Eliades & Ors v Lewis

This is an appeal by the defendants against the judgment and order of Nelson J dated 28 February 2003 whereby he dismissed the defendants’ appeal against an order of Master Whitaker dated 1 August 2002 awarding the claimant judgment against each of the defendants under CPR Part 24 in the sum of US $6,273,641 together with interest and costs to be assessed.

That summary judgment was entered by way of enforcement of a judgment obtained by the claimant against the defendants in proceedings in the United States District Court South District of New York which included a claim for treble damages under the United States Act entitled The Racketeer Influenced and Corrupt Organisations (“RICO”) Act. The appeal concerns the scope and application of the Protection of Trading Interests Act 1980 (“the 1980 Act”).

The claimant, who is the undisputed world heavyweight boxing champion and a resident of the United Kingdom was the defendant in the New York proceedings, having been sued by the defendants following the breakdown of their relationship with the claimant as his managers and promoters. Damages in the sum of US $7,273,641 were awarded to the claimant on his counterclaim for fraud, breach of fiduciary duty, breach of contract and racketeering contrary to the RICO Act.

The counterclaim was made under 12 different heads, six of which alleged racketeering under the RICO Act, the relevant section of which provides that:

The trial of the action took place between 1 and 14 February 2002 before His Honour Judge Baer and a jury. The jury rendered their verdict in the form of answers to written questions posed for them by the judge following discussions with the parties. Their findings in favour of the claimant were that each of the defendants was liable for (i) US $6,821,159 as damages for breach of fiduciary duty, (ii) US $56,400 as damages for fraud, (iii) US $396,082 as damages for violation of the RICO Act. No punitive damages were awarded. The sum in respect of the RICO Act violations constituted the basic compensatory award under that Act, with no “threefold” multiplication applied.

On 15 March 2002 the trial judge issued his judgment awarding “Lennox Lewis judgment in the amount of US $7,273,641 as against Panix Promotions Ltd, Panix of the US Inc and Panos Eliades”. That was the aggregate of the sums in (i)-(iii) above and contained no multiple element.

On 18 March 2002 the claimant commenced these proceedings to enforce the 15 March judgment against the defendants, applying for summary judgment on 22 March 2002.

On 25 March 2002 the claimant filed a motion in the New York court requesting the trebling of the US $396,082 figure for RICO Act damages so as to increase it to US $1,188,246 and for consequential amendment of the overall verdict to US $8,065,805.

On 17 April 2002 the defendants filed a cross-motion opposing the claimant’s motion and seeking an order reducing the amount of the New York judgment to US $6,821,159. They also filed a motion for judgment or a new trial. These motions were rejected by Judge Baer on 3 June 2002.

On 5 July 2002, Mr Burstein, the claimant’s American attorney, made a witness statement in the English Part 24 proceedings in response to a contention by the first defendant that the judgment relied upon by the claimant was unenforceable by reason of s.5 of the 1980 Act. He stated:

Accordingly, on 17 July 2002 Mr Burstein filed in New York a further motion seeking amendment of the judgment of the RICO Act award of US $396,082 so as to treble it to US $1,188,246 with a further request that the total resultant award be bifurcated so that

In those circumstances, on 1 August 2002, upon the hearing of the claimant’s application, Master Whitaker gave judgment in the sum of US $6,273,641 with interest to be assessed, being the amount of the 15 March judgment less the sum of US $1million which reflected an agreed set-off in favour of the defendants for that amount.

S.5 of the 1980 Act provides as follows:

S.6 provides that:

There was no dispute at the hearing before the Master that the 15 March judgment was final and conclusive for the purpose of enforcement, albeit it might be subject to an appeal. It was also conceded by the defendants that no part of that judgment contained any trebling or other multiplication of the basic damages award under each head claimed. However, the defendants argued that because, under the RICO Act claim, the claimant had an automatic entitlement to have his damages trebled, the entire judgment was precluded from registration and enforcement in the United Kingdom under s.5 of the 1980 Act. The Master rejected that argument. He commented upon the draconian effect of such a decision and took the view that s.5 should be construed strictly. He found that as the words in s.5(3) defined a judgment for multiple damages as “a judgment for an amount arrived at by doubling, trebling or otherwise multiplying the sum assessed as compensation”, s.5 had no application to the facts of the case because the judgment of 15 March contained no such multiple element.

