Schnabel v Lui

[2002] NSWSC 15

CITATION:	PETER R SCHNABEL, PREMIER RIDES INC., STEVEN MARBLE & CATALYST ENTERTAINMENT INC. v KEVIN YUNG LUI, FROYER HOLDINGS DEVELOPMENT & TRADING COMPANY, FROYER HOLDINGS (ASIA) LIMITED, FROYER HOLDINGS USA INC & FSN TOP SECRET PRODUCTIONS INC. [2002] NSWSC 15
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50017/2001
HEARING DATE(S):	25 July 2001, 20, 21 & 22 November 2001
JUDGMENT DATE:	1 February 2002
PARTIES :	Peter R Schnabel, Premier Rides Inc., Steven Marble, Catalyst Entertainment Inc. (Plaintiffs) Kevin Yung Lui (First Defendant) Froyer Holdings development & Trading Company (Second Defendant) Froyer Holdings (Asia) Limited (Third Defendant) Froyer Holdings USA Inc. (Fourth Defendant) FSN Top Secret Productions Inc. (Fifth Defendant)
JUDGMENT OF:	Bergin J

COUNSEL :	F Kunc (Plaintiffs) S Epstein SC (First Defendant)
SOLICITORS:	Deacons Lawyers (Plaintiffs) Frank Low Yeung & Co (First Defendant)
CATCHWORDS:	[Foreign Judgments] Judgment obtained in the United Stated District Court, Central District of California - Sanctions imposed by US Court "striking" defence and dismissing counterclaim "with prejudice" - Trial on damages - Damages awarded including multiple (quadruple) penal or exemplary damages - Whether the judgment is final and conclusive - Whether the award of multiple damages was a penalty - Whether penalty severable.
LEGISLATION CITED:	Foreign Judgments Act 1973
CASES CITED:	Abingdon Rural District Council v O'Gorman [1968] 3 All ER 79 Ainslie v Ainslie (1927) 39 CLR 381; (1926) 26 SR (NSW) 567 Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Angel v Bullington 330 US 183 Armour v Bate (1891) 2 QB 233 Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86; (1988) 165 CLR 30 Attorney-General (UK) v Wellington Newspapers Ltd (1988) 1 NZLR 129 Bank of Bermuda Ltd v Stutz (1965) 2 OR 121 Boyle v Victoria Yukon Trading Company (1902) 9 BCR 213 Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853 Clough & Rogers v Frog (1974) 48 ALJR 481 Cohen v McWilliam (1995) 38 NSWLR 476 Cropper v Smith (1884) 26 Ch D 700 Damberg v Damberg [2001] NSWCA 87 Desert Sun Loan Corp v Hill [1996] 2 All ER 847 DSV Silo-und Verwaltungsgesellschaft mbH v Sennar (Owners) [1985] 2 All ER 104, [1985] 1 WLR 490 Evans v Bartlam (1937) AC 473 Federated Department Stores, Inc v Moitie 452 US 394 Four Embarcadero Centre Venture et al v Kalen et al 65 OR (2d) 551 Four Embarcadero Centre Venture et al. v Mr Greenjeans Corp. et al. (1988) 64 OR (2d) 746 Gray v Motor Accident Commission (1998) 196 CLR 1 Haigh v Haigh (1885) 31 Ch D 478 Huntington v Attrill [1893] AC 150 Idoport Pty Ltd v National Australia Bank Ltd (2000) 50 NSWLR 640 Jones v Jones (1889) 22 QBD 425 Lamb v Cotogno (1987) 164 CLR 1 Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508 Minkler and Kirschbaum v Sheppard (1991) 60 BCLR (2d) 360 Morguard Investments Ltd v de Savoye (1990) 52 BCLR (2d) 160 Nouvion v Freeman (1890) 15 AC 1 Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 Raulin v Fischer [1911] 2 KB 93 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Securities and Exchange Commission v Hasho 134 F.R.D 74 (S.D.N.Y. 1991) Skaggs Companies Inc v Mega Technical Holdings Ltd, Court of Queens Bench Alberta, Judicial District of Edmonton, Unreported, Master Funduk 11.07.00 US v Powell (9th Cir 1994) (24 F. 3d) United States of America v Inkley (1989) 1 QB 255 United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 Vanquelin v Bouard (1863) 15 CB (NS) 341; 143 ER 817 Wisconsin v The Pelican Insurance Company 127 US (20 Davis) 265 [H Black "Blacks Law Dictionary" 5th edition 1979 Dicey & Morris "The Conflict of Laws" (2000) Sweet & Maxwell Everest & Strode "Law of Estoppel" (1923) Stevens & Sons Ltd. Professor H E Read "Recognition and Enforcement of Foreign Judgment" (1938) Harvard University Press. Law Reform Commission Background Paper 7 "Review of Civil and Administrative Penalties in Federal Jurisdiction" Spencer, Bower, Turner & Handley "The Doctrine of Res Judicata" (1996) Butterworths.]
DECISION:	See paragraph 181.

- 61 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BERGIN J

1 FEBRUARY 2002

50017/2001- PETER R SCHNABEL, PREMIER RIDES INC., STEVEN MARBLE & CATALYST ENTERTAINMENT INC. v KEVIN YUNG LUI, FROYER HOLDINGS DEVELOPMENT & TRADING COMPANY, FROYER HOLDINGS (ASIA) LIMITED, FROYER HOLDINGS USA INC & FSN TOP SECRET PRODUCTION INC.

