Funge Systems Inc v Newcom Technologies Pty Ltd

Case [2005] SASC 498

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

FUNGE SYSTEMS INC & ANOR v NEWCOM TECHNOLOGIES PTY LTD & ORS

Judgment of The Honourable Justice Layton

22 December 2005

PRIVATE INTERNATIONAL LAW - FOREIGN JUDGMENTS - EFFECT AND ENFORCEMENT - GENERALLY - JUDGMENTS IN PERSONAM

EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - UNDERTAKING AS TO DAMAGES

ESTOPPEL - GENERAL PRINCIPLES

Application by second defendant seeking the enforcement of orders made in the United States Bankruptcy Court as judgments duly enforceable in the Supreme Court of South Australia - opposed by intervener - application to be determined as a preliminary issue in the overall action - US orders made in the context of complex litigation in the US at the same time as litigation being pursued in Australia - US orders purport to release money held in a trust account of the solicitors for the plaintiff in South Australia as security for an undertaking for damages for an interlocutory injunction granted against the defendants - consideration of common law principles in enforcing foreign judgments - whether the US orders satisfy principles of enforcement - whether final and conclusive - whether orders bind the same parties - whether judgment in relation to merits of the case - whether intervener is estopped from challenging the US orders - whether estoppel by record, issue, omission apply - whether an abuse of process for intervener to seek orders inconsistent with the US orders - whether r 25.04 of the Supreme Court Rules applies to dispose of matter as a summary judgment - Application refused on all grounds sought

Foreign Judgments Regulations 1992 (Cth); Foreign Judgments Act 1991 (Cth); Supreme Court Rules 1987 r 25, referred to.
R v McLeod (1890) 11 LR (NSW) 218; Grant v Spaanderman  (Unreported, Supreme Court of Western Australia, 13 March and 21 June 1991, Judgment No 1679 of 1990); Benefit Strategies Group Inc & Anor v Prider (2004) 237 LSJS 1; Benefit Strategies Group Inc v Prider (2005) 91 SASR 544; White v Verkouille [1990] 2 Qd R 191; Hoysted v Federal Commissioner of Taxation (1921) 29 CLR 537; Wells v D'Amico [1961] VR 672; Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502; Marks v National & General Insurance Co Ltd (1993) 114 FLR 416; Ramsay v Pigram (1968) 118 CLR 271; Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (Receivers and Managers Appointed) (In Liq) (1993) 43 FCR 510; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; Hunter v Chief Constable of the West Midlands Police [1982] AC 529; Walton v Gardiner (1993) 177 CLR 378; Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249, 318, considered.

FUNGE SYSTEMS INC & ANOR v NEWCOM TECHNOLOGIES PTY LTD & ORS
[2005] SASC 498

  1. LAYTON J:          This application seeks the enforcement of foreign judgments made in the United States Bankruptcy Court on 27 March 2003…

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AGLC
Funge Systems Inc v Newcom Technologies Pty Ltd [2005] SASC 498
Case
[2005] SASC 498
Decision Date

CaseChat Overview and Summary

In Funge Systems Inc v Newcom Technologies Pty Ltd, the second defendant, Newcom Holdings, sought the enforcement of orders made in the United States Bankruptcy Court as judgments enforceable in the Supreme Court of South Australia. This application was opposed by the intervener, Imbros. The court was required to decide whether the US orders satisfied the principles for enforcement of foreign judgments, whether they were final and conclusive, if they bound the same parties, if they were judgments in relation to the merits of the case, if the intervener was estopped from challenging the US orders, and whether it was an abuse of process for the intervener to seek orders inconsistent with the US orders. The court also considered whether rule 25.04 of the Supreme Court Rules applied to dispose of the matter as a summary judgment.

The court found that the US orders did not satisfy the principles for enforcement of foreign judgments. The orders were not final and conclusive because they were subject to appeal. The court also found that the orders did not bind the same parties as the South Australian litigation. Furthermore, the court found that the orders were not judgments in relation to the merits of the case. The court rejected the argument that the intervener was estopped from challenging the US orders. Finally, the court found that it was not an abuse of process for the intervener to seek orders inconsistent with the US orders.

The court refused the application on all grounds sought. The court found that the US orders did not satisfy the principles for enforcement of foreign judgments and that the intervener was not estopped from challenging the US orders. The court also found that it was not an abuse of process for the intervener to seek orders inconsistent with the US orders. The court found that the intervener was not bound by the US orders and that the orders were not judgments in relation to the merits of the case. The court rejected the argument that rule 25.04 of the Supreme Court Rules applied to dispose of the matter as a summary judgment.

Orders

Orders of the court

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Background

Background to the litigation

This material sometimes consisted of portions of other affidavits or documents. Much of the material was also in a secondary form as narrative by the person deposing to it. It has been no easy task to find a complete chronology of relevant events. BackgroundThe Parties The first plaintiff, Funge Systems Incorporated, (“FSI”) is a company incorporated in the United States and before its insolvency was controlled 81 per cent by the second plaintiff Funge Systems International Limited (“FSIL”).[1] FSIL was incorporated in the Cayman Islands and has now been wound up. The remainder of the shareholding in FSI consisted of minority shareholders Messrs Girvan, Schreiber and Porges, who later formed another company, Funge Merger Corporation, (“FMC”) because FSI was likely to become insolvent. [1] Exhibit DJT 21 to the Affidavit of David John Tucker, sworn 25 August 2004, Factual Background Stipulation and Order dated 27 March 2003, tab 14. FSI was in dispute with the defendants over a contract for the provision of patents for certain telecommunications technology that FSI entered into with the defendants, on 22 March 2001 (“the said contract”). Two of the defendants are companies in South Australia, namely Newcom Technologies Pty Ltd (In Liq), (“the first defendant”) and Newcom Holdings Pty Ltd (the second defendant, hereinafter referred to as “Newcom Holdings”) which is a holding company of the first defendant. The third defendant, Keith Benson (“Benson”) was a major shareholder of Newcom Holdings and the CEO of both companies. Benson developed communications technology in Australia and sought to obtain patents for the technology worldwide. FSI was incorporated for the purpose of obtaining ownership of the US patent to the technology. The Intervener Imbros is a company incorporated in the United States. The shareholders are the same minority shareholders, Messrs Girvan, Schreiber and Porges, who formed FMC. Imbros in effect replaced FMC which had previously been incorporated in response to the following circumstances. In May 2000, FSI was likely to become insolvent and as a result, FMC was incorporated for the purpose of lending FSI money to enable FSI to sue the defendants for specific performance of the said contract and also claim damages for fraud. The purpose of the funding was “to pay Hunton & Williams[2] to pursue litigation…to try to get all of the intellectual property brought down into the Funge Systems, Inc. entity…and [t]he funding proposal was accompanied by a proposed plan of reorganization.”[3] [2] Hunton & Williams were the solicitors for FMC and later Imbros.[3] Exhibit BCR 28 to the Affidavit of Brendon Roberts, sworn 13 July 2001, 11, tab 34. The proposed “Joint Plan of Reorganization” included the following consequences: ·if FMC was successful in the action then all of FSI’s assets would be sold to FMC; ·FSI would subsequently be merged with FMC; and·FMC would succeed to all FSI’s assets and claims.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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