Before the recent decision in Rubin and another v Eurofinance SA and others and New Cap Reinsurance Corporation (In liq) and another v AE Grant [2012] UKSC 46 (the joint appeal of two earlier cases) (the Rubin/New Cap Appeal), an insolvency judgment obtained in an Australian court could be enforced in the UK despite falling outside of the traditional common law enforceability rules.

The Rubin/New Cap Appeal has now removed this special treatment afforded to foreign insolvency judgments and the old common law rules once again apply.

Background

To enforce a foreign judgment in the UK a defendant has to have either been present in the foreign jurisdiction at the time the proceedings commenced or have agreed to submit to the foreign jurisdiction. This is known as the Dicey Rule at common law and is reflected in the UK Foreign Judgments (Reciprocal Enforcement) Act 1933 (the 1933 Act).

In the earlier decisions of Rubin v Eurofinance SA [2010] EWCA Civ 895 (Rubin)and New Cap Reinsurance Corpn Ltd v Grant [2011] EWCA Civ 971 (New Cap), the UK Court of Appeal granted a special enforceability status to foreign insolvency judgments which allowed enforcement despite non compliance with the Dicey Rule or 1933 Act.

In Rubin the English Court of Appeal held that a $10m judgment of the US Bankruptcy Court was enforceable in England at common law despite the defendant not being present in the US or having submitted to US jurisdiction. This was largely based on the principle of universalism in cross-border insolvency and bankruptcy.

In New Cap, bound by the prior decision in Rubin, the English Court enforced a US$8m default judgment of the New South Wales Supreme Court.

The appeals of both decisions were joined to form the Rubin/New Cap Appeal.

Decision

The main issue before the court was whether there should be a special rule for the recognition and enforcement of foreign insolvency judgments which is more expansive than the traditional Dicey Rule. The majority found that:

  1. the Courts of Appeal were wrong to provide a special rule for insolvency because to do so is a radical departure from substantially settled law;
  2. such a change to settled law would be a matter for legislation and not for judicial innovation; and
  3. it would only be to the detriment of UK businesses without any corresponding benefit to allow such departure.

The Court also found that there is nothing in the UNCITRAL Model Law implemented by the Cross-Border Insolvency Regulations 2006 which permits recognition or enforcement of foreign judgments against third parties.

The question arose in New Cap as to whether the UK Insolvency Act 1986 (the 1986 Act) provides a procedure by which an Australian judgment may be enforced in the UK.  This is because Australia is a “relevant country” under s 426(4) of the 1986 Act. Despite Australia being a “relevant country” the majority decided that this section of the 1986 Act is not concerned with the enforcement of judgments and therefore cannot be used to enforce an Australian judgment in the UK.

Despite having found that the Dicey Rule and/or 1933 Act apply, the Court still dismissed the New Cap appeal because it found that the defendant had in fact submitted to New South Wales Supreme Court jurisdiction (hence satisfying the common law test) by filing a proof of debt in the insolvency proceeding. The defendant was not allowed to benefit from the insolvency proceeding without the burden of complying with the orders made in that proceeding.

Comment

The Rubin/New Cap Appeal deals a blow to parties wishing to enforce an Australian insolvency judgment in the UK. The UK Courts have moved away from the principle of universalism in cross-border insolvency. The decision does make clear however, that there is room for legislature to step in to allow foreign insolvency judgments to be enforced in the UK despite falling outside the Dicey Rule