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AN CHÚIRT UACHTARACH
THE SUPREME COURT
Dunne J.
Charleton J.
O'Malley J.
[2025] IESC 20
IN THE MATTER OF REGULATION NO. 1215/2012 AND ORDER 42A RULE 23(4) OF THE RULES OF THE SUPERIOR COURTS AND S.I. NO 9/2016
Between/
MICHEAL SCULLY
Respondent
AND
COUCAL LIMITED
Appellant
JUDGMENT of Mr. Justice Gerard Hogan delivered on the 26th day of May 2025
Part I - Introduction
1. In this appeal the Court is asked to determine whether the recognition of a particular Polish judgment should be refused on the ground that to do so would be manifestly inconsistent with the public policy of this State within the meaning of Article 45(1)(a) of Regulation (EU) No. 1215/2012 of European Parliament and of the Council on jurisdiction and recognition and enforcement of judgments in civil and commercial matters (recast) ("Brussels I (recast)"). The issue arises in the following way.
2. Coucal Ltd. is an Irish company which was established by some 63 investors, the majority - if not, indeed, all - of whom are Irish citizens resident in this State. They contend that they were the victims of certain wrongdoings in Poland which they say were perpetrated by Mr. Michael Scully, an Irish resident. This appeal centres on whether the assignment of a claim by the investors to Coucal Ltd. which was valid under Polish law either so savours of champerty or was one which otherwise permitted the assignment of a bare cause of action to an unconnected third party such that the Irish courts would be justified in refusing to recognise or enforce the ensuing Polish judgment on the ground that the case comes within the manifest public policy exception in Article 45(1)(a) of Brussels I (recast).
3. Before considering any of these issues, it is necessary first to sketch out the background facts.
Background
4. It appears that around 2006 Mr. Scully approached a group of 78 investors to invest in the purchase of land and the construction of a shopping centre in Opole, Poland. The investors invested considerable sums in the form of share capital in a Polish special purpose vehicle (SPV) which undertook the construction project. The shopping centre opened in March 2009. In July 2009 Mr Scully informed the investors that their intended exit strategy of refinancing the SPV's loans to allow the investors to exit the investment with a profit was no longer feasible due to the global financial crisis.
5. At the end of November 2010, Mr Scully apparently informed the investors of an offer by another company, Alterco SA, to swap the shares in the SPV with D series shares in Alterco. It seems that he maintained that this would offer a significant profit and diversification opportunity. He wrote further in December 2010 to express serious concerns about the financial situation of the shopping centre. No in-depth analysis or explanation was given at the time. The investors agreed to Alterco's offer in March 2011. They proceeded to grant Mr Scully powers of attorney to effect the necessary transactions on their behalf. Unbeknownst (it is said) to the investors, Mr Scully had, however, entered a joint venture with Alterco pursuant to which he was to arrange for the acquisition of these shares in the SPV. The transactions entered by Mr Scully are said to have been highly unfavourable to the investors which resulted in them losing the entire value of their investment.
6. Following the establishment of Coucal, the investors entered individual assignment agreements to assign their causes of action as against Mr Scully to Coucal. These assignments were executed under Polish law and it is accepted that these were valid assignments under that law. The company was established, and individual assignment agreements were devised for the express purpose of enabling the company to take action against the respondent in Poland on the investors' behalf.
7. Each individual assignment itself was set out in both Polish and English in a short five page document. It appears that the assignment was executed in May 2015 and Coucal is the assignee. Having recited the background to the dispute and the shareholding in Alterco, the operative part of the assignment went on to describe its principal purpose:
"The subject of this contract is assignment for a future debt due to the assignor from Michael Scully...provided that the court rules that the Shares Purchase Agreement(s) is (are) null and void, hereinafter referred to as the debt."
8. The fourth page of the assignment has proved to be the most contentious. Here the assignor (i.e., one of the investors) provided the following assurances or warranties to the assignee:
"The assignor states that:
- The debt is free from any incumbrances
- The right to sell the debt to the third party has not been excluded;
- The debt has not been the subject of an assignment so far;
- The assignment of the debt to other entities has not been made after the conclusion of the agreement." (emphasis supplied)
9. The highlighted words have been the subject of much controversy in both the High Court and the Court of Appeal. Did these words mean that the assignee could sell on the cause of action? Or did they - as Coucal's expert lawyers contended - simply mean that the assignor was entitled to transfer the claim to the assignee? I propose to return to this point later in the judgment.
10. In August 2015, proceedings were initiated in the Regional Court in Warsaw. Coucal contended that Mr Scully had defrauded the shareholders in respect of the investment arrangement. Coucal sought a declaration of nullity of the agreements Mr Scully had concluded on behalf of the investors' behalf using powers of attorney granted to him, and the return of the purchase price of their shares. Coucal was unsuccessful in these proceedings at first instance, and on 15th October 2015 it filed an appeal. The case was heard by the Polish Court of Appeal who, in a decision dated 10th June 2021, awarded judgment ("the Polish judgment") in the sum of PLN 28,391,106 (approximately €6.33m.) against the respondent, Mr. Scully. That Court concluded that he had wrongfully and without authority purported to enter agreements on behalf of the shareholders of Coucal.
