Bosworth & Anor v Arcadia Petroleum Ltd & Ors

Whether proceedings concern an individual contract of employment under Articles 18 and 20 of the Lugano Convention depends on the reality and substance of the conduct alleged. The court must ask whether there is a material nexus with the employment contract and whether considering that contract is indispensable to resolving the claim.

The possibility of pleading the conduct as a contractual breach is insufficient. A conspiracy claim is not automatically outside the employment provisions, but its proper characterisation cannot be controlled by pleading technique. Claims by a company which had no contractual relationship with the defendant cannot relate to an individual employment contract merely because the company and an employer belong to the same corporate group.

The appellants were formerly employed by certain companies in the Arcadia Group and acted as the group’s de facto chief executive and chief financial officer. Group companies alleged that they and others had participated in a fraud which diverted substantial profits from the group. The claims included unlawful means conspiracy, breach of fiduciary duty, dishonest assistance and knowing receipt.

On a jurisdictional application, Burton J held in [2015] EWHC 1030 (Comm) that the English court had jurisdiction over the conspiracy claims and most fiduciary-duty claims. He excluded fiduciary-duty claims arising while an appellant was employed by the particular claimant because Articles 18 and 20 of the Lugano Convention required those claims to be brought in Switzerland, where the appellants were domiciled.

The central issue was whether the remaining claims were matters relating to the appellants’ individual contracts of employment or were properly characterised as tortious claims within the English court’s jurisdiction.

1. Appeal dismissed. The English court had jurisdiction over the conspiracy claims, the fiduciary-duty claims preserved by Burton J’s order, and the claims for dishonest assistance and knowing receipt. Gross LJ delivered the judgment, with which Gloster and Macur LJJ agreed.

2. Articles 18 and 20 of the Lugano Convention establish an important and exhaustive jurisdictional regime protecting employees as the presumptively weaker party. When that regime applies, it excludes the special contractual and tortious jurisdictions and ordinarily requires an employer to sue an employee in the state of the employee’s domicile. Its protective purpose does not dispense with the anterior question whether the proceedings concern an individual contract of employment.

3. The governing inquiry concerns the reality and substance of the alleged conduct. The court asks whether the claims have a material nexus with the individual employment contract and whether their legal basis can reasonably be regarded as a contractual breach, making consideration of that contract indispensable. The mere possibility of framing the alleged conduct as a breach of an implied duty of fidelity or loyalty is not decisive. This approach gives effect to Alfa Laval and to Brogsitter v Fabrication de Montres Normandes EURL.

4. The conspiracy claims did not have the required nexus. The alleged wrongdoing arose from the appellants’ de facto group-wide roles, which were outside the employment contracts they had drafted. Those contracts provided an opportunity for the alleged fraud but formed only a small part of its history. They were not indispensable to deciding whether several alleged conspirators had dishonestly acted in combination. There is no special jurisdictional rule for conspiracy: characterisation always depends on the substance and facts, rather than the pleader’s choice.

5. The fiduciary-duty claims were correctly divided according to the existence of a contractual relationship. Claims between persons having no contractual relationship cannot be matters relating to a contract and, still less, matters relating to an individual employment contract. Samengo-Turner and Petter did not permit the separate corporate personality of group companies to be disregarded generally. Those decisions depended on contractual benefit arrangements intrinsically connected with employment, for which there was no equivalent here.

6. The conspiracy claims were properly characterised as tortious, permitting jurisdiction under Article 5.3 or Article 6.1. The parties agreed that the dishonest-assistance and knowing-receipt claims should receive the same jurisdictional treatment, and the court so held.

• Court of Appeal (Civil Division): In [2016] EWCA Civ 818, the court unanimously dismissed the appellants’ appeal and upheld the material jurisdictional rulings. It also confirmed jurisdiction over the subsequently pleaded dishonest-assistance and knowing-receipt claims.
• High Court, Queen’s Bench Division, Commercial Court: Burton J held in [2015] EWHC 1030 (Comm) that the court had jurisdiction over the conspiracy claims and most claims for breach of fiduciary duty. He dismissed for want of jurisdiction those fiduciary-duty claims arising while an appellant was employed by the claimant concerned, because Articles 18 and 20 of the Lugano Convention required such claims to be brought in Switzerland.