Deutsche Bank AG and Others v Asia Pacific Broadband Wireless Communications Inc. and Another
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE FLAUX |
| Judgment Date | 30 April 2008 |
| Neutral Citation | [2008] EWHC 918 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 30 April 2008 |
| Docket Number | Case No: 2007 FOLIO 577 |
[2008] EWHC 918 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Flaux
Case No: 2007 FOLIO 577
Mr Bankim Thanki QC and Mr Derrick Dale (instructed by Allen & Overy LLP) for the Claimants
Mr Christopher Butcher QC and Mr Paul Stanley (instructed by Davis & Co) for the Defendants
Approved Judgment
Hearing dates: 25 April 2008
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 Flaux:
Introduction and background
This is the Claimants' application for permission to amend the Claim Form and Particulars of Claim to plead two additional causes of action in the light of the Defence. The Defendants oppose the application on the ground that the Court does not have jurisdiction over the proposed new claims.
The background can be stated relatively briefly. The existing claims are for repayment of monies advanced by various lenders (the Claimants consisting of those lenders or their successors in title) under a Credit Agreement dated 31 March 2006 whereby the Claimants made available a credit facility of some US$210 million to the First Defendant (“APBW”), a telecommunications company in Taiwan which operated a mobile phone network. The loan was ostensibly to finance the purchase by APBW of equipment from another Taiwanese company, Huawei. The Second Defendant, which is the parent company of APBW, guaranteed the loan and became a co-obligor with APBW under the Credit Agreement. At the time the Agreement was made, both Defendants were companies in the Rebar Group controlled by the Wang family.
By clause 34 of the Credit Agreement, the Agreement was governed by English law. Clause 35 consisted of an exclusive jurisdiction clause in the following terms:
“35. ENFORCEMENT
35.1 Jurisdiction
(a) The English courts have exclusive jurisdiction to settle any dispute in connection with any Finance Document.
(b) The English courts are the most appropriate and convenient courts to settle any such dispute in connection with any Finance Document. Each Obligor agrees not to argue to the contrary and waives objection to those courts on the grounds of inconvenient forum or otherwise in relation to proceedings in connection with any Finance Document.
(c) This Clause is for the benefit of the Finance Parties only. To the extent allowed by law, a Finance Party may take:
(i) proceedings in any other court; and
(ii) concurrent proceedings in any number of jurisdictions.
(d) References in this Clause to a dispute in connection with a Finance Document includes any dispute as to the existence, validity or termination of that Finance Document.”
The credit facility was duly provided to APBW, which then made withdrawals under it and paid interest due until about December 2006. At that time members of the Wang family, including the Chairman of APBW, Mr Wang Ling-Tai, were indicted before the criminal courts of Taiwan for fraud. Those allegations gave rise to default under the Credit Agreement in January 2007. In February 2007 entirely new management was brought into both defendant companies.
On 9 March 2007, the First Claimant, Deutsche Bank AG, as Facility Agent on its own behalf and on behalf of the other lenders declared various events of default and made formal demand for sums outstanding against both Defendants. After various monies had been paid out of escrow accounts, the sums outstanding were equivalent to some US$175 million. The Defendants did not pay any part of the sums outstanding and on 30 April 2007, the present proceedings were commenced in the Commercial Court. The Claim Form stated (supported by a statement of truth signed by the Claimants' solicitors) that the Court had jurisdiction on the basis that the Defendants were parties to an agreement conferring jurisdiction to which Article 23 of the Judgments Regulation 44/2001 applies (evidently a reference to Clause 35 of the Credit Agreement).
The Claim Form was served on the Defendants pursuant to Clause 35.2 of the Credit Agreement by service on Law Debenture Corporate Services Limited, being the agent for service within the jurisdiction appointed by the Defendants. At that stage no objection was raised as to the jurisdiction of the English Courts.
After several extensions of time, the Defence was served on 14 September 2007. It is a lengthy document but in essence (as set out in the Summary served pursuant to CPR 16 PD 1.4), it contends that the Credit Agreement is void because the members of the Wang family who were the Chairmen of the defendant companies and who signed the Credit Agreement and other documents on behalf of the companies did not have authority to enter into this transaction on behalf of the companies. In particular:
(i) There was no or no effective board resolution of the First Defendant to authorise the transaction contemplated and/or evidenced by the various agreements;
(ii) Alternatively, if there was an effective board resolution, the agreements were not authorised because they were not in the best interests of the Defendants.
The Claimants' Skeleton Argument sought to characterise these defences as “technical” but as Mr Christopher Butcher QC for the Defendants pointed out, by reference to the Response to a Request for Further Information served by the Defendants on 18 January 2008, the Defendants' case is that the transaction involving the Credit Agreement was entered into by the Wang family as part of a large scale fraud perpetrated by them upon the defendant companies, including the extraction of US$800 million from the Second Defendant which this transaction was designed to conceal. The supposed board resolutions of the defendant companies were created by the Wang family entirely for their own interest and in reality board meetings were not held, the family having had complete disregard for the principles of corporate governance. Furthermore, it is the Defendants' case that Deutsche Bank knew or ought to have known (i) of the bad reputation of the Wang family in Taiwan and (ii) that this transaction was not in the best interests of the defendant companies.
Although the Claimants have been disparaging about these defences, they raise serious issues which will require to be tried, as the Claimants themselves recognise by the fact that they served a detailed and lengthy Reply which raised the alternative claims for the first time. At a Case Management Conference on 14 November 2007, I ordered that the Claimants should serve any proposed amendment to the Claim Form and Particulars of Claim to raise these alternative claims by 19 November 2007 and that, by 3 December 2007, the Defendants through their solicitors should indicate whether the amendments were accepted or whether the Defendants disputed the Court's jurisdiction in relation to the alternative claims. On 13 December 2007, the Defendants' solicitors wrote indicating that jurisdiction was disputed; hence this contested application for permission to amend.
There are two alternative claims set out in the draft Amended Particulars of Claim:
i) The Claimants contend that if the Credit Agreement is void (as the Defendants allege but the Claimants deny) the monies paid out pursuant to it were paid under a mistake of fact and/or law and/or for a consideration which wholly failed. Accordingly, the Claimants claim repayment of the monies in restitution.
ii) If, as the Defendants contend, the Credit Agreement is void because there was no board meeting of the First Defendant authorising Mr Wang as its chairman to enter the Credit Agreement, then Mr Wang made misrepresentations to the Claimants that such a meeting had taken place, misrepresentations for which the First Defendant is said to be liable to the Claimants.
It will be seen immediately that both the restitution claim and the misrepresentation claim are true alternatives to the primary claim in contract already before the Court. These alternative claims are both predicated upon the Defendants establishing that the Credit Agreement is void for want of authority on one or other of the grounds alleged in the Defence. Unless the Defendants' case succeeds on one or other basis, the alternative claims are unnecessary because on that hypothesis, the Claimants will succeed on their primary claim in contract.
It is common ground between the parties that the application raises two issues:
i) Whether the jurisdiction clause in Clause 35 of the Credit Agreement operates to give the English Court jurisdiction by virtue of Article 23 of the Judgments Regulation 44/2001 notwithstanding that the Credit Agreement itself is found to be void (“the severability issue”).
ii) If the Clause is valid, whether the alternative claims fall within its scope (“the construction issue”).
Legal principles applicable in relation to the severability issue
It is accepted by both parties that, because the First Claimant is domiciled in a Member State of the European Union, the validity of the jurisdiction clause is to be assessed by reference to Article 23 (1) of the Judgments Regulation which provides as follows:
“If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or...
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