The Dekagram: 9th October 2023

Articles, News

09/10/2023

This week’s Dekagram examines what happens when rules change: that transitional period between one set of rules and another, when no one is quite sure what’s happening. We seem to have had quite a few of those recently; just as we were getting over the horrors of the Withdrawal Act, along came the changes to the Fixed Recoverable Costs regime – changes which, we remind readers, remain in a state of flux, notwithstanding that the new regime is now in force.

Res Judicata and Rule Changes

In the recent case of Invest Bank PSC v El-Husseini & Ors [2023] EWHC 2302 (Comm),  Stephen Houseman KC, sitting as a Judge of the High Court, dealt with a number of preliminary issues which are of general interest.

Background

The wider background to the case was the attempt by Invest Bank PLC (“Claimant”) to enforce in this jurisdiction judgments it had secured in the United Arab Emirates (UAE).

As far back as 2016, Mr El-Husseini gave 2 personal guarantees for credit facilities granted by the Claimant to two UAE registered companies The Claimant subsequently sought to enforce those guarantees and obtained final money judgments in the Abu Dhabi courts for that purpose (“Judgments”). 

It was alleged by the Claimant that Mr El-Husseini (D1) had transferred assets (including properties in England and Wales) to the second to eighth defendants (D2-8) for undervalue, and it sought to unwind those transactions under ss 423-425 of the Insolvency Act 1986.  

18 months after the commencement of proceedings in England and Wales, the Claimant had obtained default judgment against D1 for the outstanding debt in the absence of his filing of a defence (“Default Judgment”).

An application was made by Ds 5,6 and 8 in April 2023 to set aside the Default Judgment against D1, but the Claimant contended that, as co-defendants, they lacked standing to do so.

Finally, it transpired that, in January 2023, 11 days before the Default Judgment was entered, a new law was promulgated in UAE which prevented the enforcement of certain money judgments in Abu Dhabi, and D1 subsequently obtained decisions in the Abu Dhabi courts to the effect that the new law prevented the execution of the Judgments against him.

The Decision: the Judgments

The court determined that, under UAE law (which was also Abu Dhabi law in so far as is relevant), both Judgments were res judicata at all times material and notwithstanding the passage of the new legislation. res judicata arises in respect of what courts decide at the time they decide it. Other than appeals, subsequent legal events do not affect that status:

43. There is no rule of common law that a foreign judgment with res judicata effect in its jurisdiction of origin cannot or should not be enforced here just because it is not presently or fully enforceable in the foreign jurisdiction itself. If such a rule existed, it would have been identified as such and its parameters discussed in authoritative practitioner or academic works on private international law such as Dicey, Morris & Collins: The Conflict of Laws (16th ed. 2022) (“Dicey”), Cheshire, North & Fawcett: Private International Law (15th ed. 2017) (“Cheshire”) or either of the current published works of Professor Adrian Briggs. It is not. In fact, the contrary is said by Professor Briggs in the final sentence of the quotation set out above.

44. In so far as there may be cases where the foreign judgment lacks the essential qualities of finality and/or conclusiveness, that is a different matter. However, the mere fact that the local courts have declined to enforce such judgment does not deprive a final monetary judgment of such qualities. Nor does the enactment of legislation in the relevant foreign jurisdiction which prohibits or suspends or curtails enforcement of such a judgment within that jurisdiction, even where such legislative protection predates the entering of the relevant liability judgment

In this connection, the judge applied the ruling in Merchant International Co Ltd v. Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy [2012] EWCA Civ 196; [2012] 1 WLR 3036:

“…In that case the claimant obtained a final monetary judgment against the defendant in Ukraine during 2006 which was affirmed on appeal. Such judgment(s) could not be enforced against the defendant in Ukraine because a new law had been enacted the previous year suspending execution of judgments against energy companies in that jurisdiction: see [11]. The appeal from David Steel J concerned a refusal to set aside default judgment entered against the defendant on the basis of the 2006 judgment(s) in Ukraine. The defendant impugned such judgment(s) by reference to a 2011 judgment of the Supreme Commercial Court in Ukraine which had repealed the 2006 judgment(s). The issue to be determined was whether the 2011 nullification judgment was itself capable of recognition in this jurisdiction. The judge held that it was not, so refused to set aside default judgment. This was upheld in the Court of Appeal, but on the narrower basis of a discretionary refusal to set aside default judgment in circumstances where there was a powerful case for concluding that the 2011 judgment involved a denial of legal certainty and fair process such as to be contrary to English public policy and in breach of the claimant’s ECHR article 6 rights.

46. The focus was, therefore, upon the recognisability here of the 2011 nullification judgment in Ukraine and its impact upon the recognition and enforcement of the 2006 judgment(s). However, the essential premise for that analysis involved knowing whether there existed any independent defence to recognition or enforcement of the 2006 judgment(s). The Court of Appeal unanimously held that no such defence existed: see Toulson LJ (as he then was) at [65]-[66] as reflected in the opening part of the headnote finding in the law report. The fact that the foreign liability judgment was not capable of enforcement in its jurisdiction of origin by reason of a local statutory provision was not an impediment to its recognition or enforcement in this jurisdiction. It was still a final and conclusive judgment in the eyes of the common law.

