Berliner Industriebank Aktiengesellschaft v Jost
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SALMON |
| Judgment Date | 05 April 1971 |
| Judgment citation (vLex) | [1971] EWCA Civ J0405-5 |
| Date | 05 April 1971 |
| Court | Court of Appeal (Civil Division) |
[1971] EWCA Civ J0405-5
In The Supreme Court of Judicature
The Court of Appeal
(Civil Division)
(From: Mr. Justice Brandon - London)
Lord Justice Salmon
Lord Justice Phillimore and
Mr Justice Lyell
Mr. RAYMOND WALTON, Q.C. and Miss A.S. GERARD (instructed by Messrs. Buckeridge & Braune) appeared on behalf of the Appellants (Plaintiffs).
Mr. RICHARD YORKE (instructed by Messrs. Bulcraig & Davis) appeared on behalf of the Respondent (Defendant).
The judgment which I am about to read is the judgment of Lord Justice Phillimore and myself.
This appeals turns upon the west German lava of bankruptcy.
In 1955 the respondent Jost was a young man. He had completed his military service and had then joined the family business - a partnership dealing with the merchanting of films. His father was dead and he had joined his mother as the only other partner.
Apparently the business was already in difficulties and soon the 15th October, 1956, the partnership borrowed DM 120,000 from the appellant Bank. The terms of the bargain are set out in a document referred to by counsel as the Notarial Act and numbered "P.1". Terms of interest and of repayment are all set out and of course the partners were made individually responsible for repayment.
They could not repay, and so on the 12th October, 1957, the Bank issued process. On the 1st May, 1958, the respondent Jost made a successful application to the Charlottenburg County Court to be made bankrupt. Thereafter proceedings took their course in accordance with the provisions of the Bankruptcy Ordinance of 1877 - Konkursordnung.
It is necessary to emphasise that the West German bankruptcy laws are very different from ours.
The existing assets of the bankrupt vest in a trustee. Beyond that, however, the laws grant the bankrupt immunity from execution being levied on his existing assets as well as on any property acquired after his application to be made bankrupt and this immunity lasts throughout the bankruptcy proceedings: see section 14 of the Ordinance.
Proofs of debt are submitted and there is a form of hearing when these are examined by the Registrar with the assistance ofthe creditors, the Trustee in Bankruptcy and the bankrupt himself. Dependent on what the Registrar decides at this hearing, entries are made in a record which is called the "Tabelle" (which was find translated as the "Table") designed to show which proofs are accepted as reliable. If a proof is accepted as reliable the entry describes it as "festgestellt", or, according to the agreed translation, "ascertained".
Ultimately, when all proceedings are at an end - in this case it was in July, 1964 - an order is made terminating the bankruptcy. The effect of this order is to remove the stay on execution and in the case of any debt which the bankrupt had not disputed at the hearing before the Registrar, the creditor, in this case the Bank, becomes free to levy execution on any after-acquired property of the bankrupt: see section 164 (2) of the Ordinance.
It will be observed fret: the brief summary we have given that when a man is made bankrupt in West Germany all his existing property is taken over by his Trustee while he is free to seek work and earn his living immune from any risk of execution on after acquired property unless and until the bankruptcy is terminated. Thereafter, however, he is completely at risk. If the creditors have not been fully paid they are free to pursue the bankrupt with a view to getting their hands on any after-acquired assets. A debt established in the bankruptcy is valid according to the German Laws of Limitation for 30 years from the date upon which it was established or ascertained: see section 218 of the Civil Code.
What happened in this case? As already indicated, Jost Bade his application to be adjudicated bankrupt in May, 1956, and at once the Table was opened and entries were made.
According to the Extract from the Table which we have, the Bank stated on the 25th June, 1953, that the debt amounted to 76,675.23 marks in respect of principal and 1,934 marks interest.
On the 23rd October, 1958, an entry in the Table shows thatthe debt was disputed by the Trustee pending production of the title.
On the 20th November, 1958, it appears that the Bank produced the Notarial Act, which was of course their evidence of title, with the result that an entry was made which after referring to section 212 of the Ordinance showed that the debt was "festgestellt" or ascertained.
