SAS Institute Inc. v World Programming Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 25 September 2019 |
| Neutral Citation | [2019] EWHC 2496 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 25 September 2019 |
| Docket Number | Case no: CL-2017-0000759 |
[2019] EWHC 2496 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Cockerill DBE
Case no: CL-2017-0000759
Ms Monica Carss-Frisk QC and Mr Andrew Scott (instructed by Macfarlanes LLP) for the Claimant
Mr Paul Lowenstein QC, Miss Josephine Davies and Mr John Bethell (instructed by Keystone Law Ltd) for the Defendant
Hearing dates: 31 July 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This judgment deals with a discrete point which arose in the context of the consequential submissions following on from my judgment in this matter (“the Enforcement Judgment”).
In that judgment I determined that a judgment of the US Courts (“the US Liability Judgment”) was not enforceable by this Court, for a variety of reasons. One of these was that it was contrary to the Protection of Trading Interests Act (“PTIA”). Following on from that argument I then determined – the final point in a lengthy judgment — that as a result of the application of the PTIA, World Programming Ltd (“WPL”) had a counterclaim, pursuant to s. 6 of the Act: “unless there is a payment attributable specifically to one element of the judgment or another – at the time of payment ….”
The nature of that counterclaim is dictated by the PTIA s. 6(3), which states:
“the … defendant shall be entitled to recover from the party in whose favour the judgment was given so much of the amount referred to in subsection (1) above as exceeds the part attributable to compensation; and that part shall be taken to be such part of the amount as bears to the whole of it the same proportion as the sum assessed by the court that gave the judgment as compensation for the loss or damage sustained by that party bears to the whole of the damages awarded to that party.”
In other words, the Act enables the defendant to recover such part of the foreign judgment as is not compensatory.
The focus of this dispute is paragraph 270 of the Enforcement Judgment. That states:
“Nor do I find an answer in SAS's case that it could as a matter of English Law allocate the payments to the compensatory elements (by reference to Chitty paragraph 21–064) and has done so by its Notice of Partial Satisfaction. Absent another appropriation (e.g. by the debtor at the time of payment) a creditor can as a matter of English law make such an appropriation. However, the point of the argument is that the statute operates as a deemed appropriation unless the payment is not one within the section. Thus, unless the appropriation were made at the time of payment, (which occurred in February and May 2018) so as to make the payment one in respect of the compensatory element only, the statute operates so as to create the entitlement. Even if an appropriation could be made later, it would seem inequitable to permit it to be made defensively: SAS's Notice came in response to the amendment in September 2018 to plead s. 6.”
At that time there was only one payment in issue, amounting to a counterclaim of $2,867,922.67. That was a payment where the alleged appropriation occurred at some point after payment. By the time of the consequentials hearing there were others (triggering a claim for at least $1,668,653.11), with alleged appropriations occurring much closer in time to the payment. I was asked to determine the issue of appropriation in relation to those payments. The factual basis on which this arose was different, in that “SAS appropriated such further recoveries as it has received to the interest and compensatory damages … as set out in Notices of Partial Satisfaction filed with the US Court dated 19 February, 1 March, and 1 April 2019.” The alleged appropriations were on any analysis much closer in time to the payment, but insofar as they depended on the Notices of Partial Satisfaction, they came sometime after the payment.
However, it was apparent that further sums would be received by SAS Institute Inc (“SAS”) in respect of the US Liability Judgment and that these would give rise to further liabilities under s.6 PTIA. It was also likely that there would be uncertainty about precisely what SAS had been paid and when.
It was therefore clear that, depending on the basis upon which I reached a decision on those payments, yet further issues might arise. I accordingly required the parties to serve written submissions “in relation to current and future relief arising from WPL's counterclaim”, in order that I could make a determination which would prevent further reference(s) to the Court becoming necessary in future cases.
