CR-2023-007112 - [2024] EWHC 1070 (Ch)

The Applicant asserts that s5 Limitation Act 1980 (“the 1980 Act”) applies to this debt. The Respondent says that this is a judgment and that s24(1) of the 1980 Act would apply were this not proceedings under the Insolvency Act 1986 (“1986 Act”), by reason of the decision of the Court of Appeal in Ridgeway Motors ( Isleworth ) Ltd v ALTS Ltd [2005] EWCA Civ 92.

“Action” is defined in s38(1) 1980 Act as:

Ridgeway Motors concerned a winding up petition based on a judgment debt which was more than six years old. The Company sought to have it dismissed on the basis that s24(1) 1980 precluded an action on a judgment when more than six years had passed. The Court of Appeal, in a wide-ranging and carefully explained judgment, considering the earlier case of Lowsley v Forbes (trading as LE Design Services) [1999] 1 AC 329, concluded that the term “action on a judgment” did not apply to bankruptcy or winding up proceedings based on judgment debts. The term applies only to a fresh action to obtain a second judgment based on the first. A winding-up petition is neither designed to re-establish the liability of the company nor a process of execution of the judgment [@para 29]. As a consequence, s24(1) 1980 Act does not apply in insolvency proceedings.

Mummery LJ noted that the 1980 Act contains no provisions relating to the commencement of winding up proceedings and that there is therefore no specific limitation bar. Any limitation has to be drawn by reference to the nature of the debt.

Clearly, if a foreign judgment is of the same nature as an English judgment, then s24(1) is disapplied and there are no other limitation issues for the Respondent save for a bar on interest for longer than six years. The Applicant, however, asserts that by reason of the quasi-contractual nature of a foreign judgment, it falls into s5 1980 Act - and relies for support on Ridgeway itself. There is obiter discussion in Ridgeway of the position of an “ordinary creditor” without a judgment @ 2881 B-C::

Is a foreign judgement of the same nature as an English judgment, or the same nature as a simple debt under a contract, or something different entirely?

Counsel for the Applicant has brought Grant v Easton (1883) 12 QBD 302 to my attention, in particular the passage that states that the liability of the defendant for a debt under a foreign judgment arises from an implied contract. Grant was a case involving the recognition of a foreign judgment by way of writ and summary judgment. It was not assessing the nature of a foreign judgment generally nor did it touch on limitation or what limitation might apply. It predates all modern limitation provisions and insolvency acts, in particular the 1986 Act and its changes to the landscape of insolvency.

The same can be said of In re Flynn No 2 [1969] 2 Ch 403, which re-iterates the contractual nature of the foreign judgment in reliance on Grant. Flynn contains an analysis of s23(4) of the Limitation Act 1939, dealing with rights of action for debts or other pecuniary claims in the personal estate of a deceased person. It is not directed towards the status of a foreign judgment, but towards the issue of acknowledgement of debts. Again, it does not deal with insolvency and, even if it had, would not have been helpful because of the step-change in IA 1986 described carefully in Ridgeway and in Drelle.

The case of Van Heeren v Cooper [2014] EWHC 4797 (Ch) is relied upon for the passage @ para 13:

“a judgment debt is entitled to the same treatment as any other debt is that the liability of a defendant in an action brought on a foreign judgment is an action which proceeds on the basis of an implied contract to pay, on the part of the party, against whom the judgement has been recovered.”

On analysis, however, Van Heeren does not say that a foreign judgment is subject to s5 of the 1980 Act as a consequence of its asserted nature as an implied contract. It concerns New Zealand judgments which were used as the basis for statutory demands. These were set aside by the District Judge and a Part 7 claim was brought under the common law to claim the amounts under the foreign judgments. There was then an appeal against the District Judge’s order setting aside the statutory demands, which was listed to be heard with the Part 7 claim. The basis on which the District Judge had set aside the statutory demands was that the effect of s24(1) of the 1980 Act was to render the debts unenforceable and non-provable because they were time-barred.

