England and Wales High Court (Chancery Division) Decisions

In the High Court of Justice
Chancery Division
Companies Court

		31st July 2009

Introduction

1. This is an application by the joint receivers and managers of The Consumers Trust ("TCT") under the Cross-Border Insolvency Regulations 2006, which gives effect to the UNCITRAL Model Law relating to cross-border insolvency, for:-

(1) recognition under article 15 of bankruptcy proceedings in the U.S. Bankruptcy Court of the Southern District of New York (Case No. 05-60155) as a "foreign main proceeding", together with recognition of the applicants as foreign representatives; and

(2) an order under article 25 enforcing the decision of the U.S. bankruptcy court, holding the respondents liable for the debts of TCT totalling $160 million, as a judgment of the English courts.

2. Two issues of some general interest are raised by the application. The first is whether the Regulations apply where the foreign bankruptcy proceedings relate to a debtor which, according to English law, has no legal personality either as an individual or as a body corporate. The second is whether a monetary judgment given in foreign bankruptcy proceedings can be enforced under the Model Law, when it could not have been enforced if it had been given in the ordinary courts of law of that foreign state.

The facts

3. TCT was settled by Eurofinance S.A. with a payment of £1. Eurofinance S.A. is a British Virgin Islands company which was wholly owned by Adrian Roman and is now owned by a Seychelles registered company. The trustees were two solicitors, Mr. Caplan and Mr. Harrison, and two accountants, Mr. Davis and Mr. Bonley, all of whom practised in Harrow, London. The beneficiaries were "the consumers (members of the public or otherwise) who had successfully participated by claiming validly in a sales promotion or promotions owned or operated by the Settlor ("Promotions")".
4. The Promotions, sometimes known as Cashable Voucher Programmes, took place entirely in the USA and in Canada, although the administration work carried out by the trustees was carried out in England. The Promotions were governed by contracts between the trustees acting for TCT, a company called Consumer Promotions Inc. (or in Canada another company called CPI) and more than 1,000 participating merchants trained in the operation of the scheme by one of these companies.
5. The basis of the scheme was a cashable voucher which the merchants issued whenever they made a sale, which was payable by TCT to the merchant's customer, if but only if he succeeded in following the precise instructions for the steps he needed to go through to claim the amount due on the maturity date. The face value of the voucher was the same as the price of the product.
6. The Promotions were financed in this way. The merchants paid 15% of the face amount of the vouchers which they had issued. Of this 6% was retained by the trustees to meet claims. Just over half the balance was paid to Eurofinance, and so effectively to Adrian Roman. The remainder was paid to Consumer Promotions Inc., CPI, various US service providers involved in the operation of the scheme, some US attorneys involved in the scheme and in the later stages to Adrian Roman's sons.
7. In order to succeed, the customer had to successfully overcome inertia, and then navigate a complex and obscure process involving both memory and comprehension tests. The assessment of whether they had succeeded was carried out in a pedantic manner. The low success rate is evidenced by the fact that, even though the trustees only received some 6% of the face value of the vouchers, they nevertheless had nearly $10 million in bank accounts in the United States and Canada by the time the scheme folded in 2005.
8. The reason, or at least one of the main reasons, why TCT's business failed was that proceedings were brought by the Attorney-General for the State of Missouri under Missouri consumer protection legislation, which resulted in a settlement involving a payment by the trustees of US$1,650,000 and $200,000 in costs, and it became clear that further proceedings were likely in other states.
9. Eurofinance then decided to institute proceedings under Chapter 11 of the United States bankruptcy code, and successfully applied to Lewison J. on 14^th November 2005 for an order appointing the present applicants as joint receivers and managers of TCT: the trustees undertook to assist them, make available all books, records, and other documents relating to TCT's affairs and generally to take all necessary steps to facilitate the bringing of a petition under Chapter 11, and similar action in Canada. The reasons why such action was desirable included the fact that all or virtually all of the 60,000 creditors were in the United States or Canada, the fact that all the assets were in the United States and the availability in the United States of the bankruptcy process for TCT as if it were a separate legal entity, under the classification of "Business Trust".
10. The petition was issued on 5^th December 2005. In the box for "Type of Debtor" TCT was referred to as a "Business Trust". It is common ground that bankruptcy proceedings can be brought in New York in relation to a business trust, even though it has no separate legal personality for any other purpose. The petition confirmed that TCT had been domiciled or had had a residence or principal place of business or principal assets in the District for the immediately preceding 180 days.
11. On 3^rd October 2006, various orders were made against Eurofinance and Mr. Roman "on behalf of the Debtor", including an order for their examination, but they did not comply with them and were held to be in contempt on 10^th January 2007.
12. In May or June 2007 the receivers settled TCT's potential claims against the solicitor trustees for $3.2 million.
13. On 24^th October 2007, the United States bankruptcy court approved a Plan of Liquidation under Chapter 11, which provided amongst other things for the prosecution of "Causes of Action" (very widely defined) against Potential Defendants including the present respondents. This plan had previously been put before Lewison J., who had ordered, on 25^th September 2007, that the receivers should be at liberty to seek approval of it from the United States bankruptcy court.
14. On the same day as the United States bankruptcy court approved the plan, it also appointed the present applicants to serve as foreign representatives on behalf of TCT and to seek recognition of the Chapter 11 case in Great Britain as a foreign main proceeding under the 2006 Regulations. The order provided that the present applicants were appointed to serve for all purposes under the Regulations and specifically

"(i) to make application to the High Court of Justice, Chancery Division ("the High Court") in London for recognition of this Chapter 11 case as a foreign main proceeding under the (regulations);

(ii) to seek assistance and cooperation from the High Court in connection with the Chapter 11 case, and, in particular, to seek the High Court's assistance and cooperation in the prosecution of litigation which may be commenced in this court, including relief regarding service of process, discovery, and the enforcement of judgments of this Court that may be obtained against persons and entities residing or owning property in Great Britain (my emphasis); and

(iii) to take such further actions on behalf of the Debtor as may be necessary or appropriate in accordance with the applicable provisions of the (Regulations)."

