Trends in International Commercial Litigation Part I – The Present State of Foreign Judgment Enforcement Law
Trends in International Commercial Litigation Part I*- The Present State of Foreign Judgment Enforcement Law
THE HON JUSTICE C.R. EINSTEIN** and ALEXANDER PHIPPS***
Unfortunately for many parties the expense and complexity of international commercial litigation does not stop at the point of final judgment. Although, as detailed by the authors in "The Application of the ALI/UNIDROIT Principles and Rules of Transnational Civil Procedure to New South Wales" (2004) 4 Unif. L. Rev. 815, recent attempts have been made to bring about a harmonisation of civil procedure rules in the international commercial context, it remains the fact that enforcing a judgment out of the forum can in many respects prove almost as difficult as obtaining it. Accordingly, part one of this two-part paper examines the present state of Australian conflicts rules with respect to the enforcement of foreign judgments, both at common law and under the Foreign Judgments Act 1991 (Cth). With particular focus on the defence to enforcement of fraud on the foreign court laid down in Abouloff v Oppenheimer (1882) 10 QBD 295, the paper concludes that there is a strong case for reform in this area at the international level.
I. Introduction: The provenance of foreign judgment enforcement
The capacity under English and Australian conflict of law rules for the recognition and enforcement of foreign judgments is far from a recent phenomena; as asserted by the editors of Dicey and Morris, "English courts have recognised and enforced foreign judgments from the seventeenth century onwards."[1] Originally the rationale for such capacity was founded on notions of international and inter-colonial judicial comity and, as a corollary of the same, the desire to have judgments of the forum accorded equal treatment overseas. Thus in Wright v Simpson [2], a case concerning certain bonds entered into in the former American colony of Georgia, Lord Eldon recognised as a principle binding on him that "natural law requires the Courts of this country to give credit to those of another for the inclination and power to do justice"; and this notwithstanding the rather scandalous fact, in view of the date of this authority, that the American party "was well affected to this country; though not very distinctly".[3] Similarly in Alves v Bunbury[4], Lord Ellenborough, in the distinctly more savoury context of an action founded on a judgment emanating from Her Majesty's loyal colony of St Vincent, declared that "[b]y the comitas gentium, the courts of different countries will recognize and enforce the judgments of each other."
Authorities from the mid-nineteenth century onward, however, began to displace this reasoning in favour of an approach which emphasised the duty of the enforcing court to give effect to the obligation placed upon the foreign judgment debtor by reason of the judgment being sought to be enforced. In what later evolved into a definite rule of the conflict of laws, in Williams v Jones [5], Parke B said:
"where a court of competent jurisdiction has adjudicated a certain sum to be due from one person to another, a legal obligation arises to pay that sum, on which an action for debt to enforce the judgment may be maintained. It is in this way that the judgments of foreign and colonial courts are supported and enforced."
Thus in Schibsby v Westenholz[6], Blackburn J held that the "judgment of a court of competent jurisdiction over the defendant imposes a duty or obligation on the defendant to pay the sum for which judgment is given, which the courts in this country are bound to enforce." In the contemporary context, while the English Court of Appeal (Slade, Mustill and Ralph Gibson LJJ) in Adams v Cape Industries Plc [7] - a massive litigation involving the attempted enforcement of a Texas judgment against an English company whose subsidiaries were involved in asbestos mining in South Africa- was prepared to recognise the 'obligation' doctrine as constituting the basal principle in accordance with which foreign judgments would be enforced [8], it noted [9] the complexities of the issues left unresolved by such an approach. Exactly what is a court of 'competent jurisdiction' for the purposes of recognition and enforcement? When will the exercise by the foreign court of jurisdiction over a particular defendant be justifiable according to the conflict of law rules of the forum? [10]. Are there some judgments the very nature of which will preclude their enforcement? These and other difficulties ensure that the enforcement of judgments in Australia remains an area mired in legal niceties, cured only in part by the emergence of statutory enforcement machinery.
II. Reform and its discontents
In light of both the various reforms effected to Australian procedural law in recent decades and the increasing emphasis on the harmonisation of procedural law at the international level, the atavistic state of Australian law relating to the enforcement of foreign judgments is especially surprising. As discussed elsewhere by the authors, [11] civil procedure in Australia generally and the State of New South Wales specifically is substantially commensurate with that contained in the Principles and Rules of Transnational Civil Procedure recently formulated by the International Institute for the Unification of Private Law (UNIDROIT) and the American Law Institute (ALI).[12] While the move towards international procedural harmonisation - as epitomised by the ALI/UNIDROIT Principles and Rules - is predicated on the assumption that procedural idiosyncrasies at the national level present a significant impediment to the freer flow of international commerce, their value is set at naught unless complemented by equally streamlined enforcement mechanisms. However, as indicated by the fact that the ALI/UNIDROIT Principles and Rules make no substantial provision as to the enforcement of judgments, the international harmonisation of this area has itself proven difficult in the face of myriad national and regional legal traditions all of which, to varying degrees, seek to protect their residents against oppressive foreign judgments. Thus while the imperative of reform in the context of a globalised economy is axiomatic, as attempted by the ALI/UNIDROIT Principles and Rules, the means by which such change may be effectively and (so far as possible) universally achieved is a matter of fundamental contention.
