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IN THE SUPREME COURT OF JUDICATURE CHANI 1998/0120/3

COURT OF APPEAL (CIVIL DIVISION )

(MR JUSTICE NEUBERGER )

Royal Courts of Justice

The Strand

London

Wednesday 31 March 1999

B e f o r e:

THE LORD CHIEF JUSTICE OF ENGLAND AND WALES

(Lord Bingham of Cornhill )

LORD JUSTICE BROOKE

and

LORD JUSTICE CHADWICK

B E T W E E N:

(1) LOUCAS HAJI-IOANNOU

(2) KYPROS COMPANIA NAVIERA SA

(3) LEFKOSIA COMPANIA NAVIERA SA

(the Second and Third Plaintiffs being

incorporated under the laws of Panama)

Plaintiffs/Appellants

and

(1) IOANNIS FRANGOS

(2) SEAWAY MARITIME SA

(3) PERMAR TRANSPORT SA

(4) SUCCESS MANAGEMENT SA

(5) NAUTICAL SA

(6) PREMIER MARITIME SA

(7) MARIA SHIPPING SA

(8) CLELIA MARTIME ENTERPRISES SA

(9) PLATINUM CRUISES SA

(10) HIGH POINT MARITIME SA

(11) MARITIME CRUISES SA

(12) EUROPEAN CRUISES SA

(13) ANGELIKA HOLDINGS SA

(14) SEA LEVEL SHIPPING CO LTD

(15) "CAPITAL NICHOLAS" MARITIME SA

(the Second to Ninth, Eleventh to Thirteenth

and the Fifteenth Defendants being bodies

incorporated under the laws of the Republic

of Panama, the Tenth and the Fourteenth

Defendants being bodies incorporated under

the Laws of Liberia)

____________________

J U D G M E N T

(As Approved by the Court )

____________________

____________________

(Computer Aided Transcription by

Smith Bernal, 180 Fleet Street, London EC4A 2HD

Telephone 0171 421 4040

Official Shorthand Writers to the Court)

_______________

A P P E A R A N C E S :

MR MICHAEL BELOFF QC, MR ROBERT MILES and MR ADRIAN BRIGGS (instructed

by Ince & Co, London EC3R 5EN) appeared on behalf of THE APPELLANTS

MR CHARLES PURLE QC, MR NICHOLAS HAMBLEN QC and MR STEPHEN SMITH

(instructed by Messrs Holman, Fenwick & Willan, London EC3N 3AL)

appeared on behalf of THE RESPONDENTS

__________________________

THE LORD CHIEF JUSTICE: This is the judgment of the court, to which all members have substantially contributed.

Before the court are an appeal by the plaintiffs and a cross-appeal by the defendants in these proceedings. Both arise out of a judgment given and an order made by Neuberger J on 14 November 1997 on a notice of motion issued by the first defendant on 23 October 1997 and an application made by the plaintiffs. The notice of motion was given in response to a writ issued in the Chancery Division of the High Court on 19 September 1997 and served on the first defendant, Mr Frangos, on 7 October 1997 when he was temporarily in London.

A number of different questions were raised and fully argued before the judge, and again before this court. The overriding issue is whether the plaintiffs’ proceedings against

Mr Frangos should be allowed to proceed in this country. An allied, but to some extent subsidiary, issue is whether the plaintiffs should have leave under RSC Order 11 Rule 1(1)(c) to serve the second to fifteenth defendants out of the jurisdiction.

The first plaintiff is a Greek Cypriot shipowner of immense wealth. He holds both Cypriot and British passports. His domicile of choice is in Monaco. He spends most of his time in Greece. He has a house in London, but the judge found nothing in the evidence to suggest that he had spent significant amounts of time in England during the past few years. The second and third plaintiffs are Panamanian companies owned and controlled by the first plaintiff and managed in Greece.

Mr Frangos, the first defendant, is a much younger man. He is Greek by nationality. He is the son of a shipowner, although not an owner of the same scale of affluence as the first plaintiff, as few owners are. Mr Frangos has a house in Monaco and his personal domicile is there, but the judge concluded that his main residence and what the judge considered his major business are in Greece. The second and third defendants are Panamanian companies which he controls.

The first plaintiff has a daughter Clelia. In January 1990 she and Mr Frangos were engaged to be married. On their engagement the first plaintiff gave the couple a yacht. The marriage was solemnised in Greece in September 1990. The plaintiffs’ statement of claim in these proceedings pleads that an agreement or understanding was made between the first plaintiff and Mr Frangos at about the time of this engagement. In paragraph 3 it is pleaded thus:

“In or about January 1990 Mr Haji-Ioannou and Mr Frangos had several conversations in the course of which they entered into an agreement or understanding to the following effect:

(1) Mr Haji-Ioannou agreed that he would (directly or through companies he controlled) transfer sums of monies to Mr Frangos (or his agents) to be used for the purpose of acquiring vessels to be run and managed as a commercial enterprise. (The said monies or the proceeds thereof including all assets acquired with and/or representing and/or derived from the same and all profits made therewith, and accretions or additions thereto, are referred to below as “the Funds”);

(2) Mr Frangos was to hold and manage the Funds on behalf of the Plaintiffs and subject to the instructions of Mr Haji-Ioannou;

(3) The Plaintiffs were to remain the beneficial owners of the Funds (including all profits thereon and additions thereto) and Mr Frangos was to account to Mr Haji-Ioannou in respect of the Funds;

(4) It was further agreed that when a specific vessel was to be acquired using the Funds, it would be acquired by a single ship company set up or acquired for that purpose; and that the shares in such company would (if registered shares) be issued or transferred into the name of Mr Haji-Ioannou, or (if bearer shares) be delivered to or be held to the order of Mr Haji-Ioannou;

(5) By managing the Funds, Mr Frangos would, for his part, be able to develop experience and gain contacts in the shipping business.”

It is not pleaded exactly when or where this agreement or understanding was made, nor what (if any) remuneration Mr Frangos was to earn. No reliance is placed in the pleading on any document evidencing or supporting it. The pleading continues in paragraph 4:

“In the premises:

(1) any Funds transferred to Mr Frangos pursuant to the said agreement or understanding were to be held by Mr Frangos (or his agents) on trust for the Plaintiffs;

(2) Mr Frangos was under a fiduciary duty to ensure that such Funds were applied only in accordance with the terms and conditions of the said agreement or understanding; and

(3) Mr Frangos was under a duty to account to the Plaintiffs in respect of the use and application of the Funds and in respect of all profits thereon and additions thereto.”

In May 1990, just before Mr Frangos’ 28th birthday, the second plaintiff paid US $5,000,000 to the account of the second defendant in Piraeus. Immediately following the wedding in September 1990 the second and third plaintiffs paid sums totalling US $10,000,000 to the account of the second defendant in Piraeus. Over the next six months three vessels were bought, respectively by the fourth, fifth and sixth defendants, each of them Panamanian companies controlled by Mr Frangos. Within a week of Mr Frangos’ 29th birthday in May 1991, the second plaintiff paid US $5,000,000 into the account of the second defendant in Piraeus. Six months later another vessel was bought, this time by the seventh defendant, a Panamanian company controlled by Mr Frangos. On Mr Frangos’ name day in January 1992, the second plaintiff made two payments, amounting in total to over US $5,000,000, to the account of the third defendant in London. During the next four months vessels were acquired by the eighth and ninth defendants, both of them Panamanian companies controlled by Mr Frangos. One of these vessels was a yacht, bought to replace the yacht given by the first plaintiff to Mr Frangos and Clelia on their engagement. Just over a week after Mr Frangos’ second wedding anniversary, the second plaintiff paid US $10,000,000 to the account of the third defendant in London. Further vessels were then bought by the tenth defendant, a Liberian company, and the eleventh defendant, a Panamanian company, both companies controlled by Mr Frangos. Within a month of Mr Frangos’ 31st birthday in May 1993, the second plaintiff paid US $10,000,000 to the account of the third defendant in London. Further vessels were then bought by the twelfth, thirteenth and fourteenth defendants, the first two being Panamanian companies controlled by Mr Frangos, the last a Liberian company controlled by him. Finally, in April 1994, a new build, which had been ordered from a Bulgarian shipyard in 1992, was delivered to the fifteenth defendant, another Panamanian company controlled by Mr Frangos.

The marriage between Mr Frangos and his wife had by the end of 1993 broken down, and in January 1994 they separated. On 6 May 1994 the three plaintiffs addressed to Mr Frangos at the offices of his management company Seaways Shipping Enterprises Limited (a Liberian company) in Piraeus an extra-judicial witness statement and without prejudice notice. By this notice the plaintiffs terminated with immediate effect and on the grounds of Mr Frangos’ unlawful conduct the informal agreement with him for the management by him of the plaintiffs’ capital in the sum of US $49,000,000 which on the instructions of the first plaintiff had been transferred by the second and third plaintiffs to the second and third defendants:

“. . . for the purchase of ships on our behalf, in the name of foreign shipping companies, available on the market for purchase, the ownership of the shares in which, together with revenue and dividends, you undertook to transfer to us and to manage these companies and these ships, being paid the usual reasonable salary in return.”

The notice called for the delivery to the plaintiffs of all shares, company documents and records relating to the fourth to fifteenth defendants inclusive and the ships which they had bought. The plaintiffs called for full written accounts in accordance with the provisions of the Greek Civil Code and Civil Procedures Code.

On 8 June 1994 the boards of the second and third plaintiffs met in Piraeus under the chairmanship of the first plaintiff and resolved to submit an indictment, by instruction and on behalf of each company, against Mr Frangos for the offence of embezzlement. Each company declared that it would appear as a civil plaintiff for financial reparation in the modest sum of 15,000 drachmas “for moral harm consisting in damage to the reputation and status of the company, with reservation for restitution of the material damage suffered by the Company as a result of the defendant’s unlawful actions”.

On 6 July 1994, on behalf of himself and the second and third plaintiffs, the first plaintiff signed an indictment directed to Mr Frangos at the Piraeus address of his management company accusing him of committing a serious felonious embezzlement of roughly US $50,000,000. According to this document, in January 1990, the first plaintiff “decided, there and then, for the sake of his daughter and future son-in-law to make an unusual gesture, as a sign of the utterly exceptional trust which he placed in him”. The nature of this unusual gesture was described in the indictment in these terms:

“Specifically, he decided to withdraw a very considerable portion of the assets, amounting to roughly fifty (50) million dollars (or 12.5 billion drachmas at today’s exchange rate), and to entrust the management of this sum on his behalf to his son-in-law, in exchange, of course, for a suitable fee, the level of which would be specified later. Thus he was giving him a unique opportunity to develop and promote his own business abilities, and also his name in the shipping world, to which he (the defendant) belonged by inclination and training (he had a Master’s Certificate in the Merchant Navy); and at the same time, of course, this represented a substantial income for him and his future family.

Thus, at the end of January 1990, the defendant tendered his resignation from his father’s company, and the above agreement then began to be put into effect, on the basis of the following scheme which was agreed at the time:

The defendant would select and propose to the first plaintiff the purchase on his (the 1st plaintiff’s) behalf of various second-hand dry-cargo vessels. Then, provided that the first plaintiff approved each purchase, the first plaintiff or companies controlled by him would transfer to the defendant or to companies controlled by him, according to his instructions, the necessary capital for the purchase. The defendant would then proceed, always on the instructions of the first of us to purchase each vessel in the name of a foreign shipping company whose shares would be issued in the name of the 1st plaintiff or his companies, or would be bearer shares, and in each case would be delivered to him. For this purpose, he (the defendant) would use the capital sums transferred to him or to the companies commissioned by him, as a loan to each foreign shipping company, so that on receipt of a further loan from a bank, the purchasing company would be able to pay in full the purchase price of each vessel. Meanwhile the defendant, acting on our instructions, would manage both the total sum of capital which we made available to him (the Capital) and the shipping company shares acquired with this capital and the loans made to these companies in our name, and also the shipping companies themselves and their vessels, through the defendant’s management companies, in exchange for the customary fee, the level of which was left to the equitable judgment of the 1st plaintiff (Article 371 of the Civil Code).

