Islandsbanki Hf & Ors v Stanford

The Court of Appeal held that enforcement measures taken under a writ of control issued during the period for appealing the registration of a foreign judgment were unlawful and could not be treated as "execution" for the purposes of section 268(1)(b) of the Insolvency Act 1986. The court construed Article 47(3) and Article 43(5) of the Lugano Convention together with section 4A(3) of the Civil Jurisdiction and Judgments Act 1982 as imposing an express prohibition on enforcement (other than protective measures) while the appeal period is running. The prohibition cannot be overridden or cured by CPR r 3.10, the court's inherent jurisdiction, CPR Part 74 or Rule 12.64 of the Insolvency Rules 2016. Because the writ was issued unlawfully it was voidable and could not satisfy the statutory requirement of execution returned unsatisfied in whole or in part in s.268(1)(b). Accordingly the appellant's bankruptcy petition failed and the appeal was dismissed.

This is an appeal by Islandsbanki HF (IB) against Fancourt J's order dismissing IB's appeal from ICC Judge Jones, who had dismissed IB's bankruptcy petition against Mr Kevin Stanford (the IB petition), and allowed a later HMRC petition to lead to a bankruptcy order.

Background and parties:

• IB relied on an Icelandic judgment (Reykjanes District Court 26 June 2013) which was registered in England under the Lugano Convention; a registration order was sealed on 23 March 2016.
• A writ of control was issued on 30 March 2016 purportedly to enforce the registered judgment; enforcement activity followed in April 2016 and the writ was later certified "unsatisfied in whole"; IB presented its bankruptcy petition on 6 April 2017. HMRC presented an earlier-in-time petition (22 August 2017) and adjudication followed on that petition.
• IB sought to establish that the execution under the writ satisfied s.268(1)(b) Insolvency Act 1986 and that any procedural defect could be cured so that the IB petition should have priority.

Issues framed:

1. Whether purported execution under a writ of control issued before the expiration of the appeal period against registration of a foreign judgment (Article 43(5) Lugano/section 4A(3) 1982 Act) can amount to "execution or other process issued in respect of the debt" for the purposes of s.268(1)(b) Insolvency Act 1986.
2. If not, whether the defect could be cured by domestic procedural powers (for example CPR r 3.10), the Insolvency Rules (IR 12.64), the court's inherent jurisdiction or other rules of court.

Reasoning and outcome:

• The court held that Article 47(3) Lugano and section 4A(3) of the 1982 Act create a clear treaty/statutory prohibition on enforcement (other than protective measures) while the appeal period runs; that prohibition is reflected in CPR Part 74. That prohibition cannot be overridden by use of CPR r 3.10, the court's inherent jurisdiction or the Insolvency Rules, because doing so would undermine the Convention and statute.
• The writ of control issued during the prohibited period was therefore "unlawful" and, although prima facie voidable until set aside, could not be relied on as execution satisfying s.268(1)(b). The statutory requirement that execution be issued and returned unsatisfied was not met.
• For those reasons the appeal was dismissed and no order for costs was made.

Procedural path: appeal from Mr Justice Fancourt, [2019] EWHC 1818 (Ch.), upholding the decision of ICC Judge Jones (22 February 2019, varied 13 March 2019). The trustees in bankruptcy did not appear.

The appeal is dismissed. The court held that Article 47(3) of the Lugano Convention and section 4A(3) of the Civil Jurisdiction and Judgments Act 1982 prohibit enforcement (other than protective measures) while the period for appeal under Article 43(5) is running; a writ of control issued during that period was unlawful and could not be validated by CPR r 3.10, the court's inherent jurisdiction, CPR Part 74 or IR 12.64. Such unlawful enforcement cannot constitute "execution" for the purposes of section 268(1)(b) of the Insolvency Act 1986, so the statutory precondition for the IB petition was not satisfied.

Appeal from the High Court (Chancery Division), Mr Justice Fancourt [2019] EWHC 1818 (Ch.), which upheld the decision of ICC Judge Jones (22 February 2019, varied 13 March 2019). Registration order for the Icelandic judgment sealed 23 March 2016; writ of control issued 30 March 2016; IB petition presented 6 April 2017; HMRC petition presented 22 August 2017 and adjudication followed on the HMRC petition.