The critical issue for the court in Van Heeren was whether s29(5) of the1980 Act extended to s24(1) of the 1980 Act by reason of acknowledgement of the debt. The District Judge had held that it did not. The Defendant asserted this on the basis that s29(5) of the 1980 Act did not apply to claims on a judgment that had already established the liability as opposed to a claim in simple contract where liability had not been established.

In Van Heeren, the judge found that s29(5) of the 1980 Act applied both to ordinary contract claims and judgment debts. Nowhere in that judgment is there any statement or finding that s5 of the 1980 Act applies to foreign judgments for the purposes of limitation. On the contrary, the judgment is focussed on the interaction between s24(1) and s29(5) of the 1980 Act. That analysis would not have been necessary if the court had taken the view that s5 applied to the foreign judgment because it has never been in doubt that s29(5) applies to s5 of the 1980 Act.

Jamal v Christiansen [2016] EWHC 2261 (Ch) relies on a number of authorities which are said to found the notion that a foreign judgment is a debt in simple contract. The very old case of Dupleix v De Roven [1705] 23 ER 950 is quoted, together with Grant, Re Flynn and Van Heeren. The parties in Jamal appear to have proceeded on the unargued basis that s5 of the 1980 Act applied, despite the fact that the section (or its precursors) is not directly mentioned as being applicable in any of the cases relied upon, and that upon proper analysis of Van Heeren it is clear that the court had s24(1) in contemplation rather than s5 of the 1980 Act.

In Jamal, the main focus of the court was on the unenforceability of a foreign judgment. The judgment appears to confuse the limitation provisions of the 1933 Act with those of a judgment not registrable under the 1933 Act. Chitty on Contracts [32^nd Edition paras 28-16] was quoted:

“A foreign judgment of a court of competent jurisdiction gives rise to an implied contract to pay the amount of the judgment, and the six-year period for actions founded on simple contract applies to an action upon such a judgment.”

There are references to a number of authorities, going back to Dupleix v De Roven[1705] 23 ER 950, where it was said:

“If a man recovers a judgment or sentence in France for money due to him, the debt must be considered here only as a debt on simple contract, and the statute of limitations will run upon it.”

Dupleix v De Roven also states:

“It is plausible and reasonable, that the statute of limitations should not take place, nor the six years be running, until the parties come within the cognizance of the laws of England; but that must be left to the legislature.”

The judgment is fragmentary and unreasoned. It is the judgment of a single judge. It is by no means definitive of the status of a foreign judgment in 2024 given the progress of English law, international law and diplomacy in the intervening 300 years.

Neither Van Heeren nor Jamal made any reference to Tasarruf Mevduati Sigorta Fonu v Demirel and another [2007] EWCA Civ 799. In that case, the Court of Appeal, which heard arguments from both sides, proceeded throughout on the assumption that s24 1980 Act applied to foreign judgments [@ para 41].

It is clear that Fonu involved an action on a judgment, so the six year limitation period in 24(1) of 1980 Act would be effective. The important point is that it was simply not in dispute that s24(1) of the 1980 Act was the correct category in which to place a foreign judgment.

There is a conflict between Jamal and Fonu. One takes it for granted that s5 of the 1980 Act applies, the other that s24(1) of the 1980 Act applies. Although neither grapples with the underlying reasons for applicability, both decisions are potentially binding on this court [Coral Reef Ltd v Silverbond Enterprises Ltd and another [2016] EWHC 3844 (Ch) [2018] 4 WLR 104] as is Dupleix v De Roven.

It seems to me that, in the absence of any other assistance from previous decisions, I am bound to follow the Court of Appeal rather than the High Court. There is another factor which I consider to be important and that is the nature of the debt created by a foreign judgment as opposed to a contractual debt.

