Summary
The claimant, GMAC, is providing financial services. It entered Facility agreement with two German companies, GertieG and HW, from the Hertie Group. HertieG was subsequently placed in administration.The defendant, Mr Rahman, was the director of the two companies.
On 28th October 2010, the administrator started proceedings in Germany against Mr Rahman. The administrator alleged that the sums paid under the Facility agreement were used by Mr Rahman to reduce HartieG’s overdraft, and are voidable in so far as they prejudice other creditors.
The claim form in the English proceedings was issued on 10th August 2011. The claimants were suing under Article 23. They were seeking damages in excess of €27 million. Mr Rahman made an application for an order that the English courts had no jurisdiction, and a request for stay of the English proceedings under Article 28 of Brussels I. On 31 January 2012, the application was dismissed by of HHJ Behrens.
On 14th November 2012, the decision of the High Court was affirmed by the Court of Appeal. Lord Justice Etherton held that the actions were not related due to the following reasons:
“19 In the first place, the German court might hold against the administrator in the German proceedings without deciding the point whether the respondent ever owned any inventory at the relevant time. It could decide that English law, which is the law applicable to the Facility Agreement, applies to the question of wrongful preference. The respondent has been advised by English lawyers that under English law there was no unlawful preference, irrespective of ownership of stock. The respondent has alleged in the German proceedings that, even if German law applies, the administrator cannot successfully challenge the repayment of HertieG’s overdraft since the repayment did not prejudice creditors. There are various other routes, which it is not necessary to describe, by which the administrator could lose the German proceedings without the issue of ownership of the stock and the accuracy of the Inventory Designation Forms being determined.
20 In that event, even though the administrator lost in Germany, the respondent would still have the same substantial claim against the appellant under the Deed of Warranty as is currently advanced in these proceedings. The respondent would not have to pay the administrator the amount of the wrongful preference arising from the reduction in the overdraft, but the respondent would still have a claim for loss arising from advancing funds to HertieG under the Facility Agreement on the basis of false statements as to HertieG’s inventory.
21 Secondly, Ms Troy informed us that the German court will not reach any decision until, at the earliest, the middle of 2013, and its decision may then be subject to successive appeals.
22 Thirdly, a judgment of the German court on the inventory point would, in any event, not be binding on an English court because the parties to the two sets of proceedings are different. […].
23 Fourthly, added weight is given to those considerations by the fact that the appellant has never indicated whether or not he accepts that HertieG did not own inventory at the relevant time.
24 Fifthly, in the light of all the above points, it is also relevant that the Deed of Warranty, on which the respondent’s claim is advanced in these proceedings, expressly provides in cl.4 that it is governed by English law and that the jurisdiction provisions in cl.42.1 of the Facility Agreement are to be treated as incorporated. With adjustment to take account of the different parties to the two documents, the effect of the incorporation into the Deed of Warranty of cl.42.1.1 of the Facility Agreement is that the appellant agreed that the English courts are to have exclusive jurisdiction to settle any disputes arising out of or in connection with the Deed of Warranty and that the courts of England are the most appropriate and convenient courts to settle such disputes.” [19-24]