Now the reference to section 212 meant merely that the debt must be reduced pro tanto if anything was obtained from the bankruptcy of the partnership itself: in other words the Bank could not recover in the bankruptcy of Jost any more than the shortfall on the debt.
On the 25th March, 1964, nothing having been derived from the bankruptcy of the partnership, a further entry was made to the effect that the debt was unconditionally "festgestellt".
Thereafter on the 21st April, 1964, an extract from the Table carrying the above entries was issued to the Bank.
Meanwhile the bankrupt had moved to this country and, although without capital, had apparently got a good job and acquired a house. He is just above the limit for legal aid and so he has had to mortgage his house to contest this case.
The Bank issued their writ on the 12th June, 1968, and they put their claims in two ways: firstly they relied on the original Notarial Act as constituting a debt, and alternatively they rolled on the entry in the Table of the 25th March, 1964, to the effect that the debt was unconditionally "festgestellt" as being equivalent to a judgment of a foreign court.
An order was made for the first submission, namely that they were entitled to claim on the Notarial Act, to be tried as a preliminary point. It was tried by Mr, Justice Roskill, who found the claim to be statute-barred.
In May, 1970, Mr. Justice Brandon tried the claim under theforeign judgment. He found that there was a final and conclusive judgment for the whole amount of the debt dating from the entry on the 20th November, 1958. Accordingly he found that the claim on the judgment was likewise statute-barred. The Bank appeals.
Mr. Walton makes four points:
- (1) The debt was not due and there was no judgment until it was "festgestellt".
- (2) The entry in the Table of November, 1958, was in effect a formula entry - it meant that the actual sum was at the time still uncertain and thus the entry of March, 1964, when the debt was described as unconditionally "featgestellt", constituted the definitive judgment.
- (3) Anyhow the entries in November, 1958, and March, 1964, were only declaratory and did not take effect until the termination of the bankruptcy in July, 1964.
- (4) Time cannot begin to run in England until July, 1964, when the German Court by terminating the bankruptcy removed the stay on execution.
On the other hand, it is said on behalf of the respondent Jost (by counter-motion) that there never was a judgment - at the best the act of the County Court was administrative only and not judicial.
It is necessary to refer to the relevant provisions of the German statutes, to some of the learned commentaries upon then, and also to some extracts frees cases reported in Germany.
Two distinguished experts on German law were called before Mr. Justice Brandon - Dr. Mann for the Bank and Dr. Jaques for the respondent. The learned judge preferred the evidence of Dr. Jaques. It is, we think, clear that Dr. Mann's familiarity with this particular topic was net as profound as his knowledge of the other branches of German law. Although we can find no reason for disagreeing with the learned judge that Dr. Jaques's evidence isto be preferred, we have awe reservations with regard to his familiarity with the practice relating to this branch of the law.
The fact is that the experts were somewhat at see and that the court needed the evidence of a German lawyer who was really experienced in the day-to-day conduct of bankruptcy matters. However, it seems to us that it was for the Bank to prove their claim and that as Dr. Mann's evidence was found unacceptable the Bank has failed to discharge the onus of proof which rested upon them.
There is no doubt that contemporary with the entry in the Table on the 20th November, 1958, a similar entry was made on the Notarial Act ("P.1") to the effect that the debt was "festgeatellt": see section 145 (1).
It is important to observe that under section 145 (2) of the Ordinance the entry of a debt which is "festgeatellt" is "deemed to be an unappealable judgment in relation to all the creditors".
Section 164 is of vital importance in this case. It reads as follows: "(1) After the termination of the bankruptcy proceedings, unsatisfied creditors may pursue their claims against the debtor without restriction. (2) Creditors whose debts were ascertained without the bankrupt having expressly objected thereto at the hearing for verification may levy execution against the debtor by means of the entry in the Table…."
The Bank says: "We could not levy execution until the termination of the bankruptcy and since we could not levy execution time could not begin to run against us and no foreign court can say that our debt was statute-barred until the prescribed time had run from the date of the termination of the bankruptcy".
We were told that it was by no means uncommon for a German bankruptcy to go on for many years - this very simple little story lasted only for six - and no doubt that is the reason for fixing the period of limitation at 30 years.
It is convenient to start with the point raised by thecross-notice. Cam a decision recorded in the Table as "festgeatellt" be treated as a judgment? Mr....
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