15. On 3^rd December 2007, proceedings which have been referred to as "the adversary proceedings" were brought in the United States bankruptcy court against a number of parties including the present respondents. These were not defended and on 23^rd July 2008 default summary judgment was given against all the defendants, including the present respondents, jointly and severally, in the amount of US$160 million. Judgment was given on the basis that they were general partners in TCT, and liable for its debts, and on the basis of breach of fiduciary duty and negligence. The amount of US$160 million represents the estimated amount which would be due to all participants in the Promotions, on the assumption that they successfully completed the process. As I understand it, the basis for this is that it would be impracticable to determine which participants have, or would have, been successful and which would not: therefore it would be necessary to admit all claims.
16. Default judgment was also entered against Eurofinance and Adrian Roman for $8,377,504.76, and against his sons for the amounts of $432,338.86 and $238,514.31 respectively, in respect of transfers of money made to them at a time when TCT was insolvent.
17. The basis for exercising personal jurisdiction over the defendants is set out in the order granting the Plaintiffs' motion for default judgment and summary judgment. The Court held that it had statutory "long-arm" personal jurisdiction under Bankruptcy Rule 7004(f), essentially because the defendants chose the United States as the place to carry on their business. The defendants had the opportunity to challenge this, but did not do so. The defendants did not, of course, have any opportunity to make submissions to the United States bankruptcy court on the issue which is now relevant, namely whether the judgment of that court is enforceable in this country.

The Model Law

18. UNCITRAL adopted the Model Law on Cross-Border Insolvency in May 1997, and issued a substantial Guide to Enactment for the benefit of States which might consider enacting it. The Model Law is, as its name suggests, a blueprint, and individual Enacting States are free to adopt it in whole or in part and subject to whatever modification they may consider to be suitable. Once enacted, the provisions are directly enforceable within the Enacting State whether or not there are reciprocal provisions in the country where the foreign proceedings are taking place.
19. The Guide to Enactment expresses the purpose of the Model Law in its opening paragraphs in the following terms:-

"1. The UNCITRAL Model Law on Cross-Border Insolvency, adopted in 1997, is designed to assist States to equip their insolvency laws with a modern, harmonized and fair framework to address more effectively instances of cross-border insolvency. Those instances include cases where the insolvent debtor has assets in more than one State of where some of the creditors of the debtor are not from the State where the insolvency proceeding is taking place.

2. The Model Law reflects practices in cross-border insolvency matters that are characteristic of modern, efficient insolvency systems. Thus, the States enacting the Model Law ("enacting States") would be introducing useful additions and improvements in national insolvency regimes designed to resolve problems arising in cross-border insolvency cases. Both jurisdictions that currently have to deal with numerous cases of cross-border insolvency and jurisdictions that wish to be well prepared for the increasing likelihood of cases of cross-border insolvency will find the Model Law useful.

3. The Model law respects the differences among national procedural laws and does not attempt a substantive unification of insolvency law. It offers solutions that help in several modest but significant ways. These include the following:

(a) Providing the person administering a foreign insolvency proceeding ("foreign representative") with access to the courts of the enacting State, thereby permitting the foreign representative to seek a temporary "breathing space", and allowing the courts in the enacting State to determine what coordination among the jurisdictions or other relief is warranted for optimal disposition of the insolvency;

(b) Determining when a foreign insolvency proceeding should be accorded "recognition" and what the consequences of the recognition may be;

(c) Providing a transparent regime for the right of foreign creditors to commence, or participate in, an insolvency proceeding in the enacting State;

(d) Permitting courts in the enacting State to cooperate more effectively with foreign courts and foreign representatives involved in an insolvency matter;

(e) Authorizing courts in the enacting State and person administering insolvency proceedings in the enacting State to seek assistance abroad;

(f) Providing for court jurisdiction and establishing rules for coordination where an insolvency proceeding in the enacting State is taking place concurrently with an insolvency proceedings in a foreign State;

(g) Establishing rules for coordination of relief granted in the enacting State in favour of two or more insolvency proceedings that may take place in foreign States regarding the same debtor."

20. Para. 9 states that the purpose of the Guide to Enactment is primarily to assist executive branches of Governments and legislators, but also to provide "useful insight to other users of the text such as judges, practitioners and academics". It is based on the deliberations and decisions of the Commission at its 1997 session, and on the consideration of the Working Group on Insolvency Law which conducted the preparatory work.
21. Section 14 of the Insolvency Act 2000 provided for the Model Law to be brought into effect in the United Kingdom by regulations to be made by statutory instrument, and it was brought into effect by SI 2006/1030 and SRNI 2007/115 (for Northern Ireland). Para. 2(1) of the Regulations provides that the Model Law has the force of law in Great Britain in the form set out in Schedule 1 (containing the UNCITRAL Model Law with certain modifications to adapt it for application in Great Britain). Para. 2(2) provides that (inter alia) the UNCITRAL Model Law and the Guide to Enactment might be considered in ascertaining the meaning or effect of any provision. Para. 3 provides that, in the case of any conflict between British insolvency law and the provisions of the Regulations, the latter are to prevail.
22. Thus the Model Law, as modified, is now enforceable throughout the United Kingdom. It co-exists with other regimes for co-operation in international insolvency matters already in place, namely common law principles, based on comity, relating to the recognition of foreign insolvency proceedings, the EC Regulation on Insolvency Proceedings, where the location of the debtor's centre of main interests ("COMI") is in an EC country and section 426 of the Insolvency Act 1986, which provides for additional co-operation between courts in the United Kingdom and courts in a designated list of foreign countries or territories.
23. The scope of the Model Law is defined in article 1 as enacted in Schedule 1 to the Regulations:-

"1. This Law applies where –

(a) assistance is sought in Great Britain by a foreign court or a foreign representative in connection with a foreign proceeding; or

(b) assistance is sought in a foreign State in connection with a proceeding under British insolvency law; or

(c) a foreign proceeding and a proceeding under British insolvency law in respect of the same debtor are taking place concurrently; or

(d) creditors or other interested persons in a foreign State have an interest in requesting the commencement of, or participating in, a proceedings under British insolvency law."

There follow a series of exceptional cases which the Model Law does not apply.

