Firebird Global Master Fund Ii Ltd v Republic of Nauru

[2014] NSWSC 1358

Supreme Court

New South Wales

Medium Neutral Citation:

Firebird Global Master Fund II Ltd v Republic of Nauru [2014] NSWSC 1358

Hearing dates:

22 September 2014; 23 September 2014; 29 September 2014; 30 September 2014

Decision date:

03 October 2014

Jurisdiction:

Equity Division

Before:

Young AJA

Decision:

Registration of foreign judgment and consequential garnishee order set aside with costs

Catchwords:

PRACTICE AND PROCEDURE - Judgments and Orders - Foreign States Immunity - whether registration of judgment and garnishee order inconsistent with foreign states immunity - whether immune from jurisdiction of Court - whether proceedings 'concern' a commercial transaction within the exception to foreign state immunity - where proceedings to register a foreign judgment - where underlying transaction of a commercial nature - where no dealings of the defendant were in issue in the proceedings - whether immune from execution -whether property for commercial purposes - meaning of "commercial purposes" and "commercial property" - whether property 'apparently not in use' and therefore commercial - whether sufficient evidence to show property not in use - application of ss 9, 11, 30, 32 of the Foreign States Immunities Act 1985 (Cth)

PRACTICE AND PROCEDURE - Judgments and Orders - garnishee orders - whether Court has discretion in relation to setting aside garnishee orders - what is the ambit of the discretion - whether Court can take into account personal circumstances of garnishee

PRACTICE AND PROCEDURE - Judgments and Orders - where Japanese judgment registered in Supreme Court of New South Wales - where garnishee order issued in relation to foreign judgment - whether Foreign Judgments Act 1991 (Cth) conflicts with Foreign States Immunities Act 1985 (Cth) - whether Foreign Judgments Act 1991 (Cth) constitutes a code - whether registration of judgment ought be set aside where failure to comply with service requirements in Foreign States Immunity Act 1985 (Cth) - whether orders and judgment made in default of appearance - interpretation of the Foreign Judgments Act 1991 (Cth)

EQUITY - Trusts and trustees - whether aid given to another country for specified purposes constitutes a Quistclose trust - whether done of aid retains a proprietary interest in aid when purpose fails - whether purpose failed because of attachment of garnishee order at the time of attachment

Legislation Cited:

Australian Constitution
Civil Procedure Act 2005 (NSW)
Common Law Procedure Act 1899 (NSW)
Foreign Judgments Act 1991 (Cth)
Foreign States Immunities Act 1985 (Cth)
State Immunity Act 1978 (UK)
Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

AIC v Federal Government of Nigeria [2003] EWHC 1357 (QB)
Alcom Ltd v Republic of Columbia [1984] 1 AC 580
Australian International Islamic College Board Inc v Kingdom of Saudi Arabia (2013) 298 ALR 655
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567
Blacktown Concrete Services Pty Ltd v Ultra Refurbishing & Construction Pty Ltd (1998) 43 NSWLR 484
Blatch v Archer (1774) 1 Cowp 63; 98 ER 969
Chatterton v Watney (1881) 17 Ch D 259
Duff Development Company Ltd v Government of Kelantan [1923] 1 Ch 385
Ex parte Major (1908) 8 SR (NSW) 68
Government of Kelantan v Duff Development Co Ltd [1923] AC 395
Juan Ysmael & Co Inc v Government of the Republic of Indonesia [1955] AC 72
Kennett v Westminster Improvement Commissioners (1855) 11 Exch 349; 156 ER 865
MG Charley Pty Ltd v FH Wells Pty Ltd [1963] NSWR 22; 80 WN (NSW) 754
NML Capital Ltd v Republic of Argentina [2011] 2 AC 495
Prichard v Westminster Bank Ltd [1969] 1 All ER 999
PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33; 247 CLR 240
Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135
Re Australia Elizabethan Theatre Trust (1991) 30 FCR 491
Re Barrier Reef Finance and Land Pty Ltd [1989] 1 Qd R 252
Re Combined Weighing and Advertising Machine Company (1889) 43 Ch D 99
Re Macks; Ex parte Saint [2000] HCA 62; 204 CLR 158
Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1992] 2 Qd R 197
Republic of Argentina v Weltover Inc (1992) 504 US 607
Society of Lloyd's v Marich (2004) 139 FCR 560
Taylor v Taylor [1979] HCA 38; 143 CLR 1
Toovey v Milne (1819) 1 B & Ald 683; 106 ER 512
United Arab Republic v Mrs X 65 ILR 384
Victoria Aircraft Leasing Ltd v United States (2005) 12 VR 340; 218 ALR 640
Wells Fargo Bank Northwest National Association v Victoria Aircraft Leasing Ltd (2004) 185 FLR 48; VSC 262

Texts Cited:

Australian Law Reform Commission, Foreign State Immunity, Report No 24 (1984)
Shorter Oxford English Dictionary (Oxford University Press, 6th ed, 2007)
Young, Croft & Smith, On Equity (Lawbook Co, 2009)
William Swadling ,The Quistclose Trust: Critical Essays (Hart Publishing, 2004)

Category:

Principal judgment

Parties:

Firebird Global Master Fund II Ltd (Plaintiff)
Republic of Nauru (First Defendant)
Commonwealth of Australia (Second Defendant)
Westpac Bank (Third Defendant)

Representation:

Counsel:
Mr T G R Parker SC with Mr J A C Potts (Plaintiff)
Mr R A Dick SC with Mr D J Barnett and Ms N D Oreb (First Defendant)
Mr N M Bender (Second Defendant)
Solicitors:
Clayton Utz (Plaintiff)
Ashurst Australia (First Defendant)
King & Wood Mallesons (Second Defendant)
Allens (Third Defendant)

File Number(s):

2012/00147600

Publication restriction:

None

Judgment

1. This case considers whether the Republic of Nauru is amenable to a garnishee order issued to enforce a Japanese judgment registered in this Court.

1. These reasons will be presented in the following way:-

(a)   Background, basic facts and general principles

(2)   Formal matters

(3)   The basic facts

(4)   Garnishment

(5)   Immunity of Foreign States

(b)   The Foreign States Immunity Act 1985 (Cth) and its proper construction

(1)   Overview

(2) Section 9

(3) Section 30

(4)   The relationship between the Immunity Act and the Foreign Judgments Act 1991(Cth)

(5)   Onus of Proof

(d)   How the matters referred to in Section B affects this case.

(e)   The Commonwealth's Rights re Aid money

(1)   Generally

(2)   Quistclose Trusts

(f)   Other Matters

(g)   The result of the case

A: Background, basic facts and general principles

A1. Formal matters

1. There are three motions before the Court, in chronological order of filing:

(a)   Motion by the Republic of Nauru filed 19 September 2014 to set aside the registration of a Japanese judgment against it and a garnishment order made against it.

(b)   Motion by the Commonwealth of Australia filed 22 September 2014 for an order that a bank account of Nauru, into which were placed substantial sums of aid monies, are not to be garnisheed.

(c)   A Motion by Firebird filed 29 September 2014 for a declaration that the Commonwealth has no proprietary interest in any funds in the bank accounts of Nauru.

1. The motions were heard on 23, 29 and 30 September 2014. Mr TGR Parker SC with Mr JAC Potts of counsel appeared for Firebird, Mr RA Dick SC, Mr DJ Barnett and Ms ND Oreb of counsel appeared for the Republic of Nauru, Mr NM Bender of counsel appeared for the Commonwealth and Ms Deegan, solicitor appeared for Westpac Banking Corporation.

