Conflict of laws – Allocation of jurisdiction – Court fees
SK Slavia Praha-Fotbal AS v (1) Debt Collection London Ltd (2) ENIC Group: CA (Civ Div) (Lords Justices Mummery, Lloyd, Stanley Burnton): 4 November 2010
The appellant Czech company (S) appealed against decisions that the English court had jurisdiction to determine claims against S for repayment under certain loan agreements and that the respondent (D) was entitled to summary judgment.
S owned and carried on the business of a professional football club. It had borrowed money from an English company (E) under loan agreements which were expressly governed by English law. E had a Luxembourg subsidiary whose Czech subsidiary had been the majority shareholder in S until some three years before the issue of proceedings. The advances were repayable on demand. E had assigned the benefit of the loan agreements to D which then demanded repayment from S. S issued Czech proceedings seeking a declaration that its obligations under one agreement had been fulfilled and the agreement discharged. The Czech proceedings were not served on D and E because S did not pay the court the fee required for service of the proceedings to be effected. D and E issued English proceedings claiming payment under all the various loan agreements and those proceedings were served on S in the Czech Republic before the Czech proceedings were served. S applied for the English court to decline jurisdiction or stay its proceedings. The judge held that the English court was first seised because there had been a failure on the part of S to take a step that it was required to take to have service effected on D within article 30(1) of regulation 44/2001, namely payment of the court fee. The judge subsequently granted summary judgment against S on the basis that it had no defence under English or Czech law to the repayment claim. S submitted that: (1) the judge had wrongly interpreted ‘failure’ in article 30(1) as meaning or including ‘delay’, when S had not failed to pay the court fee: it had simply waited, as was the usual practice under Czech law, and paid the fee when requested to do so by the court; (2) E was a shareholder or a person with substantial influence over S’s business for the purposes of the underlying principle of shareholder loyalty to a company according to Czech law and was in breach of that duty in seeking repayment of the loans.
Held: (1) The question whether a court was seised of proceedings did not have to be answered unless or until another court was or might be also seised of related proceedings. Once there were competing proceedings, it became necessary to decide which court was first seised. The proviso to article 30(1) made it necessary to consider the domestic law of the member state, in this case Czech law, to see if there had been a failure to take a required step to have service of the proceedings effected on the defendant and what the effect of that failure was. The consequence of S’s non-payment of the court fee was that service of the Czech proceedings was not and could not be effected on D or E. From the date of the lodging of the Czech proceedings until the fee was paid, there was a failure by S to perform its legal duty, which arose on its lodging of the proceedings, to pay the fee. It was established by an opinion of the Czech Supreme Court that the court would not serve the proceedings on other parties before the fee had been paid. The possible procedural consequences under Czech law of that failure upon the proceedings were irrelevant. What mattered were the consequences for being seised of proceedings under the regulation, which simply looked at whether or not there had been a failure to take a required step to effect service of the proceedings. The judge correctly held that non-payment of the fee was a failure to take a step required for effecting service within article 30(1). It followed that the Czech court was not seised of the proceedings before the English proceedings were issued and served, and that the English court was the court first seised (see paragraphs 24, 25, 27, 59 of judgment).
(2) The judge was right to grant summary judgment against S. He did not go so far as to decide that Czech law was the applicable law in relation to an issue between S and E and D. His approach was that an arguable defence of breach of the principle of shareholder loyalty under Czech law, even assuming that it was applicable, had not been made out evidentially. There was no factual evidence that E or its associates exercised any influence over S’s business or that, in demanding repayment, D was oppressing S. So there was no real prospect of S persuading the English court at trial that E had a substantial influence over S’s business. In the absence of any evidential basis for a defence based on the Czech law of shareholder loyalty English law applied to the claims and there was no arguable defence under English law to the contractual claims for repayment of advances made (paragraphs 36, 37).
Thomas Keith (instructed by Eversheds) for the appellant; Jonathan Brettler (instructed by Wallace) for the respondents.