24. Article 2 of the Model Law contains the following relevant definitions:-

"(f) "foreign court" means a judicial or other authority competent to control or supervise a foreign proceeding;

(g) "foreign main proceeding" means a foreign proceeding taking place in the State where the debtor has the centre of its main interests;

.....

(i) "foreign proceeding" means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation;

(j) "foreign representative" means a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding;

25. The concept of "centre of main interest" (COMI) is not defined, and is left for the courts to decide in any given case, save that there is a rebuttable presumption in article 16(3) that the debtor's registered office, or habitual residence in the case of an individual, is presumed to be the COMI. In the present case, it is common ground that, if TCT is a 'debtor', its COMI is New York.
26. Article 6 (which follows the UNCITRAL Model) provides that nothing in this Law is to prevent the court from refusing to take an action which would be "manifestly contrary to the public policy of Great Britain or any part of it".
27. Article 8 (again following the UNCITRAL Model) provides that:

"In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith."

28. Article 9 gives effect to the basic principle in the UNCITRAL Model Law of direct access:-

"A foreign representative is entitled to apply directly to a court in Great Britain"

There is no requirement that the foreign proceeding must first have been recognised in this country, but the definition of "foreign representative" depends upon the applicant having been authorised in the foreign proceeding, and the foreign proceeding must be within the definition set out above.

29. The following provisions of Articles 15 to 17, all of which follow the UNCITRAL Model Law, are important:-

"Article 15. Application for recognition of a foreign proceeding

1. A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed.

2. An application for recognition shall be accompanied by –

(a) a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or

(b) a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or

(c) in the absence of evidence referred to in sub-paragraphs (a) and (b), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative.

3. An application for recognition shall also be accompanied by a statement identifying all foreign proceedings, proceedings under British insolvency law and section 426 requests in respect of the debtor that are known to the foreign representative.

4. The foreign representative shall provide the court with a translation into English of documents supplied in support of the application for recognition.

Article 16. Presumptions concerning recognition

1. If the definition or certificate referred to in paragraph 2 of article 15 indicates that the foreign proceeding is a proceeding within the meaning of sub-paragraph (i) of article 2 and that the foreign representative is a person or body within the meaning of sub-paragraph (j) of article 2, the court is entitled to so presume.

2. The court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalised.

3. In the absence of proof to the contrary, the debtor's registered office, or habitual residence in the case of an individual, is presumed to be the centre of the debtor's main interests.

Article 17. Decision to recognise a foreign proceeding

1. Subject to article 6, a foreign proceeding shall be recognised if –

(a) it is a foreign proceeding within the meaning of sub-paragraph (i) of article 2;

(b) the foreign representative applying for recognition is a person or body within the meaning of sub-paragraph (j) of article 2;

(c) the application meets the requirements of paragraphs 2 and 3 of article 15; and

(d) the application has been submitted to the court referred to in article 4.

2. The foreign proceeding shall be recognised –

(a) as a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests; or

(b) as a foreign non-main proceeding if the debtor has an establishment within the meaning of sub-paragraph (e) of article 2 in the foreign State …"

30. Article 19 makes provision for applications for urgent relief once an application for recognition has been filed. Article 20 provides that upon recognition of the foreign proceeding that is a foreign main proceeding, individual actions or proceedings concerning the debtor's assets, rights, obligations or liabilities are stayed, execution against the debtor's assets is stayed and the right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended. These provisions again follow the UNCITRAL Model Law.
31. Article 21, again following the UNCITRAL Model Law, makes provision for relief which may be granted upon recognition of a foreign proceeding, whether or not it is a main proceeding:

"Article 21. Relief that may be granted upon recognition of a foreign proceeding

1. Upon recognition of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including –

(a) staying the commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1(a) of article 20;

(b) staying execution against the debtor's assets to the extent it has not been stayed under paragraph 1(b) of article 20;

(c) suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1(c) of article 20;

(d) providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities;

(e) entrusting the administration or realisation of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court;

(f) extending relief granted under paragraph 1 of article 19; and

(g) granting any additional relief that may be available to a British insolvency officeholder under the law of Great Britain, including any relief provided under paragraph 43 of Schedule B1 to the Insolvency Act 1986 [32].

2. Upon recognition of a foreign proceeding, whether main or non-main, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in Great Britain are adequately protected. …"

32. Articles 25 to 27 provide for co-operation and direct communication between the court of Great Britain and foreign courts or foreign representatives and for similar co-operation and communication between the British insolvency officeholder and foreign courts or representatives. The provisions are as follows:-

"Article 25. Cooperation and direct communication between a court of Great Britain and foreign courts or foreign representatives

1. In matters referred to in paragraph 1 of article 1, the court may cooperate to the maximum extent possible with foreign courts of foreign representatives, either directly or through a British insolvency officeholder.

2. The court is entitled to communicate directly with, or to request information or assistance directly from, foreign courts or foreign representatives.

Article 26. Cooperation and direct communication between the British insolvency officeholder and foreign courts or foreign representatives

1. In matters referred to in paragraph 1 of article 1, a British insolvency officeholder shall to the extent consistent with his other duties under the law of Great Britain, in the exercise of his functions and subject to the supervision of the court, cooperate to the maximum extent possible with foreign courts or foreign representatives.

2. The British insolvency officeholder is entitled, in the exercise of his functions and subject to the supervision of the court, to communicate directly with foreign courts or foreign representatives.

Article 27. Forms of cooperation

Cooperation referred to in articles 25 and 26 may be implemented by any appropriate means, including –

(a) appointment of a person to act at the direction of the court;

(b) communication of information by any means considered appropriate by the court;

(c) coordination of the administration and supervision of the debtor's assets and affairs;

(d) approval or implementation by courts of agreements concerning the coordination of proceedings;

(e) coordination of concurrent proceedings regarding the same debtor."

33. In the main, these provisions follow the UNCITRAL Model except that:-

(a) Article 25 paragraph 1 provides that the court may co-operate, whereas the UNCITRAL Model provides that it shall co-operate: there is no similar difference in Article 26 paragraph 1.

