Islandsbanki Hf & Ors v Stanford

Factual and Procedural Background

This appeal concerns the question of whether execution of a foreign judgment registered in the High Court under the Lugano Convention can constitute execution for the purposes of section 268(1)(b) of the Insolvency Act 1986 if such execution occurs before the expiry of the appeal period against the registration. The Appellant, Company A, appealed against an order dismissing its bankruptcy petition presented in respect of the Defendant, which was the third petition in time among three competing petitions. The underlying debt arose from an unpaid Icelandic judgment registered in England and Wales. Company A had sought enforcement via a Writ of Control issued prematurely before the appeal period against the registration order had expired. The lower courts dismissed the petition and held that the purported execution was invalid as it breached the enforcement prohibition under the Lugano Convention and related domestic legislation.

Legal Issues Presented

1. Whether purported execution of a foreign judgment registered under the Lugano Convention can be treated as execution for the purposes of section 268(1)(b) of the Insolvency Act 1986 if the execution occurred before the appeal period against the registration expired.
2. If such execution is invalid, whether the defect can be cured by the court's discretion or procedural rules.

Arguments of the Parties

Appellant's Arguments

• The Appellant contended that despite the premature nature of the execution, the requirements of section 268(1)(b) were satisfied.
• It was argued that the defect was procedural and could be cured by the court exercising its discretion under CPR r3.10(b) or related powers, including inherent jurisdiction and CPR rules 3.1(2)(m) and 3.1(7).
• The Appellant submitted that the Writ of Control was voidable rather than void as no application to set it aside had been made and enforcement was unsatisfied.
• It was further argued that the relevant provisions of the Lugano Convention and section 4A of the Civil Jurisdiction and Judgments Act 1982 should be construed broadly to facilitate rapid enforcement and mutual trust between contracting states.
• The Appellant also contended that the execution process is a matter for domestic courts and curing procedural defects would not undermine the Convention.
• Lastly, it was argued that the steps taken pursuant to the Writ of Control constituted "other process" for the purposes of section 268(1)(b).

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the interplay between the Lugano Convention, the Civil Jurisdiction and Judgments Act 1982 (as amended), the Insolvency Act 1986, and the Civil Procedure Rules. It emphasised that Articles 43(5) and 47(3) of the Lugano Convention expressly prohibit enforcement measures other than protective measures during the appeal period against the registration of a foreign judgment. This prohibition is incorporated into English law by section 4A of the 1982 Act.

The court held that the Writ of Control was issued in breach of this prohibition and was therefore unlawful. It rejected the Appellant’s argument that the defect was merely procedural and could be cured by the court’s discretion under CPR r3.10 or other rules. The court reasoned that allowing such a cure would undermine the Convention and statutory provisions, which are clear and unqualified.

The court distinguished the present case from precedents where procedural defects were cured, noting that the breach here went to the heart of the execution process and was a fundamental defect rather than a mere formal irregularity.

Furthermore, the court rejected the submission that the steps taken under the Writ of Control could amount to "other process" under section 268(1)(b) of the Insolvency Act 1986 because the execution itself was unlawful and voidable but not valid execution.

The court also dismissed the argument based on timing of service of the registration order, confirming that enforcement before valid service and expiry of the appeal period is prohibited and cannot be circumvented.

Holding and Implications

The appeal is dismissed.

The court upheld the lower courts’ decisions that execution of the foreign judgment before the expiry of the appeal period against its registration was unlawful and cannot be treated as valid execution for the purposes of insolvency proceedings. The defect in the execution process was fundamental and could not be cured by the court’s procedural discretion or inherent jurisdiction. As a result, the bankruptcy petition based on such execution failed.

The decision reinforces the binding nature of the Lugano Convention’s enforcement prohibitions as incorporated into domestic law and clarifies that domestic courts cannot override these provisions by curing procedural defects. No new precedent was set beyond affirming the strict compliance required with the Convention and related statutory provisions in enforcement actions.