Clarke (Appellant) v Fennoscandia Limited and others (Respondents) (Scotland)

In ordinary contentious litigation, the Court of Session determines only live and practical legal questions. It will not grant a declarator upon an academic question merely because the decree might confer reputational, financial or other indirect benefits.

An exceptional public interest may justify a declarator despite the absence of a contradictor. That exception does not extend to a private dispute rendered academic by an irrevocable undertaking which removes every risk of enforcement.

Recognition of a foreign judgment is analytically anterior to enforcement. Where enforcement can never be sought, recognition supplies no independent live issue. Nor may declaratory proceedings be used solely to undermine final judgments of competent foreign courts or to mount a collateral challenge to proceedings in another domestic jurisdiction.

Mr Clarke alleged that judgments and costs orders obtained against him in Delaware and Colorado had been procured by fraud. He sought declarators that they were unenforceable in Scotland and interdicts preventing Fennoscandia from enforcing them there.

During proceedings in the Inner House, Fennoscandia gave an irrevocable undertaking to the Court of Session that it and its liquidators would never seek enforcement in Scotland. The interdict conclusions consequently ceased to serve any purpose. Lord Kingarth dismissed the remaining declarator conclusions as incompetent: 2004 SC 197. The Second Division upheld that result: 2005 SLT 511.

The central issue before the House was whether the declarators nevertheless raised a live question about recognition of the American judgments, either because they might benefit Mr Clarke financially and reputationally or assist a possible collateral challenge to related English proceedings.

1. Appeal dismissed unanimously. Lord Rodger of Earlsferry delivered the leading speech. Lord Bingham of Cornhill, Lord Hope of Craighead, Lord Walker of Gestingthorpe and Lord Neuberger of Abbotsbury agreed with his reasons.

2. Per Lord Rodger, Fennoscandia's irrevocable undertaking removed every risk that the American judgments and costs orders would be enforced in Scotland. Breach could be punished as contempt of court and would attract substantially the same consequences as breach of interdict. The requested interdicts would therefore add nothing and pursuing them would waste time, effort and money.

3. Recognition and enforcement of a foreign judgment are analytically distinct. Recognition entails treating the adjudicated claim as determined once and for all, and an allegation of fraud would ordinarily arise at that stage. Nevertheless, recognition was relevant here only as a preliminary to enforcement. Since the undertaking made enforcement impossible, neither enforcement nor recognition remained a live issue.

4. The Court of Session ordinarily determines only live and practical questions. The existence of a contradictor does not itself create a live issue. Nor can possible reputational, financial or other ancillary advantages make an otherwise incompetent declarator competent. Any decree would operate only between the parties in the Scottish proceedings, would not have effect in rem, and would leave the American judgments untouched elsewhere.

5. The exceptional decision in Law Hospital NHS Trust v Lord Advocate 1996 SC 301 was distinguishable. It concerned an issue of acute practical importance throughout the Scottish medical profession. The present private dispute served no public interest once enforcement had been excluded.

6. Per Lord Rodger, comity also precluded using a declarator solely to attack final judgments produced by fair hearings in competent foreign courts. The Court of Session likewise could not be used to mount a speculative collateral challenge to the English Court of Appeal, particularly where it had no parallel jurisdiction over the English action. Any material new evidence should be presented to that court.

7. The Lord Ordinary and Second Division had therefore correctly sustained Fennoscandia's pleas and dismissed the action as incompetent.

1. House of Lords: The appeal was dismissed unanimously. The dismissal of the action as incompetent was affirmed: [2007] UKHL 56.

2. Second Division of the Court of Session: The Inner House upheld the dismissal, holding that ancillary benefits could not make the declarators competent: 2005 SLT 511.

3. Outer House of the Court of Session: Lord Kingarth sustained the defenders' pleas and dismissed the action as incompetent after the irrevocable undertaking removed any live enforcement issue: 2004 SC 197.