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Enforcement Against UK Debtors’ Assets
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Not content with holding the greatest show on earth, London is making sure that our dispute resolution colleagues around the world are not ignored in the race for excellence in litigating and resolving their disputes.
A new court has just opened in London to rival (some) of the buildings accommodating the Olympic Games. The Rolls Building (http://www.justice.gov.uk/guidance/courts-andtribunals/ courts/rolls-building.htm) contains 31 brand new courts, including 3 sophisticated new “super courts”, and it now houses the Chancery, the Admiralty and Commercial, and the Technology and Construction courts all in one innovative, specialist legal complex.
There would be little use in providing these excellent facilities, however, if our judiciary did not do their bit to ensure that every assistance is given, within the parameters of the court rules, to foreign litigants in general and insolvency practitioners in particular to aid the enforcement of their judgments against available assets in the UK.
Over the last ten years or so the English court has shown an ever-increasing willingness to assist those armed with foreign judgments, and that trend has become even more pronounced in the last year. Back in 2001 the UK court held that it would provide assistance to a foreign court unless there were powerful reasons not to (England v Smith [2001] CH 419). One such powerful reason might be the protection of a British national or company from foreign judgments where no reciprocal arrangements exist and where private international law might suggest a defendant would do well to keep its defence to itself until sued in its home court.
Such a calculation might now be severely misplaced given recent authority of the English court. A reciprocal arrangement is effectively a bilateral agreement between countries to enforce each other’s judgments. An example of this is the Foreign Judgements (Reciprocal Enforcements) Act 1933, which gives countries such as India, Pakistan and Australia, countries that are not party to European arrangements under the Brussels/Lugano schemes, the opportunity to enforce their judgments here, and vice versa. The Administration of Justice Act 1920, which includes over 40 countries, is another such arrangement.
In Rubin and another v Euro Finance SA and other [2010] EWCA Civ 895 the Court of Appeal held that despite argument to the contrary, judgments in bankruptcy proceedings were neither judgments in rem nor judgments in personam and, as a consequence, the rules of private international law did not apply. Transactions at an undervalue and preferences were liable to be struck down in most bankruptcy codes throughout the world and the English court found that such claims were integral and central to the collective nature of bankruptcy. The calculation by the defendant, therefore, not to appear in proceedings commenced in New York was fatal, as the English court upheld the enforcement of the New York judgment without the need for the claimant to prove its claim afresh in England. As a consequence the New York judgment was immediately enforceable against the defendants. The principle of reciprocity again provides the platform for an easier, quicker route to enforcement without the need to instigate fresh local proceedings.
In New Cap Reinsurance Corporation Limited and another v A E Grant and others [2011] EWCA Civ 971 the Court of Appeal confirmed the trend outlined in Rubin by assisting the Australian court and holding that the reciprocal enforcement of judgments apply in insolvency matters and that section 426 of the Insolvency Act 1986 can be deployed to enforce a foreign judgment. This is as long as a reciprocal arrangement, such as the aforementioned acts, exists. For most countries, one does.
As if these cases weren’t enough, the High Court has ruled as recently as last month that it can assist office holders in foreign insolvency proceedings using its common law powers. This is the case even if the circumstances technically fall outside assistance legislation. In Schmitt v Deichmann [2012] EWHC 62 (Ch), the court considered authority that included the cases detailed above, coming to the conclusion that the court should have wide common law powers to proactively help foreign insolvency office holders, by treating them as it would domestic office holders. It was noted in this case that a broad commercial support of international comity should always be more important than black letter law. This further points the English court’s eagerness
to aid, even if there might technically be complications in gaining assistance.
Whilst both decisions in Rubin and New Cap are under appeal to the Supreme Court (to be heard in May 2012) it seems clear that individuals or companies who ignore foreign proceedings in the future may do so at their peril. The English court is increasingly demonstrating that it is more than ready to assist enforcement the judgments of those foreign proceedings.
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