Claim No: CFI-036-2016
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
(1) BARCLAYS BANK PLC
(2) CREDIT SUISSE LOAN FUNDING LLC
(3) MIDTOWN ACQUISITIONS LP
(4) SPECIAL SITUATIONS INVESTING GROUP INC
ESSAR GLOBAL FUND LIMITED
ORDER OF JUSTICE SIR ROGER GILES
AND UPON reviewing the Appellant’s Appeal Notice dated 8 May 2017 for permission to appeal the order of Justice Sir Richard Field given on 13 April 2017
AND UPON reviewing the Appellant’s Skeleton Argument for Permission to Appeal dated 24 May 2017
AND UPON reviewing the Respondent submissions in reply to the application for permission to appeal and the proposed Appellant’s skeleton argument filed on 25 May 2017.
IT IS HEREBY ORDERED THAT:
- The time for filing the appeal notice be extended to 8 May 2017.
- Permission to appeal be refused.
- The Appellant shall pay the Third Respondent’s costs of the application for permission to appeal, such costs to be assessed on the standard basis if not agreed.
Maha Al Mehairi
Date of Issue: 11 July 2017
- On 13 April 2017 Justice Sir Richard Field (“the Judge”) granted immediate judgment on the claim by Midtown Acquisitions LP (“Midtown”) to enforce a judgment of the Supreme Court of the State of New York for USD 171,769,169. In doing so his Honour dismissed applications by Essar Global Fund Limited (“Essar”) contesting jurisdiction and for a stay of Midtown’s proceedings. Amended orders were issued on 20 April 2017.
- On 8 May 2017 Essar filed an appeal notice seeking permission to appeal. In my opinion, permission to appeal should be refused. Pursuant to rule 14 of Former Part 44 of the Rules, I provide the following reasons for the refusal.
- The appeal notice was filed at a time of change to Amended Part 44 of the Rules. Former Part 44 applies, but Essar reasonably acted on what became Amended Part 44, which allowed 21 days for filing an appeal notice in place of the 14 days of Former Part 44. Midtown does not take any point, and an extension of time is appropriate.
- I have received submissions from Midtown responding to the skeleton argument of Essar (see ARDC 44.14). I do not consider that an oral hearing is necessary.
Giving permission to appeal
- Permission to appeal may be given only where the Court considers that the appeal would have a real prospect of success or there is some other compelling reason why the appeal should be heard (FRDC 44.8). “Real prospect of success” means realistic rather than fanciful: Swain v Hillman (1999) EWCA Civ 3053. There is no bright line, it is a matter of judgment in each case.
- An order giving permission may be made subject to conditions (FRDC 44.23(2)). Midtown’s submissions included that, if permission were given, it should be subject to payment into court of the USD 171,769,169 plus USD 160,000 in relation to costs at first instance and on appeal.
The grounds of appeal
- The grounds of appeal, as elaborated in the skeleton argument, largely took up the issues and repeated the arguments at first instance. These reasons assume familiarity with the Judge’s reasons describing and determining the issues.
- Ground 1, in summary, was that the Judge was wrong in law in finding that the recognition of foreign judgments does not amount to foreign affairs within the meaning of Article 120 of the UAE Constitution, and also in finding that the legislation conferring jurisdiction on the DIFC Courts to recognise and enforce foreign judgments is within an exception to Article 120; and that the Judge was therefore in error in refusing to refer the constitutional issue to the Union Supreme Court (“the USC”).
- Ground 2, again in summary, was that the Judge was wrong in law to find that the New York judgment was a judgment for the purpose of enforcing foreign judgments; more particularly, in deciding that it was not necessary that it be given in adversary proceedings, that it was final and conclusive notwithstanding that there was a procedure available to set it aside and an extant challenge pending, and that it was not necessary that the judgment be on the merits.
- Ground 3 was that the Judge was wrong in law to find that “non-dishonest misleading” of the foreign court is insufficient to establish a defence to the enforcement of a foreign judgment.
- Ground 4 was that the Judge should have held that Essar had a reasonable prospect of succeeding and should have not granted immediate judgment.
- Ground 5 was concerned with a stay of execution; I will describe it later in these reasons.
Ground 1: Constitutional reservation
- Essar argued that the jurisdiction to recognise a foreign judgment was a matter of foreign affairs exclusively reserved by Article 120 to the Federation, so that the DIFC Courts did not have jurisdiction to enforce the New York judgment. The Judge held (at ) that “foreign affairs” in the Article connoted the conduct of foreign policy as between states on the international plane, something “wholly different” from the recognition of a foreign judgment by the DIFC Courts, and (at ) that it was “plain and obvious” that the recognition of foreign judgments by the DIFC Courts is not a matter of foreign policy conducted between states but “results from a rule of private commercial law based on a private voluntary or consensual or quasi-contractual obligation, assumed by the party to be bound.”
