Clarke v Fennoscandia Ltd & Ors (Scotland)

The House of Lords dismissed the appeal and held that the pursuer's action for declarators was incompetent because there was no longer any live justiciable issue for the Court of Session to decide. An irrevocable undertaking by the defenders not to seek enforcement in Scotland of the foreign judgments removed any realistic prospect of enforcement proceedings and therefore deprived the court of any need to decide the antecedent question of recognition.

The court emphasised the distinction between recognition and enforcement of foreign judgments and restated the principle that Scottish courts will not pronounce advisory or academic declarators, nor permit a collateral attack on final foreign judgments in the absence of a live controversy. Comity between courts and the need to avoid undermining the final decisions of competent foreign tribunals were material to the decision.

Background and facts:

• The appellant (Mr Clarke) had previously litigated in the United States (Delaware and Colorado) where he lost on the merits and orders for costs were made against him. He brought subsequent proceedings in the United States to set aside those decisions on grounds of alleged fraud; those applications were dismissed. He later raised proceedings in Scotland seeking declarators that the Delaware costs orders and the Colorado judgment were unenforceable in Scotland because obtained by fraud, together with interdicts to prevent enforcement steps in Scotland.
• While the Scottish proceedings were ongoing, the defenders (Fennoscandia and its liquidators) gave an irrevocable undertaking in 2001 not to seek to enforce, or take steps to enable others to seek to enforce, the specified foreign judgments and orders in Scotland. The appellant therefore relied on averments that a declarator would restore his reputation and improve his ability to obtain finance.

Procedural posture: The case came to the House of Lords on appeal from lower courts, including the Court of Appeal ([1999] EWCA Civ 591) and decisions in the Court of Session (see 2004 SC 197 and other proceedings).

Nature of the claim/application (i): The appellant sought declarators that the Delaware orders for costs and the Colorado judgment were not enforceable in Scotland because obtained by fraud, and interdicts to prevent enforcement steps in Scotland.

Issues framed by the court (ii):

• Whether the declarators sought were competent (i.e. whether they raised a live, practical controversy appropriate for determination by the Court of Session).
• Whether, despite the defenders' undertaking, the antecedent question of recognition (as distinct from enforcement) remained a live issue.
• Whether the court should in any event pronounce declarators that would, in effect, mount a collateral attack on final foreign judgments.

Court’s reasoning and conclusion (iii):

• The irrevocable undertaking meant the defenders would not seek enforcement in Scotland, so there was no realistic possibility of enforcement proceedings; consequently, recognition as a preliminary to enforcement was not a live issue for the Court of Session.
• The court distinguished exceptional authorities where declarators were allowed in the public interest despite the absence of a traditional contradictor (notably Law Hospital NHS Trust v Lord Advocate), observing that those were cases of wider public importance. By contrast, the present dispute was of private concern to the parties and the declarators would be purely academic.
• Permitting the commercial court in Scotland to pronounce declarators which would effectively attack or undermine the final decisions of competent foreign tribunals would be contrary to comity and established doctrine (citing Westergaard and related authorities). The lower courts were therefore right to sustain pleas of incompetency and dismiss the action.

Appeal dismissed. The House held that the action for declarators was incompetent because the defenders' irrevocable undertaking removed any live controversy as to enforcement in Scotland and therefore there was no need for the court to decide the antecedent issue of recognition. The court declined to permit a collateral challenge to final foreign judgments and emphasised comity and the prohibition on pronouncing academic or advisory declarators.

Appeal to the House of Lords from the Court of Appeal ([1999] EWCA Civ 591) and from judgments in the Court of Session (see Kingarth, 2004 SC 197 and related interlocutory proceedings). The Court of Session had allowed pleas of incompetency which were upheld by the House of Lords.