New Cap Reinsurance Corporation Ltd ((in Liquidation)) v Grant; Rubin v Eurofinance SA

JurisdictionEngland & Wales
JudgeLord Collins,Lord Walker,Lord Sumption
Judgment Date24 October 2012
Neutral Citation[2012] UKSC 46
Date24 October 2012
CourtSupreme Court
Rubin and Another
(Respondents)
and
Eurofinance Sa and Others
(Appellants)
New Cap Reinsurance Corporation (in Liquidation) and Another
(Respondents/Cross Appellants)
and
A E Grant and Others as Members of Lloyd's Syndicate 991 for the 1997 Year of Account and Another
(Appellants/Cross Respondents)

[2012] UKSC 46

Before:

Lord Walker

Lord Mance

Lord Clarke

Lord Sumption

Lord Collins

THE SUPREME COURT

Michaelmas Term

On appeal from: [2010] EWCA Civ 895; [2011] EWCA Civ 971

Appellant

Marcus Staff

(Instructed by Brown Rudnick LLP)

Respondent

Robin Dicker QC Tom Smith

(Instructed by Chadbourne & Parke LLP)

Appellant

Robin Knowles QC Blair Leahy (Instructed by Edwards Wildman Palmer UK LLP)

Respondent

Gabriel Moss QC

Barry Isaacs QC

(Instructed by Mayer Brown International LLP)

Intervener

Pushpinder Saini QC Adrian Briggs Shaheed Fatima Ian Fletcher Stephen Robins (Instructed by Taylor Wessing)

Intervener

Michael Driscoll QC

Rosanna Foskett

(Instructed by Wilsons Solicitors LLP & Wedlake Bell LLP)

Heard on 21, 22, 23 and 24 May 2012

Lord Collins ( with whom Lord Walker and Lord Sumption agree)

I Introduction
The appeals
1

There are two appeals before the court: Rubin v Eurofinance SA ("Rubin") and New Cap Reinsurance Corpn Ltd v Grant ("New Cap"). These appeals raise an important and novel issue in international insolvency law. The issue is whether, and if so, in what circumstances, an order or judgment of a foreign court (on these appeals the United States Bankruptcy Court for the Southern District of New York, and the New South Wales Supreme Court) in proceedings to adjust or set aside prior transactions, eg preferences or transactions at an undervalue ("avoidance proceedings"), will be recognised and enforced in England. The appeals also raise the question whether enforcement may be effected through the international assistance provisions of the UNCITRAL Model Law (implemented by the Cross-Border Insolvency Regulations 2006 (SI 2006/1030) ("CBIR")), which applies generally, or the assistance provisions of section 426 of the Insolvency Act 1986, which applies to a limited number of countries, including Australia.

2

In Rubin a judgment of the US Federal Bankruptcy Court for the Southern District of New York ("the US Bankruptcy Court") in default of appearance for about US$10m under State and Federal law in respect of fraudulent conveyances and transfers was enforced in England at common law. In New Cap (in which the Court of Appeal was bound by the prior decision in Rubin) a default judgment of the New South Wales Supreme Court, Equity Division, for about US$8m in respect of unfair preferences under Australian law was enforced under the Foreign Judgments (Reciprocal Enforcement) Act 1933 ("the 1933 Act"), and, alternatively, pursuant to powers under section 426 of the Insolvency Act 1986.

3

In each of the appeals it was accepted or found that the party against whom they were given was neither present (nor, for the purposes of the 1933 Act, resident) in the foreign country nor submitted to its jurisdiction (which are the relevant conditions for enforceability at common law and under the 1933 Act), but that those conditions did not apply to judgments or orders in foreign insolvency proceedings.

4

In addition to the arguments on these two appeals, the court has had the great benefit of written submissions on behalf of parties to proceedings pending in Gibraltar. Those proceedings are to enforce default judgments entered by the US Bankruptcy Court for some $247m in respect of alleged preferential payments to companies in the British Virgin Islands and Cayman Islands arising out of the notorious Ponzi scheme operated by Mr Bernard Madoff.

5

It has been necessary to emphasise that the judgments in all three matters were in default of appearance, because if the judgment debtors had appeared and defended the proceedings in the foreign courts, the issues on these appeals would not have arisen. The reason is that the judgments would have been enforceable on the basis of the defendants' submission to the jurisdiction of the foreign court. Enforcement would have been at common law, or, in the New Cap case either under the common law, or under the 1933 Act which substantially reproduces the common law principles—there is a subsidiary issue on this appeal as to whether the 1933 Act applies to judgments in insolvency proceedings, dealt with in section IX below.

