Team Y&R Holdings v Ghossoub  EWHC 2401 (Comm) is an interesting treatment of parallel proceedings. The exclusive jurisdiction clause was read to fulfil its purpose: the substance not the form of allegedly wrongful Hong Kong proceedings was important and third parties were not bound. However, despite Mr Ghossoub being in breach of the jurisdiction clause, no anti-suit injunction was granted against him. The decision should give parties pause for thought when drafting jurisdiction clauses and starting or resisting parallel proceedings. Chaos or at least inconvenience might be unavoidable without a clearly drafted jurisdiction clause. It also offers guidance on how to write a jurisdiction clause which bites on non-contracting parties.
The case arose from a sale and purchase agreement (“SPA”) for the shares of Team Y&R Holdings (“TYRH”) and a service agreement (“SA”) between Mr Ghossoub and TYRH. The SPA contained an exclusive jurisdiction clause as follows (the SA clause was less detailed).
“The English courts have exclusive jurisdiction to settle any dispute arising out of or in connection with this agreement and the parties submit to the exclusive jurisdiction of the English Courts.”
In April 2015, Mr Ghossoub brought an unfair prejudice petition against Team Y&R Holdings (“TYRH”) in Hong Kong (“HK”). The SPA and SA formed “a significant platform for much” alleged in the HK petition. TYRH wanted to stop Mr Ghossoub’s petition on the basis it was a dressed up claim for breach of the SPA and SA and should have been brought in England.
In December 2015, Cavendish (which had become party to the SPA by a novation) and TYRH issued a defaulting shareholder claim against Mr Ghossoub in England.
The English court (Lawrence Rabinowitz QC as deputy High Court judge) had to decide:
The tension in the case arose because the parties could not have intended that a Hong Kong law unfair prejudice petition should be brought in England. The courts could have jurisdiction to entertain and grant relief in such a petition.
However, the material allegations on which the petition was based were substantially breach of contract allegations. Those allegations would be normally be expected to be covered by the exclusive jurisdiction agreement.
The judge resolved the problem by interpreting “disputes” in the jurisdiction clause as describing an individual “aspect or element” of a claim rather than applying “only to a consideration of the overall nature or type of the claim”. This accorded with commercial common sense because the alternative conclusion would permit abuse. Parties could otherwise construct artificial forms for overseas proceedings where the issues in dispute were plainly contractual.
Although the judge eschewed simple application of the “one stop shop” presumption derived from, among other cases Donohue v Armco  UKHL 64 and Fiona Trust v Privalov  EWCA Civ 20), his decision fits well with the policy underlying those cases.
The result was that Mr Ghossoub was in breach of the jurisdiction clause in respect of “a very substantial part of the matters in dispute submitted to the HK court”.
Mr Ghossoub was not, however, in breach of contract having brought the HK petition against three non-parties.
Resolving the issue required rationalising apparently conflicting decisions. On the one hand was the dictum of Lord Scott in Donohue v Armco which suggested that a clause in similar terms would be breached by proceedings against a third party. On the other hand was Rix J’s decision in Credit Suisse First Boston v MLC  1 All ER 237 that it would be “far-fetched to regard ‘any disputes’ as covering disputes between [the Defendant] and any one other than [its] contract partner…” and that clear language would be required to support another conclusion. Lord Scott’s dictum had been followed by Norris J in Winnetka Trading v Julius Baer  EWHC 3146 while, in Morgan Stanley v China Hasihen Juice Holdings  EWHC 2409 (Comm) Teare J had reached the same conclusion as Rix J.
The judge effectively adopted Teare J’s analysis of how to distinguish the Donohue dictum. That is: neither the Donohue nor Winnetka contract contained any provisions relating to third parties. Further, the point was not argued in Donohue and none of the other speeches addressed the point.
Lawrence Rabinowitz QC held that the following principles could be discerned.
In short, if parties wish a jurisdiction clause to apply to non-parties:
“clear words should be used expressly setting out this intention, the parties to be affected and, if relevant, the manner in which submission of any non-contracting parties to the jurisdiction of the chosen court is to be ensured.”
The judge therefore concluded that the jurisdiction clause in this case did not bite with respect to third parties. Key points relied on were:
The judge also rejected an alternative submission that Mr Ghossoub’s petition against the third parties was abusive (or vexatious or oppressive). He reached this view on the facts and also noted that the Hong Kong courts had, following full consideration, held that the petition was not abusive or an obvious device. In those circumstances, he would have needed “very strong reason” to reach a different view on abuse.
No anti-suit injunction was granted. The judge reached his decision “with some reluctance given that Mr Ghossoub … [was, in the judge’s] view guilty of breach of contract…”
Anti-suit relief will not be granted if a strong reason can be identified (Dononhue v Armco, Star Reefers v JFC  EWCA 14. There was a strong reason because it was impossible to disentangle the HK and London claims to ensure that all the issues could be resolved in England. This was at least in part a result of Mr Ghossoub having raised additional (albeit lightly particularised) claims in the HK petition and because of the involvement of the non-contracting parties in HK.
The judge considered whether Mr Ghossoub could be required to bring some claims in England but thought this was not “a desirable outcome” and that the HK court should be able to resolve all disputes it considered appropriate before deciding the unfair prejudice petition.
The final issue was whether service of the defaulting shareholder claim and the anti-suit claim should be set aside. Two issues arose: (1) incorrect use of CPR 6.15 to permit alternative service; and (1) failure to make full and frank disclosure.
Mr Ghossoub argued that he could and should have been served in Dubai though the usual diplomatic channels in accordance with the Service Treaty (treat of 7.12.06 between the UK and UAE on Judicial Assistance in Civil and Commercial Matters). When service failed, the claimants should have corrected their error and restarted the process.
The judge rejected this view.
Further, the judge held that while there were “troubling” failures to comply with the important duty of full and frank disclosure on ex parte applications, these did not justify setting aside service. Broadly this was because the failures were inadvertent and it would be a disproportionate response to set aside service and “exacerbate still further” the serious delay in affecting service.