Newcom Holdings Pty Ltd v Funge Systems Inc
[2006] SASC 284
•18 September 2006
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
NEWCOM HOLDINGS PTY LTD v FUNGE SYSTEMS INC
[2006] SASC 284
Judgment of The Full Court
(The Honourable Justice Nyland, The Honourable Justice Gray and The Honourable Justice Vanstone)
18 September 2006
PRIVATE INTERNATIONAL LAW - FOREIGN JUDGMENTS - EFFECT AND ENFORCEMENT - GENERALLY - JUDGMENTS IN PERSONAM
Appeal against decision of single Judge declining to enforce an Order of the United States of America Bankruptcy Court in related South Australian proceedings – whether the US Order satisfies the principle of enforcement – consideration of common law principles - whether the Judge was correct in declining to enforce the US Order in the South Australian proceedings – appeal dismissed.
Funge Systems Incorporated v Newcom Technologies, Newcom Holdings and Keith Benson [2001] SASC 216; Benefit Strategies Group Inc & Anor v Prider (2005) 91 SASR 544; Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249; Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (Receivers and Managers Appointed) (in Liq) (1993) 43 FCR 510; Ramsay v Pigrim (1968) 118 CLR 271; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, considered.
NEWCOM HOLDINGS PTY LTD v FUNGE SYSTEMS INC
[2006] SASC 284Full Court: Nyland, Gray and Vanstone JJ
NYLAND J: I agree that the appeal should be dismissed for the reasons expressed by Gray J.
GRAY J:
Introduction
This is an appeal from a decision of a Judge of this Court declining to enforce an Order of the United States of America Bankruptcy Court (“the US Order”).
On 24 May 2001, this action was commenced (“the South Australian proceedings”). Funge Systems Incorporated sought specific performance of an agreement relating to intellectual property. An interim injunction was granted that day restraining Newcom Holdings Pty Ltd from dealing with certain intellectual property. At the time, Funge Systems provided the usual undertakings as to damages. The Court ordered that the undertaking be secured in the amount of $250,000. The security was provided (“the trust monies”).
The interim injunction continued until 22 June 2001. On that date an application for an interlocutory injunction was refused. The interim injunction came to an end.[1] Newcom Holdings now seeks an order for the payment to it of the trust monies.
[1] Funge Systems Incorporated v Newcom Technologies, Newcom Holdings and Keith Benson [2001] SASC 216.
In these reasons, references to the parties to the proceedings are restricted to references to Funge Systems, the plaintiff, and Newcom Holdings, the defendant.
The proceedings in this Court were “put on hold” whilst parties litigated the substantive proceedings in the United States of America (“the substantive proceedings”).
On 25 May 2001, the substantive proceedings were issued by Funge Systems against Newcom Holdings in the Bankruptcy Court, Virginia, United States of America. The underlying cause of action of Funge Systems related to the ownership of the patents, the subject of the dispute. Funge Systems, by arrangement, was funded and supported by Imbros Pty Ltd. Following trial, the claim of Funge Systems was rejected. An appeal was lodged by Imbros against that decision.
Whilst the appeal was pending, an administration application was made in the US bankruptcy proceedings (“the administration proceedings”). The Trustee of Funge Systems wished to proceed with the administration of Funge Systems’ affairs. It became necessary to resolve a claim by Newcom Holdings to an asserted entitlement to damages for breach of the undertaking given in the South Australian proceedings. Newcom Holdings sought to have this claim accepted as a claim within the bankrupt estate. The resolution of this issue led to a Stipulation and Order in the administration proceedings, dated 27 March 2003. This order is the US Order referred to at the outset of these reasons. The appeal in the substantive proceedings did not proceed.
The resolution of issues in the administration proceedings as a result of the Stipulation and Order has given rise to the present dispute. Newcom Holdings claims that the terms of the Stipulation and Order require the payment of the trust monies to Newcom Holdings.