When the matter came before the judge, the defendants had changed their U.S. attorneys and retained Coudert Brothers LLP to act in their appeal against the New York decision. There was before Nelson J a letter from Coudert Brothers dated 19 September 2002 expressing the opinion that the motions of 25 March and 27 July affected the finality of the 15 March judgment. The claimant, in answer, served an expert report from a New York lawyer and academic, Steven E. Obus whose opinion was that the authorities relied upon by Coudert Brothers only related to the issue of whether a judgment was final for the purpose of ascertaining whether time had begun to run within which a notice of appeal had to be filed and did not address the question whether a judgment was final for the purposes of enforcement or execution. He stated his conclusion as follows:

In a letter by way of purported reply dated 13 November 2002, Coudert Brothers failed to deal either with the conclusion or reasoning of Mr Obus, stating simply that they confirmed their advice that “the judgment in the United States could not be considered to be a final judgment for the purposes of the appeal in the United States”.

In those circumstances, the judge found that, contrary to the defendants’ contention, the judgment was final and conclusive, there being essentially no dispute that the decision of the New York court could be relied upon as res judicata and that it was not possible to contend that the hearing was not a full hearing on the merits, decided upon by the jury. Subject to any appeal, the existence of which was not itself a matter rendering the judgment other than final and conclusive for the purposes of execution, the existence of the judgment debt could not be contested between the parties, nor could it be abrogated or varied save by way of increase should the claimant proceed to obtain a separate judgment for the multiple element of the RICO award to which the claimant was entitled (see paragraph 11 above).

So far as the application of s.5 of the 1980 Act was concerned, the judge upheld the literal interpretation applied by Master Whitaker, holding that it was clear that the judgment of 15 March contained no multiple element in respect of the award of compensation for racketeering. He rejected the submission for the defendants that, as the trebling of damages under the RICO Act is an automatic entitlement and does not involve the exercise of any discretion, the entire judgment should be deemed to be for multiple damages and that for the purpose of s.5 “the judgment” sought to be enforced should be construed or treated as the final judgment after amendment to include the multiple element.

The judge stated as follows:

However, having found that s.5 did not apply to the judgment of 15 March 2002, which could accordingly be enforced, the judge later stated:

Pursuant to paragraph 67 of the judgment of Nelson J, there was included in his order dismissing the defendants’ appeal on 28 February 2003 the undertaking of the claimant:

The following events have subsequently taken place. They emerge from the fourth and fifth witness statements of Andrew Forbes, the claimant’s solicitor, dated 1 April 2003 and 25 September 2003 respectively and the witness statement of Philip Cohen, the defendants’ solicitor, dated 6 October 2003. Those statements are the subject of Notices of Application to adduce further evidence on this appeal, which applications we granted at the outset of the hearing.

On 4 March 2003 Mr Burstein wrote to Judge Baer informing him of the withdrawal of the claimant’s motions to amend the judgment of 15 March 2002 and confirming that the claimant no longer requested any increase in the principal amount of the judgment. On the same day he received confirmation over the telephone from the clerk to Judge Baer that the withdrawal of the motions was accepted.

However, on 16 July 2003 the clerk of the District Court, in apparent ignorance of that withdrawal and acceptance, issued an order citing the claimant’s earlier motions (paragraph 8 above) to amend the 15 March judgment so as to treble the $396,082 basic award under the RICO Act and the claimant’s further motion (paragraph 11 above) to have a separate judgment for the amount of the increase under the RICO Act provisions in the amount of $792,164, and ordering entry of a separate judgment in that amount nunc pro tunc as of the date of the original judgment for $7,273,641.

That order was subsequently suspended on 30 July 2003 by an order signed by Judge Baer reciting the withdrawal by the claimant of his motion to treble RICO damages and bifurcate the judgment on 4 March 2003 and providing:

That last mentioned sum represented the amount of the judgment of 15 March 2002 augmented by the trebled RICO Act damages, plus $40 in respect of an original miscalculation for the total damages under the other heads of claim.

