King v Linkage Access Ltd
[2022] VSC 158
•31 March 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2021 04717
| JONATHAN D KING IN HIS CAPACITY AS CHAPTER 7 TRUSTEE OF ZETTA JET USA INC AND ZETTA JET PTE LTD & ORS | Plaintiffs |
| v | |
| LINKAGE ACCESS LIMITED | Defendant |
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JUDGE: | Riordan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 February 2022 |
DATE OF JUDGMENT: | 31 March 2022 |
CASE MAY BE CITED AS: | King v Linkage Access Ltd |
MEDIUM NEUTRAL CITATION: | [2022] VSC 158 |
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FOREIGN JUDGMENT – Recognition and enforcement at common law – Elements to be satisfied on the application.
PRACTICE AND PROCEDURE – Application for leave to proceed where no appearance filed by the defendant – Principles to be applied – Agar v Hyde (2000) 201 CLR 552 applied – Rossiter v Core Mining Ltd [2015] NSWSC 360 not followed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Dr O Bigos QC with Mr H Hill-Smith | DLA Piper Australia |
| For the Defendant | No appearance | No appearance |
Contents
The parties
Procedural history
Application for leave
Principles
Has the defendant been properly served?
Does the originating process make a claim of the requisite kind?
Application for recognition and enforcement
International Jurisdiction
The foreign judgment must be final and conclusive
Identity of parties
The foreign judgment must be for a fixed sum or definite sum of money
Other matters
The status of Linkage
Leave to rely upon the affidavit of Mr Lacy affirmed 28 February 2022
Orders
HIS HONOUR:
In accordance with paragraph 5 of the Court’s Practice Note SC GEN 15 Enforcement of Foreign Judgments, the plaintiffs filed an originating motion on 15 December 2021 seeking relief against the defendant (‘Linkage’), relevantly including an order that the defendant pay USD $4,839,043.26, being a judgment debt pursuant to paragraph 7 of the orders made on 12 August 2021 by the United States Bankruptcy Court, Central District of California, Los Angeles Division.[1]
[1]Case numbers 2:17-bk-21386-SK, 2:17-bk-21387-SK and adversary proceeding number 2:18-ap-01340-SK.
The motion is supported by:
(a)an affidavit of Jonathan D King affirmed 13 December 2021;
(b)an affidavit of Mr Brian Lacy affirmed 28 February 2022, exhibiting an expert report of Mr Lacy dated 10 December 2021 (‘the Expert Report’);
(c)a further affidavit of Mr Lacy affirmed 28 February 2022, exhibiting a further expert report dated 2 February 2022 (‘the Second Expert Report’); and
(d)an affidavit of Mr Greg Leacock affirmed 21 January 2022.
The plaintiffs apply for:
(a)leave to proceed against Linkage under r 7.07(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’); and
(b)judgment in default of appearance under r 45.03(1) of the Rules.
The parties
The third plaintiff (‘Zetta Jet Singapore’) is a Singaporean company which operated an aviation business including a fleet of private jets available for private charter.
The second plaintiff (‘Zetta Jet USA’) is a company incorporated in California and is related to Zetta Jet Singapore. In these reasons, I refer collectively to Zetta Jet Singapore and Zetta Jet USA as ‘the Zetta Jet Companies’.
On 2 October 2017, the first plaintiff (‘the Trustee’) was appointed by the Office of the United States Trustee as Chapter 11 Trustee of the Zetta Jet Companies, after those companies filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code,[2] in the United States Bankruptcy Court on 15 September 2017.[3]
[2]11 USC (2020) (‘the US Bankruptcy Code’).
[3]US Bankruptcy Court, Central District of California, Los Angeles Division (case nos. 2:17-bk-21386-SK and 2:17-bk-21387-SK).
On 4 December 2017, the trusteeship was converted into a liquidation under Chapter 7 of the US Bankruptcy Code, and the Trustee was appointed Chapter 7 trustee of the Zetta Jet Companies by the Office of the United States Trustee, and confirmed by a resolution of creditors on 8 January 2018.