The Stipulation records the background to the US Order. The document entitled Stipulation and Order commences with the following introduction:
This STIPULATION AND ORDER by and among Darrell Clark Esq., Chapter 11 Trustee (“Trustee”), as legal representative of debtor Funge Systems, Inc. (“Debtor” or “FSI”), and creditors Newcom Holdings, Pty. Ltd. (“Newcom”) and Keith Benson (“Benson”) is entered this 25th day of March 2003.
Later in the document the parties’ agreement is recorded and the terms of the court order set out. They are as follows:
WHEREFORE, IN ACKNOWLEDGMENT OF THE FACTS STIPULATED ABOVE AND TO COMPROMISE THIS DISPUTE AND THE MATTERS RAISED HEREIN, THE PARTIES HEREBY AGREE, AND THE COURT ORDERS AS FOLLOWS:
AGREEMENT AND ORDER
A. In partial acknowledgement of Newcom’s damages claim, the Trustee hereby consents to immediate release of the $250,000 (Australian) security posted in the Australian Court in FSI’s name in connection with the May 24 Injunction, payable to Newcom Holdings Pty. Ltd. and Benson or to such recipient as Newcom and Benson shall direct. The Trustee hereby waives, releases and disclaims any interest in said security on behalf of the Trustee and FSI’s Estate and creditors. To the extent that the Trustee and the Debtor have any authority with regard to the security posted in connection with the May 24 Injunction, the Trustee shall submit written instruction to the Debtor’s Australian counsel, Clayton Utz and Kelly & Co., to release the funds to Newcom immediately, provided, however, that neither the Trustee nor the Estate shall be liable for any additional fees incurred by Australian counsel.
B. The Trustee hereby transfers to Newcom and Benson all rights of the Debtor’s Estate in a deposit held by Smart Card Integrators, Inc., which deposit is subject to a potential claim in the name of FSI.
C. The Debtor’s Damages Undertaken provided to the Australian Court was made outside the ordinary course of business in violation of Sections 363(b) and 364(b) of the Bankruptcy Code. Therefore, the damages incurred by Newcom and Benson in excess of those compensated under paragraph A shall not be allowed as administrative expenses payable by the Estate under Section 503(b) of the Code, with priority under Section 507(a)(1) of the Code.
D. Nothing in this Stipulation and Order shall be construed to preclude or limit any claim that Newcom or Benson may assert for payment of their damages other than as against the Trustee or the FSI Estate.
E. Upon such time as this Stipulation and Order becomes a final, binding and non-appealable Order of this Court, the prohibition on distributions under the previously confirmed Chapter 11 Plan shall be lifted to enable the Trustee to distribute funds to creditors in accordance with the Chapter 11 Plan; provided that this limitation shall not apply to approved payments to professionals, including attorneys, accountants and the Trustee.
F. Nothing in this Stipulation and Order shall be deemed to preclude any person or entity which is not a party to this Stipulation and Order from presenting additional evidence or arguing other inferences or conclusions in any other proceeding held in any forum.
The Stipulation discloses that Newcom Holdings asserted a loss sustained by reason of the interim injunction – said to be $12.05 million (US) - and sought to have that asserted loss treated as an administrative expense in the Funge Systems’ estate. The Stipulation also disclosed that the Trustee of Funge Systems disputed the claim that the asserted losses should be treated as an administrative expense in the estate.
It is apparent from the insertion of the word “assert” in paragraphs 24, 29 and 30 of the Stipulation that the assertion in respect of whether damages were suffered was no more than that. Those paragraphs provide:
Newcom and Benson assert that if the Offshore Restructuring Transaction had not been enjoined by the May 24 Injunction issued by the Australian Court, Newcom would not have appeared in these proceedings and would not have incurred the resulting legal fees and costs, nor would Newcom have lost all of its rights, title and interest in the Global IP due to the foreclosure by Newcom’s secured creditor. Accordingly, Newcom and Benson assert that the minimum damages that were directly caused by the May 24 Injunction, for which [Funge Systems] is liable under the Damages Undertakings, are not less than $12,050,000.