1. Apart from the three motions, in his closing address, Mr Dick foreshadowed an oral application to extend time for applying to set aside the judgment and garnishee order. He wanted to hold his hand on this in case Nauru would be promoting it be held to submit to this Court's jurisdiction. Mr Parker strongly objected to leave being reserved to make this application. I will deal with this in section D.

1. There was debate as to whether these motions should be heard together. Because of the need to preserve hearing time, I merely reserved my decision on this and heard the motions concurrently.

1. The decision on these motions has to be given as a matter of urgency as almost all the liquid funds of Nauru are currently frozen until these motions are determined, so that Nauru is no longer in a position even to pay its public servants. This is the reason why these reasons are not in perfect shape, as there has been no time to have them fully checked for inaccuracies. Further, the statement of non-controversial facts and many of counsels' submissions have been copied directly from counsels' written submissions or the transcript.

1. I should add that, on more than one occasion, counsel for Firebird referred to the principle in Blatch v Archer (1774) 1 Cowp 63; 98 ER 969, being that all evidence is to be weighed against what was in the power of the relevant litigant to put before the court. Although I bear that principle in mind, its influence is considerably weakened when the court is dealing with a case brought on at short notice because of its urgency.

A2. The basic facts

1. The basal facts are that the plaintiff, to which I have referred and will continue to refer as "Firebird", is the holder of bonds issued by an entity which was guaranteed by the government of Nauru. The bond issuer defaulted, as did the guarantor.

1. Firebird sued in Japan and recovered a judgment equivalent to approximately 31 million Australian dollars. Nauru had waived its immunity with respect to that action.

1. Firebird then issued a summons in this Court to register the Japanese judgment. This summons was not served on Nauru.

1. It was determined by a Deputy Registrar who, on 6 June 2012, made the following Orders:

Republic of Nauru, First Defendant is to pay Firebird Global Master Fund II Ltd, First Plaintiff the sum of ¥1300000000.00

The court orders that:

(1) The judgment dated 28 October 2011 of the Tokyo District Court by which it was adjudged that the Republic of Nauru pay money to Firebird Global Master Fund II Ltd (the Foreign Judgment) be registered under Part 2 of the Foreign Judgments Act 1991 of the Commonwealth (the Act) for

(a)   The principal sum of ¥1,300 million; and

(b)   Interest:

(ii)   On ¥300 million of the principle sum, calculated at an annual rate of interest of 6.5% from 1 June 1995 until payment, which as at 4 May 2012 was ¥ 330,057,534.25 and accrues at a rate of ¥ 53,424.66 per day; and

(iii)   On the remaining ¥ 1,000 million of the principle sum, calculated at an annual rate of interest of 7% from 28 July 1994 until payment, which as at 4 May 2012 was ¥ 1,243,890,410.96 and accrues at a rate of ¥ 191,780.82 per day.

(2)   Pursuant to section 6(15)(a) of the Act, the Defendant pay the Plaintiffs reasonable costs of and incidental to the registration of the Foreign Judgment.

(3)   The Foreign Judgment may be enforced to the full extent of the terms that are to be registered.

(4)   Pursuant to section 6(11)(a) of the Act, the Foreign Judgment be registered in Japanese Yen, being the currency in which it is expressed.

(5)   Pursuant to section 6(4) of the Act, the Defendant may, within 14 days after service upon it of notice of registration of the Foreign Judgment, apply to set aside the registration of the Foreign Judgment.

1. The Deputy Registrar considered that he did not have power to make the remaining orders that were sought and (although nine months late) the summons was referred to a judge. Schmidt J heard it on 19 March 2013 and made the following orders:

(1) Pursuant to rule 18.2(2) of the Uniform Civil Procedure Rules 2005 (NSW) (the Rules) the Plaintiff may proceed without service on the Defendant of the notice of motion filed 8 March 2013.

(2)   Pursuant to rule 53.2(3) of the Rules, the Plaintiff may proceed without service of the summons filed 9 May 2012 on the Defendant.

(3)   Pursuant to rule 11.5 of the Rules, the Plaintiff be granted leave to serve the Notice of Registration of Judgment annexed to the notice of motion filed 8 March 2013 and marked "A" outside Australia.

(4)   Pursuant to rule 11.5 of the Rules, the Plaintiff be granted leave to serve the Notice of Change of Solicitor filed 8 March 2013 outside Australia.

(5)   Pursuant to rule 53.6(2) of the Rules, service of the Notice of Registration of Judgment be effected by way of private process server on the Secretary for Justice of the Defendant.

(6)   The costs of the motion are costs in the cause.

1. Her Honour gave short reasons.

1. Mr Dick says that the summons used to commence these proceedings wasn't served on Nauru as required by s 27 of the Immunity Act, which has the effect that the orders for registration of a foreign judgment must be set aside and it follows that the garnishee order which is founded on those orders must also be set aside for those reasons, but also because of Nauru's immunity against execution under s 30 of the Immunity Act.

1. What then happened, but a substantial period later, on 18 August 2014, a process server left the notice of registration of judgment at the office of the Secretary of Justice in Nauru with a person who appeared to be over 16 years and who was apparently a member of the staff (affidavit of service of Mr Hutcheson).

1. When the case came on for hearing before me evidence was presented by Firebird and Nauru. Nauru relied on a certificate given by Mrs Jeremiah, the head of Nauru's diplomatic mission in Australia, giving details of the thirty bank accounts held by Nauru in Australia and claiming that that property was held for the purposes specified in that certificate.

1. Under s 41 of the Immunity Act, in contrast to the UK Act, such a certificate is merely evidence of the facts stated, not "sufficient" evidence nor "conclusive" evidence. Mr Adeang, Nauru's Minister of Finance, gave evidence and he was cross examined for some considerable time by Mr Parker. I will refer to this evidence under discrete headings below.

1. Westpac Bank, the person garnisheed and the bank in which all the Nauruan money is kept in Australia, informed the Court (vide UCPR Pt 39.41) that it had reason to suspect that there were other interests involved in approximately half of the bank accounts affected by the garnishee order. Its solicitor also made it clear that the bank did not intend to make any submissions in the case.

A3. Garnishment

1. I need briefly to consider the modern law in NSW as to garnishment.

1. Traditionally garnishee proceedings are used in relatively small cases so that creditors can be paid by debtor's employers at the time when their weekly pay becomes due. However in the present case the stakes are large, the plaintiff having a judgment for approximately $31,000,000.

1. Traditionally garnishee matters were dealt with by an order nisi being made in the first instance and then the garnishee being served. The garnishee would either pay the money into court or appear to prevent the order being made absolute.

1. However, the procedure under UCPR, pt 39 r 34 and following, is that the usual form of order, which was issued in the present case, is in form 70. That requires the person garnisheed to pay the amount attached to the judgment creditor within 14 days after the date on which the order is served. That time has expired but has been extended by order of the Court.

1. The old rules were considered by Jacobs J in MG Charley Pty Ltd v FH Wells Pty Ltd [1963] NSWR 22; 80 WN (NSW) 754. His Honour took the view that it was only those persons who were mentioned by the person garnisheed as having an interest in the relevant fund who could have their claims considered by the Court. This was because of the terms of the previous s 184A of the Common Law Procedure Act 1899 (NSW), a provision that now appears as pt 39.41of UCPR.

