Supreme Court dismisses appeal on enforcement of foreign insolvency order due to lack of real connection.

THE SUPREME COURT

APPEAL NO. 284/2006

Murray J.

Hardiman J.

Fennelly J.

Finnegan J.

O’Donnell J.

IN THE MATTER OF FLIGTLEASE (IRELAND) LIMITED (IN VOLUNTARY LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACT 1963 TO 2005

AND

IN THE MATTE OF AN APPLICATION PURSUANT TO SECTION 280 OF THE COMPANIES ACT 1963

PAUL McCANN AND STEPHEN AKERS, JOINT LIQUIDATORS

APPLICANTS

Judgment of Mr Justice Finnegan delivered on the 23rd day of February 2012

Flightlease (Ireland) Limited (in voluntary liquidation) (“Flightlease”) was incorporated in Ireland on the 21st November 1997. At an

extraordinary general meeting of the shareholders of Flightlease held on the 13th July 2004 a resolution for the winding-up of the

company was passed and Paul McCann and Stephen Akers were appointed as joint liquidators. Flightlease is a wholly owned subsidiary

of Flightlease AG which in turn is a subsidiary of SAir Group which is the highest holding company in a complex corporate structure.

Swissair Schweizerisch Luftverkehr-Aktiengesellschaft in Nachlassliquidation (which translates as Swissair Transport Company Limited

in debt restructuring liquidation) (“Swissair”) was the operational aviation company of the SAir Group. Flightlease AG and Swissair are

subsidiaries of S Air Lines the subholding company of S Air Group. S Air Group and Flightlease AG are also in debt restructuring

liquidation in Switzerland. Karl Wüthrich is the liquidator of S Air Group, Swissair and Flightlease AG.

Flightlease AG, Flightlease and associated companies incorporated in Guernsey and Bermuda of which Flightlease AG was also the

intermediate parent company were incorporated for the purpose of aircraft leasing. Flightlease leased seven Airbus 320 aircraft to

Volare Airlines Spa (“Volare”). These aircraft were used on various flight routes but were also used by Volare to handle Swissair flights

on the route Zurich-Venice. In respect of the Zurich-Venice route Volare was at all material times a creditor of Swissair. However in

connection with the operation of the leased aircraft Volare also purchased services from other companies in the S Air Group and in

respect of these services was at all material times indebted to Flightlease and to other companies within the S Air group. By June

2001 Volare was in arrears with payments to Flightlease and to the other companies in the S Air group. From that date S Air retained

payments due to Volare in respect of the Zurich-Venice route with the intention of transferring amounts retained to companies within

the S Air Group in discharge of the indebtedness of Volare. On the 20th September 2001 CHF8,000,000 from the amounts retained

were transferred to Flightlease. All the creditors to whom Flightlease acknowledged indebtedness and the joint liquidators entered into

a wind down agreement dated 22nd December 2003 for the purposes of providing for the orderly winding down of Flightlease and the

distribution of the realised assets in accordance with the terms of the agreement. Swissair is not a party to the write down

agreement. Kurt Wülrich as liquidator executed the write down agreement on behalf of Flightlease AG. The only outstanding claim in

respect of Flightlease, not covered by the agreement, is a claim by Swissair for repayment of the said sum of CHF8,000,000. This

claim is all that remains preventing the distribution of the assets of Flightlease in accordance with the wind down agreement.

Swissair submitted a claim in the liquidation on the 23rd May 2005 which claim was rejected by notice of rejection of proof dated 18th

October 2005. It was open to Swissair to apply to the court pursuant to the Companies Act 1963 section 280 which provides as

follows:-

“280(1) The liquidator or any contributory or creditor may apply to the court to determine any question

arising in the winding-up of a company, or to exercise in relation to the enforcing of calls or any other

matter, all or any of the powers which the court might exercise if the company were being wound up by the

court.

(2) The court, if satisfied that the determination of the question or the required exercise of power will be

just and beneficial, may accede wholly or partially to the application on such terms and conditions as it

thinks fit or may make such other order on the application as it thinks just.”

Swissair did not avail of section 280. Instead Swissair, without notice to the joint liquidators, instituted proceedings in the Swiss

courts seeking the return of certain monies paid by Swissair to Flightlease and the existence of which proceedings was not revealed

until after rejection of the proof of debt. The Swiss proceedings were served on the 31st January 2006. By originating notice of

motion dated the 15th February 2006 the joint liquidators applied to the High Court in the liquidation pursuant to section 280 of the

Companies Act 1963 seeking the following reliefs:-

“1. An order granting liberty to the applicants to distribute the assets of the company without reference to

the claim submitted by Swissair Schweizerisch Luftverkehr-Aktiengesellschaft in Nachlassliquidation (the

“claimant”) acting by its liquidator Karl Wüthrich dated the 23rd May 2005;

2. In the alternative, an order fixing the time for the taking of any challenge or appeal to the applicant’s

notice of rejection of proof dated the 18th October 2005 in respect of the claimant’s claim;

3. Such further or other order as to this Honourable Court shall seem fit;

4. An order providing for the costs of this application.”

The joint liquidators claim on the application pursuant to section 280 is that under Irish conflicts of law rules the question as to

whether a claim is a provable debt in the liquidation of Flightlease is one that falls to be determined in Ireland in accordance with the

Irish rules as to the treatment of claims in the winding-up of a company and as to the lodgment, verification and admission of such

claims. Accordingly if Swissair is dissatisfied with the rejection of its claim the appropriate course is to apply to the court pursuant to

section 280 and challenge the rejection. Swissair contend that the appropriate forum for the determination of the claim of Swissair is

the Zurich Commercial Court. Under Swiss law the Swiss court has jurisdiction to hear and determine Swissair’s claim.

The Preliminary issue

Questions arose between the joint liquidators and the liquidator of Swissair as to whether a judgment obtained in the Swiss

proceedings would be recognised and enforced by the courts of this jurisdiction. The joint liquidators required an early decision on this

question to enable them to decide whether or not to participate in the Swiss proceedings: to so participate, on one view of the law,

would be to submit to that jurisdiction and confer upon the Swiss court a jurisdiction which it would not otherwise have. From the

liquidator of Swissair’s point of view if a judgment of the Swiss court would not be recognised and enforced in Ireland there may be

little point in pursuing the Swiss proceedings. For the foregoing reasons an application for the trial of a preliminary issue was brought

by the joint liquidators which application was granted.

By order dated the 28th April 2006 the High Court directed a preliminary issue in the following terms:-

“Whether in the event that the order sought by Swissair Schweizerisch Luftverkehr-Aktiengesellschaft (in

debt restructuring liquidation) (“the claimant”) against Flightlease Ireland Limited (in voluntary liquidation) in

the Swiss proceedings was granted, that order would be enforceable in the State.”

Thereafter points of claim, points of defence and rejoinders to points of defence were exchanged. Arising out of the pleadings the

learned trial judge identified as arising on the preliminary issue the following individual issues:-

1. Whether the order sought would be excluded from enforcement under the common law as arising from a

proceeding in bankruptcy or insolvency. It was contended by the joint liquidators of Flightlease that such an

exclusion arose and that, therefore, the order of the Swiss court would not, on that ground alone, be enforced in

this jurisdiction.

2. In the event that the answer to 1 is no, a second question arose on the pleadings as to whether, under Irish

rules of conflict of laws, the order of the Swiss court would be recognised on the basis of a “real and substantial

connection” test (as contended for by the liquidator of Swissair), rather than the narrower test summarised in

Dicey. (This is a reference to Dicey Rule 36 as to which see infra).

