England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(MR JUSTICE HART)

		Royal Courts of Justice Strand London, WC2
		8th November 2005

1. LORD JUSTICE CHADWICK: There is listed for hearing before the Court today an appeal in proceedings brought by the Law Debenture Trust Corporation PLC against Elektrim Finance BV, Elektrim SA and Concord Trust. The appeal is from an order made by Hart J on 16th September 2005. The judge held that there had been events of default under a trust deed securing a bond issuer; and directed payment of the amounts which thereupon became due to the Trustee. The judge gave permission to appeal; but recognising that an appeal needed to be resolved urgently, reduced the time for filing appellants' notices.
2. On 24th October 2005, an application was made to me in this Court for expedition of the hearing of the appeal. That application was made not by the appellants but by the respondents, the Law Debenture Trust Corporation and Concord Trust, a bond holder. I acceded to that application and ordered that the appeal be heard in the week starting 7th November. In the event, it was listed for hearing today, 8th November.
3. Following that order, an application was made to this Court on 4th November on behalf of the appellant Elektrim SA for the hearing to be postponed. That application was refused, for the reasons set out in the judgments that we delivered on that day. A further application for an adjournment of this hearing was made by a letter from Elektrim SA, dated 7th November 2005 and received in the Civil Appeals Office at 1647 yesterday evening. That application is renewed by a further letter received this morning at 1035.
4. The first question for the Court, therefore, is whether or not we should now adjourn the hearing fixed for this morning.
5. It is necessary to say something of the background. The Trustee has certified events of default under the Trust Deed. It has given notices of acceleration in January and February 2005. Following those notices, the Trustee commenced bankruptcy proceedings in the District Court in Warsaw. The petition was presented on 3rd March 2005. Shortly thereafter, it commenced these proceedings in London; and sought summary judgment.
6. The bankruptcy proceedings came before the court in Warsaw on 20th May 2005. The petition was dismissed. In the judgment which led to that decision, the Warsaw court recognised that there was no dispute as to the facts, nor as to the contents of the documents which the parties had executed. But it took the view that the submissions which had been made on behalf of the Trustee did not lead to the conclusion, beyond any doubt, that the Trustee held a legitimate claim to the debt on which it was relying.
7. The basis of that decision was that, because the Trust Deed and the conditions annexed to the bonds were governed by English Law, a Polish court was not competent to rule on the interpretation of those provisions. In other words, the Bankruptcy Court in Warsaw appears to have taken the view that, absent some determination in England by a court or an arbitrator, it could not be sure that the debt was due. In those circumstances, rather than adjourn the bankruptcy proceedings so that the proceedings already commenced in England could reach a determination, the court in Warsaw dismissed the petition. It did so, I think, on the grounds that the bankruptcy proceedings should be brought to finality as soon as possible.
8. The Trustee has appealed from that order of the Warsaw Court. The pending appeal in Poland is now due to be heard on 15th November; that is to say on Tuesday of next week. We are told that there will not in fact be an oral hearing on that day. The Appeal Court in Warsaw will deal with the matter on the papers.
9. Between 20th May 2005 and the hearing on 15th November 2005, the Trustee has brought the proceedings in England before a judge at the High Court, Hart J, and has satisfied him that the claims which it asserted were well founded. Hart J was satisfied that there was no defence to those claims which required the proceedings to go to trial. So, on 16th September 2005, he gave summary judgment in favour of the Trustee.
10. The Trustee wishes to place that judgment before the Polish Appeal Court on 15th November. It will say that the doubts which had led the District Court in Warsaw to the conclusion which it reached on 20th May 2005 have now been laid to rest by Hart J's judgment. But the Trustee recognises, of course, that Hart J gave permission to appeal from his judgment and that the appeal in the English proceedings has not been determined.
11. It was in those circumstances that the application was made for expedition of the appeal in this Court, so that the Trustee could put before the Polish Appeal Court the judgments and order of this Court whichever way the decision on appeal in this Court might go. The application for expedition was made as soon as it was known that the appeal in Poland would be heard on 15 November.
12. The need for an early resolution of the appeal in Poland arises in the context of articles 128 and 127 of the Polish Bankruptcy Code. Transactions which have taken place within six or twelve of the date of the presentation of the bankruptcy petition can be avoided if a bankruptcy order is made. The effect of those provisions is that transactions which took place on 21st October 2004 and 31st January 2005, and which the Trustee wishes to challenge, would be vulnerable, if the effective date of the commencement of the bankruptcy proceedings was 3rd March 2005; so also would a further transaction which took place on 15th June 2005.
13. For that reason, it is important from the Trustee's point of view to succeed in Poland on the appeal against the decision of 20th May 2005. It will then be able to rely on the existing petition. If it were now to present a second petition, the provisions of articles 128 and 127 would have effect from the date of the presentation of that second petition. So those provisions would be unlikely to apply to the transactions which the Trustee wishes to set aside.
14. We were told that it is not open to the Trustee to file a protective second bankruptcy petition while the current appeal from the decision on the first petition is pending in Poland. So, the longer the position remains unresolved in Poland, the further into the future will be the presentation of a second petition (if any); and the more difficult it will have become to challenge past transactions.
15. For those reasons, the Trustee is concerned to have a decision of this Court on Elektrim's appeal from the order of Hart J as soon as possible. The lack of a decision of this Court exposes the Trustee to the risk of injustice. Either the Polish Court of Appeal will reach a conclusion on 15th November without knowing the outcome of the English proceedings. Or the Polish court might think it right to postpone the date of the hearing in Poland which, we were told, would be most unlikely unless an application to postpone were supported by Elektrim and that postponement would itself give rise to potential delay in the presentation of any second petition and so risk the loss of a sucessful challenge those past transactions.
16. It was those considerations which led this Court to fix the appeal for hearing this week; so that this Court would be able to determine the position in the English proceedings and so assist the Appeal Court in Poland in its consideration of the bankruptcy proceedings on 15th November.
17. That was the position following the order made in this Court on 24th October 2005. That order was made in the knowledge that the solicitors then on the record for Elektrim in the English proceedings, Skadden Arps Slate Meagher & Flom UK LLP, were considering applying to come off the record. The possibility of such an application had been obvious following correspondence which had taken place on 19 October 2005 between the Trustee's solicitors, Messrs Simmons & Simmons and Skadden Arps.
18. On 19th October 2005, Simmons & Simmons had notified Skadden Arps that they were requesting expedition of the appeal. By way of explanantion Simmons & Simmons set out matters which caused them concern as to the basis upon which applications had been resisted on behalf of Elektrim earlier in the year. The letter concluded with the paragraph:

"We would be grateful if you could explain as a matter of urgency the reason for the inaccuracy in the case presented to Mann J and the apparent inconsistency between the evidence given by Ms Iracka-Piskorz in her Witness Statement before Pumphrey J (which was also before Hart J), and what we now understand to be the true factual position."

19. The response from Skadden Arps, also on 19th October, was that they had not been aware of the matter set out in Simmons & Simmons's letter. But Skadden Arps accepted that, if true, those matters were:

"... inconsistent with the position represented by our client and by our firm on behalf of our client, in the course of these proceedings. This is obviously a matter which our firm takes very seriously."

They went on to say that they had sought an immediate explanation from the client and would revert to Simmons & Simmons as soon as they could.

20. It is now known, from a letter sent by Elektrim to this Court, that Skadden Arps advised Elektrim on 19th October 2005 that Elektrim should instruct other solicitors. Plainly, Skadden Arps felt that they were so embarrassed by what they had learnt that they could not continue to represent their client. No doubt it was the failure of Elektrim to take that advice and to instruct or start the process of instructing other solicitors on 19th November 2005, which led to the decision on or after 24th October 2005 that Skadden Arps would themselves seek to come off the record.
21. The application to come off the record was made to Neuberger LJ. On 1st November 2005, Neuberger LJ took the view that, on the basis of the material which was before him, (which he did not refer to in any detail in his ruling and which is not before us), Skadden Arps's application to come off the record could not be refused. He made it plain in the judgment which he gave on 1st November that he was quite satisfied that it was through no fault of their own that Skadden Arps could not continue to represent Elektrim.
22. On 24th October 2005, I had indicated that, if a sucessful application were made by Skadden Arps to come off the record, then Elektrim and any new solicitors and counsel which they might instruct should not expect a sympathetic hearing on any subsequent application to adjourn or vacate the hearing of the appeal fixed for the week beginning 7th November. I gave that indication because it seemed to me that if steps were taken promptly to instruct new solicitors and new counsel there would be no reason why the appeal should not be properly prepared and presented by solicitors and counsel in the week commencing 7th November.
23. Neuberger LJ took the same view on 1st November. He did so not only on the basis of his own understanding of what the issues under appeal were, but also on the basis of an assurance from leading counsel (then appearing for Skadden Arps) that a competent leading counsel, if briefed within the next day or two (that is on 2nd or 3rd November), should be fully capable of arguing the appeal this week.
24. Having had the opportunity since the matter was last before the Court on 4th November, when an application for an adjournment was made, to read the papers in some detail, I am satisfied that, had steps been taken promptly either on 24th October or even on 1st November, this appeal could have been presented competently by counsel on behalf of Elektrim. I say that because the papers in this appeal have been prepared with obvious care by Skadden Arps and they include a very full and helpful skeleton argument by counsel then instructed on behalf of the appellants. This is one of those appeals in which the issues are not unduly complex although not without some points of difficulty. They emerge clearly from the documentation. They could be fully presented on the basis of the careful analysis both in the judgment and in the skeleton arguments. This is not an appeal in which it need take more than a few days for competent counsel to read into the papers and present the arguments.
25. There is nothing which I have said that suggests that any steps to instruct new solicitors or counsel were taken by or on behalf of Elektrim until Monday 7th November. We have been sent a copy of an exchange of e-mail messages between Elektrim (or a lawyer acting on their behalf) and a firm of solicitors in London. That firm was approached at or about 1050 on the morning of Monday 7 November. That firm declined to take on the case. It may well be that it found itself in a position of conflict; but that does not appear from the exchange of e-mails. There is no other evidence of any attempt made on behalf of Elektrim to instruct solicitors and counsel to represent them today.