1. The Present Situation
a) Procedural requirements of enforcement
In Australia, the enforcement of foreign judgments is possible either at common law or pursuant to the Foreign Judgments Act 1991 (Cth) (the FJA). In procedural terms, the following points are of importance:
aa) Common Law Enforcement Procedures
The foreign judgment creditor seeking to enforce at common law has two options; first, to commence fresh in personam proceedings in the Australian court with the unsatisfied judgment being the cause of action in the manner of an ordinary debt [13] or, second, to commence fresh proceedings on the original cause of action wherein the defendant will be estopped from raising any defence which was, or could have been, raised in the foreign proceedings.[14]
bb) Statutory Enforcement Procedures
Part 2 of the FJA applies to money judgments of superior courts in countries with whom Australia has concluded a bilateral arrangement as to reciprocity of enforcement; thus s 5(1) permits the making of regulations extending the operation of the FJA to the courts of a country in which "substantial reciprocity of treatment will be assured in relation to the enforcement in that country of money judgments given in all Australian superior courts." Following such recognition, judgments to which the FJA applies may be registered upon an ex parte application in the Federal Court of Australia or the State and Territory Supreme Courts at any time within 6 years after the final disposal of the proceedings (s 6(1)), and the effect of such registration is that the judgment may be enforced in the ordinary manner of a judgment of the court in which it has been registered (s 6(7)). In addition, it should be noted that:
(i) s 5(3) provides for the extension of the FJA to judgments of inferior courts of specified countries on the condition that 'substantial reciprocity of treatment' will be assured in that country in respect of the enforcement of Australian inferior court judgments;
(ii) s 5(6) provides for the extension of the FJA to non-money judgments, although at present no such recognition has been prologued;
(iii) s 10(1) provides that the FJA is a code in respect of the enforcement in Australia of judgments to which the FJA applies.
The courts of the countries in respect of which regulations have been made pursuant to s 5(1) are listed in the Schedule to the Foreign Judgments Regulations 1992, and are: New Zealand (including inferior courts); the Canadian Province of Alberta (including inferior courts); The Bahamas; the Canadian Province of British Columbia (including inferior courts); British Virgin Islands; Cayman Islands; Dominica; Falkland Islands; Fiji; France; Germany; Gibraltar; Grenada; Hong Kong Special Administrative Region; Israel; Italy; Japan; Korea; Malawi; the Canadian Province of Manitoba (including inferior courts); Montserrat; Papua New Guinea; Poland (including inferior courts); St Helena; St Kitts and Nevis; St Vincent and the Grenadines; Seychelles; Singapore; Solomon Islands; Sri Lanka; Switzerland (including inferior courts); Taiwan; Tonga; Tuvalu; the United Kingdom (including inferior courts); Western Samoa.
b) Problems with the existing procedural requirements
Observation of the scope of this list reveals a multitude of drawbacks with a judgment recognition system founded on bilateral recognition. First, agreement has not yet been reached with any federal or state jurisdictions of the United States, a quite remarkable situation in light of the fact that the US is Australia's second largest export market - worth AUD$ 9.5 billion in 2003 [15] - and the anticipated coming into effect of a free trade agreement with that country. Second, no agreement has been concluded with rapidly developing export markets such as China or India, Australian exports to which in 2003 totalled AUD$ 9.1 billion and AUD $ 3.3 billion respectively and to which in the same year, merchandise exports increased by 8.4 percent and 34 percent respectively. Third, in some federations, such as Canada, it is necessary to conclude separate agreements with each sub-national jurisdiction, given that s 3(1) of the FJA defines 'country' to include any region "which is part of a foreign country"; thus while judgments from the superior and inferior courts of the Provinces of Alberta, British Columbia and Manitoba are covered by the FJA, those from Provinces such as Ontario, Quebec or Nova Scotia are not. While it of course remains open to enforce judgments from non-FJA 'countries' at common law, to do so encounters myriad technical and jurisdictional difficulties (detailed below) the existence of which it was the FJA's very purpose to circumvent.
c) Judgments unenforceable per se
It is critical to note at this stage that there remain some species of foreign judgments which are unenforceable in Australia either at common law or under statute. These are:
aa) Judgments Unenforceable At Common Law
Australian courts will not entertain proceedings which have the effect of enforcing the penal [16], revenue [17], appropriation [18] or other public laws [19] of a foreign country, nor laws giving effect to the public policy of another state. [20] Moreover, enforcement will be declined in respect of judgments founded on laws contrary to the public policy of the enforcing court, such as those manifestly in breach of clearly established rules of international law. [21]
bb) Judgments Unenforceable Under the FJA
The FJA contains a number of similar restrictions on the type of judgments enforceable pursuant to Part 2 in addition to the basic position, as discussed above, that at present it extends only to money judgments. Viz, s 3(1) defines "enforceable money judgment" to mean a judgment which is payable in "an amount of money, other than [...] taxes or other charges of a similar nature; or a fine or other penalty" [22], with s 7(2)(a)(ix) further providing that the registration of a judgment may be set aside on the basis that its enforcement "would be contrary to public policy."
d) Substantive requirements of enforcement
In substantive terms, for a foreign judgment to be enforceable in Australia either at common law or under the FJA, the following requirements must be met:
aa) Substantive requirement one: jurisdiction of the enforcing court
At common law, given that the primary means of enforcement is to commence a fresh action on the judgment, the judgment debtor must be present in the jurisdiction (or anywhere in Australia by virtue of s 15 of the Service and Execution of Process Act 1992 (Cth)) at the time of service for the Australian court to acquire jurisdiction. Alternatively, under Supreme Court Rules Pt 10 r 1A(1)(v) it is permissible in New South Wales to serve the judgment debtor outside Australia.