On 22 August 2017, Linkage was incorporated in the British Virgin Islands (‘BVI’). A search report of the BVI Financial Services Commission, Registry of Corporate Affairs from 1 December 2021 (‘the BVI Registry Search’) shows the following details with respect to Linkage:
(a)Current Registered Address as OMC Chambers, Wickhams Cay 1, Road Town, Tortola, VG1110, Virgin Islands British;
(b)Current Registered Agent as Overseas Management Company Trust (BVI) Ltd;
(c)Current Registered Agent Address as OMC Chambers, Wickham’s Cay 1, Road Town, Tortola, VG1110, Virgin Islands British; and
(d)status as having been struck off the register of companies on 1 May 2021, due to non-payment of its annual company fees.
Procedural history
Between 13 October 2017 and 11 December 2018, there was extensive litigation in the Federal Court of Australia, as well as an application for special leave to appeal to the High Court, following the arrest of the Dragon Pearl in Darwin on 16 October 2017.[4] The litigation was summarised in the affidavit of the Trustee affirmed 13 December 2021 as follows:
a.Proceeding VID 1104 of 2017 was a proceeding in admiralty brought by Zetta Jet Singapore and me against the Dragon Pearl. That proceeding was unsuccessful.[5] An appeal was dismissed;[6]
b.Proceeding VID 737 of 2018 was another proceeding brought by Zetta Jet Singapore and me against the Dragon Pearl. That proceeding was also unsuccessful;[7]
c. Proceeding VID 770 of 2018 was a proceeding brought by Zetta Jet Singapore and me against Linkage. An application for an interlocutory injunction was dismissed.[8] An appeal was allowed in part, but otherwise dismissed.[9] Special leave from the dismissal decision was refused;[10] and
d.Proceeding VID 1157 of 2018 was a proceeding brought by Zetta Jet Singapore and me against Linkage and [Dragon Pearl Ltd], under the voidable transaction provisions of the Corporations Act 2001 (Cth). That proceeding was dismissed.[11]
[4]The commencement of the litigation is summarised in Zetta Jet Pte Ltd v The Ship ‘Dragon Pearl’ [2018] FCA 878, [2]-[6] (Burley J) (‘Dragon Pearl 1’).
[5]Dragon Pearl 1 [2018] FCA 878.
[6]Zetta Jet Pte Ltd v The Ship ‘Dragon Pearl’ [2018] FCAFC 99 (Allsop CJ, Rares and Middleton JJ).
[7]Zetta Jet Pte Ltd v Ship “Dragon Pearl” (No 2) [2018] FCA 1130 (Perram J).
[8]Ibid.
[9]Zetta Jet Pte Ltd v The Ship Dragon Pearl (No 2) (2018) 265 FCR 290 (Allsop CJ, Moshinsky and Colvin JJ).
[10]Zetta Jet Pte Ltd v The Ship "Dragon Pearl" [2019] HCATrans 14 (Gageler, Nettle and Edelman JJ).
[11]King (Trustee), in the matter of Zetta Jet Pte Ltd v Linkage Access Limited [2018] FCA 1979.
On 29 October 2018, the Trustee filed an Adversary Complaint (‘the Complaint’) against Linkage and others in the United States Bankruptcy Court claiming relief including monetary judgments against Linkage on the basis of allegations, which were in summary as follows:
(a)Between 18 April 2016 and 16 December 2016, the director of the Zetta Jet Companies, Mr Geoffrey Owen Cassidy, misappropriated moneys totalling AUD $4,492,034.82 from the Zetta Jet Companies and applied those moneys to purchase a luxury yacht known as the Dragon Pearl, which was registered in the name of Dragon Pearl Ltd, a company incorporated in the Marshall Islands, under the control of Mr Cassidy as its sole director and shareholder.
(b)On 28 September 2017, shortly after the insolvency proceedings were commenced, the Dragon Pearl was purportedly transferred to New Target Investments Ltd (‘New Target’), a company incorporated in Samoa, for nominal consideration.
(c)On 8 June 2018, the Dragon Pearl was purportedly transferred to Linkage, for consideration of USD $1.
On 23 January 2019, default judgment was entered by the Clerk of Court, United States Bankruptcy Court, Central District of California, against Linkage and New Target (‘the first default order’) on the basis that both had failed to respond to the Complaint by 29 November 2018.