11. On 7th July 2021, the Court of Appeal in Poland permitted Coucal to commence enforcement proceedings in Ireland in respect of the judgment and by letter dated 28th July 2021 Coucal served Mr Scully a letter laying out its intention to commence enforcement proceedings in Ireland against his assets. In response, Mr Scully filed an originating notice of motion on 30th July 2021 initiating proceedings in the (Irish) High Court seeking an order pursuant to Article 45(1)(a) of Brussels I (recast) that the recognition and enforcement of the Polish judgment should be refused.
12. Mr Scully sought this refusal on two bases: First, it was said that the transfer of individual bare causes of action to Coucal was impermissible as a form of champerty and maintenance ("the assignment issue"). Second, he argued that the Polish Court that issued the judgment was improperly constituted in a manner contrary to the principle of judicial independence ("the rule of law issue"). This Court is at present concerned only with the assignment issue.
13. On 11th May 2022, the Polish Court of Appeal delivered written reasons for its judgment of 10th June 2021. Mr Scully sought leave to appeal to the Supreme Court of Poland on 11th July 2022. This leave was granted in March 2023. It appears that that Court made a reference to the Court of Justice under Article 267 concerning aspects of judicial independence in Poland. While this issue featured in the judgment of the High Court and was later pressed before the Court of Appeal that Court did not find it necessary to adjudicate on this issue. I would propose that at the conclusion of this judgment that this Court should invite the parties, should they think well of it, to make further submission on this single issue.
Part II -The judgment of the High Court
14. In an ex tempore judgment of the High Court delivered by on 11th November 2022, Owens J. refused the relief sought by Mr Scully. The High Court concluded that there was no issue of fundamental principle of Irish law that would be infringed by the recognition of the judgment by reason of the assignment of the cause of action issue. Owens J. considered that while the Irish law may not align on that of Poland in respect of who is entitled to bring an action, such was a matter for the law of the forum and not an essential ingredient of the legal order in Ireland. Recognition could not be refused because the other state's rules on assignments were not the same as Ireland as it was not necessary to insist that the rules must be identical in the original judgment rendering state and this State in which the judgment is sought to be enforced.
15. Owens J. was not satisfied in any case that the assignments in this case amounted to maintenance and champerty as there was 'correspondence' between the shareholding of Coucal and the investors' claims to recover their investment. As such, there was no bare trading of an action designed to make a profit, thereby commercialising the litigation. Owens J. held that while compelling policy grounds have always been a basis on which the courts have refused to recognise foreign judgments, that there was no evidence that in this case the recognition of the foreign judgment would be 'manifestly' contrary to public policy for the purposes of the threshold of Article 45(1)(a) of Brussels I (recast).
16. In relation to the rule of law issue, the High Court held that there was no evidence demonstrating that the possibility of ministerial abuse had any impact on the conduct or outcome of the appeal in Warsaw. Owens J. held that it would have been necessary to identify a systemic deficiency in the procedure of that Court and that the deficiency had a significant impact on these proceedings. Owens J. concluded that such had not been shown in this case and that there was no reason for the Court to make any such inquiry itself. In such circumstances, the High Court held that there was no need to await the outcome of the preliminary reference made by the Polish Court pursuant to Article 267 TFEU concerning the compatibility of the Polish Court appointment system with EU law, as there was no evidence of interference with judicial independence presented in this case. Mr Scully duly appealed this judgment and order of the High Court to the Court of Appeal.
Part III - The judgment of the Court of Appeal
17. In a judgment delivered on 30th April 2024, Donnelly J. allowed the appeal of Mr Scully and refused the recognition of the orders of the Court of Appeal in Poland: see Scully v. Coucal Ltd. [2024] IECA 104. Donnelly J. held that the principles underpinning the legal framework governing non-recognition are well-known and that it was the application of these general principles to the factual situation which was in issue.
18. With regard to the assignment issue, the Court of Appeal first considered whether the impugned assignments were assignments of bare causes of action which would be unenforceable if litigated in this jurisdiction. Donnelly J. disagreed with the trial judge's characterisation of the assignments and found the applicant to have acquired the underlying claim as well as the proceeds of prosecuting the claim through the assignment agreement. Donnelly J. held that the assignment of a bare right to litigation is prima facie champertous and therefore unenforceable unless there is a genuine commercial interest in the claim purportedly assigned, where that interest exists prior to and independent of the assignment.
19. In this respect, Donnelly J. was satisfied that the commonality of identity between the original investors and the shareholders of Coucal met the requirements of a pre-existing genuine commercial interest in the claim. Donnelly J. held however, that such a connection was not itself sufficient to determine the issue, and that the possibility of onward transmission of the claim to an unconnected third party must be considered. In this respect, Donnelly J. concluded that as the express term in the assignment provided "the right to sell the debt to a third party [had] not been excluded", that the assignment would be prohibited by Irish public policy as it directly contemplated the possibility of onward transmission. Donnelly J. rejected the submission that the lack of intention to permit onward transmission distinguished this matter. Donnelly J. held that the assignments were clearly contemplated and permitted and thus were designed and intended to permit onward transmission and that as such would be clearly prohibited by Irish public policy as to the commodification of litigation.
