FKI Engineering Ltd & Anor v De Wind Holdings Ltd & Anor

An alternative contractual claim is a “claim” for Article 6(1) of the Judgments Regulation 44/2001 if its cause of action has accrued, even where it is advanced on a premise that the claimant denies. In deciding whether claims are closely connected, the court must compare the whole claims, including breach, causation and loss, rather than merely the contracts on which they arise. Where the validity of a foreign defendant’s claim must be determined to assess loss on the domestic anchor claim, the claims may be inextricably linked. It is then expedient to hear them together to avoid irreconcilable judgments. Forum convenience is irrelevant. The anchor claim need only raise a serious issue to be tried or real prospect of success; genuine disputes of fact or expert accounting evidence are not suitable for summary resolution.

FKI sold its shares in the German wind-turbine company, DWG, to its English parent, DWL. DWG later brought proceedings in Germany alleging unpaid liabilities under capital reserve agreements and a German company-law repayment claim.

FKI brought English proceedings against DWL under the share sale agreement. It alleged that DWL had failed to disclose financial information necessary for the completion balance sheet. FKI also sought a negative declaration against DWG that it was not liable for the German claims. The claim against DWL was relied on as the anchor claim for jurisdiction over DWG.

David Steel J held that the English court had jurisdiction and that the anchor claim met the requisite merits threshold. DWG appealed, disputing both the close connection required by Article 6(1) of the Judgments Regulation 44/2001 and the arguability of the anchor claim.

Appeal dismissed. Tuckey LJ gave the leading judgment. Toulson LJ and Sir John Chadwick agreed.

1. Article 6(1) of the Judgments Regulation 44/2001 applied. An alternative or contingent claim is still a claim where the cause of action has accrued. The fact that FKI denied the premise on which its claim against DWL would produce loss did not render that claim premature or improperly brought.

2. The required comparison under Article 6(1) is between the whole anchor claim and the whole claim against the foreign defendant. It is insufficient merely to compare the share sale agreement with the capital reserve agreements. The alleged breach by DWL, causation and loss all formed part of the anchor claim.

3. FKI could not establish or quantify its alleged loss against DWL without determining whether DWG’s €25.6 million claim was valid. That was the same issue raised by FKI’s negative declaration claim and by DWG’s German proceedings. The claims were therefore inextricably linked. It was expedient to determine them together to avoid irreconcilable judgments. Forum convenience did not arise under the Regulation.

4. The anchor claim had to meet the serious-issue-to-be-tried, or real-prospect-of-success, threshold. The disputed accounting treatment of the €25.6 million claim, the alleged revival of inter-company loans, and consistency with management accounts each raised triable issues. They could not properly be resolved summarily on DWG’s jurisdiction challenge.

The Court of Appeal accordingly upheld the English court’s jurisdiction over DWG and dismissed the appeal.

• Court of Appeal (Civil Division) — by [2008] EWCA Civ 316, dismissed DWG’s appeal and upheld jurisdiction under Article 6(1) of the Judgments Regulation 44/2001.
• High Court of Justice, Queen’s Bench Division (David Steel J) — held that the claim against DWG was sufficiently connected with the claim against DWL and that the anchor claim was arguable.