By notice of motion filed 15 February 2019, K&L Gates LLP, on behalf of Linkage, applied to Judge Klein for an order setting aside the first default order. Footnotes to the notice included:
1Linkage, by bringing this Motion, does not waive any defenses it has to the claims asserted by the Trustee and specifically reserves the right to assert any and all available defenses including the defenses set forth in Fed. R. Civ. P. 12(b)(1)-(7), including, without limitation, lack of personal jurisdiction, lack of subject matter jurisdiction, insufficient process, and insufficient service of process.
2K&L Gates LLP is appearing specially in this matter on behalf of Linkage for the limited purpose of bringing this Motion.
The Memorandum of Points and Authorities filed on behalf of Linkage in support of the motion contended that there was good cause to set aside the first default order on the following grounds:
(a)The first default order was improperly entered because the summons did not comply with relevant procedural rules.
(b)The first default order was not entered on account of any culpable conduct by Linkage.
(c)Linkage has meritorious defences.
(d)Setting aside the first default order would not prejudice the plaintiffs.
With respect to these grounds, Linkage submitted as follows:
(a)The first default order was improperly entered because the plaintiff relied on Linkage’s failure to respond to the Complaint within 30 days of service; but the summons provided for a response deadline of only 13 days after it was purportedly served. Further, contrary to the Federal Rules of Bankruptcy Procedure, the Court had not prescribed the time for service of the answer from Linkage, as a party in a foreign country.
(b)No culpable conduct led to the first default order, because Linkage only received the Complaint from its agent a month after it was served and it needed time to consider how to proceed in defending the action.
(c)Linkage had ‘numerous meritorious defences’, including the following:
(i)Personal jurisdiction defence on the basis that there was insufficient connection between the claim relating to the Dragon Pearl and the United States of America (‘the USA’).
(ii)The process was insufficient because the summons incorrectly described the response date as a date only 13 days following the date of service and accordingly did not set a response deadline for Linkage, as a foreign defendant.
(iii)The fraudulent transfer laws of the USA do not apply extraterritorially.
(iv)The claims are barred by the doctrine of res judicata arising from the dismissal of the proceedings in the Federal Court of Australia.
(v)The conduct alleged in the Complaint related to the alleged transfers of funds to the vendor of the yacht, which took place prior to the commencement of the bankruptcy; and accordingly Linkage had certain defences under the US Bankruptcy Code that should result in the Complaint failing as a matter of law.
(d)The plaintiff was not prejudiced by a decision to set aside the first default order because ‘the result of vacating the default is that this case will be decided on the merits as opposed to on an improper (because no response deadline was entered by this Court) technicality’.
As a result, ‘Linkage respectfully asks this Court to set aside the [first default order] and permit Linkage to defend this case on the merits’.
On 13 March 2019, Judge Klein granted Linkage’s motion to set aside the first default order for the reasons stated in the Court’s ‘tentative ruling’. In the ‘tentative ruling’, Judge Klein stated she was satisfied that, on the basis of each of its contentions, Linkage could have meritorious defences.
By a motion for default judgment filed 11 February 2021 and heard on 31 March 2021, the Trustee moved for a default judgment against Linkage and the other defendants on the basis of their failure to respond to the Trustee’s Amended Complaint filed 13 September 2019.
On 28 April 2021, the Trustee filed an amended motion for default judgment against each of the other defendants, which sought relief as follows:
Each of the Defendants was properly served with the Amended Complaint. None of them responded and each Defendant has been defaulted. Because the Defendants failed to respond to the Complaint or Amended Complaint, all of the allegations against them are taken as true. The Trustee is submitting a declaration supporting his damages along with this Motion. The Trustee respectfully requests that the Court enter default judgments against the Defendants to enable him to pursue and collect judgments against them in other jurisdictions and recover the value of the assets that the Defendants wrongfully and fraudulently transferred.
