Court of Appeal Rules That “Judgments on Judgments” Are Not Registrable for Enforcement Under the Administration of Justice Act 1920

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Latham & Watkins LLPThe Court found that the Administration of Justice Act 1920 should be interpreted purposively rather than literally.

The English Court of Appeal has considered for the first time whether the Administration of Justice Act 1920 should be interpreted as permitting the registration of a Commonwealth State judgment in England and Wales, which was itself a judgment enforcing an original judgment given by the courts of a third State.

In Strategic Technologies PTE Ltd v. Procurement Bureau of the Republic of China Ministry of National Defence,[1] the Court sided with the prevailing academic view on this previously undecided issue and found that the Administration of Justice Act 1920 (1920 Act) should be interpreted purposively rather than literally. As a result, the 1920 Act was found not to permit the registration of a judgment given by one Commonwealth State which itself enforced a judgment from the courts of a third State.

The Court overturned the decision at first instance and set aside the order for registration of the judgment for two key reasons. First, the principle of reciprocity, which underlies the 1920 Act, would be undermined if judgment creditors could simply “launder” a judgment from a third State by passing it through an intermediary Commonwealth jurisdiction so that it could be enforced in England and Wales. Second, an analysis of the 1920 Act shows that it clearly contemplated two stages for enforcement in England and Wales, rather than three stages, which would necessitate interpreting the intermediary State judgment as being the “original judgment” as referred to in the 1920 Act. As such, its safeguards — in particular the ability of the English courts to scrutinise the merits of the original judgment — would be ineffective when considering a judgment on a judgment, which could not have been Parliament’s intention.

Facts

The substantive dispute arose regarding a contract under which the Claimant agreed to supply a measuring system for an underground firing range for the Defendant in the Republic of China (Taiwan). Delays and disputes as to the agreed specifications for the project led to the Claimant attempting to rescind the contract and the Defendant attempting to call on the performance bond that secured it.

The Claimant obtained judgment in Singapore in 2002 and was awarded damages. In 2009, the Claimant attempted to enforce the Singapore judgment in the Cayman Islands, where it obtained a default judgment recognising the Singapore judgment, relying on the Defendant’s interest in a Cayman account relating to separate proceedings brought by the Defendant against a third party. In 2016, the Claimant successfully applied for registration of the Cayman judgment in England, and in 2019, it attempted to enforce the Cayman judgment against the Defendant’s assets in London. The Defendant subsequently applied to have the order for registration set aside, which formed the subject of the current dispute.

Judgment

The judgment in the English High Court on the Defendant’s application to set aside the order for registration turned on a literal interpretation of the 1920 Act itself. Justice Carr recognised that, under her interpretation, the 1920 Act potentially permitted “judgment laundering” but held that this was unavoidable because “there is no escaping the clear and express words” in the 1920 Act, which states that it applies to “any” civil judgment for the payment of money. The fact that Cayman Islands judgments fall within the scope of the 1920 Act was not in dispute between the parties. Justice Carr’s reasoning also relied on the fact that the 1920 Act had not been amended to specifically exclude judgments on judgments. This fact is notable, because Parliament did deem it necessary to amend the Foreign Judgments (Reciprocal Enforcement) Act 1933 (1933 Act) to exclude such judgments, and the 1933 Act is substantially similar to the 1920 Act — except that it applies to countries outside of the Commonwealth. On this basis, and due to the clear and unambiguous wording in the 1920 Act, Justice Carr held that if Parliament had also wished to exclude judgments on judgments from the 1920 Act, it would have done so.

The Court of Appeal departed from this reasoning in favour of a purposive interpretation of the 1920 Act. Lord Justice Males accepted that the broad definition of “judgment” in the 1920 Act could be interpreted literally to include judgments on judgments, but found this interpretation to be inconsistent with the overall purpose of the act when read as a whole.

