Betta Oceanway Company v SC Tomini Trading SRL

Factual and Procedural Background

This appeal concerns an application by the Appellant, a former director and minority shareholder of the Romanian defendant company (Company B), to be joined as a defendant in proceedings initiated by the Claimant (Company A) for a declaration of debt owed by Company B to Company A. The Appellant contends that the debt admitted by Company B is not actually due and alleges that the proceedings form part of a fraudulent scheme by Company A and Company B, both controlled by the same individual, to acquire his minority shareholding for no value.

Company B was founded in 1999 by the Appellant and operated in scrap metal trading, with a principal customer being a Panamanian company. Following the 2008 financial crisis, Company B incurred a large debt to this customer, which was the subject of a series of contracts in 2009 involving Company B, the customer, and a Lebanese company ultimately controlled by the same individual controlling Company A.

The contracts’ effect is disputed: the Appellant asserts the debt was cancelled in 2009, while Company A and Company B contend the debt was assigned but remains payable. The Appellant alleges that the debt was kept on the books to avoid Romanian tax liabilities and that documents were backdated to support this position.

Subsequent documents in 2015 and 2016 assigned the debt to Company A and provided for repayment terms, which were not met. An addendum in 2016, governed by English law and providing for English jurisdiction or London arbitration, extended repayment dates. The Appellant’s directorship was terminated in 2020, and a call option to acquire his shares was exercised by the majority shareholder’s company, leading to ongoing Romanian litigation over share valuation.

Company A commenced arbitration under the 2016 addendum seeking a declaration of the debt’s existence and validity. The Appellant initially defended the arbitration, denying the debt and alleging the credit agreements were shams. Company A sought discontinuance of the arbitration to pursue English court proceedings, which the tribunal conditionally allowed, expressing concern about potential abuse of process given the control of both parties by the same individual.

Company A commenced English court proceedings in June 2023 without initially including the Appellant as a party. The Appellant applied to be joined as a defendant to contest the debt and challenge the proceedings as an abuse of process. The trial judge dismissed this application, finding the English court was not the natural forum, that the defence of the claim was a matter for Company B’s board, and that the Appellant’s case was weak and unsupported by contemporaneous evidence.

The Appellant appealed against the dismissal of his application to be joined as a defendant.

Legal Issues Presented

1. Whether it is desirable to add the Appellant as a defendant under CPR 19.2(2) to enable the court to resolve all matters in dispute, including the validity of the alleged debt.
2. Whether the Appellant, as a minority shareholder and former director, has standing to participate in the proceedings to contest the debt and allege abuse of process.
3. Whether the English court is the appropriate forum to determine the dispute, or whether the matter should be resolved in the Romanian courts.
4. Whether the Appellant’s case has a real prospect of success such that it should be heard, or whether it should be summarily dismissed.

Arguments of the Parties

Appellant's Arguments

• Both Company A and Company B are controlled by the same individual, creating a risk of abuse of process in the current litigation.
• The English court’s judgment will be significant in Romanian proceedings concerning the valuation of his shares.
• The arbitral tribunal recognized a real risk of abuse, which supports his joinder to the proceedings.
• The dispute is not a mere shareholder disagreement but involves allegations of fraud and abuse of process that require adjudication by the English court.

Company B's Arguments

• The decision to admit the debt and defend the claim is a matter for the board of directors, not for a minority shareholder.
• The Appellant’s case is weak, unsupported by contemporaneous documentation, and involves admissions of participation in fraudulent conduct.
• The English court is not the natural forum for the dispute, which should be resolved in Romania.
• The judge’s dismissal of the application to join was a proper exercise of discretion and case management.

Company A's Position

• Formally neither supporting nor opposing the appeal, but agreeing the judge took into account all relevant factors.
• Consent to the Appellant’s joinder would be given if the court ordered it, complying with procedural requirements.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
In re Pablo Star Ltd [2017] EWCA Civ 1768	Wide interpretation of "matters in dispute" under CPR 19.2(2) to include matters "in issue".	Supported the view that joinder can be appropriate even if no formal dispute exists but issues are "in issue".
Dunwoody Sports Marketing v Prescott [2007] EWCA Civ 461	Joinder under CPR 19.2 can exist after judgment and the need for a wide interpretation of "matters in dispute".	Reinforced the principle that joinder rules are broadly construed to protect affected parties' rights.
Stanhope [1994] BCC 84 and Blenheim [2000] BCC 554	Distinction between third parties directly or indirectly affected and the desirability of joinder.	Used to explain that shareholders generally cannot intervene in company litigation management but exceptions exist where interests are directly affected.
ED&F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472	Court may reject factual assertions unsupported by contemporaneous evidence.	Supported the judge’s approach to scrutinizing the credibility of the Appellant’s evidence.
Okpabi v Royal Dutch Shell Plc [2021] UKSC 3	Limits on summary dismissal and need for a full trial in complex cases.	Supported the conclusion that the Appellant’s case should not be summarily dismissed at this stage.
Lungowe v Vedanta Resources Plc [2019] UKSC 20	Complex cases involving serious issues of fact require full trial, not summary dismissal.	Supported the court’s refusal to find no real prospect of success for the Appellant’s case.

Court's Reasoning and Analysis

The court began by identifying the matter in dispute as the existence and validity of the debt owed by Company B to Company A. Applying the principles in In re Pablo Star Ltd, it acknowledged that "matters in dispute" should be interpreted widely to include matters "in issue." The court found that without the Appellant’s participation, the court would likely decide the matter on the basis of Company B’s admissions, without adversarial testing of the Appellant’s allegations.

The court recognized the unusual circumstance that both parties to the litigation are controlled by the same individual, which raises a reasonable inference of an ulterior purpose behind the litigation: to use an English court declaration to acquire the Appellant’s shares for no value in Romanian valuation proceedings. This factor had not been adequately considered by the trial judge.

The court rejected the trial judge’s view that the dispute was purely a shareholder dispute to be resolved in Romania, holding that the issue of abuse of process is for the English court. It also rejected the argument that allowing the Appellant to participate would usurp the board’s authority, clarifying that the Appellant’s role would be to allege abuse of process, not to override the board’s decisions.

While acknowledging that the Appellant’s case has weaknesses, the court found there is some force in his explanation and that the case is not suitable for summary dismissal. The court noted that the absence of enforcement of the debt and the circumstances of the transactions support the possibility that the debt was cancelled.

The court concluded that the Appellant is directly affected by the litigation and that it is desirable for him to be joined as a defendant so that the court can properly consider whether the declaration sought should be granted. To address concerns about potential misuse of the joinder, the court made the joinder conditional on the Appellant providing security for costs.

Holding and Implications

The appeal is allowed. The court orders that, upon the Appellant providing security for costs in the sum of £400,000, he shall be added as a defendant to the claim.

The court’s decision ensures that the Appellant, who faces a direct and significant impact from the litigation, will have the opportunity to contest the validity of the debt and the allegation of abuse of process. This will allow the court to adjudicate on the substantive issues with full adversarial participation and evidence, thereby reducing the risk of a judgment being used improperly in related foreign proceedings.

No new precedent is established beyond the application of existing principles on joinder, abuse of process, and the court’s discretion under CPR 19.2(2). The decision primarily affects the parties by permitting fuller participation by the Appellant and conditioning joinder on security for costs to protect the existing parties.