The position with which this court is now concerned is one in which the judgment sought to be enforced by the claimant is a judgment in the single sum of $8,065,805 which includes a clearly identifiable award of treble damages under the RICO Act of $1,188,246. The issue is whether, as the defendants submit, the entire judgment for $8,065,805 is unenforceable by reason of s.5 of the 1980 Act or whether, as the claimant submits, it is enforceable save as to $1,188,246 (“the RICO element”). Before turning to that issue it is to be noted that, as is also agreed between the parties, this court is not concerned with the question whether or not, in the light of the outstanding appeal in New York, the judgment is not to be regarded as final and conclusive. No leave to appeal has been granted in respect of that issue.

It is common ground between the parties that the question turns upon the meaning and scope of the definition of “a judgment for multiple damages” in s.5(3) of the 1980 Act. It is equally not in issue that the whole of the RICO element of the judgment (US $1,188,246) is within the words which follow i.e. “a judgment for an amount arrived at by … trebling … a sum assessed as compensation for the loss or damage sustained by” the claimant in respect of the defendants’ fraud under the RICO Act. The question is whether the fact that the RICO element of the judgment comes within that definition renders the entire judgment for US $8,065,805 “a judgment for multiple damages” for the purposes of s.5 or whether the RICO element only is to be so regarded and thus unenforceable. Put another way, are the words “a judgment for..”, where they appear for the second time in s.5(3), to be read in the sense of “a judgment for or including … an amount arrived at” by the trebling exercise, as the defendants submit, or in the sense of “a judgment to the extent that it is for an amount arrived at” by the trebling exercise, as the claimant submits?

For the defendants, Mr Warwick submits that the judgment referred to in s.5(3) should be treated as indivisible and that, if (as in this case) a single element within the sum for which judgment is given represents an award of multiple damages, then the entire judgment is unenforceable under the clear wording of s.5(1). He acknowledges the draconian effect of such an interpretation, but he submits that it is nonetheless appropriate for the following reasons. First, he submits, that the very terms of the Act make clear that the policy behind it is one of hostility to awards of multiple damages regardless of their origin or purpose. S.5(1) not only prohibits registration for enforcement under the Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933 (“the 1933 Act”); it also prohibits proceedings at common law for the recovery of any sum payable under the judgment sought to be enforced. Thus the prohibition includes even such part of a judgment for multiple damages as may be purely compensatory.

Second, Mr Warwick points out that the draftsman, having prohibited registration for enforcement under the 1933 Act, notably failed to provide an exception or saving provision along the lines of s.2(5) of that Act which provides that:

Again, Mr Warwick points out that, whereas the draftsman provided in s.6(2) of the 1980 Act for recovery by a defendant who has already paid money pursuant to a judgment for multiple damages of such part or proportion of the sum paid as exceeds the part or proportion attributable to compensation, he notably failed to mirror such provision by relieving from the prohibition on enforcement imposed by s.5 any part of the judgment attributable to compensation.

So far as authority is concerned, Mr Warwick acknowledges that no court has directly considered the issue which arises in this case. However, he relies upon the statement in the text beneath Rule 52 of Dicey & Morris: The Conflict of Laws (12ed) vol 1 at p.547 where it is stated in relation to the 1980 Act that:

He also relies upon the observation of Parker J in British Airways v Laker Airways [1984] QB 142 at 161 where, in a short review of the provisions of the Act for the purposes of the issue before him, he observed:

Mr Warwick also relies upon the statement of Lord Diplock in the course of the appeal to the House of Lords in the same action at [1985] AC 85 that he agreed with the analysis and conclusions of Parker J in relation to the 1980 Act.

Finally, Mr Warwick has referred us to a recent decision of this court in Motorola Credit Corporation v Uzan & Others [2003] EWCA Civ 752 (12 June 2003) in which, at paragraph 136, the court, obiter, referred to the authorities just mentioned, and raised, but did not answer, the question now before us, observing that the point had not been considered in any detail by the English Courts.

