Brompton Gwyn-Jones v McDonald

• Jurisdiction: Ireland
• Judge: Mr. Justice Barr
• Judgment Date: 22 December 2020
• Neutral Citation: [2020] IEHC 689
• Docket Number: [Record No. 2019/16 FJ.]
• Court: High Court
• Date: 22 December 2020

BETWEEN

HENRY ALEXANDER BROMPTON GWYN-JONES

APPLICANT

AND

RICHARD WILLIAM MCDONALD

RESPONDENT

[2020] IEHC 689

Barr

[Record No. 2019/16 FJ.]

THE HIGH COURT

JUDGMENT of Mr. Justice Barr delivered electronically on the 22nd day of December, 2020

Introduction

1 On 31st October, 2017, the respondent obtained a judgment against the applicant in the Sofia City Court in the Republic of Bulgaria in the sum of €425,926, together with costs of circa €16,500, plus interest pursuant to Bulgarian statute law from 2nd March, 2016 until payment. That judgment was confirmed by a judgment of the Court of Appeal in Bulgaria on 6th December, 2018. By a judgment delivered on 10th October, 2019, the Supreme Court of Cassation in Bulgaria refused to permit the applicant any further appeal against the original judgment or the determination of the Court of Appeal.

2 In this application, the applicant seeks a number of reliefs, which can be summarised in the following way:-

(a) The applicant seeks an order from the court refusing recognition or enforcement of the judgment obtained by the respondent against him in the Courts of Bulgaria, on the grounds that to do so would be contrary to public policy in Ireland; in particular, because it would enable the respondent to perpetrate a fraud on the applicant.

(b) In the alternative, the applicant seeks an order from the court staying the recognition or enforcement of the Bulgarian judgment against him, pending the outcome of arbitration proceedings currently pending before the International Court of Arbitration of the ICC, wherein the arbitral tribunal will determine the liabilities of the parties in connection with a series of contracts concerning the purchase of a shopping centre in Sofia, Bulgaria and related contracts, including certain loan contracts on which the Bulgarian judgment was grounded.

Background

3 In order to properly understand the grounds on which the applicant moves the application herein, it is necessary to set out the background to the commercial disputes between the parties. It is the applicant's case that in or about 2007, he was approached by the respondent with an investment proposition concerning investment in the development of a shopping centre in Sofia, Bulgaria. In essence, the applicant states that he was told by the respondent that in order to proceed with the venture, it would be necessary for them to make an investment of €20m. It was represented to the applicant that if he were to put up €15m, the respondent stated that he would put up the remaining €5m from his own funds. The applicant maintains that he agreed to this proposal and put up the funds via a company controlled by him called Gort Holdings Ltd, which was registered in Guernsey.

4 The applicant states that he made that investment relying on the representations that had been made by the respondent, in particular, that he would have “ skin in the game” by investing €5m of his own money. In addition, it was a requirement of the bank which was providing the mortgage over the purchase of the shopping centre, that a personal guarantee would be given by the applicant. Accordingly, he gave a personal guarantee to Piraeus Bank (Bulgaria) of €20m. The applicant states that he only provided that personal guarantee on the basis of the fraudulent representations made to him by the respondent.

5 It is the applicant's case that in the events which transpired, the respondent did not invest €5m of his own funds in the project and the applicant has lost the entire of his investment, which is said to stand at present at €22m and he also remains personally liable on foot of the guarantee to Piraeus Bank.

6 That is a greatly simplified version of the dispute between the applicant and the respondent herein concerning the purchase of the shopping centre, which was known as Burgas Plaza. The complexity of the arrangements actually entered into, can be seen by virtue of the fact that in a second set of arbitration proceedings commenced by the applicant in January, 2020 arising out of the collapse of the whole Burgas Plaza investment, those proceedings were instituted against eleven separate respondents. However, for the purposes of this judgment, the simple outline of the essential dispute between the parties as given above, will suffice.

