Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd
[1995] FCA 770
•22 SEPTEMBER 1995
CATCHWORDS
PRACTICE AND PROCEDURE - Stay of proceedings - applicants in these (Federal Court) proceedings suing, in Supreme Court of State of New York, a New York firm of attorneys ("Skadden Arps") which had been joined by respondents in these proceedings as cross respondents to their cross claims - same subject matter in both proceedings - these (Federal Court) proceedings far advanced and fixed for hearing commencing 18 March 1996 for minimum estimate of six months - motion by Skadden Arps for injunction restraining applicants from prosecuting New York proceedings ("anti-suit injunction") - evidence that US courts exercise a jurisdiction to enjoin such applications in foreign courts ("anti-anti-suit injunctions") - application now made ex parte in these (Federal Court) proceedings for injunction restraining applicants from seeking such anti-anti suit injunction in New York pending consideration by this Court of Skadden Arps' motion ("anti-anti-anti suit injunction") - serious question to be tried - limited purpose of holding status quo for short period to ensure that Skadden Arps able to have this Court hear its motion for anti-suit injunction - balance of convenience - ex parte injunction granted for short period from Thursday 21 September to Monday 25 September for which date Skadden Arps' motion for anti-suit injunction made returnable.
National Mutual Holdings Pty Ltd v The Sentry Corporation (1989) 22 FCR 209 (Gummow J).
Societe Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 1 AC 871 (PC).
Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25 (McClelland J). Laker Airways v Sabena, Belgian World Airlines 731 F.2d 909 (1984).
Owens-Illinois Inc v Webb 809 S.W.2d 899 (1991).
Pittsburgh-Corning Corporation v Askewe 823 S.W.2d 759 (1992). Owens-Corning Fibreglass Corporation v Baker 838 S.W.2d 838 (1992).
Cigna Insurance Australia Limited v CSR Limited, unreported, Supreme Court of NSW, Commercial Division, Rolfe J, 15 August 1995.
Bank of New York v Bank of America 861 F Supp 225 (1994).
ALLSTATE LIFE INSURANCE CO & ORS v AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED & ORS (No 16)
No NG 381 of 1994
Lindgren J
Sydney
22 September 1995
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 381 of 1994
GENERAL DIVISION )
BETWEEN:
ALLSTATE LIFE INSURANCE CO and the parties listed as applicants in Annexure A to the second further amended statement of claim.
Applicants
AND:
AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED and the parties listed as respondents in Annexure B to the second further amended statement of claim.
Respondents
CORAM:Lindgren J
PLACE:Sydney
DATE:22 September 1995
REASONS FOR JUDGMENT (No 16)
Yesterday I heard, ex parte, and on an urgent basis, an application by the first cross respondent, Skadden Arps, Slate Meagher & Flom, to whom I will refer as "Skadden Arps". The application was brought by a notice of motion which, pursuant to leave granted yesterday, was filed in Court. By para 2 of that notice of motion Skadden Arps sought an order that:
"The Applicants be restrained until further order from taking any step directly or indirectly to obtain from the Supreme Court of the State of New York or from any other court an order restraining or purporting to restrain Skadden Arps from proceeding with this present Notice of Motion."
That particular paragraph was in the nature of interlocutory relief. The substantive relief sought in the notice of motion is set out in para 3 of it, which is as follows:
"3.The Applicants be restrained from taking any further step directly or indirectly in proceedings in the Supreme Court of the State of New York captioned Ithaca Partners LP and Gabriel Capital LP v Skadden, Arps, Slate, Meagher & Flom (Index # 110552/94), Executive Life Insurance Company Trust et al v Skadden, Arps, Slate, Meagher & Flom (Index # 128800/ 94), Scheiber v Skadden, Arps, Slate, Meagher & Flom (Index No 128343/94), Colonial Intermediate High Income Fund v Skadden, Arps, Slate, Meagher & Flom (Index No 132616/94), Ithaca Partners LP and Gabriel Capital LP v United States Trust Company of New York (Index # 133276/94), and Ariel Fund Ltd et al v Bear Stearns & Co Inc (Index No. 12153/94)."
Thus the motion, in its substance, seeks an "anti-suit injunction". That is, it seeks an order restraining the prosecution of the six suits in the Supreme Court of the State of New York.
The matter was heard late yesterday and I made orders at 4.55 pm. Because of the lateness of the hour (the office of the Registry normally closes at 4.00 pm and the orders had to be taken out) I did not give reasons at that time and stood the matter over to 9.00 am this morning for that purpose. I now deliver oral reasons for yesterday's orders. The jurisdiction of the Court, in appropriate circumstances, to enjoin the beginning or continuing of proceedings in a foreign jurisdiction is, I think, established: see for example National Mutual Holdings Pty Ltd v The Sentry Corporation (1989) 22 FCR 209, (Gummow J); Societe Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 1 AC 871 (PC); Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25 (McClelland J).