(b) There are some minor alterations to article 26; and

(c) Article 27 in the UNCITRAL Model concludes:

"(f) [the Enacting State may wish to list additional forms or examples of co-operation]."

But no additional forms or examples for co-operation have been listed.

The recognition application

34. Although the main issue in this case is whether the procedure under the Regulations and the Model Law can be used to enforce the judgment in the adversary proceedings in England, as indicated above there are two parts to the application: the applicants must succeed in obtaining recognition of the proceedings before consideration can be given to the nature of the assistance which this Court can and should give.
35. Mr. Tregear Q.C. on behalf of the applicants submits that the conditions for recognition set out in Article 17 have been fulfilled. The United States bankruptcy proceedings are clearly a "foreign proceeding" within the meaning of article 2(i). The applicants are foreign representatives by virtue of the order of the United States bankruptcy court dated 24^th October 2007. The documents required by article 15(2) and (3) have been supplied. The application has been submitted to the Chancery Division as required by article 4. Therefore, article 17 requires that the United States bankruptcy proceedings "shall be recognised". Since it is common ground that TCT's COMI is New York, it must be recognised as a foreign main proceeding, with the consequences set out in article 20.
36. The first point taken in response to the application for recognition by Mr. Staff is that, whilst it is clear that a business trust is treated in US bankruptcy law as a separate legal entity, and can be the subject of insolvency remedies – according to the applicants' United States counsel, Mr. Friedman, TCT "is an insolvent corporate entity" – it is not a separate legal entity as a matter of English law. Articles 15 and 17, read together with the definitions of "foreign proceeding" and "foreign representative" in article 2 require the existence of "a debtor". Mr. Staff submits that the word "debtor" must be given its ordinary meaning in English law, from which it follows that there is no debtor and that the Model Law cannot be applied in this case, or in any other case in which the insolvent estate in a foreign jurisdiction is not that of an individual or of a corporate entity recognised in English law as an independent legal entity.
37. In support of his argument, Mr. Staff relied on a decision of Comyn J. in R. v. Leeds City Council ex parte Datta (1962) T.L.R. 224, in which the issue was whether the applicant was entitled to a grant on the basis that he was attending a full-time course which was either a first degree course or comparable to a first degree course, in circumstances in which he had attended degree courses in India. In my view, the decision in this case turned on the facts: Comyn J. found that, on the evidence, the applicant's Calcutta degrees were not comparable to English degrees, from which it followed that his current course was either a first degree course or comparable to a first degree course. Mr. Staff also relied on a decision of Stirling J. in Re Bethell (1887) 38 Ch. D. 220, in which he decided that the child of a polygamous marriage was not legitimate and could not inherit under the will. The English law of wills required that the marriage should have been voluntary union with one person for life. I do not think that either of these authorities takes the issue in this case any further. The issue depends on the proper construction of the Model Law.
38. Mr. Staff further relies on a passage in the judgment of David Richards J. in re HIH Casualty [2006] 2 All ER 671 at para. 143, where he says of the Model Law:-

"It is not a convention, but a set of provisions drafted to be enacted by individual states, with such local variations as may be necessary."

Therefore, it is submitted, uniform interpretation is unnecessary, and the words used in the Model Law should be given their ordinary domestic meaning.

