Bundeszentralamt Für Steuern (being the Federal Central Tax Office of the Federal Republic of Germany) v Richard Heis

JurisdictionEngland & Wales
JudgeMr Justice Hildyard
Judgment Date22 March 2019
Neutral Citation[2019] EWHC 705 (Ch)
Docket NumberCase No: CR/2011/013738
CourtChancery Division
Date22 March 2019
Between:
Bundeszentralamt Für Steuern (being the Federal Central Tax Office of the Federal Republic of Germany)
First Applicant
and
(1) Richard Heis
Respondents
(2) Michael Robert Pink
(3) Edward George Boyle (as the joint special administrators of MF Global UK Limited)
Deutsche Bank AG
Second Applicant
and
(1) Richard Heis
(2) Michael Robert Pink
(3) Edward George Boyle (as the joint special administrators of MF Global UK Limited)
Respondents

[2019] EWHC 705 (Ch)

Before:

Mr Justice Hildyard

Case No: CR/2011/013738

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

INSOLVENCY AND COMPANIES LIST (ChD)

Rolls Building

Royal Courts of Justice

7 New Fetter Lane

London, EC4A 1NlL

Mr Tom Smith QC and Mr Andrew Shaw (instructed by Hogan Lovells International LLP) for the First Applicant

Mr Richard Fisher (instructed by Freshfields Bruckhaus Deringer LLP) for the Second Applicant

Mr Gabriel Moss QC, Mr Daniel Bayfield QC, and Mr Adam Al-Attar (instructed by Weil Gotshal & Manges (London) LLP) for the Respondents in both applications

Hearing dates: 28 and 29 January 2019

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.

Mr Justice Hildyard Mr Justice Hildyard

Subject matter of this judgment

1

The primary question raised by the two applications addressed by this judgment is whether appeals by the applicants, the German Federal Tax Office (“the GTA”) and by Deutsche Bank AG (“DB”) against the rejection by the Joint Special Administrators (“the Administrators”) of MF Global UK Limited (“MFGUK”) of their respective proofs of debt, each of which is described below (respectively, “the GTA Appeal” and “the DB Appeals”, and together “the Appeals”), should be stayed by this court. The stays are sought in each case in order to allow the underlying claim which forms the subject of the proof to be resolved by the specialist German tax or fiscal courts, which both the applicants (for different reasons) contend are the natural forum for the determination of the claims and the forum in which they can be resolved most efficiently.

2

The GTA has commenced a process which would, if a stay is granted, lead to the determination of the issues in the German fiscal courts (subject to a potentially preliminary point, I shall later explain as to whether such courts can make a substantive ruling). However, it is common ground that if no stay is granted, the GTA Appeal and the DB Appeals will proceed in this jurisdiction: the German courts would defer to that decision and automatically stay any proceedings in their own courts relating to the dispute between MFGUK and the GTA as to MFGUK's entitlement to the withholding tax refunds which have already been paid to MFGUK. That is so even though further proceedings raising substantially the same issues have been issued by MFGUK (through its Administrators) in the German Fiscal Court of Cologne, in respect of which no stay is sought and which will thus proceed to adjudication (and any appeal) in Germany.

3

A secondary question which arises if the stays sought are refused is as to the directions to be given for the determination of the appeals in this court. In particular, it will be necessary to consider whether the appeals should proceed in parallel, or whether the DB Appeals should await the outcome of the GTA Appeal.

4

The questions to be addressed raise interesting issues as to (a) the interplay between the principles ordinarily applicable in determining whether to stay proceedings in favour of a foreign forum and the ordinary presumption and preference in the context of a liquidation process in this jurisdiction for all matters of proof to be dealt with here; and (b) the ‘rule against double proof’, which has been the subject of considerable debate.

The claims and proofs which are the subject of appeal

5

The proofs that have been rejected and are now subject to appeal all concern refunds of withholding tax obtained in relation to a series of transactions to which MFGUK was party prior to its administration. Such refunds were obtained from the GTA pursuant to tax refund applications made by MFGUK which were at the time accepted by the GTA, which issued tax assessments (“Original Tax Assessment Notices”) sanctioning payment of such refunds accordingly.

6

The GTA maintains that all these transactions have characteristics typical of “Cum/ Ex” schemes (as they have become known). These are explained in more detail below: for the present it is sufficient to say that the GTA considers that “Cum/ Ex” transactions in the context of such schemes have no legitimate purposes and are illegitimate devices specifically designed in order to obtain withholding tax refunds from the German treasury in excess of the withholding tax that had been paid over to it.

7

Accordingly, the GTA's position is that the relevant refund claims in respect of withholding tax submitted on behalf of MFGUK in respect of more than one hundred transactions bearing such characteristics were false and wrongfully made.

8

The GTA has issued four tax assessment notices amending (in point of form) the Original Tax Assessment Notices under which it had sanctioned and effected the payment of withholding tax which MFGUK had claimed. In her witness statement made on 17 August 2018, on behalf of the GTA (“Voigt 1”), Ms Tatjana Voigt (“Ms Voigt”) states that as an administrative employee in the Cum/ Ex Division of the GTA she has handled Cum/ Ex cases on a day to day basis since October 2014 and has explained that the effect of these so-called “Amended Tax Assessment Notices”, as a matter of German law, is that MFGUK is obliged to repay the amounts it received pursuant to the Original Tax Assessment Notices, together with interest.