3. In the light of the proper test different questions as to whether the test found to be appropriate was met on the

facts of the case would also arise.

4. Arising from a rejoinder to the points of defence, which was filed on behalf of the joint liquidators of Flightlease, a

further issue arose as to whether the order sought by Swissair in the Swiss proceedings would be enforceable in the

State having regard to the fact that there had been no appeal against the notice of rejection of the claimant’s

proof of debt in the liquidation under Irish proof of debt procedure.

For the purposes of the preliminary issue there was no dispute on the facts. The agreed facts are set out in the judgment of the High

Court but having regard to the manner in which the appeal before this court proceeded it is not necessary to set out the agreed

facts in full. I will refer to the agreed facts only where relevant to the issues to be determined by this court. Having regard to the

conclusion reached by the learned High Court judge on the first and second issues mentioned above it was unnecessary for him to

deal with the third and fourth issues and he did not do so.

Central to issue 1 is whether the claim sought to be maintained in the Swiss proceedings is to be categorised under Irish law as a

claim in the liquidation or as a claim in personam. If the former an order of the Swiss court would not be recognised and enforced by

the Irish courts. If the claim before the Swiss court is a claim in personam then the issue is whether Rule 36 in Dicey, Morris & Collins

on Conflicts of Laws 14th edition (“Dicey”) represents the law in Ireland and if it does whether the court should declare and/or

develop the common law of Ireland in accordance with contemporary requirements of private international law and the principles of

comity and adopt the principles of international law and principles of international comity in accordance with Canadian jurisprudence.

According to Rule 36 of Dicey if a judgment debtor was, at the time the proceedings were instituted present in a foreign country or if

the judgment debtor submitted to the jurisdiction of the courts of the foreign country the Irish courts would recognise and enforce a

judgment of a court of that country. Under the Canadian jurisprudence Canada applies a real and substantial connection test. In

Canada foreign judgments will be enforced so long as the foreign court has properly and appropriately exercised jurisdiction: that test

is met where the defendant was present in the foreign jurisdiction at the time of the action or has submitted to that jurisdiction or if

the foreign jurisdiction has a real and substantial connection with the claim. If Rule 36 in Dicey is applied a judgment of the Swiss

Court will not be recognised and enforced whereas if a real and substantial connection test is applied the judgment will be recognised

and enforced.

Proceedings in the High Court

1. Whether the order sought would be excluded from enforcement under the common law as arising from a proceeding in bankruptcy

or insolvency. It was contended by the joint liquidators of Flightlease that such an exclusion arose and that, therefore, the order of

the Swiss court would not, on that ground alone, be enforced in this jurisdiction.

In the High Court on the first issue on behalf of Flightlease it was contended that the order sought in the Swiss proceedings would be

excluded from enforcement in Ireland under the common law as arising from a proceeding in bankruptcy or insolvency. It was not, it

was submitted, a claim in personam. The joint liquidators relied upon a passage from the 1927 edition of Dicey:-

“An action in personam may be defined positively…as an action against a person with a view to enforcing the

doing by him of some particular thing e.g. the payment of damages for breach of contract or for a tort;

under this head comes (inter alia) every common law action, whether on contract or tort, also every

equitable proceeding, the objective of which is to compel the doing or not doing of a particular thing, as e.g.

specific performance of a contract…It may be well, though hardly necessary, to add that an action in

personam does not include any proceedings which are not in strictness an ‘action’ at all, such as a

proceeding for divorce, judicial separation, restitution of conjugal rights, or for a declaration of nullity of

marriage or of legitimacy or a proceeding in bankruptcy.”

The learned trial judge accepted the passage as a statement of the common law in Ireland. In the course of his judgment he said:-

“In a corporate insolvency a liquidator may claim that the company is owed money by a third party. The

third party may dispute such a liability. The question of the existence or otherwise of the liability may be

determined, as a matter of procedure, within the insolvency, or, in accordance with the permitted

procedure in this jurisdiction, a court having authority over the insolvency may authorise separate

proceedings to be commenced and, if appropriate, defended to resolve such issues. Similar disputes may

arise between an insolvent individual and a third party as to the ownership of assets which, if owned by the

individual, might be properly taken into account for the purposes of determining the entitlements of all

creditors.

There can be little doubt that even if such claims by or against the insolvent person or entity are

determined, as a matter of procedure, within the insolvency process, orders made as a result of such claims

could not by that fact alone lose their status as judgments in personam. The fact that, in accordance with

the procedural law of the relevant jurisdiction, a claim of an insolvent company to (for example) monies

owing, is determined within the insolvency proceedings rather than independent proceedings would not, in

my view affect the proper characterisation of any award made as being one in personam against the party

from whom the monies were claimed. It is the insolvency process itself, involving the gathering in of assets

and their distribution in accordance with the appropriate insolvency law, that is the process which is not

properly regarded as in personam. Determinations made whether within or outside the process, concerning

the entitlements or liabilities of the insolvent person or entity are not, in my view, properly characterised as

being a procedure in bankruptcy or insolvency in the sense in which that term is used in the above passage

from Dicey.”

The learned trial judge did not accept a submission by counsel on behalf of Flightlease that, while some orders made in insolvency

proceedings may be enforced, the nature of the claim brought in the Swiss proceedings in this case is so closely connected to the

insolvency proceedings and could only be brought within an insolvency and as such ought not to be enforced. The learned trial judge

held that the substance of the order to be made in the Swiss courts, should Swissair succeed, is not so closely connected to the

insolvency proceedings so as to exclude it from enforcement as an order in bankruptcy or insolvency. The learned trial judge held that

an order in the Swiss proceedings is properly categorised as an in personam order. Its enforceability in this jurisdiction depends on

the application of the appropriate rules for the recognition and enforcement of in personam orders at common law.

2. In the event that the answer to 1 is no, a second question arose on the proceedings as to whether, under Irish rules of conflict of

laws, the order of the Swiss Court will be recognised on the basis of a “real and substantial connection” test (as contended for by the

liquidator of Swissair), rather than the narrower test summarised in Dicey.

As to the second issue Swissair contended that an order of the Swiss courts, being an order in personam, should be recognised and

enforced on the basis of a “real and substantial connection test” rather than that the test in Dicey Rule 36 first case be applied. The

lead of Canadian courts should be followed and the test applied in Canadian jurisprudence adopted. Rule 36 first case of Dicey

provides as follows:-

“Subject to Rules 37 to 39, a court of a foreign country outside the United Kingdom has jurisdiction to give a

judgment in personam capable of endorcement or recognition in the following cases:

First case – if the judgment debtor was, at the time the proceedings were instituted, present in

the foreign country.”

The learned High Court judge held that many judgments of the Irish courts involving conflict of laws placed reliance on Dicey and

adopted its rules as representing the common law in this jurisdiction and to adopt the real and substantial connection test would

represent a relatively significant alteration in the common law as so understood. If the real and substantial connection test should be

adopted on the agreed facts the test would be met. However if Dicey Rule 36 first case represents the law in Ireland, while at the

time of the transaction which gives rise to the claim in the Swiss proceedings Flightlease had a fixed place of business in Switzerland

from which it carried on business, at the time of the commencement of the proceedings Flightlease was in liquidation and its affairs

were therefore conducted in Ireland by the joint liquidators. It had no presence in Switzerland at the time of the commencement of

the Swiss proceedings for the purposes of conferring jurisdiction on the Swiss court. Accordingly it would not be appropriate to afford

recognition to and to enforce any judgment obtained in the Swiss proceedings. The learned trial judge refused to follow the Canadian

jurisprudence and in so doing listed the following matters which he considered relevant:-

(I) He had not been referred to judgments from other common law jurisdictions which suggested that common law courts generally

have followed the Canadian lead.

