Polymer Vision R & D Ltd & Ors v Van Dooren [2011] EWHC 2951 (Comm)

[2011] EWHC 2951 (Comm)Case No CLAIM NO. 2011 FOLIO 261
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 17/11/2011
Before
THE HONOURABLE MR JUSTICE BEATSON
Between
(1) Polymer Vision R & D LtdClaimants(2) TempleCo 663 (Nominee) LtdClaimant(3) Stewart Owen FordClaimantSebastiaan Maarten Marie Van DoorenDefendant
Charles Samek QC and Charlotte Davies (instructed by Withers LLP) for ClaimantsStephen Davies QC (instructed by Brown Rudnick LLP) for DefendantHearing Hearing date: 31 October 2011
Judgment

Introduction

[1]This is a jurisdiction challenge involving the scope of the bankruptcy exception in Article 1.2(b) of Council Regulation 44/2001 (“the Judgments Regulation”) which replicates an identical provision in the Brussels Convention. If the Judgments Regulation does not apply the question is whether, in view inter alia of Council Regulation 1346/2000 (“the Insolvency Regulation”), this court is forum non conveniens and the appropriate forum is the Netherlands. If the Judgments Regulation does apply, the issue is whether the defendant must, as a result of Article 2, be sued in the Netherlands, where he is domiciled, or whether Article 2 has been displaced by the special jurisdiction in Article 5.1 and 5.3 so that he may be sued in England.[2]The claimants are two companies, Polymer Vision R and D Ltd (“R&D”), and Temple Co 663 (Nominee) Ltd. (“Templeco”), and Mr Stewart Ford, who controls the two companies. The defendant, Mr van Dooren, is the Dutch bankruptcy trustee of Polymer Vision Ltd (hereafter “PVL”), an English registered company which had its place of business in Eindhoven in the Netherlands. He is a member of Holla Advocaten, a Dutch firm of lawyers and was appointed PVL’s administrator on 24 June 2009 and its bankruptcy trustee on 6 July 2009. PVL was struck off the public register in England and dissolved on 26 October 2010.[3]The ultimate dispute concerns the validity of an “Intra-Group Asset Transfer Agreement” and related share sale agreement between PVL and the claimants on or about 17-18 June 2009, shortly before the defendant was appointed PVL’s administrator. Under this, PVL’s intellectual property rights were vested in R&D for a consideration of £3 million paid for by a transfer of shares in R&D to PVL. PVL then sold the R&D shares to Templeco in exchange for Mr Ford waiving £3.1 million of his loans to PVL. The defendant maintains that the “Intra-Group Asset Transfer Agreement” was a disposal of assets in fraud of creditors. The claimants deny this.[4]The immediate underlying dispute concerns an agreement (the “settlement agreement”) on 27 July 2009 between the claimants and the defendant to facilitate the sale by the defendant of the disputed intellectual property rights. The claimants maintain that, in a letter sent before the settlement and which induced it, the defendant agreed that PVL’s indebtedness to Mr Ford was at least €3 million and that, if it was established that a debenture and Dutch pandrecht (“pledge”) securing his loans were valid, he would accept him as a secured creditor. On 4 March 2011 they issued proceedings seeking damages for misrepresentation and/or breach of contract. They served the defendant at his professional address in the Netherlands without seeking permission to serve out on the ground that CPR 6.33(1) applies because the defendant is domiciled in a Member State.[5]The defendant filed an Acknowledgment of Service on 6 April. He should (see CPR 58.7(2)) have challenged jurisdiction within 28 days; that is by 5 May. For reasons I deal with at [29] and [74] – [79] he did not. The claimants served their Particulars of Claim on 25 May. On 27 May the defendant’s solicitors informed the claimants’ solicitors that he would make an application “challenging the jurisdiction of the Commercial Court and … seeking relief pursuant to rule 3.8 CPR, from any sanction imposed for not having brought that application thus far”.[6]In this application, lodged on 2 June 2011, the defendant seeks an extension of time to challenge jurisdiction, and, if that is granted, submits that these proceedings should be stayed or dismissed. His primary ground is that the relevant European legislation is not the Judgments Regulation, on which the claimants rely, but the Insolvency Regulation. That Regulation accords jurisdiction to the law of the State in which the bankruptcy proceedings are opened, in this case the Netherlands. The defendant’s alternative, and secondary, ground proceeds on the basis that the Judgment Regulation applies. It is that he is domiciled in the Netherlands and the claimants have not shown a good arguable case for displacing the basic rule under Article 2 that a person domiciled in a member state shall be sued in the courts of that state in favour of the special jurisdiction in Article 5.1(a) and (c). It is also contended that the parties have, within the meaning of Article 23, agreed that the Netherlands shall have exclusive jurisdiction in relation to this dispute. More recently, on 14 October 2011, the defendant applied, without prejudice to his earlier and principal jurisdiction challenge, for an order that these proceedings be struck out as disclosing no reasonable cause of action and/or summary judgment pursuant to, respectively, CPR 3.4(2) and CPR Part 24. In view of my conclusion on the principal challenge (see [70] – [71] and [88] – [91], it is not necessary for me to reach a decision on the defendant’s more recent application.[7]The evidence on behalf of the defendant consists of four statements of Mr Peter J.M. Declercq, a solicitor and partner in Brown Rudnick LLP, and also a Dutch qualified lawyer, respectively dated 2 June, and 10, 14, and 26 October 2011, and a statement of Mr Van Dooren, dated 10 October 2011. The evidence on behalf of the claimants consists of the statements of Adam Lindsay Duthie, a partner in Withers LLP, the claimants’ English solicitors, dated 12 September 2011, and Wouter Johan Pieter Jongepier, a partner in Boekel De Nerée NV, the claimants’ Dutch lawyers, dated 25 October 2011.