9

The GTA regards the matter as particularly important, and as having systemic significance, because “Cum/ Ex” schemes have been much used in Germany, have caused very large losses to the German treasury, and have become a matter of considerable public and German governmental concern 1.

10

In Voigt 1 it is stated that the GTA “regards this as tax evasion” (and thus illegal). In her second witness statement dated 20 December 2018 (“Voigt 2”), Ms Voigt has explained further that the controversy surrounding “Cum/ Ex” schemes is such that the Federal Parliament of Germany convened an inquiry committee to investigate them. This investigation, which ended in 2017, concluded that “ Cum/ Ex transactions are deliberately concealed tax evasion” constituting criminal behaviour by those involved in developing them.

11

Given these concerns, and the nature of the arguments under German law that it relies on, the GTA has at all times maintained that its claim (“the GTA Claim”) should be determined in Germany by the German tax courts. It explains that it felt compelled to submit a proof in MFGUK's administration in order to preserve its rights in light of the hard bar date of 15 January 2018 provided for by a CVA proposal by which all claims were to be submitted. Had its proof not been submitted before this date, the CVA proposal provided that the GTA Claim would have been extinguished.

12

In the event, the CVA proposal did not proceed: it never became fully effective because not all the conditions precedent to its operation were satisfied ( Heis v FSCS

[2018] EWCA Civ 1327). Accordingly, the rationale for requiring creditors to submit their proofs by 15 January 2018 has disappeared
13

Nevertheless, of course, once submitted, the GTA's proof fell to be determined by the Administrators in accordance with the (UK) Investment Bank Special Administration (England and Wales) Rules, as did also DB's proofs which it too lodged before the bar date provided for under the CVA proposal. The individual proofs can be summarised as follows:

(1) The “GTA Proof/Appeal”, submitted by the GTA based on the GTA Claim, is for a refund of approximately €52m of withholding tax refunds paid by the GTA to MFGUK that, the GTA allege, should be repaid 2;

(2) The “DB Mirror Proof/Appeal”, submitted by DB, arises out of materially the same circumstances as the GTA Appeal, but is made on the basis that DB acted as MFGUK's agent when submitting the claims for withholding tax refunds and is therefore liable to a claim being brought against it by the GTA, in which event it claims an entitlement to be indemnified by MFGUK; and

(3) The “DB €127m Proof/Appeal”, submitted by DB, which relates to a further €127m of withholding tax refunds paid to various entities which were not deducted by DB, and which DB believes the GTA or those various entities may seek to recover from it (though no such claim has yet been made) and that DB believes it is entitled to be indemnified against by MFGUK.

14

The Administrators rejected each such Proof in its entirety. That was before the Court of Appeal decision in respect of the CVA proposal, which was handed down on 11 June 2018: until that decision the CVA proposal had been considered (and at first instance held) to have become effective. The terms of the CVA proposal required that any appeal against the Administrators' decision to reject a proof had to be made within 21 days of receiving that decision. Both the GTA and DB filed appeals at the end of February 2018 accordingly. Those are the appeals of which stays, alternatively directions, are now sought.

15

There are two applications, one by the GTA in respect of the GTA Proof/Appeal; the other by DB in respect of both its appeals. Different considerations apply to the two sets of stay applications (that is, DB's application for a stay in respect of its two appeals and the GTA's application for stay of its appeal); and DB emphasised, and it is right to record, that it disputes any alleged liability on its...

To continue reading

Request your trial
4 cases
  • Transworld Payment Solutions U.K. Ltd ((in Liquidation)) v First Curaçao International Bank N.v
    • United Kingdom
    • Chancery Division
    • 31 Octubre 2022
    ...is true where different parts of the dispute are before courts in two or more jurisdictions. 71 In Bundeszentralamt für Steuern v Heis [2020] 1 BCLC 649 the German tax authorities and a bank applied for an order staying their appeals against special administrators' rejection of their proof ......
  • Hulley Enterprises Ltd (a company incorporated in Cyprus) v The Russian Federation
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 14 Abril 2021
    ...jurisdictions is “ always capable of amounting to a very strong reason for granting a stay, as the cases … show and emphasise”: Bundeszentralamt v Heis [2019] EWHC 705 (Ch) § 113; Ferrexpo AG v Gilson Investments Ltd [2012] EWHC 721 (Comm) § 155. ii) The “ costs and inconvenience of dupli......
  • Tatiana Akhmedova v Farkhad Teimur Ogly Akhmedov
    • United Kingdom
    • Family Division
    • 14 Agosto 2020
    ...exercise is cautious. 89 A recent authority has conveniently summarised the relevant factors. In Bundeszentralamt fur Steuern v Heis [2019] EWHC 705 (Ch) the court considered, in the context of a liquidation process, whether to stay appeals as to proofs of debt arising out of tax refunds i......
  • Section 92 of the Companies Law (2018 Revision) and Altair Asia Investments Ltd
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 16 Marzo 2020
    ...in a number of English cases: Prifti [2006] Lloyd's Rep I. R. 221; Curtis [2008] 1 CLC 219 and most recently in Bundeszentralamt [2019] EWHC 705 Ch. 60 In the latter case Hildyard J granted a stay of an appeal against the rejection of a debt in insolvency proceedings before the English Cou......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT