Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc.

Hearing date : 30 July 2008

Facts

The issue in this appeal is whether an exclusive jurisdiction clause, which covers any dispute as to the existence or validity of the contract, covers not merely claims advanced on the basis that the contract is a valid and subsisting contract but also alternative claims advanced on the basis (asserted by the defendant but denied by the claimant) that the contract is of no effect.

The claims in the present case are primarily for repayment of monies advanced by various lenders (the claimants being those lenders or their successors in title and otherwise known as “the Finance Parties”) under a Credit Agreement dated 31 ^st March 2006. Under that agreement 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. Mr Wang Ling-Tai was the Chairman of APBW. In December 2006 he and other members of his family were indicted for fraud in Taiwan. From February 2007 both defendant companies have been under new management.

Clause 34 of the Credit Agreement provided that the Agreement was governed by English law.Clause 35 was 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.”

This is as wide a jurisdiction clause as is readily conceivable.

The credit facility was duly provided to APBW, which then made withdrawals under it and paid interest due on sums so withdrawn until about December 2006. No further payments of interest after that date were made and on 9 ^th 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 ^th April 2007 the present proceedings were begun in the Commercial Court in London. The Claim Form (supported by a statement of truth signed by the claimants' solicitors) stated 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 applied. That was, of course, 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. It is perhaps difficult to see how there could have been any such objection.

After several extensions of time, the defence was served on 14 ^th September 2007. It is a lengthy document but in essence 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 the authority of the companies to enter into the Credit Agreement on their behalf. In particular it is said

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.

It is also said that the loan was entered into in order to conceal (or assist in concealing) misappropriations of about US$800 million of company money made by members of the Wang family.

The essence of the defendants' case is, therefore, 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 large sums of money which the credit facility transaction was designed to conceal. It is said that 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 and apparently, not therefore enforceable.

The claimants served a detailed and lengthy reply which raised two alternative claims for the first time. At a Case Management Conference on 14 ^th November 2007, Flaux J ordered that the claimants should serve any proposed amendment to the Claim Form and Particulars of Claim to raise these alternative claims by 19 ^th November 2007 and that, by 3 ^rd 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 ^th December 2007, the defendants' solicitors wrote indicating that jurisdiction was indeed disputed. That gave rise to a contested application for permission to amend to plead the alternative claims which Flaux J in due course refused on the grounds that the court had no jurisdiction to determine them, [2008] EWHC 918 Comm, [2008] 2 Lloyds Rep. 177. Hence this appeal.

The two alternative claims set out in the draft amended particulars of claim are:-

i) The contention 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 money lent together with interest on the basis that the defendants would be unjustly enriched if they retained the amounts drawn down under the Credit Agreement. This claim can be categorised as a restitutionary claim.

ii) The contention that 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 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 only arise if the defendants establish 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 now common ground between the parties that the new claims fall within the terms of the exclusive jurisdiction clause contained in the Credit Agreement. What is in dispute is whether the English Court has jurisdiction to try them.

Background to Submissions

It is accepted by both parties that, because the first claimant is domiciled in a Member State of the European Union, the right to rely on the jurisdiction clause depends on the terms of Article 23 (1) of the Judgments Regulation (“the Regulation”) which provides as follows:

“If the parties, one or more of whom is domiciled in a Member State, have...