…
Because [Funge Systems] Damages Undertaking was made after the Petition Date, Newcom and Benson assert that the full amount of the $12,050,000 in damages they have suffered, which would not have occurred in the absence of the Australian Injunction, must be paid as an administrative expense of [Funge Systems] Estate under Section 503(b) of the Bankruptcy Code, and is entitled to priority under Section 507(a)(1) of the Bankruptcy Code.
The Trustee [of Funge Systems] asserts that because [Funge Systems] did not seek or obtain approval of this Court in providing the undertaking for damages, as required by Section 363(b) of the Bankruptcy Code, the obligation made by [Funge Systems] through the Damages Undertaking was in violation of Section 364(b) of the Bankruptcy Code, and that the Estate [of Funge Systems] is not liable for the debt incurred.
The US Order resolved this dispute in the manner set out above.
It is the terms of the US Order that are sought to be enforced as a judgment in this Court. If successful, this step would avoid the need for a later hearing to determine the entitlement (if any) of Newcom Holdings for damages suffered as a consequence of the interim injunction granted in the South Australian proceedings.
As earlier observed, the Stipulation and Order arose out of the resolution of an administrative claim made by Newcom Holdings against the Trustee of the estate of Funge Systems. The matter was complicated in that US attorneys, who had acted for Imbros in the substantive US proceedings, also had a claim in the administration proceedings in their own right. At the hearing before the US Bankruptcy Court on 27 March 2003, the attorneys withdrew their joint application. The US Judge noted that the stipulation was between two parties, the Trustee of Funge Systems and Newcom Holdings.
The attorneys, in their personal capacity, joined with the Trustee of Funge Systems to oppose the administrative claim. The claim did not relate to the substantive US proceedings. Imbros did not formally join with the Trustee of Funge Systems in the administration proceedings in opposing the claim. Newcom Holdings’ solicitors, in an exchange of emails, treated Imbros as having no role with respect to the terms of the US Order. Imbros was only a party to the substantive proceedings.
The Application by Newcom Holdings
In August 2004, Newcom Holdings applied, in the South Australian proceedings, for specific directions including:
1.That [Newcom Holdings] be discharged from its undertaking given to this Honourable Court on 23 July 2001 to abide by the terms of the injunction granted by Judge Mayer of the United States Bankruptcy Court Eastern District of Virginia (Alexandria Division) on 10 July 2001.
2.That the orders of Judge Mayer in the United States Bankruptcy Court Eastern District of Virginia (Alexandria Division) made on:
2.1.27th March 2003;
…
be registered as [a judgment] of this Honourable Court.
3.That the plaintiffs pay to the second defendant the sum of $250,000.00 for damages payable by the Plaintiffs upon the undertakings as to damages given by the plaintiffs:
3.1. firstly upon the granting by Justice Lander in this Honourable Court on 24th May 2001 in this action of an interim injunction; and
3.2. secondly upon the recording by Justice Lander in this Honourable Court on 26th July 2001 in this action of undertakings by the first and second defendants to abide by the terms of the injunction granted by Judge Mayer on 10 July 2001 set out in paragraph 1 above.
4.Directing Kelly & Co. to pay out the moneys paid into their trust account by way of security for the plaintiffs undertakings as to damages referred to in paragraphs 3.1 and 3.2 above the said sum of $250,000.00 to Rankines Solicitors for and on behalf of the second defendant.
5.Directing Kelly & Co to pay out of the moneys paid into their trust account as security for costs payable by the plaintiffs to the first and second defendants to Rankines Solicitors for and on behalf of the first and second defendants the sum of $10,000.00.
6.That the Plaintiffs claim in this action be dismissed.
...
On 23 August 2004, Imbros intervened and claimed to be the beneficial owner of the trust monies. As earlier observed, Imbros is an entity related to Funge Systems. Imbros asserted that Newcom Holdings had no present entitlement to the monies and opposed the orders for payment out. Imbros contended that Newcom Holdings had not established that it had sustained any damage by reason of the injunctive order.
