Verum Plus AG (in liquidation) & Ors v Petroineos Trading Limited

Foreign insolvency assignees who alone have authority under the foreign insolvency law to conduct proceedings may be joined under Civil Procedure Rules 1998 r 19.2(2), even though the assigned right is procedural and English law does not directly apply the foreign procedural rule. Joinder may be desirable to avoid the result that no party can pursue the claim and to give effect to comity and the overriding objective.

Unjustified delay is a strong discretionary factor, but delay is not penalised without regard to prejudice and the circumstances. Contractual prohibitions on assigning rights under an agreement may extend to an assignment of the right to prosecute an accrued cause of action, even where the underlying cause of action remains with the insolvent estate.

Verum Plus AG brought claims against Petroineos arising from petroleum-trading contracts and an alleged joint venture. After Verum’s Swiss bankruptcy, the Applicants received assignments under Article 260 of the Swiss Debt Enforcement Act of the authority to conduct the proceedings. They applied to be joined as claimants and to amend the pleadings. Petroineos opposed joinder on grounds including lack of title to sue, delay, contractual anti-assignment provisions and the non-joinder of Litasco. Petroineos also applied to strike out Verum as a party.

The central issues were whether the Applicants could be joined under Civil Procedure Rules 1998 r 19.2(2), whether the contractual restrictions prevented the assignments, whether Litasco was necessary, and whether Verum should be removed.

1. Joinder. The Applicants were permitted to join for the claim under the alleged joint venture agreement. Although Article 260 of the Swiss Debt Enforcement Act transferred a procedural right and English procedural law governed, the court could apply its own joinder rules to add the persons who alone could conduct the claim. This was desirable under Civil Procedure Rules 1998 r 19.2(2)(a), consistent with the overriding objective and comity, and avoided the unsatisfactory result that neither Verum nor the Applicants could sue.
2. Delay. The delay was excessive and inadequately explained. It was nevertheless concurrent with delay by both parties, and no significant prejudice was shown to be attributable solely to the joinder delay. Refusal would risk preventing the Applicants from pursuing Verum’s claim, particularly given possible limitation issues. The court therefore exercised its discretion in favour of joinder.
3. Anti-assignment provisions. The restrictions in Contracts D13, D19 and D20 prohibited assignment of rights under the agreements in whole or in part. They covered the Article 260 assignment because it transferred the right to pursue claims for breach in the assignees’ own names. A reasonable commercial party would not distinguish between transfer of a cause of action and transfer of the right to prosecute it. The Applicants were therefore refused permission to amend to plead claims under those contracts.
4. Litasco and Verum. Litasco’s waiver meant that it did not need to be joined; the court considered that an order could be made under Civil Procedure Rules 1998 r 19.3(2). Verum was retained as a party because doing so made Petroineos’s counterclaim procedurally more straightforward. The strike-out application was therefore not granted at that stage. The parties were invited to agree the form of order.