The Supreme Court of the United Kingdom has, in a judgment
handed down on 24 October 2012, ruled that the liquidators of New
Cap are entitled to enforce in England against a Lloyd's
Syndicate a judgment of the New South Wales Supreme Court ordering
the Syndicate to repay US$5,980,600, plus interest, which the
Syndicate had received from New Cap in January 1999.
New Cap, an Australian reinsurer, reinsured Lloyd's
Syndicate 991 for a number of years, including the years 1997 and
1998. The reinsurance agreements were governed by English law and
contained London arbitration clauses. The parties entered into
commutation agreements under which New Cap paid the sums of
US$2,000,000 and US$3,980,000 representing the losses in these two
years. However, at the time of payment New Cap was insolvent, and
it entered administration three months later. Shortly afterwards it
was wound up by its creditors. Those circumstances triggered the
unfair preferences provisions of Part 5.7B of the Corporations Act
In 2003 the liquidator commenced proceedings in New South Wales
against the Syndicate, seeking a return of the payments under s
588FF of the Corporations Act 2001. The Syndicate contested the
jurisdiction of NSW Court and refused to appear in the proceedings
on the grounds that the Syndicate was not present in NSW and had
not submitted to the jurisdiction of the Court. In December 2003
permission was given for service on the Syndicate in London,
jurisdiction being founded on the fact that the cause of action
arose in NSW.
The Syndicate continued to refuse to participate in the
proceedings, despite a judgment of White J in September 2008
confirming that the NSW Court possessed jurisdiction and that the
arbitration clauses were ineffective as between the liquidator and
the Syndicate. However, the Syndicate remained a party to the
separate liquidation proceedings and submitted proofs of debt in
respect of unpaid sums and return premiums. Judgment was given
against the Syndicate by Barrett J in New Cap Reinsurance
Corporation Ltd v A E Grant  NSWSC 662, a judgment later
varied,  NSWSC 950, to take account of the different
membership of the Syndicate in the two years in question.
The NSW Court sought the assistance of the English courts in the
recognition and enforcement of the award in England. English law on
the recognition and enforcement of foreign judgments is
labyrinthine, and there are several different procedures, including
the common law and the Foreign Judgments (Reciprocal Enforcement)
Act 1933 for ordinary judgments, the Brussels Regulation for EU
judgments, the Lugano Convention for other European judgments, plus
special statutory procedures for the recognition and enforcement of
judgments given in insolvency proceedings inside the EU and outside
the EU. The enforcement proceedings in England turned upon which of
these procedures was the correct one and whether its requirements
had been satisfied.
In a 200 paragraph judgment which produced disagreements on
various points but unanimity in the outcome, the Supreme Court
ruled in favour of the liquidator. The majority approach, found in
the comprehensive judgment of Lord Collins, was that the judgment
could be recognised and enforced under the 1933 Act, a measure
which operates on a basis of reciprocity. Reciprocal arrangements
exist with Australia. The Act operates where the court whose
judgment is to be enforced possessed jurisdiction over the
defendant either because he was present in the jurisdiction or
because he had voluntarily submitted to the jurisdiction of the
court. In the present case, the Syndicate was not present in NSW,
but the Supreme Court found that the Syndicate had voluntarily
submitted to the jurisdiction of the NSW court by pressing its
claims in the liquidation of New Cap: the two sets of proceedings
were sufficiently closely related for that purpose.
In the outcome, therefore, the judgment of the NSW Court in 2009
ordering the money to be repaid by the Syndicate is enforceable in
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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