(II) Academic commentary cautioned against adopting the Canadian approach.

(III) Only limited consideration had been given by the Irish courts to a real and substantial test. In the context of divorce in K.D. v

M.C. [1985] I.R. 697 the Supreme Court had been urged to adopt the real and substantial connection test in reliance on Indyka v

Indyka [1969] 1 AC 33. However that test had not been raised at first instance and the Supreme Court, on that basis, did not

consider the test.

(IV) On the basis of the existing test Irish residents would make decisions as to whether or not they should participate in proceedings

in foreign courts and foreign residents as to whether they should participate in proceedings in Irish courts. A change in Irish law would

have significant effects on many parties and should not therefore be lightly engaged in.

(V) The nature of the common law is that it will gradually evolve to meet new circumstances and new principles may develop to

reflect the changing world in which the law has to operate. In making such changes the common law courts declare the law as it was

at the time of events giving rise to the proceedings in which the issue arises. A radical change in the common law has, therefore, the

potential to have a retrospective effect which would not, in the ordinary way, arise on a statutory amendment and this creates the

potential for injustice.

(VI) Common law courts should not engage in an alteration of the common law which amounts to legislation as opposed to the orderly

evolution of common law principles.

(VII) No real consensus exists in the common law world as to a need for a change leading to the adoption of the Canadian test.

The learned High Court judge held that Dicey Rule 36 first case represents the common law in Ireland and refused to follow the

Canadian jurisprudence and answered the question posed on the second issue in the negative.

Notice of appeal and notice to vary

Swissair filed notice of appeal and Flightlease notice to vary. The former raises fourteen substantive grounds of appeal and the latter

nine substantive grounds of appeal. However before this court the appeal concerned a single issue. Dicey, Morris and Collins on

Conflict of Laws 14th edition (“Dicey”) provides as follows at Rule 36:-

Jurisdiction in Personam

“Rule 36. Subject to rules 37 to 39, a court of a foreign country outside the United Kingdom has jurisdiction

to give a judgment in personam capable of enforcement or recognition in the following cases:

First case. If the judgment debtor was, at the time the proceedings were instituted, present in the foreign

country.

Second case. If the judgment debtor was claimant, or counterclaimed in the proceedings in the foreign

court.

Third case. If the judgment debtor, being a defendant in the foreign court, submitted to the jurisdiction of

that court by voluntarily appearing in the proceedings.

Fourth case. If the judgment debtor being a defendant in the original court, had before the commencement

of the proceedings agreed, in respect of the subject matter of the proceedings to submit to the jurisdiction

of that court or of the courts of that country.”

The learned trial judge held that Swissair’s claim is a claim in personam rather than a claim in the liquidation and that Rule 36 first

case in Dicey represents the common law in Ireland. The effect of this is that the jurisdiction to recognise and enforce a foreign

judgment in Ireland exists only where either the defendant was present in the foreign country at the time the action was instituted or

where the defendant has submitted to that jurisdiction under the second, third or fourth cases. In the present case there was no

submission to jurisdiction and accordingly any judgment obtained on foot of the Swiss proceedings could only be enforced as a foreign

judgment in Ireland where the judgment debtor was, at the time the proceedings were instituted, present in Switzerland. As

Flightlease was not present in Switzerland at the relevant time any judgment of the Swiss court would be unenforceable in the Irish

courts.

Swissair accepts that any judgment of the Swiss court would be a judgment in personam but relies on two decisions of the Supreme

Court of Canada which held that the traditional common law test, which is the test set out in Dicey at Rule 36 first case, should no

longer represent the law of Canada and substituted for that test a real and substantial connection test. For Swissair it is submitted

that this court should have regard to the development in Canada and either incorporate into Dicey Rule 36 first case a real and

substantial connection test (as has been done in Canada) or alternatively substitute such a test for Rule 36 first case.

On the notice to vary the joint liquidators contend that Swissair’s claim is a claim in the liquidation in which case a judgment of the

Swiss courts would be unenforceable in the Irish courts. The joint liquidators in the alternative contend that the claim in the Swiss

court is a claim in personam and that any change in the established common law should only be by legislation.

Developments in Canadian Jurisprudence

The facts in De Savoye v Morguard Investments Limited and Credit Foncier Trust Company [1990] 3 S.C.R. 1077 (“Morguard”) were

as follows. The respondents were mortgagees of lands in Alberta. The appellant was the mortgagor and at the date of the mortgage

resided in Alberta but moved to British Columbia and did not thereafter reside or carry on business in Alberta. The mortgages fell into

default and a foreclosure action was commenced in Alberta. Following a judicial sale of the mortgaged properties there remained a

shortfall and the respondents obtained judgments against the appellant in Alberta for the deficiency between the value of the

property and the amount owing on the mortgages. The respondents then each commenced separate actions in British Columbia to

enforce the Alberta judgments for the deficiencies. The appellant took no steps to appear or to defend the actions and the

respondents obtained judgments. The judgments were upheld on appeal to the British Columbia Court of Appeal but on different

grounds than at first instance. The Court of Appeal upheld the judgments on the basis of reciprocity, as a British Columbia court

would have taken jurisdiction on the same facts, it should recognise the Alberta judgments. That decision was appealed to the

Supreme Court of Canada. At the time the proceedings commenced in Alberta and when enforcement was sought in British Columbia

the law governing the enforcement in one Canadian province of an in personam judgment obtained in another Canadian province was

the same as the common law rules on the enforcement of foreign in personam judgments in Ireland (ignoring some statutory changes

in England). The issue on the appeal accordingly was whether a judgment in personam validly given in Alberta against an absent

defendant could be enforced in British Columbia where he then resided.

The case most frequently cited in Canada as a statement of the Canadian law pre Morguard was Emanuel v Symon [1908] 1 K.B. 302

where Buckley L.J. summarised the law as follows:-

“In actions in personam there are five cases in which the courts of this country will enforce a foreign

judgment:

(i) where the defendant is a subject of the foreign country in which the judgment has been

obtained;

(ii) where he was resident in the foreign country when the action began;

(iii) where the defendant in the character of plaintiff has selected the forum in which he is afterwards sued;

(iv) where he has voluntarily appeared; and

(v) where he has contracted to submit himself to the forum in which the judgment was obtained.”

The second case cited by Buckley L.J. corresponds with Dicey’s Rule 36 first case. In Canada these rules were applied not just to

foreign judgments but also to judgments of other provinces which for the purposes of the rules of private international law were

considered foreign countries. There were exceptions where a judgment obtained in one province would be enforced in another e.g.

Mareva injunctions and in relation to divorce where Indyka v Indyka [1969] 1 A.C. 33 was followed. In Indyka at p.105 Lord

Wilberforce had this to say:-

“In my opinion, it would be in accordance with the developments I have mentioned and with the trend of

legislation – mainly our own but also that of other countries with similar social systems – to recognise

divorces given to wives by the courts of their residence wherever a real and substantial connection is shown

between the petitioner and the country, or territory, exercising jurisdiction.”