As I had anticipated, the issues proved to be not entirely straightforward and detailed submissions were served: 24 pages by WPL and 14 pages by SAS followed by a 12-page reply from WPL. A further oral hearing was sought.
The issues therefore arise against a backdrop of what I have already found. The parties were divided on what that was. Both contended that my judgment favoured them. WPL contended that I had by the Enforcement Judgment rejected SAS's case on appropriation. SAS disagreed, contending that my judgment recognised that despite the PTIA it was in principle open to SAS to appropriate any recoveries in respect of the US Judgment to the compensatory damages provided for in the US judgment and that this is what SAS had done.
Inevitably on revisiting the judgment the paragraph in question seems imperfectly expressed, looked at through the prism of the issues which now arise. My judgment refers to the time of payment and does not focus specifically on by whom the payment is made, although the authorities which refer to appropriation on payment tend to be those referring to appropriation by the debtor. That approach has, it seems, introduced a regrettable ambiguity. However, as I read the paragraphs to which I have been referred they do reflect my intention: namely to hold that the particular alleged appropriation relied on was not apt to act as an appropriation.
I did not by paragraph 270 decide the major point of principle: namely whether an appropriation can arise at all in the context of the PTIA. That much is clear from the disjunction between the first sentence and the second two sentences in the following passage:
“Absent another appropriation (e.g. by the debtor at the time of payment) a creditor can as a matter of English law make such an appropriation.
However, the point of the argument is that the statute operates as a deemed appropriation unless the payment is not one within the section. Thus, unless the appropriation were made at the time of payment, (which occurred in February and May 2018) so as to make the payment one in respect of the compensatory element only, the statute operates so as to create the entitlement.”
What I therefore decided was that:
i) Normally appropriation can occur either (a) before payment, by the debtor or (b) after payment, by the creditor;
ii) Here there was no such appropriation.
That left undecided two elements:
i) Whether an appropriation made at the time of payment could defeat the PTIA. My judgment assumes but does not find this;
ii) Quaere whether an appropriation made defensively could be permitted.
This judgment therefore deals with a number of issues relevant to the question of appropriation:
(1) Whether SAS can never appropriate, because immediately SAS receives payment on account of the US Judgment, the statutory appropriation under s.6 PTIA operates.
(2) If SAS could appropriate, whether SAS cannot rely on the Notices of Partial Satisfaction filed on 19 February, 1 March, 1 April 2019 and 3 June 2019 or any future purported appropriation because:
(a) WPL has/would already have appropriated the relevant sums;
(b) SAS's appropriations were (and would be) manifestly defensive; and
(c) (as regards the Notices of Partial Satisfaction filed to date) these do not and, where SAS has addressed them, are not even said to, evidence or effect an appropriation at the time of payment.
(3) Whether interest which has accrued on the US Liability Judgment debt under US law should be apportioned pro rata in the same manner as the principal.
The effect of the statutory scheme
The backdrop to this point is that I have concluded that any payment received by SAS in respect of the US Liability Judgment at large will automatically prima facie fall within the scheme of the statute.
One then has to grapple with whether, and if so how, the common law rules as to appropriation operate in that context. Logically, as I have indicated in paragraph 270, if a payment is to be removed from the statutory scheme, this must be done at the latest at the time of payment. It is only in that way that the appropriation precedes the trigger for the statutory scheme, which is when “an amount on account of the damages has been paid … to the party in whose favour the judgment was given”.
This may suggest that an appropriation before payment by a debtor, i.e by WPL, could be one which was contrary to the statutory scheme. At the other end of the spectrum, after payment is received by the judgment creditor, the operation of s.6 is triggered by the words of the statute, and no appropriation can be made.
That, however, leaves two questions hanging:
(1) What is the position as regards an appropriation by a third party on behalf of WPL, or by WPL in respect of a payment to be made by a third party?
(2) What is the position as regards an appropriation made by the creditor effectively contemporaneously with the payment – what one might term “appropriation on payment”? (I note here that it is now...
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