Ferand Business Corporation & Ors v Maritime Investments Holdings Ltd & Anor

Declaratory relief is discretionary. The court must identify a real and present dispute, ensure that all affected parties are before it or properly represented, and consider whether the declaration will serve a useful purpose and provide the most effective means of resolving the issue.

English courts should generally avoid declarations intended to influence foreign proceedings or to circumvent an agreed arbitral process. That consideration carries less weight where the relevant parties are before the English court and the declaration will finally resolve the dispute. A declaration should be confined to the precise issue established by the evidence and pleadings.

The claimants sought declarations concerning the parties’ rights and obligations under a stockholder agreement governing Maritime Investments Holdings Ltd, including information rights, management fees, charter hire, the sale of a vessel, the appointment of a director and sums allegedly due.

Some demands had been made by extra-judicial notices issued in Greece. Related issues were also subject to Greek proceedings or a London arbitration. The court therefore had to determine both the substantive entitlement to declarations and whether declaratory relief should be refused as an inappropriate attempt to influence foreign proceedings or circumvent arbitration.

1. Discretionary principles. The court applied the principles summarised from Rolls Royce plc v Unite the Union [2009] EWCA Civ 387; Finance Service Authority v Rourke [2001] EWHC 704; and MessierDowty Ltd v Sabena SA [2000] 1 WLR 2040. Declaratory relief requires a real and present dispute, affected parties must be before the court or properly represented, and the court must consider utility, justice and whether another forum is more effective.
2. Declarations concerning the extra-judicial notices were refused where they would interfere with an extant arbitration, affect a party not before the court, or determine issues more appropriately litigated elsewhere. In particular, the court would not determine First Lines’ alleged management-fee claim against Maritime Investments Holdings Ltd, which was subject to London arbitration.
3. The court rejected the argument that service of the Greek extra-judicial notices itself breached the exclusive jurisdiction clause in the stockholder agreement. The notices were not formal litigation or proceedings capable of being brought in the English courts. In any event, several intended beneficiaries were not parties to the agreement, and no suitable present dispute existed for declaratory determination.
4. Declarations were granted concerning the provision of financial information, the agreed management fee of US$30,000 per vessel per month, and the accounting for charter hire received by the owning companies of the Nikolas III and Titan. The declarations were limited to matters proved by the documents and did not include broad or tendentious sweep-up wording.
5. The court rejected Kolen’s pleaded case that charter hire had been retained by Maritime Enterprises Management S.A. and rejected an unpleaded theory involving fraudulent accounting. Pleadings define the issues for trial, and a party should not be permitted to advance serious allegations outside the pleaded case.
6. The court rejected the alleged agreement that profits from the onward sale of the Christine B would be transferred to Maritime Investments Holdings Ltd or shared with John Frangos. The evidence, commercial probabilities, absence of documentation and the preparation of the reconciliation schedule supported the claimants’ case. A declaration was therefore granted that the defendants were not entitled to proceeds of that sale.
7. Declarations were also granted concerning the appointment of Sheldon Goldman as a director and sums due to the claimants and Maritime Investments Holdings Ltd, subject to further argument on precise drafting. Kolen’s counterclaim for US$770,665.65 was not pursued.