Lars Windhorst v Albert Levy

This is an appeal by Lars Windhorst against an order of Eady J dated 6 May 2021 dismissing (i) an appeal by Mr Windhorst against an order of Master Eastman dated 17 August 2020 (“the Registration Order) registering a judgment of the Landgericht (Regional Court) Bielefeld, Germany dated 10 March 2003 in favour of Albert Levy (“the 2003 Judgment”) and (ii) an application by Mr Windhorst for a stay pursuant to CPR rule 83.7(4). The appeal raises issues as to the interplay between Council Regulation 44/2001/EC of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“the Brussels I Regulation”) and Council Regulation 1346/2000/EC of 29 May 2000 on insolvency proceedings (“the Insolvency Regulation”). I should explain that it is common ground that (i) it is those Regulations that apply to the present case, and not their successors, and (ii) the issues in this case are unaffected by Brexit.

Mr Windhorst is a German businessman who became well-known in the early 1990s as a result of his interests in the trade, production and sale of software, electronic devices and components, particularly in Asia.

In mid-1999 Mr Levy entered into an agreement with Mr Windhorst, whereby Mr Levy would make an investment of $2 million in Mr Windhorst’s companies and would receive a substantial share-holding in return. Although Mr Levy duly made the agreed payment, he complained that Mr Windhorst failed to keep his side of the bargain. Mr Levy brought a claim in unjust enrichment in the Landgericht Bielefeld. In the 2003 Judgment, Mr Levy's claim was upheld and Mr Windhorst was ordered to re-pay Mr Levy the sum of $2 million plus interest.

Towards the end of the 1990s Mr Windhorst’s businesses got into difficulties. He sought to resolve matters by entering into various agreements with creditors, but those attempts were unsuccessful. In the autumn of 2004 Mr Windhorst filed an application to open insolvency proceedings under German law, explaining that he faced claims of around €81 million from some 55 creditors and was unable to meet his debts. On 14 January 2005 the Amtsgericht (District Court) Charlottenburg in Berlin opened those proceedings.

On 14 February 2005 Mr Levy applied for inclusion of the 2003 Judgment debt in the German insolvency proceedings. On 18 August 2005 Mr Levy participated (through his lawyers) in a creditors’ meeting. At that meeting, a proposed insolvency plan (“the Insolvency Plan”) was put forward, on the following terms:

At a hearing before the Amtsgericht Charlottenburg on 25 August 2005, it was recorded that the majority of creditors had voted in favour of the Insolvency Plan, which was duly approved by the court. On 31 August 2007 the insolvency proceedings were terminated, given the court’s approval of the Insolvency Plan.

It is common ground that, under German law, whilst the court order approving the Insolvency Plan meant that it became binding on the parties by virtue of section 254(1) Insolvenzordnung (Insolvency Statute), that did not automatically render the 2003 Judgment unenforceable: see the decision of the Bundesgerichtshof (Federal Court of Justice) dated 25 September 2008 in Case I ZB 205/6 Counterclaim for enforcement after discharge of residual debt. It was, however, open to Mr Windhorst to apply to have enforcement of the 2003 Judgment declared inadmissible pursuant to section 767 Zivilprozessordnung (“ZPO”, Code of Civil Procedure).

Notwithstanding their earlier dispute, there is evidence of positive relations between Mr Windhorst and Mr Levy resuming in or around 2012. It is common ground that, since his fortunes have begun to improve, Mr Windhorst has made some payments to Mr Levy, and has promised to make further payments.

By letter dated 7 September 2018 Mr Levy’s lawyers notified Mr Windhorst of Mr Levy’s intention to enforce the 2003 Judgment in the United Kingdom. Given this indication of Mr Levy’s position, on 18 April 2019 Mr Windhorst made an application under section 767 ZPO before the Landgericht Bielefeld, seeking a declaration that the 2003 Judgment was unenforceable in the light of the Insolvency Plan.

The declaratory proceedings are contested by Mr Levy, who argues that the payments made by Mr Windhorst to Mr Levy amount to an acknowledgment of the debt under the 2003 Judgment and thus the waiver in the Insolvency Plan has been rescinded. Mr Windhorst contends that that they are no more than a recognition of a moral obligation, legally to be characterised as a gift. Mr Levy has also questioned the jurisdiction of the German courts to determine this issue, given that he does not seek to enforce the 2003 Judgment in Germany, but in the United Kingdom (where, he says, more of Mr Windhorst’s assets are now located).

On 17 June 2019 the Landgericht Bielefeld made an interim order suspending enforcement of the 2003 Judgment, pending determination of the declaratory proceedings, subject to Mr Windhorst providing security in the sum of $2.2 million. It is common ground that Mr Windhorst did not provide this security.

On 9 October 2019 the Landgericht Bielefeld dismissed the application on jurisdictional grounds.

Mr Windhorst has filed an appeal against that decision, which is currently pending before the Oberlandesgericht (Higher Regional Court) Hamm. On 19 February 2020 that Court made a further interim order again staying enforcement of the 2003 Judgment pending determination of the appeal, but now subject to Mr Windhorst providing security in the amount of $3.44 million. The Court explained that its preliminary view was that the German courts were likely to have jurisdiction pursuant to Article 22(5) of the Brussels I Regulation or Article 24(5) of the successor Regulation. It is again common ground that Mr Windhorst has not provided this security.