1. At the initial hearing of the motions I asked whether the Charley case was still binding under the present rules. Doubtless in order to outflank any problem in this area, the Westpac Bank has now indicated in the case of fifteen of the thirty accounts that other persons may have an interest in the monies. This includes account # 9, the account into which Australian Aid money was deposited. Thus, this matter need not be considered further.

1. Under the law as has existed for many years and indeed under the present rules, the effect of a garnishee order is not to assign the debt that was owing by the garnishee to the principal debtor, but rather as Cotton LJ said in Chatterton v Watney (1881) 17 Ch D 259 at 262:

The effect of a garnishee order is to bind the debt attached and to prevent the creditor from receiving it; and when it is made absolute it gives the judgment creditor a right to recover payment from the garnishee...[i]t has not the effect of transferring the security, nor does it give the person who obtained the garnishee order any right to the security or any claim against the land comprised in it.

1. Cotton LJ repeated this in Re Combined Weighing and Advertising Machine Company (1889) 43 Ch D 99 at 104.

1. It has been applied on many occasions since, see eg Re Barrier Reef Finance and Land Pty Ltd [1989] 1 Qd R 252 at 253, Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1992] 2 Qd R 197at 200-1, and Blacktown Concrete Services Pty Ltd v Ultra Refurbishing & Construction Pty Ltd (1998) 43 NSWLR 484.

1. Although as a general rule, the garnishee process happens more or less mechanically, supervised at registrar level, exceptional cases such as the present arise from time to time. Under the present procedure, there is no order nisi, the order against the garnishee is made absolute at once but it can be set aside.

1. Under s 124 of the Civil Procedure Act 2005 (NSW) on the application of a judgment creditor who considers that a garnishee order has not been complied with, the Court may give judgment in favour of the judgment creditor against the garnishee or may refuse to give such a judgment if it is of the opinion that such a judgment should not be given.

1. This is complemented in pt 39.38 of UCPR, which says that the court may refuse to make a garnishee order if of the opinion that such an order is inappropriate. Examples are given as to the smallness of the amount involved. That rule doesn't cover the present case because the garnishee order has already been made.

1. The vital question is as to the ambit of the discretion.

1. The discretion seems to stem initially from Kennett v Westminster Improvement Commissioners (1855) 11 Exch 349 at 354; 156 ER 865. It was applied by the English Court of Appeal (Donning MR, Edmund Davies and Phillimore LJJ) in Prichard v Westminster Bank Ltd [1969] 1 All ER 999. In those cases the garnishee order had the effect of giving the creditor preference over all other creditors where the debtor was insolvent. However, whilst the Prichard case was in that flight, it seems to me that the words of Baron Platt in the Kennett case go somewhat wider.

1. The importance of this discretion in the instant case is that the Government of Nauru says that if it has to suffer deletion of its bank account by this garnishee it will not have enough money to pay its judges and public servants. The Commonwealth says that if the garnishee order is not set aside it fears for the $11,000,000 in aid, which it has recently given to Nauru for health and education purposes, that that money will instead be diverted to paying the Japanese creditors.

1. It is a very real question as to whether the subjective matters on the part of the judgment debtor are relevant. The argument for saying they are relevant is that the smallness of the debt and the position of the debtor are particularly mentioned in the rules. However, the old process did not allow the debtor himself to be heard when it was being considered whether the garnishee order should be made absolute.

1. In my view, the personal circumstances of the debtor are generally not a legitimate matter for the Court to consider when exercising its discretion. Obviously, in view of the terms of s 124, the need to take into consideration that the debtor is left with some proper means of support is relevant, but matters such as the fact that the debtor will not be able to pay other creditors is not, unless the case comes into the category of preferences.

1. However, in this case, there is the public interest question as to how far the Court may protect foreign aid money from attachment by garnishee proceedings. That matter was not really argued. I am of the tentative view that it is competent for the Court to exercise its discretion not to make an order on this ground. But, if it were necessary to make a final decision on this point, I wold first invite further submissions.

A4. Immunity of Foreign States

1. Throughout recorded history in the western world it has been recognised that protection needs to be given to the persons of foreign diplomatic personnel and the property of foreign sovereign States present in a country.

1. In PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33; 247 CLR 240 (hereafter "Garuda") the plurality of the High Court approved a statement from an American Restatement that "until the twentieth century, sovereign immunity from the jurisdiction of foreign courts seemed to have no exception" (at [5], p 244).

1. The Immunity Act and corresponding legislation elsewhere redefined the rights of foreign States because of the growing involvement of foreign States in commercial activities.

B: The Immunity Act and its proper construction

B1. Overview

1. The vital point in this case is the true construction of the Immunity Act.

1. The Immunity Act creates specific immunities for foreign States to which the Court must give effect.

1. Unfortunately, as the following discussion reveals, one's first impression that the Immunity Act actually confers substantial immunity on foreign States is rather illusory. The statutory exceptions to immunity cover a wider area than the immunity granted.

1. Section 38 provides that where the Court is satisfied that a judgment, order or process of the Court is inconsistent with an immunity conferred by the Immunity Act, the Court "shall set aside the judgment, order or process so far as it is so inconsistent".

1. Nauru contends that the Garnishee Order must be set aside under s 38 of the Act for the reasons set out below. Nauru does not seek to invoke the provisions of the UCPR dealing with garnishee orders. The mandatory provisions of the Immunity Act cannot be fettered by any State procedural rule or provision such as s 109 of the Constitution or, for that matter, any common law rule.

1. I now need to set out the key legislative provisions.

1. A number of the sections of the Immunity Act are of critical importance.

9 General immunity from jurisdiction

Except as provided by or under this Act, a foreign State is immune from the jurisdiction of the courts of Australia in a proceeding.

11 Commercial transactions

(1) A foreign State is not immune in a proceeding in so far as the proceeding concerns a commercial transaction.

(2) Subsection (1) does not apply:

(a) if all the parties to the proceeding:

(i) are foreign States or are the Commonwealth and one or more foreign States; or

(ii) have otherwise agreed in writing; or

(b) in so far as the proceeding concerns a payment in respect of a grant, a scholarship, a pension or a payment of a like kind.

(3) In this section, commercial transaction means a commercial, trading, business, professional or industrial or like transaction into which the foreign State has entered or a like activity in which the State has engaged and, without limiting the generality of the foregoing, includes:

(a) a contract for the supply of goods or services;

(b) an agreement for a loan or some other transaction for or in respect of the provision of finance; and

(c) a guarantee or indemnity in respect of a financial obligation; but does not include a contract of employment or a bill of exchange.

14 Ownership, possession and use of property etc.

(1) A foreign State is not immune in a proceeding in so far as the proceeding concerns:

(a) an interest of the State in, or the possession or use by the State of, immovable property in Australia; or

(b) an obligation of the State that arises out of its interest in, or its possession or use of, property of that kind.

(2) A foreign State is not immune in a proceeding in so far as the proceeding concerns an interest of the State in property that arose by way of gift made in Australia or by succession.

(3) A foreign State is not immune in a proceeding in so far as the proceeding concerns:

(a) bankruptcy, insolvency or the winding up of a body corporate; or

(b) the administration of a trust, of the estate of a deceased person or of the estate of a person of unsound mind.

