The Enforcement of Judgements in Bermuda
Jan W. Woloniecki & E. Barclay Simmons
Introduction
Bermuda is a small island of approximately 22 square miles. With statutes dating back to 1612 the legal system in Bermuda is one of the oldest in the Commonwealth. It is based on English common law, and decisions of the Court of Appeal and the House of Lords of the United Kingdom are highly persuasive on the courts in Bermuda. Bermuda’s court of first instance is the Supreme Court, followed by the Court of Appeal and finally the Privy Council, comprised of members of the English House of Lords. With such a close connection and shared history, it is no surprise that the procedure for the enforcement of judgements in Bermuda is derived from English law. As a result of Bermuda’s importance as a domicile for insurance and reinsurance companies, much of the case law in Bermuda dealing with the enforcement of judgements is insurance related.
There are two basic procedures for the enforcement of foreign judgments in Bermuda: (1) at common law and (2) under The Judgments (Reciprocal Enforcement) Act 1958. Since the common law rules apply to the judgments of courts in the United States and have been given rise to most of the case law, they will be described first.
Enforcement at Common Law
At common law the Supreme Court will enforce the judgment of a foreign court in a claim in personam provided that the following conditions are satisfied:-
(1) the foreign judgment is for a debt or definite sum of money, which is not for taxes or in respect of fine or other penalty;
(2) The foreign judgement is "final and conclusive" on the merits (a judgement may be "final and conclusive" even though it is subject to appeal and an appeal is pending before a foreign court); and
(3) The foreign court had jurisdiction over the judgment debtor in accordance with the Bermudan rules of private international law, that is to say in one of the following four cases: -
(a) If the judgment debtor was, at the time the proceedings were instituted, present in the foreign country,
(b) If the judgment debtor was the plaintiff or counterclaimed in the proceedings in the foreign court;
(c) If the judgment debtor was the defendant and submitted to the jurisdiction of the foreign court by voluntarily appearing in the proceedings and contesting them on the merits,
(d) If the judgment debtor was the defendant and, before the commencement of the proceedings agreed, in respect of the subject matter of the proceedings, to submit to the jurisdiction of the foreign court;
(4) The foreign judgment was not: -
(a) Procured by fraud, or
(b) Given in breach of natural justice, or
(c) Otherwise contrary to Bermudan public policy.
Provided these conditions are satisfied, the Bermudan Court will not review the foreign judgment on the merits. The plaintiff is entitled to enforce the foreign judgment by action for summary judgment under R.S.C. Order 14. It is important to note that the fact that a foreign court regards itself, under its rules of private international law, as having jurisdiction over the defendant/judgment debtor, is irrelevant to question of recognition/enforcement of the foreign judgment in Bermuda. For example, in Buchanan v. Rucker, the plaintiff brought an action in England on a judgment given by a Court in Tobago. The defendant had never been to Tobago and had not submitted to the jurisdiction of its Court. There had been substituted service of the proceedings, apparently valid under the law of Tobago, effected by nailing a copy of the Writ to the court-house door. It was held that the judgment was unenforceable in England. Lord Ellenborough said, "Can the Island of Tobago pass a law to bind the rights of the whole world? Would the world submit to such an assumed jurisdiction?"
A Bermudan reinsurer who receives notice of foreign proceedings in a case where he is not present in and has not previously agreed to submit to the jurisdiction of the foreign court, and is not minded to submit to the foreign court's jurisdiction by contesting the proceedings on the merits, has two options. He may simply ignore the foreign proceedings on the basis that the judgment would not be enforced against him in Bermuda, or he may seek to appear before the foreign court for the limited purpose of contesting its jurisdiction under its rules of private international law. Neither option is without potential difficulty. Before electing to ignore the foreign proceedings, the possibility that a foreign judgment given in default of appearance may be enforceable against assets of the judgment debtor in the foreign country or in the Courts of a third country must be considered. For example, if a reinsurer is sued in Texas, although he may have no tangible assets there, he may find that premium due to him from other reinsureds or claims due from retrocessionaires elsewhere in the United States has been attached by way of enforcement of the Texas judgment. Other countries where the judgment debtor has assets may well recognize an American default judgment in circumstances where the Bermudan Court would not. For example, the Canadian Courts have recently departed from the English common law rules, in recognizing the judgments of one province in another. It should also be borne in mind that the question of whether the foreign court has jurisdiction under the Bermudan rules of private international law, may well involve "a nice examination of all the facts and inferences must be drawn from a number of facts adjusted together and contrasted ...".
There may be very little time to make a considered decision as to whether or not to appear before the foreign court. In International Risk Management v. Elwood, the Bermudan plaintiffs were served by substituted service on the Secretary of State for Texas, this was valid under Texas law which provided that time for entering an appearance ran from the date upon which service was effected on the Secretary of State, not the date on which the foreign defendant received actual notice of the proceedings. The Secretary of State forwarded the Texas complaint to the Bermudan plaintiffs at their registered office in Bermuda, by ordinary U.S. mail, with the result that they had less than a week in which to decide on their response. The Bermudan plaintiffs obtained an ex parte injunction from the Supreme Court of Bermuda, on the day time expired for entering an appearance in Texas, restraining the plaintiff in Texas proceedings from entering a default judgment in Texas.
