Rahman v GMAC Commercial Finance Ltd

Whether proceedings are “related actions” under Article 28(3) of the Judgments Regulation requires a fact-sensitive assessment. Overlap between issues is insufficient. Relevant considerations include whether the first proceedings are likely to determine the common issue, whether the resulting judgment would bind the parties in the second proceedings, potential delay, and the parties’ contractual allocation of jurisdiction. Even if proceedings are related, a stay remains discretionary. An exclusive English jurisdiction clause may carry substantial weight and may outweigh concerns about inconsistent judgments. The Court of Appeal dismissed the appeal without deciding the wider interaction between the Judgments Regulation and the Insolvency Regulation.

GMAC financed two German companies within the Hertie Group. After one company entered administration, its administrator brought proceedings in Germany alleging that payments made to GMAC were voidable. GMAC then brought English proceedings against a former director under a deed of warranty and for fraudulent misrepresentation, alleging that inventory forms contained false statements.

The appellant sought a stay or other relief on the basis that the German and English proceedings were connected. At the hearing he accepted that the English court had jurisdiction. The High Court refused a stay, holding alternatively that the proceedings were not related actions and that discretion should be exercised against a stay. The central issues on appeal were whether Article 28 of the Judgments Regulation applied and, if so, whether a stay should be granted.

1. Appeal dismissed. The Court of Appeal did not need to decide the precise interaction between the Judgments Regulation and the Insolvency Regulation, or whether Article 28 could apply where the first proceedings were insolvency proceedings.
2. The judge was entitled to hold, on the alternative hypothesis, that the German and English proceedings were not “related actions” under Article 28(3). The German court might dispose of the insolvency claim by applying English law or on another ground without deciding who owned the inventory or whether the inventory forms were accurate. If the administrator lost without those issues being decided, GMAC would retain its separate warranty claim against the appellant.
3. The assessment was multi-factorial. Relevant considerations included the likely delay before the German proceedings and any appeals, the fact that a German judgment would not bind the English court because the parties differed, and the appellant’s failure to state whether he accepted the administrator’s position on ownership.
4. Even if the proceedings had been related, the decision whether to stay was discretionary. The risk that GMAC’s claim might never be tried and the parties’ agreement that English courts had exclusive jurisdiction were powerful considerations. On these facts, the jurisdiction agreement outweighed any concern about conflicting decisions.
5. The court retained an inherent power to stay proceedings in an appropriate case. The judgment did not determine whether that power might be exercised in the future if circumstances changed.

1. Court of Appeal (Civil Division): [2012] EWCA Civ 1467. Appeal dismissed.
2. High Court of Justice, Queen’s Bench Division, Mercantile Court: Order dated 31 January 2012. The appellant’s application challenging jurisdiction or seeking a stay was dismissed. The court held that Article 28 did not apply, alternatively that the proceedings were not related actions, and further that discretion should be exercised against a stay.