The Supreme Court of Canada came to the conclusion that the traditional English common law test, being that set out in Dicey Rule

36 first case should no longer represent the common law of Canada in the relationship between sister provinces. In its place the

Supreme Court of Canada substituted a real and substantial connection test. At page 1108 La Forest J. said:-

“Turning to the present case it is difficult to imagine a more reasonable place for the action for the

deficiencies to take place than Alberta. As noted earlier, the properties were situate in Alberta, and the

contracts were entered into there by parties then both resident in the province. Moreover, the deficiency

actions follow upon foreclosure proceedings, which would obviously take place in Alberta, and the action for

the deficiencies cries out for consolidation with the foreclosure proceedings in some manner similar to a Rice

Order. A more ‘real and substantial’ connection between the damages suffered and the jurisdiction can

scarcely be imagined. In my view the Alberta Court had jurisdiction, and its judgment should be recognised

and be enforceable in British Columbia.”

The rationale of the judgment appears from the following passages commencing at page 1095:-

“The common law regarding the recognition and enforcement of foreign judgments is firmly anchored in the

principle of territoriality as interpreted and applied by the English courts in the nineteenth century; see Rajah

of Faridkote [1894] A.C. 670. This principle reflects the fact, one of the basic tenets of international law,

that sovereign states have exclusive jurisdiction in their own territory. As a concomitant to this, states are

hesitant to exercise jurisdiction over matters that may take place in the territory of other states.

Jurisdiction being territorial, it follows that a state’s law has no binding effect outside its jurisdiction. Great

Britain, and specifically its courts, apply that doctrine more rigorously than other states; see Libman v The

Queen [1985] 2 S.C.R. 178 which deals with the question in its criminal aspect. The English approach, we

saw, was unthinkingly adopted by the courts of this country, even in relation to judgments given in sister

provinces.

Modern states, however, cannot live in splendid isolation and do give effect to judgments given in other

countries in certain circumstances. Thus a judgment In Rem, such as a decree of divorce granted by the

courts of one state to persons domiciled there, will be recognised by the courts of other states. In certain

circumstances as well, our courts will enforce personal judgments given in other states. Thus we saw, our

courts will enforce an action for breach of contract given by the courts of another country if the defendant

was present there at the time of the action or has agreed to the foreign courts exercise of jurisdiction. This,

it was thought, was in conformity with the requirements of comity, the informing principle of private

international law, which has been stated to be the deference and respect due by other states to the actions

of a state legitimately taken within its territory. Since the state where the judgment was given had power

over the litigants, the judgments of its court should be respected.

But a state was under no obligation to enforce judgments it deemed to fall outside the jurisdiction of the

foreign court. In particular, the English courts refused to enforce judgments on contracts, wherever made,

unless the defendant was within the jurisdiction of the foreign court at the time of the action or had

submitted to its jurisdiction. And this was so, we saw, even of actions that could most appropriately be tried

in the foreign jurisdiction, such as a case like the present where the personal obligation undertaken in the

foreign country was in respect of property located there. Even in the nineteenth century, this approach

gave rise to difficulty, a difficulty in my view resulting from a misapprehension of the real nature of the idea

of comity, an idea based not simply on respect for the dictates of a foreign sovereign, but on the

convenience, nay necessity, in a world where legal authority is divided among sovereign states of adopting a

doctrine of this kind.”

La Forest J. cited with approval the following passage from “The Objectives of Private International Law, Yntema” [1957] 35 Can. Bar.

Rev. 721 at 741:-

“In a highly integrated world economy, politically organised in a diversity of more or less autonomous legal

systems, the function of conflict rules is to select, interpret and apply in each case the particular local law

that will best promote suitable conditions of interstate and international commerce, or, in other words, to

mediate in the questions arising from such commerce in the application of the local laws.”

He went on to say:-

“………..comity must be adjusted in the light of a changing world order. The approach adopted by the English

courts in the nineteenth century may well have seen suitable to Great Britain’s situation at the time. One

can understand the difficulty in which a defendant in England could find himself in defending an action

initiated in a far corner of the world in the then state of travel and communication. The Symon case, where

the action arose in Western Australia against a defendant in England affords a good illustration. The

approach, of course, demands that one forget the difficulties of the plaintiff in bringing an action against the

defendant who has moved to a distant land. However his may not have been perceived as too serious a

difficulty by English courts at a time when it was predominantly English men who carried on enterprises in

far away land. As well there was an exaggerated concern about the quality of justice that might be meted

out to British residents abroad; see Lord Reid in The Atlantic Star [1973] 2 All E.R. 175 at p. 181.

The world has changed since the above rules were developed in nineteenth century England. Modern means

of travel and communications have made many of these nineteenth century concerns appear parochial. The

business community operates in a world economy and we correctly speak of a world community even in the

face of decentralised political and legal power. Accommodating the flow of wealth, skills and people across

state lines has now become imperative. Under these circumstances our approach to the recognition and

enforcement of foreign judgments would appear right for reappraisal. Certainly, other countries, notably the

United States and members of the European Economic Community, have adopted more generous rules for

the recognition and enforcement of foreign judgments to the general advantage of litigants.”

A number of matters appear to have influenced La Forest J.:-

1. In the course of his judgment La Forest J. had regard to the position in the adjoining federal jurisdiction, the

United States of America and also in Australia in each of which a regime of mutual recognition across the country

exists.

2. In Canada, in some other areas of law, provinces accord recognition to judgments in other provinces e.g. Mareva

injunctions, matrimonial status.

3. The 1968 Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters (the Brussels

Convention).

However he did not see that the “reciprocity approach” in Indyka v Indyka and the Canadian decisions on matrimonial status as

relevant to introducing a real and substantial connection test in in personam actions.

The next and most significant development in Canadian jurisprudence occurred in Saldanha & Ors v Frederick H. Beals & Another

[2003] 3 S.C.R. 416. The facts are as follows. The appellants sold a vacant lot in Florida to the respondents. The purchase was not

completed and the appellants instituted proceedings in Florida. While a defence was filed the appellants chose not to defend any of

the subsequent amendments to the action. Under Florida law the failure to defend the amendments had the effect of not defending

the action. The respondents received a jury award of US$210,000 damages and US$50,000 punitive damages. On receiving notice of

the judgment the appellants sought legal advice and were advised by an Ontario lawyer that the foreign judgment could not be

enforced in Ontario and in reliance on the advice took no steps to have the judgment set aside or to appeal the same. The

respondents commenced proceedings in Ontario to enforce the judgment. The trial judge dismissed the action for enforcement of the

judgment. The Court of Appeal allowed the respondents’ appeal. On appeal to the Supreme Court of Canada it was held that the

judgment of the Florida court should be enforced. In short it was held that international comity and the prevalence of international

cross-border transactions and movement called for a modernisation of private international law. Subject to the legislature’s adopting a

different approach, the real and substantial connection test, which had until then only been applied to inter-provincial judgments,

should apply equally to the recognition and enforcement of foreign judgments. The real and substantial connection test was made out

on the facts. Judgment was delivered by Major J. with five judges concurring. Of the three dissenting judges Iacobucci, Binnie and Le

Bel JJ agreed that the real and substantial connection test should apply but would not enforce the Florida judgment for other reasons.

Le Bel J suggested that the real and substantial connection test should be extended to judgments obtained outside Canada but

should be modified to allow Canadian courts assess the propriety of the foreign courts jurisdiction in a way that acknowledges the

additional hardship imposed on a defendant who is required to litigate in a foreign country. In addition Le Bel J. held that the defences

available in Canada would require to be reformulated as a result of the adoption of the new test. The majority judgment endorsed the

views expressed by La Forest J. in Morguard that the time was right for a reappraisal of the approach to the recognition and

enforcement of foreign judgments, but not just in relation to inter provincial judgments. International comity and the prevalence of

international cross-border transactions and movement call for a modernisation of private international law. Both comity and the notion

of reciprocity are compelling both in the inter provincial and international context; it is reasonable that a domestic court recognise

and enforce a foreign judgment where the foreign court assumed jurisdiction on the same basis as the domestic court would, for

example, on the basis of a real and substantial connection test.