Skadden Arps' motion was supported by an affidavit of Geoffrey Hugh Sutherland, sworn 21 September 1995. The grounds on which Skadden Arps will, in due course, argue that the order referred to in para 3 of the notice of motion should be made arises, in general terms, out of the coincidence or similarity of the subject matter of these present proceedings and that of the six suits in the Supreme Court of the State of New York, to which para 3 of the notice of motion refers. Skadden Arps' case for that relief as it was put yesterday, will be along these lines (I quote from a written submission handed up yesterday afternoon):
In the context of the Australian proceedings, including the advanced stage which they have reached, it is oppressive to Skadden Arps to have to defend, essentially the same proceedings at the same time in New York;
(II)If the New York proceedings continue, it is inevitable that most of the other parties to the Australian proceedings will be interpleaded with the consequence that there will be vast and oppressive expense and waste of time and resources on account of the duplication of issues;
(III)The inevitable progress of the New York proceedings if permitted to continue, will threaten the orderly progress of the Federal Court proceedings and threaten the integrity of the Federal Court's own processes;
(IV)There is a strong public policy that all disputes arising out of the same subject matter should be resolved between all parties at one time and in one forum. Australia is the only forum to which all parties are amenable."
For the limited "holding measure" purpose with which I was concerned on the ex parte application, I reached the conclusion that for the above reasons and on the basis of the evidence in Mr Sutherland's affidavit, there is a serious question to be tried as to whether the anti-suit injunction sought by Skadden Arps in para 3 of its notice of motion should be made.
The reason why the application was made ex parte yesterday and the nature of the ex parte relief sought in para 2 of Skadden Arps' notice of motion are matters which can be approached in this way. United States courts will, in cases thought appropriate, grant relief in the nature of an order restraining a party from seeking an anti-suit injunction in a foreign court, that is to say in the circumstances of the present case, an injunction restraining Skadden Arps from seeking the relief referred to in para 3 of their notice of motion. Such an order might be referred to as an anti-anti-suit injunction. I was referred to Laker Airways v Sabena, Belgian World Airlines 731 F.2d 909 (1984); Owens-Illinois Inc v Webb 809 S.W.2d 899 (1991); Pittsburgh-Corning Corporation v Askewe 823 S.W.2d 759 (1992); and Owens-Corning Fibreglass Corporation v Baker 838 S.W.2d 838 (1992) as authority for the general proposition.
In circumstances which will become clearer Mr Sutherland, the solicitor for Skadden Arps, deposed to a fear that such an
injunction might be granted in the Supreme Court of New York suddenly and imminently with the result that Skadden Arps would be shut out from even seeking from this Court the relief referred to in para 3 of their notice of motion.
In order to understand this it is necessary to go to the facts but it does not seem necessary for me to give an account of them in great detail at this time. In the current proceedings relief is sought by a number of United States investors arising out of the issue, in October 1988, by Linter Textiles Corporation Limited ("Linter Textiles") of US$200,000,000 13.75% senior subordinated debentures due 1 October 2000 underwritten by Drexel Burnham Lambert Incorporated.
Relief is sought against numerous parties in these proceedings including Linter Textiles itself, Linter Group Limited ("Linter Group"), the parent company of Linter Textiles, subsidiaries of Linter Textiles ("the Linter Subsidiaries") and various officers of the Linter companies ("the Linter officers"). As well, relief is sought relevantly against a number of Australian banks ("the Initial Banks"). I will refer to Linter Textiles, Linter Group, the Linter Subsidiaries and the Linter officers, collectively as the "Linter parties". Freehill Hollingdale and Page, ("Freehills") solicitors who were retained as professional advisers on various aspects of the debenture issue, are also respondents in these proceedings.
It is alleged that there was an agreement made between the Linter parties and the Initial Banks prior to the issue of the debentures that certain guarantees which had been given by the Linter Subsidiaries to the Initial Banks would be released just prior to the issue of the debentures on the understanding that the guarantees would be reinstated immediately after the debenture issue. This agreement has been referred to as the "Release and Reinstatement Scheme". The applicant investors' case is that by the prospectus they were misled into investing by the suggestion that there were no guarantees whereas in fact, under the Release and Reinstatement Scheme, the guarantees in favour of the Initial Banks were to be released only temporarily and were to be reinstated after the issue of the debentures. The investors' case is that the reinstatement in fact occurred. Linter Textiles is now in liquidation. The investors lost their money which they seek to recover with interest in these proceedings on the basis that they were induced to invest by the misleading prospectus, and, in particular, by the non-disclosure of the Release and Reinstatement Scheme.
