This case considered whether to decline to make an interim charging order final if the effect would be to give one creditor priority in enforcing its judgment against other defendants.
Unusually there was no statutory insolvency scheme applicable because the defendants although insolvent were not domiciled or incorporated within the English jurisdiction and so the English statutory insolvency regimes had no application. Although a bankruptcy process was theoretically available in Saudi Arabia, (the relevant jurisdiction), it was at best an imperfect one which would not result in a pari passu distribution of assets.
The court concluded that where there was no statutory insolvency regime, the general rule was that the “first past the post” principle applies so that whoever obtained the charging order first would be entitled to enforce first. However, it is only a general rule and there may be exceptions when it is appropriate in the exercise of the court’s discretion not to make a charging order final. There may, therefore, be exceptional cases where even though no statutory insolvency regime applies, it is appropriate to conclude that a judgment creditor should not have the benefit of a final charging order on the basis that the Charging Orders Act 1979 and the terms of CPR 73.8 recognise the existence of a discretion as to whether to make an order final.
Although a charging order will prejudice other creditors if granted because it gives the creditor security against which to enforce his judgment which the other creditors would not have, it is only where that prejudice is “undue” that the court should consider not making a final charging order.
The prejudice to the other creditors was only undue if there was something about the judgment creditor’s conduct which would cause undue prejudice if the order was made final or if there was some other exceptional circumstance.
Although the judgment creditor had attended meetings with the other claimants there was nothing inequitable for them to have the charging order made final. Overall the court did not consider the judgment creditor’s conduct could be said to be such as to make it inequitable to refuse to make the order final.
This was quite an unusual situation as mostly when dealing with an insolvent judgment debtor there will be a statutory regime applicable such that the judgment creditor is not entitled to have its interim order made final. However, this decision is an interesting analysis of the court’s approach where there is no such insolvency regime.
British Arab Commercial Bank PLC and others v Ahmad Hamad Algosaibi and Brothers Company and others [2011] EWHC 2444