39. This seems to me unrealistic, for at least three reasons. First, the drafting origins of the relevant definitions are international, not domestic. Secondly, the definition which is principally relevant is the definition of "foreign proceeding", where the word occurs in the following phrase "in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court …". It would in my view be perverse in that context to give the word "debtor" any other meaning than that given to it by the foreign court in the foreign proceedings.
40. Thirdly, article 8 provides that in interpreting the Law, regard is to be had to its international origin and to the need to promote uniformity in its application. Both these considerations would be disregarded, if the court were to adopt a parochial interpretation of "debtor" and as a result refuse to provide any assistance in relation to a bona fide insolvency proceeding taking place in a foreign jurisdiction. Whilst the Guide to Enactment does not specifically address this issue, it is clear from many passages in it that its object is to promote communication, co-operation and assistance in cross-border insolvencies of any kind.
41. What has given me some pause for thought is consideration of whether the Model Law will work in practice, where the debtor is not a legal entity known to English law. For the most part, there should be no difficulty, since the requirement to co-operate is expressed in general terms and is mainly discretionary. However, it is worth considering how article 20 would work. This imposes an automatic stay on the commencement or continuation of proceedings "concerning the debtor's assets, rights, obligations or liabilities" and on "execution against the debtor's assets", and suspends the right to transfer, encumber or otherwise dispose of "any assets of the debtor". Nevertheless, I do not think that there would be any great difficulty in applying this to TCT. The stay and suspension would apply to proceedings involving, or assets held by, the trustees qua trustees. At all events, I do not think that the difficulty is so great as to lead me to accept the respondents' argument on this point, when it is clearly inconsistent with the object of the Model Law.
42. I therefore hold that TCT is a "debtor" for the purposes of the Regulations and the Model Law, from which it follows that I must recognise the Chapter 11 proceedings as a foreign main proceeding. It does not matter whether any other order can be made; if the conditions for recognition are met, the applicants are entitled to have the proceedings recognised.
43. The respondents' next submit that the applicants are foreign representatives for the original Chapter 11 proceedings only, and not for the adversary proceedings. If this is correct, the enforcement application, which relates to the judgment in the adversary proceedings, would inevitably fail. It is submitted that, by virtue of articles 15(2) and 17(1)(c), a foreign representative must produce the appropriate certification from the foreign court, and that the only certification produced in this case relates to the order of the United States bankruptcy court relating to the insolvency case on 24^th October 2007, which was before the adversary proceedings had even been commenced.
44. The issue here is whether the adversary proceedings are part of the original Chapter 11 insolvency proceedings, or new and separate proceedings. Whilst it is true that the adversary proceedings have a separate case number, I find that they are, as the applicants submit, part of the insolvency proceedings which began on 24^th October 2007. Para. 5.1 of the Plan which the United States bankruptcy court approved vested the causes of action in TCT and provided that they became part of its assets. Para. 5.4 gave the applicants exclusive power to pursue them. The title of the adversary proceedings refers to the applicants as plaintiffs "solely in their capacity as receivers for (TCT)". Para. 1 describes the causes of action as "arising in or related to" the insolvency proceedings. This is accepted by the court at para. 1 of its conclusions of Law (page 23 of its order granting the plaintiffs' motion). In my view this is a straightforward example of receivers being authorised, as part of the insolvency proceedings, to pursue claims for the benefit of the insolvent estate with a view to distributing the proceeds amongst the creditors.
45. The respondents next submit that adversary proceedings are not a foreign proceeding within the meaning of article 2(i). This is put in two ways. First, it is submitted that where there is a claim by the bankrupt against a third party, which is not bound up with the process of collecting and distributing the bankrupt estate, that claim is not part of the collective judicial proceedings. There is a dichotomy between what is part of the collective proceedings and what is incidental. Here, the adversary proceedings are not part of the collective judicial proceedings but are merely incidental to it. Secondly, it is submitted, the adversary proceedings are not brought "pursuant to or relating to an insolvency". It is only the status of the receiver to bring the proceedings which arises from the law relating to insolvency, not the causes of action.
46. I do not agree with either of these submissions. As to the first, bringing adversary proceedings against debtors of the bankrupt is clearly part of collecting the bankrupt's assets, with a view to distributing them to creditors. In my view, there is nothing in the distinction which is sought to be drawn. In any event, as I have already found, the adversary proceedings were always part of the plan and are an integral part of the Chapter 11 insolvency proceedings.
47. As to the second point, again the short answer is that the adversary proceedings are part and parcel of the Chapter 11 insolvency proceedings. But even if this were not so, the adversary proceedings are in my view brought "pursuant to a law relating to insolvency", and they also "relate to" insolvency. But for United States bankruptcy law, and the Chapter 11 proceedings, differently constituted proceedings would have had to be brought by or on behalf of TCT in order to pursue the claims in the adversary proceedings. It is not necessary that the cause of action should have arisen from a law relating to insolvency: this would give the provision an unduly narrow scope, for which no sensible reason was, or in my view can be, advanced.
48. In relation to both these points, a purposive construction should be given to these provisions. Their object is to facilitate co-operation between different jurisdictions in relation to bankruptcy proceedings. For trustees in bankruptcy or their foreign equivalents to pursue adversary proceedings against persons connected with the debtor is hardly unusual, and a construction of the provisions which made it impossible for co-operation and assistance to be offered in relation to such matters would make no sense.
49. Finally, the respondents submit that the adversary proceedings are outside the ambit of the Model Law because it can no longer be said that, in these proceedings, the assets and affairs of the debtor are subject to control or supervision by a foreign court. This is because the proceedings were terminated by the default summary judgment and are therefore no longer subject to such control or supervision. In my view, this is unarguable. Since the judgment has not been satisfied, the execution stage of the proceedings continues and is subject to the control and supervision of the United States bankruptcy court.

The enforcement application

50. It is common ground that, but for the bankruptcy, the only way in which a judgment obtained by TCT against the respondents could be enforced in England is by an action on the judgment at common law, which would succeed only if the defendant in the action was present in the foreign country at a time the proceedings were instituted, counterclaimed in the proceedings, voluntarily appeared or agreed to submit to the jurisdiction. See Dicey & Morris, the Conflict of Laws, 14^th ed. at 14-009, 14R-018, 14R-048. It is not suggested on behalf of the applicants that any of these occurred as regards any of the respondents.
51. The applicants nevertheless submit that the Model Law confers jurisdiction to recognise the judgment and order it to be enforced as though it were a judgment of this Court, in accordance with CPR Parts 70 to 73. They submit that the Model Law was intended to be implemented in such a way as to permit money judgments given in insolvency proceedings in one jurisdiction to be enforced in another. They submit that the court is empowered to grant such relief by two separate provisions of the Model Law, namely:-

(a) article 21.1(e), which permits the court to grant any appropriate relief including "entrusting the administration or realisation of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court"; and

(b) article 25.1, which permits the court to "co-operate to the maximum extent possible" with foreign courts or foreign representatives.

52. Mr. Tregear submitted that it would not be particularly surprising if, on the proper construction of the provisions, they enabled the court in effect to by-pass the common law requirements for the enforcement of a judgment, because this would in any event be possible, if there had been a request by the New York court, on the basis of the common law principle of comity, which recognises that bankruptcy proceedings should be of universal application and that therefore English courts should provide assistance and co-operation in foreign bankruptcy proceedings. This principle is discussed in Dicey at paras. 30R-097 et seq. It is clear that its ambit is uncertain, and that there is no case in which it has been applied to justify enforcement of a foreign judgment otherwise than in accordance with the domestic rules of private international law.
53. Mr. Tregear relies strongly on the decision of the Privy Council in Cambridge Gas Transportation Corporation v. Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508. In that case, a New York bankruptcy court approved a plan for the assets of a business to be taken over by its creditors. The business consisted of the operation of a number of ships, each of which was owned by a separate company which was a sub-subsidiary of a holding company called Navigator. Cambridge, the appellant, owned 70% of the issued share capital of Navigator, and was itself a wholly-owned sub-subsidiary of a company called Vela which participated in the Chapter 11 proceedings and therefore submitted to the jurisdiction in New York. The plan, which was approved by the New York court, involved the shares in Navigator being vested in the creditors committee. This was not a decision as to the pre-existing ownership of the shares; it was just part of the plan to realise the assets to the best possible effect.
54. The New York court sent a letter of request to the High Court of Justice of the Isle of Man asking it to give effect to the plan and the confirmation order and the creditors' committee petitioned for an order vesting the shares in their representatives, at which point Cambridge opposed the application on the basis that it (as opposed to Vela, its parent) had not submitted to the jurisdiction of the New York court, and that the order approving the plan amounted to a judgment in rem affecting property outside the court's territorial jurisdiction. Cambridge's opposition succeeded in the High Court, but it failed on different grounds before the Staff of Government Division, and the first instance and appeal court decisions were both overruled by the Privy Council.
55. The main point for present purposes is that the Privy Council held that the New York order and plan involved neither a judgment in rem nor a judgment in personam, but was to be regarded as a collective proceeding to enforce rights, not to establish them: see paras. 13-15. Lord Hoffmann said that what the Privy Council was upholding was a scheme of arrangement which could equally well have been set up in the Isle of Man, which was for the benefit of creditors generally and which was not unfair to the shareholders; it was therefore binding on Cambridge as a shareholder since, even if it had not technically submitted to the jurisdiction in New York, it has had ample opportunities to participate and anyhow had no economic interest in the proceedings: see paras. 8-9 and 24-27.
56. The central passage in Lord Hoffmann's advice is as follows:

