Catalyst Investment Group Ltd v Lewinsohn & Ors

Factual and Procedural Background

There are five applications across three separate claims before the court. One unopposed application seeks joinder of additional claimants pursuant to CPR Rule 19.2(2). The other four applications are contentious Part 11 applications seeking to stay the relevant claims on forum conveniens grounds, particularly due to parallel proceedings in Utah, USA.

The claims fall into two groups: the first group involves the defendants' applications in two related claims collectively referred to as the "Declaratory Proceedings," involving Company A and Appellant, and Company B as claimants against Defendant and Maximillian & Co. The second group consists of two applications in a third claim, known as the "Noteholder Proceedings," involving Company A as claimant and Defendants including Defendant, Maximillian & Co, and a third party, Company C.

The Declaratory Proceedings and Noteholder Proceedings share much factual background and principal parties, though they concern distinct issues and are likely to proceed to separate trials. The background involves secured loan agreements governed by Utah law, promissory notes issued by a now-defunct Utah corporation, and related intellectual property rights ("IP Rights"). Company A and Appellant are English domiciliaries; Defendant is also domiciled in England and uses Maximillian & Co as a trading name. Company B is a Luxembourg entity, and Company C is registered in the British Virgin Islands.

Disputes arose from letters allegedly drafted by Defendant and sent in England, concerning investment commitments in the Utah corporation. Subsequent agreements to convert secured notes into equity and back, bankruptcy proceedings in Utah, and litigation in both England and Utah followed. Parallel proceedings include the "Utah Fraud Proceedings" initiated by Defendant and others against Company A and Company B in Utah, alleging fraudulent misrepresentation, and the "Utah Noteholder Proceedings" initiated by Maximillian against Company A in Utah, mirroring the English Noteholder Proceedings.

The Part 11 applications seek to stay or dismiss the English claims in favor of the Utah courts, asserting that Utah is the more appropriate forum.

Legal Issues Presented

1. Whether the English court has the power to decline jurisdiction or grant a stay on forum conveniens grounds in favor of courts of a non-EU country, given that jurisdiction is properly founded under Article 2 of Council Regulation (EC) No 44/2001 ("the Regulation").
2. Whether the decision in Owusu v. Jackson [2005] QB 801, which precludes an EU court from declining jurisdiction on forum non conveniens grounds in favor of a non-EU court absent lis alibi pendens, applies where there is a lis alibi pendens.
3. Whether Article 27 of the Regulation, concerning lis pendens between courts of different Member States, can be applied by analogy ("reflexively") to proceedings involving non-EU courts to justify a stay.
4. Whether, assuming jurisdiction exists, the English court should exercise its discretion to stay proceedings on forum conveniens grounds in favor of the Utah courts.

Arguments of the Parties

Defendants' Arguments

• The English court should stay or dismiss the proceedings as the Utah courts are the more appropriate forum, based on forum conveniens and the existence of parallel proceedings in Utah.
• Article 27 of the Regulation should be applied by analogy to non-EU courts, allowing the English court to stay proceedings where the same cause of action and parties are involved in earlier foreign proceedings.
• Exclusive jurisdiction clauses in the relevant agreements favor the Utah courts, and the English court should give effect to these.
• The application of forum conveniens principles is consistent with the purpose of the Regulation and avoids conflicting judgments.

Claimants' Arguments

• The Regulation, as interpreted by the ECJ in Owusu, precludes the English court from declining jurisdiction on forum non conveniens grounds where jurisdiction is founded on Article 2.
• Lis alibi pendens is not a free-standing ground but only a factor in forum conveniens analysis, which itself cannot override the mandatory jurisdiction rules of the Regulation.
• The English court does not have power to stay the proceedings in favor of a non-EU court under the Regulation.
• Even if a stay power existed, the defendants have not established that Utah is the clearly more appropriate forum.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first recognized that all proceedings fall within the scope of the Regulation, which mandates jurisdiction based on defendant domicile under Article 2, permitting exceptions only as expressly provided. The key question was whether the court could decline jurisdiction or stay proceedings in favor of a non-EU court on forum conveniens or lis alibi pendens grounds.

The court examined the ECJ decision in Owusu v. Jackson, which held that an EU court properly seised under Article 2 cannot decline jurisdiction on forum non conveniens grounds in favor of a non-EU court. Although Owusu did not address lis alibi pendens situations explicitly, the court found no basis to distinguish the present case, where parallel proceedings exist in Utah.

The defendants' argument for a "reflexive" application of Article 27 (which governs lis alibi pendens between EU courts) to justify a stay in favor of the Utah courts was rejected. The court reasoned that Article 27 applies only between courts of Member States and that importing a discretionary forum conveniens test via Article 27 would undermine the Regulation's objectives of legal certainty and uniformity.

The court relied on prior English authority, including Arkwright and Berisford, which held that the Convention (and by extension the Regulation) does not permit a discretionary stay on lis alibi pendens grounds in favor of non-EU courts. The court also considered the reasoning of the Irish Commercial Court and Supreme Court, which reached similar conclusions.

While acknowledging scholarly commentary suggesting a power to stay might exist in certain cases, the court found that such views do not align with the binding authority of Owusu and the Regulation's mandatory jurisdictional scheme.

The court distinguished the enforcement of exclusive jurisdiction clauses in favor of non-EU courts, which is permissible and supported by case law, from discretionary stays based on lis alibi pendens, which are not.

On the merits of forum conveniens, the court applied the principles from Spiliada, considering factors such as domicile of parties, location of witnesses, subject matter, governing law, and progress of foreign proceedings.

For the Declaratory Proceedings, the court found England to be the clearly more appropriate forum, given the English domicile of most parties, the English law governing the contractual relationship, the locus of relevant events, and the relatively early stage of the Utah proceedings.

For the Noteholder Proceedings, the court acknowledged that Utah law issues and the involvement of the Utah bankruptcy court added complexity favoring Utah. However, the overall connection to England, including the domicile of key parties and the nature of the dispute, led the court to conclude that Utah was not distinctly the more appropriate forum.

Holding and Implications

The court DISMISSED all the Part 11 applications seeking to stay or set aside the English proceedings in favor of the Utah courts.

The direct effect is that the English proceedings will continue, and the court will exercise jurisdiction as properly founded under Article 2 of the Regulation. The court confirmed that it does not have power under the Regulation to grant a stay on forum conveniens or lis alibi pendens grounds in favor of a non-EU court.

The court granted the unopposed application to join the Assignors as co-claimants in the Noteholder Proceedings.

No new precedent was established beyond the application and reaffirmation of existing ECJ authority and English case law concerning the limits of forum non conveniens and lis alibi pendens under the Regulation.