Rawlinson & Hunter Trustees Sa (in Its Capacity as The Trustee of The Tchenguiz Discretionary Trust) v Kaupthing Bank Hf (Defendant/Applicant)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BURTON,Mr Justice Burton |
| Judgment Date | 16 March 2011 |
| Neutral Citation | [2011] EWHC 566 (Comm) |
| Docket Number | Cases Nos: 2010 Folio 773 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 March 2011 |
[2011] EWHC 566 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Burton
Cases Nos: 2010 Folio 773
Cases Nos: 2010 Folio 784 & 2010 Folio 1246
Mr Mark Howard QC and Ms Lucy Frazer (instructed by Edwards Angell Palmer and Dodge UK LLP) for the Claimant in Actions 2010 Folio 784 & 1246
Mr Gabriel Moss QC and Mr Adam Al-Attar (instructed by Stephenson Harwood) for the Claimant in Action 2010 Folio 773
Mr Robert Levy QC and Mr Sebastian Prentis (instructed by Weil Gotshal & Manges) for the Defendant in all 3 actions
Hearing dates: 9, 10 & 11 February 2011
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 :
Two sets of claims have been brought in this Court by trustees relating to the Tchenguiz family interest, one by the Tchenguiz Discretionary Trust ("TDT"), in which the Claimant is represented by Mark Howard QC and Lucy Frazer of Counsel, and one by the Tchenguiz Family Trust ("TFT") (and others), in which the Claimants are represented by Gabriel Moss QC and Adam Al-Attar of Counsel. Both are brought against the Kaupthing Bank HF, an Icelandic bank, subject to winding-up in Iceland, which I shall call "the Defendant", although there is a second defendant in the TFT action, not relevant to this application. The claims are each for very substantial damages, of more than £300m, for (inter alia) fraudulent misrepresentations and unlawful interference, and the setting aside of (inter alia) an agreement called the Framework Agreement and of identified Security Documents. The claim forms were issued on 1 and 5 July 2010 (for reasons not relevant to this application, TDT has issued a further claim on 21 October 2010, but it is common ground for the purposes of this application that the July date is the relevant date, although, in the event, whether it is July or October 2010 would not be material for my decision).
There were, as is common ground, exclusive jurisdiction clauses in each of the Framework Agreement and the relevant Security Documents, and there is therefore jurisdiction in this Court, pursuant to Article 17 of the Lugano Convention, to which both the United Kingdom and Iceland are signatories, in respect of the Claimants' claims against the Defendant.
The Defendant was, prior to the financial crisis of October 2008, the largest bank in Iceland, and a credit institution within the Banking Consolidation Directive of 20 March 2001 2001/24/EC. It is now in liquidation, and therefore subject to the provisions of Directive 2001/24/OT of the European Parliament and the Council of 4 April 2001 on the Re-organisation and Winding-up of Credit Institutions ("the Directive"), which is not of direct effect, but has been implemented in the UK by the Credit Institutions (Re-organisation and Winding-up) Regulations 2004 ("the Regulations"), and in Iceland by incorporation of provisions in the Financial Undertakings Act (Act No 161/2002) ("the FUA").
The application by Mr Robert Levy QC and Sebastian Prentis of Counsel, on behalf of the Defendant in both actions, is to stay the claim for want of jurisdiction, on the grounds (i) that the Defendant has been "subject to reorganisation and/or winding-up measures in Iceland pursuant to which there is a stay on proceedings against it", relying on the Regulations, alternatively (ii) in that the Claimants have each (in December 2009) put in, as they were required to do, a proof of debt to the Defendant's Winding-up Committee that the claim should be struck out as an abuse of process.
In order to succeed on the first ground, the Defendant must establish that, at the time when the English claims were commenced by the Claimants (July 2010), the Defendant was subject to an EEA Insolvency Measure, which the English court would recognise. An EEA Insolvency Measure is defined within the Regulations (paragraph 5(6)) as meaning "as the case may be, a directive reorganisation measure or directive winding-up proceedings which have effect in relation to an EEA credit institution by virtue of the law of the relevant EEA state", in each case as defined by reference to paragraph 2(1) in Article 2 of the Directive, namely:
"'Reorganisation measures' shall mean measures which are intended to preserve or restore the financial situation of a credit institution and which could affect third parties' pre-existing rights, including measures involving the possibility of a suspension of payments, suspension of enforcement measures or reduction of claims;
…
'Winding-up proceedings' shall mean collective proceedings opened and monitored by the administrative or judicial authorities of a Member State with the aim of realising assets under the supervision of those authorities, including where the proceedings are terminated by a composition or other similar measure."
