FKI Engieneering Ltd and Another v Stribog Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BURTON,Mr Justice Burton |
| Judgment Date | 21 May 2010 |
| Neutral Citation | [2010] EWHC 1160 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 May 2010 |
| Docket Number | Case No: 2010 FOLIO 61 |
[2010] EWHC 1160 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: MR JUSTICE BURTON
Case No: 2010 FOLIO 61
Mark Templeman QC and Emily Wood (instructed by Davis & Co) for the Claimants
Barry Isaacs and Stephen Robins (instructed by Pinsent Mason LLP) for the Defendant
Hearing date: 12 May 2010
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 Burton:
This has been an application by the Defendant Stribog Ltd, formerly DeWind Ltd, (“DWL”) for a stay of proceedings (an application that the Court decline jurisdiction has not been pursued before me) pursuant to Article 28, alternatively Article 27, of Council Regulation (EC) No 44/2001 (“the Judgments Regulation”): the Application Notice recites the grounds as being that “proceedings between the same parties have been brought in the Landgericht Lübeck in Germany [“the German proceedings”], which court was first seised: the [German] proceedings involve the same cause of action and/or are related proceedings within the meaning of said Articles”.
Those Articles (both in Section 9 of the Judgments Regulation) read as follows:
“Article 27
1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.
2. Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.
Article 28
1. Where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings.
2. Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.
3. For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”
Article 30 is relevant to both such Articles:
“Article 30
For the purposes of this Section [9], a court shall be deemed to be seised:
1. at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have service effected on the defendant, or
2. if the document has to be served before being lodged with the court, at the time when it is received by the authority responsible for service, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have the document lodged with the court.”
Although Counsel for DWL, Mr Barry Isaacs and Mr Stephen Robins, in their skeleton preserved an argument by reference to Article 27, they recognise that if they could not succeed on Article 28 then they would not succeed at all, and in the event oral argument was exclusively put on the basis of Article 28, i.e. that the German proceedings and these proceedings are “so closely connected” within the meaning of Article 28.3.
The action that is sought to be stayed by DWL is one brought by the Claimant companies (“FKI”) against DWL in this Court, as assignees of claims under a “Business Transfer Agreement” (“BTA”) dated 1 August 2005, resulting from the failure of DWL to pay the purchase price under the BTA.
There has been, at any rate since last year, a substantial and international dispute, extending to the United States and Korea, between the groups of which FKI and DWL respectively form part. Suffice it to say that the background can be summarised as follows:
i) On 4 July 2005 FKI, the previous owners of DeWind GmbH (“DWGmbH”) sold the shares in DWGmbH to a company now called DeWind Holdings (“DWH”).
ii) On 1 August 2005, DWGmbH sold its assets to DWL by a Sales and Transfer Contract – the BTA – containing an English law and English jurisdiction clause (Mr Isaacs does not now concede that this is an exclusive jurisdiction clause, although, as appears in paragraph 10 below, his client so described it in the German proceedings). Reference is somewhat quaintly made to ‘Milton Keynes’ (where there is a District Registry of the High Court):
“7. This contract is exclusively governed by English law. Place of jurisdiction for all disputes under and in connection with this contract is Milton Keynes.”
iii) On 29 August 2008 DWGmbH entered into insolvency procedures in Germany – an Administrator, Dr Pannen, was appointed on 9 October 2008 – leaving its former owners FKI as principal creditors. FKI allege that DWL and its Group (“the DW Group”) have stripped out the assets of DWGmbH, leaving only the debts.
iv) By an agreement dated 31 August 2009 (“the Assignment Agreement”) FKI took an assignment from the Administrator of DWGmbH of all claims by DWGmbH against (inter alios) DWL. Even before such assignment, FKI had started to make a variety of claims against DWL and the DW Group, including claims in the United States, relating (inter alia) to its handling of DWGmbH's assets. By a letter dated 14 August 2009 (“the 14 August letter”) attorneys, on behalf of FKI, gave notice to DaeWoo Shipbuilding and Engineering Co Ltd (“Daewoo”) of Korea, which had apparently purchased the DW business from Composite Technology Corporation (“CTC”), the ultimate owner of the DW Group, drawing such claims to Daewoo's attention. The letter includes the following passages:
“We represent [FKI] who were the previous owners of [DWGmbH] … We write primarily in connection with the insolvency proceedings over the assets of [DWGmbH] …
1. … The information available to the administrator and our clients suggests that the know-how, intellectual property, assets and employees that form the core of the [DW] business were transferred from [DWGmbH] to [DWL] and then transferred again to DeWind Inc. … Due to the position that [DWGmbH] was left [in] by its Group it was unable [to] and did not fulfil [its] obligations … It is strongly believed that the transactions mentioned above were undertaken at an undervalue. Therefore the parent company of our clients is now aggressively seeking to challenge these transactions based on the evidence obtained to date.”
The letter then sets out the various claims which it is said that the Administrator of DWGmbH had against DWL and the DW Group, both under various provisions of German insolvency law and tort law, and by reference to claims for restitution of assets and intellectual property rights. After the Assignment Agreement, an action was then commenced, in the United States District Court in California on 2 September, against various members of the DW Group by FKI as assignees of DWGmbH, for a restraining order in relation to any proceeds of the sale to Daewoo.
v) DWL's response was to bring the German proceedings on 18 September 2009 for a declaration of non-liability to FKI. I now turn to consider the German proceedings against this background.
The German Proceedings
The pleadings in the German proceedings are (in the original and in translation) before me, and their context and purpose are quite plain. There is an express reference, as will be seen, to the 14 August letter, and its contents. The purpose of the German proceedings is, on their face, to obtain a declaration that the various claims listed in that letter have no foundation. There is, as will be seen, an express exclusion from the German proceedings of any consideration of what are called “any potential purchase price claims” (“etwaige Kaufpreisansprüche”) under the BTA. Thus the pleadings commence (as translated):
“We hereby raise an action against [FKI] on behalf of and duly authorised by [DWL] with the application to declare that neither [FKI Company] has any claims or rights, especially no rights of avoidance, no contractual claims, claims in tort or other claims against [DWL], with the exception of any potential purchase price claims plus, as the case may be, (default) interest under the [BTA] made between [DWGmbH] as the seller and [FKI] as the purchaser.” [My underlining.]
The pleading continues:
“[FKI] wrongly assert – in Germany and abroad – and especially in business relationships, that they have rights against [DWL], in particular rights of avoidance and claims of [DWGmbH] assigned to them. … By asserting such alleged rights and claims [FKI] try to prevent and/or impede a transaction between CTC and … Daewoo … regarding assets and liabilities of the DeWind business unit. For this purpose [FKI's] lawyers have asserted such rights and claims vis-à-vis Daewoo in a letter dated 14 August 2009 … With this Action [DWL] seeks a declaration that the legal relationships described in the application do not exist … Purchase price claims of [FKI] that might exist under the [BTA] are explicitly not the subject matter of this Action.” [The latter underlining is again mine.]
The pleadings then launch, in section (ii), into an explanation as to why it is that there was nothing wrong with the handling by DWL of the affairs and assets of DWGmbH, setting out the history from DWL's point of view from 2004 onwards. In paragraph 3, in the course of this exegesis, there is the following repetition of what has been...
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