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Anything Less Than Fraud Just Won’t Do
London & Bermuda Newsletter
The Bermuda Supreme Court and Court of Appeals were recently asked to consider whether a foreign judgment registered in Bermuda under the Judgments (Reciprocal Enforcement) Act 1958 could be set aside on the basis of a mere suspicion that the judgment was procured by fraud.
The Act allows a UK judgment creditor to register and enforce a UK award in Bermuda. The Act, however, provides that such registration is to be set aside if it can be shown that the judgment was obtained by fraud. In Munib Masri v Consolidated Contractors International Company Ltd [2009] Bda L.R. 12, the Supreme Court reaffirmed the principle that, unless there is clear evidence of fraud in the first instance, an application to set aside on this basis is bound to fail. A mere suspicion will not suffice. The decision was upheld on appeal ([2009] CA (Bda) 16 Civ).
Facts
In 1992, Munib Masri agreed to participate in the exploitation of an oil field in southern Yemen. The field was owned by Consolidated Contractors International Company (CCIC), a Lebanese company which was a member of the Consolidated Contractors Company Group (CCC), an international consortium that specialised in construction projects in the Middle East.
English proceedings
The Yemeni project was an immense success. A dispute, however, arose as to whether Mr Masri was entitled to recover any returns in respect of his involvement with the project. It culminated in Mr Masri issuing proceedings in England against Consolidated Contractors International (UK) Limited (CCUK), a UK incorporated member of CCC. Proceedings were then separately issued against CCIC, also in London.
CCUK applied to dismiss Mr Masri’s claim on the basis that it was not a party to the relevant contract with him. Mr Masri countered this assertion, saying in evidence, “I believe that the contract was with CCUK”. CCUK’s application was refused.
CCIC also challenged Mr Masri’s claim. It argued that there was no connection between it, the transaction in issue and the UK and that, consequently, the English High Court lacked jurisdiction. CCIC’s arguments were rejected and its application also refused.
The claims against CCUK and CCIC were consolidated shortly thereafter and, at about the same time, CCIC indicated it would voluntarily submit to the High Court’s jurisdiction. Mr Masri was successful at the trial of the amalgamated proceedings in the spring of 2006. The trial judge ordered CCIC to pay Mr Masri just under $50 million in damages. However in her judgment she found that CCUK had been improperly named in the suit, thus wholly rejecting Mr Masri’s initial evidence regarding his belief that he had entered into a contract with CCUK.
Bermuda enforcement
CCIC sought to challenge registration of the judgment against it in Bermuda by resurrecting its jurisdiction argument. The Act automatically deems a foreign court to have jurisdiction where, as here, the judgment debtor voluntarily submitted to jurisdiction. However, CCIC sought to disapply this rule, on the basis its submission and the trial were procured by fraud – namely the evidence of Mr Masri that was later rejected at trial.
False evidence must be material / evidence of dishonesty required
Neither the Supreme Court nor the Court of Appeal accepted CCIC’s reasoning and both upheld registration of the judgment. Although Mr Masri gave false evidence about why he believed CCUK was the contracting party, there was nothing to indicate his evidence was material to the decision of the court of jurisdiction. It was more likely that the court found jurisdiction on other bases (such as the use of company letterhead). There was also nothing in the way in which Mr Masri had advanced his case, or in the manner in which the interim decision was articulated, to suggest that he had acted deliberately or dishonestly. As such, it was impossible to say the judgment had been procured through fraud.
Motivation for challenging enforcement
Given the gravity of CCIC’s complaint against registration, the Supreme Court found it curious that the point had not been raised earlier. It had been clear, during cross-examination at the very latest, that Mr Masri’s evidence at trial did not support his earlier testimony. The judge said that it was bizarre that CCIC would wait until steps were being taken to enforce the judgement in Bermuda before raising allegations of fraud. He remarked:
While football referees and cricket umpires are not supposed to be influenced by the strength of appeals for a penalty or a wicket (as judges ought not to be influenced by counsel passionately advancing a poor point), the absence of any appeal or complaint at all is rarely insignificant.
If, as CCIC contended, Mr Masri’s evidence at trial suggested that he had procured the interim order by fraud, it was difficult to understand why CCIC (or its legal team) failed to do anything in response in England, particularly during the trial.
Conclusion
It is clear that CCIC’s challenge to the registration of the foreign judgment was driven by a desire to evade paying the judgment debt, and was not based upon the merits of its application. The Supreme Court and Court of Appeal were both alive to and unimpressed by this. The Bermuda courts take a dim view of attempts to re-litigate matters that have already been determined overseas. The enforcement regime set out by the 1958 Act is summary in nature. If the preconditions to registration are met, registration will follow as a matter of course. Registration will not be impeded unless there is clear evidence at first blush of fraud, or one of the other grounds for setting registration of a foreign judgment aside. While CCIC’s argument was novel it was nonetheless bound to fail.
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