It was also agreed that the auditors Moore Stephens & Co., who have offices in Piraeus, should be appointed to carry out the regular audit of the management of ships and companies.

On the basis of this informal, verbal agreement (because of the moral impossibility of obtaining a document) which was reached in Piraeus at the end of January 1990, the defendant tendered his resignation from his father’s company. He then nominated for us the Panamanian companies SEAWAY MARITIME S.A and PERMAR TRANSPORT S.A. as the companies commissioned by him to manage the capital. All the capital stock of these companies belongs to the defendant. Indeed the first of us, in the spirit of assisting the defendant towards this end, saw to it that the company under his share control, known as ISTHMIA COMPANIA NAVIERA S.A., leased to the defendant’s company JOHN FRANGOS (BROKERAGE) LTD. part of its 6th floor in the multi-storey building at 64 Filonos Street and 7 Ilas Merarchias.

Immediately after this, the defendant began to investigate the market for second-hand ships, and on 10 May 1990 the first of us ordered the second (KYPROS COMPANIA NAVIERA) to transfer to the aforesaid SEAWAY in Piraeus the sum of five million (5,000,000) US dollars as a first instalment of the Capital withdrawn for management.

On 23 September 1990, the defendant married the first plaintiff’s daughter, Cleo (Clelia) in Athens. The couple lived initially in London until June 1991, and immediately afterwards in Athens at 45 Kalvou Street, Paleo Psychiko, where they remained until 27.01.1994, when the defendant abandoned the conjugal home.”

The indictment set out details of the sums transferred and vessels bought, and alleged that Mr Frangos had purchased ships through the various defendant companies at a total cost of over US $115,000,000, borrowing over US $85,000,000 from banks. The indictment alleged that:

“Under our agreement, he kept the shares in his possession, and also the other company documents -- a circumstance which was a further expression of the utterly exceptional trust which we placed in him.”

But the indictment alleged that Mr Frangos had criminal intentions from the outset, as evidenced by the facts that money was borrowed from banks for the purchase of ships and that only part of the money advanced to him by the plaintiffs was used for purchasing vessels, the balance remaining in his hands. Reference was made to the extra-judicial statement dated 6 May 1994 served on Mr Frangos at the registered office of his business, and the summary of the case against him was expressed in this way:

“Thus, with the manifestation - now beyond all doubt - of his criminal intent which is implicit in his extra-judicial statement of 18 May 1994, the defendant has made final and complete the crime of embezzlement of the entire amount of the huge fortune which we entrusted to his detention [ katochi] and management - a crime which he was committing, as has been proven, continuously from May 1990 to May 1994. Specifically, the defendant unlawfully appropriated:

- The shares in the ship owning companies, which he purchased on behalf of the first of us. As soon as these shares were purchased on behalf of the first of us, they passed directly into his ownership [ kyriotita] in accordance with the agreement between us, while the defendant retained the detention [ katochi] thereof by virtue of the managerial mandate which had been given to him (Article 977 of the Civil Code. Furthermore, even if the defendant had acquired the shares with our money, which was not the case, embezzlement would still have been a fact, according to Article 375 para. 3b of the Penal Code).

- The cash which was placed at his disposal, i.e. in his detention [ katochi] (see Areios Pagos 1093/1991 Full Bench, Poin. Chr.MB’ page 39), with the mandate to manage it, as distinguished in greater detail below:

a. The cash which was used for the purchase of ships became the object of unlawful appropriation to the extent that, as has been proven, it was issued by the defendant to the aforesaid Panamanian and Liberian companies on his own behalf and in his name, while the express mandate whereby the money was made available to him required that he should in turn give (lend) it to the companies for purchase of the ships on behalf of the first of us. Thus, with his high-handed, wilful disposal of the money in a manner which we had not wished, and for his own benefit, he in fact incorporated it into his own property, thus manifesting his intention to appropriate it unlawfully, an intention which he carried out in precisely this manner. This legal and criminal assessment of the defendant’s conduct is, of course, bound up with the role played by the known single-ship companies as purchasers and ship owners. Essentially we are dealing with embezzlement of the ships under the terms of Article 375 para. 3b of the Penal Code .....

b. The cash remaining after purchase of the ships. The amount, as mentioned above, was far greater than we knew, because the defendant made extensive use of bank loans ......

c. The cash accrued from his general management of ships and cash. These profits, especially freight and interest, as finally accrued, belong to us, just as all the other money which remained in the defendant’s hands for management is ours.”

All three plaintiffs appeared as civil plaintiffs.

On 5 November 1996, the Council of Judges of the Court of First Instance in Piraeus gave a reasoned judgment concluding that Mr Frangos should not be charged with the crime of embezzlement. The basis of their decision, in summary, was:

“In accordance, therefore, with the foregoing, there is not even any objective foundation to the crime of wilful embezzlement, of which the defendant stands accused, given that, as we have seen, the monies paid to him by the plaintiff took the form of a gift or, in all events, the form of a loan, meaning that he acquired ownership thereof in accordance with the rules of civil substantive law (Civil Code 806, 496); there is therefore no basis for the crime in question in that there cannot be appropriation of things or monies belonging to the perpetrator himself. (Supreme Court of Appeal 166/1985 (chronicle of criminal cases LE 685), Supreme Court of Appeal 263/68 and 246/69). However, irrespective of the fact that the accused has no criminal liability in accordance with the foregoing, it must be said that he can still be actively pursued through civil channels in accordance with subjective law, in order to recover the monies given or lent, over and above the fact that the accused (as he himself acknowledges) has an imperative moral obligation to return the aforementioned to the plaintiff, given the imminent dissolution of his marriage with the plaintiff’s daughter.”

Meanwhile, in July 1994, Clelia had issued a petition for divorce which was served on Mr Frangos at his business address in Piraeus. In her petition Clelia referred to the home which she and Mr Frangos had set up temporarily in London while she had been completing her studies as a student at the City University, and she described how, on her graduating in June 1991, she and her husband had moved to Athens where they had made their permanent residence until the separation. In May 1995 Mr Frangos made a complaint to the Public Prosecutor of Piraeus alleging perjury, false witness and aggravated defamation against the first plaintiff and others. A trial of this accusation is pending.

The plaintiffs appealed against the dismissal of the indictment against Mr Frangos, but on 5 March 1997 the Court of Appeal at Piraeus, in a reasoned judgment, rejected the appeal, concluding that the money had been provided to Mr Frangos by way of loan so that he had become the owner of the funds.

The writ in these proceedings was served on Mr Frangos in London when he visited to do some shopping on 7 October 1997, and before the end of that month vessels belonging to the defendants had been arrested at the suit of the plaintiffs in South Africa, England, Amsterdam and the Netherlands Antilles. At this stage no application had been made to serve any of the second to fifteenth defendants out of the jurisdiction. Mr Frangos issued his notice of motion in these proceedings on 23 October 1997, and the plaintiffs then made application to serve the second to fifteenth defendants out of the jurisdiction. Following the decision of Neuberger J on 14 November 1997, the four vessels were released from arrest. In a judgment given on 18 November 1997 Meskin J, sitting in the High Court of South Africa at Durban, gave his reasons for ordering the release of the vessel arrested there:

“The essential allegation of the first respondent is that Frangos in breach of trust refused to procure that the first respondent (or his nominee) should have the beneficial ownership of the shares in the applicant. In my opinion, such allegation, even if true, cannot possibly generate a right in the first respondent to ownership of the vessel itself, which would support a claim for the said declaration. The only rights it could generate are rights against Frangos to delivery of the shares and to an account in respect of his dealings therewith. These rights cannot found claims against the applicant.”

On 19 November 1997 the Supreme Court of Greece allowed an appeal by the plaintiffs against the Court of Appeal decision of 5 March 1997 on grounds relating (in the first plaintiff’s case) to want of reasoning and (in the second and third plaintiffs’ case) to their authority to act. The matter was remitted to the Court of Appeal for further consideration. The case was again considered by the Court of Appeal at Piraeus, differently constituted, and in a long reasoned judgment dated 30 June 1998 the plaintiffs’ appeal was again rejected. The Court found no serious indications that Mr Frangos did not become the owner of the money on its transfer to him and his companies, or that the money had been given to him with instructions to buy the ships on behalf of the first plaintiff or to manage the money and the ships on his behalf. An appeal by the plaintiffs against this further decision of the Court of Appeal awaits judgment by the Supreme Court.

We shall consider the issues argued before us in the order in which they logically arise, irrespective of whether they are issues raised by the appeal or the cross-appeal.

The 1968 Brussels Convention, as amended, was given the force of law in this country by section 2(1) of the Civil Jurisdiction and Judgments Act 1982. So far as relevant to these proceedings, Article 2 of the Convention provides:

“Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State.”

The plaintiffs contend that the first defendant does not fall within this provision, relying on the undoubted fact that his personal domicile is in Monaco, of which he has consistently described himself as a resident. Mr Frangos contends that the provision does apply to him, as a person with a special domicile in Greece.

By Article 52 of the 1968 Convention it is provided (so far as relevant):

“If a party is not domiciled in the State whose courts are seised of the matter, then, in order to determine whether the party is domiciled in another Contracting State, the court shall apply the law of that State.”

Section 41 of the 1982 Act contains provisions which, subject to Article 52 of the Convention, determine whether an individual is domiciled in a state other than a Contracting State. Section 41 (7) provides:

“An individual is domiciled in a state other than a Contracting State if and only if -

(a) he is resident in that state; and

(b) the nature and circumstances of his residence indicate that he has a substantial connection with that state.”

Article 51 of the Greek Civil Code, in a translation favoured by the plaintiffs’ expert, provides:

“Domicile. The person has as domicile the place of his main and permanent establishment. No one can have simultaneously more than one domicile. For matters which relate to the exercise of business, the place where the person exercises that business is considered as special domicile.”

There is a conflict of expert evidence on the interpretation of Article 51 and its application to the present case. According to the plaintiffs’ expert, Mr Papadimitriou, any entitlement to special domicile is confined to Mr Frangos’ company in Piraeus and to disputes directly relating to that company. The defendants’ independent experts take a different view: in their opinion Mr Frangos enjoys a special domicile in Piraeus as the place where he carries on business through his company, and the present dispute relates to the ship-owning and managing business which he carries on.

Having reminded himself of the appropriate test (to which we make reference below), the judge concluded that the plaintiffs had a good arguable case for contending that Mr Frangos did not enjoy a special business domicile in Greece under Article 51 of the Civil Code; that the ownership and management in Greece of a company which did have such a special domicile might very well be insufficient to give him personally a special Greek domicile; and that (even if Mr Frangos did have a special Greek domicile) the plaintiffs had a good arguable case for saying that the claims in the present proceedings were not matters which were related to the exercise of Mr Frangos’ business.