The factual background

[8]PVL was established in November 2006. By the beginning of 2009 it was in a parlous financial state. Between 9 January and the middle of June 2009, Mr Ford loaned PVL some £2.74 million. The loans were secured by a debenture dated 29 January 2009, and a deed of pledge (pandrecht) dated 19 May 2009 granted by PVL in Mr Ford’s favour. PVL’s assets included intellectual property rights acquired from Koninklijke Phillips Electronics NV (“Phillips”) in December 2006. On 5 February 2009 PVL granted Mr Ford an option to purchase all its assets and undertakings for a sum equal to the aggregate of its “actual liabilities and indebtedness” as verified by its auditors. Because others, in particular Technology Capital SA which owned 75% of the voting shares in PVL, questioned the validity of the debenture and the option agreement, Mr Ford instituted proceedings in the Chancery Division. On 6 May 2009, Blackburne J granted Mr Ford’s application for a declaration that the debenture was valid and binding, but refused his application in respect of the validity of the option agreement: [2009] EWHC 945 (Ch).[9]The next development is the “Intra-Group Asset Transfer Agreement” between PVL and R&D. It is dated 17 June 2009. Under it PVL’s intellectual property assets were vested in R&D for a consideration of £3 million, satisfied by means of a transfer of shares in the R&D to PVL. The “share sale agreement” between PVL and Mr Ford is dated 18 June. PVL’s shares in R&D were sold to Templeco for a consideration (clause 3 of the share sale agreement) of £3.1 million, to be satisfied by “the partial waiver of the PVL indebtedness [to Mr Ford] for an amount equivalent to the purchase price” i.e. £3.1 million. These transactions, which were completed on 23 June, have been referred to in the evidence on behalf of the defendant and by Mr Stephen Davies QC, on behalf of the defendant, as “a hive-down of PVL’s assets” to the third claimant and his companies. The transactions were questioned by Mr McGoldrick, a director of PVL, who, on 24 June issued proceedings in the Netherlands in which he applied for a provisional suspension of payments in respect of PVL. This was granted and the defendant was appointed PVL’s administrator (“bewindwoerder”). It was at this time that a supervisory judge, the Hon. Mr M Poelman, was first appointed. He was replaced first by the Hon Mr Loesberg (who was acting at the time of the negotiations which led, see [17] – [19], to the settlement agreement), and then by the Hon Mr Neijt.[10]On 1 July the defendant issued his “first summary proceedings” seeking to preserve the patents registered in PVL’s name by restraining the alteration of their registration. On 6 July a bankruptcy order was made in respect of PVL by the District Court of ’s-Hertogenbosch and the defendant was appointed as the bankruptcy trustee to act under the supervision of the Dutch supervisory judge. On 10 July the defendant expressed serious concerns about the timing and nature of the “Intra-Group Asset Transfer Arrangement/hive-down”. In a letter of that date, the defendant declared, pursuant to the Dutch concept of actio pauliana based primarily on Article 42 of the Dutch Bankruptcy Code, that the “Intra-Group Asset Transfer Agreement/hive-down” was void.[11]There was subsequent correspondence between Boekel De Nerée, Mr Ford’s Dutch lawyers, and the defendant. In a letter dated 15 July 2009 Boekel De Nerée sought acknowledgements from the defendant that(i) the debenture and the pandrecht were valid,(ii) Mr Ford’s claim was €3,392,958, and(iii) a person nominated by Mr Ford would be part of the team dealing with the sale. The defendant’s reply, dated 17 July and signed as “trustee in bankruptcy”, explained the grounds upon which he considered that the “Intra-Group Asset Transfer Agreement/hive-down” was a fraudulent transaction. He stated it was for a price which was never paid but set off against a claim which the third claimant had against PVL; it was to the disadvantage of PVL’s other creditors, and was to the exclusive advantage of the buyer, the second claimant, a company controlled by the third claimant.[12]As to the proposal made by Boekel De Nerée, the defendant stated “because all elements of the proposal are unacceptable, it…makes no sense to address individual elements” but that the defendant was “willing to make the counter-proposal presented in the following”. The material parts of this are:
“1. The [PVL] business shall be sold by the trustee in bankruptcy, whereby the assumption shall be that no sale and lease-back construction has taken place. The sale shall take place…without further interference by your client. 2. The trustee in bankruptcy is willing to recognise your client’s claim up to an amount of (rounded) €3,000,000.00. 3. Your client’s claimed security interests shall be looked into further. These security interests shall of course be respected if they prove to be valid. 4. If your client’s claim does not take precedence, I will regard the claim as an ordinary liability. …While pursuing a solution, I am nonetheless willing, after receipt of the sale proceeds, to make a payment directly to your client in the amount of €1,000,000.00 on the condition that your client then agrees that the same amount will accrue directly to the estate, regardless of the possible existence of security interests on the part of your client. …”
[13]On 24 July, in the context of “second summary proceedings” in which the defendant sought an interim order for the sale of the disputed assets, the parties agreed with the suggestion of the civil judge presiding over those proceedings that they discuss an arrangement enabling their sale and the proceedings were adjourned. In an email dated that day, Boekel De Nerée reiterated the proposal that the defendant acknowledge that Mr Ford has security rights under Dutch law (“pandrecht”) and English law (“debenture”), and the amount of the claim. The email also proposed that the sale of PVL’s business would continue under the supervision of an investment bank appointed by Mr Ford so as to guarantee that the best possible price was achieved. Thirdly, it proposed that the proceeds of the sale be placed in a separate account, with provisions as to the distribution of moneys from that account.[14]In an email dated 25 July 2009, the defendant, who on this occasion signed as administrator, stated inter alia:
“I will not acknowledge the pandrecht nor the debenture. As I told you yesterday, and you agreed upon that, it is my task as administrator to investigate if the pandrecht and the debenture are valid. This investigation has not yet been fully performed nor finished, however I already told you that there may be more to this than you think. The pandrecht has not been properly registered and the debenture is subject to a loan letter that was not signed. Furthermore, it is debatable if the debenture has any effect regarding the assets outside the UK. Therefore, I am not in a position to acknowledge that your client is a separatist. If he eventually is, he will be treated as such.”
[15]The email also stated that the defendant was prepared to acknowledge Mr Ford’s claim to €1.5 million. As to the proceeds of the sale of the intellectual property rights, the email stated that €3 million “will be paid to Mr Ford, regardless of the validity of the pandrecht or debenture or the amount of his claim”, and €2 million will be placed in a separate account “in order to enable me to further investigate the separatist position of Mr Ford”. The email also stated that the proposal did better justice to the third claimant’s position “now his secured position is in fact debatable” but “nevertheless, he receives €1.5 million up front”. It concluded with the statement that “I must make the restriction of approval of the supervisory judge”.[16]There was further correspondence between the defendant and Withers. On 25 July Mr Duthiecomplained that the defendant had copied Mr McGoldrick into an email, stating “may I remind you that this is a matter between my client and you in your capacity as administrator”.[17]An email was sent by the defendant to Withers on Sunday 26 July. In it the defendant informed Withers that the supervisory judge (Mr Loesberg), who was copied into the message, did not agree to a higher amount than €1.5 million. The defendant stated that the judge had told him that he thought “that amount already does too much justice to your client’s position, since the validity of the securities (in any event the pandrecht) is still quite unsure”. After acknowledging that it was to be expected that Mr Ford felt entitled to a larger piece of the pie, the defendant stated:
“…that’s no problem for me. As I have said from the beginning, I will acknowledge his claims once it has been established that his claims are valid. Can’t we work something out to have those claims legally checked on short notice by way of arbitration of some sort. For instance, we could ask Clifford Chance in Amsterdam to review the securities and give binding advice, while I continue the process of selling the company”
. The remainder of the email deals with the allocation of the proceeds beyond the first €750,000 which would be paid to the estate, and the second €1.5 million, which was to be paid to Mr Ford. It is this email, together with the letter dated 17 July (see [11] - [12] above) that is the basis of the claimants’ case on misrepresentation and collateral warranty: see Particulars of Claim, paragraphs 14 – 20.[18]In an email dated 27 July, Boekel De Nerée set out the fundamentals of an agreement about the sale process, and the allocation of proceeds, including the deposit of proceeds above the total sum that were to go to the estate and the third claimant, in an escrow account. The email stated it was hoped that this proposal would provide for a short-term compromise while enabling the PVL business to be sold. In an email later that day, the defendant informed Boekel De Nerée that the proposal was acceptable to him, but was subject to the approval of the supervisory judge, from whom he was awaiting a response.[19]Later that day, after the supervisory judge approved the arrangement, the defendant, “in his capacity of bankruptcy trustee of [PVL]”, PVL, and the claimants entered into the settlement agreement. Its material provisions were:
“2.1 In order to sell the PVL business at the shortest possible notice and to the highest price, [the parties in the present proceedings] provide the trustee with an irrevocable power of attorney to sell the PVL business either from the assets of [the first claimant] or from the assets of [the second claimant]. … 2.5 In the event the PVL business is sold, the first Eur 750,000, of the proceeds, will accrue to the bankrupt estate of [PVL]. 2.6 The amount of the proceeds of the sale of the PVL business above Eur 750,000, up to and including Eur 2,250,000, will accrue to [the third claimant]. All payments to the account of [the third claimant] or his companies shall be paid to [a designated bank account of Boekel De Nerée or to such bank account as the third claimant notifies [the administrator in writing]. … 2.7 After distribution of the first Eur 2,250,000 of the proceeds in accordance with paragraphs 2.5 and 2.6…the trustee will transfer the remaining proceeds of the sale of the PVL business (the “Escrow Amount”) to [the “designated account”] and the received amount will be help in deposit. 2.8 If any additional sums resulting from the sale of the PVL business are to be paid into the bankrupt estate of PVL, the trustee will have those amounts paid on the designated account. …”
[20]Clauses 2.9 and 2.10 provided for non-binding mediation proceedings. In the event that did not lead to a favourable outcome, they stated the parties would bring their dispute “before the court of ’s-Hertogenbosch”. Clause 2.11 provided for the withdrawal of the proceedings (see [10]) then before the court, and clause 5.1 stated the agreement was to be rescinded if the trustee did not receive statutory authorisation by the supervising judge. By clause 5.5, the parties waived their right to have the agreement rescinded or to cancel or terminate it. Clause 5.7 provided that the laws of the Netherlands shall be applicable to the agreement, and clause 5.8 that “all disputes arising pursuant to this agreement or any agreements pursuant to this agreement shall be brought before the competent court in ’s-Hertogenbosch”.[21]Following the settlement agreement, on 11 August 2009 PVL’s intellectual property rights were sold to Wistron Corporation for €5 million, and a further incentive fee of between €1 million and €3 million.[22]By the beginning of December 2009, Mr Ford had decided that mediation was not feasible. In an email dated 3 December, he informed the defendant that if he did not acknowledge the disputed security rights by 8 December, he would initiate proceedings. The defendant responded on the same day, stating that he “can and will not acknowledge Mr Ford’s security rights”, giving his reasons for this and stating that while there was no agreement as to the consequences of the “Intra-Group Asset Transfer Agreement/hive-down”, that it was “far from unthinkable” that the third claimant had no claim at all due to the fact he waived the debt. He also stated there was no understanding regarding the amount of the claim, and suggested that before initiating court proceedings it would be better for there to be further exploration of their respective points of view.[23]The next significant matter is (Particulars of Claim, paragraph 24) the allegation that, on 18 May 2010, in the course of a telephone call between the defendant and Mr Elshof, of Boekel De Nerée, the defendant “admitted that the pandrecht was valid”. The defendant’s evidence is (see paragraph 7) that he had a record of a telephone call with Mr Elshof on 18 May, and the call was short, lasting no more than six to twelve minutes. He stated: “although I have no specific recollection of the details of our conversation, I am sure that at no point whatsoever was there, or has there ever been, any unconditional acknowledgement by me of the pandrecht”.[24]The material parts of the subsequent correspondence between the defendant and the third claimant’s lawyers are a letter from Mr Jongepier to the supervisory judge, complaining “about the course of action taken by the trustee in bankruptcy” which the claimants “consider biased and not objective”. The letter asked the court to dismiss the defendant as trustee in bankruptcy and replace him. The letter set out the claimants’ view of the facts, the previous proceedings, and the settlement, which (see paragraph 26 of the letter) it was said “did not address the legitimacy of the hive-down”.[25]The letter was treated by the supervisory judge as an application for the court to intervene pursuant to Article 69 of the Dutch Bankruptcy Code. On 2 August and 8 October 2010, there were hearings. In a letter dated 18 October 2010 the supervisory judge informed Mr Jongepier that the defendant could not continue to delay a decision about the “Intra-Group Asset Transfer Agreement/hive-down”. The judge directed the defendant to seek independent legal advice “to further evaluate the prospects of proceedings and instigate proceedings” against the third claimant, but otherwise rejected the complaints. The defendant instructed the Dutch firm Nauta Dutilh on 25 October.[26]The next material development was a petition dated 18 February 2011 by Mr Ford for an order that the defendant take affirmative action in respect of his claims. The grounds are similar to those in the complaint in the letter dated 18 June 2010. That is, there was complaint of delay in the process and prejudice to him as a result of the defendant’s attitude, and failure by the defendant to discharge the duties of a bankruptcy trustee properly, or in some cases at all. Mr Declercq’s first statement (paragraph 53) refers to a letter dated 21 February 2011 from the defendant’s lawyers which stated, given the complexity of the matter, the defendant was proceeding appropriately, and that a writ was being prepared.[27]On 8 March, after these proceedings were instituted, but before the supervisory judge had ruled on the petition dated 18 February 2011, Mr Ford petitioned the Dutch court for the dismissal from office of the defendant on the ground of bias. This third petition revealed the existence of the English proceedings to the defendant. It stated that the claimants had instituted proceedings “against the Trustee (in person)”. On 11 March 2011 the supervisory judge rejected the petition dated 18 February. As to the petition dated 8 March, a hearing was listed for 21 March, and, on 20 April, the Dutch court determined that there was no cause either to dismiss the defendant as a bankruptcy trustee or to appoint a second trustee.[28]By this time, the claim form in these proceedings had been served on the defendant – service was effected on 18 March. The Dutch bailiff’s statement of service records that service was effected on the defendant “acting in his capacity of trustee in bankruptcy of the company under foreign law [PVL]”.[29]Brown Rudnick filed an Acknowledgement of Service on behalf of the defendant contesting jurisdiction on 6 April 2011. Mr Davies submitted on behalf of the defendant that the reason he did not contest jurisdiction within 28 days of filing that acknowledgement of service as required by CPR 58.7(2) was because of ambivalence in the claim form. The claim form referred to acts which the defendant performed as insolvency holder, but was said to suggest “by omission” that he might be sued personally. The reference to the English proceedings in the petition dated 8 March 2011 to the Dutch court was in terms of the defendant being “bankruptcy trustee in person”. There was also a mistake on the part of Mr Declercq (second statement, paragraph 69) because he believed that the time for such an application was 28 days following service of the Particulars of Claim.[30]The claimant’s Particulars of Claim were served on 25 May. In a letter dated 27 May, Brown Rudnick stated that it was not until the defendant had sight of the Particulars of Claim that he was able to understand the nature of the case and the jurisdictional issues, including the capacity in which he was allegedly sued. This letter reserved the defendant’s right to challenge jurisdiction. By then, the 28 day period had elapsed. Withers informed Brown Rudnick of this in a letter dated 2 June. That letter stated that Withers considered that the defendant had submitted to jurisdiction and that any challenge would be resisted. This challenge was issued on the same day.[31]On 9 September the defendant instituted proceedings in the Dutch court against the claimants, seeking to set aside the “Intra-Group Asset Transfer Agreement/hive-down”. The relief sought (see paragraph 15(f) of Mr Declercq’s second witness statement) was primarily declaratory. First, the defendant sought a declaration that the debenture and the pandrecht did not create valid security rights over PVL’s assets in respect of Mr Ford’s advances at all or that can be invoked against PVL’s bankrupt estate.Secondly, he sought a declaration that the “Intra-Group Asset Transfer Agreement/hive down” and associated documents and transactions including the debenture and the pandrecht are void as a result of the declaration (see [10]) made by the defendant. The defendant also sought damages against the second and third claimants.[32]In a letter dated 22 September to Mr Van Ingen, of Holla Advocaten, the Hon Mr Neijt, who is now the Dutch supervisory judge in charge of PVL’s bankruptcy, stated that he “will not provide a binding opinion on the civil relations between trustee and third parties” because his job is “limited to overseeing the management and liquidation of the bankrupt estate by the trustee”. The letter states that he was informed “that the trustee, in person, was brought before the court in England” and that “this is highly undesirable”. The letter stated:
“In the core, the dispute…concerns the interests of the creditors of [PVL]. Mr Van Dooren has clearly concluded the settlement as part of the handling of the bankruptcy. The judge in charge of the bankruptcy has approved the conclusion of the settlement. This means that any dispute arising from the settlement and its conclusion is closely related to the bankruptcy in the Netherlands and should be assessed before the Dutch courts. A proceeding in England will likely delay the handling of the bankruptcy in the Netherlands and furthermore will complicate my position as judge in charge of the bankruptcy. After all, I have to monitor the performance of the trustee and proceedings in which he is involved.”