Under the FJA, the registration process set out in s 6 dispenses for the need for the Australian court to establish jurisdiction over the person against whom the judgment is to be enforced, given that it involves merely an ex parte application rather than the commencement of adversarial proceedings. As stated by Stephen, Mason and Wilson JJ in Hunt v BP Exploration Co (Libya) Ltd, [23] the creation of such a simplified procedure was the very purpose of the FJA and its state predecessors:
"It is the purpose of the Act, as it was with its statutory predecessors in the United Kingdom, to replace the common law with a simpler and more effective system of enforcement of foreign judgments, the essence of which is that the foreign judgment, provided that it satisfies the necessary qualifications, is registered and enforced as if it were a judgment of the local court. The Act dispenses altogether with the old procedure whereby the judgment creditor sues on the foreign judgment so as to obtain a new judgment in the Supreme Court which is then enforced against the local assets of the judgment debtor. Instead the foreign judgment is registered and once registered, subject to certain qualifications, execution may be effected against local assets. The application for registration does not involve an action in personam requiring service of the Supreme Court's process in or outside the jurisdiction."
bb) Substantive requirement two: jurisdiction of the foreign court
At common law, the jurisdiction of the foreign court to have heard and determined the proceedings the subject of the judgment may be established by the residence or presence of the judgment debtor in the forum at the time of the commencement of the proceedings, [24] the express contractual submission by the judgment debtor to the jurisdiction of the foreign court [25] or voluntary submission by unconditional appearance (provided that appearance was not merely for the purpose of contesting jurisdiction, challenging the exercise of jurisdiction or protecting property: FJA s 11).
Similar rules apply in respect of judgments enforced under the FJA, with s 7(2))(a)(iv) allowing for the setting aside of the registration of a judgment on the basis that "the courts of the country of the original court had no jurisdiction in the circumstances of the case." In turn, s 7(3)(a) deems the foreign court to have had jurisdiction when the judgment debtor voluntarily submitted to the jurisdiction [26], agreed prior to the proceedings to be subject to the jurisdiction, or either resided in, or had its principal place of business in (in the case of a corporation), the jurisdiction at the time of the commencement of proceedings.
cc) Substantive requirement three: final and conclusive judgment
At both common law and under the FJA, a foreign judgment cannot be registered unless it finally and conclusively determines the controversy between the parties that led to the proceedings.[27] It is immaterial whether a right of appeal lies against the determination, or the ability to apply to have it set aside in the case of default judgments, provided that a res judicata is set up until such appeal or application is made.28
dd) Substantive requirement four: that none of the defences to enforcement apply
The foremost defences, both at common law and under the FJA, to the enforcement of a foreign judgement are, first, that there was a fraud on the foreign court, second, that the judgment debtor (being the defendant in the foreign proceedings) was denied natural justice in those proceedings and, third, that the enforcement of the foreign judgment would be contrary to the public policy of the forum.
cc) Defence to enforcement one: fraud
It is trite law that a judgment, wherever given, is liable to be set aside on the ground that it was obtained by a fraud upon the court. In Wentworth v Rogers (No 5), [29] Kirby P (with whom Hope and Samuels JJA agreed) set out the principles germane to such an application, the most fundamental of which is that:
"it must be shown, by the party asserting that a judgment was procured by fraud, that there has been a new discovery of something material, in the sense that fresh facts have been found which, by themselves or in combination with previously known facts, would provide a reason for setting aside the judgment."
Alternatively expressed, and considering that rendering nugatory a judgment is a "drastic step" that is prima facie at odds with the "public interest in the finality of litigation" [30], it is not permissible for a party to know of the fraud at the time of the hearing only to raise the matter on appeal or at a subsequent application to set aside the judgment; there will be no fraud in the relevant sense merely if the supposedly defrauded party "move[s] on nothing more than the evidence upon which they have previously failed". [31]
However, and notwithstanding the stringency of the test in the domestic context, since the decision of the English Court of Appeal in Abouloff v Oppenheimer & Co[32] a line of authority has developed, as explained by the editors of Dicey and Morris, to the effect that a foreign judgment "can be impeached for fraud even though no newly discovered evidence is produced and even though the fraud might have been, and was, alleged in the foreign proceedings."[33] The incongruence between these two positions is puzzling, has been universally condemned by the commentators and, as suggested by Kirby P in Wentworth, "might be no more than a reflection of the attitudes of the English judiciary at the apogee of the British Empire." [34] For present purposes, given the importance of the finality of litigation in the commercial context, it need only be said that the so-called 'Abouloff rule' demonstrates the inappropriateness of an enforcement system that remains saturated in conflictual rules over a century old.
