In Re a Company [2024] EWHC 1070 (Ch) was an application to restrain presentation of a petition on five grounds:
(1) that the judgment debt was time-barred;
(2) that it was unclear if there had been an acknowledgment of the debt within the limitation period;
(3) that there was a substantial dispute as to whether the judgment debt had been satisfied;
(4) that the company was solvent; and
(5) whether it was appropriate to grant an injunction.
Judgment in the sum of US $776,907 had been given in favour of the respondent creditor in Lebanon in 2010. That judgment had been upheld by the appellate courts in Lebanon in 2014 and 2017 following appeals by the company. Enforcement attempts in Lebanon in around 2015 had been unsuccessful.
On the limitation issues, three questions arose for determination. The first was which limitation regime applied to a foreign judgment; the second was when time started to run for any limitation period; and the third was whether any action of the applicants might have caused the limitation period to “reset.”
Deputy ICC Judge Jones noted that the status of a foreign judgment which had not been recognised or converted by way of a Part 7 claim and the role it might play in insolvency proceedings had not been closely examined until recently. However, on 11 March 2024, the day before the hearing before her, Richards J handed down judgment in the case of Drelle v Servis-Terminal LLC [2024] EWHC 521 (Ch). The central question in that case was whether an unrecognised foreign judgment met the requirements of s 267 Insolvency Act 1986 so as to provide the foundation for the presentation of a creditor’s bankruptcy petition. Richards J concluded it did. Deputy ICC Jones took the view that it would be perverse for “debt” to be construed differently for the purposes of winding up and bankruptcy. Accordingly, the principles in Re Drelle applied in the case before her, and the Lebanese judgment was a debt for the purposes of winding up without the need for registration or recognition (but subject to the limitation question).
After consideration of a great deal of authority on limitation and insolvency she concluded, taking Ridgeway Motors ( Isleworth) Ltd v ALTS Ltd, Tasarruf Mevduati Sigorta Fonu v Demirel and another and Re Drelle together:
(1) that an unregistered/unrecognised foreign judgment was final and conclusive and amounted to a debt for the purposes of IA 1986;
(2) that a foreign judgment fell into the same category as an English/Welsh judgment for the purposes of limitation and not into the same category as a simple contract;
(3) that that category was s 24 Limitation Act 1980;
(4) that insolvency proceedings were not an “action on a judgment” so s 24(1) of the 1980 Limitation Act had no effect; and
(5) that there was no statutory limitation period applicable to a petition based on a judgment and no limitation under the common law.
She went on to find, on the facts of the case, that even if the Limitation Act applied, the company had acknowledged the judgment debt through its agents within the six years running from the date of the final judgment on 23 March 2017 by affirming that the money was owed, which was an acknowledgement within the relevant limitation period (whether s 5 or s 24(1)). Time restarted at the time of payment, and the debt could therefore be enforced.
On the evidence she rejected a claim that a payment had been made in satisfaction of the judgment debt.
She also rejected an application for a stay:
“[I]t seems to me that the issue does not need to be decided as there is no indication of a formal stay in Lebanon, other than that imposed in April 2023 for the purposes of allowing a decision on the effectiveness of the attempt to pay the judgment debt in Lebanon, which does not affect the running of any limitation period which might apply. Any stay in connection with an appeal would, in my view, be wrapped up in the decision of the appeal court wherein time resets if the appeal is dismissed. It is likely that a stay in a foreign court, being procedural, would not, in and of itself, stop time running in this jurisdiction. That is, however, an argument for another day.”
She dismissed an abuse of process argument to the effect that the petition had been presented precipitously and without prior service of a statutory demand:
“In fact, there is no necessity for a statutory demand before issuing a winding-up petition and there had been some significant and fairly aggressive assertions of the existence of the Lebanese judgment debt. The lack of response to the letter dated 13.12.2023, whilst apparently not deliberate, would reasonably cause concern, particularly given the difficulties of getting into Court during the Christmas Vacation.
Although possibly a little precipitate, it seems to me that getting the arguments before the court was inevitable and that there would have been little point in continuing with what had become a sterile and repetitive argument. Neither side was going to concede its points. The bringing of this application is not an abuse of process.”
The application failed, the deputy judge concluding:
“There is no substantial dispute of a nature which requires evidence or hearing. There is no limitation defence available to the Applicant for the reasons set out above. There is no necessity to obtain an English judgment to found a winding up Petition. The debt is incontrovertibly owed. There has not been satisfaction of the debt. The failure to pay the debt is of itself an act of insolvency, so the underlying solvency of the Applicant is not relevant to my considerations.”
She did, however, say that she would hear submissions as to whether there should be an interim time-limited injunction or undertaking (if offered) to allow the provision of information about a prospective or outstanding appeal and for the listing of a further hearing to consider the right of the Respondent to interest or costs of previous proceedings.
The importance of the judgment is its importing the principles in Re Drelle into the corporate sphere: affirmation of the fact that a judgment can be the subject of a petition without registration or recognition under the Administration of Justice Act 1920 or the Foreign Judgments (Reciprocal Enforcement) Act 1933, and the avoidance of “normal” limitation restrictions in relation to a winding-up petition.