Muhl as liquidator of Nassau Insurance Company v Ardra Insurance Company Ltd 1995 Civil Jur. No. 484

• Jurisdiction: Bermuda
• Judgment Date: 16 May 1997
• Date: 16 May 1997
• Docket Number: Civil Jurisdiction 1995 No. 484
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Ground, J

Civil Jurisdiction 1995 No. 484

BETWEEN:

Edward J. Muhl, Superintendent of Insurance of the State of New York, and his successors in office as Superintendents of Insurance of the State of New York, as Liquidator of Nassau Insurance Company (In Liquidation)

Plaintiff

-and-

Ardra Insurance Company Ltd.

Defendant

Mr. S. Froomkin QC for the plaintiff; and

Mr. N. Hargun for the defendant.

Ellefsen v Ellefsen 1993 Civil Jur. No. 202

Bermuda Industrial Union v The Attorney General 1992 Civil Appeal No. 16

MV Yorke Motors v EdwardsUNK [1982] 1 All ER 1024

Hardy v Focus Insurance Company Limited 1995 Privy Council Appeal No. 6

Enforcement of judgment of Supreme Court of State of New York — Enforcing foreign judgment at common law — Natural justice — Contempt — Defendant not permitted to defend unless it posted security which it could not pay

JUDGMENT

By this action the plaintiff seeks to enforce a judgment of the Supreme Court of the State of New York. The matter comes before me on what was described as a preliminary issue, pursuant to an order of Wade J of 25th April 1996, which was made by consent. That order did not in terms refer to a preliminary issue, but it is plain from the context (and particularly the plaintiff's summons of 22nd April 1996 which inter alia sought the trial of a preliminary issue) that that is what was intended. The order provided that—

‘1. The Plaintiff shall within the next 14 days file affidavit evidence, if any, in support of its claim that the judgment of the Supreme Court of New York, County of New York, should be enforced by the Supreme Court of Bermuda.

2. The Defendant shall within the next 14 days thereafter file affidavit evidence, if any, in opposition to the plaintiff's claim for enforcement of the said judgment of the Supreme Court of New York.

3. The Plaintiff shall, within the next 14 days thereafter file affidavit evidence, if any, by way of reply.

4. The hearing of the Plaintiff's claim for enforcement of the said judgment of the Supreme court of New York shall be set down thereafter with an estimated time for hearing of 4 days.’

In fact, there is no other issue now extant in these proceedings, the defendant having discontinued its counterclaim. This was, therefore, in effect the trial of the matter, and I heard it in open court as such, notwithstanding that it had originally been set down in Chambers.

I think it important to say that parties who agree to the trial of a preliminary issue should take pains to define clearly what is to be tried. More could have been done in that respect in this case. However, on its face, I have no doubt that the effect of the order of 25th April 1996 was that all issues raised by the pleadings relating to the enforceability of the New York judgment in Bermuda were for trial before me, including issues of both fact and law. In this respect I note that the order made provision for affidavit evidence, and the parties were agreed that the deponents should attend for cross-examination. In the event, the plaintiff's deponent not attending (I was told simply that he could not attend and no point is taken on it), it was agreed that the majority of his exhibits could be admitted in evidence, but not the text of his affidavit. As a result the defendant did not rely on one of its affidavits in response. I have not, therefore, seen or had regard to that document, and the maker, a Mr. DiLoreto, was not tendered for cross-examination. The defendant did, however, rely on a further affidavit by a Mr. Christopher Wetherhill, a Director and the President of the defendant company, and he was duly produced for cross-examination before me.

The issues raised by the pleadings are that the New York judgment should not be enforced because:

(i) it was obtained in direct contravention of orders of the Supreme Court of Bermuda made on 18th May and 12th June 1987; and

(ii) the New York proceedings leading up to the judgment were opposed to Natural Justice, and/or offended principles of substantial justice.

(See paragraph 9 of the Defence).

