DFD v DFE & Anor

Facts

In Originating Application No 222 of 2023, the claimant DFD obtained permission without notice to enforce an arbitral award against two defendants under s 29 of the International Arbitration Act 1994. The award gave DFD a priority right over the proceeds of sale of about 12.1m shares in a company, said to have been pledged to it by the second defendant under a guarantee. The second defendant had been declared bankrupt in a foreign jurisdiction (called Ruritania in the judgment), and its curator applied to set aside the enforcement order, arguing among other things that the arbitration agreement was invalid, that there was no real dispute because the second defendant had raised no objection, and that the award had been procured by fraud.

The applicant was the trustee for holders of €250m of bonds issued by the second defendant, which had obtained summary judgment abroad for €263m plus interest and claimed to be its largest unsecured creditor. It had discovered that the shares were transferred to another company for €1 shortly after it filed the bankruptcy petition, and was suing elsewhere to undo that transfer as a transaction to defraud creditors. By Summons No 1198 of 2023 it applied to be added as a party so it could support the setting-aside application.

Issues

1. How the addition of parties under O 9 r 10(1) of the Rules of Court 2021 should be approached
2. Whether it was just and convenient to add the bondholders' trustee as a party
3. Whether confidentiality of the arbitration would have barred the trustee's participation
4. Whether the trustee should be invited to participate as an interested non-party under O 9 r 22(3)

Holding

The Assistant Registrar dismissed the intervention application and refused the trustee permission to participate in the proceedings in any capacity, whether as an added party or as an interested non-party.

Reasoning

The Assistant Registrar held that the two-stage approach in Ernest Ferdinand Perez De La Sala v Compañia De Navegación Palomar, SA and others and other appeals [2018] 1 SLR 894 continues to guide additions under the new rule. An applicant relying on the just and convenient limb needs a legal interest directly connected to the proceedings; factual overlap or a commercial interest is not enough.

The trustee's interest was that of a creditor facing a bad debt. The shares were not part of its security, and a competing priority claim did not change that, since recovering an insolvent's assets is the insolvency office-holder's task and creditors have other routes to challenge her conduct. The curator was aligned with the trustee and could be given its material, so there was no risk of collusion. The risk of the same issues being relitigated abroad was a real concern, but did not turn a commercial interest into a legal one, especially as the trustee, a stranger to the arbitration, could challenge the award's merits elsewhere anyway.

Had the first stage been met, confidentiality would not have stood in the way, since DFD's counsel conceded it had been lost as against the trustee and the curator considered herself free to share future affidavits with creditors.

The new rule on interested non-parties is not a fallback for those who fail the test for addition. The trustee could not assist in any way the curator could not, and making it a non-party would not achieve the aim of binding it by the decision. The judge hearing the setting-aside application could still invite it.

From the judgment