Introduction
The New Zealand Courtroom of Enchantment has allowed an attraction towards a everlasting anti-suit and anti-enforcement injunction in relation to a default judgment from Kentucky, which the plaintiff alleged had been obtained by fraud: Wikeley v Kea Investments Ltd [2024] NZCA 609. The Courtroom upheld the findings of fraud. It additionally didn’t rule out the potential for an injunction being an acceptable treatment sooner or later. Nevertheless, the Courtroom concluded that an injunction may solely be granted as a step of final resort, which required the plaintiff to pursue its proper of attraction towards the Kentucky judgment.
The background to the case is about out in a earlier submit on this weblog (see additionally right here). In abstract, the case concerned allegations of “an enormous worldwide fraud” perpetrated by the defendants — a New Zealand firm (Wikeley Household Trustee Ltd), an Australian resident with a protracted enterprise historical past in New Zealand (Mr Kenneth Wikeley), and a New Zealand citizen (Mr Eric Watson) — towards the plaintiff, Kea Investments Ltd (Kea), a British Virgin Islands firm owned by a New Zealand businessman. Kea alleged that the US default judgment obtained by WFTL was primarily based on fabricated claims meant to defraud Kea. Kea claimed tortious conspiracy and sought a world-wide anti-enforcement injunction, which was granted by the Excessive Courtroom, first on an interim after which on a everlasting foundation. Wikeley, the only real director and shareholder of WFTL, appealed to the Courtroom of Enchantment.
The Courtroom of Enchantment allowed the attraction towards the grant of the injunction. On the similar time, it upheld the Excessive Courtroom’s declarations that the Kentucky default judgment was obtained by fraud and that it was not entitled to recognition or enforcement in New Zealand. It additionally upheld the Excessive Courtroom’s damages award (for authorized prices incurred in abroad proceedings in defence of the tortious conspiracy).
The judgment
There are two factors from the judgment that I need to concentrate on right here: the Courtroom’s emphasis on comity, and the relevance of fraud as a foundation for an anti-enforcement injunction.
Comity
A whole part of the judgment is devoted to the idea of comity, which the Courtroom relied on as a guideline. The Courtroom mentioned that it was essential “to confront, head on, the appropriateness, in comity phrases, of an order which … in substance, is addressed to United States courts and which may, a minimum of in idea, provoke countermeasures, with the outcome that no authorized system will be capable of administer justice” (at [167]). Drawing on work by Professor Andrew Dickinson, the Courtroom confirmed that comity was not merely “a matter of judicial collegiality” (at [164]). Within the worldwide system, comity was like “the mortar which cements collectively a brick home” (citing Choose Wilkey in Laker Airways Ltd v Sabena Belgian World Airways 731 F second 909 (DC Cir 1984) at 937).
Anti-suit and anti-enforcement injunctions had the impact of interfering with comity, as a result of they interfered with “the pursuits of a overseas authorized system in administering justice inside its personal territory” (at [164]). Drawing once more on Dickinson’s work, the Courtroom mentioned that anti-suit/enforcement injunctions “push[ed] on the boundaries of … the worldwide system of justice” (at [166]). The Courtroom disagreed (at [189]) with the Excessive Courtroom’s statement that the injunction “might even be seen as in keeping with the necessities of comity”, insofar because the injunction had the impact of restraining a New Zealand firm from abusing the method of the Kentucky courtroom to perpetuate a fraud. The US courts had been “unlikely to search for or want the safety of New Zealand courts” and had been “effectively able to figuring out fraud and making certain no reward flows from it” (at [189]).
Excessive warning was essential, subsequently, earlier than exercising the ability to grant an anti-suit/enforcement injunction (at [176]). Comity required “the courtroom to recognise that, in deciding questions of weight to be hooked up to various factors, completely different judges working below completely different authorized techniques with completely different authorized insurance policies might legitimately arrive at completely different solutions” (at [177]). Anti-enforcement injunctions had been particularly uncommon and had been “characterised by significantly cautious assessments of whether or not the reduction sought is actually essential and in keeping with comity” (at [180]).
Due to these considerations, an anti-enforcement injunction must be “a measure of final resort” (referring once more to Dickinson, at [185]). This meant that the Courtroom on this case needed to “a minimum of await the result of the attraction course of [in Kentucky] earlier than contemplating whether or not to situation an anti-suit or anti-enforcement judgment” (at [186]).
