Guernsey Law Reports 2009-10 GLR 252
BRAUN v. BRANTRIDGE ESTATES LIMITED
ROYAL COURT (Collas, Deputy Bailiff): July 30th, 2009
Conflict of Laws—civil procedure—commencement of proceedings—details of procedure governed by lex fori even when structure of procedure governed by lex causae—when foreign lex causae refers to commencement of proceedings, Guernsey law as lex fori prescribes details of commencement according to Royal Court Civil Rules 2007, r.89
The plaintiff, the insolvency administrator of a German company, sought a declaration that certain payments made to the defendant by the company before it was placed in insolvent administration were “gratuitous benefits” within the meaning of s.134(1) of the Insolvenzordnung (the principal German insolvency legislation).
Under s.134(1), “gratuitous benefits” conferred by a company entering insolvent administration could be contested by the administrator if they had been made less than four years before the commencement of the insolvency proceedings. Insolvency proceedings were commenced in Germany in respect of the German company on December 31st, 2003. The right of the plaintiff to challenge the making of the payments to the defendant (as “gratuitous benefits”) expired on December 31st, 2005 but was extended by mutual agreement to January 30th, 2006.
Since time could be extended further by, inter alia, bringing proceedings within the limitation period for a declaration of the existence of a claim, the plaintiff issued proceedings in Guernsey by summons dated
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January 30th, 2006. The summons was purportedly served on the defendant on January 31st but service was set aside as defective, because the address of the defendant’s registered office had changed the previous day and service was made at the wrong address. The defendant only acquired actual knowledge of the summons and its purported service on February 3rd, 2006, three days after the expiry of the limitation period under German law.
The parties were in agreement that German law governed the plaintiff’s claim (the lex causae) and that German limitation law determined whether the plaintiff was entitled to pursue his remedy. Limitation was suspended by the “bringing of an action” for a declaration of the existence of a claim but in the absence of service of process in accordance with the German procedural rules, it was assumed to take effect on the date on which the defendant acquired factual knowledge of the document. In the present case, the plaintiff therefore failed because the defendant only acquired such knowledge on February 3rd, 2006, four days after the expiry of the limitation period. The defendant, in an exception de fond, submitted that according to German law the plaintiff had failed to bring the present proceedings in time to suspend limitation.
The plaintiff submitted in reply that although the German limitation law governed his right to pursue his remedy, the lex fori (Guernsey law) governed the procedure by which proceedings were commenced. Under Guernsey law (at that time, the Royal Court Civil Rules 1989, r.56, now the Royal Court Civil Rules 2007, r.89), the “bringing of an action” commenced by summons took place when the summons was handed by the plaintiff to the Sergeant for service on the defendant. This took place on January 30th, 2006 and the action was therefore commenced within the limitation period.
Held, holding that the action had been commenced within the limitation period:
It was the case that the lex causae was German law, which gave the plaintiff the right to pursue his remedy and specified the limitation period within which his action should be brought. It also specified that the limitation period could be suspended (and therefore extended) by, inter alia, bringing an action for a declaration of the existence of the claim, which the plaintiff had done here. What constituted “bringing an action” was, however, a procedural matter governed by Guernsey law as the lex fori: the commencement of proceedings in Guernsey took place, by virtue of r.89 of the Royal Court Civil Rules 2007, when the plaintiff handed the summons to H.M. Bailiff for service. As this happened on January 30th, 2006, the proceedings had been commenced within the limitation period (paras. 15–18).
Case cited:
(1) Pfeiffer (John) Pty. Ltd. v. Rogerson (2000), 203 C.L.R. 503; 172 A.L.R. 625; [2000] HCA 36, referred to.
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J.M. Wessels for the plaintiff;
Ms. K.M. Le Cras for the defendant.
1 COLLAS, DEPUTY BAILIFF:
The substantive action
Dr. Eberhaud Braun, the insolvency administrator of Walter Marketing GmbH & Co. K.G. (“the plaintiff”) has instituted proceeding in the Royal Court against Brantridge Estates Ltd. (“the defendant”) seeking a declaration that certain payments made by the plaintiff company before it was placed in insolvent administration constituted gratuitous benefits for the purposes of s.134(1) of the German Insolvenzordnung (“InsO”), which states that “a gratuitous benefit granted by the debtor may be contested unless it was made earlier than four years prior to the request to open insolvency proceedings.”
Exceptions de fond
2 In response, the defendant has filed defences including three exceptions de fond. I am required to rule on the first of those exceptions, the other two having been withdrawn. It is:
“The plaintiff’s cause of action arises under and is governed by German law. In particular, the plaintiff alleges that certain payments made to the defendant by the plaintiff are gratuitous benefits under the provisions of s.134(1) of the German Insolvenzordnung (‘InsO’).
Section 146 of the InsO provides that the right to contest a transaction (under s.134 of the InsO) is subject to a limitation period of two years from the opening of insolvency proceedings.
Suspension of the limitation period is governed by the German Civil Code (the ‘Code’) and the German Civil Procedure Code (the ‘Civil Procedure Code’).
Section 204 of the Code provides that limitation shall be suspended by the bringing of an action for performance or for a declaration of the existence of a claim.