The legislative framework

[33]The crucial provision is Article 1.2(b) of the Judgments Regulation (Council Regulation 44/2001) which excludes bankruptcy provisions from its scope. It is in identical terms to the equivalent provision in the Judgment Regulation’s predecessor, the Brussels Convention. Accordingly, I will first set out the material provisions of the Judgments Regulation and then turn to the Insolvency Regulation (Regulation 1346/2000), which although predating the Judgments Regulation, postdates the Brussels Convention.

The Judgments Regulation

[34]The relevant recitals are:
“(7) The scope of this Regulation must cover all the main civil and commercial matters apart from certain well-defined matters. … (11) The rules of jurisdiction must be highly predictable and founded on the principle that jurisdiction is generally based on the defendant’s domicile and jurisdiction must always be available on this ground save in a few well-defined situations in which the subject-matter of the litigation or the autonomy of the parties warrants a different linking factor. … (12) In addition to the defendant’s domicile, there should be alternative grounds of jurisdiction based on a close link between the court and the action or in order to facilitate the sound administration of justice. … (14) The autonomy of the parties to a contract, other than an insurance, consumer or employment contract, where only limited autonomy to determine the courts having jurisdiction is allowed, must be respected subject to the exclusive grounds of jurisdiction laid down in this Regulation. (15) In the interests of the harmonious administration of justice it is necessary to minimise the possibility of concurrent proceedings and to ensure that irreconcilable judgments will not be given in two Member States. There must be a clear and effective mechanism for resolving cases of lis pendens and related actions…”
[35]The material provisions are:
“Article 1 1. This Regulation shall apply in civil and commercial matters whatever the nature of the court or tribunal. 2. The Regulation shall not apply to: … (b) bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings; … Article 2 1. Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State. 2. Persons who are not nationals of the Member State in which they are domiciled shall be governed by the rules of jurisdiction applicable to nationals of that State.”

Article 2

[36]Article 5 is in the section of the Regulation deals with special jurisdiction. It provides:
“A person domiciled in a Member State may, in another Member State, be sued: 1 (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question; … 3 in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur”
[37]Article 23 deals with jurisdiction agreements. It provides:
“ If the parties, one or more of whom is domiciled in a Member State, have agreed that a court of the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. …”
The Insolvency Regulation[38]I turn to the material provisions of the Insolvency Regulation. The relevant recitals are:
“(4) It is necessary for the proper functioning of the internal market to avoid incentives for the parties to transfer assets or judicial proceedings from one Member State to another, seeking to obtain a more favourable legal position (forum shopping). … (6) In accordance with the principle of proportionality this Regulation should be confined to provisions governing jurisdiction for opening insolvency proceedings and judgments which are delivered directly on the basis of the insolvency proceedings and are closely connected with such proceedings….”
[39]By Article 1(1) the Regulation applies to collective insolvency proceedings which entail the partial or total divestment of a debtor, and the appointment of a liquidator. Article 3 provides that the courts of the Member State in which the centre of the debtor’s main interest is situated, that is the state in which the company has its seat, shall have jurisdiction to open insolvency proceedings.[40]By Article 4: “1. Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings… (the ‘State of the opening of proceedings’.) 2. The law of the State of the opening of proceedings shall determine the conditions for the opening of those proceedings, their conduct and their closure. It shall determine in particular: … (b) the assets which form part of the estate and the treatment of assets acquired by or devolve on the debtor after the opening of the insolvency proceedings; … (f) the effects of the insolvency proceedings on proceedings brought by individual creditors, with the exception of lawsuits pending; … (i) the rules governing the distribution of proceeds from the realisation of assets, the ranking of claims and the rights of creditors who have obtained partial satisfaction after the opening of insolvency proceedings by virtue of a right in rem or through a set-off; … (m) the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors.[41]Articles 7 – 10 contain special provisions concerning sellers’ rights based on a reservation of title, immovables, payment systems and financial markets, employment contracts, and the widely differing national laws, by providing that rights in rem should normally be determined according to the lex situs, issues concerning payment systems and financial markets should be governed by the law applicable to the system or the market, and employment should be governed by the law applicable to the employment relationship.[42]Chapter 2 of the Regulation deals with recognition of insolvency proceedings. Article 16 provides that any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction pursuant to Article 3 shall be recognised in other Member States. Article 25 deals with recognition and enforceability of other judgments. Article 25.1 provides that the judgments of the court whose judgment concerning the opening of proceedings is recognised in accordance with Article 16 “which concern the course and closure of insolvency proceedings, and compositions approved by that court, shall also be recognised…”. Article 25.2, reflecting recital 6, provides that Article 25.1 “shall also apply to judgments deriving directly from the insolvency proceedings and which are closely linked with them, even if they were handed down by another court”.

The Contracts (Applicable Law) Act 1990

[43]By the Contracts (Applicable Law) Act 1990, and the Rome Convention set out in Schedule 1 to the Act, the basic regime is that a contract shall be governed by the law chosen by the parties. In the absence of a choice, Article 4 provides that the contract shall be governed by “the law of the country with which it is most closely connected”. By Article 4(2) “it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate … its central administration”.

Discussion

[44]The written and oral submissions principally concerned five issues:-(1) Should the defendant be permitted to challenge jurisdiction even though he is out of time?(2) Does the “bankruptcy exception” in Article 1.2(b) of the Judgment Regulation apply so as to exclude the application of that Regulation?(3) On the assumption that the Judgment Regulation applies, do the claimants have a “good arguable case” in the sense (“much the better of the argument”) that test is used in the context of the jurisdictional gateways to service out: see Canada Trust Co v Stoltzenburg (No. 2) [1998] 1 WLR 547, 555 – 7; Cherney v Deripaska (No. 2) [2008] EWHC 1530 (Comm) at [41] – [44] and Kolden Holdings Ltd v Rodette Commerce Ltd [2008] EWCA Civ 1468 at [49] – [50])?(4) Is Article 23 of the Judgments Regulation engaged, so that the Dutch court has exclusive jurisdiction?(5) If the Judgments Regulation does not apply, is England or the Netherlands the most appropriate forum on forum non conveniens principles, and should the claimants be granted retrospective permission to serve out? A sixth issue is raised very briefly in paragraph 37 of Mr Davies’s skeleton argument. It is that, if the Judgments Regulation applies, the Dutch insolvency proceedings are “related actions” within the meaning of Article 28 and the Dutch court was “first seised”. Although Mr Davies did not formally abandon this point, he did not pursue it at the hearing.[45]The resolution of the first issue, whether to permit the defendant to challenge jurisdiction although he did not do so within the 28 period in the rules, depends in part (see [79]) on whether there is substance in the challenge. Accordingly, I first deal with whether these proceedings do not fall within the Judgments Regulation because they are excluded by Article 1.2(b). Article 1.2(b) provides that the Judgments Regulation shall not apply to “bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings”.

