An unsatisfied writ for a foreign judgment was not execution under the Insolvency Act 1986 and could not be the basis of a bankruptcy petition.
Summary
The court held that the unsatisfied writ in respect of a foreign judgment was not ‘execution’ for the purposes of section 268(1)(b) of the Insolvency Act 1986 and therefore could not found a bankruptcy petition. In turn, the writ of control had to be set aside.
Background
In 2013 Islandsbanki (IB) obtained a judgment against Stanford (S) in Iceland. This was for over £1.5 million with interest. A certificate was issued pursuant to the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. IB then registered the judgment in England and the registered order was sealed on 23 March 2016. This contained a direction that S had one month after service of the notice of registration to appeal against the registration and that the judgment could not be executed during this time or, if there was an appeal, until after that appeal had been determined.
Despite this, a writ of control was issued on the 30 March 2016 in the High Court, pursuant to CPR Part 74. The enforcement officers were unable to enforce the debt, despite making a number of visits to S’s property and the writ was certified as unsatisfied in February 2017.
IB then petitioned for S’s bankruptcy. This petition was dismissed by the Insolvency and Companies Court on the basis that there had been “no enforcement for the purposes of s268(1)(b) of the Insolvency Act 1986” and that the writ of control was invalid.
Two of S’s other creditors also petitioned for S's bankruptcy and the bankruptcy order was made on HMRC’s petition. This petition was presented 4 months after IB’s petition and this meant that a preference payment allegedly made by S to their spouse could not be void as this was made more than two years before HMRC’s petition.
IB's appeal to the High Court was dismissed, and they appealed again to the Court of Appeal.
The court's decision
The Court of Appeal dismissed IB’s appeal and held that:
the Lugano Convention’s purpose was to create a single regime for foreign judgments to be enforced in contracting States. Articles 43(5) and 47(3) of the Lugano Convention, when construed purposively, create an overarching principle applicable in every contracting state
article 43(5) of the Lugano Convention provides that an appeal against a registration order must be lodged within one month of service (or two months if the debtor is domiciled in a state different to that registering the judgment). During this period, and until any such an appeal is determined, Article 47(3) of the Lugano Convention sets out that ‘no measures of enforcement may be taken’ (other than protective measures against the property of the party against whom enforcement is sought)
not only is the Convention directly effective in English law, these provisions were put into effect by section 4A(3) of Jurisdiction and Judgments Act 1982 (CJJA 1982). This provision also has to be referenced in the registration order itself as per CPR 74.6(3). This is the relevant provision of the CPR, not the general provision under CPR Part 3 and any exercise of the discretion under CPR 3.10(b) in order to validate the Writ of Control, despite the fact that it was issued during a period in which execution was prohibited by Article 47(3), would have the effect of undermining the Convention itself
contravention of Article 47(3) of the Lugano Convention, section 4A of the 1982 Act and CPR 74.9(2) cannot be categorised merely as an “error of procedure” as the defect was fundamental
the court below was right to decide that the writ of control was voidable rather than automatically void and that the court was obliged to set it aside as soon as it came to its attention. The writ could be set aside either on application of the debtor or on the court’s own motion without having to advance any substantive case on the merits
enforcement forbidden by the terms of the Lugano Convention and section 4A of the 1982 Act cannot be “execution” for the purposes of s268(1)(b) of the Insolvency Act 1986 to satisfy the requirement that the debtor is unable to pay the debt
Comments
This judgment highlights that checking whether a client has been given the necessary period of time within which to appeal the registration of a foreign judgment before enforcement action is taken is an important step, particularly when looking at possible grounds to defend a bankruptcy petition from a foreign creditor.
Even if the client is made bankrupt at a later date, by defending the bankruptcy petition on this basis a debtor could buy themselves some time. This may result in some transactions not falling within the period of time that could lead to the position of the parties being restored.