27 Judgment in default of appearance

(1) A judgment in default of appearance shall not be entered against a foreign State unless:

(a) it is proved that service of the initiating process was effected in accordance with this Act and that the time for appearance has expired; and

(b) the court is satisfied that, in the proceeding, the foreign State is not immune.

(2) A judgment in default of appearance shall not be entered against a separate entity of a foreign State unless the court is satisfied that, in the proceeding, the separate entity is not immune.

30 Immunity from execution

Except is provided by this Part, the property of a foreign State is not subject to any process or order (whether interim or final) of the Courts of Australia for the satisfaction or enforcement of a judgment, order or arbitration award or, in admiralty proceedings, for the arrest, detention or sale of the property.

1. Section 32 is headed 'Execution against commercial property' and provides:

1. Subject to the operation of an provision that is effective by reason of section 10, section 30 does not apply in relation to commercial property

...

3. for the purposes of this section:

(a). Commercial property is property, other than diplomatic property or military property, that is in use by the foreign State concerned substantially for commercial purposes; and

(b). Property that is apparently vacant or apparently not in use shall be taken to being used for commercial purposes unless the Court is satisfied that it has been set aside otherwise than for commercial purposes.

39 Discovery

(1) A penalty by way of fine or committal shall not be imposed in relation to a failure or refusal by a foreign State or by a person on behalf of a foreign State to disclose or produce a document or to furnish information for the purposes of a proceeding.

(2) Such a failure or refusal is not of itself sufficient ground to strike out a pleading or part of a pleading.

1. Subsection 3(5) of the Act says:

A reference to this Act in a commercial purpose includes a reference to a trading, a business, a professional and industrial purpose.

1. The Act was enacted after a very detailed report into the law on the subject made by the Australian Law Reform Commission (Report No 24) of 1984. A good deal of reference was made to that report during submissions, which I will consider when dealing with the appropriate part of the argument. However, I should note here that in the late 20th Century, it became the policy of a number of nations to abandon the common law position, which it was thought gave over much protection to foreign States, and to restate the rules in a more limited form. This was done in the United Kingdom by the State Immunity Act 1978 (UK) (hereafter the "UK Act"). The Australian Law Reform Commission Report recommended against following the precise provisions of the UK Act. In particular, separate provisions are made in Australia with respect to immunity from suit and immunity from execution. There are also significant differences with the definition of "commercial" property or purpose. However, in general, decisions on the UK Act are valuable in construing the Immunities Act.

1. I must also set out some of the provisions of the Foreign Judgments Act 1991 (Cth):

6 Application for, and effect of, registration of foreign judgments

...

(7) Subject to sections 7 and 14:

(a) a registered judgment has, for the purposes of enforcement, the same force and effect; and

(b) proceedings may be taken on a registered judgment; and

(c) the amount for which a judgment is registered carries interest; and

(d) the registering court has the same control over the enforcement of a registered judgment;

as if the judgment had been originally given in the court in which it is registered and entered on the date of registration.

7 Setting aside a registered judgment

(1) A party against whom a registered judgment is enforceable, or would be enforceable but for an order under section 8, may seek to have the registration of the judgment set aside by duly applying to the court in which the judgment was registered, or (where applicable) a court in which the judgment was registered under Part 6 of the Service and Execution of Process Act 1992, to have the registration of the judgment set aside.

(2) Where a judgment debtor duly applies to have the registration of the judgment set aside, the court:

(a) must set the registration of that judgment aside if it is satisfied:

(i) that the judgment is not, or has ceased to be, a judgment to which this Part applies; or

(ii) that the judgment was registered for an amount greater than the amount payable under it at the date of registration; or

(iii) that the judgment was registered in contravention of this Act; or

(iv) that the courts of the country of the original court had no jurisdiction in the circumstances of the case; or

(v) that the judgment debtor, being the defendant in the proceedings in the original court, did not (whether or not process had been duly served on the judgment debtor in accordance with the law of the country of the original court) receive notice of those proceedings in sufficient time to enable the judgment debtor to defend the proceedings and did not appear; or

(vi) that the judgment was obtained by fraud; or

(vii) that the judgment has been reversed on appeal or otherwise set aside in the courts of the country of the original court; or

(viii) that the rights under the judgment are not vested in the person by whom the application for registration was made; or

(ix) that the judgment has been discharged; or

(x) that the judgment has been wholly satisfied; or

(xi) that the enforcement of the judgment, not being a judgment under which an amount of money is payable in respect of New Zealand tax, would be contrary to public policy; or

(b) may set the registration of the judgment aside if it is satisfied that the matter in dispute in the proceedings in the original court had before the date of the judgment in the original court been the subject of a final and conclusive judgment by a court having jurisdiction in the matter.

(3) For the purposes of subparagraph (2)(a)(iv) and subject to subsection (4), the courts of the country of the original court are taken to have had jurisdiction:

(a) in the case of a judgment given in an action in personam:

(i) if the judgment debtor voluntarily submitted to the jurisdiction of the original court; or

(ii) if the judgment debtor was plaintiff in, or counter claimed in, the proceedings in the original court; or

(iii) if the judgment debtor was a defendant in the original court and had agreed, in respect of the subject matter of the proceedings, before the proceedings commenced, to submit to the jurisdiction of that court or of the courts of the country of that court; or

(iv) if the judgment debtor was a defendant in the original court and, at the time when the proceedings were instituted, resided in, or (being a body corporate) had its principal place of business in, the country of that court; or

(v) if the judgment debtor was a defendant in the original court and the proceedings in that court were in respect of a transaction effected through or at an office or place of business that the judgment debtor had in the country of that court; or

(vi) if there is an amount of money payable in respect of New Zealand tax under the judgment; or

(b) in the case of a judgment given in an action of which the subject matter was immovable property or in an action in rem of which the subject matter was movable property-if the property in question was, at the time of the proceedings in the original, court situated in the country of that court; or

(c) in the case of a judgment given in an action other than an action of the kind referred to in paragraph (a) or (b)-if the jurisdiction of the original court is recognised by the law in force in the State or Territory in which the judgment is registered.

(4) In spite of subsection (3), the courts of the country of the original court are not taken to have had jurisdiction:

(a) if the subject matter of the proceedings was immovable property situated outside the country of the original court; or

(b) except in the cases referred to in subparagraphs (3)(a)(i), (ii) and (iii) and paragraph (3)(c), if the bringing of the proceedings in the country of the original court was contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in the courts of the country of that court; or

(c) if the judgment debtor, being a defendant in the original proceedings, was a person who under the rules of public international law was entitled to immunity from the jurisdiction of the courts of the country of the original court and did not submit to the jurisdiction of that court.

(5) For the purposes of subparagraph (3)(a)(i), a person does not voluntarily submit to the jurisdiction of a court by:

(a) entering an appearance in proceedings in the court; or

(b) participating in proceedings in the court only to such extent as is necessary;

for the purpose only of one or more of the following:

(c) protecting, or obtaining the release of:

(i) property seized, or threatened with seizure, in the proceedings; or

(ii) property subject to an order restraining its disposition or disposal;

(d) contesting the jurisdiction of the court;

(e) inviting the court in its discretion not to exercise its jurisdiction in the proceedings.

(6) Where the registration of a judgment is set aside on an application to a court in which the judgment was registered under Part IV of the Service and Execution of Process Act 1901, the applicant must:

(a) forthwith notify the Registrar of the court in which the judgment was registered under this Act of the order setting the judgment aside; and

(b) within 7 days lodge a certified copy of the order in that court.

