ch)).