Rubin and another v Eurofinance SA and others

A foreign judgment imposing personal liability in insolvency avoidance proceedings remains a judgment in personam. It is enforceable at common law only where the foreign court had jurisdiction under the ordinary English conflict-of-laws rules, including presence or submission by the judgment debtor. Modified universalism does not create a special insolvency exception.

The Cross-Border Insolvency Regulations 2006 do not authorise enforcement of foreign judgments against third parties. Nor do sections 426(4)–(5) of the Insolvency Act 1986 provide an enforcement procedure. A creditor may, however, submit to the supervising foreign court by proving and participating in the insolvency. An Australian insolvency judgment falling within the Foreign Judgments (Reciprocal Enforcement) Act 1933 must then be enforced by registration.

These conjoined appeals concerned default judgments obtained in foreign insolvency avoidance proceedings. In Rubin v Eurofinance SA, receivers of an English-law trust obtained a judgment for about US$10 million from the United States Bankruptcy Court. The defendants had neither appeared in the adversary proceedings nor been present in the United States. The Court of Appeal nevertheless held the judgment enforceable at common law: [2010] EWCA Civ 895.

In New Cap Reinsurance Corporation Ltd v Grant, an Australian liquidator obtained a judgment requiring members of a Lloyd’s syndicate to repay approximately US$8 million as unfair preferences. The syndicate had not appeared in the avoidance action, but had proved debts and participated in the Australian liquidation. The Court of Appeal upheld enforcement: [2011] EWCA Civ 971.

The central questions were whether insolvency avoidance judgments escape the ordinary jurisdictional rules for foreign judgments, whether the statutory regimes for cross-border insolvency assistance authorised enforcement, and whether the syndicate had submitted to Australian jurisdiction.

1. Disposition. The appeal in Rubin v Eurofinance SA was allowed by a majority of four to one. The appeal in New Cap Reinsurance Corporation Ltd v Grant was dismissed unanimously. Lord Collins delivered the leading judgment, with which Lord Walker and Lord Sumption agreed. Lord Mance agreed with the reasoning and conclusions subject to reserving the correctness of Cambridge Gas Transportation Corpn v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26. Lord Clarke dissented only on the common-law issue in Rubin.

2. Ordinary rules governed avoidance judgments. The foreign orders imposed personal monetary liabilities and were judgments in personam. Avoidance proceedings are integral to insolvency and serve the collective interest of creditors, but that characteristic creates no principled jurisdictional exception. A judgment debtor must therefore have been present in the foreign country, have submitted to its court, or fall within another established ground of international jurisdiction. Modified universalism could not justify a radical judicial enlargement of the settled enforcement rules. Any new jurisdictional regime required legislation and appropriate international consultation.

3. Cambridge Gas. Lord Collins, Lord Walker and Lord Sumption concluded that Cambridge Gas had been wrongly decided because neither the shareholder nor the Manx shares had been subject to the relevant jurisdiction of the United States Bankruptcy Court. Lord Mance regarded that case as distinguishable and left its correctness open. Lord Clarke considered it correctly decided.

4. Cross-border insolvency legislation. Articles 21, 25 and 27 of the Cross-Border Insolvency Regulations 2006 concern relief, co-operation and procedural assistance. They do not, expressly or by implication, create a system for recognising and enforcing foreign judgments against third parties. The United States judgment in Rubin was therefore unenforceable.

5. Section 426. Although unnecessary to the result, the court concluded that sections 426(4)–(5) of the Insolvency Act 1986 authorise an English court to give assistance and make its own orders. They do not provide a procedure for enforcing a foreign judgment.

6. Submission and statutory registration. The Lloyd’s syndicate had proved debts, participated in creditors’ meetings and voted in the Australian liquidation. It thereby submitted to the jurisdiction of the court supervising that insolvency and could not take the benefits without accepting the burdens of its orders. The Australian judgment concerned a civil or commercial matter within the Foreign Judgments (Reciprocal Enforcement) Act 1933. Section 6 consequently required enforcement by registration rather than a common-law action.

7. Dissent. Lord Clarke would have recognised a fifth common-law ground of jurisdiction for avoidance judgments made in foreign bankruptcy proceedings which the foreign court had jurisdiction to entertain, subject to justice and United Kingdom public policy.

• United Kingdom Supreme Court: Allowed the Rubin appeal by a majority of four to one and dismissed the New Cap appeal unanimously: [2012] UKSC 46.
• Court of Appeal—Rubin: Allowed the receivers’ appeal and held the United States avoidance judgment enforceable at common law: [2010] EWCA Civ 895, [2011] Ch 133.
• High Court—Rubin: Recognised the Chapter 11 proceedings and the receivers as foreign representatives, but refused to enforce the avoidance judgment: [2010] 1 All ER (Comm) 81.
• Court of Appeal—New Cap: Upheld enforcement of the Australian judgment, principally through registration under the Foreign Judgments (Reciprocal Enforcement) Act 1933: [2011] EWCA Civ 971, [2012] 2 WLR 1095.
• High Court—New Cap: Held the judgment unenforceable under the 1933 Act but enforceable under section 426 of the Insolvency Act 1986 and at common law: [2011] EWHC 677 (Ch).