The Decision: Set Aside

As to the application to set aside default judgment, the court declined to do so. Whilst it accepted that D6 et.al. did have sufficient interest to be permitted to seek to set aside the Default Judgment against D1, being “directly affected” by the same, that did not relieve them of the requirement to obtain relief from sanctions:

“…to allow a different defendant or directly-affected non-party to circumvent the need to obtain relief from sanctions would contradict the philosophy and compromise the efficacy of our civil procedure system and threaten the finality of judgments which have been regularly entered in civil proceedings”

In light of the fact that D1’s default in failing to serve a defence or otherwise to participate in proceedings had been deliberate and terminal, D6 et.al. were unable to meet the requirements laid down in Denton v TH White Ltd [2014] EWCA Civ 906, [2014] 1 W.L.R. 3926, [2014] 7 WLUK 202. They could be in no better position in this regard than D1 itself:

“She [D6] may derive standing and impetus to make a set aside application from the direct impact of D1’s judgment debt upon her potential statutory or equitable accountability, but her ability to remove that judgment as to primary liability is no better than her ability to remove the sanction imposed for D1’s procedural default”

Finally, in light of the court’s conclusions on the existence of D1’s indebtedness under the Judgments, he had no prospect of successfully defending the Claimant’s claims against him for their enforcement.

About the Author

Dr Russell Wilcox was called to the Bar in 2000, and before joining chambers enjoyed an illustrious career in academia. He was an associate member of McNair Chambers in Qatar, where he worked on a number of large-scale cross-jurisdictional commercial disputes and on international arbitral proceedings, and acted as disclosure counsel in Athenasios Sophocleus & Others v Secretaries of State for Foreign and Commonwealth Affairs and Defence, relating to the actions of the Colonial Administration in Cyprus during the Cyprus Emergency of 1956 to 1959. He now accepts the full range of work undertaken by the travel team at 1 Chancery Lane.

The Rollercoaster of Sport, and Procedural Rule Changes

I spent 1st October 2023 slouched on the sofa glued to the drama unfolding in Rome as Europe seemed sure to romp to victory over the USA, only to stutter, before ultimately cruising to a comprehensive victory.  What a day!  Nerves of steel from the players, boundless enthusiasm from the crowds, and the mighty Americans were toppled and the Ryder Cup regained.

I was less enthusiastic when I was reminded of the plethora of new civil procedure rules that came into force on 1st October, courtesy of the Civil Procedure (Amendment No.2) Rules 2023.  As with all amendments to the CPR, these are best read with a large glass of red but this time they are important and required reading for any civil practitioner.

A pithy Dekagram is not the place to consider the whys and wherefores, rights and wrongs, and do’s and don’ts of the Rule changes.  But knowledge of what has happened is required, if only so you can cancel the rear extension, and rein in your spending as more of your cases are deemed subject to the Fixed Recoverable Costs regime (FRC).

So here goes  …..

  • The FRC has been extended to all civil claims across the fast track, including a new process and separate table of costs for Noise Induced Hearing Loss (NIHL) claims valued up to £25,000.
  • A new intermediate track and corresponding FRC for less complex claims valued at more than £25,000, but not more than £100,000 has been created.
  • FRCs will apply to all cases in the fast track and the new intermediate track, with limited exceptions, with specific provisions for vulnerable parties and witnesses.
  • The arrangements for Part 36 offers to settle in low value personal injury cases already subject to FRC have been updated to cover all FRC claims.
  • A new, revised PD 45 has been created with new, revised tables of fixed costs.
  • CPR Part 26 has been substantially amended to provide new rules governing allocation to the fast or intermediate track, and assignment to one of four complexity bands (which will in turn determine the amount of allowable fixed costs under Part 45).

All, perhaps, to be expected. 

But there are, maybe, two saving graces.

  1. Judges will retain the discretion to allocate more complex cases valued at under £100,000 to the multi-track, so that complex cases will not be inappropriately captured by the extended FRC regime in any event.
  2. Whilst the new FRC will apply to claims where proceedings are issued on or after 1st October 2023, there is an exception for personal injury claims: the rules will apply to claims where the cause of action accrues on or after 1st October 2023, and to disease claims where the letter of claim has not been sent to the defendant before 1st October 2023.

So there we are. 

Take my advice: pour yourself a large drink, cancel the rear extension and / or the weekend away in Paris, and get back to the sofa.

About the Author

Called in 1991, Jeremy Crowther is listed in the Legal 500 for clinical negligence and personal injury. He co-authors Deka Chambers’ Practical Guide to clinical negligence claims andhe regularly advises in case of the highest value, involving catastrophic (and subtle) brain injury, fatal accidents, above knee amputations, chronic pain and nervous shock.

Featured Counsel

Jeremy Crowther

Call 1991

Dr Russell Wilcox

Call 2000

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