1. Also relevant are some provisions of the UCPR.

53.7 Setting aside registration

(1) Subject to subrule (2), the Supreme Court may, on the application of the judgment debtor, make an order setting aside the registration.

(2) An application for such an order must be made within the time fixed under section 6 (4) of the Foreign Judgments Act 1991 of the Commonwealth or within such further period as may be allowed under section 6 (5) of that Act.

1. It will be seen that (unlike the corresponding UK legislation), there are separate provisions for immunity from suit and immunity from execution.

B2. Immunity Act section 9

1. The key section re immunity from jurisdiction is s 9, which is worded clearly. Any difficulty is to be found in working out what are the exceptions.

1. Section 9 of the Immunity Act provides that "except as provided by or under this Act, a foreign State is immune from the jurisdiction of the courts of Australia in a proceeding".

1. Nauru's counsel on its behalf invoke that immunity and submit that, unless an exception applies, the Court must set aside the Registrar's orders and Schmidt J's orders.

1. They also submit that Firebird bears the burden of establishing that an exception applies. I will consider that proposition in section B5.

1. One exception is provided by s 11 in so far as the proceedings concern a commercial transaction. Another is provided by s 19, which states that a foreign State is not immune in a proceeding in so far as the proceeding concerns a bill of exchange. Section 19 may be disregarded on the facts before me.

1. Section 11 makes it clear that there is no immunity "in so far as the proceeding concerns a commercial transaction". "Commercial transaction" is defined in s 11(3) as including a contract for the supply of goods and services and a transaction in respect of the provision of finance.

1. Mr Parker submits, if I have understood him correctly, at if the Nauruans use aid money for a hospital and some of that money is used to purchase surgical equipment or to pay doctors and nurses, then there is a commercial transaction and thus no immunity from suit.

1. Although there is some support for this proposition from English cases such as Alcom Ltd v Republic of Colombia [1984] 1 AC 580 (hereafter "Alcom"), the real question is whether the proceeding "concerns" a commercial transaction, not just whether there is a commercial transaction associated with the proceeding. It also must be noted that, in Garuda at [11] p 246, the plurality said that the words "in so far as" in s 11 indicates that, as to part, the proceeding may not concern a commercial transaction.

1. The word "concerns" is not defined in the Immunity Act. Whether a proceeding concerns a commercial transaction will usually depend on the facts and circumstances. The Immunity Act does not further define it see, Garuda at [39] p 253.

1. In my view, in the hospital example I have given, if a supplier of goods or services sued Nauru, the proceeding would concern a commercial transaction. However, if there was an administrative law question as to the working of the hospital, the mere fact that the hospital bought suppliers and paid its staff would not mean that that proceeding concerned a commercial transaction.

1. I do not consider that it is appropriate to analyse closely the decisions in Alcom or the later cases of AIC v Federal Government of Nigeria [2003] EWHC 1357 (QB) (hereafter AIC) or NML Capital Ltd v Republic of Argentina [2011] 2 AC 495 (hereafter NML) which approved of the decision in AIC.

1. In NML, a 3:2 majority of the English Supreme Court held that Argentina was immune under the UK Act. However, under the UK Act, there is an exception where the proceedings "relat[e] to a ... commercial transaction". NML had obtained a Judgment in New York with respect to debt obligations owed by the Republic of Argentina. NML sought to have that Judgment recognised and enforced in the UK as a foreign Judgment. NML argued that as the underlying transaction (the debt obligation) was a commercial transaction, the proceedings to register and enforce the New York Judgment related to a commercial transaction, thus the Republic of Argentina was exempt from the State Immunity.

1. The majority (Lords Mance and Collins (with whom Lord Walker agreed)) held that proceedings to recognise and enforce a foreign Judgment in the United Kingdom were not proceedings "relating to a ... commercial transaction". This is because a narrow construction of "relating to" was preferred by the majority, which indicates that the proceedings related to a Judgment, rather than the underlying commercial transaction (being the debt obligation).

1. Lords Clarke and Phillips, in dissent, preferred an "updated" interpretation of the "relating to" provision, which instead gave effect to the practical reality that the proceedings relate to a liability under the bonds, which was plainly a commercial transaction.

1. In the present case, Nauru argues, similarly to the position of the Republic of Argentina, that it has immunity because the proceedings relate to registration and enforcement of a judgment, rather than a 'commercial transaction' and thus do not fall within an exception under the Immunity Act, particularly s 11(1).

1. Nauru seeks to draw an analogy between "relating to" under the UK legislation and "concerns" under the Australian legislation. For reasons I have given I do not consider that this analogy can be drawn. However, the basic thought is correct.

1. Nauru does not concede that the underlying transaction the subject of the Japanese Judgment falls within either s 11 or s 19. However, even if it does, it submits that the proceeding under the Summons concerns the Japanese Judgment, not the underlying transaction. The Japanese Judgment is neither a commercial transaction nor a bill of exchange.

1. The application by Firebird was to register a Japanese judgment. The original cause of action was subsumed in the judgment. The judgment is not a commercial transaction within the meaning of s 11(3) of the Immunity Act. Thus s 9 provides immunity from suit.

B3. Immunity Act section 30

1. The Australian Law Reform Commission Report referred to earlier at [50], gives the Commission's reasons, later adopted by the parliament, for making separate provision for immunity with respect to execution.

1. The Commission said:

Part of the reason for treating execution as a distinct matter from jurisdiction is that the considerations governing the two matters are not entirely the same. The object of the definition of 'commercial' in the context of jurisdiction was to focus on the nature of a specific transaction. Moreover, in that context 'purpose' or 'motive' are usually said to be irrelevant. To attempt to use this definition in the context of execution where 'purpose' is intended to be the key discriminator is not a recipe for clarity.

1. The Report noted the difficulty with respect to bank accounts kept by a foreign embassy in Australia and suggested that some specific provision be made in the legislation to exclude embassy bank accounts in the definition of "commercial property". However, this did not happen.

1. Like the case of immunity from suit, s 30, the key section dealing with immunity from execution is in general terms, but the crunch is in the words "except as provided by this Part".

1. The critical exception is in s 32 which provides that the immunity does not apply in relation to commercial property. Section 32(3) defines 'commercial property' as property, other than diplomatic property, or military property, that is in use by the foreign State concerned substantially for commercial purposes, as well as the property referred to in s 32(3)(b), to which I will refer shortly.

1. Before the enactment of the Immunity Act and the approximate English equivalent, it would seem that the property, in the instant case being the thirty bank accounts, would be protected from garnishee by judgment creditors. This is the result of the decision of the English Court of Appeal in Duff Development Company Ltd v Government of Kelantan [1923] 1Ch 385 affirmed sub nom in Government of Kelantan v Duff Development Co. Ltd [1923] AC 395 though the House of Lords did not deal with the point in that appeal.

1. Normally one would reason that the Immunity Act did not seek to displace the common law except so far as it plainly did so. However, in the present circumstances, it is clear that the legislature deliberately decided to depart from the common law.

1. The structure of s 32(3) is that all property is commercial property unless it comes within the "other than" clause and there is no room for any third category such as property held on trust for charitable purposes within the foreign country.

1. I agree that this appears to be the structure, however, as Nauru submits, it raises a number of anomalies. If a government has property out of which it pays its staff wages or salaries that is not commercial property, but if it instead outsources the work and pays a lump sum to a contractor out of that property, the property probably is commercial property.

