Orexim Trading Ltd v Mahavir Port And Terminal Private Ltd & Ano

A claim under Insolvency Act 1986 section 423 may fall within paragraph 3.1(20)(a) of Practice Direction 6B. The gateway permits service outside England and Wales where the enactment, properly construed, allows proceedings against persons abroad. It does not require express words authorising foreign service.

Section 423 has extra-territorial reach, but the court must rigorously assess whether the defendant and claim have a sufficient connection with England and Wales. That assessment and the separate question whether England and Wales is clearly the proper place for the claim are safeguards against an oppressive exercise of the statutory power.

Orexim Trading Ltd, a Maltese company, sought to set aside under section 423 of the Insolvency Act 1986 sales of a vessel by an Indian company to Singaporean and Indian companies. It alleged that the transactions were intended to prejudice claims arising from commercial dealings and a settlement agreement governed by English law.

HHJ Waksman QC, sitting in the Commercial Court, held that paragraph 3.1(20) of Practice Direction 6B did not permit service out of the jurisdiction, following Re Harrods (Buenos Aires) Ltd [1992] Ch 72. He would otherwise have granted permission: [2017] EWHC 2663 (Comm). The appeal raised the scope of that gateway and, if it applied, whether permission should be granted.

1. Appeal dismissed unanimously. The court agreed with the order refusing permission to serve the section 423 claim outside England and Wales, but for reasons different from those of the judge.

2. Paragraph 3.1(20)(a) of Practice Direction 6B applied. The enactment need not expressly authorise proceedings against persons outside England and Wales. It is enough that, on its proper construction, it permits such proceedings. Section 423 has that effect. Re Harrods (Buenos Aires) Ltd [1992] Ch 72 concerned materially different former rules under which service could occur without permission, and did not govern the modern gateway.

3. The claimant had a reasonable prospect of establishing the two statutory elements: a transaction at an undervalue and a purpose of putting assets beyond the reach of a person who might make a claim. The purpose need not concern an identified creditor. The court upheld the judge’s evaluative conclusion on this issue.

4. However, the broad extra-territorial effect of section 423 requires a rigorous assessment of sufficient connection with England and Wales. Relevant matters include the parties’ residence and business, the transaction and property, the circumstances in which the defendant acquired an interest, good faith, and the effect of foreign law. The judge’s failure to assess those matters vitiated his provisional conclusion.

5. The connection was insufficient. The parties, vessel, transactions, financing, assets and likely evidence were foreign; the impugned transactions pre-dated the English-law settlement agreement; and the present claim had a distinct factual and juridical basis. Alleged bad faith and the settlement agreement did not supply the necessary connection.

6. England and Wales had also not been shown to be clearly the proper place for the claim. The claimant bore that burden. India or Singapore were plausible alternative forums, and there was no evidence of a legitimate juridical advantage in England and Wales. Permission was therefore refused.

• Court of Appeal (Civil Division): Appeal dismissed. The court held that the Practice Direction gateway applied, but upheld the refusal of permission because there was insufficient connection with England and Wales and it had not been shown to be the proper place for the claim: [2018] EWCA Civ 1660.

• High Court, Commercial Court: HHJ Waksman QC refused permission to serve out, holding that the gateway did not apply under Re Harrods (Buenos Aires) Ltd [1992] Ch 72, but stating that he would otherwise have granted permission: [2017] EWHC 2663 (Comm); [2018] Bus LR 470.