Instrumental execution: the Manx civil litigator’s best-kept secret (shh!)

The instrumental execution scenario

Imagine the scenario.

Your client already has the benefit of a judgment or order in their favour. That judgment or order requires “any conveyance, contract or other document” to be executed.  But the party ordered to execute it still hasn’t complied. Or simply won’t.

What can you ask the Court to do about it?

This was the scenario which arose – twice – in Sodzawiczny v McNally & others (ORD 21/0028) (05.10.23) (unrep.).

Data centre entrepreneur Franek Sodzawiczny (FS) had the benefit of an English arbitral award, and an order to enforce that arbitral award in the Isle of Man.

The arbitral award related, amongst other elements, to ownership of a valuable Spanish property.

Enforcement of the arbitral award, it was contended, was being frustrated. Several Defendants, based in several jurisdictions, were said to be orchestrating a sophisticated ‘anti-enforcement’ strategy.

(In this respect, the Court’s contempt jurisdiction was successfully invoked – see the example cited in Isle of Man Civil Contempt – Practice & Procedure – Coren Law – as also was the Court’s power to issue debarring orders: see Debarring orders in the Isle of Man – Practice & Procedure – Coren Law).

The Spanish property was owned via a complex international property-holding structure. This included, amongst other elements, Spanish and Isle of Man companies.

In July 2023, further steps were taken – including (as Acting Deemster Gough put it) a “rather clumsy” attempt to wind up the Isle of Man company – in an apparent attempt to wrest control of the Isle of Man company (in particular) from FS. These steps were in flagrant breach of the Manx Court’s orders.

FS’s advocate – Steven Coren of Coren Law, instructed by Charles Russell Speechlys LLP – turned to a rarely-used Court enforcement power, s 45 of the High Court Act 1991.

The Court was invited to order – and duly twice ordered – that if parties claiming to be the existing director/directors of the Spanish / Isle of Man companies did not, by specified deadlines, execute company resolutions removing themselves as directors and appointing FS / FS and his wife as directors, then the Court would nominate the Coroner to execute those resolutions.

Section 45 High Court Act 1991

Section 45 provides:

“Execution of instrument by person nominated by the High Court

(1) Where the High Court has given or made a judgment or order directing a person to execute any conveyance, contract or other document, or to indorse any negotiable instrument, then, if that person —
(a) neglects or refuses to comply with the judgment or order; or
(b) cannot after reasonable inquiry be found,
the High Court may, on such terms and conditions, if any, as may be just, order that the conveyance, contract or other document shall be executed, or that the negotiable instrument shall be indorsed, by such person as the court may nominate for that purpose.

(2) A conveyance, contract, document or instrument executed or indorsed in pursuance of an order under this section shall operate, and be for all purposes available, as if it had been executed or indorsed by the person originally directed to execute or indorse it.”

There was only one immediately apparent Manx precedent for the use of this power: A v B (2DS 11/16) (14.10.16) (see § 10).

In that (family) case, the Coroner had been nominated by the Court to execute a conveyance, in default of execution by a party.

In FS’s case, in the context of arbitral award enforcement proceedings, this same power was successfully deployed to change key company directorships.

Acting Deemster Gough granted FS’s applications, requiring the Coroner of Middle to execute the necessary company resolutions to change directors of the property-holding companies. The Acting Deemster stated (underlining below added, to show the application of s 45):

“10. [The Isle of Man company] did not act on the order as required by the court appointed deadline of 4pm on 14 July 2023. Instead, Mr Ruhan and Mr Bryce engaged in other activities and as related below. The Coroner for Middle, acting under authority from the court, passed the resolutions thereby removing all directors of [the Spanish company] and appointing FS as sole director…

39. I accept that the order appointing FS and JS as directors of [the Isle of Man company] is an unusual order to make but this is an unusual case. Almost every avenue has been explored by FS to counter the attempts by some of the defendants to get the upper hand in this case and each time the court has made orders designed to maintain the current position the Defendants counter it with another move. The latest has been the appointment of Mr Ruhan and Mr Bryce as directors of [the Isle of Man company], the passing of a rather clumsy winding up resolution (said by them to be prior to the court’s decision on 13 July 2023 being “published”, which was untrue) and saying that Mr Shimmin had been approached as a candidate for a receivership position when he had not. In addition there is now the spectre of Dr Smith in the background and some strong evidence that he is pulling the strings of Messrs Ruhan and Bryce…

44. The parties charged by the arbitration award to put the Spanish property into the beneficial ownership of FS have managed, through a series of maneuvers and devices, deliberately to confuse the ownership trail. The only way to hold the line now, in my view, is to put the [Spanish and Isle of Man] companies in to the hands of FS with a general mandate to remain neutral…”.

Other potential applications

The discretion in s 45 exists to make an order: “on such terms and conditions, if any, as may be just”.

The Court in Sodzawiczny recognised the (undoubtedly) “unusual” circumstances of the case.

But consider again – for a moment – the potential scope of the Court’s enforcement power, which applies to: “any conveyance, contract or other document”.

This statutory wording is remarkably broad. This enforcement tool may be invoked in a potentially myriad range of further civil litigation scenarios – ie. where “any conveyance, contract or other document” requires to be executed, in order to comply with a judgment or order.

(For further reading on the UK experience, including examples where the equivalent English power has been used, see Withers, Instrumental executions – the mighty section 39 of the Senior Courts Act 1981 and its role in commercial litigation (04.11.24). The article cites, for example, Lim & Ors v Ong & Ors [2023] EWHC 321 (Ch) (19.02.24)), where a director/shareholder of a company had been directed to transfer legal title to certain shares to the successful claimant following trial, but had refused to do so.)

Note for practitioners: The Court’s power to nominate a person to execute a document, until Sodzawiczny, was rarely used in practice in the Isle of Man. That case demonstrated its legally far-reaching consequences. Its potential future uses are also far-reaching. 

Disclaimer: professional advice should be sought before applying any information in a given case.

For advice on Isle of Man civil procedure or enforcement, or litigation relating to Isle of Man company law, contact Coren Law.

See also Coren Law’s Isle of Man civil procedure portal: Click On | Coren Law.

Photo credit: Scott Graham