Vizcaya Partners Ltd v Picard & Anor (Gibraltar) , Privy Council, Judgment, Law, casemine.com

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Membership of foreign companies and partnerships
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Vizcaya Partners Ltd v. Picard & Anor (Gibraltar) (Rev 1)

Smart Summary

Factual and Procedural Background

An extensive Ponzi scheme operated by Individual A through Company A collapsed in 2008. The Respondent, acting as trustee in bankruptcy of Company A, obtained a default judgment for US $180 million in The State Bankruptcy Court against the Appellant, an investment fund incorporated in The Offshore Jurisdiction. Approximately US $74 million of the questioned funds were traced to bank accounts in The Territory.

The trustee sought to enforce the default judgment in proceedings already on foot in The Territory. The Chief Justice refused summary judgment for the Appellant, holding the trustee had an arguable case based on (i) the presence of the Appellant in The State when proceedings commenced and (ii) an alleged prior agreement to submit to The State's jurisdiction. The Territory Court of Appeal dismissed the “presence” argument but left open the “submission” argument. Special leave to appeal to the Judicial Committee of the Privy Council was granted on the single question of submission. While the matter was pending, the parties reached settlement (subject to approval in The State), but the Board proceeded to give judgment because of the general importance of the issue.

Legal Issues Presented

Whether, under common-law rules for enforcing foreign judgments, a defendant can be treated as having submitted to the jurisdiction of a foreign court by anything less than an express contractual clause.
If implied or inferred submission is possible, whether the governing-law clause deeming the contract “made in The State and governed by The State law” constituted such submission.
Whether any submission, if established, would extend beyond contractual disputes to statutory avoidance claims brought by a bankruptcy trustee.

Arguments of the Parties

Appellant's Arguments

Submission must be express; it cannot be implied from choice-of-law, place of performance, or foreign statutes conferring jurisdiction.
Clause 10 of the customer agreement is purely a governing-law clause; it does not address jurisdiction and, even if it did, would cover only contractual disputes, not insolvency avoidance actions.
The correct test for recognition of foreign judgments is the common-law test applied in the enforcing forum, not any broader test said to exist under The State law.

Respondent's Arguments

Clause 10 is governed by The State law; under that law, a choice of The State law combined with business transacted there amounts to consent to the specific jurisdiction of The State courts.
Expert evidence (Mr Zeballos) shows the combination of choice-of-law language, the agency relationship with Company A, and the transaction of business in The State satisfies the long-arm statute and therefore constitutes prior submission.
Whether submission is established is a mixed question of fact and foreign law unsuitable for summary determination against the trustee; the claim therefore has a real prospect of success.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Rubin v Eurofinance SA	Common-law grounds for enforcing foreign insolvency judgments	Supplied background; Board followed its approach that expanded rules of insolvency enforcement are for the legislature, not courts.
Schibsby v Westenholz	Traditional bases of foreign-court jurisdiction recognised at common law	Historical reference in reviewing evolution of submission doctrine.
Copin v Adamson	Effect of shareholder agreement as express consent to foreign jurisdiction	Illustrated circumstances where actual consent exists; contrasted with mere implication.
Rousillon v Rousillon	Recognition where parties contracted to submit to foreign forum	Referential support for requirement of actual agreement.
Feyerick v Hubbard	Early example of enforcing foreign judgment pursuant to express jurisdiction clause	Cited to show historic acceptance of express submission.
Sirdar Gurdyal Singh v Rajah of Faridkote	No submission implied solely from contract made abroad	Treated as authority against implying submission from minimal contacts.
Blohn v Desser	View that submission can be implied from partnership registration	Board considered and declined to follow its broad implication approach.
Parke-Bernet Galleries Inc v Franklyn	The State law: transacting business plus choice of law yields specific jurisdiction	Formed part of Respondent’s expert evidence; Board found it insufficient.
Helicopteros Nacionales v Hall	Definition of “specific jurisdiction” (U.S. Supreme Court)	Cited in expert affidavit; not determinative of English common-law test.
Picard v Cohmad Securities Corp	Prior decision establishing personal jurisdiction in related Madoff litigation	Used by Respondent to justify relying on long-arm statute; not accepted as showing consent.
AWB (Geneva) SA v North America Steamships	Jurisdiction clauses may not extend to insolvency avoidance claims	Board relied on this to emphasise that any agreement would not automatically cover trustee actions.
Marks & Spencer plc v BNP Paribas (Jersey)	Modern statement of test for implying contractual terms	Provided analytical framework; Board applied strict “necessity” threshold.
Michael Wilson & Partners Ltd v Emmott	Illustration of terms implied by law rather than fact	Supported distinction when assessing whether submission term could be implied.
Vallée v Dumergue; Bank of Australasia v Harding; Bank of Australasia v Nias	Shareholder/partner deemed consent through governing instruments	Historical context for express or deemed agreements.
Emanuel v Symon	Mere membership in foreign partnership not sufficient for submission	Accepted as correct; used to rebut Respondent’s implication theory.
Sfeir & Co v National Insurance Co of New Zealand	Implied submission must be “necessary,” not merely reasonable	Cited favourably to show courts’ reluctance to imply submission.
Dunbee Ltd v Gilman & Co	Choice-of-law clause alone does not equal jurisdiction agreement	Applied directly to reject Respondent’s argument on clause 10.
Vogel v RA Kohnstamm Ltd	Rejected implied submission from multiple foreign contacts	Supported Board’s conclusion that contacts alone are insufficient.
Adams v Cape Industries	Requirement of clear consent for submission	Reaffirmed need for express or clearly implied agreement.
SA Consortium Textiles v Sun & Sand Agencies	Consent need not be contractual but must be actual	Quoted to distinguish between actual consent and loose implication.
King v Brandywine Reinsurance Co	Role of foreign-law experts in contract interpretation	Explained evidential deficiencies in Respondent’s expert material.
Vita Food Products Inc v Unus Shipping Co Ltd	Applicable law governs implied terms arising by law	Referred to when analysing absence of evidence for foreign implied term.

Court's Reasoning and Analysis

The Board approached the question in two stages:

Is implied submission possible in principle?
Reviewing historic authorities, the Board held that common law requires an actual agreement or consent, which may in theory be implied, but only where the implication is necessary and obvious. Mere factors such as governing-law choice, place of contracting, or transaction of business in the forum are insufficient.
Was there such an agreement here?
• Clause 10 is a choice-of-law clause; nothing in its wording submits disputes to The State courts.
• Expert evidence on The State law showed only that the long-arm statute would confer jurisdiction, not that the parties agreed to it.
• No rule of The State law implying a jurisdiction term was proved.
• Even if a jurisdiction agreement could somehow be implied, precedent (e.g., AWB v North America Steamships) indicates such an agreement would not extend to trustee avoidance claims, which are insolvency proceedings, not contract disputes.

Because the Respondent failed to demonstrate any express term, necessary implied term, or separate consent covering the avoidance proceedings, the common-law criteria for enforcing a foreign judgment were not met.

Holding and Implications

HOLDING: APPEAL ALLOWED.

The New York default judgment (US $180 million) cannot be enforced in The Territory on the basis of implied submission. Any further orders are left to be determined in light of the parties’ settlement.

Implications: The decision confirms that English-derived common law demands clear, actual consent before a foreign default judgment will be enforced on a “submission” ground. Choice-of-law clauses, place-of-contract, and transacting business in the forum do not, without more, amount to such consent. The ruling narrows the circumstances in which insolvency trustees can rely on foreign default judgments across jurisdictions and underscores the need for express jurisdiction clauses if parties wish to ensure enforceability abroad.