Summary

The High Court concluded that it did not have jurisdiction to hear claims by three companies against their chief executive officer and chief financial officer, because the claims were matters relating to individual contracts of employment under the Lugano Convention 2007 s.5 and the defendants were not domiciled in the UK. It reached that decision even though the defendants were employed by only two of the three claimant companies, by relying on the decisions in Samengo-Turner v J&H Marsh & McLennan (Services) Ltd [2007] EWCA Civ 723 and Petter v EMC Europe Ltd [2015] EWCA Civ 828.

Facts

The defendants challenged the court's jurisdiction to hear claims brought by the claimant group companies.

The first claimant was the group holding company incorporated in the Netherlands. The second claimant was its trading entity incorporated in Dubai. The defendants were domiciled in Switzerland. They had worked for the third claimant in Macedonia as chief executive officer and chief financial officer respectively, before the first and second claimants were incorporated, and later became CEO and CFO of the group as a whole. They entered into "advisory contracts" with the second claimant under which they were retained as self-employed advisors to the group. The majority of their pay came from the second claimant under those agreements. The agreements contained a jurisdiction clause which stated: "in case of disagreements, they shall be solved in the Court of the United Kingdom". The claimants alleged that the defendants had (a) dishonestly caused or procured them to enter into contracts with a company linked to the first defendant's family, causing large payments to be made to that company in breach of their fiduciary duties; (b) breached their contracts by failing to properly supervise supply contracts and entering into disadvantageous contracts, causing substantial losses to the claimants.

The claimants asserted that the advisory contracts gave the UK court jurisdiction over the dispute under the Lugano Convention 2007 art.23. The defendants argued that the claims were matters relating to individual contracts of employment under s.5 of the Convention, and therefore could not be brought in the UK as the defendants were domiciled elsewhere.

Held

Applicable tests - The test was whether the claimants had a good arguable case that because of the jurisdiction clause, the instant court had jurisdiction to determine the claim under art.23. For s.5 to apply, the relationship between the parties had to be one of employment, governed by contract. The employment concept was an autonomous one under the Convention, not a matter of national employment law of the forum or the governing law of the contract. Employment was a question of substance, not form. There had to be a contract, but it need not be in writing. The criteria set out in WPP Holdings Italy Srl v Benatti [2006] EWHC 1641 (Comm) and endorsed in WPP Holdings Italy Srl v Benatti [2007] EWCA Civ 263 were applicable, WPP (Comm) applied and WPP (EWCA) followed. It was also important to bear in mind, when dealing with senior roles within corporations, that significant executive authority and/or autonomy at work was not inconsistent with employment (see paras 24-31 of judgment).

Third claimant's claims - The defendants were both full-time, salaried, executive employees of the third claimant. They were entitled to reside in Macedonia under successive annual work permits, issued by virtue of their employed status. They were employed under successive contracts in step with those work permits, and were granted a statutory pension and other benefits as an employee. Their roles elsewhere within the group did not change the nature of their engagement by the third claimant. The advisory contracts with the second claimant did not affect the nature of the defendants' relationship with the third claimant. Those contracts were just a tax-saving device. Accordingly, the third claimant's claims were all subject to s.5 and the court did not have jurisdiction (paras 39-43, 46-47, 49-51).

First claimant's claims - (a) D1 - D1 had been appointed as CEO of the first claimant, and of the group as a whole, from its incorporation in 2007. However, there was no written contract appointing him as such, and no evidence that he was remunerated separately for that role. The proper conclusion was that his appointment was contractual between him and the first claimant for the purposes of s.5, and supplemented/varied his engagement by the third claimant under a contract of employment, WPP (Comm) applied. The advisory contracts did not affect the position (paras 52-61). (b) D2 - D2's appointment to a wider role within the group was documented in a signed contract of employment in July 2010. The court rejected the first claimant's argument that the employment contract was a sham. It was the advisory contracts which failed to reflect the true nature of the defendants' engagement within the group (paras 62-67).

Second claimant's claims - The defendants were not employed by the second claimant, but s.5 could still apply, Samengo-Turner v J&H Marsh & McLennan (Services) Ltd [2007] EWCA Civ 723, Petter v EMC Europe Ltd [2015] EWCA Civ 828 followed, Arcadia Petroleum Ltd v Bosworth [2016] EWCA Civ 818considered. The advisory contracts between the defendants and the second claimant, in respect of their employment by other group companies, should be regarded as contracts of employment for s.5 purposes. They were indistinguishable from the contracts in Samengo-Turner and Petter, and were to provide documentary cover for the second claimant to be the payment vehicle for some or all of the salary to which the defendants were entitled as employees of group companies. The second claimants' claims were all in the nature of claims that would be made by an employer in respect of employment, and for all those reasons the defendants' challenge to jurisdiction in respect of the second claimants' claims succeeded (paras 36-37, 68, 71-79).

Outcome - The claims brought against the defendants were matters relating to individual contracts of employment within art.18. The jurisdiction clause was ineffective to confer jurisdiction on the instant court (para.82).

Application granted