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Tchenguiz & Ors v Grant Thornton UK LLP & Ors [2015] EWHC 1864 (Comm)
Ryan Perkins, Barrister, South Square, London, UKAbstract
In Tchenguiz & Ors v Grant Thornton UK LLP & Ors [2015] EWHC 1864 (Comm), Carr J considered the construction and effect of the Credit Institutions (Reorganisation and Winding-Up) Regulations 2004 (the 'Credit Institutions Regulations'), which implement Directive 2001/24/EC on the Reorganisation and Winding-Up of Credit Institutions (the 'Credit Institutions Directive'). Carr J held, inter alia, that the prosecution of a tort claim against an insolvent Icelandic bank was prohibited by Regulation 5 of the Credit Institutions Regulations.
Background
Kaupthing Bank hf (‘Kaupthing’) is an Icelandic bank, which fell into severe difficulties during the 2008 financial crisis. Following a series of interim protective measures, the District Court of Reykjavik made a winding-up order against Kaupthing in November 2010 (the 'Winding-Up Order'), pursuant to the Icelandic Financial Undertakings Act 2003 ('the FUA'). In January 2012, Kaupthing’s affairs were brought under the control of a winding-up committee (the 'Winding- Up Committee'). Jóhannes Jóhannsson ('JJ') is a leading member of the Winding-Up Committee.
In November 2014, Vincent Tchenguiz and others (the 'Claimants') brought a claim in the Commercial Court (the 'VT Action') against five defendants: Grant Thornton UK LLP ('GT'), two partners of GT, Kaupthing and JJ. The Claimants sought damages for conspiracy, malicious prosecution and other forms of tortious misconduct. The claim form was served out of the jurisdiction on Kaupthing and JJ, both of whom were domiciled in Iceland. The Claimants contended that the claims against Kaupthing and JJ fell within the Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the 'Lugano Convention'), so that permission to serve out of the jurisdiction was not required: see CPR 6.33(1)(b).
In January 2015, Kaupthing and JJ applied under CPR Part 11 for the VT Action to be stayed or dismissed (the 'Application'). The GT defendants did not participate in the Application, and accepted that the claims against them would continue notwithstanding the outcome of the Application.
Kaupthing argued that the VT Action should be stayed or dismissed on two independent grounds. First, Kaupthing argued that the VT Action was barred by the statutory stay under Icelandic insolvency law, which was to be recognised in England pursuant to Regulation 5(1) of the Credit Institutions Regulations (the 'Insolvency Ground').
Second, Kaupthing argued that the VT Action did not fall within the Lugano Convention, so that there was no basis for serving the claim form out of the jurisdiction without permission under CPR 6.33(1)(b) (the 'Jurisdiction Ground'). JJ also relied on the Jurisdiction Ground. However, since JJ was not a credit institution, he could not rely on the Insolvency Ground. The Application was heard by Carr J in June 2015. Her judgment is reported at [2015] EWHC 1864 (Comm). Carr J held that the Insolvency Ground was successful (so that the VT Action could not be continued against Kaupthing), but that the Jurisdiction Ground was unsuccessful (so that the VT Action could be continued against JJ). Her reasoning is explained below.
The insolvency ground
The primary European instrument dealing with cross-border insolvency is Council Regulation No. 1346/2000 on insolvency proceedings ('the Insolvency Regulation'). However, by Article 1(2), the Insolvency Regulation expressly does not apply to insolvency proceedings in respect of certain financial institutions, including credit institutions.
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