The “bankruptcy exception” in Article 1.2(b)

[46]It is common ground that, in the light of the authorities, the reference to “civil and commercial” matters in the Judgments Regulation is “broad in its scope” but the Insolvency Regulation and Article 1.2(b) of the Judgments Regulation “should not be broadly interpreted”: see the most recent of the decisions of the ECJ on this point, Case C-292/08 German Graphics Graphische Maschinen GmbH v van der Schee [2010] ILPr 1 at [23] and [25] (hereafter “German Graphics”). It is also common ground that, notwithstanding indications (discussed at [61]) in the judgment of the ECJ in Case C-339/07 Seagon v Deko Marty Belgium NV [2009] 1 WLR 2168 (hereafter “Seagon”), the Insolvency Regulation does not itself confer exclusive jurisdiction on the member state where the main insolvency proceedings have been opened. I note, however, that the Schlosser Report on the accession of the United Kingdom, Denmark and Ireland to the Brussels Convention stated (at paragraph 53) that the Judgments Regulation and the Insolvency Regulation were “intended to dovetail completely with each other”.[47]The ECJ has stated that Article 1.2(b) of the Judgments Regulation should be interpreted in the same way as the identically worded provision in the Brussels Convention: see Case C-111/08 SCT Industri AB i likvidation v Alpenblume AB 2 July 2009 at [22] – [24] (hereafter “SCT”) and German Graphics at [27] – [28]. Accordingly, the starting point in determining what proceedings excluded from the Regulation by Article 1.2(b) is the decision of the ECJ in Case C-133/78 Gourdain (Liquidator of Soc. Fromme France Manutention) v Nadler [1979] ECR 733 (hereafter “Gourdain’s case”). In what can be described as the “Gourdain formulation”, the ECJ stated: “[I]t is necessary, if decisions relating to bankruptcy and winding-up are to be excluded from the scope of the [Brussels] Convention, that they must derive directly from the bankruptcy or winding-up, and be closely connected with the proceedings for the liquidation des biens or the règlement judicire”. (at [4]) In the next sentence the ECJ stated that it was “therefore necessary” to ascertain whether the legal foundation of an application “is based on the law relating to bankruptcy and winding-up as interpreted for the purposes of the Convention”.[48]The Gourdain formulation has been widely cited and followed: see, in the ECJ, Seagon’s case at [19] and German Graphics at [26], and in the English courts, Re Hayward, decd at [38], Ashurst v Pollard (albeit primarily by reference to the decision in Re Hayward, decd) and Byers v Yacht Bull Corp [2010] EWHC 133 (Ch) at [22] and [25] – [26] (albeit by reference to the post-Gourdain decisions of the ECJ on the Judgments Regulation).[49]It is also to be noted that the wording of Recital 6 to and Article 25.2 of the Insolvency Regulation (set out at [38] and [42]) is very similar to the Gourdain formulation. The Virgos-Schmit Report stated (paragraph 195) that the raison d’être of Article 25.2 derives from the judgment in Gourdain’s case. In Re Rodenstock GmbH [2011] EWHC 1104 (Ch) Briggs J at [47] stated that although, at the time of the Schlosser Report, what is now the Insolvency Regulation was still under discussion as a planned Convention, “nothing which occurred thereafter appear[ed] … to have been intended to detract from the plan that the bankruptcy exclusion should exclude from the Judgments Regulation nothing more, and nothing less, than what was included within the scope of the Insolvency Regulation”.[50]Mr Samek QC, on behalf of the claimants relied in particular on German Graphics. He submitted (see skeleton argument, paragraph 31) that it and the other decisions of the ECJ and the English courts also establish that:-(1) If bankruptcy is “the principal subject matter of the proceedings” then the insolvency exception applies: Ashurst v Pollard [2001] Ch 595 at [30], per Jonathan Parker LJ approving Rattee J in Re Hayward, decd [1997] Ch 45 at 54.(2) Bankruptcy will be the “principal subject matter of the proceedings” if they are “proceedings about whether or not the debtor should be made bankrupt” or if each claim is “a special bankruptcy remedy”: per Jacob J at first instance in Ashurst v Pollard [2000] 2 All ER 772 at [13], applying Re Hayward, decd and Gourdain’s case.(3) Proceedings which are not “based on the law of the insolvency proceedings” and which require “neither the opening of such proceedings nor the involvement of a liquidator” are not within the bankruptcy exception (German Graphics at [32]) and accordingly “independent” claims.(4) The fact that the proceedings are consequential on the bankruptcy, or arise in the context of a bankruptcy, is insufficient to engage the exception: Ashurst v Pollardper Jacob J at [13] and Choudhary v Bhatter [2009] EWCA Civ 1176 at [30] – [32]. The fact that a liquidator or trustee in bankruptcy is a party to the proceedings is similarly insufficient: German Graphics at [33]. Mr Samek submitted that the decisions on which Mr Davies QC relied, in particular Seagon and Byers v Yacht Bull Corp, do not detract from the four propositions of law above, but reinforce and are consistent with them.[51]As to the application of the principles in the circumstances of these proceedings, Mr Samek submitted that it is necessary to identify the claim that has been pleaded and its legal basis. Here the claims against the defendant are in misrepresentation and/or breach of collateral contract. The relief claimed is damages at common law or damages under section 2 of the Misrepresentation Act 1967. Such claims do not require the opening of insolvency proceedings or the involvement of a trustee in bankruptcy, and they are not about whether or not PVL should be made bankrupt. Accordingly, he submitted they are independent claims and not claims based on Dutch insolvency law, and thus not within Article 1.2(b). The relief claimed is not a special bankruptcy remedy, and the fact that the defendant is a trustee in bankruptcy and that the proceedings arise in the context of PVL’s bankruptcy are insufficient to engage the bankruptcy exception. Mr Samek accepted that the approach could be characterised as formalistic, but submitted that such an approach was necessary because the exception in Article 1.2(b) is to be construed narrowly.[52]Mr Samek also relied on the letter dated 22 September from the Dutch supervisory judge, Mr Neijt. In that letter Mr Neijt stated he would not provide “a binding opinion on the civil relations between trustee and third parties” because his job is limited to overseeing the management and liquidation of the estate.[53]Mr Samek’s argument is effectively that the claims in these proceedings are independent claims under the general law and that the requirement of direct derivation refers to juridical derivation not factual derivation, and it is ascertained by focussing on the pleaded claim and not the facts. He relied on the use of the word “and” in the Gourdain formulation that the claim “must derive directly from the bankruptcy or winding-up, and be closely connected with” the insolvency proceedings. He submitted that that the requirement of “closeness” was an additional requirement to the requirement of “direct” derivation.[54]He also relied on the references in Re Hayward to the “nature of the claim” (at [41]), and in the Attorney General’s opinion in Gourdain’s case [1979] 3 CMLR 180, 190 – 191 to “a very close material connection” with the bankruptcy. Those references undoubtedly provide support for Mr Samek’s contention. So does the reference in German Graphics at [32] to the independence of a claim against a liquidator by a seller based on a reservation of title clause “as” the claim was “not based on the law of the insolvency proceedings and requires neither the opening of such proceedings nor the involvement of a liquidator”. I do not, however, consider that he is assisted by Choudhary v Bhattar because that case is materially different to these proceedings. The dispute did not involve a bankruptcy/insolvency officeholder or the exercise of his powers in the insolvency. The claim was by the “old” management of a company against its “new” management (appointed by the Indian Court when staying winding up proceedings) for compensation and for the avoidance of allotments of shares.[55]It is clear that the fact that a claim factually depends on the bankruptcy does not in itself suffice to bring it within Article 1.2(b): see the claims of the trustees and liquidator in Re Hayward, Ashurst v Pollard, and Byers v Yacht Bull and the claim against the liquidator in German Graphics. In the first three cases the claims did not suffice because they related to the acquisition of the pre-bankruptcy/insolvency property rights of the bankrupt/insolvent company by a trustee or a liquidator by virtue of the bankruptcy/insolvency.[56]In Byers v Yacht Bull, the Chancellor stated (at [26]) that “the claim is made by the liquidators, but the claim to ownership arises under the general law and, if well made, had accrued to [the company] before it was wound up. The link with either the Insolvency Act or the winding up of [the company] is neither direct nor close”.[57]In German Graphics the seller’s claim was based on a reservation of title clause in the pre-insolvency contract of sale with the company and (see [31]) the “only question before the court relat[ed] to the ownership of certain machines situated on the premises of [the insolvent company]”. These cases concerned (see the Virgos-Schmit Report, paragraph 196) “the existence or validity under the general law of a claim (e.g. a contract) … [and] … actions to recover another’s property the holder of which is the debtor”. Moreover, apart from German Graphics they involve “actions that the debtor could have undertaken even without the opening of insolvency proceedings”.[58]The question, however, is whether it follows from the fact that a factual derivation is not per se sufficient in all cases, that it never suffices and that what might be called a direct juridical derivation is necessary. I do not consider that it does. It is true that in many of the cases brought by trustees or liquidators, the court has focussed on the fact that the proceedings could only be brought by a liquidator or a trustee, or that the cause of action arose under bankruptcy legislation: see, for example, Gourdain at [4] in relation to the French legislation, and Re Hayward, decd at 41.[59]The cases to which I have referred at [55] - [57] show that it was not the mere fact that the transfer was by the liquidator in the exercise of his powers as liquidator which brought Article 1.2(b) into play. In all but one of them, the claims were made by the trustees/liquidators in the exercise of their powers under the relevant national laws on bankruptcy/insolvency but they related to pre-bankruptcy/insolvency rights under the general law. German Graphics concerned a claim against a liquidator, but it too was based on a pre-insolvency property right under the general law; that of the seller as a result of the reservation of title clause in its pre-insolvency contract with the company. In these cases there was, as Mr Samek accepted (see e.g. skeleton argument, paragraph 32(b)(iii) in relation to Byers v Yacht Bull) a link with the bankruptcy/insolvency, but it was insufficiently close. But the reason the link was insufficiently close in those cases was because the only relevance of the insolvency was that its opening transferred either the debtor’s rights under the general law or the debtor’s liabilities under the general law to the trustee/liquidator. They did not involve either the internal management of the insolvency process or the conduct of the insolvency office holder.