KMG International NV (a company incorporated under the laws of the Netherlands) v Melanie Anne Chen
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 14 May 2020 |
| Neutral Citation | [2020] EWHC 1203 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000753 |
| Date | 14 May 2020 |
[2020] EWHC 1203 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
THE HONOURABLE Mrs Justice Moulder
Case No: CL-2017-000753
Alain Choo-Choy QC (instructed by PCB Litigation LLP) for the Claimant
Jonathan Crow QC, Graeme Halkerston and Jamie Holmes (instructed by Fox Williams LLP) for the Defendants
Hearing date: 6 May 2020
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.
THE HONOURABLE Mrs Justice Moulder
This is the judgment on the application of the defendants dated 15 April 2020 to strike out the report (or parts thereof) of Professor Veder dated 31 March 2020 (the “Veder report”) and the claimant's application dated 20 April 2020 (the “Amendment Application”) for permission to amend the Re-Amended Particulars of Claim and (in effect) for permission to adduce the Dutch law evidence pertaining to those amendments.
In support of the claimant's application the claimant filed the Sixteenth Witness Statement of Mr Nicholas Ractliff, partner in PCB Litigation LLP, acting for the claimant, dated 20 April 2020.
By reason of the current circumstances of Covid 19, the hearing of the applications was held remotely by video link but both parties were represented by leading counsel and I had the benefit of both written and oral submissions.
Background
The outline facts in this claim are set out in the judgment of this court dated 9 May 2018 [2018] EWHC 1078 (Comm) (the “Forum judgment”) in relation to the defendants' application to stay the proceedings on the basis that England was not the most appropriate forum.
In brief the proceedings relate to the alleged unlawful dissipation of assets, namely the transfer of shares in Novero GmbH and Novero Dabendorf (together “Novero”) which was owned by a Dutch company, Novero Investments BV (“NIBV”) out of the DP Group, a group of companies ultimately owned by DP Holding SA (“DP Holding”) and formerly owned by Dinu Patriciu. The transfer is alleged to have happened in 2015 or in the alternative September 2014. The claimant, KMG International NV (“KMG”), is a creditor of the ultimate holding company of NIBV, DP Holding by virtue of an arbitration award obtained on 30 April 2016. Novero was ultimately sold to Laird plc (“Laird”).
The claimant brings a claim in tort under Dutch law, in particular Article 6:162 of the Dutch Civil Code. The first defendant, Melanie Anne Chen (“MC”) is alleged to have been a quasi or de facto director of NIBV. The second defendant (“CML”) is a company incorporated in the BVI. CML was also originally alleged to have been a “de facto or formal” director of NIBV, but it is now common ground that CML was only the formal director of NIBV from 25 June 2015 onwards. MC was a director of CML and owned and controlled CML.
The defendants deny liability. The defendants allege that Novero was transferred out of the DP Group in return, amongst other things, for the cancellation of €7 million of loans made by MC's father.
The claimant advances an alternative case in unlawful means conspiracy under English law which is currently stayed.
Chronology
It is material on these applications to note the following in the chronology of these proceedings.
On 18 and 19 April 2018 (the “April hearing”) I heard the defendants' application to stay the proceedings on the basis that England was not the most appropriate forum (the “Forum Application”). In light of the arguments on these applications, it is necessary to set out briefly the nature of the issues which were before the court at the April hearing and the analysis of the court. It is also relevant to note at this point, in light of the arguments raised below, that the representation for the claimant at the April hearing was the same as appeared before me at this hearing.
As is clear from the Forum judgment, the issue of Dutch law and the extent of the dispute between the experts was a significant factor for the court to consider in determining the Forum Application. At paragraphs [26] – [31] of the judgment the court summarised the legal principles including this citation from Lord Mance in VTB Capital plc v Nutritek International Corpn and others [2013] UKSC 5 at [46]
“46 The governing law, which is here English, is in general terms a positive factor in favour of trial in England, because it is generally preferable, other things being equal, that a case should be tried in the country whose law applies. However, that factor is of particular force if issues of law are likely to be important and if there is evidence of relevant differences in the legal principles or rules applicable to such issues in the two countries in contention as the appropriate forum…” [Emphasis added in judgment]”
As recorded at [38] of the judgment, counsel for the defendants submitted there are “difficult Dutch law issues on which there is divergent expert evidence and therefore better dealt with by the Dutch courts”.
The court at the April hearing had before it reports from three experts of which the relevant ones were the reports of Mr van Maanen (instructed by the defendants) and Professor Veder (instructed by the claimant). The experts were agreed that liability to creditors under Article 6:162 is only imposed on a director where his actions justify “serious reproach”. However there was a significant difference in the basis of liability in this case.
Mr van Maanen doubted whether KMG could show that the defendants were quasi directors of NIBV as a matter of fact but concluded that this could amount to a breach of the duty of proper social conduct where exceptional circumstances apply. In his report (cited at [46] of the judgment) he stated that:
“such exceptional circumstances could exist, in my view, if KMG can demonstrate that the transfer of Novero GmbH by NIBV in June 2015 was detrimental to the interests of KMG and actually intended by directors of NIBV at the time of the transaction to cause prejudice to KMG as creditor of the ultimate parent DPH SA.” [emphasis added]
The court identified three issues of Dutch law (at [47]–[49] of the judgment):
i) whether the defendants as a matter of fact were quasi directors;
ii) whether as a matter of Dutch law, the defendants had breached the standard of liability;
iii) whether there was sufficient proximity between the defendants and KMG as creditor of the ultimate parent company.
In relation to the second issue the court said at [48]:
“…If KMG can establish as a matter of fact that the transfer of Novero was intended by the defendants to cause prejudice to KMG as creditor of DPH, it appears on the basis of Mr van Maanen's report that the standard of “serious reproach” will have been met.” [emphasis added]
In relation to the third issue the court said at [49]:
“…Again, applying Mr van Maanen's report, if the facts are established, it will amount to what he referred to as “exceptional circumstances” so as to establish liability.”
Having identified the issues of Dutch law, the court concluded:
“50. Although therefore in other circumstances, the issue of what amounts to “serious reproach” may be a difficult one as a matter of Dutch law, it would not appear to be an issue giving rise to any difficulty on the alleged facts of this case. Further although Mr van Maanen states that the Dutch case law requires a sufficient level of proximity between the company and the party making the tort claim against the director, it would appear from his report that, this element is satisfied, if KMG can establish the case on the facts as it alleges, based on a deliberate intention to prejudice KMG.” [emphasis added]
The court then considered the approach of the other expert, Professor Veder, who was of the view that any liability on MC under Article 6:162 would be as an ordinary person and not a director. However the court noted (at [54]) that:
“54. Thus, although in Professor Veder's opinion, liability would attach not as a quasi director but as an ordinary person, on the alleged facts, liability still arises under the same provision of the Dutch Civil Code, article 6:162. Whilst the test of what constitutes a wrongful act appears at first sight to be an unfamiliar concept for the English courts to apply, it appears from Professor Veder's report that on the facts of this case (assuming they were established) there would be no issue as to whether the norm had been breached.” [emphasis added]
It is clear therefore from the judgment that the consideration of the relevance and significance of the Dutch law issues was based on an analysis of the differences between the experts and a conclusion that on the case advanced by the claimant of an intentional act by the defendants, this would not require the court to determine controversial issues of Dutch law. This was set out in the judgment:
“[56]…On the case advanced by KMG, the question of whether the conduct fell below the requisite standard does not appear to give rise to any difficulty as a matter of Dutch law. Proximity for the reasons stated above would also not appear on the basis of evidence of the experts to give rise to any...
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