The applicants seek relief against Linter Textiles, Linter Group, the Linter officers, the Initial Banks and Freehills. It will be noted that the applicants do not seek relief against Skadden Arps so that there is no issue joined as between those parties. However, there have been cross claims filed against Skadden Arps by each of the Initial Banks, Freehills, Linter Group and the Linter Subsidiaries. It is said that Skadden Arps, a United States firm of attorneys with an office in Sydney, were knowingly involved in misleading or deceptive conduct by Linter or alternatively were negligent in failing to disclose the Release and Reinstatement Scheme to the applicant investors. Skadden Arps, in turn, have filed cross-claims against the Initial Banks, Freehills, Linter Textiles, Linter Group, the Linter Subsidiaries and the Linter officers. There are also cross-claims filed by the Initial Banks, Linter Group, the Linter Subsidiaries and Skadden Arps against Price Waterhouse a firm of accountants.
I will not attempt to give an account of the history of these proceedings except to say that the processes of discovery are in train at present and the proceedings are fixed for hearing commencing on 18 March next year. There have been numerous interlocutory hearings. At present the proceedings are fixed for hearing before me for various interlocutory purposes next Monday 25 September. All the evidence suggests that the parties are busy preparing for the hearing to commence before me in Sydney on 18 March 1996. Various estimates of the hearing time have been made. It seems to be common ground that the hearing will run for not less than six months.
There have been earlier proceedings in the United States which are deposed to in Mr Sutherland's affidavit. There have been two sets of proceedings in the United States District Court, Southern District of New York brought by some of the applicants. Those proceedings are Allstate Life Insurance Co Et Al v Linter Group Limited et al, 91 Civ 1655 (S.D.N.Y.) (Patterson J) and Allstate Life Insurance Co et al v Linter Group Limited et al 91 Civ 2873 (S.D.N.Y.) (Patterson J). I will refer to these as "Linter 1" and "Linter 2".
On 1 June 1992 the Linter 1 proceedings were dismissed by the United States Federal District Court; Fed. Sec. L. Rep (CCH) 96, 864 (S.D.N.Y June 1, 1992) (Patterson J). On 21 December 1992 the proceedings in Linter 2 were dismissed by the same Court: Fed Sec L. Rep (CCH) 997, 317 (S.D.N.Y. Dec 21, 1992). There was an appeal and on 2 June 1993 the United States Court of Appeals for the Second Circuit affirmed the decisions of Patterson J in Linter 1 and Linter 2: 994 F2d 996. The applicants subsequently appealed to the Supreme Court of the United States but certiorari was denied: 114 S Ct 386. In short, and no doubt by way of an oversimplification, the dismissal was on the basis of comity and/or forum non conveniens, by reference to the proceedings before this Court.
This brings me to the current New York proceedings. These proceedings are listed in para 3 of Skadden Arps' notice of motion noted earlier. Skadden Arps applied in those proceedings in the Supreme Court of New York for a dismissal and in April 1995 Justice Cahn denied Skadden Arps' motion. In June 1995 his Honour denied Skadden Arps' motion to reargue and renew. There was an appeal and on 19 September 1995, that is to say, two days before Skadden Arps made their ex parte application to me, the Appellate Division of the First Department of the Supreme Court of the State of New York denied Skadden Arps' appeal. There was placed before me yesterday evidence of the view expressed by Skadden Arps' attorneys in those proceedings, namely, Lankenau Kovner & Kurtz, in a letter dated 20 September 1995 to Skadden Arps' solicitors in Sydney, Dibbs Crowther & Osborne, that there would be no purpose in an appeal because an appeal would be likely to fail. The result of this is that Skadden Arps is, so far as the Supreme Court of the State of New York is concerned, bound now to continue with the defence of the six proceedings before that Court.
I will not attempt to summarise all aspects of the letter from Lankenau Kovner & Kurtz, dated 20 September 1995 but I will incorporate in these Reasons at least one paragraph which is as follows:
"As a result of the denial of Skadden's appeal, Skadden must respond to the various complaints and the various actions pending in New York. Skadden has until October 3, 1995 to answer these complaints. I have been instructed by Skadden to answer the complaints and also to file third party claims against most of the parties to the Australian action including Linter Group Limited, Linter Textiles Corporation Limited, the initial participant banks, and Freehill, Hollingdale & Page. Once the third party claims are filed and served the cross-defendants will have 20 days to respond to the complaints. I believe that it is highly likely in light of the fact that many of the parties to be impleaded successfully brought a forum non conveniens motion before the United District Court for the Southern District of New York, that they would likewise bring a forum non conveniens challenge in these proceedings against their having been impled. This obviously will increase the costs considerably for everybody."
The letter continues by dealing with the likely future course of the litigation in the Supreme Court of the State of New York. For example, the attorneys give an estimate that the proceedings there would be unlikely to proceed to trial before the end of 1997 at the earliest. They say that although it is difficult to estimate how long the trial would take, on the assumption that Skadden Arps successfully join the various other parties to which I have referred, the trial would last at least six months.