[60]Those cases are to be contrasted with two decisions relied on by Mr Davies. The first is Seagon’s case. In that case the ECJ decided that proceedings in Germany by a German liquidator to set aside a pre-insolvency transaction with a Belgian company and to recover money paid to it on the ground that it was detrimental to creditors fell within Article 3.1 of the Insolvency Regulation which conferred jurisdiction on the German courts. The argument (accepted by the German first instance court) that the Belgian company should have been sued in Belgium was rejected. The ECJ (see [20] – [21]) took into account recital 6 to the Regulation, which reflects the Gourdain formulation, in concluding that although Article 3.1 only refers to jurisdiction to “open insolvency proceedings”, it had to be interpreted as also conferring jurisdiction to set a transaction aside because proceedings to do this derive directly from the insolvency proceedings and are closely connected with them. There is no indication in the later ECJ decision in German Graphics that the interpretation in Seagon’s case was regarded as impermissibly broad.[61]As to whether the jurisdiction in the Insolvency Regulation is alternative or exclusive, in Seagon’s case the Advocate General (see [64] – [68]) considered that in respect of preservation measures and proceedings to set aside a transaction, it is not. The position of the court differed. It referred (see [24] – [25]) to the need to avoid incentives to forum shopping by transferring assets or judicial proceedings from one member state to another and stated that “the possibility for more than one court to exercise jurisdiction” in such cases would “undermine the pursuit of such an objective”. It also considered (see [22]) that concentrating all the actions directly related to the insolvency before the courts of the member state with jurisdiction to open the insolvency proceedings was consistent with the objectives of the Insolvency Regulation referred to in recitals 2 and 8. But, it did not (cf Mr Davies’s skeleton argument, paragraph 23(a)) explicitly state that the jurisdiction of the member state in whose territory insolvency proceedings were opened to hear and determine actions which derived directly from those proceedings and were closely connected to them was exclusive. In the present case it is not necessary to resolve this issue, and in any event, it is common ground (see [46] and paragraph 29 of Mr Davies’s skeleton argument), that the jurisdiction of the member state where the main insolvency proceedings have been opened is not exclusive.[62]Mr Samek submitted that Seagon’s case is not of assistance in the present context because neither the Advocate-General nor the ECJ considered Article 1.2(b) but decided the case solely by reference to the Insolvency Regulation. I accept that the failure of the ECJ to consider Article 1.2(b) is a factor. But the Insolvency Regulation and what became the Judgments Regulation were intended to dovetail completely: see the references to the Schlosser Report at [46] and to Briggs J’s observation in Re Rodenstock GmbH at [49]. Moreover, the Virgós-Schmit Report referred (paragraph 77) to what is needed “to avoid unjustifiable loopholes between the two Conventions”, and the Advocate-General in Seagon’s case (see [71]) referred to “the principle of the absence of lacunae” between the Regulations. For these reasons, I do not accept that the failure to consider Article 1.2(b) is a reason for regarding Seagon’s case as of no assistance. It was a case in which the liquidator’s cause of action accrued on or after the opening of the insolvency proceedings. The aim of the proceedings brought by the liquidator was the preservation of the rights of the general body of creditors over the debtor’s assets. It provides useful guidance.[63]Mr Davies also relied on the SCT case. SCT’s Swedish liquidator, in the exercise of powers under Swedish insolvency law, had transferred to a third party, shares owned by SCT in an Austrian company with assets in Austria. After the insolvency proceedings were closed, SCT brought proceedings in Austria. The Austrian Court held the liquidator had no power to dispose of assets situated in Austria and the third party’s acquisition of the shares was invalid. The third party sought restitution in the Swedish courts. The Swedish Högstra domstolen (Supreme Court) referred the question whether the Judgments Regulation required it to recognise the judgment of the Austrian court or whether the matter fell within Article 1.2(b). The ECJ held that the matter fell within Article 1.2(b).[64]The ECJ stated (at [25]) that “it is the closeness of the link, in the sense of the Gourdain case-law, between a court action such as that in the [Austrian] proceedings and the insolvency proceedings that is decisive for the purposes of deciding whether the exclusion in Article 1.2(b) of Regulation No 44/2001 is applicable”. The key factors for concluding that the link between the Austrian proceedings and the insolvency proceedings was particularly close were that the Austrian proceedings concerned(i) the exercise by the liquidator of a power for the benefit of the general body of creditors, and(ii) the extent of the liquidator’s powers.[65]As to the first reason, the ECJ stated (at [27]) that the dispute in the Austrian proceedings solely concerned the ownership of shares transferred in insolvency proceedings by the liquidator on the basis of the Swedish law of insolvency. The court stated (at [28]) that the issue in those proceedings was “the direct and indissociable consequence of the exercise by the liquidator …. of a power which he derives specifically from the provisions of national law governing that type of proceedings”. I have referred (see [58] - [59]) to the significance of references by the courts to the juridical basis of the liquidator’s power and the context of most of those references.[66]It is the ECJ’s second reason which is of particular relevance to the case before me. That reason was (see [30]) that the ground on which the Austrian court held the transfer invalid related “specifically and exclusively to the extent of the powers of [the] liquidator in insolvency proceedings …”. The content and scope of the Austrian decision “are therefore intimately linked to the conduct of the insolvency proceedings”. Accordingly, although the Austrian proceedings were not juridically directly derived from the insolvency proceedings, they were closely linked by these two factors.[67]All that the defendant does as PVL’s trustee in bankruptcy is subject to the supervision of the supervisory judge. The claimants and others in their position have statutory rights in the Netherlands in respect of the trustee’s actions. Indeed, the claimants have sought to exercise these rights since the settlement by applying to the supervisory judge to intervene (see [24] and [26]) and (see [27]) to dismiss the trustee.[68]In the present case the underlying transactions about which the claimants have brought their claims are negotiations and a settlement between them and the defendant acting as the trustee of PVL’s bankruptcy: see the capacity in which his emails and the settlement were signed, [11], [14] and [19]. It was also (see [16]) the basis upon which the claimants’ legal representatives dealt with him and (see [28]) served these proceedings on him. The dispute concerned the insolvency process/procedures. It was about a post-insolvency actio pauliana declaration by the defendant based on Article 42 of the Dutch Bankruptcy Code declaring the “Intra-Group Asset Transfer Agreement/hive-down” to be a fraudulent transaction and void and the summary proceedings by the defendant to prevent the registration of the intellectual property rights transferred pursuant to that agreement in the name of the transferee. The aim of the defendant’s declaration was to preserve the rights of the general body of creditors over PVL’s assets.[69]The post-insolvency declaration by the trustee that the “Intra-Group Asset Transfer Arrangement/hive-down” was void as a fraudulent transaction and the action he took to restrain the re-registration of the intellectual property rights and to realise property for the benefit of the general creditors undoubtedly qualify under the Gourdain formulation: see Seagon and SCT.[70]The question is whether the negotiations and the settlement also qualify. I have concluded that they do. The negotiations with the claimants were (see [13]) instigated at the suggestion of the presiding judge in the second summary proceedings to enable the disputed intellectual property rights to be sold as part of the insolvency process. The supervisory judge in the bankruptcy played a part in the negotiations in the sense that he was sent copies of emails and expressed views, in particular (see [17]) in relation to the amount to be paid to Mr Ford. The statements made by the defendant during the course of the negotiations concerned the exercise by him of his powers as trustee – whether he would admit Mr Ford’s claims and whether he would accord them priority in the bankruptcy. The settlement enabled the property rights to be sold for inter alia the benefit of the general creditors. Its terms largely concerned the future conduct of the bankruptcy process. Moreover, the defendant made it clear to Mr Ford’s Dutch lawyers (see [15]) that it was a term of the agreement that the supervisory judge approve the settlement.[71]The representation and collateral contract alleged are of a binding promise by the defendant as to the way he would exercise his powers under Dutch bankruptcy law in (as the way he signed his communications shows) his capacity as an officer of the Dutch court. The settlement was the direct consequence of the exercise by the defendant of power he had under Dutch law in relation to the conduct of PVL’s insolvency proceedings. To regard the statements made in negotiations to settle a dispute about the way to conduct the insolvency process in the future and the resulting agreements as directly derived from and closely connected with the insolvency proceedings and thus within the Gourdain formulation is not to give Article 1.2(b) of the Judgments Regulation and the Insolvency Regulation a broad interpretation.[72]I turn to the submission that the proceedings fall outside Article 1.2(b) because the claimants’ case is that the defendant is personally liable. The Particulars of Claim do not plead how he is said to be so liable save that it is pleaded (paragraph 30) that the “representation was made by [the defendant] negligently alternatively innocently”. It is clear on the evidence that the personal liability of a bankruptcy trustee personal liability depends on the claimant satisfying the test laid down by the Hoge Raad (the Dutch Supreme Court) in the case of Maclou/Curatoren Van Schuppen HR 19 April 1997, NJ 1996, 727.[73]The formulation of the test by both Mr Declercq (first statement, paragraph 20; second statement, paragraphs 7-9) and Mr Jongepier (statement, paragraphs 6-7) is in terms of whether the trustee has acted “in such a manner as – in all reasonableness – can be expected from a bankruptcy trustee having sufficient understanding and experience, fulfilling his duties with dedication and punctuality”. But Mr Declercq’s evidence (second statement, paragraphs 7-9) is also that, in order to establish the personal liability of a trustee, it is first necessary to bring proceedings against the trustee in his capacity as trustee. Mr Jongepier’s statement, although made after Mr Declercq’s second statement, does not address this issue. Accordingly, Mr Declercq’s evidence on this particular point is unchallenged. Given this, and in the light of the totality of the other circumstances to which I have referred, I have concluded that the claims are sufficiently close to the insolvency proceedings to satisfy the Gourdain formulation.

