Alta Trading UK Ltd v Bosworth

For the employment-jurisdiction provisions of the Lugano Convention, an individual contract of employment requires a relationship of subordination between the company and the individual. The inquiry is fact-sensitive and concerns the actual relationship, not merely the written contractual terms.

A director or senior executive who has a non-negligible ability to influence the company is not subordinate to it. The shareholders’ power to dismiss the executive, or to give general directions, does not alone establish subordination. The guidance in Holterman concerning a shareholder-manager does not impose a universal two-stage test requiring identification of an instruction-giving body in every case.

The claimants alleged that the first and second defendants, formerly the de facto chief executive officer and chief financial officer of the Arcadia Group, had participated in a large-scale fraud which diverted trading profits from the group. The defendants were domiciled in Switzerland and challenged the jurisdiction of the English court.

Following a reference to the CJEU and a remittal by the Supreme Court, the Commercial Court held that the claimants had a good arguable case that the defendants were not subordinate to the Arcadia claimant companies. It therefore dismissed the jurisdiction challenge: [2020] EWHC 2757 (Comm).

The defendants appealed on the sole substantive issue whether subordination had to be assessed by the proposed two-stage Holterman test, rather than by asking whether they had a non-negligible ability to influence their putative employers.

1. Appeal dismissed. Lord Justice Nugee, with whom Lord Justice Henderson and the Master of the Rolls agreed, held that the Commercial Court had applied the correct test. The claimants had a good arguable case that each defendant had more than a negligible ability to influence each Arcadia claimant company. That was sufficient to show the absence of a relationship of subordination and, consequently, of an individual contract of employment for the relevant jurisdictional provisions.

2. The CJEU authorities required an autonomous and factual assessment. An employment relationship is hierarchical and must be assessed by reference to all factors and circumstances characterising the relationship between the individual and the putative employer. The factual reality prevails where it differs from the written contract.

3. The court rejected the defendants’ proposed universal two-stage reading of Holterman Ferho Exploitatie BV v Spies von Büllesheim (Case C-47/14). Its direction to identify the body able to instruct and supervise a shareholder-manager was guidance for the particular facts of that case. It did not replace the decisive inquiry: whether the individual had a non-negligible ability to influence the company concerned.

4. The shareholders’ ability, through Farahead, to hire and fire the defendants did not itself establish subordination. General shareholder directions and ordinary shareholder control mechanisms were likewise insufficient. The defendants’ ability to determine who employed them and on what terms, coupled with their autonomy in running the group, supported the conclusion reached below.

5. The jurisdictional rules did not require the alternative test urged by the defendants. Although predictability is important, the established requirement to examine all relevant circumstances remained controlling. The case was unusual and did not mean that senior managers generally fall outside the protection of Section 5 of Title II of the Lugano Convention.

• Court of Appeal (Civil Division): dismissed the defendants’ appeal and upheld the declaration that there was a good arguable case that no relevant relationship of subordination existed: [2021] EWCA Civ 687.

• Commercial Court: after remittal, dismissed the jurisdiction challenge, holding that the claimants had a good arguable case that the defendants were not subordinate to the claimant companies: [2020] EWHC 2757 (Comm).

• Supreme Court and CJEU: the Supreme Court allowed the appeal only to remit the subordination issue after the CJEU’s ruling in the same litigation, Bosworth v Arcadia Petroleum Ltd (Case C-603/17; [2019] ILPr 22).

• Court of Appeal (Civil Division): dismissed an earlier appeal on the characterisation of the conspiracy, fiduciary-duty, dishonest-assistance and knowing-receipt claims: [2016] EWCA Civ 818.

• Commercial Court: initially rejected the defendants’ jurisdiction challenge in material respects: [2015] EWHC 1030 (Comm).