- The thrust of Essar’s skeleton argument was that, although recognising that the issue was one of civil law interpretation of Constitution, the Judge had wrongly applied “a common law gloss” in his characterisation of the recognition of foreign judgments. I do not agree. In order to decide whether the DIFC Courts would be engaging in foreign affairs within Article 120, it must be determined what a court does when enforcing a foreign judgment. A court does not, as Essar’s argument required, recognise and enforce the sovereign act of another state. As the Judge’s preceding discussion amply demonstrated, under the doctrine of obligation long accepted it acts upon the obligation to which the party subjected itself. With due regard to the submissions more fully made in the skeleton argument, I see no error in the Judge’s reasons, and in my opinion Essar does not have a real prospect of success on this ground.
- It is unnecessary to go to the alternative basis of the exception to Article 120, and there is no occasion to refer the constitutional issue to the USC.
- In that regard, the skeleton argument included a rather hesitant submission that it was “at least arguable” that Essar had a right to have the refusal to make such a reference reviewed on appeal. The submission was founded on Article 58 of Federal Law No 10 of 1973, which includes that if a court rejects a constitutional challenge –
“…the concerned parties may challenge that rejection along with the decision to be issued on the merits of the case before the court that has jurisdiction to examine the appeal to such decision as long as the appeal thereto is admissible”.
- Essar submitted that “may” gave permission to the parties, not a discretion to the court, and that the only limitation was in “as long as the appeal thereto is admissible”. There it left the submission. The hesitancy is well justified, since even if all else be accepted in Essar’s favour (which I will assume), the concluding words subject any appeal to the necessity of permission to appeal.
Ground 2: Judgment
- The New York judgment was a “Judgment by Confession” founded on a Confession for Judgment provided by Essar as part of a settlement agreement in a Term Sheet. Under the New York Civil Practice Law and Rules, judgments may be entered for a sum of money confessed by a defendant to be due in an affidavit and authorising the entry of judgment. That happened: there was no adversary proceeding.
Ground 2(a): Adversary proceeding
- Essar argued below, and repeated in its skeleton argument, that there must be an adversary proceeding before there can be a judgment capable of enforcement, relying on ex part Moore; in re Faithfull (1885) 14 QBD 627 (“Moore’s case”). It submitted that this was a “definitional requirement”, and that in his reasons the Judge “failed to engage” with the argument.
- That is not correct. The Judge correctly distinguished Moore’s case, the ratio of which is not that there must be an adversary proceeding. Essar provided (and still provides) no other authority for the definitional requirement. The reasons given by the Judge (at ) for rejecting the argument were not, as submitted by Essar, irrelevant, but provided grounds whereby a judgment coming into being as the New York judgment did was enforceable notwithstanding that there not been an adversary proceeding. In proceedings between Midtown and Essar in the Commercial Court in England, decided after the hearing before the Judge, in which the same argument was put forward by Essar, Teare J held for substantially similar reasons that “…it would not be right for the English Court to deny the New York judgment the status of a judgment in English law simply because there was no lis or action between the parties”. (Midtown Acquisitions LP v Essar Global Fund Ltd (2017) EWHC 519 (Comm) (“Midtown UK”) at ).
- Other than by its reliance on Moore’s case, Essar does not present a positive argument for its definitional requirement, or explain why a procedure such as the Judgment by Confession procedure of the New York Supreme Court should not be regarded as resulting in an enforceable judgment under English and DIFC law. In my opinion, the Judge’s conclusion cannot reasonably be gainsaid, no sound reasons for the definitional requirements are proffered, and there is not a real prospect of success in an appeal on this sub-ground.
Ground 2(b): Final and conclusive
- The Judge declined to accept Essar’s submission that the New York judgment was not final and conclusive because it could be vacated by the court which issued it and an application to vacate was on foot. In my opinion his Honour’s reasons, including the regard he paid to Nouvion v Freeman (1890) 15 App Cas 1 on which Essar relied and continues to rely, are plainly correct and there is no real prospect of success in an appeal against his conclusion.
- I note that in Midtown UK, Teare J rejected the like submission, giving perhaps more full reasons (which I respectfully consider compelling) and accepting that the New York judgment was “final and binding” (at ) notwithstanding the application to vacate.
- It may be added that Essar’s application to vacate has since been denied. Essar has appealed to the New York Appellate Division in respect of that decision, but there is no extant application to vacate. When a right of appeal or an appeal against a judgment does not prevent the judgment from being final and conclusive, for present purposes vacation of the New York judgment has fallen away.
Ground 2(c): On the merits
- Essar contended for another “definitional requirement”, that a judgment had to be “on the merits” meaning that a judicial mind had to be applied. It submitted that the Judge had not given due consideration to its arguments, contrasting the consideration given by Teare J to its like arguments in Midtown UK.
