The Court of Appeal has today handed down judgment in the case of Orexim Trading Limited v Mahavir Port and Terminal Private Limited  EWCA Civ 1660, raising important issues as to the service of claims under s.423 of the Insolvency Act 1986 out of the jurisdiction.
The Claimant, Orexim, commenced proceedings in England claiming damages against the First Defendant, MPT, for breach of a settlement agreement. In addition, Orexim sought an order under s.423 of the Insolvency Act 1986 setting aside transactions pursuant to which MPT sold a vessel to the Second Defendant (Singmalloyd), and Singmalloyd in turn sold the vessel to the Third Defendant (Zen). The basis of that claim was that the transactions in question were entered into at an undervalue, for the purpose of putting the vessel beyond the reach of MPT’s creditors.
MPT and Zen are both Indian companies and Singmalloyd is a Singaporean company. The settlement agreement contained an English jurisdiction clause, and MPT therefore accepted that the Court had jurisdiction to hear that claim. However, both MPT and Zen brought applications challenging the Court’s jurisdiction to hear the claim under s.423.
At first instance, HHJ Waksman QC held that the Court lacked gateway jurisdiction to hear the s.423 claim. In particular, it was held that the gateway in paragraph 3.1(20) of PD 6B, which applies to “claims under an enactment which allows proceedings to be brought” did not, on its proper construction, cover claims under s.423. In reaching this conclusion, HHJ Waksman QC applied the decision of the Court of Appeal in Re Harrods (Buenos Aires) Ltd  Ch 72, and declined to follow the decision of Flaux J in Erste Group Bank v JSC (VMZ Red October)  EWHC 2926 (Comm).
The Court of Appeal disagreed with HHJ Waksman QC. It held that the decision in Re Harrods did not apply to gateway (20), and that “the time has now come to say that the court does have power under ‘gateway’ (20) to permit service of a claim under section 423 outside England and Wales” (para 47). However, the Court emphasised that this power is subject to important “safeguards” (para 49). In particular, relief under s.423 will not be granted unless it can be shown that there is a “sufficient connection” between the defendants and England and Wales to make such relief appropriate, and the Court will not grant permission to serve a claim under s.423 out of the jurisdiction unless it can be shown that there is a realistic prospect of establishing that connection.
The Court of Appeal accepted MPT’s and Zen’s arguments that, on the facts of the case, there was an insufficient connection between the Defendants and England and Wales to justify relief under s.423, and that the claim therefore had no reasonable prospect of success. In reaching this conclusion, the Court rejected a submission by Orexim that the fact that MPT had agreed to an English jurisdiction clause in the settlement agreement (which the claim under s.423 was brought in support of) provided a sufficient connection. The Court also held that Orexim had not established that England and Wales was the proper place to hear the claim. It followed that the appeal failed.