Posts Tagged Unjust enrichment
ED&F Man Capital Markets v Come Harvest Holding et al. First application of the UKSC Vedanta ruling and applicable law issues under Rome II Articles 4 and 10.
In  EWHC 1661 (Comm) ED&F Man Capital Markets v Come Harvest Holding et al claimant, MCM, entered into a Master Commodities Sale and Purchase Agreements with two Hong Kong companies, Come Harvest and Mega Wealth. The Master Agreements contained English exclusive jurisdiction agreements. Subsequent agreements were then entered into for the sale and purchase of nickel. The dispute between the parties turned on whether payments had been made by MCM to Come Harvest and Mega Wealth based on forged warehouse receipts. Those receipts had been issued by a warehouse operator, Access World, to the initial order, in most cases, of a Singaporean company, Straits.
In May 2017, MCM commenced pre-action disclosure proceedings in Singapore against Straits and in December 2017 it commenced English proceedings against Come Harvest and Mega Wealth. In September 2018 MCM sought to join Straits to the English proceedings and obtained an order granting permission to serve Straits out of the jurisdiction in Singapore. Straits challenged the jurisdiction of the English court.
There is sometimes an advantage to not immediately follow-up a Tweet with a blog post: the two preceding paras are the summary of the factual and procedural background by Herbert Smith.
Of particular note is the discussion at 43 ff on the impact of the UKSC’s Vedanta ruling: particularly, the ‘multiplicity’ issue which in my review of Vedanta, I discuss at 5. At 45:
Straits contended that MCM should not be able to rely as a “trump card” on the multiplicity point and the risk of irreconcilable judgments so as to create a single forum for all claims against all parties in England, in circumstances where that outcome was the result of choices which MCM had made along the way. Straits claims that MCM exercised a choice at the outset to commence the OS 533 action against Straits in Singapore and thereby intended that any substantive proceedings would be brought there too. Straits says that MCM should be held to this choice which it says exerted and continues to exert a “gravitational pull” towards Singapore. Straits also says that MCM could have attempted to engineer a single composite forum for all claims against all parties in Singapore by requesting that Come Harvest and Mega Wealth did not insist on their rights under the English court exclusive jurisdiction clauses in the Master Agreements or by commencing proceedings against those parties in Singapore in breach of the exclusive jurisdiction clauses and then contending that strong reasons existed as to why no anti-suit injunction should be imposed against the continuation of those proceedings.
At 46 Teledano DJ dismisses the suggestion.
In Vedanta, and leaving aside the substantial justice issue, the claimants had a straightforward choice between Zambia and England for all claims against all parties. The dispute was overwhelmingly Zambian in focus and nature. Yet the claimants chose to pursue their claims in England. In the present case, MCM has never had a straightforward choice of this kind that would have enabled it to sue all parties in Singapore (or some other jurisdiction apart from England). MCM has at all material times been bound by the exclusive jurisdiction clauses in the Master Agreements to sue Come Harvest and Mega Wealth in England. There is no evidence to suggest that, had either of these parties been approached, they would have been willing to give up their rights under those exclusive jurisdiction clauses. Nor do I accept that the concept of choice as referred to by the Supreme Court can be stretched so as to require a party to act in breach of contractual promises as to jurisdiction and then to fall on the mercy of the Court so as to avoid the grant of an anti-suit injunction. MCM is entitled to say that it had no choice but to sue Come Harvest and Mega Wealth in England. Having done so, there is real force in the submission made by MCM that England is the proper place for all claims against all parties because it is the only jurisdiction where a single composite forum can be achieved.
Turning then at 59 ff to applicable law, the issue is particularly how to define ‘direct damage’ (Article 4 Rome II) in the case of unlawful means conspiracy. Straits contends that the direct damage occurred where MCM was unable to obtain the metal it had purchased. That would be at the warehouses in Singapore, Malaysia and South Korea. By contrast, MCM contends that the direct damage occurred in England. This was the place from which MCM paid out funds to purchase the metal and it is also the place in which MCM received the Receipts that it alleges were forged. Teledano DJ at 62:
The key to ascertaining where the direct damage occurred in the present case is to keep in mind that, under the Master Agreements, MCM was only required to make payment upon receipt of the Receipts. MCM suffered direct damage when it made payment upon receipt of what are alleged to have been forged Receipts. Both the payment out, and the obtaining of the Receipts, occurred in England. If the Receipts were forged, the warehouse operators will not have been required to hand over metal from the warehouses upon presentation of the Receipts. However, it seems to me that this is a consequence of the damage that on MCM’s case it had already suffered rather than the direct damage itself.
English law, therefore, applies, as it does (at 70 ff) to the knowing receipt and equitable proprietary claims (see discussion re Article 4 cq 10 (unjust enrichment) Rome II, at 70 ff).
(Handbook of) European private international law, second ed. 2016, Chapter 8, Headings 184.108.40.206., 8.3.2; Chapter 4, Heading 4.4.
Siemens: Debt arising from the unjustified repayment (by the authorities) of a fine for infringement of competition law excluded from Brussels I.
The Court held in C-102/15 Siemens just before mine and their summer break. It had escaped my attention. At issue was whether debt arising from the unjustified repayment of a fine for infringement of competition law falls within the scope of application of the Brussels I Recast. It does not. The Court distinguished flyLAL: while private actions brought to ensure compliance with competition law fall within the scope of the Regulation, a penalty imposed by an administrative authority in the exercise of the regulatory powers conferred upon it under national legislation comes within the concept of ‘administrative matters’, excluded from the scope of Regulation No 44/2001 in accordance with Article 1(1) thereof.(at 35).