The following passages from the judgment of Major J. are relevant to the finding that the real and substantial connection test was

made out:-

“In the present case the appellants purchased land in Florida, an act that represents a significant

engagement with the foreign jurisdiction’s legal order. Where a party takes such positive and important

steps that bring him or her within the proper jurisdiction of a foreign court, the fear of unfairness related to

the duty to defend oneself is lessened. If a Canadian enters into a contract to buy land in another country, it

is not unreasonable to expect the individual to enter a defence when sued in that jurisdiction with respect to

the transaction.”

Further it was held that in entering a defence the appellants attorned to the jurisdiction of the Florida court: the subsequent

procedural failures under Florida law did not invalidate that attornment: in those circumstances Canadian courts have jurisdiction. The

appellants had a right of appeal in Florida which they did not avail of on legal advice: such reliance could not be a bar to the

enforcement of the respondents’ judgment. Under Canadian law there are defences applicable to an action to enforce a foreign

judgment, namely natural justice, public policy, fraud and forum non-conveniens and which were developed by the common law

courts. However Major J. went on to say:-

“Unusual situations may arise that may require the creation of a new defence to the enforcement of a

foreign judgment. However, the facts of this case do not justify speculating on that possibility. Should the

evolution of private international law require the creation of a new defence, the courts will need to ensure

that any new defences continue to be narrow in scope, address specific facts and raise issues not covered

by the existing defences.”

The Position in Other Common Law Jurisdictions

The researches of counsel failed to discover any decision in other common law jurisdictions in which the courts followed or refused to

follow Saldanha & Ors v Beals & Another.

Submissions on behalf of Flightlease on the Notice to Vary

The issue on the Notice to Vary is whether the order sought in Switzerland would be excluded from enforcement by separate action in

this jurisdiction under the common law as arising from a proceeding in bankruptcy or insolvency. The learned High Court judge

accepted that the following passage from the 1927 edition of Dicey represented the law in this jurisdiction:-

“An action in personam may be defined positively…as an action against a person with a view to enforce the

doing by him of some particular thing, e.g. the payment of damages for a breach of contract or for a tort;

under this heading come (inter alia) every common law action, whether on contract or tort, and also every

equitable proceeding, the object of which is to compel the doing or the not doing of a particular thing, as

e.g. the specific performance of a contract…

It may be well, though hardly necessary, to add that an action in personam does not include any proceeding

which is not in strictness an ‘action’ at all, such as a proceeding for divorce, judicial separation, restitution of

conjugal rights, or for a declaration of nullity of marriage or of legitimacy, or a proceeding in bankruptcy.”

In the course of his judgment the learned trial judge said:-

“It is clear that a proceeding in bankruptcy is not, in itself, an action against an individual. Indeed the

bankruptcy itself (whether individual or corporate) involves the collecting in of the assets of the insolvent

individual or entity and their distribution in accordance with the appropriate rules. It is, of course, the case

that for the purposes of the orderly conclusion of any insolvency it may be necessary to determine the

liabilities and entitlements of the insolvent person or entity as against third parties. In a corporate insolvency

a liquidator may claim that the company is owed money by a third party. The third party may dispute such

a liability. The question of the existence or otherwise of the liability may be determined, as a matter of

procedure, within the insolvency or, in accordance with a permitted procedure in this jurisdiction, a court

having authority over the insolvency may authorise separate proceedings to be commenced and, if

appropriate, defended to resolve such issues. Similar disputes may arise between an insolvent individual and

a third party as to the ownership of assets which, if owned by the individual, might be properly taken into

account for the purpose of determining the entitlements of all creditors.”

The Swiss proceedings seek a form of relief peculiar to insolvency proceedings and which do not involve the judicial determination of

the existence of rights but rather “the collecting in of the assets of the insolvent individual or entity” for appropriate distribution to

Swissair’s creditors. Swissair characterises the claim as “analogous to a claim pursuant to section 139 of the Companies Act 1990 for

the return of assets which were improperly transferred”, and this makes it clear that the claim is materially bound up with the

mechanism of collective execution against the property of the debtor rather than an in personam claim. It is submitted that the

learned High Court judge failed to recognise properly the distinction between the incidental establishment of rights and liabilities in the

context of a bankruptcy or winding-up on the one hand, and orders made as part of (or ancillary to) the mechanism of collective

execution against the property of such bankrupt or insolvent on the other. The law is correctly stated in Cambridge Gas

Transportation Corporation v Unsecured Creditors of Navigator Holdings Plc [2007] 1 A.C. 508 where Lord Hoffman at paragraph 13

and 14 said:-

“13. Mr Howe’s submissions as to the rules of private international law concerning the recognition and

enforcement of judgments in rem and in personam are, of course, correct. If the New York order and plan

had to be classified as falling within one category or the other, the appeal would have to be allowed. But

their Lordships considered that bankruptcy proceedings do not fall into either category. Judgments in rem

and in personam are judicial determinations of the existence of rights: in the one case, rights over property

and in the other, rights against a person. When a judgment in rem or in personam is recognised by a foreign

court, it is accepted as establishing the right which it purports to have determined, without further enquiry

into the grounds upon which it did so. The judgment itself is treated as the source of the right.

14. The purpose of bankruptcy proceedings, on the other hand is not to determine or establish the existence

of rights, but to provide a mechanism of collective execution against the property of the debtor by creditors

whose rights are admitted or established. That mechanism may vary in its detail. For example, in personal

bankruptcy in England the assets of the bankrupt are vested in a trustee for realisation and distribution to

creditors. So the mechanism operates by divesting the bankrupt of his property. In corporate insolvency, on

the other hand, the insolvent company continues to be owner of its property but holds it in trust for the

creditors in accordance with the provisions of the Insolvency Act 1986…

But these are matters of detail. The important point is that bankruptcy, whether personal or corporate, is a

collective proceeding to enforce rights and not to establish them. Of course, as Brightman L.J. pointed out in

In Re Lines Bros Limited [1983] Ch. 1, 20 it may incidentally be necessary in the course of bankruptcy

proceedings to establish rights which are challenged: proofs of debt may be rejected: or there may be a

dispute over whether or not a particular item of property belonged to the debtor and is available for

distribution. There are procedures by which these questions may be tried summarily within the bankruptcy

proceedings or directed to be determined by ordinary action. But these again are incidental procedural

matters and not central to the purpose of the proceedings.”

In Re Lines Bros Limited Brightman L.J. said:-

“If the creditor petitions to wind-up a company, or claims in a liquidation initiated by others, he is not

engaged in proceedings to establish the company’s liability or the quantum of the liability (although liability

and quantum may be put in issue) but to enforce the liability. Indeed, he is precluded from initiating or

supporting a winding-up petition if his status as a creditor is bona fide disputed by the company. The

liquidation of an insolvent company is a process of collective enforcement of debts for the benefit of the

general body of creditors. Although it is not a process of execution, because it is not for the benefit of a

particular creditor, it is nevertheless akin to execution because its purpose is to enforce, on a pari passu

basis, the payment of the admitted approved debts of the company.”