1. Again, cases such as Wells Fargo Bank Northwest National Association v Victorian Aircraft Leasing Ltd (2004) 185 FLR 48; VSC 262 (hereinafter "Wells Fargo") at [108] speak in terms of political, diplomatic or government purposes being immune. It is fairly clear that this statement is too broad. Not all governmental purposes (whatever that term really denotes) are non-commercial and the same comment applies to political purposes.

1. Section 32(3)(b) includes as commercial property, "property that is...apparently not in use", unless the Court is satisfied that it has been "set aside" otherwise than for commercial purposes.

1. There was considerable debate before me as to the implications of s 32(3)(b). The evidence showed that of the thirty bank accounts, 16 had not been operated upon for four weeks except for the deduction of account keeping fees or the addition of interest.

1. Mr Dick says this is hardly surprising and it must be remembered that the accounts have been frozen for the most recent two week period, so that a Court should not draw the inference that they are "apparently" not in use.

1. Mr Parker cited the Swiss case of United Arab Republic v Mrs X 65 ILR 384 (decision of the Switzerland Federal Tribunal, 10.2.1960), where money was held in a Swiss bank for some years after a failed transaction. However, that case is distinguishable on its facts.

1. "Apparently" must refer to how the evidence before the Court causes the Court to draw a conclusion as to non-use. In my view, the fact that these accounts have not been operated upon for four weeks does not make it apparent to me that they are not in use, when I bear in mind the period during which they have been frozen and the evidence that they form part of the consolidated revenue of the Government of Nauru.

1. One of these accounts is a term deposit which does not mature for a few months. Even though this is not a debt currently repayable (except by the grace of Westpac) it still may be the subject to a garnishee order because of s 117 of the Civil Procedure Act2005 (NSW).

1. Mr Dick submits that it is absurd to contend that a foreign State cannot hold monies which it uses for government purposes in an interest earning account because if it does so the money (or the chose in action against the bank with respect to the money) will be classified a commercial property.

1. Although absurdity is a good reason for examining a proposition, the law is that if parliament clearly legislates, it must be obeyed, even if the result appears to be commercially absurd, see eg Ex parte Major (1908) 8 SR (NSW) 68.

1. The Immunity Act does not even mention trust accounts. There were no meaningful submissions on this point. If the trust was for a person then it may be that it could be said that the property was not the property of the foreign State, but that cannot be said in the case of a trust for a purpose.

1. In Alcom, the House of Lords declined to pare down the Colombian bank account into parts that were commercial and parts that were not. In the present case, because there are thirty bank accounts, that exercise may have to be done. However, because on my analysis unless money is held in a bank account for embassy or military purposes it is classified as commercial property, I do not need to do so.

1. I believe that the omission of the Immunity Act to deal with trust accounts cannot be cured by the court dealing with the matter by some general feeling of fairness and equity. However, this is a factor to consider when exercising the discretion to set aside a garnishee order as noted in section A2.

1. Mr Dick submits that the accounts are used to provide government services. This is not sufficient as government services can cover not only consular and military services but commercial services as well.

1. The evidence showed that two of the accounts are devoted to the government airlines. Mr Adeang gave evidence, which I accept, that because it appears to commercial airlines to be uneconomic to service Nauru, the government provides an airline to allow its residents to fly to Fiji or New Zealand or Australia. However, under cross-examination, he conceded that these aircraft are also available for charter. Whilst it is understandable that a government would want to provide the capacity for its residents to travel, and that it is a proper government expense to operate the airlines, this does not automatically mean that money held in a bank account to operate the airline is not commercial property.

1. In any event, I accept Mr Parker's submission that it is unnecessary for the enterprise to be profitable for it to have a commercial character, see eg, Republic of Argentina v Weltover Inc (1992) 504 US 607 at 616.

1. The key question in the instant case is whether the thirty bank accounts are or are not commercial property. If they are commercial property, then the Immunity Act does not protect them.

1. On this question, the English cases are distinguishable because the UK Act does not have a separate provision for execution and the English test of commercial purpose or commercial property involves a reference to a transaction where goods and services are provided, whereas the Immunity Act does not.

1. Mr Parker and Mr Potts basically put that one must regard property as commercial property and thus outside the immunity if the property is used in buying and selling.

1. Thus they say that, if money in a bank account is used for the purpose of purchasing medical supplies for Nauru, then the money is used for a commercial purpose and is commercial property, even though the supplies are used for the hospital.

1. They also seem to dispute the proposition that carrying on a hospital is necessarily a function of government. It could be a commercial purpose even if it was never intended to make a profit.

1. It is common ground that the "property" which the Court is considering is not money, but the choses in action being the debts owed by the bank to its customer. It is trite law that when one puts money in a bank account, the money becomes the property of the bank and the customer just has a right of action against the bank.

1. It follows from the above that s 30 does not protect the bank accounts from attack by garnishment.

B4. The Relationship between the Immunity Act and the Foreign Judgments Act

1. I now need to consider what is the nature of registration of a foreign judgment in NSW under the Judgments Act.

1. First it should be noted that the Commonwealth Judgments Act now covers the field and thus the steps taken under that legislation are steps taken in the exercise of federal jurisdiction, Society of Lloyd's v Marich (2004) 139 FCR 560 at [23].

1. In Re Macks; Ex parte Saint [2000] HCA 62; 204 CLR 158 at 232-3, Gummow J explained that after registration, the foreign judgment retains its identity, however, by virtue of the Judgments Act rights and liabilities are created as if the judgment consisted of orders made by the local Supreme Court.

1. Counsel for Nauru submit that, accordingly the matters of fact and law (or the merits) of the proceedings before the foreign court are irrelevant. The proceedings commenced under the present summons can only concern the Japanese Judgment and not the underlying transaction.

1. Counsel thus say that two relevant questions arise. The first is whether, given the nature of the process for registration, the proceedings involved an exercise of jurisdiction such that the immunity in s 9 "from the jurisdiction of the courts of Australia" is attracted. The second is whether the proceeding commenced by the Summons concerns a commercial transaction or bill of exchange.

1. As to the first question, in PT Garuda at [17], the joint judgment made the point that the term "jurisdiction" is used in different senses and that in s 9 the term is used to express the notion that: "the Australian courts are not to implead the foreign State, that is to say, will not by their process make the foreign State against its will a party to a legal proceeding. Thus, the immunity may be understood as a freedom from liability to the imposition of duties by the process of Australian courts".

1. Counsel for Nauru put that the present proceedings plainly fall within the ambit of that concept. Further, for the reasons set out below, they involve the exercise of jurisdiction in the more narrow sense of authority to adjudicate.

1. Thus, they put that here, the proceedings commenced by the Summons sought orders for registration of the Japanese Judgment and for enforcement of it. The Court was exercising jurisdiction - federal jurisdiction - in both respects. The proceedings involve no investigation into the transaction the subject of the Japanese Judgment. No activity or dealings of Nauru are at issue in the proceedings: see PT Garuda at [40]-[42].

1. They then draw the conclusion that the summons filed by the plaintiff commenced a proceeding, is a "proceeding in a court", within the meaning of the definition in s 3 of the Immunity Act. Even if the underlying transaction the subject of the Japanese Judgment concerned a commercial transaction or a bill of exchange, this proceeding does not concern that matter; it concerns the Japanese Judgment. Accordingly, under s 9 of that Act, Nauru is immune from the jurisdiction of the Court in these proceedings.

