BG Atlantic Inc v Hay Hill Investments Ltd

The fraud exception to enforcement of a foreign judgment is carefully delimited. It requires conscious and deliberate fraud practised on the foreign court, concerning either the claim or the court’s process, and the fraud must have had an operative effect on the judgment. Historic fraud concerning the source of funds is insufficient without a principled basis for extending the exception. The public policy defence concerns enforcement of the foreign judgment, rather than merely the underlying transaction. It cannot succeed by repackaging the same facts relied on for an unsuccessful fraud defence without an additional public policy element.

The claimant sought judgment in England for a debt arising from a judgment of the Supreme Court of the State of New York concerning an unpaid loan. There was no applicable enforcement treaty or convention. The defendant admitted the loan, default and New York judgment, but alleged that the loan funds derived from historic fraud involving a third party. It relied on fraud and public policy, and said that the allegations had not been litigated in New York.

The claimant applied for summary judgment and, alternatively, to strike out parts of the defence. The central issues were whether the alleged historic fraud could engage the fraud exception to enforcement of a foreign judgment, whether the same matters could found a public policy defence, and whether the defence had a realistic prospect of success.

1. Summary judgment. The court applied the realistic-prospect test under CPR 24.3 and the strike-out principles under CPR 3.4(2). It was permissible to decide the legal issues without a mini-trial. The court assumed, for the application, that the pleaded facts concerning the alleged fraud would be proved at trial.
2. Fraud defence. The common-law exception requires a fraud practised on the foreign court. It may concern the claim advanced there or be collateral or procedural fraud affecting the court’s process. The fraud must be conscious and deliberate and must have had an operative effect on the foreign judgment. The pleaded case concerned only historic fraud in the acquisition of the loan funds. It did not allege that the loan agreement or claim in New York was fraudulent, or that the claimant otherwise misled that court. Extending the exception to require investigation of historic dealings and earlier judgments would be a significant and impermissibly expansive development.
3. Public policy. The relevant question was whether enforcement of the New York judgment, not simply the underlying loan transaction, would offend public policy. The defence could not succeed by repackaging the same facts as the fraud defence without identifying an additional ingredient. The link between the alleged fraud and the judgment was remote, and refusing enforcement would allow the defendant to retain money to which it was not entitled.
4. Other matters. The proposed abuse-of-process argument would have succeeded because the defendant could have raised the fraud allegations in New York but made a tactical choice not to do so. Parts of the defence relying on a foreign judgment as evidence of the truth of its findings would also have been struck out. A possible New York appeal did not prevent finality or justify a stay.
5. Order. Summary judgment was granted for the claimant. Judgment was entered for £857,395.85, with interest of £78,848.65. Costs were summarily assessed at £75,000 on the standard basis, payable within 14 days.

First-instance decision. No prior English appellate decision in the present proceedings was stated.