20. Turning then to the question of whether public policy would preclude the recognition of the Polish judgment, Donnelly J. noted the two ways in which the public policy exemption could arise: the infringement would have to constitute a manifest breach of a rule of law regarded as essential in the legal order of the State in which enforcement is sought, or of a right recognised as being fundamental within that legal order. Donnelly J., having considered the leading decision of this Court in SPV Osus Ltd. v. HSBC Institutional Trust Services (Ireland) Ltd. [2018] IESC 44, [2019] 1 IR 1, concluded that the prohibition on the enforcement of agreements amounting to assignments of a bare cause of action applied to the present case. This was, she held, a clear statement of public policy and a rule of law which can be regarded as essential in the legal order of the State, namely, the commodification of claims running counter to the administration of justice. These considerations were sufficient to meet the high threshold of Article 45(1)(a). Donnelly J. held that to ask the courts to enforce a judgment arising from this type of unenforceable assignment would be to ask the courts to engage in the very thing that the public policy finds offensive; facilitation of commercial activity rather than administering justice between two parties with a genuine dispute. In this respect, Donnelly J. rejected the contention that a public policy consideration could not be fundamental if it could be changed by legislation.
21. Finally, Donnelly J. held that there was no need to engage with the rule of law argument presented in the High Court in circumstances where it was impermissible in public policy to enforce the judgment of the Polish court. Furthermore, in light of the fact that the Polish Court had made a referral to the CJEU, the Court of Appeal considered that it was neither necessary nor appropriate that the Court engaged with the second ground of appeal and considered that it should not itself make a preliminary reference or give any particular view on the matter.
Part IV- The grant of leave by this Court
22. Coucal brought an application for leave to appeal to this Court pursuant to Article 34.5.3° of the Constitution seeking to set aside the order of the Court of Appeal. It applied for leave on the basis that the Court had not considered the appropriate interpretation and application of the 'public policy' ground for non-recognition under Article 45(1)(a) and the question of whether the onward transmission of a cause of action that is not precluded by the terms of an assignment is sufficient to render that assignment unenforceable under Irish law. Coucal also sought to contend that the 'rule of law' issue required a determination by this Court.
23. Leave was granted by this Court by a determination dated 11th November 2024 on the basis that while it was clear in Irish law that an agreement for the assignment of a bare cause of action is unenforceable by reason of the fact that such agreements are prohibited as being contrary to the public policy in this State, as decided in SPV Osus, that case did not consider whether such a breach of public policy constitutes a manifest breach of a rule of law regarded as essential in the legal order of the State in which enforcement is sought or of a right recognised as essential within that legal order in accordance with the interpretation of the 'public policy' ground for non-recognition of a Member State judgment under Article 45(1)(a) of Brussels I (Recast) as that phrase is understood in EU law. The Court did not grant leave as to the 'rule of law' issue as the issue was not given consideration in the judgment in the Court of Appeal and in those circumstances, it would not be appropriate to grant leave on that issue: see generally [2024] IESCDET 133.
Part V- The submissions of the parties
The argument of Coucal Limited
24. The appellant contends that it was an error for the Court of Appeal to focus solely on whether champerty and maintenance and impermissible assignments were sufficiently fundamental to the Irish legal order. The appellant argues that also relevant to the determination of the matter is the characterisation of the assignments. The appellant contends that the assignment of an action is not wrongful per se, but only where it would amount to the commodification of litigation. The appellant contests that their assignments would not have represented any such commodification insofar as the proceeds of the litigation would ultimately be assets in the company and there was no possibility of profiting from the matter. The appellant contends that the Court of Appeal was in error in determining that the assignments savoured of champerty as contrary to Irish public policy by reason of the permissibility of onward transmission.
25. The appellant contends in this respect that the Court of Appeal failed to have regard for the fact-specific analysis mandated by the CJEU. It further submits that the wording of the terms of the assignment relating to onward transmission were a mere surplusage and that the effect of the Court of Appeal judgment is that the assignments would have been unlawful unless there had been an express provision precluding onward transmission, in circumstances where onward transmission would have been permissible. The appellant contends that this did not account for the lack of evidence of any intention to proceed in this manner. Moreover, the appellant contends that SPV Osus was not determined on the basis of the wording of the assignment itself, but rather the general commercial nature of the transaction, so that the existence of a clause permitting or excluding the onward transmission was not, in itself, dispositive of the matter. The appellant asserts that in any case, Mr Scully's case was not based on an assertion that Coucal was engaged in maintenance or champerty, but that the assignment amounted to trafficking in litigation. The appellant submits that in circumstances where it was accepted that Coucal had a legitimate commercial interest in the litigation that the onus of proof is on the respondent to demonstrate that the assignments amounted to trafficking in litigation.