While we naturally hesitate to differ from the learned judge, we have to say that we find the expert evidence of Mr Frangos’ experts very much more persuasive than that of Mr Papadimitriou. It is our clear opinion that, despite his personal domicile in Monaco, Mr Frangos enjoyed a special business domicile in Greece at the time when these proceedings were issued. The evidence shows that he worked in and from the office of his company in Piraeus and did not work in or from any other office whether in Greece or elsewhere. That was the office of his Liberian management company through which he managed the fleet of ships which give rise to these proceedings. He was the principal shareholder of this management company and its principal executive officer. Both the first plaintiff and his daughter have addressed all official documents to Mr Frangos at this address, including the extra-judicial notice of 6 May 1994, which was served upon him at that office, the indictment which described him as residing at that address and the divorce petition which described him as resident in Athens and professionally resident at the company offices. The Council of Judges of the Court of First Instance described him as resident both in Monaco and at his company’s address. We cannot, with respect to the judge, regard it as arguable that the issues in this action may not relate to the carrying on of Mr Frangos’ business. On the plaintiffs’ account, the funds which they seek to recover were transferred to Mr Frangos as part of a strictly business arrangement, albeit within a family context. Even on Mr Frangos’ account, the purpose of the transfers was to establish him as a successful ship-owner, no doubt indirectly for the benefit of the first plaintiff’s daughter and any children she and he might have. It is of course true that Mr Frangos carried on business through the medium of a number of companies, but it would be surprising if that very normal fact were to deny him a special business domicile under Article 51 and the expert evidence does not lead us to that conclusion. We think it plain on the evidence that Mr Frangos carried on his business in Piraeus and the present proceedings are related to the exercise of that business. We think it very doubtful whether the nature and circumstances of Mr Frangos’ residence in Monaco indicate a substantial connection with that state, since it may very well be a domicile adopted for fiscal reasons only.

We conclude that at the relevant time Mr Frangos enjoyed a special business domicile by virtue of Article 51 of the Greek Civil Code. Applying Article 52 of the Convention, we conclude that he was domiciled in Greece, a Contracting State. He must therefore be sued there under Article 2 of the Convention. We would allow Mr Frangos’ cross-appeal on this ground.

In case our foregoing conclusion is wrong, we must consider the alternative submissions addressed to us on the premise that Mr Frangos was not at the material time domiciled in Greece.

Central to these submissions is Article 4 of the Convention which, so far as material, provides:

“If the defendant is not domiciled in a Contracting State, the jurisdiction of the courts of each Contracting State shall, subject to the provisions of Article 16, be determined by the law of that State.”

Article 16 has no bearing on the present issue.

Our attention has been drawn to section 49 of the 1982 Act which provides:

“Nothing in this Act shall prevent any court in the United Kingdom from staying, sisting, striking out or dismissing any proceedings before it, on the ground of forum non conveniens or otherwise, where to do so is not inconsistent with the 1968 Convention or, as the case may be, the Lugano Convention.”

The first issue which arises under this Article is whether, if proceedings are brought in England against a defendant not domiciled in another contracting state (which for present purposes we assume to be the position of Mr Frangos), the English court may on appropriate facts stay the proceedings or decline jurisdiction in favour of a clearly more appropriate forum in another contracting state (in this case, said to be Greece).

The plaintiffs’ submission was, in brief summary, to the following effect:

1. Mr Frangos was personally served with these proceedings during his temporary presence in London. Under the rules of our own municipal law such service conferred jurisdiction on the English court to entertain these proceedings against him.

2. This basis of English jurisdiction, although excluded by Article 3 of the Convention in relation to defendants domiciled in other contracting states, is expressly preserved in relation to defendants not so domiciled by Article 4 of the Convention, which provides that in such cases the jurisdiction of the courts of each contracting state shall be determined by the law of that state.

3. Where the English court has jurisdiction over a defendant not domiciled in another contracting state, by virtue of personal service of proceedings upon him within the jurisdiction of the English court, that court may not stay proceedings or decline jurisdiction in favour of the court of another contracting state on grounds of forum non conveniens, even if the other court is a clearly more appropriate forum, since to do so would be inconsistent with the Convention and subversive of the Convention régime which seeks to achieve uniformity of approach and certainty of outcome among contracting states.

4. In any event, it would be futile for the English court to stay its proceedings in favour of the court of another contracting state, since under a stay the English court would remain seised of the proceedings and the foreign court would be obliged to stay its proceedings or decline jurisdiction under Article 21 of the Convention (if the proceedings involved the same cause of action between the same parties) or would be entitled to stay its proceedings under Article 22 (if the actions were related).

The correctness of the plaintiffs’ first two submissions is not in doubt. In considering the problem before us the starting point must be that Mr Frangos was properly served with these proceedings, however temporary and fortuitous his presence in this country, and the court has jurisdiction to entertain the action. The case is one in which jurisdiction has been plainly established against Mr Frangos as of right.

In submitting as they did in their third submission that the primary object of the Convention was to avoid clashes between the jurisdictions of the contracting states by the application of rigid rules, and that the Convention was intended, in general, to confer jurisdiction by the application of mandatory, non-discretionary rules, the plaintiffs were correct: see Lord Goff of Chieveley in Airbus Industrie GIE v Patel [1999] 1 AC 119 at 131-132; Professor Schlosser’s report, Official Journal 1979 No.C59/71, page 97, para.78. It follows that in this context there is no room whatever for jurisdictional imperialism or chauvinism, and no room whatever for application of the doctrine of forum non conveniens where a person domiciled in a contracting state is sued in the court of that state. But if in a case such as the present a court such as this defers to the court of another contracting state which in its considered judgment is significantly better placed, for whatever reason, to administer true justice between the parties, such deference involves not jurisdictional imperialism or chauvinism nor any clash or competition between jurisdictions but the truest comity between courts of contracting states. While we are obliged to have regard to the guidance of Professor Schlosser, and gladly do so, it would seem that he was, as Mance J put it in Sarrio S.A. v Kuwait Investment Authority [1996] 1 Lloyd’s Rep. 650 at 655,

“. . . throughout only dealing with forum non conveniens in the context of jurisdiction exercised on what I have called pure Convention grounds (under art 2 or 3)”.

Uniformity of approach and certainty of outcome are no doubt in general desirable, but it is very hard to see how these objectives can be achieved where jurisdiction is conferred by virtue of national rules under Article 4 of the Convention. At the heart of the plaintiffs’ case (as will become apparent below) is the contention that their rights against Mr Frangos depend, crucially, on the fortuity of his temporary visit to London. Had he chosen to shop in Paris or Rome instead of London, or had he chosen to shop at home in Athens, their legal rights would (they say) have been quite different. If, as they argue, the English court has no choice but to exercise the jurisdiction which municipal rules confer upon it, the outcome might well be regarded as anomalous and unpredictable. It would appear that the draftsman of section 49 of the 1982 Act envisaged circumstances in which courts in England and Wales, or Scotland, or Northern Ireland, could properly stay, sist, strike out or dismiss proceedings on grounds of forum non conveniens consistently with the Convention. It is necessary to examine whether such powers or any of them may be exercised in a case such as the present.

In re Harrods (Buenos Aires) Limited [1992] Ch. 72 concerned a dispute between two shareholders in a company. Neither of the shareholders was domiciled in a contracting state, but the company itself (which played no part in the proceedings) was domiciled in England. Service was effected on the defendant under English municipal law, and the defendant contended that another court in a non-contracting state was clearly a more appropriate forum for resolution of the dispute. The question was whether the court could, in principle, stay the proceedings in favour of the foreign court. The Court of Appeal held that it could. The decision has excited considerable controversy and may no doubt be overruled or varied hereafter. But it is at present authority binding upon us for whatever the case decided. The case must be taken to have decided that, where the choice is between the exercise of jurisdiction properly conferred on the English court and the exercise of jurisdiction by a foreign court in a non-contracting state, the power to stay on grounds of forum non conveniens is not excluded by the Convention. This court did not consider that such a conclusion in any way subverted the régime established by the Convention, and there would appear to be force in that view.

The present issue arose more directly in Sarrio, above, where the choice was between the exercise of jurisdiction in England and in another contracting state. Essentially the same submission was made to Mance J as has been made to us (see page 654) but he rejected it (see page 655). He acknowledged that the issue in Harrods was different, but observed (at page 655):

“The Court’s conclusion that considerations of appropriateness of forum were admissible in this connection does not determine the present question - though it might be said to be somewhat paradoxical if forum non conveniens was relevant to the exercise of discretion on pure Convention grounds when the alternative forum was in a non-contracting state, but was irrelevant to its exercise on national grounds under art.4 when the alternative forum was in a Contracting State. Both situations fall outside the central purposes of the Convention.”

The Court of Appeal took the same view: see [1997] 1 Lloyd’s Rep.113 at 123-124 per Evans LJ; page 126 per Peter Gibson LJ; and page 129 per Brooke LJ. These expressions of opinion were not necessary for the decision of the case, which was eventually decided by the House of Lords on other grounds: see [1999] 1 AC 32. They are nonetheless, in our judgment, persuasive expressions of opinion. In The “Xin Yang” [1996] 2 Lloyd’s Rep. 217 Clarke J, who did not have the benefit of the Court of Appeal judgments in Sarrio, shared the view of Mance J. He said (at page 221):

“It would, I think, be very odd if in the case of an action against a defendant not domiciled in a Contracting State the English Court could decline to exercise jurisdiction on the merits in favour of a more appropriate forum in a non-Contracting State, such as Argentina in In re Harrods (Buenos Aires), but was bound to determine the case on its merits and to refuse to decline to do so in favour of a more appropriate forum in a Contracting State.”

He expressed the governing principle in this way (at page 222):

“It follows that my conclusion is the same as that of Mr Justice Mance in Sarrio. It is that (leaving arts.16 and 17 on one side) where the defendant is domiciled within a Contracting State there is no room for the exercise of a discretion to decline jurisdiction on the grounds of forum non conveniens. On the other hand, where the defendant is domiciled outside a Contracting State the Court which would otherwise be first seised is entitled to decline to exercise jurisdiction on the ground of forum non conveniens whether the alternative forum is within a Contracting State, as in this case, or outside a Contracting State as in In re Harrods (Buenos Aires) ”.

Although the plaintiffs made reference to some reported decisions, they rightly placed much greater reliance on the erudite and judicious consideration of this subject by Briggs and Rees in Civil Jurisdiction and Judgments (2nd Edition) 1997, particularly in paragraphs 2.225 - 2.231. As the authors point out, there is no ruling upon the present question by the Court of Justice, and until there is the question is open to debate. Having reviewed the arguments both ways, in a manner which calls for careful reading but cannot be fairly summarised, the authors incline to the opinion that there is in the present situation no discretion to stay on grounds of forum non conveniens. It does not, however, appear to us that the exercise of jurisdiction to stay on grounds of forum non conveniens is subversive of the Convention régime, and in appropriate circumstances we consider that recognition of a power to stay or dismiss may promote that due administration of justice which must be the ultimate and paramount concern of all contracting states. Much the most powerful argument against retention of a power to stay or dismiss where the court has jurisdiction under its own municipal rules by virtue of Article 4 is, in our opinion, that to do so would be futile because of Articles 21 or 22. That brings us on to the plaintiffs’ fourth submission. Unless that is correct, we consider that it is in principle open to this court to stay or dismiss proceedings even where it has jurisdiction by virtue of Article 4.

It is, the plaintiffs submitted, the invariable practice of the English court when giving effect to an argument based on forum non conveniens to stay its own proceedings and not to dismiss them or order their discontinuance. In reliance on Rofa Sport Management AG and Another v DHL International (UK) Limited and Another [1989] 1 WLR 902, the plaintiffs further submitted that the effect of a stay is in law quite different from a dismissal or discontinuance. So long as it is stayed, an action remains technically in being: see page 911. It follows, the plaintiffs argued, that if this court were to stay the plaintiffs’ action against Mr Frangos on grounds that the Greek court was a clearly more appropriate forum, the Greek court would be obliged to stay proceedings or decline jurisdiction under Article 21, or entitled to stay its proceedings under Article 22; thus any such decision by this court would be futile; and that conclusion shows that the discretion contended for cannot survive the application of the Convention.

