Enforcement of Judgments: a game of cat and mouse
Author: Paula Swain
Applies to: England and Wales
This article looks at the case of Merchant International Company Limited v Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy, 2016.
The Court of Appeal was recently asked to consider whether the provision of security for costs should be a condition attached to a permission to appeal order. Of note here, is how the Court spoke about compliance with Court orders generally in the case. It may be that we can extrapolate and learn some points for how we manage non-compliance with court orders in the recoveries litigation world.
This case started in the London based Commercial Court, with the claimant seeking to enforce the judgment of a Ukrainian Court. The claimant obtained a freezing order against assets within the jurisdiction (initially over an English oil and gas company). The foreign judgment was subsequently set aside by a Ukrainian Court, but the English Court did not cancel the freezing order. The defendant tried to appeal to the Supreme Court (formerly the House of Lords) but permission to appeal was refused.
The claimant sold the shares in the English company subject to the freezing order and recovered part of its debt. An opportunity to recover further sums came from some maturing loan notes in favour of the defendant, and the claimant obtained the appointment of a receiver to receive payment of the loan note monies. The defendant appealed against this decision, and a stay of the receivership order was granted. The Court of Appeal was asked to consider whether to require the defendant to pay the amount of the unpaid judgment into court pending the appeal.
The Court decided that the defendant should be compelled to make the payment into Court. In making that decision the Court said:
'It is unacceptable that Naftogaz should seek to invoke the appellate jurisdiction of the Court whilst at the same time failing to comply with the judgment pronounced against it in 2011, which the Courts at first instance and on appeal have declined to set aside.This is not a run of the mill, ordinary, or normal case.Naftogaz plainly has no intention of honouring the 2011 judgment unless forced to do so and will take all possible steps (of which this appeal is one) to avoid having to do so.'
The Court of Appeal quoted Andrew Smith J: 'I do observe every sign that the Defendant is using devices to delay meeting its dues' and Mr Hofmeyr QC: 'It is clear from the material before the court that Naftogaz will do whatever it can to avoid having to satisfy the judgment and interest.'
The Court of Appeal went on to say: 'The Court is entitled to deal robustly with appellants such as these who.depending on your choice of metaphor, may be said to be seeking to have their cake and eat it, to cock a snook, to play a game of cat and mouse or one of 'heads we win, tails you lose'.'
It is possible to infer from this decision that you should closely review the behaviour of judgment debtors, and whether it can be said that they are using devices to delay paying their dues. While enforcement of judgments will vary from case to case, it may assist you and your lawyers to keep a clear catalogue of behaviour both before and post judgment, and which points clearly to an attempt to avoid payment by failing to comply with or challenge (without merit) orders made by the Court. Practically, a log of court orders can be created with the date of challenge, or breach logged. This might then prompt a legal discussion about next steps, and whether any remedy can be pursued.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.