26. Finally, the appellant considers that in any case the prohibition on champerty, maintenance and impermissible assignments is not sufficiently fundamental to the Irish legal order to meet the threshold of Article 45(1)(a) of Brussels I (recast). The appellant suggests that laws that are subject to change over time through common law or legislative development are unlikely to constitute Irish public policy. The appellant submits that the prohibition of assignment of bare causes of action in certain circumstances falls into this category as a creation of common law and as such is not sufficiently fundamental to the Irish rule of law so as to justify non-recognition of the Polish judgment.
27. The appellant contends that the Court of Appeal erred in failing to consider whether the breach of public policy was 'manifestly' contrary to public policy. The appellant contends that there was no manifest breach in circumstances where it is seriously debateable if the prohibition of any assignment of a cause of action is fundamental to the Irish legal order and if these assignments themselves would contravene Irish law.
The arguments of Mr Scully
28. Mr Scully disagrees with the scope of the appeal. The respondent contends that it is not necessary for this Court to assess the meaning and effect of the assignments, and that the only question is the threshold of the public policy non-recognition exception in Article 45(1)(a). In this respect, the respondent asserts that the Court of Appeal took the correct approach in determining that to enforce the judgment arising from this type of unenforceable assignment would be to ask them to do the very thing that public policy finds offensive. In this respect, the respondent contends that the appellant is in error in asserting that the word 'manifest' adds stringency to this test. The respondent suggests that 'manifest' is used to underscore the exceptional nature of non-recognition on public policy grounds, and rather than implying an evaluation of degree or severity of infringement, it is used to communicate the certainty and obviousness of the breach.
29. The respondent contends that the appellant has failed to address the contention that the relevant consideration of public policy engaged by champertous assignments is the administration of justice, a fundamental principle regarded as essential in the legal order of the State which is specific and capable of narrow expression. The respondent identifies two factors which stand out in identifying that this is a fundamental rule; that champerty and maintenance are criminal offences and torts, and that common law can engender public policy. In this respect, the respondent disagrees with the implication that the fact that legal order may be changed by legislative activity that this in some way suggests that it is not an essential and fundamental rule. The respondent contends that the appellant is in error in suggesting which types of laws and rules which are likely and unlikely to form public policy and suggests that the source of public policy can include common law and that common law rules should have no less standing as essential rules.
30. Notwithstanding that the respondent contends the issue of the character of the assignment is outside the scope of the appeal, they nonetheless submit that the Court of Appeal correctly characterised the assignment as one which is impermissible on public policy grounds. The respondent contends that the only relevant determination was the argument based on the specific clause contained in the assignment which contemplated and permitted onward transmission. Despite the accepted genuine commercial interest and commonality of identity, given it contemplated and permitted the onward transmission to a third party, the assignment manifestly savoured of champerty. The respondent disagrees that there was any burden on the appellant to establish a genuine commercial interest and that the assignment was not designed and intended to permit onward transmission and in any case states that this was not so established by the appellant.
Part VI - The public policy exception
31. The starting point in this appeal is that this Court must take the Polish judgment as it finds it. Save, perhaps, in exceptional circumstances, we are not entitled to look behind that judgment or to query the reasoning of that Court, since this would amount to a review as to substance, contrary to the prohibition contained in Article 52 of Brussels I (recast). It follows that the Polish judgment is prima facie entitled to recognition in the State unless such recognition would be "manifestly contrary to public policy" in this State as provided by Article 45(1)(a) of Brussels I (recast).
32. The power to refuse the recognition of a foreign judgment on grounds of public policy was an established feature of the bundle of common law rules of private international law which were carried over by Article 50.1 of the Constitution. One can see examples of this in well-known cases such as Peter Buchanan Ltd. v. McVey [1954] IR 89 (where this Court refused to give effect to a foreign revenue judgment) and Mayo-Perrott v. Mayo-Perrott [1958] IR 336 (where this Court refused to give effect to a foreign judgment for costs in a divorce suit having regard to the public policy disapproving of divorce expressed in the original version of Article 41). These cases were, however, regarded as exceptional.
33. This very point was made by O'Daly J. in his concurring judgment in Mayo-Perrott. Quoting from the 5th edition of Cheshire's Private International Law, he stated that Cheshire had observed that ([1958] IR 336 at 351):
"The conception of public policy is, or should be, narrower and more limited in private international law than in internal law. A transaction that is valid by its lex causae...should not be nullified on this ground unless its enforcement would offend some moral, social or economic principle so sacrosanct in English eyes as to require its maintenance at all costs and without exception."
34. This led O'Daly J. to conclude ([1958] IR 336 at 352) that "Enforcement by our courts of the costs of a decree of divorce would clearly offend against a moral principle which the Constitution asserts." Of course, the constitutional changes to Article 41 effected principally by the 15th Amendment of the Constitution Act 1996 in respect of divorce means that the underlying public policy which at the time prevented the enforcement of a judgment for costs in respect of a divorce decree is no more.
35. Mayo-Perrott nonetheless illustrates the general principle that the enforcement of the foreign judgment must offend against some fundamental and deep-seated legal principle before such enforcement could be refused on public policy grounds. This was the position at common law prior to the establishment of the Brussels system and, of course, these are the principles which still apply in the case of the recognition of a judgment which emanates from outside the Brussels system: see, e.g., Adoption Authority of Ireland v. C [2023] IESC 6; [2023] 1 ILRM 161.