On this point at least Briggs and Rees entertain no doubt: Ibid, para 2.209, particularly at page 150.

It is plain, on the authority of Zelger v Salinitri [1984] ECR 2397 (Case 129/83) that “the court first seised” in Article 21 means the court before which the requirements for proceedings to become definitively pending are first fulfilled, and this court has held those requirements to be satisfied (for Convention as opposed to domestic purposes) upon service of the writ and not its issue: Dresser UK Limited and Others v Falcongate Freight Management Limited and Others [1992] QB 502; The Sargasso [1994] 3 All ER 180. It would, however, seem that there is nothing to prevent the second court accepting jurisdiction if the court initially first seised effectively disseises itself. We understand it to be the practice of the Scottish courts, when acceding to a plea of forum non conveniens, not to stay the proceedings in the Scottish court but to decline jurisdiction by dismissing the action: see Dicey and Morris on the Conflict of Laws (12th edition, 1993) at page 398; Societé du Gaz de Paris v La Socíeté Anonyme de Navigation “Les Armateurs Francais” 1926 SC(HL)13, (1925) 23 Ll. Rep.209. It would be very strange if, as between different jurisdictions within the United Kingdom, a difference of practice were to lead to a different outcome, unless the difference of practice reflected a difference of real substance. We note that in The “Xin Yang”, above, at page 224 Clarke J stayed the action before him “on the express basis that the English Court declines to exercise its jurisdiction on the merits”. In the present case it seems clear that Neuberger J was fully alive to this aspect of the matter. He recorded in his order the undertaking of the defendants not to contest the jurisdiction of the Greek civil courts in the event of the plaintiffs or any of them bringing proceedings against the defendants or any of them in the Greek civil courts upon the claims the subject of these proceedings, and stayed the proceedings upon the express terms

“That there be general liberty to all parties to apply, and without prejudice thereto:

(a) that the Plaintiffs and the First Defendant be at liberty to apply to discontinue or strike out these proceedings;

(b) that the Plaintiffs be at liberty to apply to lift the stay granted by para.1 of this Order in the event that the Plaintiffs are unable to found jurisdiction before the Greek Courts against each of the Defendants in respect of the subject-matter of this action”.

Thus the judge made it as plain as could be that the English court would not entertain any jurisdiction in the proceedings provided the Greek civil courts accept jurisdiction, as he had every reason to expect them to do given the undertaking of the defendants to submit. If there was any room for doubt, he left it open to Mr Frangos to apply to discontinue or strike out the proceedings, an application to which he plainly would have acceded if Mr Frangos and the other defendants had honoured their undertaking and the Greek civil courts had accepted jurisdiction. It appears to us that by the form of this order the English court effectively disseised itself, just as the Scottish court would have done by declining jurisdiction or dismissing the proceedings; but if there is any doubt about this, we would be willing in principle (always assuming, for purposes of argument, that the Greek forum is plainly more appropriate than the English) to dismiss this action. On this issue, therefore, we reach the same conclusion as the judge, and reject the argument advanced by the plaintiffs under this head in support of their appeal.

In considering the plaintiffs’ submissions on Article 2 and Article 4 of the Convention, we have not so far considered the test which must be applied. In Canada Trust Co and Others v Stolzenberg and Others (No.2) [1998] 1 WLR 547 the Court of Appeal held that the plaintiff seeking to show that the English court had jurisdiction was required to show a good arguable case. At page 555 Waller LJ said:

“It is also right to remember that the “good arguable case” test, although obviously applicable to the ex parte stage, becomes of most significance at the inter partes stage where two arguments are being weighed in the interlocutory context which, as I have stressed, must not become a “trial”. “Good arguable case” reflects in that context that one side has a much better argument on the material available. It is the concept which the phrase reflects on which it is important to concentrate, i.e. of the court being satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction.”

We consider, differing from the judge, that on the facts of this case the plaintiffs do not show a good arguable case on the materials now before us that Mr Frangos is not a person domiciled in a contracting state or that he is a person not domiciled in a contracting state. On the material now available we consider that he has a much better argument on those points.

In argument before us the plaintiffs pointed out (quite rightly) that the issues argued under Article 4 awaited authoritative determination by the Court of Justice, and accordingly urged that we should refer a question for decision by that court under Article 3(2) of the 1971 Protocol to the Convention. But for the decision which we have reached on Article 2, we should have been inclined to do so. But having reached a clear decision that Mr Frangos does, contrary to the plaintiffs’ submission, fall within Article 2, we do not regard a decision on the effect of Article 4 as “necessary” to enable us to give judgment. We accordingly decline to make a reference, which the defendants resisted.

Mr Frangos also contends that the judge was wrong to hold that these proceedings should not be stayed pursuant to Article 21 of the Convention on the grounds that the criminal court at Piraeus was the court first seised of proceedings involving the same cause of action and between the same parties. Article 21 provides:

"Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Contracting States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.

Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court."

It must be noted that other language versions of the Convention speak of the proceedings having the same “ objet” and the same “ cause”.

This issue might be regarded as academic in certain respects, since the plaintiffs have repeated before us the offer of an undertaking which they made to the judge, to the effect that they would discontinue the criminal proceedings in Greece if the continuation of those proceedings formed the only ground on which these English proceedings might be stayed, struck out or set aside. If we were otherwise willing to accept such an undertaking, however, it would be open to argument whether we should also require an additional undertaking that the plaintiffs should pay Mr Frangos any costs he has incurred in defending himself in Greece before being permitted to continue with his claim in this country.

In order to evaluate the arguments based on Article 21 it is necessary to describe in more detail the nature of the civil claim being made in the Greek criminal proceedings and the procedure which is being followed by the judges in the Greek criminal court before going on to consider certain decisions of the European Court of Justice which throw light on the question we have to decide.

Under Greek law, a private complainant may institute criminal proceedings for an offence like embezzlement by filing a sworn indictment at the office of the public prosecutor. If the public prosecutor does not consider the complaint unlawful or ill-based on the merits, he may initiate a penal prosecution in one of two ways. He may remit the case directly to the court for trial. Alternatively, he may order interrogation or pre-interrogation. In either case, no further indictment will come into existence if the matter proceeds to trial.

If interrogation is directed, as here, the case is allocated to an examining judge. He will interrogate the witnesses orally and take statements from both the complainant and the defendant. When this process is completed, all the documents and the evidence are sent to a public prosecutor of the court of first instance. He will examine them and prepare an opinion which he submits to the council of judges of that court so that they may decide whether the case should go to trial. A council of judges of a court is constituted in the same way as a court itself, although it will sit in chambers in the absence of the parties or their lawyers. A first instance criminal court is generally made up of the president of the judges of that court sitting with two other judges of the court, and a council of judges of that court is composed in the same way.

If, as in this case, the council decides that the defendant should not stand trial, the complainant may appeal, and the court of appeal will then follow a procedure similar to that followed in the court of first instance. In other words, the public prosecutor of that court will prepare an opinion for the council of judges of that court which will decide whether to uphold or overrule the decision of the council of judges at first instance. If, as in this case, the initial ruling that the case should not go to trial is upheld, there is the possibility of a further appeal by the complainant to the Supreme Court of Greece.

Greek law, like the law in other European countries, has a feature which is unknown to English law whereby a victim of a crime may link to a criminal indictment a civil claim for damages or restitution. If he does so, he has the right to be heard as a party in the criminal proceedings. If the criminal indictment does not proceed to trial, or if the defendant is acquitted at the trial, then the criminal court’s jurisdiction to award compensation for the complainant’s civil claim is extinguished. Otherwise, the criminal court is obliged to decide the civil claim, although it may remit any unliquidated part of the claim to the civil courts for determination. Although Article 65(2) of the Greek Code of Penal Procedure uses the word “exceptionally”, the plaintiffs’ Greek lawyer, Mr Papadimitriou, has told us that this procedure is invariably followed, since the Greek criminal courts do not wish to have their business interrupted by having to decide complicated civil claims. On the other hand, the defendant’s expert in Greek law, Mr Scorinis, has observed that the plaintiffs’ claim for US$49 million is a liquidated claim.

In the present case the plaintiffs each elected to include in the indictment a civil claim for 15,000 drachmas (about £33 sterling) by way of “moral damages”, a type of compensation which is provided by Greek law in relation to certain torts. The expression relates to damages arising from a tort directed against the “person” or the “name” of a plaintiff, and not against his property. The first plaintiff claimed reparation for the moral harm he had suffered as a consequence of Mr Frangos’ conduct and, as we have already noted, the two corporate plaintiffs linked their claim with moral harm to their good name and reputation, and to the good progress of their business.

Mr Papadimitriou says that in Mr Frangos’ case moral damages may have the same factual (historical) basis as the embezzlement but they do not have the same legal basis, since the claims for indemnity and restoration in natura and those relating to proprietary rights arise out of “contract”. In response, Mr Scorinis says that the tort claim for moral damages is founded upon precisely the same facts and legal basis as the claim for restitution.

There are five decisions of the European Court of Justice (“the court”) which touch on the issue we have to decide.

In Sonntag v Waidman [1993] 1 ECR 1963 the court was concerned with a case in which a German child had died in the mountains during a school-trip to Italy, and criminal proceedings were instituted in Italy against a teacher accompanying the trip for causing death by negligence. The deceased’s family exercised their rights under Italian law to join these criminal proceedings as civil parties claiming compensation against the defendant for the loss caused by the accident, and when the defendant was convicted in the criminal court at Bolzano he was ordered to pay 20 million lira to the deceased’s family. Article 1 of the Brussels Convention provides that the Convention “shall apply in civil and commercial matters whatever the nature of the court or tribunal”, and the court observed in paragraph 16 of its judgment that it followed from that wording that the Convention also applied to decisions given in civil matters by a criminal court. It went on to say in paragraph 19:

"Even though it is joined to criminal proceedings, a civil action for compensation for injury to an individual resulting from a criminal offence is civil in nature. In the legal systems of the Contracting States the right to obtain compensation for injury suffered as a result of conduct regarded as culpable in criminal law is generally recognised as being a civil-law right ...”

In Zelger v Salinitri [1984] ECR 2397 the court was concerned to resolve a difficulty which had arisen because German civil procedure differed in certain respects from the procedure prescribed in at least four other Convention countries in relation to the initiation of civil proceedings. The court found it impossible to reconcile these differences. It observed in paragraph 14 of its judgment that it might properly be inferred from Article 21, read as a whole, that a court’s obligation to decline jurisdiction in favour of another court only came into existence “if it is established that proceedings have been definitively brought before a court in another State involving the same cause of action and between the same parties” (our emphasis). It therefore ruled in paragraph 16 that:

"... Article 21 of the Convention must be interpreted as meaning that the court ‘first seised’ is the one before which the requirements for proceedings to become definitively pending are first fulfilled, such requirements to be determined in accordance with the national law of each country."

In Gubisch Maschinenfabrik AG v Palumbo [1987] ECR 4861 German manufacturers had instituted proceedings in Germany for the enforcement of a contract for the sale of goods to an Italian customer before the customer started proceedings in Italy claiming declarations that his purchase order was inoperative or that it should be treated as discharged by breach. In paragraph 8 of its judgment, the court observed that the rules contained in Section 8 of Title II of the Convention (ie Articles 21-23, which are concerned with lis pendens and related actions) are “designed to preclude, in so far as is possible, and from the outset, the possibility of a situation arising such as that referred to in Article 27(3), that is to say the non-recognition of a judgment on account of its irreconcilability with a judgment given in a dispute between the same parties in the State in which recognition is sought”.