On 18 April 2005, directions were given in the South Australian proceedings for the determination of a preliminary issue - being the issue raised by specific direction No. 2 - whether this Court should enforce the US Order. The Court required the parties to identify the affidavits relied on for the purposes of the preliminary issue and the objections, if any, to the other parties’ affidavits.
The common law requirements for the recognition and enforcement of foreign judgments in personam are:
-that the foreign court must have exercised jurisdiction over the judgment debtor which Australian courts will recognise;
-that the foreign judgment must be final and conclusive;
-that there must be an identity of the parties;
-that the foreign judgment must be for a certain sum.[2]
[2] Benefit Strategies Group Inc & Anor v Prider (2005) 91 SASR 544.
A learned Judge of this Court heard the preliminary issue on 25 August 2005 and delivered judgment on 22 December 2005.[3] The Judge accepted that the common law requirements referred to above needed to be established. The Judge declined to make the orders sought.
[3] Funge Systems Inc & Anor v Newcom Technologies Pty Ltd & Ors [2005] SASC 498. (footnotes original)
The Judge’s conclusions included the following:[4]
[4] Funge Systems Inc & Anor v Newcom Technologies Pty Ltd & Ors [2005] SASC 498 at [53], [68]-[70], [77]-[78]. (footnotes original)
[T]here are a number of impediments to the enforcement of the US Orders in this action, namely:
The matter before Judge Mayer on 27 March 2003 was not one in which Imbros was a party.
...
The Bankruptcy Court did not purport to resolve the merits of whether either Newcom Holdings ... had in fact suffered damages, and if so to determine the quantum of such damages ... as a consequence of the interlocutory injunction taken out against it by [Funge Systems] in Australia. ...
Judge Mayer, when making the orders, appears to have been acting in an administrative capacity in relation to the dispute between the Trustee and the creditors of [Funge Systems]. ... Judge Mayer was not acting in a judicial capacity deciding an adversarial action on any issue. ...
The [US] Bankruptcy Court could not have jurisdiction, in the dispute before it, to determine that the said sum held by Kelly & Co for the specific purpose of supporting the undertaking as to damages as ordered by this Court, be paid to Newcom Holdings ... The undertaking is given to the Court,[5] it is not a right in personam enforceable by a party. It is only this Court which has jurisdiction to release the funds. ...
[5] Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 at 318.
...
I also have reservations as to whether the US Orders are final and conclusive as to the entitlement of Newcom Holdings to a quantum of damages as a consequence of the South Australian interlocutory injunction. ...
Finally, Imbros was not a party to the US Orders, at best, Imbros, had an economic or financial interest in the assets of [Funge Systems]. [Funge Systems] was legally represented by the Trustee. Imbros is therefore not estopped by reason of the order of Judge Mayer alone, (as distinct from other legal issues of estoppel to which I will later refer), from pursuing its own economic and financial interest.[6]
...
The above impediments also arise in relation to whether estoppel by record or issue estoppel applies. Both of these forms of estoppel depend entirely upon the content of the US Orders and the character of the proceedings before the Bankruptcy Court. The argument of Newcom Holdings is that Imbros is estopped from denying the US Orders and therefore the monies held by Kelly & Co should be paid to it.
For reasons which I have already set out, the parties are not the same as those before Judge Mayer, and in particular Imbros was not a party to the US Orders. The defendants in each case are also different. There was no judicial determination on the merits of the order for payment to Newcom Holdings only. There was also no privity of interest between [Funge Systems] and Imbros such that the US Orders in binding [Funge Systems], would bind Imbros as a matter of res judicata.[7] The interest of Imbros was an economic or financial interest in the assets of [Funge Systems], it was interested in the outcome and stood to benefit in the event that they were successful.[8] I therefore reject the argument that estoppel by record or issue estoppel apply.