Extension of time/relief from sanctions

[74]The claimants resist the defendant’s application for an extension of time in which to challenge jurisdiction by way of relief from the deemed submission to jurisdiction by virtue of CPR 11(5). They do so on the following grounds. First, no good reason has been given for not complying with the time limit. Secondly, the stated reason of wanting to see how the claim was pleaded in the Particulars of Claim showed that there was an intention not to apply within time which constituted “real fault” on the part of the defendant, who does not therefore have a “good” explanation for not meeting the time limit. Mr Samek submitted that in view of the clarity of the rules and the statement on the face of the Acknowledgement of Service that a challenge to jurisdiction must be made within the 28 day period, there could not have been any legitimate doubt in the defendant’s mind as to what he was required to do to challenge jurisdiction. It was, he argued, an “inexcusable oversight” which Lord Dyson in Attorney General for Trinidad and Tobago v Universal Projects Ltd [2011] UKPC 37 at [23] stated it was difficult to see as ever amounting to a good explanation.[75]Mr Samek also relied on the differences between what Mr Declercq stated in his first and second witness statements. In his first witness statement (paragraphs 21 – 24) Mr Declercq stated that, in the light of the fact that the defendant was served “acting in his capacity of trustee in bankruptcy” (see [28]) it was not clear whether the claimants were in fact proposing to sue the defendant in his personal capacity and it was not until the claimants filed their Particulars of Claim that the defendant was able to understand the nature of the claim and the extent of any jurisdictional issues. He stated that, had a jurisdictional challenge been filed before the Particulars of Claim were served, it would only have been possible to send out a generic challenge, which might not have been of assistance to the court.[76]In his second statement (paragraphs 10 and 69) Mr Declercq referred to the commencement of these proceedings in a confusing manner without observing any of the pre-action protocols. He also stated that the deadline for challenging jurisdiction was missed “as it was mistakenly assumed that the time for issuing such application was following service of the Particulars of Claim”. Mr Samek submitted that there is a marked contrast between the explanations in the first and second witness statements. That, together with the fact that there could not have been a legitimate doubt in the defendant’s mind, mean that time should not be extended.[77]I reject these submissions and accept those of Mr Davies, which are summarised at [29]. The claimants have not alleged a particular detriment other than their inability to rely on the mistake made by the defendant’s solicitor. Having regard to what Lord Collins stated in Texan Management Ltd and others v Pacific Electric Wire & Cable Co Ltd [2009] UKPC 46 and in his earlier judgment in Chris Sawyer v Atari Interactive Inc [2005] EWHC 2351 (Ch), the circumstances of this case and the delay are such that there is a strong case for an extension of time.[78]The defendant indicated that he would challenge jurisdiction at the time he filed his Acknowledgement of Service on 6 April. I do not consider that the reasons given by Mr Declercq in his first and second statements are inconsistent. The first statement explains why no challenge was made on receipt of the claim form. The second statement explains the reason for not meeting the deadline. That reason was inadvertence, i.e. a clear error by himself or his firm, as the defendant’s solicitors. Once the failure to meet the deadline had been pointed out by the claimants’ solicitors, the application was filed promptly. For the reasons I have given, I have concluded that if time is extended, the defendant’s application succeeds.[79]In the Texan Management case, Lord Collins (at [1]) referred to the statement that “in the pursuit of justice, procedure is a servant and not a master”. In Chris Sawyer v Atari Interactive Inc, he stated (at [47]) that “it would be absurd if a simple error by solicitors as to the time limit had the potentially far-reaching effect of causing a submission to jurisdiction, which could be rectified by an application for an extension of time…”. He also stated that Chris Sawyer v Atari was “a proper case for the exercise of the discretion” to extend time because the administration of justice would not be affected by granting an extension, whereas “a failure to do so might involve a case being heard in England which might otherwise not have been”. He thus considered the merits of the challenge to jurisdiction (a factor which has been held relevant in other contexts in determining whether to extend time: see, for example, R (Finn-Kelcey) v Milton Keynes BC [2008] EWCA Civ 1067 at [29]). In Chris Sawyer v Atari, as in this case, there was no prejudice to the claimant except its inability to rely on the mistake made by the defendant’s solicitor. Collins J (as he then was) stated that the reason for the failure in that case was understandable, if not excusable, and it was the failure of the solicitors and not of the client. That too is the position in this case.