Mr Mill QC for the claimant submits that there is nothing in the text of Dicey & Morris, nor in any decided authority, which addresses the question at issue in this case, namely whether, in the case of a foreign judgment regularly obtained and otherwise enforceable by common law action, the court is precluded from entertaining the enforcement proceedings where it appears that part only of that judgment falls within the definition contained in s.5(3).

Mr Mill submits that such could not have been the statutory intention and s.5(3) should not be so construed. So far as the policy underlying the Act is concerned, he points out that its introduction was prompted by the increasingly broad reach of the U.S. Anti-Trust statutes (the Sherman Act 1890 15 U.S.C.A. §§ 1-7 and the Clayton Act 1914 15 USCA §§ 12-27) and, in particular, by certain large anti-trust actions brought against UK-based companies pursuant to anti-trust provisions which, in addition to imposing criminal penalties, gave private plaintiffs injured by anti-trust violations a right to treble damages. He submits that, while it was understandable that Parliament should wish to refuse to enforce penal remedies of a kind peculiar to a foreign jurisdiction, it should not, without clear provision to such effect, be taken to be similarly hostile to judgments in respect of remedies similar to those available in this country and embodying compensatory awards based on ordinary common law principles to which there can be no reasonable policy objection. Mr Mill submits that, because s.5 of the 1980 Act constitutes an exception to the general rule in favour of recognising and enforcing foreign judgments by courts of competent jurisdiction, that exception should be construed so as to minimise its impact upon the general rule.

Mr Mill acknowledges the absence of any provision in the 1980 Act which specifically provides for a distinction to be drawn for purposes of enforcement between that part of a judgment which is for multiple damages as defined in s.5(3) and that part which is not. However, he submits that the court should be guided by what he calls the principle of ‘severance’ in respect of the recognition and enforcement of foreign judgments. In this respect he has referred us to Raulin v Fischer [1911] 2 KB 93 in which it was held in respect of a French judgment which both imposed a criminal penalty and awarded damages by way of civil compensation, that the judgment should be treated as severable for the purpose of enforcing the award of damages in this country, thus avoiding the defendant’s plea that an English court should not assist in the execution of the penal judgments of a foreign court. Mr Mill also points to the machinery of section 2(5) of the 1933 Act and submits that the court should construe the 1980 Act restrictively so as to harmonise with that provision rather than assume that the omission of such a provision was deliberate.

I prefer the arguments of Mr Mill.

So far as Mr Warwick’s first point is concerned, I accept, and indeed it is not in issue between the parties, that the 1980 Act makes clear its hostility to awards of multiple damages by barring enforcement in the United Kingdom of any part of such award including the basic compensatory award to which a multiple element has been applied and superadded. The wording of the definition in s.5(3) makes that clear. However, I do not consider that the wording provides the answer to the question whether, when the judgment is in part only a judgment for multiple damages as defined in s.5(3), but also comprises a judgment for simple compensatory damages in respect of separate causes of action to which no multiple element has been applied, it is to be regarded as indivisible for the purposes of enforcement under s.5(1). It seems clear to me that the provisions of s.5, taken as a whole, beg that question rather than answering it, and that they raise an ambiguity properly to be resolved by an exercise of purposive construction in which (if necessary) application of the rule in Pepper v Hart is legitimate: see generally Section 217 of Bennion: Statutory Interpretation (4 ^th ed) at 526-528.

In answering the question raised, I derive no assistance from the authorities referred to by Mr Warwick. Rule 52 in Dicey & Morris and its supporting text do not provide an answer because they do not address the particular question. The same is true of the observations is the Laker Airways and Motorola cases.

So far as overall questions of policy are concerned, the preamble to the 1980 Act proclaims its purpose as being:

In the Parliamentary debates preceding the passage of the Bill, it was stated by the Secretary of State to be a measure:

As to the enforceability of multiple damage judgments and, in particular, the compensatory element of such judgments, it was further stated that multiple damage awards were regarded as penal in character and so unenforceable under a commonly accepted principle of private international law (ibid at 1536, 1546 and 1548). In particular the Secretary of State stated:

It is notable that, so far as Clause 5 was concerned, no statement appears which suggests any intention to extend the principle of unenforceability more widely than triple damage judgments or such other foreign ‘competition policy’ judgments as might be specified.