Newcom Holdings also argues that the principle enunciated in the case of Port of Melbourne Authority v Anshun Pty Ltd[9] applies in this case. It was argued that Imbros had an opportunity to challenge the orders of Judge Mayer, but chose not to. This principle does not appear to me to be applicable on these facts. The situation is completely different from the circumstances in the Anshun case, where the party sought to be estopped was a party which was already before the court at the hearing and did not put an argument which it could have addressed at the time. By contrast in this case, Imbros was not the party before the Court. The Anshun principle could not be extended to require that a non-party should seek to be joined in an action and that if it does not, then it is estopped from taking a later action. This conclusion is further reinforced by the existence of paragraph F of the US Orders.
...
For the reasons which I have set out above, I consider that the application of Newcom Holdings should be refused. I therefore do not consider that r 25.04 applies to this application to have the matter dealt with as a summary judgment.
I conclude that the orders sought, as expressed in paragraph 2 of the Notice for Specific Directions dated 23 August 2004, and in the terms sought in the draft minutes of order, be dismissed. I will hear the parties as to costs.
[6] Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (Receivers and Managers Appointed) (in Liq) (1993) 43 FCR 510.
[7] Ramsay v Pigrim (1968) 118 CLR 271.
[8] Affidavit of David James Wrathall sworn 18 November 2004, as exhibited to the Affidavit of David John Tucker, sworn 19 November 2004, tab 18.
[9] Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
The Appeal
The question that has arisen on this appeal is whether the Judge was correct in declining to enforce the US Order in the South Australian proceedings.
The undertaking
As earlier observed, in the South Australian proceedings, Funge Systems gave the usual undertakings as to damages in support of an interim injunction. The undertaking was secured by the deposit of the trust monies. The trust monies secured the undertaking in respect of the period during which the interim injunction operated. The interim injunction was enforced from 24 May to 22 June 2001.
Imbros claimed an interest, or at least a contingent interest - in the trust monies as it maintained that it had paid the monies into the solicitor’s trust account. Imbros did not assert that its interest in the trust monies had priority over Newcom Holdings’ right to have recourse to the trust monies for the purposes of satisfying any order the South Australian Court may make in respect of the undertaking as to damages. Imbros claimed that Newcom Holdings had suffered no relevant loss or damage and had no entitlement to the trust monies.
In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd,[10] the High Court considered the legal nature of the undertaking as to damages. Stephen J observed:[11]
Perhaps the first point to be observed is that undertakings such as this are given to the court and not to the party enjoined. Brett L.J. made this point when, in Smith v. Day he said: "Now in the present case there is no undertaking with the opposite party, but only with the Court. There is no contract on which the opposite party could sue." A claimant under an undertaking cannot complain of any breach of contract nor of any breach of duty, tortious or otherwise, owed to him, nor, of course, of any breach of the undertaking. What occurs when such an undertaking is extracted from a plaintiff is that the court, as a condition of its grant of interim or interlocutory injunctive relief, has ensured that, should it turn out that that relief should never have been granted, it will have the power, so far as monetary compensation allows, to make good the harm which the grant has done to the defendant. The court acquires powers to do justice between the parties which it would not otherwise possess. As North J. said in Attorney-General v. Albany Hotel Co.:
"If it should subsequently appear that such an order had been improvidently made, it is difficult to see how, in the absence of such an undertaking, the defendant could recover from the plaintiff the damages which were really sustained by him by reason of the improper order of the Court."
Damages awarded under such an undertaking are, therefore, of a rather different nature from those awarded at common law. Their special character appears from the fact that their source lies in the plaintiff's own voluntary undertaking, given as the price of obtaining an injunction. It may also be seen in the words of the common form of the undertaking, they must not only be sustained by reason of the grant of the injunction but the court must form the opinion that the plaintiff "ought to pay" them. It was in the context of such an undertaking that, in Finnigan's Case, Cussen J. said:
"I think the terms of the undertaking are themselves of importance. It provides that there may be an order as to damages if the Court shall be of the opinion that the defendant has sustained any. I think the word ‘damages’ in that undertaking is to be given a very general meaning, and is not necessarily to be given the same meaning as the word ‘damages’ when used in connection with breaches of contracts. ‘Damages’ in this case seems to me to mean real harm, rather than to have any strictly defined meaning."