"16. The English common law has traditionally taken the view that fairness between creditors requires that, ideally, bankruptcy proceedings should have universal application. There should be a single bankruptcy in which all creditors are entitled and required to prove. No one should have an advantage because he happens to live in a jurisdiction where more of the assets or fewer of the creditors are situated. For example, in Solomons v. Ross (1764) 1 HBl 131 in a firm in Amsterdam was declared bankrupt and assignees were appointed. An English creditor brought garnishee proceedings in London to attach £1,200 owing to the Dutch firm but Bathurst J, sitting for the Lord Chancellor, decreed that the bankruptcy had vested all the firm's moveable assets, including debts owed by English debtors, in the Dutch assignees. The English creditor had to surrender the fruits of the garnishee proceedings and prove in the Dutch bankruptcy.

17. This doctrine may owe something to the fact that 18^th and 19^th century Britain was an imperial power, trading and financing development all over the world. It was often the case that the principal creditors were in Britain but many of the debtor's assets were in foreign jurisdictions. Universality of bankruptcy protected the position of British creditors. Not all countries took the same view. Countries less engaged in international commerce and finance did not always see it as being in their interest to allow foreign creditors to share equally with domestic creditors. But universality of bankruptcy has long been an aspiration, if not always fully achieved, of United Kingdom law. And with increasing world trade and globalisation, many other countries have come round to the same view.

18. As Professor Fletcher points out (Insolvency in Private International Law, 1^st ed (1999), p.93) the common law on cross-border insolvency has for some time been "in a state of arrested development", partly no doubt because in England a good deal of the ground has been occupied by statutory provisions such as section 426 of the Insolvency Act 1986, the European Council Regulation (EC) No. 1346/2000 of 29 May 2000 on insolvency proceedings (OJ 2000 L160, p.1) and the Cross-Border Insolvency Regulations 2006 (SI 2006/1030), giving effect to the UNCITRAL Model Law. In the present case, however, we are concerned solely with the common law.

19. The underdeveloped state of the common law means that unifying principles which apply to both personal and corporate insolvency have not been fully worked out. For example, the rule that English moveables vest automatically in a foreign trustee or assignee has so far been limited to cases in which he was appointed by the court of the country in which the bankrupt was domiciled (in the English sense of that term), as in Solomons v. Ross, or in which he submitted to the jurisdiction; In re. Davidson's Settlement Trusts (1873) LR 15 Eq 383. It may be that the criteria for recognition should be wider, but that question does not arise in this case. Submission to the jurisdiction is enough. In the case of immoveable property belonging to a foreign bankrupt, there is no automatic vesting but the English court has a discretion to assist the foreign trustee by enabling him to obtain title or to otherwise deal with the property.

20. Corporate insolvency is different in that, even in the case of moveables, there is no question of recognising a vesting of the company's assets in some other person. They remain the assets of the company. But the underlying principle of universality is of equal application and this is given effect by recognising the person who is empowered under the foreign bankruptcy law to act on behalf of the insolvent company as entitled to do so in England. In addition, as Innes CJ said in the Transvaal case of In re. African Farms Ltd [1906] TS 373, 377, in which an English company with assets in the Transvaal had been voluntarily wound up in England, "recognition which carries with it the active assistance of the court". He went on to say that active assistance could include:

"A declaration, in effect, that the liquidator is entitled to deal with the Transvaal assets in the same way as if they were within the jurisdiction of the English courts, subject only to such conditions as the court may impose for the protection of local creditors, or in recognition of the requirements of our local laws."

21. Their Lordships consider that these principles are sufficient to confer upon the Manx court jurisdiction to assist the committee of creditors, as appointed representatives under the Chapter 11 order, to give effect to the plan. As there is no suggestion of prejudice to any creditor in the Isle of Man or local law which might be infringed, there can be no discretionary reason for withholding such assistance."

57. All this is very far from providing authority for the proposition that an English court can disregard the normal rules of private international law relating to the enforcement of judgments and give effect to a judgment in foreign bankruptcy proceedings against a third party (whether the third party was involved in the bankrupt business or not). The principle of universalism, to the extent that it has been achieved, is intended to ensure fairness in the distribution of assets as between the creditors and shareholders and has nothing at all to do with taking a jurisdictional shortcut as against third parties. As Lewison J. said recently in re Stanford International Bank Ltd [2009] EWHC 1441 (Ch) at para. 104 the general principle of universalism is that there should be "one collective proceeding in which all creditors are entitled to participate, irrespective of where they are located." The New York court in Cambridge had established a plan which was fair as between all the creditors and the shareholders and, as a matter of comity, the Manx court should have given effect to it so as to prevent one shareholder securing an unfair advantage by unreasonably claiming not to be bound by it.
58. In the present case, the New York bankruptcy court has done something quite different, namely establish the debtor's rights as against third parties in what is undoubtedly a judgment in personam. To give effect to this without more, disregarding the common law rules of private international law, is not justified by anything said in Cambridge. On the contrary, Lord Hoffmann makes it clear that the principle of universality would not justify it at para. 13:-

"Mr. Howe's submissions as to the rules of private international law concerning the recognition and enforcement of judgments in rem and in personam are of course correct. If the New York order and plan had to be classified as falling within one category or the other, the appeal would have to be allowed."

It is precisely because, as he went on to say, the order of New York bankruptcy court was neither a judgment in rem nor a judgment in personam, but an order which was "to provide a mechanism of collective execution against the property of the debtor by creditors whose rights are admitted or established", that it was to be given effect to by the Manx court.