In Abouloff itself, the defendants in the English proceedings were sued in Russia by the plaintiffs for detention of goods, the former setting up the defence in the foreign proceedings that the goods were in fact in the plaintiff's possession. This argument failed, and judgment was entered for the plaintiffs. In subsequent recognition and enforcement proceedings in England, the defendants again sought to raise the defence of fraud, a defence which the Court of Appeal found good. Per Lord Coleridge CJ:
"where a judgment has been obtained by the fraud of a party to a suit in a foreign country, he cannot prevent the question of fraud from being litigated in the courts of this country, when he seeks to enforce the judgment so obtained."[35]
For the Lord Chief Justice, this approach would not result in the enforcing court re-enquiring into matters already settled by the foreign court or, by the forensic election of the allegedly defrauded party, not placed before it, on the basis of a rather curious distinction between the issue of whether a party has acted fraudulently per se and that of whether the foreign court specifically was defrauded. His Lordship said:
"We are to decide whether the courts at Tiflis have been mislead by the fraud of the plaintiff; but the question whether they were misled, never could have been in issue before them, and therefore never could have been decided by them. The English courts are not either re-trying or even re-discussing any question which was or could have been submitted to the determination of the Russian courts."[36]
However, in circumstances when the grounds upon which fraud is alleged are no different from those placed before the foreign court, it is difficult to disagree with Nygh and Davies when they state that "this piece of sophistry cannot disguise the fact that the real issue, namely the truth or falsity of certain evidence, is the same in both proceedings."[37] Indeed, all sophistry aside, that the Abouloff rule permits the enforcing court to re-litigate certain aspects of the foreign proceedings was candidly detailed by Lindley LJ in Vadala v Lawes [38] when his Lordship said:
"that if the fraud upon the foreign Court consists in the fact that the plaintiff has induced that Court by fraud to come to a wrong conclusion, you can reopen the whole case even although you will have in this Court to go into the very facts which were investigated, and which were in issue in the foreign Court."
In Jet Holdings Inc v Patel[39], the plaintiff company sought enforcement of a judgment obtained by default against the defendant, a former employee, in the Superior Court of California. While the defendant entered an appearance in the Californian proceedings such as to voluntarily submit to its jurisdiction, he refused to attend for oral discovery on the basis that he feared for his physical safety; his position was that he owed no money to the plaintiffs but, rather, that they had been attempting to extort and threaten money from him. The reasons for the defendant's failure to attend were considered by the Californian court- to the extent even that a bodyguard was offered- but ultimately dismissed, and default judgment entered accordingly. In allowing the defendant to re-litigate the matter upon the plaintiff company commencing enforcement proceedings in England, however, Staughton LJ (with whom Nicholls LJ agreed) dismissed the latter's submissions that the question was res judicata:
"If the rule is that a foreign judgment obtained by fraud is not enforceable, it cannot matter that in the view of the foreign court there was no fraud. But this doctrine makes a great inroad into the objective, which is generally desirable, of enforcing judgments where in the eyes of English law the foreign court had jurisdiction ... If he asserts that the plaintiff's claim and evidence were fraudulent that issue must be tried all over again in enforcement proceedings. The lesson for the plaintiff is that he should in the first place bring his action where he expects to be able to enforce a judgment."[40]
Moreover, in Owens Bank Ltd v Bracco[41], Lord Bridge of Harwich (with whom Lord Griffiths, Lord Goff of Chieveley and Lord Browne-Wilkinson agreed) held that the Abouloff meaning of the expression 'fraud' applied mutatis mutantis to the identical, but undefined, term in the Foreign Judgments (Reciprocal Enforcements) Act 1933 (UK) on the basis that such was Parliament's intention. Having reached this conclusion his Lordship then refused to entertain the invitation extended to him to overrule Abolouff in light of the present, dramatically changed, international legal context, for fear that to do so result in a chasm opening up between the common law and statutory tests. His Lordship said in this respect that:
"I recognise that, as a matter of policy, there may be a very strong case to be made in the 1990s in favour of according to overseas judgments the same finality as the courts accord to English judgments. But enforcement of overseas judgments is now primarily governed by the statutory codes of 1920 and 1933. Since these cannot be altered except by further legislation, it seems to be out of the question to alter the common law rule by overruling Abolouff v Oppenheimer & Co and Vadala v Lawes. To do so would produce the absurd result that an overseas judgment creditor, denied statutory enforcement on the ground that he had obtained his judgment by fraud, could succeed in a common law action to enforce his judgment because the evidence on which the judgment debtor relied did not satisfy the English rule. Accordingly the whole field is effectively governed by statute and, if the law is now in need of reform, it is for the legislature, not the judiciary, to effect it."[42]
While his Lordship's concern regarding a potential disparity between the common law and statutory tests is pro tanto valid, again it is difficult to argue with Nygh and Davies when they submit that "[t]he statutory provision to which his Lordship referred does not define the word 'fraud.' It can be given any meaning the court chooses. It is clear that it should have the same meaning as at common law, and if the House had reversed the previous decisions of the Court of Appeal, the very basis for giving the statutory provision the wider meaning would have gone."[43] Nonetheless, on the strength of this authority it is likely that a similar process of reasoning would apply to s 7(2)(a)(v) of the FJA, which dictates that registration of a foreign judgment may be set aside on the basis that "the judgment was obtained by fraud."