Fraud as a definite class?
Within the anti-enforcement context, some students have handled fraud as a definite class of case that will justify the grant of an injunction: see, most just lately, Hannah L Buxbaum and Ralf Michaels “Anti-enforcement injunctions” [2024] 56 NYU Journal of Worldwide Regulation and Politics 101 at 110-111, citing Ellerman Strains Ltd v Learn [1928] 2 KB 144 (CA) in assist. The Queensland Supreme Courtroom additionally relied on Ellerman Strains when granting reduction in help of the New Zealand interim orders (Kea Investments Ltd v Wikeley (No 2) [2023] QSC 215 at [178]–[188], with the Queensland Courtroom of Enchantment upholding the reasoning in Wikeley v Kea Investments Ltd [2024] QSC 201).
The Courtroom of Enchantment’s reasoning casts doubt on the existence of fraud as a definite class. In [176], the Courtroom adopted Dickinson’s “handy assortment” of the next 4 classes that will justify anti-suit reduction (see fn 157): that “the overseas courtroom has acted or is more likely to act in extra of its jurisdiction below worldwide regulation, in violation of the necessities of pure justice, in any other case in a way manifestly incompatible with New Zealand’s elementary insurance policies, or that its proceedings are probably considerably and irreversibly to intrude with the administration of justice in New Zealand”.
On the information of the current case, the Courtroom thought that the class of pure justice was most related. The Courtroom thought-about it “nearly inevitable” that, had the New Zealand courtroom been within the Kentucky courtroom’s place, it could have put aside the default judgment, on the idea that the continuing had not been drawn to Kea’s consideration and sufficiently substantial grounds of defence had been made out (at [182]). The Courtroom mentioned that, in these circumstances, “[a]t least if the judgment had been ultimate, with all attraction rights exhausted and towards a New Zealand entity … a New Zealand courtroom would possibly effectively think about that, regardless of its respect for the US courts, a sufficiently elementary coverage situation was engaged – one finally primarily based in ideas of pure justice and truthful listening to rights – that an anti-suit or anti-enforcement order ought to situation” (at [183], emphasis added).
What’s extra, the Courtroom distinguished the case from Ellerman Strains Ltd v Learn [1928] 2 KB 144 (CA) on the idea “there was no contractual jurisdiction clause that the New Zealand Courtroom was in search of to implement” (at [187]). It expressed “warning” concerning the proposition that the pursuit of the Kentucky proceedings must be injuncted as a result of the continuing was fraudulent and subsequently “inherently unconscionable”, referring to criticism by Dickinson that the language of unconscionability is “a vestige of an earlier monotheistic society [which] now not performs any helpful position and obscures the actual causes for granting injunctions” (at [190]). A conclusion by the New Zealand courtroom that the Kentucky continuing was vexatious or oppressive had “the capability to look patronising from the attitude of the US – one thing which in comity phrases must be prevented” (at [191]). The difficulty of fraud might be addressed by the US courtroom, “with all the superior legislative and customary regulation equipment accessible to it to do justice between the events” (at [191]).
Then again, the Courtroom clarified that it was not suggesting that “it could by no means be acceptable for a New Zealand courtroom to situation a worldwide anti-enforcement order” (at [188], emphasis in authentic).
Feedback
The Courtroom’s detailed engagement with comity is heartening for anybody who is worried concerning the destabilising results of anti-suit/enforcement injunctions on the worldwide system. But the reasoning can also be underpinned by stress.
First, the Courtroom appeared to eschew fraud as a definite foundation for the award of an anti-enforcement injunction, whereas accepting the appropriateness of figuring out whether or not the overseas continuing was fraudulent (and granting declaratory reduction to that impact). If the Courtroom is prepared to entertain a declare that the pursuit of a overseas continuing kinds a part of a tortious conspiracy, why ought to this not present a possible foundation for an injunction (versus, say, pure justice)?