In Adams v. Cape Industries plc, the Court of Appeal reviewed the authorities on presence and residence of corporations, and stated the following general principles:-
"(1) The English courts will be likely to treat a trading corporation incorporated under the law of one country ("an overseas corporation") as present within the jurisdiction of the courts of another country only if either (i) it has established and maintained at its own expense (whether as owner or lessee) a fixed place of business of its own in the other country and for more than a minimal period of time has carried on its own business at or from such premises by its servants or agents (a "branch office" case), or (ii) a representative of the overseas corporation has for more than a minimal period of time been carrying on the overseas corporation's business in the other country at or from some fixed place of business.
(2) In either of these two cases presence can only be established if it can fairly be said that the overseas corporation's business (whether or not together with the representative's own business) has been transacted at or from the fixed place of business. In the first case, this condition is likely to present few problems. In the second, the question whether the representative has been carrying on the overseas corporation's business or has been doing no more than carry on his own business will necessitate an investigation of the functions which he has been performing and all aspects of the relationship between him and the overseas corporation.
(3) In particular, but without prejudice to the generality of the foregoing, the following questions are likely to be relevant on such investigation: (a) whether or not the fixed place of business from which the representative operates was originally acquired for the purpose of enabling him to act on behalf of the overseas corporation; (b) whether the overseas corporation has directly reimbursed him for (i) the cost of his accommodation at the fixed place of business; (ii) the cost of his staff; (c) what other contributions, if any, the overseas corporation makes to the financing of the business carried on by the representative; (d) whether the representative is remunerated by reference to transactions, eg. by commission, or by fixed regular payments or in some other way; (e) what degree of control the overseas corporation exercise over the running of the business conducted by the representative; (f) whether the representative reserves (i) part of his accommodation, (ii) part of his staff for conducting business related to the overseas corporation; (g) whether the representative displays the overseas corporation's name at his premises or on his stationery, and if so, whether he does so in such a way as to indicate that he is a representative of the overseas corporation; (h) what business, if any, the representative transacts as principal exclusively on his own behalf; (i) whether the representative makes contracts with customers or other third parties in the name of the overseas corporation, or otherwise in such manner as to bind it; (j) if so, whether the representative requires specific authority in advance before binding the overseas corporation to contractual obligations.
This list of questions is not exhaustive, and the answer to none of them is necessarily conclusive ..."
A party may elect to appear to contest the jurisdiction of the foreign court. He may succeed; but if he does not he then faces same dilemma, namely whether or not contest the proceedings on the merits. In England, Section 33 of the Civil Jurisdiction and Judgments Act 1982 permits a party to appear in a foreign court solely for the purpose of contesting jurisdiction and provides that he will not be regarded as having submitted in the event that he loses and subsequently withdraws from the foreign proceedings. Section 33 reverses the effect of the much criticized decision of the Court of Appeal in Henry v. Geoprosco International. The 1982 Act does not apply to Bermuda, but in AAICo v. Al Amana, Mr. Justice Ground said (obiter) that Henry v. Geoprosco would not be followed in Bermuda.
Bermuda Cases
The principles of English private international law governing the recognition and enforcement of foreign judgments at common law have been followed and applied by the Bermuda Courts. In Muhl, Superintendent of Insurance of the State of New York, as Liquidation) v. Ardra Insurance Co. Ltd., Mr. Justice Ground referred to the principles set out in Dicey & Morris and cited his earlier decision in Ellefsen v. Ellefsen, in which he had summarised the position at common law as follows:-
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 find 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 English law; (2) that the foreign 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."
In Muhl v. Ardra, the defendant/judgment debtor successfully argued that a judgment of the New York State Court should not be enforced in Bermuda for two reasons. First, because the plaintiff was in contempt of orders of the Bermuda Court, it would be contrary to Bermudan public policy to enforce the New York judgment. Second, because the New York proceedings "were contrary to Natural Justice as that expression is understood in England and Bermuda".
The defendant, Ardra, a Bermudian reinsurer, had entered into three reinsurance treaties with the reinsured, Nassau Insurance Company, Nassau. Two of the treaties provided for arbitration in New York, the third provided for arbitration in Bermuda. Nassau was placed into liquidation in New York, and its Liquidator successfully argued in New York proceedings that, as matter of New York insolvency law, the arbitration clauses in the treaties were not binding upon him and that he was entitled to sue Ardra in the New York State Court in respect of sums allegedly due under the treaties. Meanwhile, Ardra had obtained an ex parte injunction from the Bermuda Court restraining Nassau's Liquidator from suing Ardra in New York in respect of claims due under the treaty which contained the Bermuda arbitration clause. Nassau's Liquidator responded by commencing contempt proceedings against Ardra in New York for an alleged breach of the Order of the New York Court placing Nassau into liquidation, which prohibited the institution or continuation of proceedings against Nassau.
