Summary

Despite the risk of inconsistent decisions in proceedings in England and Italy, the English court declined to order a stay, on case management grounds, of an issue in the English proceedings pending determination of that issue in Italy.

Facts

The applicant (L) applied for an order staying the determination of some of the issues in the action pending the completion of certain proceedings in Italy. The respondents (C) were two persons who had sold the shares in a company (S) to L. Their claim was for the final tranche of the sale price. L resisted that claim on the basis that it had given notice of a warranty claim which entitled it to withhold the final tranche. It counterclaimed for damages for breach of warranty, alleging that C had failed to disclose the existence and terms of two material contracts, a development agreement and an exploitation agreement, relating to a project which had been entered into by S. C admitted that they had not disclosed the two contracts, but claimed that they had not been obliged to do so because those contracts were not "material contracts" as defined in the share sale agreement. Proceedings had been commenced in Italy against S and others by a claimant (P) in relation to the same project. Other defendants in those proceedings had filed third party claims against S. The issues in the Italian proceedings included whether S was in breach of the development agreement and the exploitation agreement. L applied for a stay of the English proceedings in respect of the issue of breach of the material contracts warranty in the share sale agreement. L submitted that the issue whether the development agreement and exploitation agreement had been properly performed by S was raised in both sets of proceedings and there was therefore a risk of inconsistent decisions which should be avoided by staying determination of the material contracts issue pending the decision in the Italian action to which all those who entered into the two agreements were party.

Held

There was a risk of inconsistent decisions between the English and Italian courts, since the English court might hold that the development agreement and exploitation agreement had been completely fulfilled and the Italian court might later hold that they had not been. That would be an injustice to L. The court had an interest in deciding in which order related proceedings should be tried and had a discretion to stay proceedings on case management grounds, Reichhold Norway ASA v Goldman Sachs International (2000) 1 WLR 173 CA (Civ Div) applied. There had to be very strong reasons for ordering such a stay, but the risk of inconsistent decisions was capable of amounting to a very strong reason. The reason for granting a stay was that there was a risk of inconsistent decisions and resulting injustice to L. However, the force of that factor was weakened by the consideration that a stay would not eliminate that risk though it might reduce it. If C did not accept the findings of the Italian court they could not be prevented from seeking findings inconsistent with it. Against that factor was the risk of significant delay to the resolution of C's claim in England and resulting injustice to C. The force of that factor was weakened by the fact that the trial of the other issues could take place without delay and by the fact that an award of interest could compensate for the delay. But the prejudice caused by delay was not thereby eliminated. In all the circumstances it could not be said that there were very strong reasons for granting a stay. The benefits which were likely to result from a stay did not clearly outweigh any disadvantage to C. The scales were evenly balanced and a stay was refused.

Application refused