Formosa Plastics Corporation USA v Chauhan & Ors

An appellate court may refuse further time and leave to appeal where the proposed defence is speculative, unsupported by the evidence and raised only after substantial delay. The court must balance the interests of both parties, including the claimant’s interest in the benefit of an existing judgment. A foreign judgment will not generally be impeached on natural justice grounds where an oral hearing was available but the defendant did not request one, even if the failure resulted from legal advisers’ negligence.

The defendants applied for leave to appeal against summary judgment entered by Ferris J. The judgment enforced in England a substantial Texas judgment obtained against the first defendant under a guarantee. Claims under Insolvency Act 1986, section 423, were also brought concerning properties registered in the names of other defendants.

The defendants had initially advanced no arguable defence. They later relied on natural justice and sought further time to investigate and plead fraud, alleging that associated companies, rather than the claimant, had supplied the goods. Ferris J rejected the natural justice argument and refused leave to appeal. The central issue was whether the Court of Appeal should grant a further adjournment and permit an appeal based on a late and unparticularised fraud allegation.

1. Application dismissed. The Court of Appeal refused both the further adjournment and leave to appeal. The defendants had not advanced an arguable defence on the documents.
2. The proposed fraud case was wholly speculative. The documents did not begin to establish fraud, and counsel could not properly sign a pleading advancing it. The defendants had known, or should have known, the circumstances of the sales and deliveries. They had also previously sworn affidavits in the United States proceedings which supported the claimant’s contractual position.
3. The proposed amendment was raised far too late. The alleged point had first appeared only in an affidavit months earlier and had not been crystallised into a pleaded case. Any later discovery of supporting material did not explain why the same investigations had not been undertaken during the earlier Texas proceedings.
4. The natural justice objection was untenable. An oral hearing had been available in Texas, but the defendants had not requested one. The court regarded Al-Mehdawi v Secretary of State for the Home Department [1990] 1 AC 876 as clear authority that negligence by lawyers would not make that failure sufficient to resist recognition or enforcement.
5. Justice had to be administered to the claimant as well as to defendants facing a substantial judgment. The defendants’ repeated requests for indulgence were therefore brought to an end. The application was dismissed with costs.

• Court of Appeal (Civil Division): refused leave to appeal and dismissed the application with costs.
• High Court, Ferris J: gave summary judgment against the first defendant and made directions for the section 423 proceedings; leave to appeal was subsequently refused.
• Texas proceedings: the underlying foreign judgment had been entered by a district court in Texas, with an appeal pending there. The English judgment was ordered not to be enforced pending the outcome of that appeal.