Interestingly, however, Parker LJ in the Court of Appeal below in Owens Bank clarified somewhat the jurisprudential foundation of the rule by rejecting[44] as "unconvincing" the reasoning in Abolouff to the effect that the findings of the foreign court were not being re-opened. Rather, his Lordship proffered the view that, with the shift in the mid-nineteenth century from judicial comity to the "doctrine of obligation" as the rationale of enforcement, "[i]t followed that anything which may properly be held to negative that obligation was a defence to the action upon the judgment."[45] While attractive to a certain degree, his Lordship did acknowledge the persuasive submission to the contrary, namely that if the foreign court is deemed capable of deciding every other issue of fact or law raised in the proceedings then why is the same deference not shown in respect of questions of fraud?
However it must be noted that one exception to the Abouloff rule has developed in England, being where the judgment debtor has already moved to have the foreign court set aside its judgment on the basis of fraud by making a fresh application to that effect. In House of Spring Gardens Ltd v Waite & Ors[46], the plaintiffs obtained judgment in the Republic of Ireland in a matter relating to breach of copyright and the failure to pay royalties in respect of the manufacture and sale of bullet-proof vests. Subsequently the defendants commenced fresh proceedings in that jurisdiction seeking to avoid the judgment on the ground that it had been obtained by fraud, a claim that was dismissed after a protracted hearing. Subsequently again the plaintiffs commenced the subject enforcement proceedings in the High Court, to which the defendants set up the defence of fraud on the basis that the Abouloff rule permitted the English court to examine the matter de novo. While regarding himself bound by that line of authority, despite it having been "decided at a time when our courts paid scant regard to the jurisprudence of other countries", Stuart-Smith LJ was prepared to distinguish it and declare that the defendants were estopped from alleging fraud in the Irish proceedings as a defence to enforcement. His Lordship said:
"in my judgment the scope of these decisions should not be extended, and they are clearly distinguishable. In none of these cases was the question, whether the judgment sued upon here was obtained by fraud, litigated in a separate and second action in the foreign jurisdiction. Unless Egan J's decision is itself impeached for fraud, it is conclusive of the matter thereby adjudicated upon, namely, whether Costello J's judgment was obtained by fraud."[47]
It is submitted that in reaching this conclusion Stuart-Smith LJ was, with respect, entirely correct. As discussed above, the jurisprudential rationale of the Abouloff rule is that the enforcing court is not re-hearing matters already put to the foreign court but is, rather, entertaining an entirely new claim; namely, whether the foreign court was defrauded. In the Waite context, however, such logic is deprived of whatever logic it was initially seized, as the question of whether the foreign court was defrauded has been subject to subsequent consideration.
In other common law jurisdictions the rule has received a mixed reception; whereas it has been applied in New Zealand,[48] the Canadian courts have long treated fraud in overseas proceedings consistently with that in domestic.[49] Specifically in Australia, however, a conflict of authority exists and the matter still awaits, some 120 years after the decision in Abouloff, determination at appellate level.
In Keele & Anor v Findlay & Anor [50], the plaintiffs sued in the Superior Court of Arizona for the recovery of moneys due under a promissory note made by the defendants in respect of the assignment of rights under an agricultural lease. Judgment was obtained by the plaintiffs, who then commenced the subject enforcement proceedings in New South Wales; in reply, the defendants asserted that the Arizona judgment was tainted by fraud in the form of perjured evidence, with the Abouloff rule permitting them to advance this submission in the absence of fresh evidence. Rogers CJ Comm D began by citing the principles outlined by Kirby P in Wentworth v Rogers (No 5) respecting the setting aside of local judgments on the basis of fraud and noted that; "If I may say so, the considerations which informed the principles relating to domestic judgments ... should, on the face of it, have equal application to foreign judgments. Yet that is certainly not the law in England today."[51] Noting the long line of Canadian authority at divergence from Abouloff, the lack of binding Australian authority, the preponderance of academic opinion and the need to avoid legal "error" being "transplanted into this country in a matter of such importance in the administration of justice", his Honour thereby refused to follow the English authorities. His Honour said:
"I can do no better than to say that all the considerations enumerated by Kirby P in Wentworth v Rogers (No 5) as justifying the law's approach to local judgments, cry out for the same approach to be taken in relation to foreign judgments. With very great respect, it seems to me, odd to say the least, that on the one hand, local courts should grant a stay of proceedings in their courts, and send the litigants to a foreign court, and at the same time, arrogate to themselves the right to re-try an issue determined by the foreign judge, simply on the basis that the local court may be more skilful in detecting perjury than was the foreign judge. It is accepted, on all hands, that, whatever errors of fact, or law, the foreign court may commit, its judgment is conclusive. I can detect no difference in principle between a grossly erroneous finding of fact and an incorrect conclusion that a person is telling the truth. Yet under the law of England, the resultant foreign judgment cannot be challenged in the first case, but grounds a permissible argument of fraud in the latter. The principle of enforcement of foreign judgments calls for self denial in those circumstances."[52]
It is submitted that, with respect, the judgment of Rogers CJ Comm D was entirely correct in both law and principle, commensurate with the public interest in both the finality of litigation and the reciprocal enforcement of foreign judgments, and at variance with no authority binding upon his Honour. Moreover, it is perhaps unsurprising that a commercial judge proved so willing to depart from such a weighty line of English precedent in this regard, given the detriment that the Abouloff rule has the potential to wreak in the modern international commercial context.
