MIDTOWN ACQUISITIONS LP V ESSAR GLOBAL FUND LTD [2017] EWHC 519 – ENFORCEMENT OF FOREIGN JUDGMENTS

If it looks like a duck, swims like a duck and quacks like a duck… In this blog post, Patrick Vincent of 12 King’s Bench Walk looks at a recent attempt to escape enforcement of a New York judgment in England on various grounds.

The Claimant obtained two judgments for a total of US$587m in the courts of New York. It did so pursuant to Rule 3218 of the New York Civil Practice Law & Rules (“CPLR”). That rule enables a claimant to enter judgment against a defendant who has “confessed to judgment” by affidavit (“a judgment by confession”), without an action being brought or notice being given. The Defendant had signed such affidavits in the course of negotiating its liabilities to the Claimant.

The English court hearing in front of Teare J determined (i) the Defendant’s challenge to jurisdiction (ii) the Claimant’s application for summary judgment in its action upon one of the New York judgments and (iii) the Defendant’s application for any judgment to be stayed. The applications were heard together by consent.

Jurisdiction

The Claimant contended that it had much the better argument that the English courts had jurisdiction (the “Canada Trust gloss”). The Defendant disputed jurisdiction on the basis that, for three reasons, the New York judgment was not a “judgment” at all as that expression is used in English law.

First it was argued that as there was no action brought in New York, there was no lis between the parties and so there could be no judgment in English Law. The argument was rejected. The provision by the CPLR of a short cut to judgment for an admitted sum was little different to judgment on an admission under CPR14.3. Both required the court to be satisfied that it was appropriate to enter judgment and the absence of any preceding paperwork under the CPLR did not detract from the fact that a judgment obtained pursuant to Rule 3218 was treated like any other judgment.

Next it was argued that the New York judgment was not a judgment because it was not final and conclusive. The Defendant attempted to equate the New York judgment to an obscure, historical species of Spanish judgment (a “remate judgment”) which appears to have been a weak form of interim judgment that either party could elect to ignore and then proceed to have all issues determined at a hearing. The comparison failed. The “remate” judgment was quite different to the New York judgment which, whilst susceptible to appeal or setting aside, was otherwise final, binding and treated by the New York courts as res judicata.

Finally it was argued that the New York judgment was not a judgment because it was not a judgment on the merits. The Defendant relied upon a passage from the judgment of Lord Brandon in The Sennar No. 2 [1985] 1WLR 490 suggesting that for the final judgment of a foreign court to be “on the merits” it has to establish relevant facts, state the relevant law and reach a conclusion as to the result of applying the law to the facts. Teare J stated that those requirements were met in that that the New York Court had the necessary facts in the affidavit and reached a conclusion by “adjudging” that the Claimant should recover the sum in question from the Defendant. In any event, Lord Brandon’s formulation, expressed in a different factual context, was not to be translated word for word into a situation where a foreign court had legitimately given judgment on the basis of a defendant’s admitted liability.

Teare J therefore concluded that the Claimant had much the better case that the New York judgment was a judgment in English law, and succeeded on the jurisdiction point.

A sub-issue was the Claimant’s reliance upon a written agreement in which the Defendant waived any right to object to a venue or forum chosen by the Claimant to enforce the New York judgment. The Defendant successfully submitted that the agreement did not prevent it from challenging the subject matter jurisdiction of the court, but since the challenge had been brought unsuccessfully the point was academic.

Summary Judgment

The Defendant then proceeded to resist the application for summary judgment by raising three possible defences.

Jurisdiction

Its first ground for doing so was that whilst the Claimant may have convinced the court that it had “much the better argument” that the New York judgment was a judgment in English law, there was a real prospect of the Defendant establishing otherwise. Teare J rejected the argument. Having heard two days of argument on the point he did not see any prospects of success for the Defendant at trial.

Fraud

Where a foreign judgment has been obtained by fraud it cannot be enforced in England even if the foreign court has rejected the allegation of fraud – Abouloff v Oppenheimer (1883) 10 QBD 295.

The Defendant’s case was that the New York judgment was obtained by fraud. Its case was that the Claimant’s lawyers should not have obtained the New York judgment because a payment plan drawn up between the parties provided that they should not do so without the Defendant defaulting on payments under the plan.

The real issue was whether proof of deliberate dishonesty was required when seeking to impeach a foreign judgment. The Defendant argued that it was not – it had to take that line, since it explicitly (and unsurprisingly) disavowed any allegation of dishonesty against the Claimant’s lawyers.

After reviewing the authorities, in particular Jet Holdings v Patel [1990] 1 QB 335 and JSC VTB Bank v Skurikhin [2014] EWHC 271 (Comm), Teare J had no hesitation in concluding that deliberate dishonesty was required, and that the fraud defence had no prospects of success.

Breach of Natural Justice

The final line of defence was that the New York judgment was obtained in breach of natural justice, in that the Defendant had not been given notice by the Claimant of its intention to obtain judgment.

The argument was rejected. This was not a case of a litigant being taken by surprise and finding themselves subject to a judgment with no opportunity to defend themselves. The parties were sophisticated commercial entities with the benefit of legal advice. The Claimant had taken advantage of a long standing procedural law to which the Defendant had agreed to be subject. The Defendant had thereby voluntarily and knowingly waived any right to notice or an opportunity to be heard before the Claimant entered judgment.

Conclusion

The Claimant was accordingly granted summary judgment. The judge did, however, stay execution of the judgment until 7 days after the Defendant’s various objections that it had raised in the New York court were heard.

 

A “Judgment by confession” is not a creature known to English Courts. But it is underpinned by established procedural rules and a requirement for evidence of a defendant’s acknowledgment that a debt is owing. Teare J therefore had little difficulty in deciding that it should be recognised notwithstanding the absence of any requirement that a defendant be given notice of its being obtained. It bears the hallmarks of a judgment in English law and was treated as such.

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