The term ‘bringing of an action’ is to be construed in accordance with s.253(1) of the Civil Procedure Code which provides that the bringing of an action is effected by way of service of a writ.
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Service is defined in s.166(1) of the Civil Procedure Code as the act of bringing to a person’s attention a document in the form prescribed by law.
Section 189 of the Civil Procedure Code provides that if service is not effected or cannot be proven by means of proper documentation, service is assumed to take effect as of the date on which the person to be served acquires factual knowledge of the document.
On December 31st, 2003 insolvency proceedings were opened over the assets of Walter Marketing GmbH & Co. K.G. by virtue of a resolution of the Local Court of Karlsruhe. As a matter of German law the principal limitation period for the plaintiff’s claim expired on December 31st, 2005.
By letter dated December 22nd, 2005 the defendant agreed to extend the limitation period until January 30th, 2006.
By summons dated January 30th, 2006 the plaintiff issued proceedings against the defendant in the Royal Court of Guernsey. Purported service of the summons on the defendant was effected by H.M. Sergeant on January 31st, 2006 and the cause was placed on the Rôle des Causes à Plaider on February 3rd, 2006. By act of court dated March 17th, 2006 the purported service of the summons on January 31st, 2006 was deemed to be defective.
The purported service of the summons came to the defendant’s attention on February 3rd, 2006. The defendant therefore acquired factual knowledge of the plaintiff’s summons on February 3rd, 2006, three days after the principal limitation period had expired as a matter of German law.
The plaintiff’s claim is time-barred under German law for failure to bring an action in time in accordance with the provisions of the Code and Civil Procedure Code and this action should be struck out and dismissed.”
Chronology
3 The parties agree that the limitation period for the plaintiff’s claim was extended until January 30th, 2006. It is also now accepted that on January 30th, 2006, a summons in the Guernsey action was handed to Her Majesty’s Sergeant by the plaintiff’s advocates to be served on the defendant.
4 That summons was returnable in the Royal Court on February 3rd, 2006 when the defendant failed to appear and so judgment was given against the defendant in default of appearance. That judgment was later set aside following a successful requête civile. The reason for setting aside the
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judgment was that the defendant did not become aware of the summons until some time on February 3rd, after the court had sat and had entered judgment against it. As I remember, there were several reasons for the delay, including that on January 30th, the Register of Companies was amended to show a new registered office for the defendant so that when H.M. Sergeant purported to effect service on January 31st at the address he had been given by the plaintiff’s advocate, that address was no longer correct and the person who received the summons was not aware, or had forgotten, that the address had changed. The end result, and this is agreed by the parties, is that the summons first came to the attention of officers of the defendant on February 3rd.
5 When allowing the requête civile, I set aside the default judgment and ordered that the matter be placed on the Rôle des Causes à Plaider. What I now have to decide is whether the plaintiff had done what was required as at January 30th, 2006 to interrupt the limitation period or whether he only did so on February 3rd, 2006, by which time the limitation period had expired and hence it would have been too late.
Lex causae or lex fori
6 The parties are agreed that it is German law, rather than Guernsey law, that governs the plaintiff’s claim and that it is the substantive German law of limitation that determines whether the plaintiff is entitled to pursue the remedy it seeks. What they have not agreed is whether it is German law or Guernsey law that governs whether the limitation period has been interrupted by the commencement of these proceedings.
The defendant’s submissions
7 The parties were agreed that s.146 of InsO applies:
“Section 146—Limitation of the right to contest
The right to contest a transaction shall be subject to limitation after two years from the opening of the insolvency proceedings.
Even if the right to contest has become subject to limitation, the insolvency administrator may refuse performance of an obligation in consideration of a benefit under a transaction subject to contest.”
There was also agreement that the effect of s.146 (and s.214 of the German Civil Code (“BGB”)) is that a plaintiff’s right to bring a claim is extinguished; it does not merely bar the remedy.
8 Advocate Le Cras, for the defendant, submitted that all matters pertaining to the limitation period applicable to the plaintiff’s claim, and the method by which the limitation period is interrupted or suspended are governed by German law. She relied upon affidavit evidence from Dr.
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Matthias Haas, a partner in the Frankfurt office of the law firm, Salans LLP, who said that the terms of German civil law are highly interrelated within the framework of legal terms in the various statutes and in the context of statutory interpretation. He submitted that the terms are normally to be understood and construed in the way they are generally defined and construed unless there is a specific definition or provision to the contrary.
9 By reference to provisions of the BGB and the German Civil Procedure Code (“ZPO”), he submitted that in order to suspend the limitation period (as extended by agreement) the plaintiff had to bring the action before January 30th, 2006 in accordance with the following rules:
“(a) §204(1)(1) of the BGB provides that limitation shall be suspended by ‘the bringing of an action upon performance or for ascertainment of a claim . . .’ [Emphasis supplied.]
(b) §253(1) of the ZPO provides that the bringing of an action is effected by way of service of a writ.
(c) §166(1) of the ZPO defines service as the act of bringing to a person’s attention a document in the form prescribed by law.