Thus it is submitted a judgment obtained in the Swiss Court will not be in personam. Rather it is part of the insolvency process and as

such ought not to be enforced. The Swiss proceedings are proceedings which can only be brought within the context of insolvency

proceedings. A transaction avoidance claim taken by a liquidator e.g. to set aside a preference, will be part of the insolvency

proceedings, a judgment which is sui juris and not an action for the recovery of a debt or asset.

Dyer v Dolan unreported, High Court, 10th June 1993, is distinguishable from the present case. What was before the court in Dyer v

Dolan was an application for liberty to enter final judgment on a summary summons being the amount of a judgment obtained in the

Massachusetts Superior Court. The judgment did not arise from a proceeding in bankruptcy at all. However subsequent to the

judgment but before the Irish proceedings the defendant filed for bankruptcy under U.S. federal bankruptcy law. Ordinarily on

discharge from bankruptcy the claims of pre-bankruptcy creditors would be barred. However the plaintiff brought an application to

have the judgment declared “non dischargeable” so that it would not be discharged by the bankruptcy and the application was

successful. When the plaintiff sought to enforce the judgment in Ireland the defendant raised his discharged bankrupt status by way

of defence and also argued that the court should not recognise the order making the judgment non-dischargeable. In short Keane J.

held that having invoked the protection of the bankruptcy court the defendant could not dispute the jurisdiction of that court to

make the non-dischargeable debt order.

Submissions of Swissair on the notice to vary

The learned High Court judge, it is submitted, correctly considered the nature of the Swiss proceedings at paragraphs 3.5 and 3.6 of

the judgment said:

“It is clear from the facts referred to above (para 2.3) that in order for Swissair to succeed it will be

necessary for the Swiss court to be satisfied that the transaction in favour of Flightlease was carried out for

the purposes of effecting what, in the analogous jurisdiction of the courts in Ireland in respect of liquidations,

might be seen as similar to a fraudulent preference. The transaction must have occurred during the period

of five years prior to the commencement of the insolvency proceedings. Thus it is said, correctly, that

proceedings of the type contemplated can only arise where there is an insolvency and an insolvency process

before the courts.

While that much is true it does not, it seems to me, at the end of the day take away from the substance of

the order which will be made, which is to the effect that on foot of the application of the relevant Swiss law,

Flightlease will, if it is unsuccessful, be ordered to pay a liquidated sum of money back to Swissair. While

some weight must be attached to the fact that the relevant proceedings could only have arisen in the event

of an insolvency, it seems to me that greater weight must be attached to the nature of the order to be

made.”

The reasoning and finding of the learned High Court judge is adopted. Critical is the nature of the order to be made at the conclusion

of the proceedings. In this case the order will be for payment of a sum of money. Accordingly, it is submitted, the order is correctly

characterised as an order in personam rather than an order in bankruptcy or insolvency.

Submissions on behalf of Swissair on the Appeal

Dicey, Rule 36 sets out the effect of decisions of the English courts which were summarised in Emanuel v Symon. The Irish courts

have not always accepted Dicey as a statement of Irish law. Thus in Rainford v Newell Roberts [1962] I.R.95 the High Court refused

to follow Rule 80 Case 2 in the first edition of Dicey which dealt with the enforcement of judgments in personam. The learned High

Court judge therefore erred in the status he accorded Dicey as representing the Irish law. Further in holding that Rule 36 was a

comprehensive statement of Irish law as to the grounds for recognising and enforcing a foreign judgment the learned trial judge was in

error. Insofar as Emanuel v Symon endorsed Rule 80 second case of the first edition of Dicey it was not followed in Rainford: nowhere

in the judgment of Davitt P. is it stated that Dicey Rule 36 is an exhaustive statement of the Irish law. The learned High Court judge

was accordingly in error in finding that the Irish law on the recognition and enforcement of foreign in personam judgments has been

clear since 1962.

In Dyer v Dolan unreported, High Court 10th June 1993 Keane J. did not rely on Dicey for the propositions of law upon which he based

his judgment but rather on a passage from Cheshire on Private International Law which was referred to in Rainford:-

“The result so far of our enquiry into the international competence of foreign courts is that jurisdiction

sufficient to render a judgment actionable in England exists in two cases, namely, where the defendant was

present in the country of the Forum at the time of the action, or where he submitted to the jurisdiction.

The question now is whether there are any other grounds of competency.”

It is clear, therefore, that there may be other grounds upon which a judgment in personam will be enforced in this jurisdiction. This

being so it was open to the High Court to declare as part of Irish law the Canadian jurisprudence and apply the real and substantial

connection test. Both Rainford and Dyer are decisions at first instance and insofar as they support the view that the Irish common

law is exhaustively that set out in Dicey Rule 36 there has been no pronouncement by the Supreme Court on these issues.

In Indyka v Indyka [1967] 1 A.C. 33 the House of Lords held that it would be in accordance with developments and with the trend of

legislation to recognise divorces given to wives by the courts of their residence wherever a real and substantial connection is shown

between the petitioner and the country, or territory, exercising jurisdiction.

In K.D. v M.C. [1985] I.R. 697 the appellant sought to rely on Indyka v Indyka. However as the issue had not been raised in the High

Court the Supreme Court declined to hear and determine the issue. In W.v W. [1993] 2 I.R. 476 Indyka v Indyka was again

considered. In his judgment Blayney J. at p.504 said:-

“Two additional conclusions can be drawn from the passages cited from the judgment in Travers v Holly

[1953] p.2146 and Indyka v Indyka [1969] 1 A.C. 33: firstly, the common law rule is judge made law and is

not immutable; and secondly that the question of whether or not a foreign divorce should be recognised

should be answered by the court in the light of its present policy.”

In G.McG v D.W. [2000] 1 I.R. 96 the High Court (McGuinness J.) held that because the English divorce was granted prior to the 2nd

October 1986 (i.e. prior to the Domicile and Recognition of Foreign Divorces Act 1986) common law principles govern the

determination of whether or not it was capable of recognition under Irish law. In declaring the common law, it was open to the court

to consider the present policies of the courts and statutes and if necessary to modify the existing recognition rules based on the

common domicile of spouses.

Submissions on behalf of Flightlease on the appeal

The learned High Court judge summarised the issue as follows:-

“There are two competing contentions as to the appropriate basis upon which the common law in this

jurisdiction should recognise an in personam order of a foreign court. Flightlease argues that the traditional

test as set out in Dicey (and in particular Rule 36) represents the current law in this jurisdiction. Swissair

contends that the courts in this jurisdiction should follow the lead of Canadian courts and adopt a ‘real and

substantive connection’ test.”

The learned High Court judge recognised that any individual considering the matter would have regard to Dicey as many of the

judgments of the courts in this jurisdiction concerning Private International Law have placed reliance on Dicey and adopted its rules

as representing the common law in this jurisdiction.

In Rainford v Newell Roberts, Davit P. adopted the views expressed in Cheshire on Private International law to the effect that

jurisdiction sufficient to render a foreign judgment in personam enforceable in Ireland exists only where the defendant was present in

the country at the time of the action or where he had submitted to that jurisdiction. Davit P. rejected nationality or allegiance as an

adequate basis for recognition. The first edition of Dicey 1896 Rule 80 had the following as the second case:-

“Where the defendant is, at the time of the judgment in the action, a subject of the sovereign of such

country”.