Following the decision of the New York Court of Appeals that Nassau's Liquidator was not bound by the arbitration clause, the New York proceedings continued. Nassau's Liquidator obtained an Order from the New York Court pursuant to Section 1213 of the New York Insurance Law, that Ardra be required to post security in the amount of $10,351,877.38, failing which Ardra's Answer to the Liquidator's Complaint would be struck out. Ardra failed to post the security, the Answer was struck out, and Nassau's Liquidator obtained judgment in default in respect of Ardra's liability under the reinsurance treaties. Damages were subsequently assessed at US$16,351,398.11. Following an unsuccessful appeal by Ardra to the New York Court of Appeals, Nassau's Liquidator sought to enforce the New York judgment against Ardra in Bermuda by bringing an action on the judgment.
Mr. Justice Ground held that it was contrary to Bermudan public policy to permit a judgment to be enforced which had been obtained following a willful decision to disregard the Bermuda Court's injunction. He said:-
"It may have been based on the perception that this was a New York matter which did not concern Bermuda, but if that was so then the plaintiff must live with the consequences. At the end of the day it comes back to the rule of law and to the question of upholding the respect and authority of the Courts. I find it quite extraordinary that the New York Liquidator can choose to disregard a Bermuda Court Order when it suits him, and then expect the assistance of the same Court when he belatedly realizes he needs it. I would, therefore, on this ground alone have refused to enforce the judgment upon which the plaintiff sues."
Mr. Justice Ground further held that the New York proceedings leading to the default judgment were contrary to the English/Bermudan idea of substantial justice. He found the New York Courts' refusal to consider Ardra's ability to pay the amount of security to be objectionable, and was satisfied that Ardra was in fact unable to pay the amount of security.
Mr. Justice Ground said:-
"The question is whether, looked at in the round, the judgment was obtained in a way which accords with the English idea of substantial justice. It is not a question of whether the legislation is unfair or objectionable, but whether the conduct of the particular case was, on its particular facts, contrary to Natural Justice. If it was, I do not think that it matters whether the procedure is derived from statute, case law or the whim of the presiding judge - if it is unfair, the English and Bermudan Courts will not enforce any judgment obtained as a result of it ... In my judgment, it is contrary to substantial or Natural Justice to require a defendant to put up a security as a condition of defending which it cannot meet. I think that this is a common law principle of general application which can be discussed in the case law governing the united range of circumstances in which a defendant under our system can be required to post security. I have principally considered cases under Order 14, under which a defendant against whom summary judgment is refused may nevertheless, if his defense is `shadowy', be required to bring into court some or all of the sum claimed. Even in such a case, where there is a judicial determination that his defense is slim, the principle is that a defendant should not be required to bring in more than he can in fact manage."
Enforcement by Registration under Statute
The Judgments (Reciprocal Enforcement) Act 1958, which is derived from the English Foreign Judgments (Reciprocal Enforcement) Act 1933, provides for enforcement by registering a foreign judgment, to which the Act applies, in the Supreme Court of Bermuda. The 1958 Act applies to judgments of Courts in the United Kingdom, and of the following countries or territories: Australia, Bahamas, Barbados, British Guiana, Gibraltar, Grenada, Hong Kong, Leeward Islands, St. Vincent, Jamaica, Nigeria, Dominica, St. Lucia. In order to qualify for registration under the Act the judgment must be:
a. final and conclusive as between the parties, and
b. for a sum of money, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty.
The effect of registration is that the foreign judgment is of the same force and effect as a judgment of the Supreme Court of Bermuda entered at the date of registration, and such steps may be taken to enforce it as if it were such a judgment.
Registration of the foreign judgment is liable to be set aside if the foreign court did not have jurisdiction over the judgment debtor. The foreign court is deemed to have jurisdiction, in the case of a judgment given in an action in personam, in the following cases:
i. if the judgment debtor, being a defendant in the proceedings giving rise to such judgment, submitted to the jurisdiction of that court by voluntarily appearing in such proceedings otherwise than for the purpose of protecting, or obtaining the release of, property seized, or threatened to with seizure in such proceedings or of contesting the jurisdiction of the court; or
ii. if the judgment debtor was a plaintiff in, or counterclaimed in, the proceedings giving rise to such judgment; or
iii. if the judgment debtor, being a defendant in the proceedings giving rise to such judgment, had, before the commencement of such proceedings, agreed, in respect of the subject matter thereof, to submit to the jurisdiction of the court giving such judgment; or
iv. if the judgment debtor, being a defendant in the proceedings giving rise to such judgment, was at the time when such proceedings were insitituted resident in, or being a body corporate had its principal place of business in, the foreign jurisdiction;
v. if the judgment debtor, being a defendant in the proceedings giving rise to such judgment, had an office or place of business in the foreign jurisdiction and such proceedings were in respect of a transaction effected through or at such office or place.
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