Vizcaya Partners Ltd v Picard and another (Gibraltar)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Collins |
| Judgment Date | 03 February 2016 |
| Neutral Citation | [2016] UKPC 5 |
| Date | 03 February 2016 |
| Docket Number | Appeal No 0048 of 2014 |
| Court | Privy Council |
[2016] UKPC 5
Lord Neuberger
Lord Mance
Lord Clarke
Lord Sumption
Lord Collins
Appeal No 0048 of 2014
Privy Council
From the Court of Appeal of Gibraltar
Appellant
Michael Driscoll QC
(Instructed by Katten Muchin Rosenman UK LLP)
Respondent (Irving Picard)
Pushpinder Saini QC
Keith Azopardi QC
Shaheed Fatima
(Instructed by Browne Jacobson LLP)
Heard on 14 December 2015
This appeal arises out of the fraudulent Ponzi scheme operated by Bernard Madoff, through his company Bernard L Madoff Investment Securities LLC ("BLMIS"), a New York corporation. After Madoff's fraud came to light in 2008, Irving Picard ("the trustee") was appointed as trustee in BLMIS's liquidation in the US Bankruptcy Court for the Southern District of New York ("the New York Bankruptcy Court"). The trustee commenced proceedings under the anti-avoidance provisions of the US Bankruptcy Code against investors who had been repaid before the fraud was discovered, including the appellant, Vizcaya Partners Limited ("Vizcaya"), a BVI company which carried on business as an investment fund, and which invested about US$328m with BLMIS between January 2002 and December 2008, but was repaid US$180m before the fraud was discovered.
In New York the trustee obtained a judgment in default of appearance against Vizcaya and its shareholders. The judgment against Vizcaya was for US$180m, and US$74m of the funds transferred to Vizcaya was in Gibraltar. Because of his concern to enforce the judgment against Vizcaya (and others) abroad, the trustee sought (in his capacity as a party to proceedings in Gibraltar, including these proceedings, and in the Cayman Islands), and was given permission to intervene in the appeal in the UK Supreme Court in Rubin v Eurofinance SA [2012] UKSC 46, [2013] 1 AC 236. That appeal concerned the enforceability in England of an unrelated default judgment in the New York Bankruptcy Court. In that decision the UK Supreme Court held, in summary, that at common law a foreign judgment in personam would be enforced in England only if the judgment debtor had been present in the foreign country when the proceedings had been commenced, or if it had submitted to its jurisdiction; and that, as a matter of policy, the court would not adopt a more liberal rule in respect of the enforcement of judgments in insolvency cases in the interests of the universality of bankruptcy, any change in the settled law of the recognition and enforcement of judgments being a matter for the legislature.
This appeal concerns primarily the content and scope of the rule that a foreign default judgment is enforceable against a judgment debtor who has made a prior submission to the jurisdiction of the foreign court (as distinct from a submission by appearance in the proceedings). The principle is set out in Dicey, Morris & Collins, Conflict of Laws, 15th ed, 2012 ("Dicey"), para 14R-054 ("Dicey's Fourth Case"):
"… 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 …
…
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 the court or of the courts of that country."
An important and controversial question which has been debated on this appeal is whether the agreement to submit must be express, or can also be implied or inferred.
The conditions for the enforcement of foreign judgments at common law remain an important practical question, notwithstanding the fact that in the United Kingdom much of the ground is covered by statute and by European Union legislation, for these reasons: first, the common law rules continue to apply in the United Kingdom to the many countries, some of them of great trading importance (such as the United States, China and Japan), with which there are no treaties or other arrangements for the reciprocal enforcement of judgments; second, the statutory schemes in the Administration of Justice Act 1920 (which applies to many Commonwealth countries) and the Foreign Judgments (Reciprocal Enforcement) Act 1933 (which still applies to several foreign countries, to some British dependencies, and to some Commonwealth countries including Australia, Canada and India), and their equivalents in the Commonwealth, are based on the common law and fall to be interpreted in accordance with the common law; and third, the common law rules continue to apply in many parts of the Commonwealth.