On 12 August 2021, Judge Klein recorded that:
The Court, having considered the Trustee’s Amended Motion for Default Judgment … filed by Plaintiff Jonathan D. King, Chapter 7 Trustee for Zetta Jet PTE, Ltd (‘Zetta PTE’) and Zetta Jet USA, Inc (the ‘Trustee’), Docket No. 184, the Memorandum of Points and Authorities in Support of the Trustee’s Motion for Default Judgment against the Defendants, the supporting declaration of the Trustee filed as Docket No. 161-2, and all files and records on file in the cases, and it appearing that the Defendants were properly served with the summons and complaint herein, and that the Motion was duly served on all interested parties, no timely oppositions to the Motion having been filed, appearances at the above-captioned hearing having been noted on the record, and good cause appearing therefor:
Judge Klein ordered that ‘[f]inal judgment shall be entered against all Defendants on all Counts of the Amended Complaint’. Relevantly, judgment was entered against Linkage and two other defendants on count VI in the amount of USD $4,829,043.26 plus post judgment interest at the federal judgment rate (‘the final judgment’).
Application for leave
Principles
Rule 7.07 provides:
Leave to proceed where no appearance by person
(1)If an originating process is served on a person out of Australia and the person does not file an appearance, the party serving the document may not proceed against the person served except by leave of the Court.
(2)An application for leave under paragraph (1) may be made without serving notice of the application on the person served with the originating process.
In determining whether leave should be granted under rule 7.07, the Court will have regard to whether:
(a)the defendant has been properly served; and
(b)the originating process makes claims of a kind which fall within one of the subparagraphs to rule 7.02.[12]
[12]Agar v Hyde (2000) 201 CLR 552, 574-5 [53]-[54] (Gaudron, McHugh, Gummow and Hayne JJ) (‘Agar’); Lew Footwear Holdings Pty Ltd v Madden International Ltd [2014] VSC 320, [107(6)] (Elliott J); Rio Tinto Shared Services Pty Ltd v English Datasytems LLC [2021] VSC 660, [1] (Lyons J).
If these criteria are satisfied, in the absence of some countervailing consideration, leave to proceed should then be given.[13]
[13]Agar (2000) 201 CLR 552, 575 [54].
Counsel for the plaintiffs brought the attention of the Court to case law in New South Wales, in relation to the equivalent rule to rule 7.07,[14] which referred to additional factors to be considered in the grant of leave to proceed.
[14]Uniform Civil Procedure Rules 2005 (NSW) r 11.8AA.
In Rossiter v Core Mining Ltd, Adamson J identified two additional considerations relevant to an application for leave to proceed and stated:
If originating process is served on a defendant outside Australia and the defendant does not enter an appearance, the plaintiff needs leave to proceed against that defendant: UCPR, r 11.4(1).
In [Agar] at [50]-[61] the High Court addressed the matters to be considered in deciding whether leave under UCPR r 11.4(1) ought be granted are whether:
(a) the defendant has been properly served;
(b) the claims in the originating process fall within UCPR, Sch 6;
(c)the plaintiff has an arguable case in the sense that it would be sufficient to survive an application for summary judgment; and
(d)the local forum is clearly inappropriate and there is another more appropriate forum.[15]
[15][2015] NSWSC 360, [10]-[11], quoted with approval in Western Sydney Local Health District v Jaca [2017] NSWSC 1626, {5} (Schmidt J); and Yoon v Lee [2017] NSWSC 1338, [6] (Darke J). See also Hutchinson v AD Securities America LLC [2021] NSWSC 1573, [4] (Ward CJ in Eq); Bingley-Pullen v Montgomery [2018] NSWSC 1308, [5] (Campbell J).
In my opinion, if Adamson J was intending to set out the considerations for a grant of leave on an application made without notice to a defendant, the inclusion of the considerations referred to in sub-paragraphs (c) and (d) appear to be inconsistent with the decision of the plurality in Agar. In particular, consideration of whether the plaintiff has an arguable case is contrary to the statement by the plurality that:
Where the application is made without notice to a defendant, there will be no occasion to consider any question about the strength of the plaintiff’s claim.[16]
[16]Agar 201 (2000) 201 CLR 552, 574 [53] (Gaudron, McHugh, Gummow and Hayne JJ).
However, the plurality in Agar said that, on an application to set aside service or to have the Court decline to exercise jurisdiction, the Court may be expected to have regard to the considerations (b), (c) and (d) in the quoted passage of Adamson J.[17] Of course, as such an application would be made by a defendant, consideration (a) would not be relevant.
[17]Ibid 575 [55].