59. Therefore, in my opinion, Cambridge establishes the opposite proposition to that advanced by the applicants. At common law, an English court could not accede to a request by a foreign insolvency court to enforce a judgment in personam contrary to the rules of English private international law.
60. Mr. Tregear also relied on the decision of the House of Lords in Re HIH Casualty v. General Insurance Limited [2008] 1 WLR 852, in which the House reversed the decision of David Richards J., upheld by the Court of Appeal, and held that the English provisional liquidators should remit the assets in their hands to the Australian liquidators for distribution in accordance with Australian rules, which differed substantially from English rules. Essentially, this was because Australian liquidation was the principal liquidation. The decision as made under section 426 of the Insolvency Act and there was a division in the House of Lords as to whether the court would have had the same jurisdiction at common law.
61. I was referred to the following passages in Lord Hoffmann's speech:-

"6. Despite the absence of statutory provision, some degree of international co-operation in corporate insolvency had been achieved by judicial practice. This was based upon what English judges have for many years regarded as a general principle of private international law, namely that bankruptcy (whether personal or corporate) should be unitary and universal. There should be a unitary bankruptcy proceeding in the court of the bankrupt's domicile which receives worldwide recognition and it should apply universally to all the bankrupt's assets.

7. This was very much a principle rather than a rule. It is heavily qualified by exceptions on pragmatic grounds; elsewhere I have described it as an aspiration: see Cambridge Gas Transportation Corpn v. Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508, 517, para. 17. Professor Jay Westbrook, distinguished American writer on international insolvency has called it a principle of "modified universalism": see also Fletcher. Insolvency in Private International Law, 2^nd ed. (2005), pp.15-17. Full universalism can be attained only by international treaty. Nevertheless, even in its modified and pragmatic form, the principle is a potent one.

8. In the late 19^th century there developed a judicial practice, based upon the principle of universalism, by which the English winding up of a foreign company was treated as ancillary to a winding up by the court of its domicile. There is no doubt that an English court has jurisdiction to wind up such a company if it has assets here or some other sufficient connection with this country: In re. Drax Holdings Ltd [2004] 1 WLR 1049. And in theory, such an order operates universally, applies to all the foreign company's assets and brings into play the full panoply of powers and duties under the Insolvency Act 1986 like any other winding up order: see Millett J in In re International Tin Council [1987] Ch 419, 447: "The statutory trusts extend to [foreign] assets, and so does the statutory obligation to collect and realise them and to deal with their proceeds in accordance with the statutory scheme."

.....

29. I therefore agree with the Court of Appeal that the court has jurisdiction, even if not for precisely the same reasons. But the Court of Appeal nevertheless decided that the jurisdiction should not be exercised because the outcome for some creditors would be worse than if the English assets were distributed according to English law. There as, said Carnwath LJ [2007] Bus LR 250, para. 72, no "rule of private international law, or any other countervailing benefit" which would require the court to disregard the principles applicable under English insolvency law.

30. I must respectfully disagree. The primary rule of private international law which seems to me applicable to this case is the principle of (modified) universalism, which has been the golden thread running through English cross-border insolvency law since the 18^th century. That principle requires that English courts should, so far as is consistent with justice and UK public policy, co-operate with the courts in the country of the principal liquidation to ensure that all the company's assets are distributed to its creditors under a single system of distribution. That is the purpose of the power to direct remittal. "(My emphasis)"

62. That this again makes the same point: the principle of universalism is directed at ensuring so far as possible a uniform and fair system for distributing the assets of an insolvent estate with assets in more than one jurisdiction as between those who have a claim to them. It has nothing whatsoever to do with how or in what jurisdiction a possible asset of the insolvent estate consisting of a claim against third parties is to be established.
63. Accordingly, I turn to the provisions of the Model Law, but without any pre-disposition in favour of the applicants' case on the suggested basis that the principle of universalism would have entitled an English court to give effect to the judgment of the United States bankruptcy court against the respondents if requested to do so by that court, irrespective of the normal rules, and that it is therefore natural to construe the Model Law, as enacted here, as providing for such enforcement.
64. The general parts of Guide to Enactment do not suggest that anything so radical was intended. I have already set out paras. 1-3 above and they suggest that the intention was to provide modestly useful improvements. Paras. 15 and 16 recognise that some countries have legislation for the enforcement of foreign judgments which may include foreign insolvency orders, but it is not suggested that the general provisions as to co-operation in the Model Law are intended to take the place of, or have the same effect as, these. Para. 20 refers to the scope of the Model Law being "limited to some procedural aspects of cross-border insolvency cases" so as to fit in with existing insolvency law in the enacting State. Para. 28 refers to the objective of providing expedited and direct access for foreign representatives to the courts of the enacting State, without the need to rely on cumbersome and time-consuming letters rogatory or other forms of diplomatic or consular communications, so making fast action possible. There is no suggestion anywhere that the Model Law is intended to replace the rules of private international law of any enacting State. Nor is there anything in the Explanatory Memorandum to the Regulations, 2006 No. 1030 to support the applicants' argument.
65. As indicated earlier, the first provision on which the applicants is rely is article 21(e), giving the court a discretion to entrust the realisation of all or part of the debtor's assets located in Great Britain to the foreign representative.
66. This provision cannot assist the applicants for two reasons. First, as Mr. Staff submits, the judgment is not located in Great Britain but in New York: see A-G v. Bouwens (1838) Y W & M 171 and 179; New York Life Insurance Co. v. Public Trustee [1924] 1 Ch. 101 at 107-8. It would only be located in Great Britain if the Court made an order for its enforcement here, but the provision cannot be used unless it is already located in Great Britain. In other words, in order to get within this provision, the applicants are forced to advance a bootstraps argument.
67. Secondly, even if this difficulty did not exist, the provision would only give the court a discretion to permit the foreign representative to realise the assets i.e. the judgment debt. Nothing in it would permit realisation in a manner which was not authorised by the general law. The court could authorise the foreign representatives to bring an action on the judgment, or to bring a fresh claim here. Nothing in the provision would justify permitting them to treat the New York judgment as if it were an English judgment, contrary to the common law.
68. The applicants then rely on article 25 which permits the courts to co-operate to the maximum extent possible with foreign courts or foreign representatives, and submits (in my view correctly) that co-operation is not limited to the forms of the co-operation specified in article 27.
69. Mr. Tregear points out that section 426 of the Insolvency Act which provides inter alia that an order made by a court of any part of the United Kingdom is to be enforced in any other part of the United Kingdom as if it were made by a court exercising the corresponding jurisdiction in that other part, is headed "Co-operation between courts exercising jurisdiction in relation to insolvency", and suggests that this shows that the enforcement of the judgment of another court is properly to be regarded as "co-operation" in this context. However, in my view the weight to be attached to the Insolvency Act as an aid to construction is slight: the relevant travaux préparatoires are those preceding the Model Law, which is the origin of the word "co-operation" in the Model Law as applied by this country as an enacting State.
70. The relevant part of the Guide to Enactment includes the following passage:-