1. Accordingly, they put, the Registrar's orders and Schmidt J's orders should not have been made. They were contrary to s 9 of the Act. The Court must set them aside under s 38 of the Immunity Act.

1. Needless to say, Mr Parker SC and Mr Potts do not agree.

1. However, in my view the proposition is sound. The cause of action on the Nauru bonds merged in the Japanese Judgment and thereafter the underlying cause of that judgment was quite irrelevant.

1. Counsel for Nauru submit that the orders should be set aside for three principal reasons:

(1)   There was a non-compliance with the requirements of the Immunity Act when orders were sought and made by the Deputy Registrar and by Schmidt J;

(2)   There was no proper compliance with the Foreign Judgments Act.

(3)   There was operative immunity under the Immunity Act.

1. Counsel for Nauru put that the procedure adopted by the plaintiff appears to have been based on consideration of the Judgments Act only, and not the Immunity Act.

1. The plaintiff did not serve the initiating Summons on Nauru, presumably that is the course ordinarily taken in respect of applications for registration of foreign judgments. Instead of serving the Summons, the plaintiff expressly sought orders in the Summons permitting it to proceed without service, as set out above.

1. Section 27 of the Immunity Act provides that a judgment in default of appearance shall not be entered against a foreign State unless "it is proved that service of the initiating process was effected in accordance with this Act and that the time for appearance has expired" and "the court is satisfied that, in the proceeding, the foreign State is not immune".

1. Counsel for Nauru submit that the Registrar's orders and Schmidt J's orders were judgments "in default of appearance" by Nauru because Nauru did not appear in relation to those judgments/orders; they were made in the absence of appearance by Nauru: Shorter Oxford English Dictionary, sixth edition (2007). Note also that s 3(6) of the Immunity Act provides that a reference to default of appearance includes a reference to any like procedure.

1. Neither the Registrar nor Schmidt J had before them proof of service of the Summons (apart from the fact that no such proof is on file, the Summons itself seeks an order that service of the Summons not be required and that was an order ultimately made by Schmidt J). Further, it is plain from the foregoing that neither of them reached any state of satisfaction that Nauru is not immune. None of the Summons, notice of motion, supporting affidavits or correspondence with the Court on file refers to the Immunity Act. Perusal of the transcript of the application before Schmidt J indicates that her Honour's attention was not drawn to the Immunity Act.

1. Nauru submits that the consequence is that the Registrar's orders and Schmidt J's orders were entered in breach of s 27(1) of the Immunity Act and must be set aside.

1. Firebird submits that one never gets to the Immunity Act. The Judgment Act constitutes a code for the registration and enforcement of foreign judgments in Australia and there is no doubt that the plaintiff complied with that Act.

1. Nauru denies that the Judgments Act should be considered to be a code. It points to ss 6 & 7 of the Judgments Act and notes that s 7(1) refers to "A party against whom a registered judgment is enforceable", thus recognising that there would be persons who would not be liable to enforcement. I must confess I found that argument unconvincing. The expression is merely a broadly descriptive one.

1. Then the section refers to a person "duly" (ie in accordance with the rules of court) applying to the Court to set aside the registration. I find in this word a slight indication that the Judgments Act does not constitute a code.

1. It is true that the Judgments Act superseded a number of State and Commonwealth Statutes dealing with enforcement of foreign judgments, but I do not consider it is a code covering the whole field. It does not deal with interstate judgments and it does not deal with recognition of foreign judgments generally, it fixes upon the act of registration. I cannot see any intention to exclude the principle that has always been accepted that within limits, foreign sovereign States enjoy some immunity.

1. There was also discussion as to whether there had been implied pro tanto repeal of the Immunity Act by the Judgments Act, it being the later Act.

1. A court should not lightly infer implied repeal. Indeed, the principle of interpretation that when one has two statutes whose provisions appear to be inconsistent and one statute is a generally applicable Act and the other a specialized Act, one prefers the latter.

1. Mr Parker did not cavil with that proposition, but said that it did not assist as both statutes dealt with specialized subject matter.

1. I beg to disagree. In my view, the Judgments Act applies generally when one is endeavouring to register a foreign judgment in Australia and the Immunity Act deals with the unusual situation where the judgment debtor is a person entitled to the benefit of the Immunity Act.

1. Mr Parker puts that there has been no compliance with UCPR Pt 53 particularly r 7 with respect to setting aside registration of a judgment. He puts that the Immunity Act does not permit Nauru to sidestep this rule.

1. Although I am exercising Federal Jurisdiction and, in this connection, UCPRs must be considered surrogate federal legislative provisions, in my view the provisions of the Immunity Act operate as an exception to the usual rules as to setting aside registration.

1. In any event, although this is not a power to be exercised unsparingly, the Court has an inherent power to set aside orders which ought not to have been made, see Taylor v Taylor [1979] HCA 38; 143 CLR 1.

1. Mr Parker then puts that the registration of a foreign judgment is not a "proceeding" within the meaning of s 9. Even if it was a proceeding, as the bond issue on which the Japanese judgment was based was a commercial transaction, s 11(1) would exempt the proceeding from immune status. Also, he puts, it is wrong to classify the decision to register the judgment as a "judgment in default of appearance".

1. I have dealt with and rejected most of these propositions in earlier reasoning. As to whether the application to register the Japanese Judgment is a proceeding, I accept the submissions of Nauru that the application involved a Court receiving an application, requiring evidence to support it and making an adjudication thereon and thus it is properly tagged a "proceeding".

1. Finally, Mr Parker put that because, originally, Nauru challenged only the garnishment and not the registration of judgment it had waived its immunity qua the registration.

1. I do not accept that proposition. In order to establish waiver one needs much more material than available to Firebird. This is not a case of election between inconsistent rights. The mere choosing in the initial stages of this case to focus on the garnishee does not evince any intention to abandon rights with respect to the registration of the judgment.

1. Accordingly, despite Mr Parker's best endeavours, I cannot see any answer to this point. There was clear non-compliance with the Immunity Act and virtually ex debito justiciae the judgment must be set aside and with it the garnishee order.

B5. Onus of proof

1. As noted earlier each principal party says that the onus of proof on whether the property attached by the garnishee order is commercial property is on the opposing party.

1. Nauru relies on and cites in support of that proposition, Wells Fargo at [61] (on appeal sub nom Victoria Aircraft Leasing Ltd v United States (2005) 12 VR 340; 218 ALR 640) and Alcom at 604E.

1. In Juan Ysmael & Co Inc v Government of the Republic of Indonesia [1955] AC 72 at 89-90, a case decided before the recent statutes, the Privy Council ruled that it was insufficient for the foreign State merely to say that that the proceedings affected it in a manner to which it was entitled to immunity. Whilst it did not bear any onus, it must produce evidence that its claim was not merely illusory.

1. The Queensland Court of Appeal (Holmes, White JJA & Atkinson J) followed that course in Australian International Islamic College Board Inc v Kingdom of Saudi Arabia (2013) 298 ALR 655.

1. It seems to me that this is the correct approach. The onus is on the person claiming that there is no immunity, but if this claim is resisted, then, unless the matter is obvious, there is an evidentiary onus on the foreign State to produce some facts to show that the exception pleaded against it is unfounded.

1. In the instant case, although some time was spent on this matter, the basal facts are relatively clear, though I agree with Mr Parker that more factual material would have been useful to shore up the rulings with respect to the aircraft and fuel accounts status.