Her Honour’s comments were presumably intended to refer to the considerations that arise if:
(a)the defendant is given notice; or
(b)on an application to:
(i)set aside; or
(ii)decline to exercise jurisdiction,
where different issues arise to those applicable on an ex parte application for leave to proceed. This is consistent with the following observation of Austin J in Bulldogs Rugby League Club Ltd v Williams, with respect to the statement of the plurality in paragraph 53 of Agar:
It is worth noting that subr 11.4 (2) allows the application for leave to proceed without serving that application on a defendant. The significance of this is explained by the judgment of Gaudron J, McHugh J, Gummow J and Hayne J in [Agar v Hyde] at [53]. Their Honours said that in circumstances where the application is made without notice to a defendant, there will be no occasion to consider any question about the strength of the plaintiff’s claim. Other cases – and Agar v Hyde itself [where the defendant had been served] - indicate that there are essentially four matters to consider in an application for leave under rule 11.4.[18]
[18][2008] NSWSC 822, [29]. See also Lew Footwear Holdings Pty Ltd v Madden International Ltd [2014] VSC 320, [107(5)] (Elliott J).
Has the defendant been properly served?
Rule 7.09 provides:
A document to be served out of Australia need not be personally served on a person so long as it is served on the person in accordance with the law of the country in which service is effected.
I am satisfied that Linkage has been properly served with the following documents in accordance with the law of the BVI (‘the relevant documents’):
(a)a letter from DLA Piper to Linkage dated 16 December 2021;
(b)the originating motion filed 15 December 2021;
(c)a notice (form 7AAA) to Linkage of the originating motion;
(d)the supporting affidavit of Jonathan D King affirmed on 13 December 2021 with the accompanying Exhibit JDK-1; and
(e)the Expert Report.
I am so satisfied for the following reasons:
(a)By affidavit affirmed 21 January 2022, Greg Leacock (a process server in the BVI) deposed to effecting service of the relevant documents by leaving them with the managing director of Overseas Management Company Trust (BVI) Limited (‘OMC’), being Linkage’s current Registered Agent, at OMC Chambers, located on the ground floor of the Yamraj Building, Road Town, Tortola, BVI.
(b)Mr Leacock further deposed to the fact that the Managing Director, Ms Sandra Vasquez, gave him a written acknowledgement of service on behalf of Linkage.
(c)I accept the expert evidence of Mr Lacy, who is a legal practitioner of the Eastern Caribbean Supreme Court (Virgin Islands) and a partner and head of BVI Dispute Resolution at Ogier, a legal firm in Tortola, BVI. Mr Lacy deposed in the Second Expert Report that s 101(1) of the BVI Business Companies Act 2004 provides as follows:
Service of a document may be effected on a company by addressing the document to the company and leaving it at, or sending it by a prescribed method to—
(a) the company's registered office; or
(b) the office of the company's registered agent.
(d)I consider the BVI Registry Search to be admissible pursuant to ss 48(1)(f) and 69 of the Evidence Act 2008 (Vic).[19] It shows the following details with respect to Linkage:
(i)Current Registered Address as OMC Chambers, Wickham’s Cay 1, Road Town, Tortola, VG1110, Virgin Islands, British; and
(ii)Current Registered Agent as Overseas Management Company Trust (BVI) Ltd.
[19]Lei v Lei (2016) 50 VR 409 (Riordan J).
The plaintiffs also contended that by reason of leaving the document with the Managing Director of OMC, service was also effected on the company’s registered office. As I am satisfied it was effective service on the company’s registered agent, it is not necessary for me to consider that submission.
Does the originating process make a claim of the requisite kind?
Rule 7.02 provides:
An originating process may be served out of Australia without leave in the following cases—
…
(m) when it is sought to recognise or enforce any judgment;
As noted above, the plaintiffs’ claim is to recognise and enforce a judgment of the USA and accordingly, I am satisfied that the claim in the originating process falls within rule 7.02(m).
Application for recognition and enforcement
Rule 45.03 relevantly provides:
(1)Where a defendant fails to file an appearance within the time limited, the Court may—
(a)on application made by the plaintiff without notice to the defendant; and
(b) on proof of service of the originating motion and of the failure—
give judgment against that defendant for the relief or remedy sought in the originating motion.