In paragraph 15 the court held that the legal proceedings in the different contracting states were based on the same “cause of action” (“ cause”), that is to say the same contractual relationship. In paragraph 16 it observed that the question whether the contract was binding lay “at the heart of the two actions”. They accordingly had the “same subject-matter” (“ object”). The court held in paragraph 17 that “that concept cannot be restricted so as to mean two claims which are entirely identical”. In the following paragraph it referred to the objectives of the Convention, “which is intended to strengthen protection throughout the territory of the Community and to facilitate recognition in each Contracting State of judgments given in any other Contracting State”.

In Overseas Union Insurance Ltd v New Hampshire Insurance Company [1992] 1 QB 434 the court held that once a court in a Convention country is satisfied that a court in another such country is first seised of a matter, it has no option but to stay its proceedings if it does not decline jurisdiction altogether. It is not permitted to examine the basis on which the court first seised determined that it had jurisdiction.

In the Maciej Rataj [1995] 1 Lloyd’s Rep. 302 ship-owners had brought proceedings in the Netherlands claiming a declaration that they were not liable, or not fully liable, for the alleged contamination of their cargo. Subsequently, cargo owners started two different actions in rem in London seeking the arrest of the vessel involved and a sister ship. The parties to these various actions were not identical, and the court held in paragraph 34 of its judgment that Article 21 required the second court seised to decline jurisdiction only to the extent to which the parties to the proceedings pending before it were also parties to the action previously started before the court of another contracting state.

In paragraph 38 the court pointed out that the English version of Article 21 did not expressly distinguish between the concepts of “object” and “cause of action”. In paragraph 39 it explained that, for the purposes of Article 21, the “cause of action” (“ cause”) comprises the facts and the rule of law relied on as the basis of the action. It followed that an action for a declaration of “non-liability” had the same cause of action as a subsequent action brought on the basis of shipping contracts, which were separate but in identical terms, concerning the same cargo transported in bulk and damaged in the same circumstances. In paragraph 41 the court said that “the object of the action” (“ objet”) for the purposes of Article 21 meant the end the action had in view. In these circumstances, since the issue of liability was central to both actions, the second action had the same object as the first. The fact that the first action was an action in personam and the second action an action in rem was immaterial for the purposes of the Convention (paragraph 47).

We derive from these five judgments the following principles:

(1) The Brussels Convention applies to a civil claim for compensation or restitution even when the claim is an appendage to criminal proceedings;

(2) A court in a Convention country will be seised of proceedings for the purposes of Article 21 as soon as they are definitively pending before it;

(3) Proceedings involve the same cause of action for the purposes of Article 21 if they have the same cause and the same objet;

(4) Actions have the same cause if they have the same facts and rule of law as their basis;

(5) Actions have the same objet if they have the same end in view;

(6) In so far as the proceedings in a court second seised include additional parties, that court shall decline jurisdiction in favour of the court first seised in relation to the part of its proceedings which is between the same parties;

(7) The court second seised will not inquire into the basis on which the court first seised has asserted its jurisdiction.

The judge held that Article 21 did not avail Mr Frangos for seven reasons, although he said that the point did not appear to be clear and he conceded that there was a risk of inconsistent decisions. He was influenced by the consideration that if the Greek criminal proceedings were permitted to continue, they would be pursued by the state. He said that although in a sense they had commenced, because a formal complaint had been lodged and the judicial process had been started, there was no question of proceedings, in the sense of a prosecution, having yet started. He placed weight on the fact that the plaintiffs were only mounting a civil claim in the criminal proceedings in order to give them locus standi to pursue their complaint, and they were not seeking any significant financial benefits in terms of substantive relief. Although it would be open for them to do so, they had not yet done so, and a conviction for embezzlement would be a precondition to civil relief being granted.

The judge was also influenced by the consideration that it seemed to him to be overwhelmingly likely that even in those circumstances (viz a claim for significant financial relief and a conviction) the Greek criminal court would refer the plaintiffs’ claim to the Greek civil courts, and there was nothing to stop them mounting a civil claim there now, whatever happens in the criminal proceedings. The judge also referred to the different standard of proof obtaining in the Greek criminal court.

In our judgment, the judge was right to hold that the action should not be stayed pursuant to Article 21, although we do not agree with all the reasons he gave. The jurisprudence of the European Court of Justice has established that a civil claim of the type the plaintiffs have made in Greece is one to which the Convention applies, and it is a matter of choice for the plaintiffs to decide how much to claim in these proceedings. They said that Mr Frangos had embezzled the liquidated sum of US $49 million, and if they only choose to claim a fraction of that sum under the rubric of “moral damages”, that is a matter for them. We assume that it would always be open to them to increase their claim before the trial, if the matter is allowed to proceed to trial. It appears to us that, in the language of the European Court of Justice, the same facts and rule of law form the basis of each proceedings. Although in England the plaintiffs are asserting that the same underlying agreement gave rise to different legal consequences from which different obligations and, therefore, different legal remedies flowed, the cause would appear to be the same in both countries.

Unless and until further defendants are joined, the proceedings are between the same parties. They are definitively pending in Greece. They are on the way to the Supreme Court on appeal from a ruling of the Council of Judges of the Court of Appeal at Piraeus for the second time. Comparisons with the procedure in another Convention country are perilous, but the proceedings in Greece are much closer to a preparatory hearing before a judge in a serious fraud trial in England than to a pre-1933 grand jury procedure, since we were told that no further indictment would be drawn up if the complaint survived the present procedures and a procedure comparable to the hearing of a motion to quash the indictment is now being followed. Nor do we consider that the fact that the Greek criminal court would apply a different standard of proof should alter the position. If it is properly seised of jurisdiction, the court second seised may not inquire into the manner in which, as the court first seised, it exercises its jurisdiction.

Article 21 does not, however, apply, because the object of the proceedings is not the same. In Greece the civil claim is a claim for the recovery of money. In England the end the proceedings have in view is not the simple recovery of money, but in large part the tracing of that money into the assets which were acquired with it, and the claim to a beneficial interest in those assets, based on allegations of breach of a duty of fidelity. This is a different object within the meaning of Article 21.

Mr Frangos relied, in the alternative, on Article 22 of the Brussels Convention as affording a ground for staying this action in England. This Article provides, so far as is material, that:

"Where related actions are brought in the courts of different Contracting States, any court other than the court first seised may, while the actions are pending at first instance, stay its proceedings.

A court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the law of that court permits the consolidation of related actions and the court first seised has jurisdiction over both actions.

For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings."

The judge rejected this contention on four grounds. He said that the substantive relief sought in the present proceedings, which was essentially of an equitable and tracing nature, could not be pursued under Greek civil law and could not therefore be the subject of a claim in the Greek criminal proceedings. He said that the tracing remedies against the ship-owning companies could not be pursued in the Greek criminal proceedings to which they were not parties, the Greek criminal proceedings could not for obvious reasons be heard in this country, and he did not see how those proceedings and the present proceedings could be “heard and determined together”. Thirdly, he had some difficulty in seeing how the Greek criminal proceedings could be said to be “pending at first instance”: on one view they were not yet pending at all, and on another view they were already at the appellate stage. Finally, he did not consider that the Greek criminal court, if it was properly treated as the court first seised, had jurisdiction to determine the plaintiff’s claim in the present proceedings, so that the second sentence of Article 22 could not be applied in Mr Frangos’s favour.

While we do not agree with all the judge’s reasons, we agree with his conclusion. He did not have the benefit of the decision of the House of Lords in Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32. In that case the Court of Appeal (see [1997] 1 Lloyd’s Rep. 113) had declined to order a stay pursuant to Article 21. Although an English court might make findings of fact which were inconsistent with the findings of fact made by a Spanish court in relation to aspects of the same dispute, the primary issues of fact raised for decision in the English proceedings were distinct from any that were raised in Spain. Since there was no risk of irreconcilable judgments, the Court of Appeal considered that Article 22 did not apply.

The House of Lords disagreed. In the only speech, with which the other members of the House agreed, Lord Saville said at page 41A-B that Article 22 was concerned not with the substantive rights and obligation of the parties, but with the ancillary and procedural question as to where in the Community those rights and obligations should be heard and determined. He said there was nothing in the Convention that suggested that it was in the interests of the Community that litigation on this question should be made more expensive and time-consuming than was necessary. He concluded at p 41F that there should be a broad commonsense approach to the question whether actions in question were related, bearing in mind the objective of the article, applying the simple wide test set out in Article 22, and refraining from an over-sophisticated analysis of the matter.

We feel sure that if he had had the benefit of this guidance the judge might have been much readier to explore the possibilities of an Article 22 stay after concluding that Article 21 could not be applied. We do not consider that in a case like this considerations as to the availability of different remedies in different Convention countries should carry very much weight as against the desirability of litigating in the same country (and that the country first seised) the issues arising out of the same dispute in related actions, in accordance with that country’s law. We also consider that the plaintiffs’ claim in Greece is in an action pending at first instance within the meaning of Article 22. On the other hand, we agree with the judge that the fact that this claim in Greece is tacked on as an appendage to criminal proceedings makes the application of Article 22 wholly inappropriate and the action should not be stayed on that ground.

RSC Order 12 Rules 7 and 8 read, so far as is material:

"7. The acknowledgement by a defendant of service of a writ shall not be treated as a waiver by him of any irregularity in the writ ...

8. A defendant who wishes to dispute the jurisdiction of the court in the proceedings by reason of any such irregularity as is mentioned in rule 7 ... shall give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the Court for -

(a) an order setting aside the writ ..."

Mr Frangos argued that the writ was irregular for four different reasons. He said that the statement of claim endorsed on the writ disclosed no reasonable cause of action, or that it was pleaded in such a way as to amount to an abuse of process. Alternatively he said that the action was an abuse of process:

(i) because of the inconsistent allegations and evidence in the Greek and other overseas courts;

(ii) because it amounts to a collateral attack on the Greek courts’ decisions;

(iii) because of the way the plaintiffs have used it to mount further proceedings in different countries to arrest ships without first applying for leave to serve the writ out of the jurisdiction on the relevant defendant companies.

We will consider the last of these arguments first. As we have already noted, after the writ was served on Mr Frangos on 7th October 1997, ships belonging to three of the companies under his control (the eighth, ninth and thirteenth defendants) were arrested between 9th and 21st October 1997 in Durban, Redcar, Amsterdam and St Eustacius (in the Netherlands Antilles) purportedly in support of and ancillary to the claims made in these proceedings, without the plaintiffs making any attempt to obtain leave to serve these proceedings on any of the second to fifteenth defendants. Mr Frangos’s notice of motion challenging the jurisdiction of this court was issued on 23rd October, and the following day Lindsay J, when ordering an expedited hearing, made observations about the effect that any further arrests might have on the decision whether there had been an abuse of process. No further arrests were made. When Neuberger J handed down his judgment on 14th November, the plaintiffs accepted that all the arrested vessels should be released, and a direction to that effect was included in the order the judge made. Mr Frangos maintained that these actions by the plaintiffs demonstrated that their true purpose in bringing these proceedings was a collateral and illegitimate one, namely the destruction of his business, and that it involved the use of these proceedings to launch vexatious, oppressive and abusive arrest proceedings.