36. The original Brussels Convention of 1968 narrowed the scope of the public policy exception. This was a natural consequence of a Treaty negotiated under Article 220(4) of the original Treaty of Rome and which was itself designed to promote what might be termed the free movement of judgments between the Member States within the (then) European Economic Community. Following the negotiation of the Treaty of Amsterdam in 1997, the Community was given power by the revised Article 61(c) and Article 87(1) TEC to adopt a new version of the Convention by means of Regulation. These Treaty changes meant that the Brussels system was now fully brought within the scope of EC (later EU) law and that the power to legislate by Regulation meant that the application of the Brussels system in domestic law was no longer dependent on the existence of transposing domestic legislation such as the Jurisdiction of Courts and Enforcement of Judgments Act 1988. These provisions are now contained in Article 67(4) TFEU and Article 81(2) TFEU.
37. Regulation No. 44/2001 (EC) ("Brussels 1") was then adopted by the then Community and it entered into force in March 2002. The new Article 34(1) not only provided that Member States could refuse recognition on public policy grounds, but it added the further requirement that recognition must be "manifestly" contrary to public policy, whereas there was no such requirement in the corresponding public policy provisions of the original Article 27(1) of the Brussels Convention. This had the effect of making the task of the litigant who sought to resist the recognition of a foreign judgment rendered by the courts of another Member State even more exacting. As Spzunar AG observed in Diageo Brands (Case C-68113, EU: C: 2015: 137)(at para. 42):
"...the adverb 'manifestly', added in the course of transformation of the [Brussels] Convention into the [original Brussels I Regulation], gives concrete expression, in the [Regulation], to the expectation of a manifest conflict between the recognition of judgments and public policy. As is clear from the explanatory memorandum in relation to Article 41 of the proposal for a Council regulation, that change was intended to underscore the 'exceptional nature of the public policy ground' with a view to improv[ing] the free movement of judgments.'"
38. These words are reproduced in Article 45 of Brussels I (recast) which entered into force on 10th January 2015. Following the entry into force of the Lisbon Treaty in December 2009 Article 67(4) TFEU and Article 81(2) TFEU now provide the legal basis for the Brussels I recast Regulation. Recital 26 of the Regulation states that "Mutual trust in the administration of justice in the Union justifies the principle that judgments given in a Member State should be recognised in all Member States without the need for any special procedure." Recital 27 speaks of the principle of "the free circulation of judgments".
39. Article 45(1)(a) provides:
"On the application of any interested party, the recognition of a judgment shall be refused:
(a) If such recognition is manifestly contrary to public policy (ordre public) in the Member State addressed..."
40. It was, in any event, clear from case-law that this public policy exception (whether under the original Brussels Convention or in later iterations of the Brussels Regulation) must be interpreted strictly: see, e.g., Case C-414/92 Solo Kleinmotoren [1994] ECR I-2237, para. 20; Case C-7/98 Krombach [2000] ECR I-1935, para. 21.; London Steam-Ship Owners' Mutual Insurance Association C-700/20, EU:C: 2022: 488, para. 77. It is also clear that recourse to the public policy clause is to be had only in exceptional cases: see, e.g., Case 145/86 Hoffmann [1988] ECR 645, para. 21 Krombach, para. 21.; Real Madrid Club de Fútbol C-633/22, EU: C: 2024: 843, para. 34.
41. All of this means that recognition must not be refused on this ground unless this would "...constitute a manifest breach of a right recognised as fundamental within the legal order of Ireland": see Fairfield Sentry Ltd. (in liquidation) v. Citco Bank Nederland NV [2012] IEHC 81 at para. 109, per Finlay Geoghegan J. Fairfield Sentry concerned the question of whether a Dutch conservatory attachment order was entitled to recognition in this State. The recognition of the order was contested reason because it enabled one unsecured creditor effectively to obtain security by reason of the location of certain assets of the insolvent company in the Netherlands. It was said that recognition of this judgment would cut across a fundamental principle of Irish insolvency law, namely, the pari passu treatment of all unsecured creditors. Finlay Geoghegan J. ultimately concluded, however, (at para. 110 of her judgment) that it had not been established that this principle had, in fact, attained that fundamental status within the Irish legal order.
42. One sees a similar approach in the judgment of Murray J. for the Court of Appeal in Gwyn-Jones v. McDonald [2021] IECA 206 at para. 15. This principle was recently re-stated by the Court of Justice so that refusal of recognition on public policy grounds could properly arise only where such would constitute "a manifest breach of a rule of law regarded as essential in the legal order of the Member State in which enforcement is sought or of a right recognised as being fundamental within that legal order": Real Madrid Club de Fútbol at para. 37. The very narrowness of the public policy exception itself reflects the high degree of mutual trust in the legal systems of the different Member States as reflected in Recital 26 of the Brussels I Regulation (recast).
