Rubin & Anor (Joint Receivers and Managers of the Consumers Trust) v Eurofinance SA & Ors

Foreign insolvency proceedings include avoidance proceedings brought by an office-holder against third parties for the collective benefit of creditors. Such proceedings are integral to the collection and distribution of the insolvent estate.

A foreign judgment given in those proceedings is governed by the sui generis rules of cross-border insolvency. The ordinary common-law rules requiring the defendant’s presence or submission therefore do not prevent enforcement. Under modified universalism, recognition carries active judicial assistance, extending to relief which the domestic court could have granted in an equivalent domestic insolvency.

Receivers of an English trust commenced Chapter 11 proceedings in New York, where the trust’s creditors and assets were principally situated. They later obtained default money judgments against persons who had received payments connected with the trust’s business. The defendants had been served but deliberately declined to submit to the New York court.

A deputy High Court judge recognised the Chapter 11 case and its adversary proceedings as a foreign main proceeding under the Cross-Border Insolvency Regulations 2006. He nevertheless refused to enforce the judgments because the defendants had not been present in, or submitted to, the foreign jurisdiction.

The receivers appealed against the refusal of enforcement. The defendants cross-appealed against recognition. The central questions were whether avoidance proceedings formed part of the foreign insolvency proceeding and whether the resulting judgments could be enforced despite the ordinary jurisdictional rules for foreign judgments in personam.

1. The appeal was allowed and the cross-appeal dismissed. The adversary proceedings and the receivers were respectively recognised as a foreign main proceeding and foreign representatives. The relevant New York money judgments were enforceable at common law.
2. Avoidance proceedings brought under insolvency legislation are integral to the collective insolvency process. They recover assets dissipated or transferred before insolvency for the collective benefit of creditors. They are not ordinary claims which merely happen to affect the size of the estate, nor are they incidental procedural matters. The American avoidance provisions were materially equivalent to sections 238 and 239 of the Insolvency Act 1986. The adversary proceedings were therefore part and parcel of the Chapter 11 proceeding and fell within article 2(i) of the Model Law in Schedule 1 to the Cross-Border Insolvency Regulations 2006.
3. The ordinary English rules governing recognition and enforcement of foreign judgments in personam did not apply to judgments made in and for the purposes of the collective bankruptcy regime. Although the orders had the indicia of judgments in personam, they were governed by the sui generis private international law of bankruptcy.
4. The common-law principle of modified universalism requires a unitary insolvency proceeding, so far as justice and public policy permit. Recognition carries active judicial assistance. That assistance includes doing what an English court could have done in an equivalent domestic insolvency and extended here to enforcement of the New York orders. This followed the principles in Cambridge Gas and HIH Insurance.
5. It was unnecessary to decide whether enforcement could independently be ordered as cooperation under the Cross-Border Insolvency Regulations 2006. Article 27 did not expressly mention enforcement, although cooperation to the maximum extent possible might include it. The court expressed no concluded view.

Ward LJ gave the judgment. Wilson LJ and Henderson J agreed.

1. Court of Appeal (Civil Division): Allowed the receivers’ appeal against refusal to enforce the New York judgments and dismissed the respondents’ cross-appeal against recognition. Permission to appeal to the Supreme Court was refused, and a stay of execution was granted.
2. High Court, Chancery Division: Mr Nicholas Strauss QC, sitting as a deputy judge, recognised the Chapter 11 case and adversary proceedings as a foreign main proceeding and recognised the receivers as foreign representatives. He dismissed the application to enforce the New York judgments.