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New Cap Reinsurance Corporation (In Liquidation) and another v A E Grant and others as Members of Lloyd’s Syndicate 991 for the 1997 Year of Account and another

before

Lord Walker
Lord Mance
Lord Clarke
Lord Sumption
Lord Collins

JUDGMENT GIVEN ON

24 October 2012

Heard on 21, 22, 23 and 24 May 2012

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)

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.