43. The fundamental question, therefore, is whether giving effect to the Polish judgment would manifestly infringe a rule of law or a legal principle deemed fundamental to the legal order by reason of the assignment by the investors of what is said to be their bare causes of action to Coucal. In any consideration of this question, it is necessary to commence with an examination of the decision of the High Court in Sporting Index Ltd. v. O'Shea [2016] 3 IR 417. I then propose to examine the decision of this Court in SPV Osus.
Part VII - The decisions in Sporting Index and SPV Osus
44. In Sporting Index the defendant, an Irish domiciliary, had opened an online spread betting account with a UK company specialising in sport spread betting. It seems that the defendant had bet heavily on the outcome of a particular rugby sporting fixture and incurred debts in the order of some €118,000. The UK firm obtained judgment in England for this sum, together with an order for costs in the sum of £17,500 sterling. The firm then sought recognition on of the judgment in this State, but MacEochaidh J. held that the principal judgment was not entitled to recognition on public policy grounds. He did, however, consider that the judgment for costs was nonetheless entitled to enforcement.
45. In arriving at this conclusion, MacEochaidh J. pointed to the fact that s. 36(1) of the Gaming and Lotteries Act 1956 provides that every contract "by way of gaming or wagering is void" and s. 36(2) further provides that no action shall lie for the recovery of a gambling or wagering debt. Having referred to the established Court of Justice case-law, he then observed ([2016] 3 IR 417 at 425):
"The enforcement of any betting contracts is prohibited and I am satisfied that the statute constitutes a rule of law regarded as essential in the legal order of this State. There is a manifest conflict between the foreign court order arising from a gambling debt and Irish public policy as expressed in the 1956 Act. Because this rule was enacted by the Oireachtas, I am bound to find that the rule is essential in the legal order of the State. The rule reflects public policy on the control of gambling. It is an essential measure in as much as the Oireachtas has considered it necessary for the purposes of controlling gambling."
46. While I acknowledge that Sporting Index is perhaps a marginal case, I find myself unconvinced that the public policy of this State was manifestly engaged in the manner in which MacEochaidh J. considered it to have been. There is, of course, a public policy for this State as reflected in the 1956 Act. But here the customer had elected to do business in another state, namely, the United Kingdom, which takes a different view of the regulation of gambling. One might say, however, that just because such gambling debts are unenforceable in this State does not in itself mean that the recognition of a judgment in respect of a gambling debt should be regarded as "manifestly" offending our public policy sensibilities. The situation might, of course, be different if the underlying activity giving rise to the foreign judgment was regarded as intrinsically unlawful by reference to our own criminal law.
47. In the context of the present appeal the key decision, however, is that of this Court in SPV Osus. This case arose out of the Madoff litigation. Mr. Madoff's business empire had collapsed in spectacular fashion in December 2008 and there were legions of investors who contended that they had thereby been defrauded. A corporate entity, Optimal Strategic, held a very significant claim against the assets of Bernard L Madoff Investments LLC ("BLMIL") which was in liquidation. For various reasons, however, the claim could not be traded on the secondary market in claims in the bankruptcy of BLMIL. In order to facilitate such claims trading, SPV Osus was established as a special purpose vehicle for the purpose of receiving an assignment of Optimal's claim against BLMIL.
48. As a result of this assignment the shareholders in Optimal could then swap their shareholding for shares in Osus. These Osus shares could then be sold with the result that the majority of the latter's shareholders were in fact the purchasers of distressed debt who were, in effect, investing in the assigned claims against BLMIL. In addition to advancing the claim in bankruptcy, Osus sought to sue certain investment banks in Ireland for alleged negligence in respect of their stewardship of Madoff investments in this jurisdiction on foot of these assigned claims, the defendant banks contended that the Osus assignments were void as being essentially champertous on the ground that they had transferred a bare right to litigate and that this constituted "trafficking in litigation."
49. This Court agreed with the submission of the defendant, HSBC, that these assignments were void as a matter of Irish law. It followed that Osus had no title to sue. O'Donnell J. stated the test thus ([2019] 1 IR 1 at 51):
"...an assignment of the right to litigate is unenforceable unless the assignee had a genuine commercial interest in the assignment."
50. Pausing at this point, it may be useful to observe that in the present case the Court of Appeal found that Coucal had a genuine legitimate commercial interest in receiving the assignment. As it happens, this issue is not before the Court as Mr. Scully has not sought to appeal this particular finding. For my part, I think that this aspect of the Court of Appeal's decision is clearly correct. Coucal was a corporate vehicle which was created for the very purpose of pursuing this litigation in Poland. It was, in effect, a sort of corporate substitute for a form of class action on behalf of the investors.
51. The gist, however, of the objections to the assignment in the present case is the possibility of the sale and onward transmission of the assignment to an unconnected third party. This was the very reason, for example, as to why the assignments in Trendtex Trading Corporation v. Credit Suisse [1982] AC 679 were held to be void. Here Trendtex had assigned its claims against the Nigerian Central Bank to a creditor, Credit Suisse. The assignment to Credit Suisse expressly contemplated that the claims would in turn be sold to a third party. When it emerged that the third party who had purchased the claim from Credit Suisse had later settled the case against the Nigerian Central Bank for a substantial profit, Trendtex sought to have the assignment condemned as champertous and void.
