Kuwait Court of Cassation principle number 330

Summary: - Parties to an application for approval to undertake restructuring procedures for distressed companies. Their restriction to the Central Bank of Kuwait and the company itself whose restructuring is sought, excluding other creditors of that company. Creditors may lodge a grievance against the stay of proceedings taken by them against the company arising as a consequence of acceptance of the restructuring application, before the competent circuit within 15 days from their receipt of the company's notification enclosing a copy of the application endorsed by the circuit's president. This concerns the effects resulting from the circuit president's acceptance of the application submitted by either of them, without regarding those creditors as parties to the application proceedings themselves. Its import. Creditors are regarded as outside the application proceedings. Articles 15, 16, 17, 18, 19, 20 and 21 of Law 2 of 2009 concerning enhancement of financial and economic stability in the State. The reason for this. - The judgment issued on the restructuring application. It does not determine a dispute between the distressed company and its creditors. Its import. It has no binding authority concerning the company's obligations toward them. Its consideration as a judgment with temporary binding authority conditional upon the company's compliance with implementation of the restructuring plan and its specified timetable. The company's breach of the plan or timetable. Its effect. The Central Bank's right to request that the judgment approving the restructuring plan be deemed never to have existed, with the consequent cancellation and stay of all judicial and enforcement proceedings against the company. - A judgment's acquisition of binding authority. Its condition. The judgment must be conclusive, having put an end to the dispute in the action in its entirety, in part, or in an incidental issue, and must necessarily exhaust the court's jurisdiction regarding what it has determined and prevent it from reconsidering it or reversing its ruling upon it. - Objection to a judgment by a person who is not a party to it. This is not considered a means of challenging it. Its consideration as a form of intervention in the proceedings, even if occurring after judgment has been issued therein, so long as it has not been established that he was joined or intervened therein, such as a creditor in an action to which the debtor is a party, since the latter is regarded as representing his ordinary creditor. That creditor benefits from a judgment issued therein in favor of his debtor, and a judgment against the debtor therein is also binding upon his creditor to the extent that the creditor's general security right over his debtor's assets is affected. The condition for admitting an objection to the judgment: the objector's proof of fraud, collusion or gross negligence by the person who represented him in the action. Continuance of the right to object to the judgment unless extinguished by lapse of time. The effect of admitting the objection. Articles 158, 161 and 162, Civil. - Assessment of the extent to which an objection to a judgment by a person who is not a party to the proceedings is admissible. Within the authority of the court of merits. Its condition. An example. Rule: The import of Articles 15, 16, 17, 18, 19, 20 and 21 of Decree-Law No. 2 of 2009 concerning enhancement of financial stability in the State is that the legislature restricted the parties to an application for approval to undertake restructuring procedures for a distressed company to the Central Bank of Kuwait and the company itself whose restructuring is sought, excluding other creditors of that company. At most, it permitted those creditors to lodge a grievance against the stay of proceedings taken by them against the company arising as a consequence of acceptance of the restructuring application, before the competent circuit within 15 days from their receipt of the company's notification enclosing a copy of that application endorsed by the circuit's president. This grievance permitted by the legislature to creditors concerns only the effects resulting from the circuit president's acceptance of the application submitted by the Central Bank of Kuwait or the company, as the case may be, without the legislature regarding those creditors as parties to the application proceedings themselves. Those creditors are therefore deemed outside the framework of the application proceedings, since the purpose of the aforementioned Decree-Law is to protect financial and economic stability in the State by protecting distressed companies and enabling them to conduct their activities and discharge their obligations, with a view to protecting the rights of the creditors themselves under the supervision of the Central Bank of Kuwait. Consequently, the judgment issued on the restructuring application does not determine a dispute between the distressed company and its creditors and has no binding authority concerning its obligations toward them. Rather, it is a judgment with temporary binding authority conditional upon the company's compliance with implementation of the restructuring plan and its specified timetable. If the company breaches the plan or its timetable, the Central Bank of Kuwait may request that the judgment approving the restructuring plan be deemed never to have existed, with the consequent cancellation and stay of all judicial and enforcement proceedings against the company. It is established in the jurisprudence of this Court that a judgment is not protected by binding authority unless it is a conclusive judgment that has put an end to the dispute in the action in its entirety, in part, or in an incidental issue, and necessarily exhausts the court's jurisdiction regarding what it has determined and prevents it from reconsidering it or reversing its ruling upon it. The provision in Article (158) of the Law of Procedure that “A person upon whom the judgment issued in an action is deemed binding, and who was neither joined nor intervened therein, may object to that judgment, provided that he proves fraud, collusion or gross negligence by the person who represented him ....”, in Article (161) thereof that “The right to object to the judgment shall remain unless the objector's right expires by lapse of time”, and in Article (162) thereof that “An objection to the judgment entails bringing the action before the court anew, only with respect to the matters covered by the objection ....”, indicate, as disclosed by the explanatory memorandum, that an objection to a judgment by a person who is not a party to the proceedings is not a means of challenging the judgment by the party against whom judgment was entered. Rather, it is in reality a form of intervention in the proceedings, even though it occurs after judgment has been issued therein, conferred by the legislature upon a person upon whom the judgment is deemed binding and who was neither joined nor intervened in the action, such as a creditor in relation to an action to which the debtor is a party, since the latter is regarded as representing his ordinary creditor. That creditor benefits from a judgment issued therein in favor of his debtor, and a judgment against the debtor therein is also binding upon his creditor to the extent that the creditor's general security right over his debtor's assets is affected. The legislature made admission of an objection to a judgment conditional upon the objector proving fraud, collusion or gross negligence by the person who represented him in the action, and provided that his right to object to the judgment remains in existence unless extinguished by lapse of time. Admission of the objection entails the removal of the judgment's binding authority and the effects it produces in relation to the objector and the matters covered by his objection, and the court reconsiders the matter anew within those limits. The court of merits also has authority to assess the fulfillment of the conditions for admitting an objection to a judgment by a person who is not a party to the proceedings in which that judgment was issued, provided that it bases its ruling on reasonable grounds. The challenged judgment based its ruling on what it found reliable in the case papers and documents, namely that the appellant company is not a party to the proceedings on the application for approval of the restructuring plan and is not bound by the judgment issued therein. Rather, at most, an effect of that judgment approving the plan is the stay of all proceedings taken or to be taken against the respondent company, and the means of disputing that stay is to lodge a grievance against it before the circuit hearing restructuring applications at the Court of Appeal, in accordance with the procedures governing that grievance set out in Article (18) of the aforementioned Decree-Law No. 2 of 2009. The means of remedying the respondent company's omission of its indebtedness to the appellant company from the list of debts it submitted with the restructuring application is criminal-law protection and recourse to the Central Bank of Kuwait to examine inclusion of that indebtedness among the respondent company's debts, as the body supervising implementation of the restructuring plan. The challenged judgment concluded that the conditions for admitting the appellant company's objection to the judgment approving the restructuring plan were not established in the documents, and consequently ruled the objection inadmissible. Since this was based on reasonable grounds supported by the documents and sufficient to sustain its ruling, what the appellant company alleges in its ground of appeal is no more than an argument concerning matters whose assessment falls exclusively within the authority of the court of merits, which may not be raised before this Court. The appeal must therefore be dismissed.