Orexim Trading Limited v (1) Mahavir Port and Terminal Private Limited ("MPT") (2) Singmalloyd Marine (S) PTE Limited ("Singmalloyd") (3) Zen Shipping and Ports India Private Limited ("Zen") [2018] 

In a decision that will be of particular interest to creditors and insolvency practitioners contemplating section 423 Insolvency Act claims against defendants based outside the EU, the Court of Appeal has refused a claimant permission to serve a claim out of the jurisdiction. 

The decision will also be relevant to those dealing with other claims brought "under an enactment" against non EU defendants.

Orexim Trading Limited v (1) Mahavir Port and Terminal Private Limited ("MPT") (2) Singmalloyd Marine (S) PTE Limited ("Singmalloyd") (3) Zen Shipping and Ports India Private Limited ("Zen") [2018] EWCA Civ 1660

Background

The underlying dispute arose from the sale and transport of a consignment of sunflower oil. Orexim, the seller, chartered the MT Bon Vent from MPT to transport the oil. There were a series of disputes between those involved which culminated in numerous sets of proceedings in the Ukraine, India, Iran and elsewhere. In May 2014, Orexim and MPT entered into a settlement agreement which was governed by English law. 

The English proceedings

Orexim initiated proceedings in the Commercial Court in London against MPT claiming damages for breach of the settlement agreement. 

Orexim also claimed that a transaction pursuant to which the MT Bon Vent was transferred from MPT to Singmalloyd and then on to Zen constituted a sham transaction and sought an order that the transaction be set aside under section 423 of the Insolvency Act 1986. Orexim successfully applied for permission to serve the Claim Form on MPT and Zen outside the jurisdiction and for a freezing injunction against Zen.

MPT and Zen applied to have the order granting Orexim permission to serve the Claim Form out of the jurisdiction set aside. Additionally, Zen sought to have the freezing injunction set aside. 

First instance decision

Orexim had sought, and been granted, permission to serve outside the jurisdiction by virtue of the gateway set out in paragraph 3.1(20) of Practice Direction 6B. It provides that the Court has the power to permit service outside of the jurisdiction of a claim made under an enactment which allows proceedings to be brought provided that those proceedings are not covered by any of the other grounds referred to paragraph 3.1.

At first instance, the Court found that Orexim could not make use of that gateway to serve out of the jurisdiction and that permission should not have been granted. The Court reasoned that, where the wrongful act, neglect or default giving rise to the claim did not take place within the jurisdiction, a party could only make use of that gateway in circumstances where the relevant enactment indicates on its face that it is expressly contemplating proceedings against persons who are not within the jurisdiction, and that section 423 of the Insolvency Act 1986 did not do so. 

Orexim appealed the judgment. 

The appeal

The Court of Appeal held that an enactment need not expressly authorise the bringing of proceedings against persons outside of England and Wales to constitute an "an enactment which allows proceedings to be brought" within the meaning of paragraph 3.1(20). Instead, the relevant question is whether, as a matter of construction, the enactment in question allows proceedings to be brought against persons not within England and Wales. 

The Court of Appeal concluded that, properly construed, section 423 of the Insolvency Act 1986 confers on the Court the power to make orders against persons or property outside England and Wales, subject to the court being satisfied that there is a close enough connection with England and Wales. Accordingly, the Court has the power to permit service of a claim brought under section 423 of the Insolvency Act 1986 outside England and Wales under paragraph 3.1(20) of Practice Direction 6B. 

There are two additional requirements that the claimant must satisfy before the Court can permit service out of the jurisdiction under paragraph 3.1(20) of Practice Direction 6B. Firstly, the claimant must satisfy the court that the claim has a reasonable prospect of success (CPR 6.37 (1)). Secondly, the court must be satisfied that England and Wales is “the proper place” to bring the claim (CPR 6.37 (3)). 

In the case of claims brought under section 423 of the Insolvency Act 1986, there is a further requirement that must also be satisfied. This is a particular feature of such claims and does not apply more generally. That is, the claimant must show that there is a sufficient connection between the defendant and England and Wales. The Court of Appeal noted that, in view of the potential breadth of Section 423, the Courts should be scrupulous in ensuring that this, and the two other safeguards identified above, are rigorously applied. 

On the facts, the Court of Appeal concluded that there was insufficient connection with England and Wales for the Court to give the Claimant permission to serve the claim outside the jurisdiction. Neither the Claimant nor any of the Defendants were incorporated in England and Wales and there was no evidence that any of the Defendants had assets within the jurisdiction or that any loss would be suffered here. Furthermore, the relevant transactions took place outside the jurisdiction and were governed by the law of Singapore. The Court of Appeal also concluded that the Claimant had failed to show that England and Wales was the proper place to bring the claim. 

Impact of the Court of Appeal judgment

Although of particular relevance to those dealing with claims to set aside transactions using section 423 Insolvency Act, the decision has wider application to claims brought "under an enactment" against defendants domiciled outside the EU.   

Addleshaw Goddard's Richard Wise and Samantha Hawley instructed Jeffrey Gruder QC of Essex Court for the successful respondent Zen.