52. Trendtex ultimately succeeded in the House of Lords. As Lord Roskill put it, these transactions "amounted to the sale of a bare cause of action to a third party who had no genuine commercial interest in the claim in return for a division of the spoils": see [1982] AC 679 at 704. These were the principles which were applied by this Court in SPV Osus. As O'Donnell J. explained ([2019] 1 IR 1 at 56):
"..., the particular assignment to Credit Suisse was, however, invalid because it contemplated the onward assignment of a claim to a party with no connection to the transaction which had given rise to a cause of action. The possibility (which in the event materialised) that the cause of action could be treated as a commodity and freely traded was fatal."
53. The assignments at issue here would accordingly be invalid under Irish law if they contemplated or permitted the assignment of a bare cause of action to an unconnected third party. Here much was made of the language found on the fourth page of the assignment to the effect that the right to sell the debt to a third party was not excluded. Counsel for Mr. Scully contended that in the light of SPV Osus this in itself rendered the agreement ex facie unlawful as a matter of Irish law. It is clear from the judgment of Donnelly J. in the Court of Appeal that this was the basis on which she held that the assignment agreements were invalid: see para. 76 of her judgment.
Part VIII - The application of the SPV Osus principles to the present case
54. For my part, I would interpret the assignment agreement somewhat differently. I think it clear from its language that the reference to the right "to sell the debt to a third party has not been excluded" simply amounts to a warranty that no sale or assignment of the debt has already taken place. The other assurances and warranties afforded to the assignee must all be seen in this light:
"The assignor states that:
- The debt is free from any incumbrances;
- The right to sell the debt to a third party has not been excluded;
- The debt has not been the subject of an assignment so far;
- The assignment of the debt to other entities has not been made after the conclusion of the agreement." (emphasis supplied)
55. It may be noted that in the High Court Owens J. did not make a formal finding as to the meaning of this clause. He rather proceeded on the basis that even if it bore the construction for which Mr. Scully had urged, there was nonetheless no manifest violation of our domestic public policy. In the light of this approach and given the way in which the Court of Appeal has approached this question, I propose to proceed in the same manner. Yet even if one takes Mr. Scully's case at its highest - and the agreement is understood in the same sense as that adopted by the Court of Appeal, i.e., that it permits the assignment of a bare cause of action to unconnected third parties - there are, nevertheless, appreciable differences between the present case on the one hand and Trendtex and SVP Osus on the other.
56. First, unlike the position in SPV Osus – where many of the shareholders were in effect third party investors in distressed debt who hoped to make a profit from the litigation - it is common case (and reflected in the parties' written responses to the questions posed by the Court) that there has been no attempt by Coucal to sell or transfer any of the assigned claims to a third party. Nor is this case comparable to Trendtex insofar as the assignment in that case directly contemplated the sale of that assigned claim to a third party for the very purpose of trading in the litigation against the Nigerian Central Bank. Even on this broader interpretation, the agreement in the present case merely records that such a sale or further assignment is "not excluded."
57. Second, the really critical point is that the public policy concerns underpinning cases such as Trendex and SPV Osus are related to safeguarding the administration of justice in an Irish court. They reflect the belief that the resolution of disputes is a matter for the parties themselves; that the commodification or commercialisation of litigation is somehow unedifying; that the prospect of trading in litigation leads to a situation where the "real" plaintiff by definition gets less than their due and there is also the concern that the new plaintiff will be suing at a remove from the factual circumstances which led to the dispute in the first instance.
58. These concerns were well expressed by O'Donnell J. in SPV Osus ([2019] 1 IR 1 at 58-59):
"...if it is possible to freely assign claims in a market, it must also be possible to make collateral agreements in relation to the giving of evidence to support such claims...Yet the concept of witnesses enter into agreements in relation to the evidence which they are to give on oath is plainly undesirable. Furthermore, the distance that is created between the nominal plaintiff and the factual circumstances to the dispute is capable of causing difficulties...Depending on the circumstances of each case, these difficulties may either help or hinder individual plaintiffs, but neither outcome is inherently desirable from the point of view of the administration of justice and seeking the truth. Commoditisation of claims runs counter therefore to important interests in the administration of justice. Therefore, while there may be choses in action that can properly be assigned and of which assignment should be encouraged (for example, in the case of commercial debts), the general suspicion and antipathy of the common law to the trading of such claims remains, in my judgment, well founded."
59. As I have just indicated, these, however, are concerns relating to the integrity of the administration of justice in Ireland up to the point of judgment. These public policy concerns reflect traditional common law values. Many countries from the civil law tradition - such as Germany and Austria - have, however, a more relaxed view of third-party litigation funding through the mechanism of the assignment of bare choses in action, with restrictions principally designed to prevent practising lawyers engaged in contingency fee arrangements.
60. This would also appear to be true of Poland as well. As the legal expert retained by Mr. Scully, Mr. Roland Rogala, explained at paragraph 13 in his second affidavit of 17th December 2021:
"There is no rule against champerty - or any equivalent - in Polish law: the assignment of a right to litigate is permissible, apart from tort claims arising from bodily injuries, which is not relevant in this case."