(2)For the purpose of these Rules, the hearing of the application is the trial of the proceeding.
The plaintiffs apply for recognition and enforcement of the final judgment against Linkage. The application is made at common law because the Foreign Judgments Act 1991 (Cth) does not apply to judgments of courts of the USA.
There are four well established requirements for recognition and enforcement of foreign judgments in personam at common law, being:
(a)The foreign court must have exercised jurisdiction over the judgment debtor which the Australian courts will recognise.
(b)The foreign judgment must be final and conclusive.
(c)There must be identity of parties.
(d)The foreign judgment must be for a fixed sum or definite sum of money.[20]
[20]Roe v Howard [2020] VSC 442, [32] (Derham AsJ) (‘Roe’); Doe v Howard [2015] VSC 75, [56] (J Forrest J) (‘Doe’); Benefit Strategies Group Inc v Prider (2005) 91 SASR 544, 552 [18] (Bleby J, with whom Vanstone and Anderson JJ agreed).
International Jurisdiction
The foreign court must have had jurisdiction, in the ‘international sense’, over the defendant at the time when the jurisdiction of the foreign court was invoked.[21] In this context, jurisdiction does not mean the foreign court has jurisdiction under its own rules.[22] In Central Petroleum Ltd v Geoscience Resource Recovery LLC, Bowskill J stated:
The authorities clearly support the proposition that it is for an Australian court to determine this question – it is not bound by the determination as to jurisdiction by a foreign court. The principle was articulated in clear terms by Staughton LJ in Jet Holdings Inc v Patel [1990] 1 QB 335 at 344:
Where the objection to enforcement is based on jurisdiction … it is to my mind plain that the foreign court’s decision on its own jurisdiction is neither conclusive nor relevant. If the foreign court had no jurisdiction in the eyes of English law, any conclusion it may have reached as to its own jurisdiction is of no value. To put it bluntly, if not vulgarly, the foreign court cannot haul itself up by its own bootstraps.[23]
[21]Supreme Court of Victoria, Practice Note SC Gen 15: Enforcement of Foreign Judgments, 30 January 2017, [4.4] (‘Practice Note SC Gen 15’); Roe [2020] VSC 442, [33].
[22]Doe [2015] VSC 75, [57], quoted with approval in Xu v Wang (2019) 58 VR 536, 556 [76] (Cameron J); Martin Davies et al, Nygh’s Conflict of Laws in Australia (LexisNexis Butterworths, 10th ed, 2020) 956 [40.4]–[40.5].
[23][2018] 2 Qd R 371, 388 [59] (citations omitted).
Jurisdiction in the ‘international sense’ means competence recognised under Australian law, which will be satisfied where the defendant:
(a)was present in the foreign jurisdiction when served with the originating process from the foreign proceeding; or
(b)was domiciled or ordinarily resided in the foreign jurisdiction; or
(c)has submitted to the foreign jurisdiction by:
(i)agreeing to accept the jurisdiction of foreign court; or
(ii)appearing in the proceeding.[24]
[24]Roe [2020] VSC 442, [33] (Derham AsJ).
The plaintiffs contended that Linkage had submitted to the foreign jurisdiction by filing a motion on 15 February 2019 to set aside the first default order and appearing at the hearing of that motion on 13 March 2019.
The defendant will not be taken to have submitted to the jurisdiction of the foreign court if the relief sought by the defendant is solely related to its challenge to jurisdiction, such as setting aside service. Of course, it would be an absurd result if a defendant who appeared before a court solely to challenge jurisdiction was to be taken to have submitted to such jurisdiction.
In Henry v Geoprosco International Ltd, the English Court of Appeal held that a defendant who did not dispute the jurisdiction, but merely unsuccessfully sought for a court, in the exercise of its discretion, to decline jurisdiction, was taken to have voluntarily submitted to the jurisdiction.[25]
[25][1976] QB 726, 748 (Cairns, Roskill and Browne LJJ).