Unfortunately, however, subsequent decisions in this country have not proved so willing to diverge from the English approach. In Close v Arnot, [53] the defendant, an Australian resident, was served with process while on a brief holiday to New York and failed to appear on the basis that he could not afford to pay for representation in that jurisdiction. Accordingly, the defendant obtained judgment by default and then commenced enforcement proceedings in New South Wales, which the defendant sought to resist on the ground that the New York judgment was obtained by perjured evidence. While Graham AJ did not find it necessary to directly consider the status of Abouloff in Australia as fresh evidence of fraud sufficient to meet the domestic threshold was presented, his Honour said:
"If it were necessary for me to do so I would distinguish Keele v Findley and find that the English rule continued to apply in New South Wales in respect of actions to enforce judgments obtained in undefended proceedings in a foreign court where the defendant has, for good reason, been unable to meet the plaintiff's case in that court. In such circumstances, it does not seem to me that one can say that a defendant has colluded in the deception of the foreign court by refraining from taking exception to the evidence presented against him and later attacked by him as being fraudulent. He could not be said to have improperly "kept his complaint in reserve".[54]
With respect, it is not immediately apparent what his Honour meant by stating that the English rule "continued" to apply in Australia, given that no authority has directly adopted it and Australian courts are not bound by the decisions of their English counterparts.
Next, Dunford J in Yoon v Song[55] expressed similar sentiments to Graham AJ in Close v Arnot, although again finding it unnecessary to decide the matter for the same reason as in that latter case. His Honour said:
"Notwithstanding the various criticisms that have been made of the Abouloff rule, I am satisfied that it correctly states the law in relation to foreign judgments and that if such law is to be changed, it should be by parliament and not by the courts. Consequently I am not satisfied that Keele v Findley was correctly decided. Indeed the facts of this case demonstrate in my mind good reason for applying a different test of fraud in respect of foreign judgments to that applied in respect of domestic judgments; although for reasons which appear hereunder I am also satisfied that even if the domestic judgment test were applied, the defendant would satisfy that test in the present case."[56]
It is perhaps instructive to note that this case, like Close v Arnot, involved an Australian resident sued in an overseas jurisdiction at great cost and expense.
In conclusion, it must be said to be beyond doubt that the Abouloff rule should not be considered to have the status of law in Australia. Decisions of English courts, while persuasive, do not have binding effect on Australian courts unless adopted at appellate level; moreover, the only local authority in which the question has formed part of the ratio of the decision is Keele v Findley. As a matter of principle, therefore, it is submitted that the rule should be resoundingly rejected as being of no utility or intellectual validity in contemporary Australian jurisprudence. Certainly, as manifested in Close v Arnot and Yoon v Song, there is scope for concern that applying the domestic rule to the foreign judgment context might lead to unjust results if a local defendant is unable to mount a defence, or a sufficient defence, in foreign proceedings due to considerations of cost and expense. However, this approach is somewhat incongruous when it is considered that all other questions of fact and law- such as rights and obligations under a contract or whether a civil wrong was committed- are considered to be the sole preserve of the foreign court. What is the distinction, for instance, between a foreign court erroneously holding that a certain misrepresentation had been made because the defendant was inadequately represented and an erroneous decision that a certain witness was telling the truth? On the same reasoning but in the obverse, moreover, there is the issue of the injustice to a foreign judgment creditor forced to re-litigate factual questions in Australia potentially without the benefit of full representation in view of its cost. And, finally, the rule is manifestly at variance with the need for finality of litigation in the modern commercial context, potentially forcing parties to go to the time and expense of litigating the same factual questions twice and standing as an incentive for defendants to strategically 'reserve' questions of fraud for airing in subsequent enforcement proceedings.
ff) Defence to enforcement two: denial of natural justice
At both common law and under the FJA it is a defence to enforcement that the foreign judgment was obtained in circumstances which involved a denial of natural justice, arising where no opportunity was afforded the defendant to present his or her case to an impartial tribunal or where sufficient notice of the proceedings was not provided.57
gg) Defence to enforcement three: contrary to public policy
As opposed to the defence of denial of natural justice, which relates to questions of the procedural fairness of the foreign court, the defence that the enforcement of a foreign judgment would be contrary to the public policy of the forum turns on the repugnancy of the foreign substantive law rather than the facts of a particular matter. As a result this defence has been subject to little consideration in the authorities, with the sole recent decision involving the House of Lords refusing to give effect to an Iraqi law "wholly alien to fundamental requirements of justice as administered by an English court" in its effect of dissolving by decree a Kuwaiti government agency and divesting it of all its property.[58]
2. Observations on the Present System
In light of the above discussion, the following observations can be made.
