Orexim Trading Ltd v Mahavir Port and Terminal Private Ltd

The Court of Appeal considered whether paragraph 3.1(20) of Practice Direction 6B (the "gateway") gives the English court power to permit service outside England and Wales of a claim under section 423 of the Insolvency Act 1986, and if so whether that power should be exercised in the circumstances of this case. The court held that the gateway can, as a matter of construction, permit service out in relation to a section 423 claim because section 423 can have extra-territorial effect, but that important safeguards apply before permission should be given (notably the requirement that the claim have a real prospect of success, that England and Wales be the proper place to bring the claim, and that there be a sufficient connection with England and Wales).

Applying those safeguards, the court concluded there was insufficient connection with England and Wales and that England and Wales had not been shown to be "the proper place" to bring the section 423 claim. For those reasons the court dismissed the appeal and upheld the refusal of permission to serve out.

Background and parties: The appellant, Orexim Trading Ltd, a Maltese company, sought to impugn a series of foreign transactions said to be transactions at an undervalue under section 423 Insolvency Act 1986. The principal target transactions were the sale and onward sale of the vessel Bon Vent by the Indian company Mahavir Port and Terminal Private Ltd (MPT) to a Singaporean company (Singmalloyd) and thence to Zen Shipping and Ports India Private Ltd (Zen). Orexim relied on a settlement agreement governed by English law and sought permission to serve the s.423 claim abroad.

Procedural posture: This is an appeal from the Commercial Court (HHJ Waksman QC, CL-2016-000527; judgment [2017] EWHC 2663 (Comm); [2018] Bus LR 470). HHJ Waksman concluded that, on authority of Re Harrods (Buenos Aires) Ltd, the PD6B gateway did not permit service out for a s.423 claim, although he said that if the court had had power he would have granted permission. Permission to appeal was granted.

Issues before the Court of Appeal:

• Whether paragraph 3.1(20) of Practice Direction 6B permits service outside England and Wales of a claim under section 423 Insolvency Act 1986; and
• If the gateway does permit service out, whether permission should be granted in the present case.

Court's reasoning: The court analysed: (i) the territorial scope of section 423 (concluding that Parliament intended it to have potential extra-territorial effect, subject to safeguards); (ii) the meaning and proper construction of PD6B para 3.1(20) and its relation to other CPR provisions (notably CPR Part 6.33(3), Part 6.36 and Part 6.37); and (iii) the safeguards that must be applied when the claimant seeks permission to serve out in an extra‑territorial s.423 claim. The court rejected a restricting interpretation derived from Re Harrods: the present procedural regime requires the court both to consider whether a claim falls within a gateway and then whether permission should be granted, applying the statutory and discretionary safeguards.

Application to the facts: Although the judge below had been entitled to find the section 423 claim had a real prospect of success, the Court of Appeal held there was insufficient connection between the claim and England and Wales and that England and Wales had not been shown to be the proper forum. Key factors included that the defendants and transactions were foreign, the disputed sale transactions pre-dated the English‑law settlement agreement relied upon by Orexim, the impugned transactions were governed by Singapore law, and there was no evidence of assets or losses located in England and Wales. The court therefore refused permission to serve out and dismissed the appeal.

This is an appeal allowed only to the extent of construing the gateway: the court held that paragraph 3.1(20) of PD 6B can permit service out in respect of a section 423 claim, because section 423 may have extra-territorial effect. However, on the facts the court refused permission to serve out: there was an insufficient connection with England and Wales and England and Wales was not shown to be the proper place to bring the claim. The appeal is dismissed for those reasons.

Appeal from the Commercial Court (HHJ Waksman QC) CL-2016-000527, judgment reported [2017] EWHC 2663 (Comm); [2018] Bus LR 470. Permission to appeal to the Court of Appeal was granted and the appeal was heard on 3 July 2018, judgment delivered 13 July 2018 ([2018] EWCA Civ 1660).