The other Judgments Regulation issues

[80]In view of my conclusion that these proceedings are excluded from the ambit of the Judgments Regulation by Article 1.2(b), it is not necessary to make decisions on the submissions about the application of Article 5.1(a) and 5.3 to displace the basic rule in Article 2, or whether because of clause 5.8 of the settlement agreement (set out at [20]), the parties have agreed that the Netherlands is to have exclusive jurisdiction over the issues between them. Since, however, there was full argument on these issues, I shall briefly indicate how I would have been inclined to decide them.[81]As to the merits of the claims, the issues are whether there is a serious issue to be tried, and there is a good arguable case (see [44(3)]) that the claims fall within the relevant jurisdictional gateways of the Judgments Regulation. Although Mr Declercq’s evidence that it is a pre-requisite of any claim against the defendant in his personal capacity that he be liable in his capacity as bankruptcy trustee has not been contradicted by the evidence filed on behalf of the claimants, there is a conflict of evidence as to whether, on the facts of this case, the test laid down in the Maclou case (see [72) would be met. There is, however, little particularity in either the evidence of Mr Declercq or that of Mr Jongepier as to the reasons for their conclusions. There is also a conflict of evidence as to whether, on 18 May 2010, the defendant admitted to Mr Elshof that the pandrecht was valid: see [23].[82]It is for the claimants to show there is a serious issue to be tried. The test has been described by Christopher Clarke J in Cherney v Deripaska (No. 2) [2008] EWHC 1530 (Comm) as a relatively low threshold: see also ET Plus SA v Welter [2006] 1 Lloyd’s Rep. 251 at [59(iii)]. In the light of the nature of the threshold, I would have been inclined to conclude that the test has been satisfied in this case. There are conflicts of evidence about Dutch law. There is common ground that there are circumstances when a Dutch bankruptcy trustee may be held personally liable. There is a conflict of evidence as to what was said about the pandrecht. The court cannot resolve these conflicts of evidence save by conducting the sort of mini-trial which it is generally accepted courts should not engage in on applications of this sort. In Kolden Holdings Ltd v Rodette Commerce Ltd [2008] EWCA Civ 1648 at [49], Collins LJ, with whom Tuckey and Rimer LJJ agreed, stated that “jurisdictional issues ought generally to be dealt with quickly and without oral evidence or mini-trials”. See also Konkola Copper Mines Plc v Coromin Ltd [2006] EWCA Civ 5 per Rix LJ at [77] – [81].[83]As to the jurisdictional gateways to service, because the jurisdiction to serve out is one over those who are not within the ordinary reach of the court, the “good arguable case” test is generally applied by, in effect, requiring a higher standard: see Canada Trust Co v Stoltzenburg (No. 2) [1998] 1 WLR 547, 555, aff’d [2002] 1 AC 1 and Cherney v Deripaska (No. 2) at [41] – [44]. As to the contract gateway in Article 5.1(a), there is undoubtedly intuitive attraction in Mr Davies’s submission that, as far as any obligation to acknowledge Mr Ford’s claims in the bankruptcy is concerned, the Netherlands, the seat of the bankruptcy, is the place of performance of that obligation. But, while (see Crucial Music Corporation v Klondyke Management AG [2007] EWHC 1782 (Ch) at [15(ii)(c)]) whether a claim relates to contract is a question which has to be determined by reference to an autonomous meaning under the Judgments Regulation l, the position differs in determining the place for performance. There (see Crucial Music Corporation v Klondyke Management AG at [15(ii)(h)]) “the applicable law of the contract must be applied”.[84]It is common ground that in this case the applicable law is the law of the Netherlands. There is unchallenged evidence (see Mr Duthie’s statement, paragraph 30) that in relation to the claim for breach of what would in English law be called a collateral contract he was told by Mr Jongepier that “insofar as the principal obligation…is the payment of the outstanding sums to the claimants, then pursuant to Article 6:115 of the Dutch Civil Code, the place for payment is in London, because that is where the Withers client account which was the designated receiving account [under clause 2.6 of the settlement] is located”. Mr Duthie also stated that Mr Jongepier informed him that insofar as the principal obligation is the acknowledgement of Mr Ford’s status as a secured creditor, this would require a communication from the defendant. He stated that, under Dutch law’s “theory of receipt” pursuant to Article 3.37 of the Civil Code, such a communication only has effect when it is received, so that the place for performance of that obligation would be the intended or likely place of receipt, which would be Withers’ offices in London.[85]Mr Davies contended that the “theory of receipt” was irrelevant and the point made was comical. But foreign law is a question of fact to be proved by evidence. In the absence of any contradictory evidence on this issue, it is not for this court to gainsay Mr Duthie’s evidence as to Dutch law, even if, impressionistically and from the perspective of English law, there may be some difficulty in understanding how the obligation is analysed in that way. Accordingly, in view of the evidence before the court, the jurisdictional threshold would have been satisfied. For these reasons, I would have been inclined to hold that the jurisdictional threshold in Article 5.1(a) has been met.[86]I consider the position in relation to the jurisdictional threshold in Article 5.3 is different. Notwithstanding the force of Mr Samek’s submissions, in the light of the discussion of the authorities in Domicrest Ltd v Swiss Bank Corporation [1999] QB 548, especially at 563A – 564B, 566H – 567C, and 567H - 568, I would have been inclined to accept Mr Davies’s submission that no “good arguable case” in the relevant sense of that term has been made out, and the threshold has not been met.[87]Finally, with respect to the submissions based on Article 23, I am unable to say that the defendant has much the better of the argument that Article 23 applies. This is because the burden of proof lies on the defendant (Konkola Copper Mines Plc v Coromin Ltd [2006] EWCA Civ 5 at [94] – [96]). The defendant accepted that Dutch law is the proper law of the settlement agreement. Mr Duthie has given uncontradicted evidence (statement, paragraphs 23 – 25) that the claims in these proceedings would not, under Dutch law, fall within the scope of clause 5.8 of the settlement agreement.

Forum non conveniens

[88]Since the Judgments Regulation does not apply, I come to the question of forum non conveniens. On the assumption that the Insolvency Regulation does not confer exclusive jurisdiction on the Dutch courts, the question is whether the effect of the opening of the insolvency proceedings in the Netherlands means that this court is forum non conveniens.[89]Mr Samek submitted that, notwithstanding his acceptance that the applicable law of the settlement agreement and any collateral contract is Dutch law, England is the appropriate forum. He did so because the characteristic place of performance of the contract according to that Dutch applicable law is England, and because Mr Neijt has stated that he cannot resolve civil claims between the trustee and the claimants.[90]I reject these submissions. First, I have decided that these claims satisfy the Gourdain formulation, i.e. that they derive directly from the bankruptcy and are closely connected with the insolvency proceedings. Secondly, whether or not the Dutch supervisory judge can resolve these claims in the proceedings themselves, a Dutch court will be better placed to apply Dutch law, which is the applicable law of the contracts and the transactions between the parties.[91]The alleged representation and collateral contract concern the way the defendant would exercise his powers under Dutch bankruptcy law, and the dispute is a dispute related to a settlement which was made as the direct consequence of the Dutch supervisory judge’s approval, and the exercise by the defendant of the power he has under Dutch bankruptcy law in relation to the conduct of PVL’s insolvency proceedings. The settlement contains a clause favouring Dutch jurisdiction whether or not it is an exclusive jurisdiction clause. It was only after Mr Ford’s applications to the Dutch supervisory judge in respect of the way the defendant was carrying out his functions were unsuccessful that he turned to proceedings in England. In the light of all these factors, the defendant’s principal application must succeed.

Cited in 4 later judgments