This decision resulted in a statutory modification such that merely inviting the court in its discretion not to exercise its jurisdiction would not constitute a submission to jurisdiction. In Australia, this modification is found in s 11 of the Foreign Judgments Act 1991 (Cth), which provides:
For the purposes of proceedings brought in Australia for the recovery of an amount payable under a judgment given in an action in personam by a court of a country, not being a judgment to which Part 2 applies, the court is not taken to have had jurisdiction to give the judgment merely because the judgment debtor:
(a) entered an appearance in proceedings in the court; or
(b) participated in proceedings in the court only to such extent as was 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.
However, a defendant will usually be taken to have submitted to jurisdiction if he takes a step which is not consistent or relevant to the challenge to jurisdiction.[26] Whether the steps were only relevant to the challenge to jurisdiction will be determined by the Court objectively in the context of all of the relevant circumstances.[27]
[26]Brealey v Board of Management of Royal Perth Hospital (1999) 21 WAR 79, 87 [38] (Ipp J, with whom Malcolm CJ agreed) (‘Brealey’), quoted in City of Swan v McGraw-Hill Companies Inc (2014) 223 FCR 295, 325, [114] (Rares J) (‘City of Swan’). See also City of Swan (2014) 223 FCR 295, 325-6 [115]-[117].
[27]Brealey (1999) 21 WAR 79, 87 [38].
The lawyers for Linkage expressly stated in the notice of motion that:
(a)they appeared for the limited purpose of bringing the motion and;
(b)Linkage did not waive its rights to a defence based on lack of personal jurisdiction.
However, in my opinion, Linkage, by its conduct, has voluntarily submitted to jurisdiction, for the following reasons:
(a)Linkage relied expressly on ‘numerous meritorious defences’ in its motion to set aside the first default order. By doing so, with the exception of the ‘personal jurisdiction defence’, Linkage sought relief which was wider than the relief relevant to the challenge to jurisdiction. In particular, allegations with respect to the fraudulent transfer laws of the USA, the doctrine of res judicata and the US Bankruptcy Code defences were not consistent with, or relevant to, the challenge based on lack of personal jurisdiction.
(b)In its Memorandum of Points and Authorities in support of its motion to set aside the first default order, Linkage:
(i)submitted that the procedural defects were sufficient reason to set aside the first default order ‘so that this case may be decided on its merits;
(ii)stated that ‘the result of vacating the default is that this case will be decided on the merits’; and
(iii)‘respectfully ask[ed] this Court to set aside the Order of Default and permit Linkage to defend this case on the merits’.
(c)In a not dissimilar case, the Queensland Court of Appeal, in Wong v Jani-King Franchising Inc, found that a defendant who filed a conditional appearance for the purpose of challenging the jurisdiction of the District Court of Dallas County, Texas USA, had submitted to the jurisdiction by opposing the joinder of another party on the basis it would delay the trial.[28] The Court held that ‘his opposition to the joinder on the basis that it would delay the trial of the matter is only consistent with an acceptance that the trial was to proceed with him as defendant’.[29]
[28][2014] QCA 076.
[29]Ibid [16] (Holmes JA, with whom Muir JA and Douglas J agreed).
Accordingly, I am satisfied that, by its motion to set aside the first default order, the defendant voluntarily submitted to the jurisdiction of the courts of the USA.
The foreign judgment must be final and conclusive
In making her order, Judge Klein expressly stated: ‘Final judgment shall be entered against all Defendants on all Counts of the Amended Complaint’.
Identity of parties
The parties to the final judgment must be the same as the parties to this proceeding.
The final judgment was entered in favour of the Trustee only. As counsel for the plaintiffs concedes, only the Trustee, as the first plaintiff, is entitled to judgment in this proceeding.
The foreign judgment must be for a fixed sum or definite sum of money
The foreign judgment in this case, being the final judgment, is for a fixed sum.
Other matters
The status of Linkage
The BVI Registry Search shows Linkage’s status as having been struck off the Register of Companies on 1 May 2021, due to non-payment of its annual company fees.
The Expert Report includes Mr Lacy’s opinion that despite the status of Linkage as having been struck off:
(a)it continues to exist and have a legal personality;
(b)it does not affect its capacity to be sued in the USA proceedings or the validity of the final judgment entered in the USA;
(c)it does not affect its capacity to have the final judgment entered in the USA enforced against it by an Australian court or the validity of any Australian judgment which enforces the final judgment;
(d)it does not affect the ability of the judgment creditors to enforce the final judgment against Linkage’s assets; and
(e)it does not affect its ability to be validly served with Australian documents.