6

Under the common law a court of a foreign country has jurisdiction to give a judgment in personam where (among other cases) the judgment debtor was present in the foreign country when the proceedings were instituted, or submitted to the jurisdiction of the foreign court by voluntarily appearing in the proceedings. In the case of the 1933 Act the foreign court is deemed to have jurisdiction where the judgment debtor submitted to the jurisdiction by voluntarily appearing in the proceedings otherwise than for the purpose (inter alia) of contesting the jurisdiction; or where the judgment debtor was resident at the time when the proceedings were instituted, or being a body corporate had an office or place of business there: section 4(2)(a)(i),(iv).

The Dicey Rule
7

The general principle has been referred to on these appeals, by reference to the common law rule set out in Dicey, Morris & Collins, Conflict of Laws (14th edition, 2006), as "Dicey's Rule 36." This was only by way of shorthand, because the rules in the 1933 Act are not quite identical, and in any event has been purely for convenience, because the Rule has no standing beyond the case law at common law which it seeks to re-state. What was Rule 36 now appears (incorporating some changes which are not material on this appeal) as Rule 43 in the new 15th edition, and I shall refer to it as "the Dicey Rule." So far as relevant, Rule 43 ( Dicey, Morris and Collins, Conflict of Laws, 15 th ed, 2012, para 14R-054) states:

"a court of a foreign country outside the United Kingdom has jurisdiction to give a judgment in personam capable of enforcement or recognition as against the person against whom it was given in the following cases:

First Case— If the person against whom the judgment was given was, at the time the proceedings were instituted, present in the foreign country.

Second Case— If the person against whom the judgment was given was claimant, or counterclaimed, in the proceedings in the foreign court.

Third Case— If the person against whom the judgment was given submitted to the jurisdiction of that court by voluntarily appearing in the proceedings.

Fourth Case— If the person against whom the judgment was given had before the commencement of the proceedings agreed, in respect of the subject matter of the proceedings, to submit to the jurisdiction of that court or of the courts of that country."

8

The first edition of Dicey in 1896 stated (Rule 80) that the foreign court would have jurisdiction if "the defendant was resident [or present?]" in the foreign country "so as to have the benefit, and be under the protection, of the laws thereof." By the 6 th edition in 1949 the formula was repeated by Professor Wortley (Rule 68) but without the doubt about presence as a basis of jurisdiction. In the 8 th edition in 1958 Dr (later Professor) Clive Parry removed the phrase (then Rule 189) about the benefit and protection of the foreign country's laws. The Rule, subsequently edited by Dr Morris and then by Professor Kahn-Freund, remained in that form until the decision in Adams v Cape Industries plc [1990] Ch 433 (CA), which established that presence in the foreign jurisdiction, as opposed to residence, was a sufficient basis for the recognition of foreign judgments. Then, edited by myself and later by Professor Briggs, the Rule took substantially its present form in the 12 th edition in 1993.

9

The theoretical basis for the enforcement of foreign judgments at common law is that they are enforced on the basis of a principle that where a court of competent jurisdiction has adjudicated a certain sum to be due from one person to another, a legal obligation arises to pay that sum, on which an action of debt to enforce the judgment may be maintained: Williams v Jones (1845) 13 M & W 628, 633 per Parke B; Godard v Gray (1870) LR 6 QB 139, 147, per Blackburn J; Adams v Cape Industries plc [1990] Ch 433, 513; Owens Bank Ltd v Bracco [1992] 2 AC 443, 484, per Lord Bridge of Harwich. As Blackburn J said in Godard v Gray, this was based on the mode of pleading an action on a foreign judgment in debt, and not merely as evidence of the obligation to pay the underlying liability: LR 6 QB 139, 150. But this is a purely theoretical and historical basis for the enforcement of foreign judgments at common law. It does not apply to enforcement under statute, and makes no practical difference to the analysis, nor, in my judgment, to the issues on these appeals.

10

Consequently, if the judgments in issue on the appeals are regarded as judgments in personam within the Dicey Rule, then they will only be enforced in England at common law if the judgment debtors were present (or, if the 1933 Act applies, resident) in the foreign country when the proceedings were commenced, or if they submitted to its jurisdiction. It is common ground that the judgment debtors were not present or resident, respectively, in the United States or in Australia, although there is an issue as to whether the New Cap defendants submitted to the jurisdiction of the Australian court, which is dealt with in section VIII below.

Insolvency proceedings and the international dimension
11

There are some general remarks to be made. First, from as early as the mid-18 th century the English courts have recognised the effect of foreign personal bankruptcies declared under the law of the domicile: Solomons v Ross (1764) 1 H Bl 131n, where Dutch...

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