That being so, there seems to me no reason of policy, patent or latent, within the terms of the 1980 Act itself which dictates the construction contended for by Mr Warwick, which, as he acknowledges, leads to the draconian consequence that a U.S. judgment for damages largely in respect of private causes of action otherwise enforceable under longstanding principles of English law may be rendered wholly unenforceable by inclusion of a claim (and consequent judgment) for damages under the RICO Act.

In my view, the proper approach to the 1980 Act is to recognise that it represents a statutory exception to the broad principle of recognition and enforcement for foreign judgments observed for several centuries in this country under the common law, at first in the name of comity, but later under the “doctrine of obligation” as propounded by Blackburn J in Schibsby v Westenholz (1870) L.R.6 Q.B.155 at 159:

Thus, the position is that, provided a foreign court has jurisdiction to give the judgment according to the English rules of conflict of laws, that judgment is conclusive in England, unless it is impeachable for reasons of fraud, public policy or the like, and a judgment creditor who seeks to enforce a foreign judgment in England at common law can now apply for summary judgment under Part 24 of the Civil Procedure Rules 1998 on the ground that the defendant has no real prospect of successfully defending the claim. Further, whereas the provisions of the 1933 Act are available in respect of judgments of the courts of many foreign countries on the basis of reciprocity of treatment, and the provisions of the Civil Jurisdiction and Judgments Act 1982 and Council Regulation (EC) 44/2001 are available in respect of judgments of the courts in states which are parties to the Brussels and Lugano Conventions, enforcement at common law is the only enforcement process available in respect of the judgments of the courts of the United States because that country does not yet have a treaty with the United Kingdom for the reciprocal enforcement and recognition of judgments.

In this case there is no dispute that the provisions of the 1980 Act preclude enforcement of the RICO element of the judgment, namely US $1,188,246. It is arguable, although not strictly relevant, that a judgment for RICO damages would be unenforceable at common law, aside from the provisions of the 1980 Act. That is because it is an established exception to the common law principle concerning enforcement of foreign judgments that the court will not enforce a foreign judgment for a penalty (see generally Dicey & Morris, Rule 35). A penalty in this sense normally means a sum payable to the state, and not to a private plaintiff, so that an award of punitive or exemplary damages has been said not to be penal: see S.A. Consortium General Textiles v Sun & Sand Agencies [1978] QB 279 at 309 per Lord Denning MR. Whether or not, absent the provisions of the 1980 Act, a RICO judgment for multiple damages would be similarly so regarded is an interesting point, but it is one which it is unnecessary to decide.

So far as the non-RICO elements of the judgment are concerned, the US court documents in this case make clear that the judgment sought to be enforced consists of sums in respect of ordinary compensatory damages for private causes of action similar to those available under English law. In my view it is both desirable and appropriate that enforcement of those elements should be open to the claimant unless plainly precluded by the terms of the 1980 Act, and the approach to the construction of the Act should be based upon that premise.

I have already indicated my view that the terms of the 1980 Act do not in terms preclude such an approach; nor do policy considerations require that the ambiguity of the wording should be resolved so as to preclude enforcement in toto. In Raulin v Fisher (above) the circumstances were different from those in this case. However, that decision indicates, rightly in my view, that in a situation where the court is asked to enforce a foreign judgment for a particular sum and it is faced with a plea by the defendant that the judgment is unenforceable, it should first examine whether and to what extent the judgment falls within the exception to enforceability relied on. If, upon such examination, it is apparent that part only of the judgment falls within that exception, the court should then consider whether the unexceptionable part can readily be distinguished, separated and quantified for the purposes of enforcement. If it can, then that separable part should be recognised and enforced. In that respect, the fact that a money judgment is in form a single judgment for the total of its separately quantifiable parts should be no barrier to enforcement in respect of the part or parts which are unexceptionable.

