R (Majera) v Secretary of State for the Home Department

The Supreme Court considered whether foreign judgments obtained in avoidance proceedings conducted in foreign insolvency processes are enforceable in England. The court rejected a broad rule that such insolvency judgments fall outside the Dicey Rule and held that the traditional common-law criteria for recognition and enforcement of foreign in personam judgments apply unless Parliament legislates otherwise. The judgment examines the role of the UNCITRAL Model Law as implemented by the Cross-Border Insolvency Regulations 2006 and the limited statutory assistance under section 426 of the Insolvency Act 1986. It also confirms that a foreign insolvency judgment will be enforceable in England if the judgment debtor submitted to the foreign court’s jurisdiction.

Applied legal principles: (1) the Dicey Rule (the established common-law tests for recognition of foreign in personam judgments) remains the starting point for enforcement; (2) avoidance proceedings are central to insolvency but do not automatically attract a different recognition rule; (3) the Model Law/CBIR confers discretionary procedural assistance but does not, by implication, create a general mechanism for reciprocal enforcement of foreign insolvency judgments against third parties; (4) section 426 of the Insolvency Act 1986 enables English courts to assist foreign insolvency courts but does not itself operate as a general enforcement mechanism for foreign judgments; (5) where a judgment debtor has submitted to the foreign insolvency jurisdiction the foreign judgment may be enforced (subject to public policy and common-law defences).

Background and parties. These linked appeals (Rubin and New Cap) raised whether judgments obtained in foreign avoidance/avoidance-style proceedings (United States Chapter 11 adversary proceedings and New South Wales preference proceedings) could be recognised and enforced in England. In Rubin the English-appointed receivers sought enforcement in England of default judgments of the US Bankruptcy Court in respect of fraudulent transfers arising from an express trust known as The Consumers Trust. In New Cap an Australian liquidator sought enforcement in England of a New South Wales Supreme Court default judgment in respect of alleged unfair preferences paid by an Australian reinsurer to members of a Lloyd's syndicate.

Nature of the relief sought. In Rubin the applicants sought recognition of the Chapter 11 foreign main proceeding under the CBIR and enforcement in England of the US Bankruptcy Court’s adversary-judgments; in New Cap the liquidator sought enforcement of the Australian judgment either under the Foreign Judgments (Reciprocal Enforcement) Act 1933, by common law or by statutory assistance under section 426 of the Insolvency Act 1986.

Issues framed. (i) Whether avoidance judgments obtained in foreign insolvency proceedings are governed by a special sui generis rule of recognition and enforcement (so as to displace the Dicey Rule); (ii) whether recognition/enforcement could be effected under the Cross-Border Insolvency Regulations 2006 (implementing the UNCITRAL Model Law); (iii) the scope and effect of section 426 of the Insolvency Act 1986 as a route to enforcement; and (iv) whether the defendants had submitted to the foreign courts’ jurisdiction.

Court’s reasoning (concise). The majority held that the Dicey Rule remains the governing common-law framework for recognition of foreign in personam judgments and that it is not for the court to create a broad new common-law exception for insolvency avoidance orders; such a change would be a matter for legislation or international agreement. The court recognised that avoidance proceedings are integral to insolvency and that the Model Law/CBIR and section 426 provide important mechanisms for international co-operation, but found no support in those instruments for implied reciprocal enforcement of foreign insolvency judgments against third parties. The court therefore allowed the Rubin appeal (insofar as the Court of Appeal had held enforcement permissible on a novel common-law basis it reversed that and endorsed the position that enforcement requires the usual jurisdictional basis or submission) and dismissed New Cap on the ground that the Syndicate had in fact submitted to the Australian court’s jurisdiction (so enforcement could proceed by established routes, including registration under the 1933 Act where applicable).

Wider context. The judgment emphasises the limited role of judicial innovation in this area, the continuing importance of international instruments (Model Law, EC Insolvency Regulation) and the need for legislative or treaty-based solutions for broader reciprocal enforcement of insolvency judgments.

The Supreme Court declined to create a general common-law exception to the Dicey Rule for foreign avoidance orders in insolvency. It allowed the Rubin appeal only insofar as the Court of Appeal had treated avoidance judgments as attracting a new common-law recognition rule (the majority disapproved that extension) and held that enforcement generally requires the usual jurisdictional tests or the judgment debtor’s submission. The related New Cap appeal was dismissed on the ground that the defendant Syndicate had submitted to the jurisdiction of the New South Wales court, and that the Foreign Judgments (Reciprocal Enforcement) Act 1933 (as extended to Australia) governs enforcement by registration where applicable. The court further held that the UNCITRAL Model Law as implemented by the CBIR and section 426 of the Insolvency Act 1986 provide assistance and co-operation mechanisms but do not imply a free-standing reciprocal mechanism for enforcing foreign insolvency judgments against third parties.

Appeals to the Supreme Court from the Court of Appeal decisions: Rubin v Eurofinance [2010] EWCA Civ 895 (reported [2011] Ch 133) and New Cap Reinsurance Corporation v Grant [2011] EWCA Civ 971 (reported [2012] 2 WLR 1095). The matters originated in the Chancery Division (first instance decisions by a deputy High Court judge and by Lewison J in New Cap) before coming to the Court of Appeal and then to the Supreme Court ([2012] UKSC 46).