Enforcement abroad: summary judgment or judgment in default?

Duferco SA v CVG Ferrominera Orinoco CA [2021] EWHC824 (Comm) was a contractual claim brought by a corporate Claimant against a state-owned entity based in Venezuela. In summary, the Claimant said that the Defendant had failed to make delivery of certain contracted-for products. It sought an eye-watering $11 million in damages plus $11 million in interest.

Service had been validly effected against the Defendant. However, the Defendant did not file an acknowledgement of service or a defence. In these circumstances, the Claimant could have sought the entry of judgment in default.

So far, so straightforward.

However, the Claimant opted not to do this; it instead applied for summary judgment. The Claimant’s reasoning was that it would be easier to enforce a judgment on the merits than a judgment by default in the relevant foreign jurisdictions (in particular, Venezuela).

The judgment, which was previously available in summary only, is now available in full on Westlaw. It provides a useful guide to this important practice point for cross-border practitioners. It is also a good illustration of the importance of a point we have been emphasising – that the practicalities of enforcement need to be considered and acted on at the very earliest stages of a case.

Pursuant to CPR r. 24.4(1), the Claimant had to ask for the court’s permission to apply for summary judgment in the first place (since no acknowledgement of service or defence had been filed).

A Malek QC (the Deputy High Court Judge) first noted that there was no need for this permission to be obtained before the summary judgment application was actually issued:

There is no requirement for a party to obtain permission under CPR 24.4(1) before issuing a summary judgment application. Both applications can be made in the same application notice.

However, a “good and proper reason must be shown if permission is to be given”.

In that respect, there was unchallenged evidence produced by the Claimant that it would encounter difficulties in attempting to enforce a default judgment in Venezuela:

Duferco has adduced evidence that is unchallenged and, which I accept, showing that there is a risk that a default judgment against FMO will not be capable of enforcement in Venezuela and that a judgment on the merits may be more readily enforced against FMO, whether in Venezuela or in other jurisdictions where it has assets.

The judge agreed that this constituted a “good and proper reason” to allow the summary judgment application to proceed:

In these circumstances, I find that there are good and proper reasons to allow Duferco to pursue an application for summary judgment before an Acknowledgment of Service or Defence has been filed by FMO. I consider it would be unjust in the circumstances to refuse permission to apply for summary judgment in circumstances where FMO has chosen not to engage with the proceedings. Permission is, therefore, granted pursuant to CPR 24.4(1) and it is appropriate for the application for summary judgment to be considered now.

Andrew Baker J had come to the same conclusion in FBN Bank (UK) Limited v Leaf Tobacco A Michailides SA & Ors. [2017] EWHC 3017 (Comm) at [18]:

The explanation given for seeking in the present case a proper judicial determination of the claims, in common with explanations that have been given to this court in other matters, is that it may assist the claimant in relation to enforcement efforts (if it has persuaded the court that there are sums properly due), that it is both the case, and can be seen to be the case, that that has been established after proper judicial scrutiny and consideration of the claims, rather than merely upon the basis of an administrative act by the court office. In my judgment, that is a good and proper reason, supported by the evidence before the court in this particular case, why there should be permission and the order on today’s judgment will therefore reflect that I grant permission.

The judge proceeded to determine the summary judgment application in the Claimant’s favour.

It is interesting to note that the Claimant specifically drew the judge’s attention to potential defences that could have been raised by the Defendant. This is surely the safest course of action, although the judge was not sure that it was strictly required:

Duferco, mindful of its obligation to the court where a hearing takes place on an ex parte basis, has given consideration of potential defences that FMO might raise, had they been present. I had doubts that there was a duty to do this, where the respondent to the application is aware of the proceedings and has elected not to participate and has not identified a potential defence or facts giving rise to a potential defence. However, it is standard practice to draw to the judge’s attention to any potential defences to the claim that FMO could have raised …

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