The common law rules which identified those foreign courts which were to be regarded as having jurisdiction for the purpose of the recognition and enforcement of judgments were developed in the 19th century, and had largely (though not entirely) been settled by the time of the great decisions of the Court of Appeal in Schibsby v Westenholz (1870–1871) LR 6 QB 155 and Copin v Adamson (1875) 1 Ex D 17, so that when Fry J came to give his summary of the principles in Rousillon v Rousillon (1880) 14 Ch D 351, 371, he was able to say that having regard to those decisions: "The Courts of this country consider the defendant bound … where he has contracted to submit himself to the forum in which the judgment was obtained."
Jurisdiction clauses were not then the everyday occurrence they now are today, but there are early cases on enforcement of foreign judgments applying the principle, such as Feyerick v Hubbard (1902) 71 LJKB 509 (Walton J: "All disputes … shall be submitted to the Belgian jurisdiction"); Jeannot v Fuerst (1909) 25 TLR 424 (Bray J: "the French Tribunals of Commerce alone to have jurisdiction").
The common law principles were reflected in the legislation governing recognition and enforcement of foreign judgments. The Administration of Justice Act 1920, section 9(2)(b), provides that no judgment is to be enforced under the section if "the judgment debtor, being a person who was neither carrying on business nor ordinarily resident within the jurisdiction of the original court, did not voluntarily appear or otherwise submit or agree to submit to the jurisdiction of that court". The Foreign Judgments (Reciprocal Enforcement) Act 1933, section 4(2), provides, so far as material, that the foreign court would be regarded as having jurisdiction "(iii) if the judgment debtor, being a defendant in the original court, 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 the country of that court".
After the hearing of the appeal but before the advice was tendered, the Board was informed by the parties that the litigation had been settled, subject to the approval of the New York Bankruptcy Court. Where an appeal raises issues which are of general importance (as opposed to being of significance only to the parties), and full argument has been heard, a court may deliver judgment notwithstanding any settlement. This is a case which raises issues which are not only of general importance, but which are of international importance in other common law countries. The Board indicated to the parties that it retained the power to deliver its advice, but that the advice would not be delivered until the settlement was approved by the New York Bankruptcy Court.
The contractual documents which governed Vizcaya's investment with BLMIS were entered into on Vizcaya's behalf by a custodian bank (originally Bank Safra (France) and then Bank Safra (Gibraltar)) on behalf of Vizcaya. Those which were in force in 2008 were those dated March 23, 2005. There were three contractual documents, namely: (1) a Trading Authorization, (2) an Option Agreement, and (3) a Customer Agreement ("the Account Management Documents").
The Trading Authorization authorised Madoff to act as Vizcaya's "agent and attorney in fact to buy, sell and trade in stocks, bonds, options and any other securities", until such authorisation was revoked in writing. The Option Agreement anticipated the opening of an option account with BLMIS.
The Customer Agreement, on BLMIS headed note paper, was signed by Bank Safra (Gibraltar) as the custodian for and on behalf of Vizcaya on March 23, 2005. BLMIS is defined in the Customer Agreement as the "Broker".
The Customer Agreement provided:
"10. CHOICE OF LAWS
THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK AND SHALL BE CONSTRUED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
…
12. ARBITRATION DISCLOSURES
*ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
*THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO JURY TRIAL.
…
13. ARBITRATION
THE CUSTOMER AGREES, AND BY CARRYING AN ACCOUNT FOR THE CUSTOMER THE BROKER AGREES THAT ALL CONTROVERSIES WHICH MAY ARISE BETWEEN US CONCERNING ANY TRANSACTION OR THE CONSTRUCTION, PERFORMANCE, OR BREACH OF THIS OR ANY OTHER AGREEMENT BETWEEN US PERTAINING TO SECURITIES AND OTHER PROPERTY, WHETHER ENTERED INTO PRIOR, ON OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION UNDER THIS AGREEMENT [AND] SHALL BE CONDUCTED PURSUANT TO THE FEDERAL ARBITRATION ACT AND THE LAWS OF THE STATE DESIGNATED IN PARA 10, BEFORE THE AMERICAN ARBITRATION ASSOCIATION, OR AN ARBITRATION FACILITY PROVIDED BY ANY EXCHANGE OF WHICH THE BROKER IS A MEMBER, OR THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC AND IN ACCORDANCE WITH THE RULES PERTAINING TO THE SELECTED ORGANISATION. THE CUSTOMER MAY ELECT IN THE FIRST INSTANCE WHETHER
ARBITRATION SHALL BE BY THE...
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