[10] Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249.
[11] Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 at 318-319. (footnotes omitted)
It is for the South Australian Court to determine the ultimate disposition of the trust monies. The undertaking was given to that Court. The undertaking was not given to a particular party. The enforcement of the undertaking is a matter for the discretion of the South Australian Court. The undertaking does not of itself found a cause of action. There is no right to damages unless and until, after inquiry, the South Australian Court determines that it is appropriate that damages be paid in consequence of the undertaking.
The issue as to the ultimate legal or beneficial entitlement to the trust funds was not addressed or determined in the administration proceedings. The US Court could be expected to be reluctant to engage in such an exercise given that the trust monies were located in South Australia and under the control of the South Australian Court.
It is also relevant to observe that the Trustee has not made a claim with respect to the fund or threatened to make a claim in respect of the trust monies. By the delivering of the agreed instructions, the Trustee has indicated that he does not intend to claim.
Nothing to enforce
The primary submission of counsel for Imbros was that there was no aspect of the US Order that required enforcement in Australia. Counsel contended that the application to enforce the US Order was misconceived. It was pointed out that the US Order was made in the administration proceedings and was not made in adversarial proceedings.
Paragraph A of the US Order required the Trustee of Funge Systems to take certain steps within Australia. The steps involved – to the extent that the Trustee of Funge Systems had authority - written instructions being provided to Funge Systems’ Australian counsel and to the solicitors holding the trust monies for the release of the trust monies to Newcom Holdings.
The written instructions were provided. Insofar as this obligation formed part of the US Order, there had been compliance. No enforcement order was or is necessary. There is no need for, or any efficacy in, an order of the South Australian Court enforcing a US Order with respect to an obligation that has been performed. Paragraphs B, C, D and E of the US Order do not involve any obligations that have operation in Australia. Paragraph F provides limitations to the operation of the Stipulation and Order.
The US Order does not purport to resolve Newcom Holdings’ entitlement to recover damages as a consequence of the interim injunction made in the South Australian proceedings. In particular, Paragraph D of the US Order provides that nothing in the Stipulation and Order should be construed to preclude or limit any claim that Newcom Holdings may assert for payment of its damages, other than as against the Trustee of Funge Systems. Paragraph F preserved non-party rights in the widest terms.
Identity of parties
The Judge of this Court, when determining the preliminary issue concluded that one reason why Funge Systems could not succeed was the absence of the necessary identity of parties. Imbros was not a party to the administration proceedings. This conclusion is correct.
By its terms, the US Order is only relevant as between the Trustee of Funge Systems and Newcom Holdings. Paragraph A of the order can be dissected as follows:
-the Trustee of Funge Systems consents to immediate release of the trust monies;
-the Trustee of Funge Systems waives, releases and disclaims any interest in the trust monies; and
-to the extent that the Trustee of Funge Systems has authority, it shall submit the agreed instructions to release the trust monies.
The orders are in personam, binding only upon the parties to the order, relevantly the Trustee of Funge Systems and not Imbros. Imbros did not consent to the immediate release of the trust monies; did not waive, release or disclaim any interest in the trust monies; and did not agree to submit instructions to release the trust monies. A review of the Stipulation and Order does not disclose any contrary suggestion.
It is relevant to note that there is no indication in the US Order that the Trustee of Funge Systems warranted that Funge Systems was the owner of the trust monies. The insertion of the words “to the extent that the trustee has authority” in Paragraph A suggests that the opposite may in fact be the case. The US Order was silent as to the question of entitlement to the trust monies.