7 The judgment issued by the Sofia City Court, which is at the heart of the present application, arose out of two simple loan contracts. The first of these was a written contract entered into between the applicant and the respondent on 28th March, 2011. It provided that the respondent would lend the applicant the sum of €122,000, which was to be repaid by 31st December, 2011. It was a very brief contract running to only eight short paragraphs. It was signed by each of the parties. The second loan agreement was dated 26th April, 2011. Under it, the respondent lent the applicant the sum of €303,926, which was to be repaid by 31st December, 2011. It had the same terms as the previous agreement and was also signed by each of the parties. Each of the loan agreements contained an exclusive jurisdiction clause, which gave jurisdiction to the Courts of Bulgaria to determine any disputes arising out of the contract. Each of the contracts provided that it was to be governed by the law of Bulgaria.

8 It was accepted by the applicant that he had entered into these loan agreements. He stated that they were in connection with certain advertising contracts that had been entered into in relation to the rental of advertising space within the Burgas Plaza Shopping Centre, whereby the respondent's company would have that advertising space for rent and it was envisaged that the loan would be repaid from the profits that would accrue due to the rental of such space.

9 When the loans were not repaid by the applicant, the respondent instituted proceedings before the Bulgarian Courts. On 5th October, 2017, a hearing was held before the Sofia City Court, where both parties were legally represented. The applicant's lawyers submitted that the loan contracts had to be seen in the context of a complex series of contracts, which had been entered into between companies controlled by the applicant and the respondent respectively in relation to the entire Burgas Plaza project. The court did not accept that submission. On 31st October, 2017, the Sofia City Court granted judgment to the respondent on foot of the contracts of loan in the sum of €425,926, together with costs and interest.

10 The applicant appealed that judgment to the Court of Appeal in Bulgaria. A hearing was held in that court on 5th November, 2018. On 6th December, 2018, the Court of Appeal delivered a written judgment, wherein it affirmed the judgment of the Sofia City Court.

11 The applicant sought to have a further appeal to the Supreme Court of Cassation in Bulgaria. However, on 10th October, 2019, that court refused to allow any further appeal in the matter.

Other Proceedings

12 Prior to the judgments obtained by the respondent in the Courts of Bulgaria, the applicant had taken a number of steps in relation to his overall dispute concerning the loss of his investment in the Burgas Plaza project. On 21st November, 2014, the applicant obtained an interim worldwide freezing order against the assets of a company known as MRP Brazil Ltd, which was the successor in title to Balkan Holdings Ltd, which had been the vehicle through which the respondent had purported to make his investment in the Burgas Plaza Shopping Centre. That worldwide Mareva injunction had been obtained before the High Court of the Isle of Man, which was where Balkan Holdings Ltd and subsequently MRP Brazil Ltd, were registered. On 19th December, 2014, a hearing was held before the High Court of the Isle of Man concerning the continuance of the worldwide freeing order, at which both parties were represented. The freezing order prevented MRP Brazil Ltd reducing its assets anywhere in the world below the sum of €22m. It also made certain directions in relation to disclosure of information by MRP Brazil Ltd.

13 On 22nd February, 2015, the High Court of Justice of the Isle of Man (Deemster Gough) gave a written judgment in which the learned judge stated that he was satisfied that the claimant in those proceedings, Gort Holdings Ltd, had a good arguable case that it had been the victim of deceit and that the misrepresentations and deceit had continued after the initial memorandum of understanding and through the project, including various agreements to inject further loan capital to keep the project afloat and the ultimate assignment of Balkan's interest to another company, Omega. On that basis, the court extended the continuance of the worldwide freezing order pending the outcome of arbitration proceedings between the parties that were then pending before the International Court of Arbitration of the ICC (hereinafter “ the ICC arbitration”).

The ICC Arbitration

14 On 18th December, 2014, a request for arbitration had been submitted by Gort Holdings Ltd against MRP Brazil Ltd and another company known as Bridgecorp A.D. and a company called Burgas Holdings Ltd. Those arbitration proceedings had reference number 20711/TO. Sir Bernard Eber QC was appointed as sole arbitrator.

15 On 24th June, 2015, an answer was filed on behalf of MRP Brazil Ltd to the arbitration proceedings. On 28th April, 2016, an order was made by the arbitrator deeming the claimant's case against the second respondent, Bridgecorp A.D. as having been withdrawn. On 11th September, 2016, by consent, an order was made by the arbitrator staying the arbitration proceedings upon settlement terms that had been set out in an order of the High Court of Justice of the Isle of Man dated 8th October, 2015. That settlement appears to have been reached between Gort Holdings Ltd and the receivers, who had been appointed over the business of MRP Brazil Ltd....