The way in which Skadden Arps put their case is, in summary, that there will be two suits dealing with the same or similar issues: one in this Court commencing on 18 March next year and running for at least six months and a subsequent hearing or hearings in New York which will run for at least a similar period of time.
Another matter to which Mr Sutherland deposes in his affidavit is this: he says that if the proceedings go ahead in the State of New York there will be a distraction of those who are pursuing Skadden Arps' interests in these present proceedings before this Court by reason of their having to render assistance in connection with the interlocutory steps in the New York proceedings. Some of these matters, of course, go directly to the substantive question raised by paragraph 3 of the notice of motion and only indirectly to the immediate question of the ex parte injunction.
I come now to what is perhaps the central point for the purposes of the ex parte relief sought. As I noted earlier, United States courts exercise a jurisdiction to make anti-anti-suit injunctions. I was referred, in particular, to Bank of New York v Bank of America 861 F Supp 225 (1994) in which, at a time when there was before an Australian court an application for an anti-suit injunction, his Honour Justice Cahn made an order restraining any further proceedings on that application. Of course, I say nothing more about this than that it makes the factual point that if such an application were to be made now in the New York proceedings there is a real possibility that Skadden Arps would be frustrated in seeking the relief referred to in para 3 of their notice of motion.
Mr Sutherland concludes his affidavit with the following:
"my belief, given the strong opposition mounted by the applicants to Skadden Arps' application in New York for a stay on the ground of forum non conveniens, [is] that the applicants if given notice of this application would seek from Judge Cahn an order of a similar nature to that referred to [in the case to which I have referred]."
I was also referred to one Australian case in which an order of the kind which I am asked to make ex parte was made. The order which was made there and which I am asked to make can, I suppose, be clumsily referred to as an "anti-anti-anti suit injunction". The case to which I refer is Cigna Insurance Australia Limited v CSR Limited, unreported, Supreme Court of NSW, Commercial Division, Rolfe J, 15 August 1995. The ex parte order made by his Honour restraining the making in the United states of an application for an anti-anti-suit injunction is referred to at page 11 of the transcript of his Honour's judgment in that case.
It did (and does) seem to me that there is reason to fear that if I do not grant the relief sought, the anti-anti-suit injunction referred to might well be sought and made in the proceedings in the Supreme Court of the State of New York. The effect of that would, of course, be quite dramatic so far as para 3 of Skadden Arps' notice of motion is concerned: Skadden Arps could not seek that relief without being in contempt of the Supreme Court of the State of New York. All that I am asked to do at present is to make an order the effect of which will be to maintain the status quo until the motion comes on for hearing. Although the relief as formulated sought an injunction until further order, I said that I would grant relief only until 5.00 pm next Monday 25 September 1995.
I raised with counsel the matter of notice to the applicants and the point was made, and is supported in my view, that to give notice may well lead to the immediate making of an application in New York of the very kind which is feared. I do not stay to express a view as to whether there would or would not be anything wrong in the applicants' conduct if they were to do that: naturally, the applicants would wish to protect their position by all means lawfully available to them. All that matters at present is that in fact there is ground to fear that such an application may well be made and granted.
For all these reasons I made the following orders late yesterday:
"1.Grant leave to Skadden Arps to file in Court the Notice of Motion dated 21 September 1995.
Direct that the Notice of Motion be returnable instanter.
Upon Skadden Arps by their counsel giving the usual undertaking as to damages, order that the Applicants be restrained until 5.00pm on 25 September 1995 from taking any step directly or indirectly to obtain from the Supreme Court of the State of New York or from any other court an order restraining or purporting to restrain Skadden Arps from proceeding to seek the relief referred to in paragraph 3 of the Notice of Motion filed in Court today.
Stand over further consideration of Skadden Arps' Motion to 9.30am on 25 September 1995 before me.
Direct that a sealed copy of the Notice of Motion and Affidavit dated 21 September 1995 of Geoffrey Hugh Sutherland and these orders be served on the applicants' solicitors in these proceedings by 6.30pm today.
Grant leave to Skadden Arps to notify the applicants of the making of these orders by telephone to the applicants' solicitors in these proceedings forthwith.
Upon notice by telephone being given, service of these orders shall be deemed to be effected upon the applicants.
Stand over for the giving of reasons to 9.00 am tomorrow.
Costs reserved."
I certify that this and the preceding 13 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated:22 September 1995
Heard: 21 September 1995
Place: Sydney
Decision: 21 September 1995
Appearances: Mr A J Sullivan QC with Mr S J Gageler and Dr A Bell of counsel instructed by Norton Smith solicitors appeared for the first cross respondents (Skadden Arps) (applicants on the motion).
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