First, while the very purpose of the FJA was to cover the field of foreign judgment enforcement and thereby streamline the existing common law procedure, judgments from only a fraction of jurisdictions worldwide fall under its aegis. Although, of course, while the failure to take a multilateral approach in this area is not entirely the responsibility of Australian legislators, the fact that judgments from some of Australia's most important trading partners are not encompassed by the FJA is in urgent need of reform. Effective international commerce depends upon the swift and final resolution of disputes.
Second, enforcement at common law- which, due to the short compass of the FJA, would be the typical avenue of enforcement in Australia- entangles the foreign judgment creditor in the cost and time expense of commencing fresh proceedings in a second jurisdiction. Moreover, given the uncertain status of the Abouloff rule in this country, it is by no means certain that the result of such enforcement proceedings would be a fait accompli, involving potentially the re-litigation of questions of fact already traversed in the foreign suit.
Third, the lack of any substantial international, multilateral convention relating to the enforcement of judgments stands in dramatic contrast to the status of foreign arbitral awards. Given effect in Australia by virtue of Part II of the International Arbitration Act 1974 (Cth), the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to which some 120 states are currently parties, provides for a straightforward mechanism for the enforcement of arbitral awards from Convention countries in Australia by deeming them to have the same effect as a domestic arbitral determination.
III. Conclusion
It is thus trite to suggest that the enforcement of foreign judgments is an area in critical need of reform. Clearly, to have a statutory registration mechanism so restricted in scope as to leave common law rules emanating from late eighteenth and early nineteenth century English jurisprudence as the primary basis of enforcement is not an acceptable situation, either at present or in the future. To be sure, Australia is by no means the only country in which enforcement can prove a protracted and costly exercise for foreign plaintiffs; Australian judgment creditors abroad must equally take the enforcing court as they find it, with some jurisdictions going so far as to either refuse recognition altogether (thus necessitating the relitigation of the merits) or permit substantial re-examination so as to ensure that enforcement would not be contrary to the public policy of the forum.[59] For instance in Japan, the national Code of Civil Procedure proscribes the enforcement of judgments whose content is contrary to the "public order or good morals of Japan", being a requirement which although analogous in form to s 7(2)(a)(xi) of the FJA, is in substance much broader in that it "furnishes the defendant to with a mechanism with which to force the court to re-examine many of the substantive issues" already determined in the foreign proceedings.[60] Necessarily, therefore, while the process of law reform in this area must start at the national level initially, it can by no means finish there; as was the case with the enforcement of arbitral awards and the 1958 Convention, it is not until multilateral agreement at the international level - in a manner akin to that adopted by the ALI and UNIDROIT in the formulation of their Principles and Rules of Transnational Civil Procedure - can be reached that a satisfactorily efficacious enforcement regime will be in place.
Thus from this observation, part two of this paper [61] will shift away from the existing situation to examine proposals for reform at both the municipal and international level.
END NOTES
* Teil II folgt in Heft 4/2005 [The published version of this paper is to be found in Praxis des Internationalen Privat – und Verfahrensrechts (IPRax), issue 3, May/June 2005, s189-292, at page 273]
** A Judge of the Supreme Court of New South Wales
*** BA (Hons), LLB (Hons). Commercial List Researcher, Supreme Court of New South Wales
1 Lawrence Collins (ed), Dicey and Morris on the Conflict of Laws, Thirteenth Edition, Sweet & Maxwell, London, 2000, page 469.
2 (1802) 6 Ves 714.
3 (1802) 6 Ves 714 at 730.
4 (1814) 4 Camp 28 at 30.
5 (1845) 13 M & W 628 at 633.
6 (1870) LR 6 QB 155 at 159.
7 [1990] 1 Ch 433.
8 [1990] 1 Ch 433 at 513.
9 [1990] 1 Ch 433 at 515.
10 It is settled that in determining these questions the court is to apply the conflicts rules of the forum:
Pemberton v Hughes [1899] 1 Ch 781 at 791, per Lindley MR.
11 “The Application of the ALI/UNIDROIT Principles and Rules of Transnational Civil Procedure to New South Wales” (2004) 4 Unif.L. Rev.815.
12 The American Law Institute/UNIDROIT, The Principles and Rules of Transnational Civil Procedure and their Application to New South Wales, Final Draft, November 2004.
13 Hong Kong and Macao Glass Co v Gritton (1886) 12 VLR 128.
14 Blair & Perpetual Trustee Co Ltd v Curran (1939) 62 CLR 464; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
15 www.dfat.gov.au/trade/
16 Huntington v Attrill [1893] AC 150. This proposition has recently been confirmed and elaborated upon by the New South Wales Court of Appeal. In European Bank Ltd v Citibank Ltd [2004] NSWCA 76 a debt owed by the respondent to the appellant, effected by the deposit of funds between the parties’ corresponding banks in New York, was governed by the law of New South Wales and subject to a force majeure clause. Upon the attachment of the deposit monies in New York by order of the US District Court, the respondent sought to resist enforcement proceedings in New South Wales by invoking that clause. Inter alia, the Court of Appeal rejected this defence on the basis that to do so- in the absence of express contractual stipulation that the debt was to be satisfied by repayment of the New York funds specifically- would be to enforce a warrant issued under a foreign penal law.