Lord Justice Males noted that Part II of the 1920 Act is titled “Reciprocal Enforcement of Judgments in the United Kingdom and in Other Parts of His Majesty’s Dominions” and that section 14(1) of the 1920 Act makes clear that the 1920 Act only applies in territories where reciprocal provisions have been made. The Court also found support for the centrality of the principle of reciprocity to the 1920 Act in its consideration of the Sumer Committee Report, which led to the passing of the 1920 Act itself. The Court found that permitting the registration of judgments on judgments would be inconsistent with this emphasis on reciprocity because the laundering of judgments in this way would mean that if one State were declared to be a reciprocating State, “it would have the effect of declaring [that] all of the jurisdictions that are reciprocal to that jurisdiction” are also reciprocal to England and Wales for the purposes of enforcing judgments, regardless of whether they are subject to the 1920 Act or whether they are even within the Commonwealth.

The literal interpretation also renders certain of the safeguards and conditions for enforcement of a foreign judgment set out in the 1920 Act as ineffective. Lord Justice Males draws specific attention to section 9(2)(f) of the 1920 Act, which provides that a judgment should not be registered if the cause of action underlying it could not be entertained by the registering court for public policy or other reasons. This scrutiny clearly targets the substantive judgment on the merits and not an intermediary judgment determining an action brought only to enforce another judgment. However, when section 9(2)(f) is read with the Cayman judgment deemed as the “original judgment”, then the Singapore judgment falls out of the analysis and is not subject to the public policy safeguard. As a result, Lord Justice Males held that the 1920 Act could not have been drafted with judgments on judgments in mind, as this would undermine the two-stage analysis of judgments contemplated in the 1920 Act and the safeguards that hinge on that analysis.

As to the amendment to the 1933 Act to exclude judgments on judgments, which was not made to the 1920 Act, the Court held that this shed no light on the interpretation of the 1920 Act. The Court held that it is “at least possible” that the amendment to the 1933 Act was made only to clarify what was already the position under that act (rather than to amend it substantively) and that not extending this amendment to the 1920 Act as well, whether for the purposes of clarification or amendment, was simply an oversight.

Finally, Lord Justice Males explained that his decision was consistent with the “consensus” of legal commenters opining on this issue. One powerful reason against allowing for the registration of judgments on judgments was taken from Dicey.[2] The authors of Dicey point out that considerable confusion could arise if both the original and intermediary judgments were to be enforceable in England, as they may differ in the interest rates or costs orders that accompany them. If only the original judgment were enforceable, then this problem would be avoided and the lack of provision for this possibility in the 1920 Act would be justified.

Conclusion

This decision sheds valuable light on the judiciary’s approach to the 1920 Act’s applicability to judgments on judgments, which has long been the subject of academic debate. Practitioners should carefully consider the jurisdictions in which a judgment could be enforced at the outset of proceedings, bearing the 1920 Act in mind in all cases where assets may be located in Commonwealth States.

However, practitioners should also be cognisant of the alternative common law route to enforcing judgments in England and Wales. This route is the only available method of enforcing judgments in England and Wales from States with which no reciprocal arrangements exist, and is expressly preserved as an alternative route for Commonwealth States under the 1920 Act. Lord Justice Males was clear that neither the 1920 Act nor the 1933 Act purport to codify or reflect the position at common law. Despite submissions to the contrary from the Defendant’s counsel, Lord Justice Males held that the common law has never grappled with the question of enforcing a judgment on a judgment, so the theoretical possibility remains that the common law could allow for the enforcement of such judgments.

A final point to note is the weight given by Lord Justice Males to the Sumer Committee Report. In this case, the context provided by the ancillary drafting document proved crucial to the Court’s interpretation of the legislation in question. Practitioners should be mindful of the persuasiveness of contemporaneous reports as to the overall purpose and effect of legislation as drafted whenever they are engaged in a dispute on legislative interpretation.

Endnotes

[1] [2020] EWCA Civ 1604.

[2] Dicey, Morris & Collins (15th Edition, 2018), paragraph 14-121.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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