Davit P. noted that Dicey’s second case was repeated without qualification in subsequent editions. However in the 6th edition of 1949

the editor notes that the doctrine of allegiance as the basis for jurisdiction cannot be established by any reported decision. Davit P.

carried out an exhaustive survey of authorities and concluded that the matter is res integra as far as the courts of this jurisdiction or

the courts in England are concerned. Then having regard to the authorities which he cited he concluded:-

“With considerable diffidence I must say that I prefer the views expressed by Cheshire to the contrary

opinions expressed by other text book writers, and with all respect to the judicial opinion expressed obiter in

the cases to which I have made reference.”

In the view of Davit P. jurisdiction to render a foreign judgment enforceable in Ireland exists in two cases, namely where the

defendant was present in the country of the forum, at the time of the action, or where he submitted to the jurisdiction. In Dyer v

Dolan Keane J. stated:-

“That the Irish conflicts of law rules as to in personam judgments are clearly established. Under these rules

the foreign court is to be regarded as having jurisdiction where at the date of commencement of the action

the defendant was resident or present in the foreign jurisdiction, so as to have the benefit, and be under the

protection of its laws. The foreign court will also have jurisdiction where a party has by his own conduct,

submitted to that jurisdiction as, for example where he himself has invoked the jurisdiction of the foreign

court.”

Dealing with the Canadian jurisprudence the learned High Court judge said:-

“…The courts in Canada have taken the view, for the reasons set out above, that the principles which

evolved in the English courts, and are encapsulated in Dicey Rule 36, are outdated and require to be

changed. On that basis the courts adopted the test of ‘real and substantial connection’, which the House of

Lords had indicated as applicable in the case of matrimonial proceedings, as appropriate to the recognition of

foreign judgments.

The real question which I have to decide is as to whether this court should follow suit.”

The learned High Court judge accepted that the Canadian approach would represent a radical change in the common law. This was

recognised by McCarthy J. in K.D. v M.C. Even in Canada the approach of the Canadian courts has been recognised as a significant

shift from the traditional tests. In Muscutt v Courcelles [2001] 5 C.P.C.(5th) 353 (S.C.J.). Sharpe J.A. described the Canadian

jurisprudence as having “radically changed the entire area of law” and of having re-written the law of jurisdiction and enforcement.

The Canadian jurisprudence represents more than a development of rules which have become outmoded. Briggs, The Conflict of Laws,

2nd edition at p.138 says:-

“As a matter of English law, such a development would require legislation. And it is important to understand

how radical the Canadian departure is. For the English common law enquires into whether the party to be

bound to the judgment has acted in such a way as to have assumed a personal obligation to obey the

judgment: his submission to the jurisdiction of the court is the commonest example, but his presence within

the jurisdiction also places him in the way of obedience. The Canadian development, however, does not

focus on whether the party to be bound has assumed an obligation, but on whether the Canadian court

should impose one for reasons of its own. There is nothing wrong with such a development, but far from

being a modernisation of the details, it represents a fundamental reorientation of the law on foreign

judgments. It is not clear that the Supreme Court fully appreciated what it was doing.”

I would add that this represents a significant change from the views expressed earlier by the author at (2004) 8 SYBIL 1, 12 and 109

LQR 549 relied upon by Swissair

Further difficulties with the Canadian approach are identified in the judgments of Iacobucci and Binnie JJ in Saldahna. Binnie J.

recognised that to adopt the real and substantial connection test of itself would not be an end to the amendments in the law

required:

“Accordingly, while I accept that the Morguard test (real and substantial connection) provides a framework

for the enforcement of foreign judgments, it would be prudent at this stage not to be overly rigid in staking

out a position on available defences beyond where the facts of this case require. Both Major J. (paras 39 –

41) and LeBel J. (paras 217 – 18) acknowledge (with varying degrees of enthusiasm) that a greater measure

of flexibility may be called for in considering defences to the enforcement of foreign judgments as

distinguished from inter provincial judgments. The time will come when such a re-examination of available

defences will be necessary. The need for such a re-examination does not arise in this case. The appellants

come within the traditional limits of the natural justice defence, and their appeal should be allowed on that

ground.”

It is appropriate for the courts of this jurisdiction to have regard to developments in other jurisdictions: however it is particularly

important that respect be paid to any consensus that may have emerged from common law jurisdictions: Kennedy v Law Society (No.

3) Supreme Court, unreported, 21st April 2005. There is no consensus on this issue and the Canadian approach appears not to have

been followed in any other common law jurisdiction.

Discussion

(a) Whether the order sought would be excluded from enforcement under the common law as arising from a proceeding in bankruptcy

or insolvency.

Cambridge Gas Transportation Corporation represents a significant development in the common law of the United Kingdom. The

judgment of the Court of Appeal refers to the judgment of Brightman L.J. in Re Lines Brothers Limited with approval insofar as it

distinguished orders made in bankruptcy proceedings from orders in personam or in rem. In Re Lines Brothers Limited Brightman L.J.

said:-

“If the creditor petitions to wind-up a company, or claims in a liquidation initiated by others, he is not

engaged in proceedings to establish the company’s liability or the quantum of the liability (although liability

and quantum may be put in issue) but to enforce the liability. Indeed, he is precluded from initiating or

supporting a winding-up petition if his status as a creditor is bona fide disputed by the company. The

liquidation of an insolvent company is a process of collective enforcement of debts for the benefit of the

general body of creditors. Although it is not a process of execution, because it is not for the benefit of a

particular creditor, it is nevertheless akin to execution because its purpose is to enforce, on a pari pasi

basis, the payment of the admitted or proved debts of the company”

The effect of the distinction is that while liability may be established within an insolvency or in separate proceedings the order made

in either case is not an order within the bankruptcy which is concerned exclusively with the process of collective execution but rather

an in personam or an in rem judgment which will be recognised and enforced only in accordance with the rules of conflict of law.

The Court of Appeal in the United Kingdom noted that the common law on cross-border insolvency had for some time been “in a state

of arrested development” partly because a good deal of the ground had been covered by the statutory provisions of the Insolvency

Act 1986 (U.K.), the European Council Regulation (EC) No. 1346/2000 on insolvency proceedings and the Cross-Border Insolvency

Regulations 2006 giving effect to the UNICTRAL Model Law. The common law had traditionally taken the view that fairness between

creditors requires that, ideally, insolvency proceedings should have universal application. There should be a single proceeding in which

all creditors are entitled and required to prove. Universality of bankruptcy had long been an aspiration of United Kingdom law and

many other countries have come round to the same view. On this basis the courts of the United Kingdom should recognise and give

active assistance to the person entitled under foreign bankruptcy law to act on behalf of the insolvent company. That assistance, at

common law, would extend to doing what the court could do in the case of a domestic insolvency. Thus orders or requests made in

bankruptcy proceedings before a foreign court are neither judgments in personam or in rem but are sui juris and United Kingdom

courts can in response to a request for co-operation make orders of assistance even though a foreign judgment in personam in similar

terms and circumstances would not be recognised. United Kingdom courts would provide assistance by doing whatever it could have

done in the case of a domestic insolvency.

Adopting this approach orders made in the US proceedings for the restitution of unjust enrichment and for the return of improperly

preferential payments were liable to be recognised and enforced as part of the insolvency proceedings notwithstanding that the US

courts did not have jurisdiction to give a judgment in personam to the like effect which would be recognised and enforced.

The foregoing represented a significant change in the common law in relation to bankruptcy and insolvency proceedings the full

effects of which are in the process of being worked out in subsequent cases. The Court of Appeal in Rubin & Anor v Euro Finance

SA[2010] E.W.C.A. Civ. 895 considered whether the principle of universality enabled the court to enforce a judgment in pesonam

which had been given in New York against the defendants in and for the purposes of bankruptcy proceedings in New York

notwithstanding that the defendants had not submitted to the jurisdiction of the New York court. The Court of Appeal held that the

principle had that effect. Academic comment on the decision is not entirely favourable. The decision is under appeal to the Supreme

Court.