As earlier observed, the US Order, itself, preserves the right of any other parties to make a claim to the trust monies. Paragraph F provides that:
Nothing in this Stipulation and Order shall be deemed to preclude any person or entity which is not a party to this Stipulation and Order from presenting additional evidence or arguing other inferences or conclusions in any other proceedings held in any forum.
Final and conclusive order for a certain sum
The US Order was not intended to be final and conclusive with respect to the trust monies. Nowhere in the Stipulation or Order is there a statement of a sum of money the subject of the US Order or an amount that the parties agreed represented any loss or damage sustained or suffered by Newcom Holdings. This construction is supported by the earlier referred to terms of Paragraphs D and F.
The US Order does not purport to declare rights in respect of the trust monies. Although the Trustee of Funge Systems has waived any claim over the trust monies, that does not amount to or equate to a declaration of proprietary rights or any declaration to entitlement.
Estoppels
Counsel for Newcom Holdings submitted that the Judge’s rejection of the estoppel contentions was flawed. Having regard to the above reasons, this submission should be rejected. Imbros was not shown to be a party to the Stipulation and Order. The reservation of rights within the US Order precluded any estoppel arising. There was no relevant finding in the administration proceedings to found any form of estoppel.
Conclusion
This appeal should be dismissed.
VANSTONE J I agree that this appeal should be dismissed.
I have had the advantage of reading the draft reasons for decision of Gray J. In those reasons are set out the background to this dispute and the Stipulation and Order which it was sought to enforce in this jurisdiction.
The form of the document is such that the parties are first recorded. Then follows a section headed “Factual Background”, containing matters of fact and assertions by the parties. Finally, there is a section headed “Agreement and Order”. The relevant paragraphs of the orders are reproduced in the judgment of Gray J. Only paragraph A is (in part) executory. It requires the trustee to “submit written instructions to the Debtor’s Australian counsel, Clayton Utz and Kelly & Co, to release the funds to Newcom immediately …”. That requirement is made only “[t]o the extent that the Trustee and the Debtor have any authority with regard to the security posted in connection with the May 24 Injunction”. It is accepted that such instructions have been submitted.
It seems to me that the six paragraphs comprising the Agreement and Order section and, in particular, the executory part of paragraph A, are the only parts of the judgment which could theoretically be enforced in this jurisdiction. That is because, strictly speaking, a judgment consists of the orders disposing of an action, rather than the reasons for judgment. (See R v Ireland (1970) 126 CLR 321, 330 and David Syme & Co Ltd v Lloyd (1985) 1 NSWLR 416.) Anyway, as a matter of commonsense, it would not usually be possible to enforce the reasons for a judgment any more than the recitations or preamble to an agreement or a series of orders. Accordingly, I agree with Gray J that there is no efficacy in this Court enforcing the US order where there is no outstanding obligation. In my view this disposes of the appeal.
As Gray J has observed, the application before the Judge for enforcement of the US judgment was separated from a number of other orders sought by Notice for Specific Directions dated 25 August 2004. When that single issue came on for hearing, Newcom Holdings applied for summary judgment. As I understand it, the use actually sought to be made of the US judgment was to prevent Imbros, the intervener, from asserting that no damages had flowed from the interim injunction, and to secure payment to Newsom Holdings of the trust monies. However, for the reasons already given, an order in terms of enforcement would not have achieved either of those ends.
In my view, the argument that Imbros, though not a party to the Stipulation and Order, was estopped from arguing that no damages had flowed from the interim injunction could only arise in the context of an application for payment of the trust monies. That was not the application under consideration.
Whether Imbros was standing behind Funge Systems throughout the relevant litigation, and whether it was involved in the negotiations which resulted in the Stipulation and Order in a way which might give rise to any issue estoppel, or alternatively yield evidence of an admission that damages did flow from the interim injunction, are matters which could arise at the time when the application for the balance of the orders sought in the Notice for Specific Directions is heard. With the benefit of hindsight, the procedure adopted to this point seems to have been unhelpful.
Since the matter is to go back for further hearing, I do not wish to say more about issues which are for future determination.
I would dismiss the appeal.
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