In the recent case of Windhorst v Levy [2021] EWHC 1169 (QB), the Court of Appeal considered an appeal against an order of Mrs Justice Eady, dated 6 May 2021, dismissing Mr Windhorst's (the Appellant) appeal from a registration order, dated 17 August 2020 (the Registration Order), and an application for a stay pursuant to CPR 83.7(4).
The case was considered pursuant to Council Regulation 44/2001/EC of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civial and commercial matters (the Brussels I Regulation) and Council Regulation 1346/2000/EC of 29 May 2000 on insolvency proceedings (the Insolvency Regulation).
Notwithstanding Brexit, this decision is relevant to cases that involve insolvency proceedings opened or judgments in proceedings instituted prior to 31 December 2020.
The Appellant is a German businessman, who in mid-1999 entered into agreement with Mr Levy (the Respondent) pursuant to which the Respondent made an investment of $2 million in the Appellant's companies in return for a substantial shareholding. As the Appellant failed to comply with the agreement, the Respondent brought an unjust enrichment claim in German courts.
On 10 March 2003, Mr Levy obtained a judgement in Germany against Mr Windhorst requiring him to pay Mr Levy the sum of $2 million plus interest (the 2003 Judgment).
On 14 January 2005, German courts opened insolvency proceedings on an application of Mr Windhorst as he faced claims of €81 million from some 55 creditors and was unable to meet his debts. A month later, Mr Levy applied for inclusion of the 2003 Judgment in the insolvency proceedings.
Subsequently, Mr Windhorst proposed an insolvency plan in relation to which a creditors' meeting took place on 18 August 2005 (the Insolvency Plan). It received the majority of creditors' votes in favour and was approved by the court. Consequently the insolvency proceedings were terminated on 31 August 2007.
It was agreed by both parties that according to German law, the Insolvency Plan did not automatically render the 2003 Judgment unenforceable, but it was open to Mr Windhorst to apply for a declaration of inadmissibility, which he had not done until 18 April 2019, when he received Mr Levy's notification of his intention to enforce the 2003 Judgment in the United Kingdom. Mr Levy objected to the application and in October 2019 the German court dismissed the application on jurisdictional grounds. Mr Windhorst's appeal against that decision is currently pending. In February 2020, the German court made an interim order staying enforcement of the 2003 Judgment pending determination of the appeal on the condition that Mr Windhorst provides security in the amount of $3.44 million (which has not been provided).
In the meantime, Mr Levy applied to register the 2003 Judgment in England and Wales under Brussels I Regulation and the Registration Order was made. Pursuant to Article 43(1) of the Brussel I Regulation, Mr Windhorst appealed the Registration Order within one month from service and, in the alternative, applied for a stay. The appeal came before Mrs Justice Eady, who dismissed both the appeal and the application for a stay. Permission to appeal was granted by Newey LJ.
Mr Windhorst appealed the decision of Mrs Justice Eady on three grounds, which are as follows:
The Appeal came before Lord Justice Newey, Lord Justice Arnold and Lord Justice Stuart-Smith on 23 November 2021, who considered each of the grounds.
The Appellant contended that the Insolvency Regulation obliged the judge to order a stay, which was rejected by the Court of Appeal on the basis of Article 17(1) of the Insolvency Regulation which required the courts of England and Wales to give the Insolvency Plan the same effect as it has in Germany (as discussed above the Judgment 2003 is subject to a stay conditional on provision of security, which has not been provided).
The Appellant contended that in the alternative the decision of Mrs Justice Eady was legally flawed in that the refusal of a stay put the Respondent in a better position than he was in Germany despite that she held that the effect should be the same as it has in Germany. Mr Levy's position was that, if granted, the stay should be subject to the same security condition as it is in Germany. The Court of Appeal agreed.
In relation to this ground, the Respondent contended that pursuant to Article 45 of the Brussel I Regulation, a court shall refuse to revoke a declaration of enforceability only on one the grounds specified in Articles 34 and 35. In essence his position was a court is precluded from refusing a declaration of enforceability on any other ground.
The Court of Appeal agreed with Mrs Justice Eady that it was not necessary to decide this question as it would only become relevant if the Appellant succeeded on Ground 3, which was not the case.
Mrs Justice Eady relied on Article 17(1) of the Insolvency Regulation saying that it merely required the courts of England and Wales to give the Insolvency Plan the same effects as it has in Germany.
Mr Windhorst's position was that this overlooked Article 25(1) of the Insolvency Regulation, which was relevant as the Insolvency Plan was approved by the court. The Court of Appeal rejected this submission on the basis that while the judgment of the German court approving the Insolvency Plan had to be recognised, it did not require the courts of England and Wales to give greater effect than it has under the German law.
The Court of Appeal also referred to the CJEU's decision Case C-267/97 Coursier v Fortis Bank SA [1999] ECR I-2543 (which it considered relevant despite being decided under the predecessor to the Brussel I Regulation) in which it was noted that:
"… the term ‘enforceable’ in Article 31 thereof refers solely to the enforceability, in formal terms, of foreign decisions and not to the circumstances in which such decisions may be executed in the State of origin" and " It follows that a decision such as the contested judgment, which bears a formal order for enforcement, must, in principle, be covered by the rules on enforcement in Title III of the Brussels Convention."
The appeal against the Registration Order was dismissed, however the appeal against the refusal of a stay was allowed and the stay was made conditional on the provision of security in the sum of $3.44 million granted (the identical terms to the order in Germany).
Our comment
The judgment provides a helpful analysis of the effect of a foreign insolvency process on the enforceability of the judgment and provides a useful reminder that notwithstanding Brexit provisions of EU Law can still be applicable.
For further information on this article, please contact Holly Ransley or another member of our Restructuring & Insolvency team.
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