In April 2020 Mr Levy applied for the interim order to be lifted, saying that he would not seek to enforce the 2003 Judgment in Germany and arguing that the German courts were not competent to decide the issue of its enforceability. There was also an application by Mr Windhorst. By a decision of 27 May 2020 the Oberlandesgericht Hamm refused both applications and continued the interim order. It maintained its preliminary view that the German courts had jurisdiction.

At the time of the hearing before Eady J the next hearing before the Oberlandesgericht Hamm was scheduled for September 2021, but since then it has been postponed to January 2022. As matters stand, it appears likely that the Oberlandesgericht Hamm will reverse the Landgericht Bielefeld’s decision that it has no jurisdiction. If so, the German courts will then need determine the merits of Mr Windhorst’s application and of Mr Levy’s defence to that application. This may involve the matter being remitted to the Landgericht Bielefeld.

In the meantime, Mr Levy applied on 21 July 2020 to register the 2003 Judgment in the Queen’s Bench Division of the High Court of England and Wales pursuant to the Brussels I Regulation. In accordance with Article 41 of the Regulation, the application was made without notice. In support of the application Mr Levy relied upon a certificate in the form set out in Annex V to the Brussels I Regulation by the Landgericht Bielefeld dated 28 February 2020 stating that the 2003 Judgment “is enforceable in the Member State of origin”.

In accordance with Article 43(1),(5) of the Brussels I Regulation, the Registration Order provided that Mr Windhorst could appeal within one month from service. Mr Windhorst did appeal, and it was that appeal which came before Eady J. Accordingly that was the first occasion on which there was an inter partes hearing of the matter. In the alternative Mr Windhorst applied for a stay. The judge dismissed both the appeal and the application for a stay. Permission to appeal was granted by Newey LJ. Pursuant to Article 44 of the Brussels I Regulation, the judge’s judgment may only be contested on a point of law.

The Brussels I Regulation provides, so far as relevant:

The Insolvency Regulation provides, so far as relevant:

CPR rule 83.7 provides, so far as relevant:

So far as Mr Windhorst’s appeal against the Registration Order is concerned, the judge’s reasoning, in summary, was that the 2003 Judgment was enforceable under German law unless and until it was declared inadmissible pursuant to an application under section 767 ZPO. Although the English courts were required by the Insolvency Regulation to recognise the Insolvency Plan, that meant no more than giving it the same effect as under German law: Article 17(1). It followed that it was not necessary for her to decide whether the powers of the court on an appeal against a declaration of enforceability were limited to deciding whether any of the grounds specified in Articles 34 and 35 of the Brussels I Regulation applied.

As for Mr Windhorst’s application for a stay, the judge considered that the facts that Mr Windhorst’s application under section 767 ZPO was still pending and that Mr Levy had stated that he sought to enforce in the UK rather than Germany “might well” amount to special circumstances. She concluded, however, that the special circumstances of the case did not render it unjust to grant a stay of enforcement for reasons she expressed as follows:

Mr Windhorst appeals on three grounds. Ground 1 is that the judge was wrong to refuse a stay, essentially because (i) the court is obliged to recognise the Insolvency Plan and (ii) the issue as to the enforceability of the 2003 Judgment having regard to the Insolvency Plan has not yet been determined by the German courts.

Ground 2 is that it is open to an appellant against the registration of a foreign judgment to raise issues as to the enforceability of the judgment, and Articles 34 and 35 of the Brussels I Regulation are not an exhaustive code in this respect.

Ground 3 is that the judge was wrong to refuse to set aside the Registration Order because the 2003 Judgment is not enforceable as a result of the Insolvency Plan.

Although counsel for Mr Windhorst placed ground 1 at the forefront of his argument, it seems to me that logically grounds 2 and 3 come first.

Article 45 of the Brussels I Regulation provides that a court with which an appeal is lodged “shall refuse or revoke a declaration of enforceability only on one of the grounds specified in Articles 34 and 35 [emphasis added]”. Mr Levy contends that this means what is says, and precludes the court from refusing a declaration of enforceability on any other ground. This interpretation receives support from two judgments of the Court of Justice of the European Union stating that the list of grounds for dispute set out in Articles 34 and 35 is “exhaustive in nature”: see Case C-139/10 Prism Investments BV v van der Meer [2011] ECR I-9511 at [33] and Case C-157/12 Salzgitter Mannesman Handel GmbH v SC Laminorul SA [EU:C:2013:597], [2014] 1 WLR 904 at [28].

Against this, Mr Windhorst points out that Article 38(1) only requires enforcement of a “judgment given in another Member State and enforceable there”, and argues that it must follow that enforcement may be denied on grounds such as: (i) the judgment was not given in a civil or commercial matter within the meaning of Article 1; (ii) the judgment was not given in a Member State; (iii) the judgment is not enforceable in the Member State of origin; or (iv) enforcement would be contrary to Articles 67 or 71(1). This contention receives support from academic literature and appears to have been common ground in Percival v Motu Novu LLC [2019] EWHC 1391 (QB) at [19]-[24].