This country is a party to the 1952 Arrest Convention, which is an international convention “for the unification of certain rules relating to the arrest of sea-going ships”. Article 2 of the Convention provides that a ship flying the flag of one of the contracting states may be arrested in the jurisdiction of any of the contracting states in respect of “any maritime claim”, an expression which includes a claim arising out of a dispute “as to the title of or ownership of any ship” (Article 1(i)(o)). No ship, other than the particular ship in respect of which the claim arose, may be arrested in respect of such a claim (Article 3(1)). Under the Convention a ship may only be arrested under the authority of a court or of the appropriate judicial authority of the contracting state in which the arrest is made (Article 4).

When effect was given to the Arrest Convention in our national law in Part 1 of the Administration of Justice Act 1956 (“the 1956 Act”), section 1(1)(a) of that Act used the same word “ownership” in relation to claims to ownership as is used in Article 1(i)(o) of the Convention. In section 3(4) of the 1956 Act, which created a right to arrest a sister ship in support of most of the maritime claims mentioned in the Arrest Convention (but not a claim arising out of a dispute as to ownership), the draftsman used the expression “beneficially owned”. The same distinction is now to be found in sections 20(2)(a) and 21(4) of the Supreme Court Act 1981 (“the 1981 Act”) which have replaced the earlier provisions. As a result of this choice of language, it has now for a long time been accepted law that ownership of a ship for the purposes of the Convention and for the purposes of the Admiralty jurisdiction of the High Court means legal ownership, except in those provisions where the word is qualified by the adjective “beneficial”: see I Congresso del Partido [1978] 1 QB 500, 541, and The “Evpo Agnic” [1983] 2 Lloyd’s Rep. 411, 414-5. In the latter case Lord Donaldson MR observed that the Convention clearly looked to ownership and registered ownership as one and the same. Even if the legal property in the shares of a one-ship company is held by A and the equitable property by B, he said that that distinction does not affect the ownership of the ship or the shares in the ship.

Section 21(2) of the 1981 Act permits an action in rem to be brought in the High Court against a ship in connection with which a claim as to ownership has arisen. The procedure governing such an action is laid down in RSC Order 75 Rule 5. This requires the filing of an affidavit which must state the nature of the claim, the name of the ship to be arrested and her port of registry ( ibid, Rule 5(4) and (9)). This court has held that so long as the deponent to the affidavit complies with the requirements of the rule, the warrant will issue as of right, and no greater duty of full and frank disclosure is required ( The Varna [1993] 2 Lloyd’s Rep. 253).

It follows that in an action in rem the jurisdiction to issue a warrant of arrest in a case like this flows from the sworn assertion that there is a claim as to the ownership of a ship within the jurisdiction, and there is no need to show that the English court has assumed jurisdiction over an action in personam against the other party to the dispute.

Unlike the judge, we have had the benefit of reading the judgment of Meskin J, given in the High Court of South Africa on 18th November 1997, when he gave his reasons for setting aside the arrest of the Triena, a ship owned by the eighth defendant in the present action. We will call the present plaintiffs “the plaintiffs” and the eighth defendant “the company” for ease of reference. Meskin J said at page 8 that the crucial issue was whether the plaintiffs had a maritime claim against the company within the meaning of the definition of “maritime claim” in section 1(1) of the Admiralty Jurisdiction Regulation Act 105 of 1983. He considered the claims that had been advanced by the plaintiffs both in the present proceedings and in the criminal proceedings in Greece, and noted that the only direct evidence as to the agreement between the parties was to be found in the Greek proceedings. He had been told that the maritime claim relied on was a claim in English equity to trace Mr Haji-Ioannou’s money into the vessel owned by the company. He held:

(1) that Mr Frangos acted strictly in accordance with the terms of his agreement with the plaintiff in applying the money to the purchase of the vessel (page 11);

(2) that even if Mr Frangos intended to retain for himself the beneficial ownership of the shares in the company when he bought the vessel, a breach of trust would only arise when he gave effect to that intention by failing to procure that the plaintiff (or his nominee) should have the beneficial ownership of the shares in the company (page 12);

(3) that even if Mr Frangos had acted in breach of trust in this way, the only rights which such a breach of trust could generate for the plaintiff would be rights against Mr Frangos to delivery of the shares and to an account in respect of his dealings therewith, and these rights could not found claims against the company (page 15).

In these circumstances he held that the plaintiffs had failed to prove, even prima facie, the existence of any maritime claim against the company in respect of which an arrest could competently occur. It appears, incidentally, from his judgment that in the High Court of South Africa an application for the arrest of a ship is made ex parte to a high court judge, and that there is a greater duty of disclosure in relation to such an application that at present exists under English law.

In this jurisdiction the plaintiffs applied for a warrant of arrest of the Angeliki I, a ship owned by the ninth defendant which was in the port of Teesside. The relevant affidavit was sworn by Mr Simon Spark, an assistant solicitor employed by Messrs Ince and Company, on the authority of the plaintiffs. He purported to comply with the requirements of RSC Order 75 Rule 5(9) by asserting that the plaintiffs’ claim was for ownership of all, or a share of, the Angeliki I arising from the use by the ship’s owners, who he believed to be the ninth defendant, of funds belonging to the plaintiffs to buy the ship on about 2nd July 1992.

In this affidavit Mr Spark asserted that Mr Frangos was under a duty to use the funds transferred to him by the plaintiffs for the purpose of acquiring vessels to be run and managed as a commercial enterprise, while the plaintiffs were to remain the beneficial owners of the funds. He made similar complaints about breach of trust as those made in the South African proceedings, and asserted that in the premises the plaintiffs were entitled to trace in respect of such parts of the funds as were transferred to or invested by or on behalf of the ninth defendant in the acquisition of the Angeliki I and were entitled to trace into the Angeliki I. Mr Spark swore a supplemental affidavit the same day, at the behest of the court, in which he asserted in paragraph 3:

"I confirm that the Plaintiffs claim a declaration that they are entitled to ownership of all, or a share of, the Angeliki I arising from the use by the Defendants of funds belonging to the First and/or Second and/or Third Plaintiffs to purchase the Angeliki I on about 2nd July 1992 and/or be entitled to trace into the Angeliki I and/or to the return of the funds."

Only the first of these claims could have been a maritime claim sufficient to support an action in rem against the ship, and it is not easy to see how Mr Spark could have thought that in the circumstances set out in his first affidavit his clients could have been entitled to the legal ownership of the ship, as opposed to a right to call for the shares in the company which owned it. However that may be, it appears to us that the plaintiffs did not have a good claim to the ownership of the ship (or of any share in it) not only for all the reasons set out in the judgment of Meskin J, with which we agree, but also because as a matter of English law the word “ownership” in section 20(2)(a) of the Supreme Court Act 1981 means “legal ownership”. Even if the plaintiffs were able to prove everything which they assert in these proceedings, this would not entitle them to displace the ninth defendant as the legal owner of the ship.

It follows, in our judgment, that this claim is totally misconceived if it purports to be an appropriate vehicle for supporting an action in rem for the arrest of any of these ships. This is not because, as Mr Frangos asserted, the plaintiffs had not yet got round to applying to serve any of the ship-owning companies out of the jurisdiction by the time the arrests were made, but because the claim itself is not a claim in respect of which an action in rem may be brought in the High Court pursuant to section 21(2) of the 1981 Act since the underlying claim is not, when properly analysed, a claim to the ownership of a ship within the meaning of section 20(2)(a) of the same Act.

The plaintiffs argued that even if we reached this conclusion, this would not be the end of their claim, since about $19 million out of the $49 million was not in fact invested in ships. We accept this submission. It would not therefore be appropriate to set aside the writ on this ground alone. We have disregarded in this context the newspaper cuttings which Mr Frangos displayed as part of his evidence before the judge. The issues in this case must be decided on evidence and not on the writings of journalists.

We can deal with the remaining grounds for Mr Frangos’ application under RSC Order 12 Rule 8 more briefly. Mr Frangos argued that the plaintiffs’ claim had been consistently rejected by the courts in Greece and that the current proceedings would constitute an abuse of process in the strict sense. In our judgment the judge was right to reject that submission for the reasons he gave. Even if the plaintiffs’ claim was being rejected by the criminal courts in fairly trenchant terms - and since the hearing before him it has been rejected again at court of appeal level - there was no evidence before him that the plaintiffs would not be able to make a similar claim in the Greek civil courts, and such authorities as Hunter v Chief Constable of the West Midlands Police [1982] AC 529 and House of Spring Gardens v Waite [1991] 1 QB 241 could be properly distinguished. We agree.

The other way in which Mr Frangos put his case in this context was to say that the fate of the plaintiffs’ claim in the Greek courts should lead the English court to conclude that the present proceedings stand no real chance of success and that they should, in effect, be put out of their misery now. The judge readily accepted that the plaintiffs’ prospects of success in the present proceedings did not look at all promising. He did not, however, consider that “the hopelessness of their claim was beyond doubt” (see The Moschanthy [1971] 1 Lloyd’s Rep 37, 42 for this test) or that the claim was one which had no foundation in fact and was not made in good faith and with a genuine belief in its merits but was manufactured for an ulterior motive (see Lonrho v Fayed (No 2) [1992] 1 WLR 1, 7G, in which Millett J had earlier observed at p 5D that a plaintiff is entitled to pursue a claim in these courts however implausible and however improbable his chances of success, unless the defendant can demonstrate shortly and conclusively that his claim is bound to fail or is otherwise objectionable as an abuse of the process of the court). The judge did not consider that the conclusion and reasoning of the Greek criminal courts justified the conclusion that the present proceedings against Mr Frangos were effectively bound to fail. In our judgment, this was a view he could reasonably have formed on this evidence.

Our attention was drawn on the appeal to a large number of inconsistencies between the way the plaintiffs put their case in the Greek proceedings and in the South African proceedings, as compared with the way they had pleaded their case here, and Mr Frangos sought to contend that the scale of these inconsistencies was such that the claim in England would be bound to fail. These, in our judgment, would be matters for the trial judge if this action was otherwise permitted to continue in England. Although we share the judge’s views that its prospects do not look particularly rosy, and although another Council of Judges of the Court of Appeal at Piraeus has rejected the plaintiffs’ claim with equal robustness since the matter was before him, we see no reason to interfere with his conclusion that he ought not to set aside this writ on these grounds.

Finally, we express the view in the next section of this judgment that we are not persuaded that, as pleaded, the statement of claim discloses any cause of action against the ship owning companies, for the reasons we give there. Since we are of the clear opinion that the proceedings in this country should be stayed, both for the reason given by the judge and on Article 2 grounds, and that leave should not be granted to serve these proceedings on those defendants, we see no advantage in lengthening this judgment by considering the reasons the judge gave, based on The Moschanthy test, for not striking out the tracing claims, since this question is wholly academic.

On the basis that we are wrong in our conclusions that, at the relevant time, Mr Frangos enjoyed a special business domicile in Greece by virtue of the Article 51 of the Greek Civil Code and so must be sued there under Article 2 of the Convention but correct in our view that it is open to this court to stay or dismiss proceedings on grounds of forum non conveniens where it has jurisdiction by virtue of Article 4 of the Convention notwithstanding that the alternative forum is the court of another Contracting State, we turn to consider the grounds on which the judge, himself, held that these proceedings should be stayed. We do so on the further assumption that we are correct in our view that this is not a case in which Article 21 requires the English court to stay its proceedings.

The judge directed himself, correctly, that the principles to be applied were set out in the speech of Lord Goff of Chieveley in Spiliada Maritime Corporation v Cansulex [1987] AC 460, at pages 476C-478E. He observed (at page 52 of his written judgment) that, the proceedings having been regularly issued and served on Mr Frangos in England, the plaintiffs were, prima facie, entitled to continue those proceedings against him here. It was only if the court were persuaded that Greece were a more appropriate forum for the trial of the action that it would be right to stay the English proceedings. He reminded himself that, even if Greece might otherwise appear the more appropriate forum, the power to stay should not be exercised if the plaintiff established, to the satisfaction of the court, that substantial justice could not be done there. We reject the criticism, if such be intended by the submission that “the judge went seriously wrong in the application of the doctrine of forum non conveniens ” (at paragraph 50 of the appellants’ skeleton argument), that the judge approached the question on the wrong basis.