61. It follows that the assignment(s) in question was and were valid by reference to the Polish lex causa. If the lex causa has no issues with the assignment of a bare cause of action to an unconnected third party in a commercial case such as this, it is not for us to insist that they should. As I have already stated, we must take the Polish judgment as we find it and (save in exceptional circumstances) we cannot look behind that judgment as this would amount to a review of its substance, something which is expressly prohibited by Article 52 of Brussels I recast. It is clear from decisions of the Court of Justice such as Real Madrid Club de Fútbol (at para. 38) that even where the courts of the State where recognition is sought consider that there has been a grave legal error on the part of the judgment rendering state, the prohibition of any review as to the substance of that decision in Article 52 precludes non-recognition on public policy grounds save where this would "result in the manifest breach of a rule of law regarded as essential in the EU legal order or of a right recognised as being fundamental...in the legal order of that Member State."
62. Judged by that exacting standard, one cannot fairly say that the recognition of the Polish judgment would amount to a manifest rule of law regarded as fundamental in our legal order. Insofar as one could say that the bare assignment of litigation claims to unconnected third parties raise public policy concerns, they relate to the manner of the administration of justice in this State. To repeat, however, if the law of the lex causa does not share these concerns so far as the administration of justice in their judgment rendering state is concerned, this is not our affair.
63. To this one might add that the judgment recognising state is generally indifferent as to the procedural and adjectival law of the forum save where it is manifest that such procedures operated in a demonstrably unfair fashion. At least in the case of other European Union countries, one would expect that these cases would have to be exceptional.
64. An example of such an exceptional case is provided by Celtic Atlantic Salmon (Killary) Ltd. v. Aller Aqua (Ireland) Ltd. [2014] IEHC 421, [2014] 3 IR 214. Here an Irish company contended that a fish kill was caused by contaminated feed supplied by a Danish company. Central to its case was a report prepared in July 2008 immediately after the event by a specialist veterinarian. Some years later the Danish company issued proceedings in the Danish courts. It then obtained a negative declaration from the Danish courts to the effect that it was not liable for the fish kill. The difficulty, however, was that under Danish procedural law the Danish courts only gave weight to expert evidence commissioned by them under the Danish Administration of Justice Act. This had the effect that the report which had been prepared by the veterinarian was in effect inadmissible in the Danish courts.
65. In my judgment in the High Court, I held ([2014] 3 IR 214 at 249) that "without that expert evidence Celtic Atlantic could not effectively advance its case that the fish feed was intrinsically unsuitable for these particular type of fish." It was because of this procedural unfairness I held that the Danish negative declaration judgment was not entitled to recognition in the State on the ground that it would be manifestly contrary to public policy. Celtic Atlantic Salmon was itself an exceptional case and it probably represents the only example to date in this jurisdiction since the commencement of the Brussels system where, by reason of some unusual feature of the procedural or adjectival law of the judgment rendering state, the subsequent judgment was not entitled to recognition on public policy grounds.
66. The Polish judgment which we are called upon to recognise is itself on its face a perfectly regular and lawful judgment. It is true that key features of Polish procedural and adjectival law may well be different from ours - not least in relation to funding arrangements - but this in itself cannot justify us in seeking to looking behind that judgment. To that extent this case cannot fairly be regarded as falling into the same category as, for example, Celtic Atlantic Salmon. As Real Madrid Club de Fútbol shows, we cannot - save, perhaps, in very special circumstances - circumvent the prohibition on reviews as to substance in Article 52 by recourse to the manifest public policy exception in Article 45(1)(a).
Part IX - Conclusions
67. Subject to the caveat which I indicated at paragraph 13 of this judgment concerning further submissions to this Court on the Polish judicial independence/rule of law issue I would allow the appeal for all the reasons just stated in this judgment. Article 52 of the Brussels 1 recast precludes any review as to substance of the judgment sought to be recognised and the consistent case-law on Article 45(1)(a)(and its predecessor) confirms that recourse to the public policy exception must itself be confined to special and exceptional cases.
68. Even if (contrary to my own view) the assignment agreement of May 2015 should be understood in the manner urged by Mr. Scully (i.e., that it permitted the assignment of a bare cause of action) it is clear that Polish law as the law of the forum does not see this as problematic so far as commercial cases of this kind are concerned. It is true that SPV Osus confirms that such assignments of a bare cause of action would be regarded as void under Irish law, but that is because of concerns which relate exclusively to the manner in which ordinary civil litigation is conducted in Ireland prior to judgment. If the lex causa has no such concerns - and it is common case that it does not - then it is not for us to insist that it should. None of this amounts to a reason as to why a Polish judgment obtained in such circumstances should not be recognised in this State.
69. In these circumstances, one cannot say that the recognition of the Polish judgment should be refused on the ground that to do so would be "manifestly contrary to public policy" in this State within the meaning of Article 45(1)(a) of Brussels I recast.
70. As I have just indicated, it follows that, again subject to the caveat at paragraph 13 of this judgment, I would accordingly allow the appeal.