Mr Lacy’s opinion, which I accept, is based on the following provisions of the BVI Business Companies Act 2004, which he summarised as follows:
10.Section 215(1) provides that ‘where a company has been struck off the Register, the company and the directors, members and any liquidator or receiver thereof, may not-
(a) commence legal proceedings, carry on any business or in any way deal with the assets of the company;
(b)defend any legal proceedings, make any claim or claim any right for, or in the name of, the company; or
(c) act in any way with respect to the affairs of the company.’
11.Section 215(2) provides that ‘notwithstanding subsection (1), where a company has been struck off the Register, the company, or a director, member, liquidator or receiver thereof, may-
(a) make application for restoration of the company to the Register;
(b)continue to defend proceedings that were commenced against the company prior to the date of the striking-off; and
(c)continue to carry on legal proceedings that were instituted on behalf of the company prior to the date of striking-off.’
12.Section 215(3) provides that ‘the fact that a company is struck off the Register does not prevent—
(a)the company from incurring liabilities; or
(b)any creditor from making a claim against the company and pursuing the claim through to judgement or execution; and does not affect the liability of any of its members, directors, officers or agents.’
13.Section 216 provides that ‘where a company that has been struck off the Register under section 213 remains struck off continuously for a period of seven years, it is dissolved with effect from the last day of that period.’
Leave to rely upon the affidavit of Mr Lacy affirmed 28 February 2022
As referred to above, the plaintiffs sought to rely upon the content of the Expert Report for the purposes of establishing the legal status of Linkage following its deregistration.
Rule 45.02 provides that, subject to specified exceptions, evidence at the trial of a proceeding shall be given by affidavit.
The plaintiffs submitted that the Expert Report was admissible pursuant to r 44.03 which provides relevantly that:
(1)Unless otherwise ordered, a party who intends at trial to adduce the evidence of a person as an expert shall ¬
…
(b)not later than 30 days before the day fixed for trial, serve on each other party, a report by the expert …
I reject the plaintiffs’ submission because Order 44 requires notice to be given of expert evidence; but does not otherwise permit such a report to be admitted into evidence without being verified by oath or affirmation.
Accordingly, on 1 March 2022, the plaintiffs filed an affidavit of Mr Lacy affirmed on 28 February 2022 which verified the truth of the contents of the Expert Report.
Rule 45.03(3) provides that:
Except for the purpose of proof of service of the originating motion and of the failure of the defendant to appear, the plaintiff shall not, unless the Court otherwise orders, use in evidence on the application any affidavit made by the plaintiff or on the plaintiff's behalf and not served on the defendant with the originating motion.
The plaintiffs applied for leave to rely upon the affidavit despite the fact that it was not served on the defendant with the originating motion or at all. In my opinion, the plaintiffs should be granted leave to rely upon the affidavit affirmed 28 February 2022 for the following reasons:
(a)The defendant was served with the Expert Report which contains the evidence on which the plaintiffs rely.
(b)The plaintiffs rely on nothing in the affidavit of 28 February 2022 except the Expert Report, as served.
(c)The relevant contents of the Expert Report are the subject of evidence only because they are matters of foreign law.
In the circumstances, I do not consider there is any prejudice if the defendant is not served with the affidavit verifying the Expert Report.
The plaintiffs do not require leave to rely upon the further affidavit of Mr Lacy exhibiting the Second Expert Report, or the affidavit of Mr Leacock, which were filed solely for the purpose of proof of service within the meaning of r 45.03(3) of the Rules.
Orders
Accordingly, I propose to enter judgment for the first plaintiff and order as follows:
(a)The first plaintiff has leave to proceed against the defendant under r 7.07(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
(b)The defendant pay the first plaintiff USD $4,839,043.26, being a judgment debt pursuant to paragraph 7 of the orders made on 12 August 2021 by the United States Bankruptcy Court, Central District of California, Los Angeles Division, in case numbers 2:17-bk-21386-SK, 2:17-bk-21387-SK and adversary proceeding number 2:18-ap-01340-SK.
(c)The defendant pay the first plaintiff’s costs of the proceeding.
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