Insovency – Avoidance proceedings – Foreign courts – English enforcing two judgments of foreign courts made in avoidance proceedings in insolvency – Whether those judgments properly enforceable – Whether insolvency cases subject to different rule than those applying to enforcement and recognition of other judgments in personam – First appeal allowed – Second appeal dismissed
In each of the joined appeals, the central issue was whether, and in what circumstances, the English Courts would recognise and enforce an order or judgment of a foreign court, made in avoidance proceedings in an insolvency, to adjust or set aside prior transactions such as preferences or transactions at an undervalue. A further issue arose as to whether enforcement could be effected through the generally applicable international assistance provisions of the UNCITRAL Model Law, as implemented into English law by the Cross-Border Insolvency Regulations 2006, or section 426 of the Insolvency Act 1986, which applied to a limited number of countries including Australia.
The first appeal related to a judgment of the US Federal Bankruptcy Court for the Southern District of New York, which had been enforced in England at common law: see [2010] EWCA Civ 895. In the second appeal, a judgment of the New South Wales Supreme Court, Equity Division, had been enforced in England under the Foreign Judgments (Reciprocal Enforcement) Act 1933, which substantially reproduced the common law principles, and, alternatively, pursuant to powers under section 426 of the 1986 Act: see [2011] EWHC 677 (Ch) and [2011] EWCA Civ 971 . Each of the judgments enforced had been entered in default of appearance by the party against whom they were made; that party was neither present, or resident, in the foreign country at the time nor submitted to its jurisdiction.
Held (Lord Clarke dissenting): The first appeal was allowed; the second appeal was dismissed.
(1) At common law, a judgment in personam by a court of a foreign country would be recognised and enforced in the UK only where the person against whom it was given: (i) was present in the foreign country at the time when the proceedings were instituted; (ii) was a claimant or counterclaimant in the proceedings in the foreign court; (iii) submitted to the jurisdiction of that court by voluntarily appearing in the proceedings; or (iv) had, before the proceedings were commenced, agreed to submit to the jurisdiction of that court, or of the courts of that country, in respect of the subject matter of the proceedings (the Dicey rule). Accordingly, presence or residence in the foreign country at the time when the proceedings were instituted, or submission to the jurisdiction, were required conditions for enforceability at common law and under the 1933 Act: Adams v Cape Industries plc [1990] Ch 433 applied.
The judgments enforced in the two appeals were judgments in personam since they gave judgment for one party against another in the sums awarded. They were therefore governed by the Dicey rule. There could be no separate rule for judgments in personam made in insolvency proceedings: Cambridge Gas Transportation Corp v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26; [2007] 1 AC 508 distinguished; Re HIH Casualty & General Insurance Ltd [2008] UKHL 21; [2008] 1 WLR 852 and In re Flightlease (Ireland) Ltd [2012] IESC 12 considered. Although it was possible to distinguish between avoidance and normal claims, for example those in contract or tort, there was no difference of principle between a foreign judgment on a substantial debt due to a company in liquidation and a foreign judgment against a creditor, in avoidance proceedings, for repayment of a preferential payment.
Further, the application of a different rule to insolvency cases would involve not merely an incremental development of existing principles, but a radical departure from substantially settled law. A change in the settled law of the recognition and enforcement of judgments, and in particular the formulation of a rule for identifying which courts should be regarded as courts of competent jurisdiction, had all the hallmarks of legislation and was a matter for the legislature not for judicial innovation: Owens Bank Ltd v Bracco [1992] 2 AC 443 considered.
(2) The UNCITRAL Model Law, as implemented by the 2006 Regulations, did not confer a power to recognise and enforce the relevant parts of the judgments. The recognition and enforcement of foreign judgments was not among the available forms of relief specifically mentioned in those provisions. Recognition and enforcement were fundamental in international cases and it would be surprising if the Model Law were intended to deal with judgments in insolvency matters by implication. Likewise, the assistance that the UK courts were required, under section 426 of the Insolvency Act 1986, to render to other relevant countries in relation to insolvency law did not extend to the recognition and enforcement of foreign judgments.
(3) Applying the above principles, the judgment of the US Federal Bankruptcy Court, which was the subject of the first appeal, was not enforceable in the English courts since the party against whom it was made had not been present in the jurisdiction at the time when the proceedings were instituted and had not submitted to the jurisdiction of the court. In the second appeal, the judgment of the New South Wales Supreme Court was enforceable, since the parties against whom it was made had, on a proper application of the relevant principles, submitted to the jurisdiction of the Australian court that was responsible for the supervision of the relevant insolvency proceedings. The proper method of enforcement was by way of registration under the 1933 Act since that Act applied to judgments in civil and commercial matters and such matters included insolvency proceedings.
Marcus Staff (instructed by Brown Rudnick LLP) appeared for the appellants in the first appeal; Robin Dicker QC and Tom Smith (instructed by Chadbourne & Park LLP) appeared for the respondents in the first appeal; Robin Knowles QC and Blair Leahy (instructed by Edwards Wildman Palmer UK LLP) appeared for the appellants in the second appeal; Gabriel Moss QC and Barry Isaacs QC (instructed by Mayer Brown International LLP) appeared for the respondents in the second appeal; Pushpinder Saini QC, Adrian Briggs, Shaheed Fatima, Ian Fletcher and Stephen Robins (instructed by Taylor Wessing) appeared for the first intervener, Irving Picard; Michael Driscoll QC and Rosanna Foskett (instructed by Wilsons Solicitors LLP and Wedlake Bell LLP) appeared for the second interveners.
Sally Dobson, barrister
