Schmitt v Deichmann & Ors

Where an ex parte order directly affects another person’s interests, the party obtaining it must promptly disclose the judgment and relevant materials explaining the basis on which it was made, particularly once the order is challenged. Delay in appealing may be excused where the affected person lacked a fair opportunity to understand the order and acted promptly after receiving the necessary information. Permission to appeal should be granted where the proposed appeal raises an arguable point of law with a realistic prospect of success, especially in a developing area and where early determination may avoid a substantial trial.

Mr Schmitt, the insolvency administrator of Phoenix Kapitaldienst GmbH appointed by a German court, obtained an ex parte order recognising his appointment and empowering him to exercise rights and powers available under English insolvency law. He later sought repayment from Dutch investors under section 423 of the Insolvency Act 1986.

The investors sought an extension of time and permission to appeal against the order. They contended that the common law power of recognition did not permit the court to authorise a foreign insolvency administrator to bring proceedings establishing rights against persons, rather than merely assisting in the collection and distribution of assets. The central issues were whether the delay should be excused, whether the proposed appeal was sufficiently arguable, and whether the appeal should proceed before trial.

1. Extension of time. The application was brought promptly in the circumstances. The investors had not received the Registrar’s judgment or the material explaining the legal basis of the order until late October and early November 2010. An ex parte order which directly affects another person’s interests carries an obligation on the obtaining party to make full disclosure of the matters explaining the basis on which it was sought and obtained. The investors were not at fault for failing to search law reports for an unprovided judgment.
2. Arguable appeal. Permission to appeal was granted. The court had doubts about the merits but considered the proposed challenge sufficiently arguable. The common law of cross-border insolvency remained in development. The discussion in Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors (of Navigator Holdings Plc and others) (Isle of Man) [2007] 1 AC 508, particularly the distinction between enforcing and establishing rights, made the issue fit for full argument on appeal.
3. Appropriate route and timing. It was unnecessary to decide whether the challenge fell under Rule 7.47 of the Insolvency Rules 1986 or the ordinary appeal and rescission procedures under Civil Procedure Rules 1998. The issue should proceed by appeal rather than being remitted to the Registrar. It was a short and discrete point of law which might determine the proceedings and avoid a substantial 21-day trial.
4. The appeal was therefore directed to be heard at High Court level before trial.

The judgment itself records that Registrar Jaques made the ex parte recognition order on 23 May 2008, reported as Re Phoenix Kapitaldienst GmbH [2008] BPIR 1082. Deputy Registrar Garwood later declined to direct a preliminary trial of the standing issue and gave the investors time to decide whether to appeal or seek rescission. The present court granted an extension of time and permission to appeal and directed that the appeal be heard by a High Court judge before trial.