17 Government of India, Ministry of Finance (Revenue Division) v Taylor [1955] 1 All ER 292.
18 Oppenheimer v Cattermole [1976] AC 249.
19 Huntington v Attrill [1893] AC 150. The question of what constitutes a foreign ‘public law’ for these purposes was recently considered by the New South Wales Court of Appeal in Evans v European Bank Ltd [2004] NSWCA 82. In that case, the Court discarded the previous rule, derived from Huntington v Attrill, that a public law in this context is one enacted to serve interests peculiar to government and enforced at the suit of the state. Rather, it held that whether a statute serves a governmental interest such as to be unenforceable in a foreign court turns on the ‘scope, nature and purpose of the particular provisions being enforced and the facts of the case.’ The mere fact that a foreign law serves a public interest and is enforceable by the state as moving party does not, without more, bring it within the scope of this exclusionary rule. Thus in this case the Court was prepared to entertain proceedings commenced by a company receiver appointed pursuant to an order of the US District Court, at the suit of the US Federal Trade Commission, for the disgorgement of fraudulently obtained funds deposited with the respondent bank. While the US law effectively being enforced certainly served a public interest- consumer protection- it was not a ‘public law’ protecting governmental interests as such, given that the funds disgorged were principally to be applied to the repayment of defrauded consumers.
20 Attorney-General (United Kingdom) v Heinemann Publishers Australia Pty Ltd (No 2) (the 'Spycatcher Case') (1988) 165 CLR 30.
21 Oppenheimer v Cattermole; Kuwait Airways Corp v Iraqi Airways Co (Nos 4 and 5) [2002] 3 All ER 209. See Government of the USA v Montgomery (No 2) [2004] 1 WLR 2241 for a recent consideration by the House of Lords of the interaction between the enforcement of foreign confiscation orders in the United Kingdom, pursuant to the Criminal Justice Act 1988 (UK), and that country’s obligations under the Human Rights Act 1998 (UK).
22 With the exception of judgments in respect of New Zealand or Papua New Guinea income tax.
23 (1980) 144 CLR 565 at 572-573.
24 Herman v Meallin (1891) 8 WN (NSW) 38 (natural persons); Adams v Cape Industries Plc [1990] Ch 433 (corporations).
25 Vogel v R & A Kohnstamm Ltd [1973] QB 133.
26 Note, however, that s 7(5) is in similar terms to s 11 in dictating that a voluntary appearance will be insufficient unless unconditional.
27 Castrique v Imrie (1870) LR 4 HL 429; FJA s 5(4)(a).
28 Schnabel v Lui [2002] NSWSC 15; FJA s 5(5).
29 (1986) 6 NSWLR 534 at 538.
30 (1986) 6 NSWLR 534 at 539.
31 (1986) 6 NSWLR 534 at 538.
32 (1882) 10 QBD 295.
33 Collins (ed), Dicey and Morris on the Conflict of Laws, page 519.
34 (1986) 6 NSWLR 534 at 541.
35 (1882) 10 QBD 295 at 300.
36 (1882) 10 QBD 295 at 302.
37 P.E. Nygh and Martin Davies, Conflict of Laws in Australia, Seventh Edition, LexisNexis Butterworths, Sydney, 2002, page 190.
38 (1890) 25 QBD 310 at 316-7.
39 [1990] 1 QB 335.
40 [1990] 1 QB 335 at 344.
41 [1992] 2 AC 443.
42 [1992] 2 AC 443 at 489.
43 Nygh and Davies, Conflict of Laws in Australia, page 191.
44 [1992] 2 AC 443 at 466.
45 [1992] 2 AC 443 at 457.
46 [1991] 1 QB 241.
47 [1991] 1 QB 241 at 251.
48 Svirkis v Gibson [1977] 2 NZLR 4 at 10, per Cooke J.
49 Jacobs v Beaver (1908) 17 OLR 496 at 506, per Garrow J.
50 (1990) 21 NSWLR 444.
51 (1990) 21 NSWLR 444 at 449.
52 (1990) 21 NSWLR 444 at 458.
53 Unreported, Supreme Court of New South Wales, Graham AJ, 21 November 1997, BC9706194.
54 BC9706197 at 22.
55 (2000) 158 FLR 295.
56 (2000) 158 FLR 295 at 300 [22].
57 Adams v Cape Industries plc [1990] Ch 433; FJA s 7(2)(a)(v).
58 Kuwait Airways Corp v Iraqi Airways Corp & Anor [2002] UKHL 19 at [16], per Lord Nicholls. See also FJA s 7(2)(a)(xi).
59 See generally: Australian Law Reform Commission, Legal Risk in International Transactions, Report No 80, 1996, pages 157-8.
60 See: Leif Gamertsfelder, "Cross Border Litigation: Exploring the Difficulties Associated with Enforcing Australian Money Judgments in Japan" (1998) 17 Australian Bar Review 161.
61 Einstein/Phipps, IPRax 2005, Heft 4.
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