Paragraph 5(1) of the Regulations provides that:
"An EEA insolvency measure has effect in the United Kingdom in relation to –
(a) any branch of an EEA credit institution,
(b) any property or other assets of that credit institution,
(c) any debt or liability of that credit institution
as if it were part of the general law of insolvency of the United Kingdom."
The main issue between the parties is whether, at the date of commencement of these proceedings (July 2010), in relation to the Defendant (i) there was a reorganisation within the meaning of the Regulations/Directive or (ii) there were winding-up proceedings within the meaning of the Regulations/ Directive:
i) If there were neither, then the issue is, subject to what is said below, straightforwardly resolved. It is common ground, as will be seen, that there were winding-up proceedings in place in Iceland, within the meaning of the Regulations/Directive, as from 22 November 2010. By that time these proceedings were pending. The Claimants then point to the provisions of Article 32 of the Directive and of the Regulations (which are in all material respects identical). The Regulations provide:
"32(1) The effects of a relevant reorganisation or a relevant winding-up on a relevant lawsuit pending in an EEA state shall be determined solely in accordance with the law of that EEA State.
(2) In paragraph (1), "relevant lawsuit" means a lawsuit concerning an asset or right of which the affected credit institution has been divested."
In that case, then, subject to Mr Levy's abuse argument, the Claimants must succeed by reference to Article 17 of the Lugano Convention.
ii) If it be held either that there was a reorganisation measure or there were winding-up proceedings within the meaning of the Directive/ Regulations in place in Iceland prior to July 2010, then, in the alternative, and if necessary, the Claimants rely, pursuant to Article 10 of the Directive, upon the law of the "home member state", namely Iceland, to show that, under Icelandic law (by reference to Article 99(2)(h) of the FUA), the decision as to whether these proceedings can be pursued is left to the law of the state where these proceedings have been initiated, namely this Court. The Defendant however contends that, at Icelandic law, the claims must at any event be stayed.
It is only if the Defendant fails to achieve a stay by reference to the insolvency proceedings as above that its alternative case, that the continuation of these proceedings by the Claimants would be an abuse at common law, arises. I shall return to this later. There were other issues originally raised. As for the Defendant, it was only at the outset of the hearing that it was accepted to be common ground that (subject to its argument as to the Directive, adumbrated above):
i) By virtue of the exclusive jurisdiction clauses, Article 17 of the Lugano Convention applies to the English claims, and
ii) Article 1(2)(b) of the Lugano Convention does not disapply the Convention to the English claims.
iii) The Lugano Convention does not apply to the claims which the Claimant has been required to put forward by way of proof of debt to the Icelandic Winding-up Committee which, upon rejection of that proof, has been referred by the Defendant to the District Court of Reykjavik on 3 August 2010, pursuant to Article 120 of the Bankruptcy Act 1991 ("BA").
Thus no question of competing dates of seisin by the Icelandic and English courts arises. As for the Claimants, two arguments which were raised by TFT (as summarised by Mr Levy in paragraph 77(i) and (ii) of his skeleton argument), were not pursued.
There have been similar measures taken in Iceland in respect of other Icelandic banks, in particular Landsbanki, and there have been some court decisions relating to both the Defendant and Landsbanki. In the courts of Iceland, there have been two decisions relating to Landsbanki, that in the District Court of Reykjavik, in Skeifan ehf v Landsbanki Islands hf, upheld in the Icelandic Supreme Court (judgment delivered 24 March 2010). Then there has been a decision in the Paris Court of Appeal in relation to a case called Kepler Capital Markets S.A. v Landsbanki Islands hf (judgment dated 4 November 2010). In addition there have been four other decisions outside Iceland, one relating to the Defendant in the Regional Court of Frankfurt, DZ Bank AG Deutsche...
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