- The submission is odd. Teare J held that the New York judgment was on the merits, equating on the merits with being final and binding (at -) and in any event holding that the confession of liability and authority to enter judgment made it on the merits; so appeal to his Lordship’s consideration does not assist Essar. The Judge likened the Judgment by Confession to a consent judgment, and Teare J likened it to a judgment on admissions, both being final and conclusive on the merits. Essar provided no sound reasons for, and scarcely addressed, taking a different view of a Judgment by Confession, and I consider the Judge’s conclusion was plainly correct.
- Essar relied on Keymer v Visanatham Reddi (1916) LR 44 Ind App 6, not cited to the Judge, for the proposition that a foreign default judgment will not be recognized because it is not decided on the merits. That the judgment be on the merits came from a provision of the Indian Code of Civil Procedure. Reliance on the case does not pay regard to the Judge’s explanation (at ) that at common law it is not necessary, for a judgment to be enforceable, that it be final and conclusive on the merits beyond final and conclusive, or to Teare J’s equation of on the merits with final and conclusive; nor does Essar address Teare J’s holding as to on the merits, or the now established position that judgments by consent or on admissions are enforceable notwithstanding that there has not been a contest on the merits.
- There is no real prospect of success on appeal on this sub-ground.
Ground 3: dishonesty
- Essar submitted that it had the fraud defence to enforcement of a foreign judgment. An affirmation in support of Midtown’s application to the New York court included that the Confession for Judgment was not conditioned on default. Essar maintained that this was incorrect because the Term Sheet was to be construed as, or contained an implied term, requiring default. It said that the New York court was thereby misled; but it eschewed alleging dishonest deception of the court, and said that misleading without dishonesty was sufficient for the defence.
- The Judge examined the cases on which Essar relied, and held that they did not come close to establishing its position. He referred to other cases for the necessity that the foreign court be misled with a dishonest intention. Essar accepted that most authorities required dishonesty, but sought to rely on the cases on which it had relied below for sufficiency of non-dishonest misleading. In my opinion, there is no error in the Judge’s reasons in this respect, and I do not think that there is a real prospect of success in an appeal on this ground.
- I note that in Midtown UK, Teare J addressed the same argument on the part of Essar, and held (at  – ) that conscious and deliberate dishonesty was required when seeking to impeach a foreign judgment and that Essar’s defence had no prospects of success.
Ground 4: Immediate judgment
- This ground was not clearly addressed in the skeleton argument. So far as it went further than encapsulating the preceding grounds, it may have suggested that the Judge had erred in finally determining the issues rather than asking whether they should go to trial. However, the facts were not relevantly in dispute, there was full argument over two days on the points of law, and immediate judgment could be given if the judge was satisfied that there was no defence to Midtown’s claim. In similar circumstances, summary judgment was given in Midtown UK. If more was intended in this ground, there is nothing in it.
Ground 5: Stay of execution
- This ground was not addressed at all in the skeleton argument, and I take it to have been abandoned. I mention it for completeness.
- Essar submitted before the Judge that, if there were immediate judgment, there should be a stay of execution pending the decision of its application to vacate the New York judgment. The Judge declined a stay, his reasons including that the New York Court “did not grant a stay of execution from the bench on 29 March 2017” (being the hearing of application to vacate). The ground of appeal was that the Judge was wrong on the facts in so stating, and was therefore wrong to deny the stay. For the error of fact the grounds of appeal asserted that the Judge should have taken account of an “order” of Baker J in Midtown UK on 12 April 2017 “to the effect that the New York court had, on 29 March 2017, granted [Essar] a ‘stay of execution’ of the New York Judgment”.
- There was no evidence of the so-called order of Baker J, or otherwise to controvert what must have been the evidence or the accepted position before the Judge. Nor was it suggested that the Judge was informed of the order; 12 April 2017 was the day before his Honour’s reasons were issued. There can be no error in failing to take account of something of which he did not know. In any event, the application to vacate the New York judgment was denied on 18 May 2017, and in the ordinary course any stay of execution would have been lifted.
- It is not easy to see why this ground was included in the grounds of appeal. It leads nowhere, and no doubt that is why it is not maintained.
Other compelling reason
- In the grounds of appeal, but not in the skeleton argument, it was asserted that there was compelling reason to grant permission to appeal in that the constitutional issue was a matter of public interest appropriate for referral to the USC for conclusive determination. However, reference to the USC does not arise as the issue remains finally determined against Essar.
Payment into court
- Since permission to appeal is refused, it is unnecessary to consider a condition of payment into court. I should say that, had permission to appeal been given on any of the grounds of appeal, I would have been strongly inclined to impose the condition sought by Midtown. I am conscious, however, that Essar has not had the opportunity to provide submissions in response to those of Midtown, and say no more.