Grooterhorst & Partner Rechtsanwälte
Incorrect statement of parties in an action to receive an order of payment – distinction between correction of the recitals and change in parties Federal German Supreme Court (“Bundesgerichtshof”), ruling handed down on 24 January 2013, file no.: VII ZR 128/12
In actual practice in civil procedures, it is not infrequently the case that the parties are not stated precisely enough in the complaint or the application for a claim. The consequences of this could be serious for the plaintiff. In addition to procedural and related cost losses, in the worst case legitimate claims may even expire under the statute of limitations. A ruling handed down by the Bundesgerichtshof on 24 January 2013 (file: VII ZR 128/12) addresses a case of incorrect statement of the parties and its consequences. The case involves the interpretation of whom the defendant in litigation is if an existing legal entity is named as the defendant in a formally correct manner, but the plaintiff then claims that he wanted to forward claims against another legal entity that also exists with a similar name and the same address.
The facts: The plaintiff concluded a general contractor agreement with S. Projektentwicklung GmbH (“SPG”) relating to the construction of a shopping centre. It sent its final invoice to SPG. As a result of remuneration for remaining work not being paid, the plaintiff initiated a dunning procedure in which it referred to the final invoice. As defendant it named S. Real Estate GmbH (“SRG”). This is a company existing along with SPG that has the same address and the same managing director. After SRG filed an objection against the order for payment, the procedure was carried out to settle the dispute. In it the plaintiff justified its claim by arguing that there was a Works Agreement between itself and the legal predecessor of the defendant, which previously operated under the name “SPG”. SRG pointed out that it was neither the contractual partner of the plaintiff, nor was it liable for any other legal reasons. The plaintiff petitioned for the recitals to be corrected. The Regional and Superior Regional Court rejected the complaint (seeking payment). The appeal failed.
The opinion of the Bundesgerichtshof: In the opinion of the Bundesgerichtshof, the plaintiff took action against the wrong party with SRG (in terms of substantive law). By naming SRG as the opponent in the action and later defendant, the plaintiff stated SRG and to be precise not SPG as the party involved in the litigation. The Court held that, although it was possible to interpret the name of the party, because the grounds for the claim were contradictory and at least subject to several interpretations, it was not possible to interpret the name of the party as meaning SPG, the reason being that in the grounds laying down the reasons for the claim the plaintiff itself did not assume that SRG and SPG were identical and that the name of the company had merely been changed.
Practical repercussions: A plaintiff should exercise a maximum of care and diligence in stating the exact name of the defending party. The reason for this is the formal definition of a party in civil procedure law. A party is accordingly deemed to mean whoever the plaintiff identifies as plaintiff and defendant in stating the parties. If the parties are not stated in a sufficiently precise manner, the true parties to the procedure can be determined by interpretation. The crucial factor here is what meaning the declaration has from the perspective of the court and the opponent in the procedure (see Bundesgerichtshof, ruling handed down on 5 February 2009 – IX ZB 136/06). If the interpretation indicates that a party has merely been incorrectly or imprecisely named, this incorrect naming has no negative repercussions and can be corrected by changing the names in the recitals. Otherwise it is necessary to change the parties.
The distinction between correcting the recitals and changing the parties frequently poses difficulties. Especially when there are different enterprises having the same name, doubts may arise as to which parties are meant – as the ruling handed down by the Bundesgerichtshof aptly shows. If these doubts cannot be allayed, there may be considerable repercussions for the plaintiff. If it is not possible to correct the name of the party, the procedure is lost against the “wrong defendant” and the plaintiff has to bear the costs of the procedure. It is even worse for the plaintiff if it intends to interrupt the statute of limitations through the action or the dunning procedure and it fails to state the name of the defending party with sufficient accuracy. If the “right defending party” cannot be determined by interpretation, the plaintiff can only change the party. This action only becomes legally pending, however, when the complaint is served to the new defendant. The new defendant can then plea that the statute of limitations has expired if the claim has expired under the statute of limitations at the point in time when the complaint is served.
The principles (of interpretation) in determining a party in a procedure also apply in answering the question as to whom the opponent is in a dunning procedure (see Bundesgerichtshof, ruling handed down on 3 February 1999 – VIII ZB 35/98). The Federal German Supreme Court (unfortunately) left the question unresolved as to whether interpreting a dunning petition can be based only on facts recognisable when the order for payment is issued or whether subsequent facts and circumstances, in particular declarations in the grounds to the claim, are to be taken into account (rejecting the latter view: Karlsruhe Superior Regional Court, ruling handed down on 11 April 2012). In view of this (continued) uncertainty, the plaintiff should exercise the greatest possible care and diligence in stating the name of the opponent to the complaint when initiating a dunning procedure.