THE LAW ON FOREIGN JUDGMENTS

There was no real dispute as to the law concerning the enforcement at Common Law of a foreign judgment, although there was a great deal of dispute as to its application to the facts of this case. I summarised the relevant law in my judgment in Ellefsen -v- Ellefsen. Civil Jurisdiction 1993, No. 202 (22nd October 1993),. and I consider that that statement of it still represents the law of Bermuda. I will, therefore, simply set it out:

‘The legal position as to the enforcement of foreign judgments is set out in Dicey & Morris on the Conflict of Law, 11th ed. p. 421—

‘A judgment creditor seeking to enforce a foreign judgment in England at common law cannot do so by direct execution of the judgment. He must bring an action on the foreign judgment. But he can apply for summary judgment under Order 14 of the Rules of the Supreme Court on the ground that the defendant has no defence to the claim; and if his application is successful, the defendant will not be allowed to defend at all.’

There is no statutory mechanism here for enforcing American judgments by means of registration and execution by the local Court, and so this statement of the common law represents the normal method for enforcing such judgments in Bermuda, and there is no dispute about that.

A final judgment in personam given by a court of a foreign country with jurisdiction to give it may be enforced by an action for the amount due under it if it is for a debt or a definite sum of money (not being a sum payable in respect of taxes or in respect of a fine or other penalty). The only grounds for resisting the enforcement of such a judgment at common law are: (1) want of jurisdiction in the foreign court, according to the view of the English Law; (2) that the judgment was obtained by fraud; (3) that its enforcement would be contrary to public policy; and (4) that the proceedings in which the judgment was obtained were contrary to Natural Justice (or the English idea of “substantial justice,” as it was put in the leading case). Unless the judgment can be impeached on one of those four grounds, the court asked to enforce it will not conduct a rehearing of the foreign judgment or look behind it in any way: see Dicey & Morris. Ibid., p. 420—

‘Rule 42—A foreign judgment which is final and conclusive on the merits and not impeachable under any of rules 43 to 46 [which are the four grounds I have set out above] is conclusive as to any matter thereby adjudicated upon, and cannot be impeached for any error either

• (1) of fact; or

• (2) of law.’

The commentary states that this has not been questioned since 1870.’

In fact, in Ellefsen I enforced a judgment of the Superior Court of New Hampshire by summary judgment here. I therefore cite that case not just for the statement of principle, but to make it quite clear that the Courts of Bermuda stand ready to enforce a foreign judgment if it does not fall within the excluded categories.

In this case the defendant says that the points raised in the defence bring the foreign judgment within two of the exceptions to enforcement. They say that because the plaintiff is in contempt of orders of this court, it would be contrary to public policy to enforce his judgment; and they say that the proceedings before the New York State Court were contrary to Natural Justice as that expression is understood in England and Bermuda. It is not in dispute but that this judgment would otherwise qualify for enforcement here, and I do not need to go into that aspect further. I turn therefore to make the necessary findings of fact and then to consider the two issues raised by the defendant. In doing so I have regarded the burden of proof as being upon the defendant to establish the grounds upon which it says the judgment should not be enforced.

THE FACTS

As to the background facts, I find as follows. The defendant is an exempted company incorporated under the law of Bermuda and engaged, at the material times, in the business of insurance and reinsurance. Under various reinsurance treaties the defendant reinsured certain risks of Nassau Insurance Company (“Nassau”), an insurance company incorporated under the law of the state of New York. The first Treaty was made on or about 12th September 1978 and was effective 1st July 1978. The second was made on or about 20th March 1980, and was effective 1st January 1980. The third was made on or about 26th September 1982 and was effective 31st December 1979. Each Treaty contained an arbitration clause, in largely similar terms, providing that—

‘… if any dispute shall arise between the Reinsured and the Reinsurer, either before or after the termination of this contract, with reference to the interpretation of this contract or the rights of either party with respect to any transactions under this contract, the dispute shall be referred to three arbitrators ….’

In the first two Treaties the place of arbitration was specified as New York, but in the third it was specified to be Hamilton, Bermuda, unless otherwise mutually agreed.

Nassau was placed in liquidation in New York by an order...