To avoid judgment debts, people sometimes leave their country of origin and set up a new life elsewhere. What if they land in New Zealand? Can the foreign judgment creditor look to enforce their foreign judgment here?

The answer is ‘yes’. How that is done will depend on the type of judgment you have. The usual process is to get the judgment ‘recognised’ by the New Zealand court through an application to the High Court.  This can only be done, however, where the judgment is from a country that New Zealand has an agreement with concerning recognition and enforcement (see Reciprocal Enforcement of Judgments Act 1934 / Trans-Tasman Proceedings Act 2010 for Australian federal and state judgments). Another process, which applies to countries where there is no statutory recognition regime (and the above Acts do not apply), is to obtain a New Zealand judgment off the back of the foreign judgment. This is usually done by issuing a new claim in the New Zealand courts based on the existence of the foreign judgment. Both involve court processes and different rules apply.

The Drelle decision

A recent UK Supreme Court decision, Servis-Terminal LLC v Drelle,^[1] has, however, confirmed that a creditor can rely on an unrecognised foreign judgment to bring a bankruptcy action in England and Wales.  This allowed the creditor to progress a bankruptcy application against the debtor without having to go through a prior court process.  This decision has gained attention, as it makes it easier, in England and Wales at least, to go straight to an enforcement process (bankruptcy) without needing to have the foreign judgment recognised.  That process can take time and can be open to challenge.

Does the same apply in New Zealand? In our view the approach taken in Drelle will not apply in New Zealand. The underlying statutory regimes are different.

The case concerned a creditor with a Russian judgment against a debtor. Despite the foreign judgment being unrecognised in England, the creditor used it as the basis for a bankruptcy action.

The key question for the Supreme Court was whether the unrecognised foreign judgment could constitute a “debt” for the purpose of s 267 of the UK Insolvency Act 1986, sufficient to form the basis of a bankruptcy action. The Supreme Court held that it could.

Why the position in New Zealand is different

Drelle turned heavily on a specific feature of the UK Insolvency Act 1986. Under s 268 of that Act, a creditor can bring a bankruptcy action if either a statutory demand has gone unsatisfied, or the debt on a judgment or order has been returned unsatisfied. The statutory demand does not need to be based on a judgment debt. In Drelle, a statutory demand had already been issued, so the Supreme Court only needed to decide whether the foreign judgment gave rise to a "debt" in the relevant sense. It did not need to treat the foreign judgment itself as a "final judgment or order".

That is not how the equivalent New Zealand provisions work. Section 17 of the Insolvency Act 2006 requires a creditor to have obtained a "final judgment or a final order against the debtor for any amount" to bring a bankruptcy action. There is no separate statutory demand pathway of the kind available under the UK Act that would allow a bare, unrecognised foreign debt to substitute for a judgment or order.

This is a material difference, and one which the Supreme Court itself flagged in Drelle. The Supreme Court observed that had a final judgment or a final order been required, this would require an English judgment or a registered foreign judgment.^[2]

The position on foreign judgments in New Zealand

New Zealand case law and commentary support the view that an unrecognised foreign judgment cannot, on its own, be used to found bankruptcy proceedings here.

Where the foreign judgment falls under the Reciprocal Enforcement of Judgments Act 1934 (which covers the United Kingdom and certain other countries - primarily from the Commonwealth - designated by Order in Council), the foreign judgment must be registered to form the basis of monetary recovery proceedings.^[3] There is a slightly more streamlined registration process for Australian federal and state judgments under the Trans-Tasman Proceedings Act 2010.

For foreign judgments falling outside those Acts, the established practice is to apply for summary judgment on the foreign judgment based on the common law requirements for recognition: a judgment for a fixed sum, given by a court of competent jurisdiction, that is final and conclusive, and not otherwise impeachable.^[4] In this instance the New Zealand court will want to be satisfied that proper process was followed in the foreign jurisdiction, and that there are no policy reasons why the foreign jurisdiction’s judgment should not be enforced here.

Get in touch

If you have questions about enforcing a foreign judgment in New Zealand, or about cross-border insolvency issues more generally, please get in touch with one of our experts.

Special thanks to Neha Pannu for her assistance in writing this article.