Vol 2 (2005) - Issue 4

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Interfacing the Insolvency Regulation with the Judgments Regulation: Oakley v Ultra Vehicle Design

As a general rule, the operations of Council Regulation (EC) 1346/2000 on Insolvency Proceedings (‘the Insolvency Regulation’) and Council Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (‘the Judgments Regulation’) are mutually exclusive in that the Judgments Regulation does not deal with insolvency matters. The English High Court had occasion to consider the precise demarcation and interface between the Insolvency Regulation and the Judgments Regulation in the recent case of Oakley v Ultra Vehicle Design. Because of the nature of the arguments presented to the court, the correct position only appears as obiter dicta in the judgment. The aim of this commentary is to demonstrate that the obiter dicta are eminently correct and much wiser than the ratio.

The facts

The material facts are as follows. Ultra Motor Homes International Limited (‘UMIL’) was the parent company of Ultra Vehicle Design Limited (‘UVDL’). UMIL was in the business of designing, manufacturing and selling motor homes. Pursuant to a contract between UMIL and Behlke dated 7 February 2002 (‘the 2002 Agreement’), governed by German law and subject to a German jurisdiction clause, UMIL was to construct a motor vehicle called Vehicle 47 and supply it to Behlke, in consideration of EUR 552 000, to be paid by instalments. The last instalment would be due on delivery. The construction of Vehicle 47 was not completed on time. However, Behlke agreed to make a prepayment of the last instalment of the price for Vehicle 47, on the condition that a security would be provided to secure the prepayment.
Accordingly, by a contract between UVDL and Behlke dated 21 March 2003 (‘the 2003 Agreement’), UVDL purported to transfer Vehicle 48 to Behlke by way of security. Although the 2003 Agreement was silent as to jurisdiction and choice of law, there was an oral agreement between the parties expressly applying German law and German jurisdiction. It is to be noted that Vehicle 48 was originally owned by UMIL.
The present proceedings can be understood only in the context of the corporate history of UMIL and UVDL as follows. UMIL ran into financial difficulties and entered into a company voluntary arrangement (‘CVA’) on 11 December 2001. The terms of the CVA provided for UMIL to continue trading and to make monthly payments for the benefit of creditors out of the receipts of the trading. The monthly payments were not maintained. Subsequently, a variation of the CVA was adopted on 13 December 2002. This provided for the business of UMIL to be sold to UVDL. Accordingly, UMIL and UVDL entered into a sale and purchase agreement dated 20 December 2002 (‘the SPA’). Unfortunately even this did not have any long term beneficial effect on the trade and the payments still were not maintained. On 2 July 2003 UMIL and UDVL were put into compulsory liquidation.
The SPA provided that property to any right title or interest in any of UMIL’s business assets was to pass to UVDL only upon payment in full being made for the respective assets. Payment was not made in full. There was a construction question as to whether Vehicle 48 was included in the sale at all under the SPA. If it was, a further question arose as to whether title to Vehicle 48 passed from UMIL to UVDL, given that the full purchase price was not paid by UVDL.