26. An approach was made, also on Monday 7 November to leading counsel formerly instructed by Skadden Arps on behalf of Elektrim. He wrote that it was his understanding that Skadden Arps had already explained to Elektrim that, in the circumstances and for the reasons which had led to the application by Skadden Arps to come off the record neither they nor we could continue to act in relation to the appeal. It was on that basis that he would have to decline to accept instructions from any newly instructed solicitor. He pointed out, as is the case, that it would be possible for Elektrim to appear by an officer to represent themselves at the appeal if they could not obtain professional representation. It may be that suggestion which led to an approach to the Civil Appeals Office by lawyers acting for Elektrim in the course of the late afternoon of Monday 7th November, with the enquiry whether a Polish advocate would be allowed to address this Court. It is my understanding that the response of the Civil Appeals Office was that the Court would be prepared to hear a representative on behalf of Elektrim this morning; notwithstanding that that representative might not have formal rights of audience in the English Courts.
27. When the application to adjourn was refused by this Court on 4th November we indicated that, if counsel were instructed over the weekend, the Court would be sympathetic to an application made by counsel for a few days in which to prepare himself to present the appeal. No such application has been made, because no counsel was instructed to make it.
28. The position therefore is that Elektrim, having chosen not to take the steps that were open to them, since 19th or 24th October, to secure representation at the hearing of this appeal, is now not represented by solicitors or counsel and does not appear by any officer or other representative. It simply asks, again, for the appeal to be adjourned.
29. On considering that application, we have to balance the potential injustice that a refusal to adjourn the appeal will cause to Elektrim against the potential injustice that may be caused to the Trustee and the bond holders if the appeal from Hart J's order of 16th September 2005 remains unresolved when the Polish bankruptcy proceedings come before the Polish Appeal Court in the course of next week.
30. I am satisfied that the balance of injustice requires that the application to adjourn this appeal be refused. Elektrim have been given every opportunity to appear at the hearing of this appeal. It has chosen not to take those opportunities. There is a clear forensic advantage to Elektrim if the appeal does not take place in this week, it can then say to the Court in Poland that the issue is still unresolved. It is difficult to avoid the conclusion that Elektrim have recognised that forensic advantage and sought to exploit it. Their conduct is difficult to explain on any other basis. If they suffer a risk of injustice it is, as it seems to me, a direct result of their own choice.
31. For those reasons, I would refuse the further application to adjourn.
32. We were invited, by Elektrim's most recent letter of 7 Novemeber 2005, to take into account an order made in the district court in Warsaw in October 2003. On its face, that order appears to restrain (on an interim basis) the Trustee from taking steps to enforce its claims in Poland. We were told by the Trustee that it had not been served with the order at the time the judgment of Hart J was handed down on 16 September 2005. It was only served with the order on 19 October 2005. We were also told that the Trustee had never been served with the underlying claim. We do not know what status or effect the order may have in Poland; but we were satisfied that it has no relevance to the issues which would fall for decision on the appeal before this Court. These issues turn on the construction of the Trust Deed, to which English Law applies.
33. LADY JUSTICE SMITH: I agree.
34. LORD JUSTICE WILSON: I also agree.
35. Order: The application to adjourn is refused. The appeal is before this Court; but no representative appears on behalf of the appellants to pursue it. In those circumstances, the respondents invite the Court to dismiss the appeal without an investigation into the merits. That is an order to which the respondents are entitled. It is the usual order to make where the appeal is not pursued at the hearing. Accordingly, the appeal is dismissed.