Summary

The Privy Council considered the scope of the principle that a foreign default judgment was enforceable against a judgment debtor who had made a prior submission to the jurisdiction of the foreign court. In particular, it discussed the circumstances in which an agreement to submit to the jurisdiction of the foreign court could be implied as a matter of fact or law.

Facts

A fraudulent investment scheme had been run through a New York company (B) and had been exposed. The trustee had been appointed in B's liquidation in the New York bankruptcy court. Under US anti-avoidance provisions, he brought proceedings against investors who had received repayments from B before the fraud was discovered. V was a British Virgin Islands company which had invested in B and had been repaid US$180 million before the fraud was discovered. The trustee obtained a default judgment for that sum against V in New York. Because a large proportion of V's funds were in Gibraltar, the trustee sought to enforce the judgment there. V's investment with B was governed by a customer agreement which specified that the agreement should be construed, and the rights and liabilities of the parties determined, in accordance with New York law. V denied that the judgment was enforceable in Gibraltar and applied for summary judgment. The Court of Appeal of Gibraltar held that the trustee had a reasonable prospect of success in its claim to enforce the default judgment in reliance on an agreement by V to submit to the jurisdiction of the New York courts.

The issue was the scope of the principle, set out in Dicey, Morris & Collins, Conflict of Laws, that a foreign default judgment was enforceable against a judgment debtor who had made a prior submission to the jurisdiction of the foreign court. In particular, it was necessary to decide whether the agreement to submit had to be express or could also be implied.

Held

There had been conflicting authorities on the question of whether at common law an agreement or consent to submit to the jurisdiction of the foreign court could be implied or inferred, Blohn v Desser [1962] 2 Q.B. 116 and Copin v Adamson (1875) 1 Ex. D. 17 considered (see paras 32-55 of judgment). An agreement to submit to the jurisdiction of a foreign court did not have to be contractual in nature. The real question was whether the judgment debtor had consented in advance to the jurisdiction of the foreign court, SA Consortium General Textiles v Sun & Sand Agencies [1978] Q.B. 279 applied. It was commonplace that a contractual agreement or consent might be implied or inferred. There was no reason in principle why the position should be different in the case of a contractual agreement or consent to the jurisdiction of a foreign court. The authorities which denied the possibility of an implied agreement really meant that there had to be an actual agreement or consent, Singh v Rajah of Faridkote [1894] A.C. 670 considered. In English domestic law, terms could be implied as a matter of fact or as a matter of law. Because there had to be an actual agreement, the agreement or contractual term could not be implied or inferred from such matters as the mere fact of being a shareholder in a foreign company or a member of a foreign partnership; the fact that the contract was made in or governed by the law of a foreign country; the fact that the contract was to be performed in the foreign country; or the fact that the foreign court had jurisdiction under its own law as a result of the contract being governed by foreign law. The question of whether there had been a submission to the jurisdiction of the foreign court for the purposes of enforcement of foreign judgments depended on English law. In the instant case, that meant that there had to be an agreement to submit to the jurisdiction of the foreign court, which might arise through an implied term. Terms implied as a matter of fact depended on construction of the contract in light of the circumstances. Where the applicable law was foreign law, questions of interpretation were governed by the applicable law. In such a case, the expert's role was not to give evidence as to what the contract meant, but to prove the rules of construction of the contract in accordance with those rules. It was then for the court to interpret the contract in accordance with those rules. The position was different for terms implied by law, where the expert's function would be to give an opinion on whether a particular term was implied by law, depending on the foreign law (paras 56-61). In the instant case, even as a matter of New York law, the evidence did not state that a choice of law carried with it an agreement to the jurisdiction of the New York court. Most importantly, there was no suggestion that there was a term implied as a matter of fact or law that V consented to the jurisdiction of the New York court. No relevant evidence had been adduced under either head. There was no evidential basis for the assertion that there was a contractual term that V submitted to the New York jurisdiction. In any event, even if a jurisdiction agreement was to be implied, prima facie it would not apply to the instant proceedings because they were avoidance proceedings and concerned with insolvency issues, AWB (Geneva) SA v North America Steamships Ltd [2007] EWCA Civ 739 applied (paras 69-74).

Appeal allowed