The judge identified eight factors which, as it appeared to him, pointed to Greece as the more appropriate forum for the trial of the plaintiffs’ claims against Mr Frangos. They may be summarised as follows: (1) Mr Frangos has no substantial connection with England. He is resident in Greece, spends much time there and carries on his principal business activities through a company based there. (2) The first plaintiff, Mr Haji-Ioannou, spends most of his time in Greece. The second and third plaintiffs are controlled by the first plaintiff and are managed in Greece. (3) The inter-relationship between the findings made by the Greek courts in the criminal proceedings and any civil proceedings is a matter which is best resolved in a Greek court. (4) The plaintiffs’ claims against Mr Frangos in the present proceedings are reflected in comparable allegations made against him by his former wife, Clelia, in divorce proceedings pending in Greece. The Greek courts are likely to be better able than the English court to ensure that findings on the same factual issues in related proceedings are consistent. (5) Most, if not all, of the witnesses so far identified are resident in Greece. None are resident in England. (6) The bulk of the original documentation is in Greek. Greek is the first language of the great majority, if not all, of the witnesses. (7) Greek lawyers have acted for both the plaintiffs and Mr Frangos in the Greek criminal proceedings for several years. In that context the Greek lawyers have become thoroughly familiar with the factual and legal issues. If the present proceedings were to be tried in London there would be an unnecessary duplication of cost and time. (8) The agreement or understanding between the first plaintiff and Mr Frangos - which led to payments being made by companies controlled by the one to companies controlled by the other - has to be examined in the light of the relationship of this father-in-law to his son-in law. The “intellectual, emotional and moral culture”, as the judge put it, underlying that relationship is Greek or Greek Cypriot. It is not English. The Greek courts are likely to be better able than the English court to assess the factors which led to payments which were made in this case.

The judge held that those eight factors, taken together, led to the conclusion that, unless there were good reasons to the contrary, Greece was, clearly, a more appropriate forum than England for any civil proceedings which the plaintiffs sought to bring against Mr Frangos in connection with the payments.

The appellants do not seek seriously to challenge the existence of the eight factors which the judge identified; save, perhaps, the last of them. But they submit that those factors should be given little or no force. The eight factors are described (at paragraph 93 of the appellants’ skeleton argument) as “the very thinnest of grounds of convenience”. We do not agree. In our view the judge was entitled to reach the provisional conclusion that - in the absence of some good reason to the contrary - those factors, separately and cumulatively, pointed clearly to Greece as the more appropriate forum for a trial. We do not think it necessary to examine each in turn. It is irrelevant that we might have given to some of those factors more or less weight than the judge gave to them. We think it important for an appellate court to keep in mind the cautionary words of Lord Templeman in the Spiliada case, at page 465F-G:

“. . . the solution of disputes about the relative merits of trial in England and trial abroad is pre-eminently a matter for the trial judge. . . . An appeal should be rare and the appellate court should be slow to interfere.”

The appellants’ principal contention was that the eight factors identified by the judge were of no significance when set against what, as they submitted, would be the consequence of denying them the ability to pursue proprietary claims in the English court. They relied on the principle expressed by Lord Goff in the Spiliada case, at page 478C-D:

“If however the court concludes at that stage that there is some other available forum which prima facie is clearly more appropriate for the trial of the action, it will ordinarily grant a stay unless there are circumstances by reason of which justice requires that a stay should nevertheless not be granted. In this inquiry the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors with other jurisdictions.”

Lord Templeman recognised the same principle, at page 465A-B:

“But whatever reasons may be advanced in favour of a foreign forum, the plaintiff will be allowed to pursue an action which the English court has jurisdiction to entertain if it would be unjust to confine him to remedies elsewhere.”

The foundation of the appellants’ contention that they would be unable to pursue proprietary claims in Greece is a passage, treated by the judge as common ground, in the affidavit of Mr Christopher Lockwood, a partner in the firm of solicitors instructed by Mr Frangos, sworn on 23 October 1997:

“44. Mr Katsouris [the attorney at Piraeus who had acted for Mr Frangos in the Greek criminal proceedings] . . . informs me that Greek law (based on a civil code) and practice provides for substantive rights and remedies for breach of mandate. These are not the same as in the English law of fiduciary relationships, trusts and tracing and in particular, there is no equivalent of the equitable doctrine of tracing into assets in the hands of third parties. If the plaintiffs’ claim were correct, Greek law would give them no proprietary right in the vessels. It would only give them a right to pursue Mr Frangos or possibly the ship owning companies personally for compensation.”

The judge described the inability to pursue proprietary claims as “the strongest argument which the plaintiffs raise” in support of their contention that Greece is not the appropriate forum. He accepted that a remedy which, if the appellants’ factual contentions were made out, would be available in England would not be available to them in Greece. Nevertheless, he did not regard that as sufficient to displace his provisional conclusion that the proceedings should be stayed on the grounds of forum non conveniens.

There are, we think, three distinct matters to be considered: (1) If the appellants establish their factual contentions in proceedings before the Greek courts, what remedies are available to them in those proceedings. (2) If the appellants establish their factual contentions in proceedings before the English court, what remedies are available here. (3) If and in so far as the remedies available in the English court are more extensive, or more efficacious, than those available in the Greek courts, would it be unjust to stay the English proceedings - and so deprive the appellants of those more extensive, or more efficacious, remedies - in the particular circumstances of the present case.

The position in Greece is best described in the Legal Opinion given on 30 October 1997 by Professor Gasis and Mr Scorinis, independent experts instructed on behalf of Mr Frangos. At paragraph 12 of that Opinion they state:

“12. The <<mandated to manage>> alleged by the Plaintiffs has the characteristics of the contract of mandate stipulated by the provisions of Articles 713 et seq of the Greek Civil Code. According to these provisions, Mr Haji-Ioannou, in his capacity as the alleged giver of the mandate, is entitled (as long as he can prove that his allegations are true) to demand against Mr Frangos, in his capacity as recipient of the mandate:

(1) to comply with the terms of the mandate in accordance with the orders of the giver

(2) to render an account regarding the amounts to be paid to him within the framework of the agreement which allegedly existed between themselves and to seek information and documents in connection with the management of the vessels by Mr Frangos

(3) to return (restitute) to the giver whatever he received and/or he acquired by reason of the performance of the mandate.”

The allegations against Mr Frangos, as they appear from the indictment signed on 6 July 1994 which we have set out, are to the effect that, out of the US$49 million transferred by the second and third plaintiffs to the second and third defendants, some US$30 million was transferred on to the fourth to fifteenth defendants (the ship owning companies) and used, together with some US$85 million provided by way of bank loans, to purchase second hand dry-cargo vessels (and a yacht) selected with the approval of the first plaintiff. It is not clear whether the monies transferred by the second and third defendants to the ship owning companies are said to have been transferred by way of loan or as capital subscriptions; but the indictment is more consistent with the former. If those allegations are correct, then there is a balance of some US$19 million which is not accounted for in the material before us.

On the basis that the position is as described by Professor Gasis and Mr Scorinis - and there is no reason to think that it is not - the remedies in Greece, on the facts alleged in the indictment, would appear to be these: (1) Mr Frangos can be ordered to render an account showing what has become of the whole of the US$49 million paid to the second and third defendants. (2) He can be ordered to deliver (or to procure companies under his control to deliver) to the first plaintiff the shares of the ship owning companies. (3) He can be ordered to transfer or assign (or to procure companies under his control to transfer or assign) to the first plaintiff the benefit of any loans made by the second and third defendants to the ship owning companies. (4) He can be ordered to make restitution to the first plaintiff of any benefits which he, the second or third plaintiffs or other companies under his control have received as owners of the shares or as lenders. (5) He can be ordered to make restitution to the first plaintiff of any part of the balance of the US$49 million (that is to say, the US$19 million or thereabouts not so far accounted for) which he, the second or third defendants or other companies under his control have retained or any assets which he or they have acquired with those funds. (6) He can be ordered to repay such part of the US$19 million not so far accounted for as has been disbursed and is not represented by assets. In other words, if the allegations are made out, there would seem to be no reason in principle why the Greek court should not have power to compel Mr Frangos to disclose what he, or companies under his control, have done with the US$49 million; to compel him to return or transfer to the first plaintiff any assets which he, or companies under his control, have acquired with those monies (including, in particular, the shares in the ship owning companies); to compel him to make restitution in respect of any benefits which he, or companies under his control, have received from the use of those monies; and to compel him to repay any balance of the monies no longer represented by assets. Those may be thought comprehensive and powerful remedies.

The remedies that would be available against Mr Frangos in the English court, if the allegations pleaded in the statement of claim were made out, are not significantly different. It is alleged that the US$49 million was transferred to him, or to the second and third defendants as his agents, on trust for the plaintiffs; that he was under a fiduciary duty to ensure that the funds were applied only in accordance with the mandate; and that he was under a duty to account for the use of the funds and in respect of all profits and benefits. The relief claimed in the amended statement of claim includes an order for the payment to the plaintiffs of “the Funds” (meaning the US$49 million and any assets acquired with, representing or derived from those monies, all profits made therewith and all additions or accretions thereto); compensation or damages for breach of duty; an order for account; and such orders, accounts or inquiries as may be appropriate for the purposes of identifying and ascertaining the whereabouts and nature of the funds. In so far as those are remedies enforceable against Mr Frangos personally, they match those which appear to be available under the Greek Civil Code and Civil Procedures Code. It is, we think, pertinent to note that the extra-judicial witness statement and without prejudice notice dated 6 May 1994, to which we have already referred, makes very much the same demands against Mr Frangos, under the alleged mandate to manage, as would be made against a former trustee following termination of the trust.

It is said, however, that the English court would give proprietary remedies - and, in particular, proprietary remedies against third parties. This contention finds expression in paragraph (6) of the prayer for relief in the amended statement of claim:

“(6) An order that the Plaintiff be entitled to trace into the vessels listed in the Schedule hereto acquired by or on behalf of the Fourth to Fifteenth Defendants, together with a declaration that the plaintiffs are entitled to ownership of such vessels to the extent the same have been acquired from the Funds.”

At first sight the contention that the appellants are entitled to a proprietary remedy against the ships themselves is a surprising one. It was, after all, a term of the alleged mandate that the monies were to be provided for the purpose of acquiring ships which would be owned by single ship companies set up or acquired for that purpose. The trust was to attach to the shares in those companies (or, perhaps, to the choses in action represented by loans made to those companies); it was not intended that the trust would attach to the ships. That would negate the principal commercial purpose of operating through single ship companies. For Mr Frangos, or companies under his control, to transfer monies out of the US$49 million to the ship owning companies for the purpose of enabling those companies to acquire the ships is not a contravention of the alleged mandate; rather, it is a performance of it. We have already noted the observations of Meskin J in the High Court of South Africa on this aspect of the plaintiffs’ claim.