It is important to note however that Cambridge Gas Transportation Corporation and Rubin all draw on the provisions of the

Insolvency Act 1986, the Cross Border Insolvency Regulations 2006 and the UNCITRAL Model Law for their decisions.

I am satisfied that In Re Lines Brothers Limited represents the common law in Ireland. The effect of any order made in the Swiss

proceedings will be to require repayment by Flightlease to Swissair of a sum of money. The nature of that order is that it is an order in

personam. Insolvency proceedings are concerned with collective execution. They are not concerned with establishing a liability. The

nature of the Swiss proceedings is to establish a liability on Flightlease to repay monies. Such an order will only be enforced in this

jurisdiction if Flightlease is present in Switzerland at the commencement of the action or has submitted to the jurisdiction of the Swiss

court. Neither is the case.

There is uncertainty in the law as it is developing in the United Kingdom. In Re H.I.H. Casualty and General Insurance Limited [2008] 1

W.L.R. 852 the English court received a letter of request from the Australian court asking that the English provisional liquidators of

four Australian insurance companies remit assets of the companies in England to the Australian liquidators for distribution. The House

of Lords held that the assets should be remitted and that such remission could be ordered pursuant to section 426(4) of the

Insolvency Act 1986. However there was disagreement as to whether such remission could have been ordered at common law. Lord

Hoffman and Lord Walker were in agreement that it could in reliance on “a general principle of private international law, namely, that

bankruptcy (whether personal or corporate) should be unitary and universal”. However Lord Scott while agreeing that it is desirable

as a general proposition that there should be one universally applicable scheme of distribution of the asserts of an insolvent company

did not agree that the court had power to remit the assets other than pursuant to statutory power. Lord Neuberger was of the same

view. Lord Phillips agreed that it was in accordance with international comity and the principle of universalism that the assets should

be remitted to Australia pursuant to the statutory power but did not enter into the controversial area of whether in the absence of

statutory jurisdiction the same result could have been achieved under a discretion available at common law. In these circumstances I

am satisfied that the approach adopted in Cambridge Gas Transportation Corporation is dependant on the statutory framework which

exists in the United Kingdom.

As to whether, notwithstanding its uncertain state this court should adopt the approach in Cambridge Gas Transportation

Corporation. I am satisfied that it should not. In the area of conflicts of law it is desirable to await development of a broad consensus

before developing the common law and it has not been suggested that such a consensus exists among common law jurisdictions. It is

in any event desirable that such a significant change in the common law should be by legislation as appears to be the case in the

United Kingdom. It is suggested by commentators that the common law in the United Kingdom is developing so that it will approximate

with Council Regulation (E.C.) No. 1346/2000. For such a change to occur in this jurisdiction it is desirable that it should occur by way

of legislation rather than by judicial development having regard to the significant changes which would be wrought in the common law.

The common law in this jurisdiction accordingly remains as before and it follows that proceedings which seek to establish a liability to

pay a sum whether taken within insolvency proceedings or separately will result in a judgment in personam. The judgment and order is

not a judgment or order in an insolvency so as to prevent its enforcement in this jurisdiction. If enforceable it will be enforceable as a

judgment in personam in accordance with Irish conflicts of law rules.

(b) Will the order of the Swiss court be recognised on the basis of a real and substantial connection test rather

than on the narrower test summarised in Dicey.

The judgment of the Swiss Court will be a judgment requiring the payment of a sum of money and accordingly an in personam

judgment. Irish conflicts of law rules are as set out in Dicey Rule 36 first case. The judgment will be recognised and enforced if at the

time the proceedings were instituted Flightlease was present in Switzerland. On the agreed facts Flightlease was not so present.

Accordingly the judgment will not be recognised and enforced. Swiss air however contend that Dicey first case is not a complete

statement of Irish law and that it is open to the court to apply in the present case a real and substantial connection test either

instead of or in conjunction with the test in Dicey first case. In short that the Canadian jurisprudence should be adopted. The learned

trial judge set out clearly his reasons for holding that the Canadian jurisprudence should not be adopted. These are as follows:-

1. The court was not referred to judgments of any other common law jurisdiction which suggested that common law courts generally

have followed the Canadian lead. That remains the position.

2. There has been some academic commentary which cautions against adopting the Canadian approach and it would not be correct to

describe the area under consideration as one where there has been a broad acceptance in the common law world of a new direction.

Insofar as reliance is placed on in Indyka v Indyka, in Ireland no concluded view was taken that the real and substantial connection

test should be adopted as a matter of the common law in the recognition of foreign divorces.

3. Persons will order their affairs based upon a view as to the law. Where a person is sued in a foreign jurisdiction he will be required

to make an important decision as to whether to participate in the proceedings on the basis of a view as to whether such judgment

would be recognised in Ireland. Accordingly a change in the law should not lightly be engaged in.

4. The common law evolves to meet new circumstances and in the course of evolution new principles may in time be developed to

reflect the changing world in which the law is to operate. A gradually evolving common law enjoys advantages over a more rigid

statutory regime where change can only occur after a full statutory process. However a radical change in common law has the

potential to have a retrospective effect which would not in the ordinary way arise in the event of a statutory amendment. Such a

change can work an injustice.

5. The courts in this jurisdiction cannot engage in an alteration of the common law which would amount to legislation as opposed to

allowing for the orderly evolution of common law principles.

6. There is no consensus in the common law world as to the need for the change identified by the Supreme Court of Canada.

I concur with each of the foregoing propositions. In relation to Indyka v Indyka, both in the United Kingdom and insofar as that has

been followed in other common law jurisdictions, it has not been extended to proceedings other than matrimonial proceedings.

The common law develops to meet changing circumstances. However in many areas uniform development by international agreement

is to be preferred. This is particularly so in the case of conflict of laws. Such uniform development is evident within the European

Union and also in the UNCITRAL Model Law. The change contended for by Swissair is of such significance that it would in my opinion

exceed the judicial function to re-state the common law in such a way. Such a change should be by legislation. Such legislation will

require the evaluation of many interests and considerations that a court could not be sure to cover. Within the Canadian

jurisprudence is a recognition that the change there effected may require the creation of new defences to applications for

enforcement of foreign judgments. It is preferable that such matters should be dealt with in comprehensive legislation rather than by

piecemeal development of the law following the introduction of a new test if uncertainty is to be avoided in an area of law where

certainty is of crucial importance. In the case of conflicts of law it is preferable that developments should take place in the context of

an international consensus by way of treaty or convention given effect to in national law by legislation.

In short I am satisfied that the change which Swissair asks this court to make in Irish law is such that it exceeds the judicial function.

Disposition

In the judgment I have dealt with the issues in the order in which they were dealt with in the High Court, that is, first the issue

arising on the notice to vary and second the issue arising on the appeal.

On the issue arising on the notice to vary, whether the order sought in the Swiss proceedings would be excluded from enforcement in

Ireland as arising from a proceeding in insolvency, I find that the order sought is not an order in a proceeding in insolvency. I would

affirm the decision of the learned High Court judge and I would dismiss the respondents notice to vary.

On the issue arising on the appeal, whether the order sought in the Swiss proceedings would be enforced on the basis of a real and

substantial connection test, I find that it would not. I would affirm the decision of the learned High Court judge and I would dismiss

the appellants appeal.