In my view the robust and sensible approach to s.5 of the 1980 Act in relation to a composite judgment of the kind now before us, is not to treat the multiple damages element of the judgment as definitive of, or ‘infecting’, its character as a whole, but to read s.5(1) as precluding proceedings for recovery at common law only to the extent that the judgment sought to be enforced is for an amount arrived at by multiplying a sum assessed as compensation for the loss or damage sustained by the person in whose favour the judgment was given.

I would dismiss the appeal save to the extent that the effect of the judge’s judgment and order is to permit enforcement in respect of the basic compensatory award of US $396,082 under the RICO Act, excluding only the multiple element of US $792,164. It has not been in issue between the parties in this court that the whole of the RICO Act element (US $1,188,246) is unenforceable. Thus, subject to final checking of the figures and the calculation of interest, the enforceable element of the judgment of the New York court in its final form dated 30 July 2003 is US $8,065,805 less the total damages of US $1,188,246 awarded under the RICO claim. From the resulting sum, before entry of judgment, there falls to be further deducted the sum of US $1,000,000 by way of agreed set off (see paragraph 12 above). I would therefore order judgment for the claimant against each of the defendants in the sum of US $5,877,559 pursuant to CPR Part 24, together with interest to be assessed in the absence of agreement at a commercial rate pursuant to s.44A of the Administration of Justice Act 1970. Subject to any contrary submissions, it does not seem to me either necessary or appropriate to continue or vary the undertaking of the claimant incorporated into the order of the judge dated 28 February 2003.

I agree with the judgment of Lord Justice Potter and that of Lord Justice Jacob.

I also agree. I would only add that for my part I reach the same conclusion without recourse to the decision in Pepper v Hart and what was said in Parliament.

The question is whether the judgment is one “arrived at” by multiplying a compensatory sum. The overall judgment sum here is arrived at by adding to purely compensatory sums a multiplied sum. So it was arrived at by two independent calculations. There are three ways of reading the words “judgment for an amount arrived at by multiplying” which in theory could apply. The meanings are:

the amount of the overall judgment sum is one arrived at solely by multiplication;

the amount of the overall judgment sum is one including an amount arrived at by multiplication;

that the words refer only to the extent to which the overall sum includes a multiplied amount.

To choose between the possible meanings I think it sufficient to apply a purposive construction and the well-known principle that one leans against absurd conclusions, leaning harder the more absurd the conclusion.

The first meaning has one virtue: that it most closely accords with a mindless, mechanistic application of the words. But it has no other. It has the absurdity that provided an overall sum included a non-multiplied element, the whole judgment sum including the multiplied element could be enforced. Parliament cannot have intended this – it would have no rhyme nor reason about it. And the obvious Parliamentary intention of preventing enforcement here of multiplied compensatory awards would be frustrated. So absurd is this result that it was sensibly not contended for by Mr Mill, even though, if right, it would mean that his client would be entitled to enforce the whole sum including its RICO element.

The second meaning, that contended for by Mr Warwick, gives rise to the absurdity that an award for compensatory damages unconnected with a multiplied sum could not be enforced if it was added to such a sum. This might turn on the happenstance of local procedure – was the order for a single judgment sum or for distinct sums, were the awards in separate or single proceedings? Parliament cannot have intended such a whimsical result. And this meaning would give rise to a severe injustice, depriving a party of enforcement of a purely compensatory award. I see no reason why Parliament can have intended such an injustice.

The third meaning has no absurdity: purely compensatory awards can be enforced, multiplied awards not. Moreover the purpose of the Act is implemented, making multiplied awards unregistrable. Only if the language could not bear this meaning should it be rejected. It is true that it involves reading in the words “to the extent.” But then meaning two also involves a reading in, of or including, as Potter LJ has pointed out. Meaning one is so absurd that no-one supports it. So one must read something in and the only sensible choice is meaning three.

One extra word. I am conscious that this case does not deal with the enforceability of the compensatory part of a multiplied award. It is not contended before us that the unmultiplied RICO award can be registered. For my part I would, therefore not wish it to be thought that the decision in this case governs that question. It can be decided if and when it arises.