In Lenkor Energy Trading DMCC v Puri [2021] EWCA Civ 770, the Court of Appeal stated that a foreign judgment is unimpeachable in the absence of contrary public policy grounds. At para 40, the court stated:

“There are sound justifications for taking a different approach to substantive claims and enforcement claims, reflecting the different role performed by the court in each circumstance: RBRG Trading (UK) Ltd v Sinocore International Co Ltd [2018] EWCA Civ 838; [2018] 1 CLC 874 [26](3). The judgment of a foreign court of competent jurisdiction creates an obligation to pay the judgment sum enforceable in this jurisdiction as a debt, irrespective of the underlying cause of action: Williams v Jones (1845) 13 M & W 628, 633; Adams v Cape Industries plc [1990] Ch 433.

The Court of Appeal in that case did not find that that the obligation to pay arose out of a fictional contract as a substantive claim, but as an obligation giving rise to an enforcement claim.

S5 of the 1980 Act does not specifically state that it applies to foreign judgments as one might expect. It applies only to simple contracts. A simple contract is not, in its essential nature, unimpeachable save on public policy grounds. A foreign judgment (subject only to the competence of the foreign court) is unimpeachable. The debts are of a very different nature. In my view, despite the sometimes ancient and largely obiter comments regarding the nature of a foreign judgment, it cannot be equated with a simple contract. It may be a fictional quasi-contract for the purpose of bringing an action on a foreign judgment, although even that seems dubious, but it is not a simple contract for the purposes of the 1980 Act.

Does it, then, equate to an English/Welsh judgment or is it of a nature which is itself sui generis? Certainly, the references to s24 of the 1980 Act in some of the authorities seem to point to a foreign judgment being of the same nature as an English/Welsh judgment for the purposes of limitation. There is no indication in the 1980 Act that the words “action on a judgment” are limited to English/Welsh judgments and no indication that the analysis in Ridgeway, tracing the evolution of the term “action on a judgment” is disapplied for a foreign judgment.

If one takes Ridgeway, Fonu and Re Drelle together the result is:

Does this mean that a foreign judgment which cannot be registered has a greater advantage than a registered foreign judgment?

A 1920 Act judgment must be registered within twelve months of its handing down [s1] but will not registered if the debtor satisfies the court that an appeal is pending or that he is entitled and intends to appeal the judgment. If the judgment is not registered, it may still be enforced by way of common law and would be treated in the same way as the Lebanese judgment. If registered, it is treated as an English/Welsh judgment, subject to 24(1) of the 1980 Act but, so far as bringing insolvency proceedings, is governed by the decision in Ridgeway that the 1980 Act does not apply at all.

A 1933 Act judgment must be registered within six years of the handing down of the judgment or, where there have been appeals, six years after the final judgment is given. Registration can be set aside or suspended if there is a genuine appeal on foot [s5(1)] and a further application can be made following an appeal [5(2)]. Thereafter, it is treated as an English/Welsh Judgment [s2(2)]. There is reference in commentaries to there then being a further six year limitation period, but this is not contained in the 1933 Act itself and there is nothing in the 1980 Act which distinguishes it from other judgments. Again, therefore, a 1933 Act judgment on which a petition is founded is not subject to s24(1) of the 1980 Act in insolvency proceedings by reason of Ridgeway.

A question that has troubled me is that the 1933 Act does not allow proceedings for the recovery of sums payable on judgments subject to the Act to be pursued other than by way of registration. This would seem at first blush to put 1933 Act foreign judgments at a disadvantage in comparison with non-registerable judgments but I have concluded that, in fact, it is likely that a 1933 Act foreign judgment would be caught by the decision in Drelle, as a petition does not amount to being “proceedings for recovery” and as set out by Richards J at paragraph 35 above.

In any event, the 1933 Act predates the changes to the insolvency regime in 1986 and, if there is any unintended disadvantage as a result, it is for Parliament to enact the appropriate changes to the legislation.

It is my finding that the Applicant does not have a limitation defence to a winding-up petition.