This potential contradiction had flow-on results for the scope of the Courtroom’s orders, as a result of the Courtroom refused to discharge the appointment of interim liquidators of WFTL. Interim liquidators had been appointed after makes an attempt by the defendant to assign the advantage of the Kentucky default judgment from WFTL to a United States entity, to “insulate” WFTL from “any New Zealand judgment” (at [43]). The Courtroom thought-about that the appointment of interim liquidators was “for legitimate home causes by making certain property accessible to fulfill any New Zealand judgment remained below the management of New Zealand events” and that it was “unaffected by discharge of the anti-suit and anti-enforcement injunctions” (at [196], [211](e)). The Courtroom acknowledged that the interim liquidators may face stress to implement the Kentucky default judgment “with a purpose to meet the New Zealand judgment debt and prices awards towards WFTL – this regardless of the judgments of the Excessive Courtroom and this Courtroom discovering claims below the Coal Settlement to be fraudulent and made pursuant to conspiracy” (at [201]). The Courtroom didn’t “at this stage categorical any view about how the ideas of worldwide comity would possibly reply to that specific state of affairs” (at [201]). Why is it a “legitimate home motive” to guard the satisfaction of a New Zealand judgment for damages that had been incurred in defending the overseas fraudulent continuing, however it’s not a “legitimate home motive” to forestall enforcement of a judgment that’s the results of such a fraudulent continuing?
Second, whereas the injunction had the potential to intrude with comity, it was additionally, arguably, a device for dialogue. The Courtroom of Enchantment was clear that the injunction couldn’t be understood as “an act of comity”; and it thought it was unlikely that the Kentucky courtroom would need or would wish the assistance of the New Zealand Courtroom. On the similar time, it could be unusual if the Kentucky courtroom didn’t take account of the discovering of fraud, or the considerations about pure justice. On this manner, the Courtroom of Enchantment’s resolution to deal with the injunction as a final resort, and to require the plaintiff to pursue an attraction in Kentucky, could also be seen as a part of an unfolding dialogue between the courts that will not have occurred – and wouldn’t have been doable – with out the potential of anti-enforcement reduction. On the very least, the choice will function a pointer to the Kentucky courtroom that the default judgment has cross-border implications and offers rise to a threat of conflicting orders.
Third, the Courtroom appeared to characterise the plaintiff’s resolution to deliver proceedings in New Zealand as a strategic transfer, noting that “WFTL’s New Zealand registration and its standing as a trustee of a New Zealand belief offered a jurisdictional leg up with which to problem enforcement [of the Kentucky default judgment]” (at [194]). This characterisation sits uncomfortably with the Courtroom’s acceptance that the Kentucky continuing – together with the defendants’ selection of Kentucky as a discussion board – was itself primarily based on fraudulent fabrications. It’s one factor to conclude that the plaintiffs ought to have persevered in Kentucky by pursuing their attraction there, on the idea {that a} overseas courtroom have to be left to regulate its personal proceedings. It’s one other to say that the plaintiff, by turning to the New Zealand courtroom for assist, was utilizing WFTL’s registration in New Zealand as a “jurisdictional leg up” (cf additionally the Courtroom’s dialogue in [183] that there could be a possible case for an anti-enforcement injunction if the default judgment was in breach of a New Zealand entity’s rights to pure justice – that’s, if the plaintiff was a New Zealand entity). The place a New Zealand entity is used as a car for fraud, the New Zealand courtroom might have a respectable curiosity – or perhaps a duty – to cease the fraud, albeit that an injunction is a measure of final resort.
Fourth, the Courtroom of Enchantment distinguished Ellerman Strains on the idea that the latter case concerned an English jurisdiction clause. This reasoning means that anti-suit/enforcement reduction could also be an acceptable response to overseas proceedings introduced in breach of a New Zealand jurisdiction clause, however that it is probably not an acceptable response to overseas fraudulent proceedings between strangers. Why is it worse to undergo a breach of a jurisdiction clause, than to be dragged right into a random overseas courtroom on the idea of a fraudulent declare (together with a solid jurisdiction clause in favour of the overseas courtroom)? The Courtroom didn’t deal with this query. The Courtroom additionally didn’t deal with – however famous, in a unique a part of the judgment – the query whether or not a breach of a jurisdiction clause ought to justify injunctive reduction as a matter in fact (see footnote 158). Clearly, the Courtroom didn’t suppose that this query was related to its resolution to differentiate Ellerman Strains, however a extra detailed dialogue would have been useful, to make sure the coherent growth of the courtroom’s energy to grant anti-suit/enforcement injunctions.