The appellants seek to meet the point that, in transferring monies to the ship owning companies for the purpose of enabling those companies to acquire ships, Mr Frangos was acting in furtherance of the alleged mandate and not in contravention of it by an allegation, pleaded at sub-paragraph 14(3) of the statement of claim, that:

“. . . at the dates he caused the Funds to be invested or applied in the acquisition of the said vessels by the [ship owning] companies Mr Frangos intended that the shares in such companies would be registered in his name or in the names of companies controlled by him or (if bearer shares) be held by him and for his own benefit;”

It is said that to apply the Funds in the acquisition of vessels by the ship owning companies at a time when he had already decided to retain the shares in those companies for his own benefit was itself a breach of trust. Further, it is said, each ship owning company must be treated as having the knowledge of Mr Frangos that the transfer of monies to it for the purpose of acquiring the ship was a breach of trust or breach of fiduciary duty on his part. Paragraph 16 of the statement of claim is in these terms:

“16. In the premises the Plaintiffs are entitled to trace in respect of such parts of the Funds as were transferred to or invested by or on behalf of each such single ship company in the acquisition of the aforesaid vessels. The Plaintiffs claim to be entitled to trace into ( inter alia) such vessels and (where any such vessel has been disposed of) the proceeds of sale of the same.”

As pleaded, there is no claim to trace into any assets other than the ships and (if any) the proceeds of sale of ships which have been sold. In particular, there is no claim to trace into any assets representing the balance of the US$49 million - that is to say the US$19 million or thereabouts not transferred to the ship owning companies - which may have come into the hands of persons other than Mr Frangos and the second and third named defendants.

The claim to trace into assets which are in the hands of persons other than Mr Frangos and the second and third named defendants - in particular, into the ships themselves - raises three issues: (i) would the English court, applying its own choice of law rules, regard the question whether, say, a ship owning company held its ship upon a trust for the plaintiffs (if the pleaded allegations were made out) as a matter to be determined by English domestic law; (ii) if so, would the ship owning company be held to be a trustee for the plaintiffs under English domestic law in the circumstances alleged; and (iii) would it be an appropriate exercise of the court’s discretion to permit service on the ship owning companies (or any other parties out of the jurisdiction) in order to enable such claims to be made against them here. It is, we think, important not to lose sight of the fact that the tracing claims which the plaintiffs seek to raise in the English court are claims against assets which (at least, prima facie) are not within the jurisdiction of that court; and, further, they are claims against assets which (again, prima facie) are in the ownership of persons who, themselves, are not within the jurisdiction.

The first of those issues - identification of the lex causae or applicable law - itself involves three stages, as explained by Staughton LJ in Macmillan Inc v Bishopsgate Investment Trust Plc [1996] 1 WLR 387, at pages 391H-392B. First, it is necessary to characterise the issue that is before the court; second, to select the choice of law rule which prescribes a connecting factor for the issue in question; and, third, to identify the system of law which is tied by that connecting factor to the issue in question. It is impossible, at this stage of proceedings, to reach a concluded view as to the appropriate characterisation of the issue or issues which would be determinative of the question whether the ship owning companies received the monies transferred to them by the second and third defendants as trustees; but, on the material available, it seems to us much more likely than not that, under English choice of law rules, that question (as distinct from the question whether Mr Frangos and the second and third defendants were themselves in breach of trust) would be determined by the law of the place (or places) of payment to, or to the order of, the ship owning companies. It is for the appellants to show that place (or those places) were in England. There is no evidence of that.

If, notwithstanding the lack of evidence as to the place of receipt, the question whether the ship owning companies received the monies transferred to them as trustees falls to be determined by English domestic law, it becomes necessary to consider whether the appellants have shown that, under English law, that question would be answered in their favour. In this context they can rely on the decision of Millett J in El Ajou v Dollar Land Holdings plc and another [1993] 3 All ER 717; and, in particular, on a passage at page 737h:

“An English court of equity will compel a defendant who is within the jurisdiction to treat assets in his hands as trust assets if, having regard to their history and his state of knowledge, it would be unconscionable for him to treat them as his own.”

But that, of course, poses two further questions. The first, which we have already mentioned, is whether it would be an appropriate exercise of the court’s powers to permit service of these proceedings on a defendant who is not within the jurisdiction in order to subject him, in relation to assets which are not within the jurisdiction, to the operation of the English law of trusts. The second is whether, if the relevant defendant (say, a ship owning company) were subjected to the jurisdiction of the English court following service abroad, it would be held unconscionable for him to treat as his own assets abroad (say, the ship) having regard its history and his state of knowledge.

In relation to the second of those questions, the appellants rely on observations in Bristol and West Building Society v May May & Merrimans [1996] 2 All ER 801, at page 818b-g. But it is important to keep in mind that those observations must be confined to circumstances in which the fiduciary had obtained funds from his principal by a fraudulent misrepresentation - see the judgment of Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1, at page 15. On a proper analysis of the statement of claim in the present case - in particular, of the way in which the plaintiffs’ case is pleaded in paragraph 14 - there is no allegation that the Funds were obtained by fraud. What is alleged is that, at the time when he caused the Funds to be applied for the purpose of the acquisition of each vessel by the relevant ship owning company, Mr Frangos intended to appropriate the shares in that company for his own benefit. It is not alleged - although, perhaps, left to be inferred - that, having formed that intention in connection with the acquisition of the first vessel to be acquired (in October 1990), the subsequent receipt of funds for the acquisition of other vessels (on dates between 17 May 1991 and 28 May 1993) was, in some way, fraudulent. Nor is there any suggestion in the extra-judicial witness statement and without prejudice notice of 6 May 1994 that the funds were obtained by fraud on the part of Mr Frangos. Indeed, it might be said that, in calling for the delivery of the shares, the plaintiffs have elected to adopt the application of the funds in accordance with the mandate. There are allegations in the indictment of 7 July 1994 to the effect that Mr Frangos’ plans were “of a criminal nature from the outset”; but the allegations of embezzlement are founded on his conduct in refusing to deliver the shares and render accounts.

In these circumstances we are not persuaded that, as pleaded, the statement of claim discloses any cause of action against the ship owning companies. In particular, we are not persuaded that, if the question did fall to be determined by English law, an English court would reach the conclusion (on the allegations made in the pleadings) that the ship owning companies held their assets on trust for the plaintiffs. But, even if the English court were to reach that conclusion, we cannot see that any useful remedy would follow. Neither the ship owning companies nor their assets are within the jurisdiction. Equity does nothing in vain; and it would not be appropriate to make orders which would have no practical effect. There is no evidence that a declaration as to beneficial ownership would have any practical effect. For the reasons which we have already given, beneficial ownership would not be sufficient, of itself, to found an arrest under the 1952 Arrest Convention.

If we were wrong so far, it would be necessary for the plaintiffs to establish that it would be an appropriate exercise of the court’s powers to permit service of these proceedings on a ship owning company which is not within the jurisdiction in order to subject it, in relation to assets which are not within the jurisdiction, to the operation of the English law of trusts. This question is, we think, conveniently considered with the related question whether it would it be unjust to stay the English proceedings; and so deprive the appellants of proprietary remedies against persons who are not within the jurisdiction, who are not parties and who will not become parties unless leave to serve out of the jurisdiction is granted. For the reasons which we have already sought to explain the supposed advantage to the plaintiffs of continuing these proceedings in England does not lie in the availability, in the English court, of more extensive or more efficacious remedies against Mr Frangos personally. The supposed advantage lies in the availability of remedies against persons who can only be sued here, under the extended jurisdiction conferred by RSC Order 11 Rule 1(1)(c), if they are necessary or proper parties to the action brought against Mr Frangos. On a true analysis the plaintiffs want to continue proceedings here not because these proceedings provide more extensive or more efficacious remedies against him than would be available in the Greek courts, but because, by proceeding against Mr Frangos here, they hope to be able to bring in claims against the ship owning companies and, perhaps, other third parties not yet identified.

RSC Order 11 Rule 4(2) requires that no leave shall be granted under Rule 1(1) unless “it shall be made sufficiently to appear to the Court that the case is a proper one for service out of the jurisdiction”. The inter-relationship of the merits of the plaintiff’s claim and the principle of forum conveniens in this context was considered by Lord Goff in Seaconsar Ltd v Bank Markazi [1994] 1 AC 438, at page 456C-E. The two elements are separate and distinct; but both must receive consideration in determining whether the case is one in which it is right for the English court to exercise its power to bring before it a foreigner who owes no allegiance here. In our view both elements point to the conclusion that this would not be a proper case for service out of the jurisdiction on the ship owning companies even if the proceedings against Mr Frangos were to continue here. The case against the ship owning companies is, on any view, very weak. There is no forum conveniens ground which can be invoked, in relation to the ship owning companies, other than the convenience of trying the claims against those companies in the same forum as the claims against Mr Frangos. But to seek to invoke that ground as a reason for refusing a stay of proceedings against Mr Frangos leads to circularity of argument. The plaintiffs cannot be heard to say, in effect, that proceedings against Mr Frangos must be allowed to continue here because it is only thus that they can proceed against the ship owning companies here; and, at the same time, that the reason for bringing the ship owning companies before the English court is that it is convenient to join them in the action against Mr Frangos which is proceeding here.

The underlying question is whether, in all the circumstances, it would be unjust to deny to the plaintiffs the advantage which they seek to obtain by bringing proceedings here in which they can join persons who are not here but who may have assets (also not here) which may be shown to be derived from the monies paid by the second and third plaintiffs to the second and third defendants pursuant to an arrangement between a Greek Cypriot ship owner and his Greek son-in-law. In our view, that question has to be answered in the negative. We are satisfied that the judge was right to reach the conclusion which he did on the issue of forum non conveniens.

The second to ninth, eleventh to thirteen and fifteenth defendants are companies incorporated in Panama, having their registered offices in Panama City. The tenth and fourteenth defendants are companies incorporated in Liberia, having their registered offices in Monrovia. None of those defendants have been served with the writ in these proceedings. The judge treated as before him an application by the plaintiffs for leave to serve out of the jurisdiction under RSC Order 11 Rule 1(1)(c); and the matter was argued inter partes by counsel appearing for Mr Frangos in circumstances which, it was accepted, did not constitute a submission to the jurisdiction on the part of the second to fifteenth defendants.

The judge held that his conclusion on the issue of forum non conveniens in relation to the proceedings against Mr Frangos made it unnecessary for him to decide whether or not to give leave to serve the other defendants out of the jurisdiction. That must be correct. The second to fifteenth defendants cannot be necessary or proper parties to an action against the first defendant which has been stayed; alternatively, it could not appear to the court that the case was a proper one for service out in such circumstances. But, the matter having been fully argued before him, the judge went on to consider whether he would have given leave to serve out if he had refused a stay of proceedings against the first defendant. He held that he would have done; but on terms which he did not find it necessary to identify.

We have already expressed the view that this is not a case in which it could be proper to give leave for service out. We have taken that into account in reaching the conclusion that it is not unjust to deny to the plaintiffs the advantage which they seek to obtain by bringing proceedings here against Mr Frangos. We do not think that it would be useful to consider the question again on the hypothesis that we could have concluded that it was unjust to stay the proceedings against Mr Frangos whether or not the other defendants were to be joined. The hypothesis is, we think, unreal in the circumstances of this case.

For the reasons which we have set out, this appeal must be dismissed.

ORDER (Not part of judgment):

Cross-appeal allowed under Article 2 of the Convention; plaintiff's appeal under Article 4 dismissed; cross-appeal under Articles 21 and 22 dismissed; cross-appeal under Order 12, rules 7 and 8 dismissed; plaintiff's appeal on forum non conveniens dismissed; plaintiff's appeal against leave to serve the 2nd to 15th defendants out of the jurisdiction dismissed; writ to be set aside for lack of jurisdiction; defendants to be released from their undertaking; liberty to apply refused; defendants to have costs of appeal and 75% of the costs below and 25% of the costs of the cross-appeal; leave to appeal refused.

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