AMT Futures Ltd v Marzillier, Dr Meier & Dr Guntner Rechtsanwaltsgesellschaft mbh
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 11 April 2014 |
| Neutral Citation | [2014] EWHC 1085 (Comm) |
| Docket Number | 2013 Folio 1157 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 11 April 2014 |
[2014] EWHC 1085 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Building, Fetter Lane
London, EC4A 1NL
The Hon. Mr Justice Popplewell
2013 Folio 1157
Thomas De La Mare QC and Andrew Scott (instructed by Farrer & Co LLP) for the Claimant
Pierre Janusz (instructed by Zimmers Solicitors) for the Defendant
Hearing dates: 4 April 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application by the Defendant ("MMGR") for a declaration that the court does not have jurisdiction over it in respect of the subject matter of the claim and for an order setting aside service of the Claim Form. It raises a question of the scope and application of Article 5(3) of the Judgments Regulation ( Council Regulation (EC) No. 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters).
The Claimant ("AMT") is a company incorporated under the laws of England and Wales. It provides financial services in the United Kingdom and has at all material times been regulated by the appropriate regulatory authority under the Financial Services Act 1986. This case is concerned with its derivatives business in which it acted as a broker on an execution only basis for the buying and selling of derivative investments on behalf of clients.
MMGR is a company incorporated under the laws of Germany and carries on business as a firm of lawyers in Germany, regulated by the Munich Bar Association.
The Claim
The claim arises out of AMT being sued in Germany by numerous former clients, at MMGR's instigation, between 2004 and 2013, asserting causes of action under German tort law. Such claims are said by AMT to have been brought in breach of the terms of the agreements between AMT and its former clients which provided for English law to govern such disputes and for the English Courts to have exclusive jurisdiction over them. In these proceedings AMT claims that MMGR wrongfully induced 70 of these former clients to breach their contracts by persuading them to bring such claims in Germany and acting for them in those proceedings, resulting in financial losses in excess of £2 million, including the cost of defending and settling such claims. AMT also seeks an injunction to restrain MMGR from inducing clients or former clients to bring further claims in Germany asserting causes of action under German law in breach of their applicable client agreements.
AMT was introduced to each of the clients by one of several independent brokers, who in each case was based and regulated in Germany. AMT contracted directly with the clients and charged the clients commission per transaction in respect of the execution only services it provided. AMT also paid commissions to the German introducing brokers.
The claims brought by the former clients of AMT in Germany were commenced in the local courts of either Duisburg or Düsseldorf. Of the 70 claimants, 12 were resident in Austria, Belgium or Switzerland. The remaining claimants were resident in Germany, but all in other parts of Germany than that falling within the domestic jurisdiction of the local courts of Duisburg or Düsseldorf. AMT alleges that the claims were deliberately brought in the local courts in Duisburg and Düsseldorf because those jurisdictions were known to be sympathetic to investors who had suffered investment losses.
The claims followed a standard model which was marketed by MMGR as a basis on which claims could be successfully pursued against solvent execution only brokers in Germany, including AMT amongst others, without having to seek recourse against the local introductory brokers who were responsible for the investment advice. The primary complaint was addressed to the conduct of the relevant independent broker in advising the client to make the investments or failing to advise of the risks, but AMT was alleged to have encouraged this conduct by "kickbacks" to the independent brokers from the fees it was earning on the transactions so as to owe a duty directly to the client in tort to prevent any transactions being undertaken contrary to the client's interests, and a duty to brief the client about what was characterised as "fee churning". The claims against AMT were in essence based on an accessory liability ancillary to that of the introducing broker. The introducing brokers were not, however, made defendants (it was said that some or all had become insolvent) so that the claims were advanced against AMT alone.
The agreements containing the contractual terms between the clients and AMT were not all in precisely the same form, the terms varying over time. Each provided for English law and the exclusive jurisdiction of the English courts. The earliest relevant client agreements were on the SFA Terms (1991) which provide that:
"33.1 This Agreement and all rights and obligations arising in respect of your Account shall be governed by, performed and construed in accordance with the laws of England and … you irrevocably submit to the exclusive jurisdiction of the English courts in relation to such dispute, without prejudice to our right to seek enforcement of any arbitration award or judgment in any other jurisdiction."
The SFA Terms (1991) also incorporated the terms of the Netting Agreement annexed to those terms, which provides at clause 12 as follows:
"12.1 These terms shall be governed by and construed in accordance with, the laws of England and Wales.
12.2 With respect to any Proceedings each Party irrevocably (i) agrees that the courts of England shall have exclusive jurisdiction to determine any Proceedings and irrevocably submits to the jurisdiction of the English courts…"
The term "Proceedings" is defined under clause 13.1 of the Netting Agreement as
"Any suit, action, or other proceedings relating to this agreement".
Over time, the terms of the law and jurisdiction clauses came to be drawn more widely. It is not necessary to set out the various versions. It is sufficient for present purposes to record that subject to an argument that the jurisdiction clauses are unenforceable because the clients were consumers, which I address and reject below, it was common ground that AMT have a good arguable case that the German proceedings commenced by each of the 70 former clients constituted a breach of the exclusive English jurisdiction terms of his client agreement with AMT; and was a breach of the English law provisions, because it was framed as a claim under German tort law which was not known to English law.
The allegation that MMGR induced such breaches of contract is not confined to their having acted on behalf of the former clients in bringing the proceedings. MMGR is alleged to have conducted a campaign to find such former clients and persuade them to bring the claims in accordance with a standard model it had developed, and in doing so to have acted unlawfully and in breach of its professional obligations by making use of stolen client lists, and taken an improper financial interest in the funding arrangements so as to circumvent the prohibition under German law on lawyers charging performance related fees.
A challenge to the jurisdiction of the German courts was made by AMT in a number of the cases brought by former clients, but for the most part unsuccessfully. In one such case, for example, a claim brought by a Dr Kramp, the Duisberg Court dismissed the challenge on the grounds that the jurisdiction clause was not wide enough to cover the cause of action framed in German tort law. Some cases reached a judgment against AMT and there have been no successful appeals, although the cases in which liability was determined by the German Courts are not included within the present claim.
Of the 70 German claims which are the subject matter of the present proceedings, 51 have been settled and 19 remain pending. The losses claimed by AMT in these proceedings fall under four headings:
(1) The sums paid to clients by AMT in settlement. The net settlement amounts comprise the equivalent of almost £1.5 million (net after associated recovery from the German introductory brokers), and this forms much the largest element of the claim. These sums were paid in Euros by AMT's German lawyers from an account in Germany to the claimants in Germany. The funding came from AMT's bank account in London.
(2) Legal and investigatory costs incurred by AMT as a result of the claims being brought in Germany. The German legal costs paid to German lawyers together with court fees, translation costs and expert witness costs, amount to the equivalent of approximately £550,000. The legal costs were incurred in Germany, and insofar as they constituted disbursements in court fees and other expenses, were paid by AMT's German lawyers in Germany. Again the funding came from AMT's bank account in London, although it is unclear the extent to which the funding occurred before the expenses were incurred or discharged or the fees incurred. There is also a claim for legal costs paid to UK solicitors and counsel, and UK expert witness costs, amounting to £85,000, which were presumably paid in England. There is additionally a claim for sums paid to corporate investigators of some £66,000.
(3) There is an unquantified claim that as a result of the German claims AMT has lost significant management time in having to respond to them.
(4) There is an unquantified claim that by reason of the German claims, AMT has ceased to undertake...
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