An action in unjust enrichment related to the interest due, following to and fro, imposition and rescinding, ending finally in confirmation of the fine, is intimately bound up with that fine and therefore follows it in the exclusion.
A judgment of note for those who wish to keep complete overview.
(Handbook of) European private international law, 2nd ed. 2016, Chapter 2, Heading 220.127.116.11 ff.
RPC and Sarah Shaul it seems, like me, are hoovering up database backlog – once again thank you to their excellent blog for alerting me to Banque Cantonale de Genève v Polevent. Other than the direct impact for the interpretation of Rome II‘s Article 10, and its relation with Article 4’s general rule, an important lesson from the case to me seems to be, yet again, the relevance of the articulation of claims, for the determination of jurisdiction.
Facts are as follows (at 2 ff). Claimant (“BCGE”) is a bank in Geneva. On 24 March 2104 a man calling himself Mr. Dumas telephoned BCGE and asked to speak to Yvan Nicolet of the accounting department. He was not in the office and so the call was taken by Jacqueline Konrad-Bertherin. Mr. Dumas asked her to send a confidential message to what he said was the private mail address of Eric Bourgeaux, the deputy CEO of BCGE. She did so and received a reply from someone claiming to be Mr. Bourgeaux instructing her to pay Euro 6,870,058 from BCGE to the Natwest Bank in London in favour of Polevent Limited. She did so. She believed she had been instructed to do so by Mr. Bourgeaux; but she had not been. The fraud was discovered and repayment was requested later that day.
Shortly before the fraud Natwest had been advised of a freezing order against Polevent in favour of an Italian company Enoi SpA (“Enoi”). The funds were therefore frozen in Polevent’s account with Natwest. BCGE has claimed damages from Polevent for deceit. BCGE accepts that that claim is governed by the law of Geneva. It has also advanced a claim against Polevent in restitution on the basis that the sum was paid by mistake. It claims that since Polevent must have realised that the sum was paid by mistake the conscience of Polevent was affected such that a constructive trust arises thereby providing BCGE with a proprietary claim in respect of the frozen funds. BCGE says that this proprietary claim is governed by English law.
Enoi is another creditor of Polevent. Enoi maintains that BCGE’s claim for restitution, in common with the claim is in deceit, is governed by the law of Geneva which does not recognise a proprietary claim. The resulting dispute is therefore between two creditors of Polevent. That company is in liquidation and has taken no part in this dispute.
The only preliminary issue which the High Court was asked to adjudicate on is worth repeating in full:
“On the basis of the facts as pleaded in the Amended Particulars of Claim and on the basis that the claim set out at paragraph 13 of the Amended particulars of Claim is governed by the law of Geneva, are the claims set out at paragraph 15 of the Amended particulars of Claim governed by English law or by the law of Geneva ? ”
One can appreciate why two different claims were formulated here.
For the claim in damages for deceit, BCGE accept Geneva law applies. The claim for restitution on the basis of unjust enrichment, however, is covered in its view by Article 10(3) Rome II: the law of the place in which the unjust enrichment took place, this being England, hence allowing for the existence of a constructive trust and priority in the pecking order following Polevent’s insolvency.
Enoi argue that the claim in restitution, like the claim in damages, is covered by the law of Geneva: at 9:
The submission of counsel for Enoi is that the law governing the claim in restitution is the law of Geneva by reason of Article 4(1) of Rome II. The claim arises out of the tort/delict of fraud and so the governing law is that of the place in which the damage occurred, namely, Geneva. Alternatively, the governing law is the law of Geneva pursuant to Article 10(1) on the grounds that the unjust enrichment concerns a relationship arising out of a tort/delict such that the governing law is that which governs that relationship, namely, the law of Geneva. In the further alternative the governing law is the law of Geneva pursuant to Article 10(4) on the grounds that the obligation arising out of the unjust enrichment is manifestly more closely connected with Geneva.
Both parties of course reverse engineer their governing law arguments: being aware of the attraction of one State’s laws over the other, counsel brief is to convince the court that the matter is characterised so that it leads to the warranted applicable law.
Enoi suggest that BCGE in reality have one claim only: one in fraud, a tort, it argues, from which the claim in unjust enrichment follows in a dependent fashion. Teare J disagrees (at 13). A claim in restitution need not be fault-based. It is a separate claim, to which Article 10’s regime applies (in the end leading to a finding of English law).
The judgment is in fact quite short. Its crucial implication to me would seem to be that BCGE has won the day by formulating two separate heads of action. Teare J acknowledges that his view may be an ‘unduly English law’ view, in other words, that he read the formulation of two claims at face value, as being two separate claims, because English law recognises non-fault based unjust enrichment. Regardless of the fact that other States, including European States, do so too, the obvious question is whether the EU’s qualification would be the same. The concept of unjust enrichment, like the concept of tort, necessarily needs to be an ‘autonomous’ one. Yet without much guidance in the preparatory works of Rome II on this concept, who can blame national law for filling in the blanks?
(Handbook EU Private International Law, 2nd ed 2016, Chapter 4, Heading 4.7).