The UK Supreme Court has ruled that New Cap Re liquidators Ernst & Young can force Lloyd’s Syndicate 991 to repay $US5.9 million ($5.6 million) plus interest.

New Cap Re reinsured its book with the syndicate for a number of years and paid $US2 million ($1.92 million) and $US3.9 million ($3.7 million) to cover losses in 1997 and 1998.

But the reinsurer was insolvent when these payments were made and in 2003 the liquidator launched an action in the NSW Supreme Court to recover the payments.

At the NSW hearing the syndicate refused to appear, arguing it had no presence in NSW and therefore was not in the court’s jurisdiction.

The syndicate continued to refuse to take part in the proceedings despite a judgement saying the NSW court had jurisdiction.

The court sought the assistance of the UK Supreme Court, which has ruled that “a foreign court has jurisdiction to give a judgement in person”.

One of the presiding judges, Lord Collins, said the syndicate had submitted to the jurisdiction of Australia by choosing to be part of New Cap’s Australian insolvency proceedings.

It also voted at a meeting of creditors in favour of the scheme of arrangement for the liquidation of New Cap Re.

“I would therefore accept the liquidators’ submission that, having chosen to submit to New Cap Re’s Australian insolvency proceeding, the syndicate should be taken to have submitted to the jurisdiction of the Australian court responsible for the supervision of that proceeding,” he said in the judgement.

“It should not be allowed to benefit from the insolvency proceeding without the burden of complying with the orders made in that proceeding.”