I agree with the judge that it is not necessary to decide this question, because it only becomes relevant if Mr Windhorst succeeds on Ground 3. For the reasons given below, this is not the case. I would only observe that there may possibly be a distinction between a contention that the judgment is not enforceable in the Member State of origin and the other potential objections mentioned in the preceding paragraph. This is because Article 54 requires the party seeking enforcement to produce a certificate in the form set out in Annex V, which requires the court in the Member State of origin to certify that the judgment “is enforceable in the Member State of origin”. This might be thought to indicate that enforceability in the Member State of origin is a matter for the courts of that Member State, and is not a matter which should be reviewed by the courts of the Member State where enforcement is sought: compare the Opinion of Advocate General Kokott in Case C-420/07 Apostolides v Orams [2009] ECR I-3571 at paragraph 98 and the judgment of the CJEU in that case at [68].

Even if it is open to the courts of England and Wales to review the enforceability of the 2003 Judgment, I agree with the judge that it is “enforceable” within the meaning of Article 38(1).

As the judge noted, the CJEU held in Case C-267/97 Coursier v Fortis Bank SA [1999] ECR I-2543:

The CJEU’s subsequent judgments in Apostolides v Oram, Prism v van der Meer and Salzgitter v Laminorul are consistent with this approach. Indeed, in Prism v van der Meer the CJEU held that Article 45 was to be interpreted as precluding the court considering an appeal under Articles 43 or 44 from refusing or revoking a declaration of enforceability on the ground that the judgment had been complied with in the Member State of origin.

As the judge also noted, Coursier v Fortis was decided under the Brussels Convention, the predecessor to the Brussels I Regulation, before the Insolvency Regulation came into force. I agree with the judge that this makes no difference in the present case. Pursuant to the Insolvency Regulation the English courts must recognise the Insolvency Plan. As recorded above, it is common ground that, under German law, the Insolvency Plan does not render the 2003 Judgment unenforceable unless and until Mr Windhorst obtains a declaration under section 767 ZPO. Thus it is common ground that the 2003 Judgment currently remains formally enforceable.

The judge relied in this context upon 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. Counsel for Mr Windhorst submitted that this reasoning overlooked Article 25(1) of the Insolvency Regulation, which was the applicable provision once the Insolvency Plan had been approved by the judgment of the Amstgericht Charlottenburg on 25 August 2005. While I agree that Article 25(1) is the relevant provision, I do not accept this submission. The first sentence of Article 25(1) simply has the effect that the judgment of the Amstgericht Charlottenburg approving the Insolvency Plan, and hence the Insolvency Plan, must be recognised. It does not require the courts of England and Wales to give the Insolvency Plan any greater effect than it has under German law. Although there was some debate during the course of argument about the meaning and effect of the second sentence of Article 25(1), it is not necessary to consider this in the present case since Mr Windhorst is not attempting to enforce any judgment of the Amstgericht Charlottenburg.

Mr Levy accepts that registration of the 2003 Judgment pursuant to the Brussels I Regulation does not exclude the English courts’ power to order a stay of execution pursuant to CPR rule 83.7(4).

Although Mr Windhorst contends that the Insolvency Regulation obliged the judge to order a stay, that contention seems to me to be untenable for essentially the same reasons I have given in relation to ground 3.

Mr Windhorst contends in the alternative that the judge’s exercise of her discretion was legally flawed because she failed to recognise that the effect of refusing a stay was to put Mr Levy in a better position than he was in Germany even though she herself had held that the Insolvency Plan should be given the same effect as it had in Germany. In Germany Mr Levy’s ability to enforce the 2003 Judgment depends upon the outcome of Mr Windhorst’s application under section 767 ZPO, which has yet to be determined. If a stay is refused, Mr Levy will be able to enforce the 2003 Judgment in full in the UK even if it subsequently turns out that Mr Windhorst’s section 767 ZPO application is successful and the 2003 Judgment is declared unenforceable. That would be manifestly unjust.

Counsel for Mr Levy had no real answer to this argument, and I accept it. As she pointed out, however, the logic of the argument supports the judge’s alternative conclusion at [68] that the stay should be conditional upon the provision of security in the same amount as ordered by the Oberlandesgericht Hamm. After all, Mr Windhorst could already have obtained a stay of enforcement in Germany if he had provided the security. In addition, both parties should have permission to apply to the High Court to discharge or vary the stay in the event that the Oberlandesgericht Hamm concludes, contrary to its preliminary opinion, that the German courts lack jurisdiction to determine Mr Windhorst’s application under section 767 ZPO.

For the reasons given above I would dismiss Mr Windhorst’s appeal against the Registration Order, but allow his appeal against the refusal of a stay and grant a stay conditional on the provision of security in the sum of $3.44 million with permission to apply. I would invite the parties to try to agree the mechanics and timing for the provision of security.

I agree.

I also agree.