"Chapter IV. Cooperation with foreign courts and foreign representatives

173. Chapter IV (articles 25-27), on cross-border cooperation, is a core element of the Model Law. Its objective is to enable courts and insolvency administrators from two or more countries to be efficient and achieve optimal results. Cooperation as described in the chapter is often the only realistic way, for example, to prevent dissipation of assets, to maximize the value of assets (e.g. when items of production equipment located in two States are worth more if sold together than if sold separately or to find the best solutions for the reorganization of the enterprise).

174. Articles 25 and 26 not only authorize cross-border cooperation, they also mandate it by providing that the court and the insolvency administrator "shall cooperate to the maximum extent possible". The articles are designed to overcome the widespread problem of national laws lacking rules providing a legal basis for cooperation by local courts with foreign courts in dealing with cross-border insolvencies enactment of such a legal basis would be particularly helpful in legal systems in which the discretion given to judges to operate outside areas of express statutory authorization is limited. However, even in jurisdictions in which there is a tradition of wide judicial latitude, enactment of a legislative framework for cooperation has proved to be useful.

175. To the extent that cross-border judicial cooperation in the enacting State is based on the principle of comity among nations, the enactment of articles 25-27 offers an opportunity for making that principle more concrete and adapted to the particular circumstances of cross-border insolvencies.

176. In the States in which the proper legal basis for international cooperation in the area of cross-border insolvency is not the principle of comity, but an international agreement (e.g. a bilateral or multilateral treaty or an exchange of letters between the cooperating authorities) based on the principle of reciprocity, chapter IV of the Model Law may serve as a model for the elaboration of such international cooperation agreements.

177. The articles in chapter IV leave certain decisions, in particular when and how to cooperate, to the courts and, subject to the supervision of the courts, to the insolvency administrators. For a court (or a person or body referred to in articles 25 and 26) to cooperate with a foreign court or a foreign representative regarding a foreign proceeding, the Model Law does not require a previous formal decision to recognize that foreign proceeding.

178. The importance of granting the courts flexibility and discretion in cooperating with foreign courts or foreign representatives was emphasized at the Second UNCITRAL-INSOL Multinational Judicial Colloquium on Cross-Border Insolvency. At that Colloquium, reports of a number of cases in which judicial cooperation in fact occurred were given by the judges involved in the cases. From those reports a number of points emerged that might be summarized as follows: (a) communication between courts is possible but should be done carefully and with appropriate safeguards for the protection of substantive and procedural rights of the parties; (b) communication should be done openly, in the presence of the parties involved (except in extreme circumstances), who should be given advance notice; (c) communications that might be exchanged are various and include: e.g. exchanges of formal court orders or judgements; supply of informal writings of general information, questions and observations; and transmission of transcripts of court proceedings; (d) means of communication include, for example, telephone, facsimile, electronic mail facilities and video; and (e) where communication is necessary and is intelligently used, there could be considerable benefits for the persons involved in, and affected by, the cross-border insolvency."

71. The general impression given by these passages, and of the wording of the provisions themselves, is that what was contemplated was that there should be practical co-operation and communication within the framework of the law in both States, but not that one State should disregard important provisions of its own legal system. The examples of the forms of co-operation in article 27 also give this impression, and it is to be noted that they provide for the co-ordination of proceedings, not for the proceedings in one country to be treated as proceedings in the other, which is in effect what the applicants contend for. I do not consider that permitting the foreign representative to enforce the judgment of a New York bankruptcy court directly in this country would constitute "co-operation" within the meaning of these provisions. Much clearer words would have been used if that had been the intention behind these provisions.
72. Alternatively, if I am wrong about that, I would not exercise my discretion in favour of doing so. That is because it is, and has for centuries been, a fundamental principle of English private international law that the judgment of a foreign court is not enforceable unless the defendant was present within the jurisdiction, or in some way submitted himself to the jurisdiction, of the foreign court. This principle applies both at common law and under the Administration of Justice Act 1920 and Foreign Judgments (Reciprocal Enforcement) Act 1933: see Dicey paras. 14-49 and -50. Whilst other countries may regard this as unduly restrictive (and probably the United States would), it represents English law and in my view it would be unfair to the respondents, who are entitled to rely on English law, for the court to exercise its discretion after the event to disregard it.
73. Further, having regard to the objective of promoting uniformity, it would be wrong in my view to ignore the absence of any evidence that the United States, or any other country, would regard the Model Law as justifying departure from its own rules of private international law in relation to the recognition and enforcement of foreign judgments.

Conclusion

74. For all the above reasons, I uphold the application for recognition of the proceedings in the United States bankruptcy court in the terms set out in the draft Recognition Order attached to the application presented to the Court of 3^rd November 2008, and I am also prepared to make the order requested at paragraph (v), but I am not prepared to make the orders requested at paragraphs (iii) and (iv).
75. Unless there are any unexpected consequential matters, it is not necessary for anyone to attend the handing down of the judgment. I would be content to receive written submissions on costs if they cannot be agreed. My provisional view is that I should order the applicants to pay one half of the respondents' costs, but I will consider arguments from either side on this. I am also content to receive submissions on permission to appeal, if this is sought, in writing.