C. How the matters referred to in Section B affect this case

1. It follows from what I have said in Section B that despite the appearance that the Immunity Act protects the property of a foreign State, when one reads the statute as a whole it, in fact, only protects a small portion of its property and the immunity conferred is actually very limited.

1. Were it not for the problems referred to in B4, Firebird would have succeeded on the evidence presented before me. I add this rider as this case has been heard urgently. Mr Parker frequently made the point that a proper determination of the case really did require discovery and considerably more evidence. I agree and, for that reason, have not made findings of fact unless that was inevitable.

1. To summarize the conclusions I have reached during the above reasoning, I hold that the application to register the judgment did not concern a commercial transaction and thus the process was one where section 9 of the Immunity Act applied and Nauru enjoyed immunity from suit.

1. I hold that the Judgments Act is not a code and that it was necessary to comply with the Immunity Act when seeking to register the Japanese judgment here and to apply for a garnishment order. There was no compliance with the Immunity Act. Therefore, pursuant to s 38 of the Immunity Act, the registration of the judgment and the garnishment order must be set aside.

1. I can see no reason why Firebird should not pay the costs of motion A and I so order.

D. The Commonwealth's rights re Aid Money

D1. Generally

1. I now turn to Motions B & C even though they might be considered now to be superfluous in view of my decision on Motion A.

1. It must first be noted that Nauru did not waive any immunity it may have to protect it against being sued in an Australian court on Motion B.

1. The reason for this attitude is that the Commonwealth's submission is, to put it in its simplest form, that where foreign aid is given for a purpose and that purpose cannot be fulfilled, the Commonwealth retains a proprietary interest in the money. Nauru wishes to maintain the position that aid money paid to it is its absolute property and has no intention of giving a court the opportunity to rule otherwise.

1. In my view, Nauru's stance is one available to it under the Immunity Act and I must uphold it.

1. Thus the motion B can only be considered as between Firebird and the Commonwealth, as Westpac has virtually submitted. Motion C, seeking a reverse declaration is in the same plight.

1. Pursuant to agreements (binding only in honour) between the Australian Government and Nauru, the Commonwealth agreed to donate money to Nauru to assist its health and education programs.

1. The parties seem agreed that it is appropriate to treat the Commonwealth payments as donations or gifts.

1. The bulk of these gifts were deposited in account #9 where about eleven million dollars remain. (I use the numbering in the s 41 Certificate).

1. Another account, #19, holds aid monies donated by New Zealand for aid purposes and the Certificate gives some details of other accounts which hold aid monies from the United Nations and the World Health Organisation. These, however, are not covered by the Commonwealth's Motion B.

1. The word "gift" is significant as s 14(2) makes it clear that there is no immunity with respect to the interest of a foreign State that arose by way of gift made in Australia.

1. The basal proposition is if aid money is given to a foreign State for a particular humanitarian purpose and that purpose cannot be achieved, the recipient holds the funds on trust for the giver.

1. The basic thrust of this proposition is based on the Quistclose trust, which I will analyse in the succeeding sub section.

D2. Quistclose Trusts

1. As is well known, this type of trust gets its name from the seminal case of Barclays Bank ltd v Quistclose Investments Ltd [1970] AC 567.

1. However, as Campbell JA pointed out in Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135, it may be a false assumption to assume that there is such a thing as a Quistclose trust. Rather "one needs to analyse an individual fact situation for the purpose of deciding whether there is an intention to create a trust , and, if so, on what terms."

1. His Honour then says that the passage in On Equity by Young, Croft & Smith at [6.1020] is correct when it states that cases in this area often depend on a close analysis of the facts.

1. There has really not been the opportunity for a close analysis of the facts in the instant case. We do have in evidence the agreement between Australia and Nauru. It makes it clear that the "agreement" is binding in honour only. One would not expect such a document to give rise to legal relations. Nor would one expect that it would be the intention of the parties that the donee would not be trusted to use the funds for the designated purpose.

1. Most examples of a Quistclose trust occur when the donee has been unable to use the funds for the designated purpose because it is wound up or becomes bankrupt.

1. The present case is not in this category as the donee still has the property and is still willing to use it for the designated purpose, but a creditor has taken up a position which may mean that without any action on its part, it will not be able to use the funds for the designated purpose.

1. In the series of essays edited by William Swadling and published as "the Quistclose Trust: critical essays" (Hart publishing 2004), there is not one example of a bank being held to be a Quistclose trustee. I thought this significant. However, Mr Bender said that he was not saying that Westpac held the monies on trust for the Commonwealth, but rather that Nauru was the Quistclose trustee.

1. However, when a garnishee order is served, it immediately attaches the property held for the debtor by the person garnisheed. Up until that moment, the purpose was not impossible. Mr Bender says that eo instanter with the service of the garnishee order, the purpose became impossible to attain and the Quistclose trust took effect. This could be correct as it would be analogous to a winding up order. However, I have my doubts as during the period allowed in the order, the person garnisheed has the opportunity of showing the Court why the order should be set aside.

1. Mr Bender directed my attention to what Gummow J had said when a member of the Federal Court in Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491. With respect, I do not consider that reference to that case aids the submission. Gummow J held, like Campbell JA later on, that a Quistclose trust was not a new legal institution but rather a particular example of the operation of principle on particular facts (p 503).

1. It is to be noted that, at common law, the indebitatus count for money had and received lay when A paid money to B and the purpose (or consideration for) the payment failed, see eg, Toovey v Milne (1819) 2 B & Ald 683; 106 ER 512. This, of course, does not assist after insolvency so equity supplies a remedy by way of trust as the common law remedies are inadequate to carry out the parties' intentions. It is arguable that that policy does not extend to cases where the purpose is frustrated by loss of the fund to a creditor.

1. Thus, I am not convinced that the Commonwealth has a claim on the facts as presented to me.

1. However, because there may be other facts which have not come out because of the urgency with which this case was heard, I do not, in my discretion, grant any reverse declaration. This makes it unnecessary to consider the interesting, but academic question as to whether a court should make a declaration on a notice of motion.

1. Accordingly, I will dismiss both Notices of Motion B & C with each party to bear its own costs.

E. Other Matters

1. I referred earlier to Mr Dick's eleventh hour attempt to file an additional motion. It was opposed by Mr Parker. In the event this motion is unnecessary so that I do not give leave for it to be filed.

F. The result of the case

1. As noted in Section C, whilst the matters concerning the Immunity Act have largely been found in favour of Firebird, the judgment and garnishee orders will be set aside because Nauru was not served with the papers that were put before the Deputy Registrar and Schmidt J when the original orders were made.

1. Even if this were not so, I would have been inclined to set aside the garnishee order in part in respect of the bank accounts in which there reside aid monies from Australia or New Zealand under the discretion I have to refuse to allow garnishment in respect of certain property. However, had it have been necessary to go this far, I would have first given Firebird the opportunity to make further submissions on this particular issue.

1. The result is that the registration of the Japanese judgment and the Garnishee order are set aside and Firebrand must pay the costs of Motion A.

1. Motions B & C are unnecessary and may be dismissed with each party to pay its own costs. The Commonwealth must pay Westpac's costs.

1. I must note that today is the final day I am rostered to sit this year. It is not intended that I sit again until late February 2015. If a party wishes to apply for some relief arising out of these reasons, the application should be made to the Duty Judge or suitable arrangements made with the Chief Judge.

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