Tag: Plaza BV v The Law Debenture Trust Corporation PLC

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Goldman Sachs v Novo Banco: on ‘Civil and commercial’ in Brussels I, and choice of court transfer

Postscript 4 July 2018. The Supreme Court this morning dismissed the appeal – the Court of Appeal’s judgment stands. In essence, the ruling held that an English court is required by article 3 of the Recognition Directive to recognise the December decision, and must therefore treat the Oak liability as never having been transferred to Novo Banco. Novo Banco was therefore never party to the jurisdiction clause in the facility agreement.

Postscript 6 June 2019  Winterbrook v NB Finance, Novo Banco and Bank of New York Mellon [2019] EWHC 737 (Ch) applies the SC’s judgment. The administrative proceedings in Portugal, seeking review of the Portuguese authorities’ decision, are not a matter of fact (as being foreign law) but rather of foreign judicial adjudication; they cannot therefore as yet (if ever) have an impact on the earlier decisions on privity.

Postscript 8 November 2016 the Court of Appeal held differently – thank you Maria Joao de Matias Fernandes for flagging: with more emphasis laid on the reorganisation Directive, the Court of Appeal held that the choice of court clause had not been transferred and that no prorogation of jurisdiction to the English courts could otherwise be established. The Court of Appeal’s decision has no impact on the High Court’s discusison with respect to ‘civil and commercial’.

In Goldman Sachs v Novo Banco SA, the High Court first of all had to consider the scope of the Brussels I Regulation on the issue of ‘civil and commercial’.  This issue came up following the restructuring of a Portuguese Bank and the role of the Portuguese Central Bank, under its statutory powers, in the transfer of liabilities to a Bridge Bank, ‘Novo Banco’. [For the facts of the case see the judgment itself and see also Christopher Bates’ review, which first alerted me to the case. Mr Bates also reviews the issue of mutual recognition under the Bank Recovery Directive].

Hamblen J (soon to move to the Court of Appeal) in my view justifiably rejected Novo Banco’s arguments that the claim was not civil and commercial, given the statutory intervention of the Central Bank. With reference to the traditional line-up of CJEU precedent (see most recently Fahnenbrock, absent from the High court’s judgment; and Sapir, which does feature heavily) he held that the nature of the claim, in spite of the factual intervention of the Central Bank, is one in debt, which is a claim based on private law rights conferred by the relevant Facility Agreement and a civil and commercial matter. A novation of the Facility Agreement would not change the nature of that claim; nor does a statutory transfer.

Having decided that the claim falls under the Regulation, the High Court subsequently had to decide whether Novo Banco was subject to the choice of court, in favour of the English court, part of the Facilities Agreement. As this is a transfer of claims and not a contractual chain, Refcomp does not apply (Hamblen J did not refer to it). The matter needs to be decided by the lex causae, here the lex contractus: English law. Upon consideration of the various arguments, the High Court held that the choice of court clause had so been transferred together with the original claims.

Finally, the Court rejected a stay on ‘case management’ grounds (see Jong and Plaza for earlier applications).

The case shows how some of the core considerations of Brussels I can create a lot of argument, indeed.

Geert.

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Plaza v The Law Debenture Trust. The Owusu hall of mirrors is ever more reflexive.

Update 9 July 2020 further litigation concerning a settlement on the issues reveals that an appeal was launched against the judgment however that it is presently stayed: [2020] EWHC 1774 (Ch) The Law Debenture Trust Corporation Plc, Re.

 

There is an obvious downside to the European Court of Justice’s judicial economy. The Court often leaves unanswered many questions asked by national courts without an answer to them being strictly necessary for the case at hand. Evidently quite a few of those resurface in later practice. Owusu is a case in point. Many postings on this blog have entertained the unanswered questions left by the ECJ’s seminal rejection of Forum Non Conveniens. UK courts in particular have leapt on the opportunity to distinguish Owusu, effectively now leading to a fairly narrow context in which Owusu is applied. As recently as Jong v HSBC on which I reported last week, the High Court professed sympathy for vacating a case pending in the UK and having it joined to proceedings in Monaco, on ‘case management’ grounds.

In Plaza v The Law Debenture Trust [2015] EWHC 43 (Ch) Proudman J dealt with a UK fallout of longstanding litigation inter alia in Australia, following the insolvency of the Australian Bell group in the 1990s. Curacao is COMI. Secondary or ancillary proceedings were opened in Australia. A variety of litigation mostly concerning priority of claims and timely (or not) execution of securities, led among others to a 2013 Deed of Settlement between parties to the current litigation. The Law Debenture trust (LDTC) is trustee for a number of bonds issued by Bell, some of which are held by Plaza (these bonds contain a non-exclusive choice of court in favour of England). Others are held inter alia by the Insurance Commission of Western Australia (ICWA).

The 2013 Deed contains an exclusive choice of court clause in favour of Western Australia. Plaza, incorporated in Curacao, sues LDTC, domiciled in the UK, in England, basically questioning its suitability as a trustee for the bonds, citing alleged conflicts of interest (LDTC may or may not be acting under instruction of ICWA).

Proudman J essentially had to decide whether Article 23 (now Article 25) of the Jurisdiction Regulation in its original version (the recast does not apply) ought to be applied reflexively (protecting choice of court in favour of non-EU courts); alternatively, whether Article 28 of the same Regulation (the lis alibi pendens rule) may be so applied; and what the impact of the ECJ’s rejection of forum non conveniens is on this all.

Ferrexpo in particular assisted her in holding that reflexive application of Article 23 (now 25) of the Brussels I Regulation is not barred by Owusu. The main argument for this approach lies in the judicial economy which I cite above: the ECJ was asked but did not entertain the question. Moreover Article 23 is a more dominant rule in the Regulation than Article 2 (now 4)’s rule referring to domicile of the defendant: a mandatory exception to the rule of Article 2 rather than, in the words of Proudman J, a discretionary exception such as forum non conveniens.

Subsidiarily, the High Court also suggests Article 28’s lis alibi pendens rule ought to apply reflexively, although it expressly suggests more discussion of that point is needed and the Article need not be laboured in the case at issue, given its finding on Article 23.

To heap further pressure on the Owusu pile, a further potential for undermining finding in Owusu is suggested in the shape of ‘case management powers’, also suggested in Jong and hinted at as potentially introducing forum non conveniens through the back door.

With Plaza v Debenture, application of Owusu by the English courts now is so distinguished, arguably little is left of the ECJ’s original intentions. One assumes: for as I noted above, judicial economy allowed national courts to be creative in their application of the rule. The issue is bound to end up again at the ECJ at some point.

Geert.

 

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