D/S Norden A/S v Samsun Logix Corporation [2009] EWHC 2304 (Ch)

Case No 11928 of 2009[2009] EWHC 2304 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Venue Royal Courts of JusticeDate Monday, 12 August 2009
Strand
London WC2A 2LL
Before
MR G NEWEY QC
Between
D/S NORDEN A/SClaimantSAMSUN LOGIX CORPORATIONDefendant
Digital Transcript of Wordwave International, a Merrill Communications Company101 Finsbury Pavement London E C2A 1ERTel No: 020 7422 6131 Fax No: 020 7422 6134Web: www.merrillcorp.com/mls Email: mlstape@merrillcorp.com(Official Shorthand Writers to the Court)
MISS L FRAZER (instructed by Mills & Co) appeared for ClaimantMISS L HILLIARD and MR S ROBINS (instructed by Birkett LLP) appeared for DefendantMR R ASWANI appeared on behalf of Carbofer Global Transport SA
JudgmentMR NEWEY:
[1]I have before me an application dated 29 June 2009 by D/S Norden A/S, which I shall call Norden, for permission to bring proceedings against Samsun Logix Corporation, which I shall call Samsun, and to enforce its security against Carbofer Global Transport SA, which I shall call Carbofer, notwithstanding a stay on proceedings imposed, on the application of Samsun and its receiver, by an order of Mr Justice Morgan dated 12 March 2009 under the Cross-Border Insolvency Regulations 2006 which provide for the UNCITRAL Model Law to have the force of law in Great Britain.[2]Also before me is an application dated 5 August 2009 by Samsun and its receiver for relief under article 21(1)(g) of the Model Law including provision for Norden’s application to be dismissed or struck out. I can summarise the factual background as follows for the most part by reference to the skeleton argument of Miss Lucy Frazer who appears for Norden.[3]Norden is the owner of a vessel named Port Moresby which it chartered to Samsun in 2006 and which Samsun sub-chartered to Carbofer. The two charter parties are substantially in a standard form as approved by the New York Produce Exchange. Each of them contains, among others, the following provisions. Clause 17 states, “that should any dispute arise between Owners and Charterers, the matter in dispute shall be referred to three persons at London, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them, shall be final, and for the purpose of enforcing any award, their agreement may be made a rule of the Court”.[4]Clause 18 states that the owner shall have a lien upon all cargoes or sub-hire freight and all sub-freights for any amounts due under the charter including general average contributions and the charterers to have a lien on the ship for all monies paid in advance and not earned and any overpaid hire or excess deposit to be returned at once. The charterers will not suffer nor permit to be continued any lien or encumbrance incurred by them or their agents which might have priority over the title and interest of the owners in the vessel.[5]Clause 30 states that the charter party shall be governed by English law.[6]Samsun failed to make payments under the charter party. In these circumstances, Norden served on Carbofer four notices of lien, on 12 December 2008, 7 January 2009, 21 January 2009 and 9 February 2009. One of the notices was subsequently withdrawn as it was paid by Samsun and another was paid by Carbofer. Two notices, the ones of 21 January 2009 and 9 February 2009, remain unpaid. Carbofer accepts it is liable for hire under the sub-charter in the sum of about $1 million. There is dispute between the parties as to a sum of the order of $500,000.[7]On 6 February 2009, Samsun filed for court receivership in Korea. On that date, the Seoul Central District Court (3rd Bankruptcy Division) issued a preservation order preventing Samsun from repaying its debts and providing any security. On 16 February 2009, the Seoul Central District Court (3rd Bankruptcy Division) ordered that no creditor should enforce against the property of Samsun. Samsun became subject to rehabilitation proceedings on 6 March 2009. On this date, Mr Hyal-Chul Hur was appointed as the receiver. On 12 March 2009, Mr Justice Morgan, on a without notice application by the receiver, ordered the recognition of the Korean rehabilitation proceedings as a foreign main proceeding under the Model Law. The order recorded that the consequences of recognition were as stated in article 20(1) of the Model Law, namely:(1) Commencement or continuation of individual actions or individual proceedings concerning the company’s assets, rights, obligations or liabilities is stayed.(2) Execution against a company’s assets is stayed.(3) The right to transfer, encumber or otherwise dispose of any assets of the company is suspended. The stay and suspension referred to in paragraphs 1, 2 and 3 above is the same in scope and effect as if the company had been made the subject of a winding-up order under the Insolvency Act 1986.[8]Mr Justice Morgan additionally ordered at the request of the receiver that “no step may be taken to enforce any security (as defined by section 248(1)(b)(1) of the Insolvency Act 1986) over the Company’s property except with the consent of the Receiver or the permission of the Court”. This stay was ordered pursuant to article 21(1)(g) of the Model Law which provides that the court can grant “any additional relief that may be available to a British insolvency officeholder under the law of Great Britain including any relief provided under paragraph 43 of schedule B1 to the Insolvency Act 1986”.