(d) §189 of the ZPO provides that if service is not effected or cannot be proven by means of proper documentation, service is assumed to take effect as of the date on which the person to be served acquires factual knowledge of the document.”
10 He then concluded that the plaintiff had failed to bring the action in time because the proceedings did not come to the actual attention of the defendant until February 3rd, 2006. He added that the meaning of “bringing an action” must be determined by German law and hence I am to determine the date of service under German law: that date would be February 3rd, 2006, being the date the claim came to the attention of the defendant.
The plaintiff’s submissions
11 Advocate Wessels began by reminding me that the English common law approach to foreign limitation periods was to ask whether the limitation period was substantive or procedural. If the former, then the English court applied the foreign rule but if it was the latter, then English rules were applied. That was altered in England following the Law Commission Report on Classification of Limitation in Private International Law (Law Com. No. 114, Cmnd. 8570 (1982)) which led to the enactment of the Foreign Limitation Periods Act 1984. Fortunately, I do not need to look back at all of the old common law rules as the parties have agreed that the substantive German law on limitation is applicable.
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12 However, Advocate Wessels submitted that where the old rules remain applicable is in relation to the question of when proceedings were commenced or issued. He relied upon Rule 17 of Dicey, Morris & Collins, 1 The Conflict of Laws, 14th ed., para. 7R–001, at 177 (2006):
“Rule 17—All matters of procedure are governed by the domestic law of the country to which the court wherein any legal proceedings are taken belongs (lex fori).”
13 Unfortunately, the commentary on the Rule states (op. cit., para. 7–004, at 178) that the Rule is not always easy to apply because of the difficulty “in discriminating between rules of procedure and rules of substance.” Advocate Wessels referred me to the decision of the High Court of Australia in John Pfeiffer Pty. Ltd. v. Rogerson (1), concerning what effect the courts of one jurisdiction in Australia in which proceedings were brought should give to the legislation of another jurisdiction in Australia in which a tort had been committed. The High Court approved ([2000] HCA 36, at para. 99)—
“. . . the formulation put forward by Mason, C.J. in McKain [(1991), 174 C.L.R. 1, at 26–27], ‘rules which are directed to governing or regulating the mode or conduct of court proceedings’ are procedural and all other provisions or rules are to be classified as substantive.”
Or, as Advocate Wessels summarized it, how you get into a court is a procedural matter and what you may then recover in that court is a substantive matter.
14 Advocate Wessels relied upon the Law Commission’s statement of the common law at paras. 4.18 and 4.19 of its Report (ibid., at 19) as to the terminus ad quem of a period of limitation: “. . . [T]he step required to be taken by a plaintiff to stop time from running against him . . . is, in general, the institution of proceedings.” The 21st Report of the Law Reform Committee (Cmnd. 6923 (1977)) had considered the suggestion of replacing that rule with “the principle that the terminus ad quem should be the service, rather than the issue, of process” but concluded that the balance of convenience lay in favour of retaining the existing rule. One of the reasons cited (ibid., at paras. 2.72–2.81) was that the terminus ad quem of the foreign jurisdiction may not be capable of being translated into the procedural rules of the jurisdiction where the proceedings are to be issued.
Conclusion
15 With that reason in my mind, I have looked at what is the Guernsey terminus ad quem. Rule 10 of the Royal Court Civil Rules 2007 requires that “in every action a cause shall be tabled before the Court” and r.11 that “a plaintiff intending to table a cause shall give notice of the fact to the defendant by serving a summons on him.” The rules governing service are
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in Part II of the 2007 Rules. They provide that, except where service is permitted by substituted service, or in some other manner, service is effected by H.M. Sergeant. Rule 89 states that where service is effected by H.M. Sergeant, “for the purposes of these Rules, an action commences when the summons is handed by the plaintiff to the Sergeant.” There were similar provisions in the Royal Court Civil Rules 1989 that were in force when these proceedings commenced, so the position has not changed under the new rules.
16 I therefore conclude that in Guernsey, the terminus ad quem is when a summons is handed to H.M. Sergeant to be served on the defendant. That is a procedural step that may not be capable of being translated into the rules of a foreign jurisdiction. It makes sense that the terminus ad quem should be governed by the rules of the jurisdiction where proceedings are instituted.
17 In my view, the decision as to whether the terminus ad quem is governed by the Guernsey rule or the rules of the foreign jurisdiction must not depend upon what the particular rule of the jurisdiction of the lex causae happens to be in any particular case. There could be instances where the rule of the foreign jurisdiction does not translate into a procedure that is, or could be, followed in Guernsey. It is irrelevant that, in the present case, the Guernsey court could give effect to the German rule that requires the proceedings to come to the attention of the defendant.
18 I conclude that, in all cases, the terminus ad quem must be determined by the rules of the lex fori. Accordingly, what was required to interrupt the limitation period was to commence proceedings, which in Guernsey is achieved when the plaintiff hands the summons to H.M. Sergeant for service. Consequently, these proceedings were commenced within the limitation period.
19 Having reached this conclusion I do not need to address the other arguments put forward by Advocate Wessels.
Order accordingly.
2010
Law Report
None
Guernsey Law Reports 2009-10 GLR 252