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Landmark ruling on foreign insolvencies 3 August 2010

Insolvency practitioners David Rubin & Partners won the appeal against American firm Eurofinance SA on Friday 30 July and the company believes it will have a major impact on the UK sector.

 

Eurofinance SA was run by a British man, Adrian Roman, with help from his sons Justin and Nicholas. Mr Roman set up a Cashable Voucher Scheme in the US, described in court as a “scam”.

 

Under the scheme, American consumers were given the vouchers if they bought goods in certain shops. They could use the vouchers to get all their money back after three years but no-one ever got their money back, because of the complicated rules by which the money was refunded.

 

Adrian Roman and his sons worked from an office based in England to check the validity of claims made by customers who presented their vouchers for a refund after three years. 

Through the scheme, 15 per cent of the purchase price of goods bought in the USA was paid into The Consumer Trust (TCT) set up by Eurofinance. But if everyone who was given a voucher had successfully claimed their money back, the trust would have had to pay out $160m. There was only $9m in the fund – nowhere near enough to refund consumers.

 

Although Adrian Roman is British, he’d set up his TCT fund in the US where consumer protection legislation is not as strong as in the UK.

 

In October 2007, TCT filed for bankruptcy in New York and a plan of liquidation was approved by the US Bankruptcy Court. David Rubin & Henry Lan of David Rubin & Partners were appointed receivers to oversee the plan.

 

Adrian Roman and his sons had received over $8m from the TCT fund and the receivers issued proceedings to recover the money taken. 

 

Eurofinance and Mr Roman were not represented in the US courts, believing that if they stayed in the UK, they could not be pursued for the money – or so they were advised. The bankruptcy court in the USA gave judgement against all the defendants.

 

The receivers argued in court in England that under Article 15 of the 2006 Cross-Border Insolvency Regulations, that the USA judgement could be enforced in the UK. The defendants disagreed.

 

The judge in the High Court originally ruled against the receivers but, helped by their legal team, the receivers successfully appealed on 30 July 2010.

 

Before the successful appeal, US bankruptcy judgments were not enforceable in England, unless a separate action had been started in the UK on the same grounds.

 

It was therefore possible to avoid any liability in the UK, but the new court ruling has clarified the matter.

 

David Stephenson, senior manager at Rubin & Partners, said: “This is a landmark case, which will make it easier for people to pursue international wrong-doers in the courts. They will not be able to avoid enforcement simply by remaining outside the jurisdiction where the bankruptcy offences took place.”  

 

 

 

 

 

 

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