[9]On 17 April 2009, Norden submitted a proof of debt in the Korean receivership in the sum of $2,148,702.36. After reviewing the proof of claim, the receiver acknowledged that Samsun owed $1,543,447.20 but denied liability for $605,255.16. Norden has challenged the denial of liability in respect of the $605,255.16 by an application to the Korean court for investigation and confirmation of rehabilitation claims. Norden had previously granted a power of attorney to a Korean law firm to enable it to deal with its affairs.[10]On 5 June 2009, the receiver presented a petition to the Korean court to set aside Norden’s sub-hire notice on the basis it should be avoided for the benefit of all creditors because it was sent out after 12 January 2009 when it was reasonably expected that Samsun was in imminent danger of becoming insolvent. Norden has, to date, taken no part in those proceedings.[11]I was told by Miss Lexa Hilliard, who appears with Mr Stephen Robins for Samsun, that it was thought the Korean court might deliver a substantive decision on the merits of the application to set aside the sub-hire notice during September. Miss Frazer told me that it was thought that Norden would then have a month to contest any decision against it.[12]In support of Norden’s application, Miss Frazer pointed out that when dealing with an application under paragraph 43 of schedule B1 to the Insolvency Act 1986 (which, as already mentioned, is referred to in article 21(1)(g) of the Model Law), a creditor would normally be given leave to exercise a proprietary right provided that this was unlikely to impede the achievement of the purpose for which the administration was being pursued. In this context, Miss Frazer referred me to Atlantic Computer Systems [1992] Ch 505 and Metro Nominees (Wandsworth) (No.1) Limited v Rayment [2008] BCC 40.[13]Opposing Norden’s application, Miss Hilliard argued it would be wrong to pre-empt the decision of the Korean court on whether Norden’s security should be avoided. It was her position that were the Korean court to rule in the receiver’s favour, an English court would or might give effect to that decision and that, accordingly, the status quo should be maintained for the time being. More particularly, Miss Hilliard contended that by filing a proof in Korea and appealing against the receiver’s partial rejection of that proof, Norden had submitted to the jurisdiction of the Korean court with the result, Miss Hilliard suggested, that any decision of the Korean court discharging Norden’s lien would be binding on Norden in England and any proceedings which Norden might subsequently bring in England would be bound to fail. Even were that wrong, the receiver would or might, Miss Hilliard said, be able to obtain relief giving effect to a Korean decision in his favour pursuant to the Model Law.[14]For her part, Miss Frazer argued that proving in a foreign insolvency does not prevent a creditor from enforcing his rights under an English contract in England or, at any rate, that on the facts of the present case, Norden’s proof and appeal against rejection could not preclude Norden from asserting its rights under English law. Miss Frazer also contended there was no prospect of an English court granting relief to give effect to a Korean decision invalidating Norden’s security in circumstances where, as Miss Hilliard accepted, the security would not be vulnerable to challenge under English domestic law.[15]It seemed to me that Miss Frazer’s submissions on these points had very considerable force. Even so, other things being equal, questions as to the extent, if any, to which a Korean decision in the receiver’s favour could be enforced in England, would, in my judgment, be best addressed if and when the Korean court has so ruled. Such an approach would be consistent with that recently adopted by the Chancellor in Perpetual Trustee Company Limited v BNY Corporate Trustee Services Limited [2009] EWHC 1912 (Ch). In paragraph 63 of his judgment, the Chancellor noted that counsel for one of the parties had submitted that the Model Law could entitle the English court to apply provisions of the US Bankruptcy Code. The Chancellor continued:
“In the course of his reply, he informed me that it was intended to seek the appointment of a foreign representative. No doubt such representative, when appointed, will consider whether by himself under Article 9 of the UNCITRAL Model Law or through the US Bankruptcy Court pursuant to Article 25, to make any and what requests for assistance from this court. It would be premature and academic for this court to decide on the extent of its powers under the UNCITRAL Model Law or the common law in the absence of a specific request or requests. Similarly, it would be inappropriate for me now, as counsel for Perpetual and Belmont invited me to do, to make the orders and declarations that they seek subject only to the provision to the trustee of appropriate indemnities. Such relief would effectively preclude any request or other application made by the foreign representative or the US Bankruptcy Court.”
[16]Miss Frazer, however, argued if it were not granted relief now, Norden would be left on the horns of a dilemma. If it continued to take no part in the Korean proceedings, it ran the risk that judgment would be given in the receiver’s favour without regard to arguments that could have been advanced on Norden’s behalf. If, on the other hand, Norden now participated in the Korean proceedings, it ran the risk that Samsun and its receiver would argue that it had, as a result, become bound by whatever the Korean court might decide. Miss Frazer told me that Norden had indicated it would take part in the Korean proceedings if Samsun would agree not to take the point that Norden had thereby submitted to the jurisdiction of the Korean court. Miss Frazer explained that Samsun had, however, refused to proceed in this way. During her submissions, Miss Hilliard confirmed she was not in a position to give an undertaking along the lines sought.[17]However, in the course of her submissions, Miss Frazer pointed out that I have power to impose conditions on the grant of relief under the Model Law. She referred me to article 22(2) of the Model Law which provides, “The court may subject relief granted under article 19 or 21 to conditions it considers appropriate, including the provision by the foreign representative of security or caution for the proper performance of his functions”. Miss Frazer also relied on paragraph 17 of schedule 2 to the Cross-Border Insolvency Regulations 2006. This provides as follows:
“On hearing a review application, the court may in addition to its powers under the Model Law to make a modification or termination order, (a) Dismiss the application. (b) Adjourn the hearing conditionally or unconditionally. (c) Make an interim order. (d) Make any other order which the court thinks appropriate including an order making such provision as the court thinks fit with respect to matters arising in connection with the modification or termination.”
[18]The expression “review application”, is defined as “an application to the court for a modification or termination order”, and the expression “modification or termination order” itself means “an order by the court pursuant to its powers under the Model Law modifying or terminating recognition of the foreign proceeding, the stay and suspension referred to in article 21 or any part of it or any relief granted under article 19 or 21 of the Model Law”.[19]Miss Frazer argued that these provisions would allow me to make the stay on the enforcement of Norden’s lien conditional on Samsun and its receiver undertaking not to argue that Norden was bound by the decision of the Korean court as a result of participating in the Korean proceedings. For her part, Miss Hilliard agreed that I had power to impose a condition to this effect but suggested that if minded to impose such a condition, I should not do so by requiring an undertaking to be given. Miss Hilliard accepted that I would have power simply to impose a condition, otherwise than by way of undertaking to the effect that if Norden participated in the Korean proceedings, Samsun and its receiver should not be permitted to argue in subsequent English proceedings that Norden was thereby estopped from denying that the decision of the Korean court should be given effect in England.[20]Miss Frazer said a condition along these lines would not fully meet Norden’s concerns. She explained in particular that if Norden had not been able to enforce its security by the time the Korean rehabilitation plan was finalised, it might be exposed to an argument that pursuant to Korean law, its debt had been discharged unless it maintained its proof.[21]However, it is not clear to me that granting Norden permission to enforce its security would necessarily solve whatever problem Norden might have in this regard. Even if I granted Norden permission to bring enforcement proceedings now, there would be no certainty that those proceedings would be concluded before the Korean rehabilitation plan was finalised. In any case, such an approach could be said to give rise to an “unseemly race with foreign courts” of the sort decried by Sir John Donaldson, Master of the Rolls, in Walker v Walker [1987] 1 FLR 31. At all events, it seems to me that an appropriate balance is struck if I exercise my discretion so as to make the continued stay on the enforcement of Norden’s security conditional in the way that I have already mentioned.[22]I should be grateful if counsel could agree an appropriate form of words. I shall also, as suggested by Miss Hilliard, give the parties liberty to reply on or after 14 October 2009 or after the Korean court has handed down judgment; whichever is the sooner.[23]There remains the question of whether I should order Carbofer to pay into court the sum which it admits to be payable. Mr Ravi Asvani who appears for Carbofer explained to me that Carbofer was willing to pay the sum in question into court provided the other parties agreed terms giving Carbofer appropriate protection, in particular, making it clear that Carbofer could not be called on to pay the same sum twice, say once in England and once in Korea. I am very much in favour of the admitted sum being paid into court on agreed terms. However, even if I had jurisdiction to order Carbofer to make a payment in without its consent, which is by no means clear, I would not think it appropriate to exercise it. Therefore, I shall not at this stage make any order directing Carbofer to make a payment into court. However, I shall hear counsel on whether, in those circumstances, it is appropriate to include any other provision in the order as regards payment. I shall also hear counsel on what, if any, other provisions should be included in the order.