Judgment

1 The plaintiffs in these proceedings Peter R Schnabel (Schnabel), Premier Rides Inc. (Premier), Steven Marble (Marble) and Catalyst Entertainment Inc (Catalyst) (the plaintiffs) seek to enforce a judgment in the amount of $US65,532.83 for Premier, $US229,914.22 for Catalyst, $US7,635,788.70 for Schnabel and $US7,635,788.70 for Marble obtained against the first defendant, Kevin Yung Lui, in the United States District Court, Central District of California (the US Court).

2 The first defendant resists the entry of judgment on the basis that the US Court entered a default judgment that (a) was not final and conclusive, (b) did not give rise to any res judicata, (c) was given in respect of causes of action which are unknown to the law of Australia and (d) was penal and was contrary to natural justice, in that damages were quantified against the first defendant without judicial assessment of the quantum of those damages. There is no application made in respect of any of the other defendants and they did not appear and were not represented at the hearing.

3 These proceedings were commenced on 15 February 2001 and the hearing commenced on 25 July 2001 when preliminary evidence was taken by video link from Los Angeles, California from Mr M Morin, attorney at law. At the conclusion of that evidence an adjournment was granted on the first defendant’s application over the plaintiff’s objection to enable him to obtain expert evidence. The trial then proceeded to conclusion on 20, 21 and 22 November 2001. Mr F Kunc, of counsel, appeared for the plaintiffs and Mr S Epstein SC appeared for the first defendant.

Background

4 The litigation in the US Court between the plaintiffs and the first defendant and the other defendants, Froyer Holdings Development and Trading Company (Froyer Trading), Froyer Holdings (Asia) Limited (Froyer Asia), Froyer Holdings USA Inc. (Froyer USA) and FSN Top Secret Production Inc. (FSN), arose out of a dispute in relation to the construction of two amusement park attractions in the Peoples Republic of China (the PRC). I shall refer to the other defendants collectively as the Lui entities.

5 One of the plaintiffs, Schnabel, had been engaged in the business of designing, selling and constructing amusement park rides for over 25 years and had developed and constructed amusement park rides at major theme parks around the world. In approximately 1991 Schnabel formed the company Premier. In about 1995 Premier entered into negotiations with Suzhou Amusement Land (SAL), an amusement park in the PRC, for the sale of two amusement park attractions designed by Premier and Catalyst. One ride, known as the “Time Machine” attraction is what has been described as a “back to the future” type ride with a dome screen theatre encompassing twelve six seat vehicles. The other ride, “Top Secret”, is a 360-degree theatre with nine fixed screens and a motion base in the centre.

6 During 1995 Premier, with Catalyst’s assistance, had entered into two agreements with SAL to sell to it the Time Machine and Top Secret attractions. After its initial financial arrangements for payment for those attractions were found to be unacceptable to Premier’s US based financial institutions, Marble introduced Premier and Schnabel to the first defendant in late January 1996. The first defendant was fluent in Mandarin Chinese and had prior experience building amusement park attractions in the PRC. The plaintiffs alleged that the first defendant claimed that he had great financial resources available for the project and indicated he was confident of his ability to solve any impediments which existed in the previous financial arrangements that SAL had made.

7 On 6 February 1996 Marble, Schnabel and the first defendant executed an initial Partnership Agreement in Los Angeles that set out the roles and responsibilities of each of the partners in relation to the construction of the two attractions. In late February 1996 the first defendant travelled to China to meet with SAL representatives. The first defendant renegotiated Premier’s two contracts and executed two new contracts with SAL in Froyer Asia’s name in place of Premier. These contracts were renegotiated with the approval of Marble and Schnabel. The SAL-Froyer Asia contract for the “Time Machine” was in the amount of $3.72 million and the contract for the “Top Secret” attraction was in the amount of $2.034 million. Additionally a third contract for the Top Secret Film to be shown in the Top Secret Attraction was negotiated at a later date between SAL, Froyer Asia and Catalyst International Inc. (Catalyst II) with Catalyst II producing the film (the Film contract).

8 After signing these contracts in February 1996 the first defendant travelled to Los Angeles and met with Marble. A second Partnership Agreement was executed by Marble, Schnabel and the first defendant. Pursuant to the terms of the second Partnership Agreement, the first defendant and Froyer Trading were responsible for the financing of the projects, Premier and Schnabel were the Project Managers and were obliged to review all costs and budgets and Catalyst and Marble were to produce the projects and be responsible for fabrication, insulation and training. The partners agreed to work together “as partners in the development, financing and installation of the two simulation attractions”.

9 The second Partnership Agreement required the first defendant to provide the partners with an accounting of all costs and to make all partnership books and records available for inspection. The first defendant failed to provide any accounting and refused to allow the plaintiffs access to the partnership books and records.

10 The plaintiffs alleged that the rides and the attractions were not constructed as designed and budgeted. It was alleged that costs were cut by using inferior products for lesser effects resulting in further cost reductions and increased profits. It was also alleged that the plaintiffs had not been paid any of the profits on the Time Machine and Top Secret attractions that were completed and fully operational.

US proceedings

11 On 26 March 1998 the plaintiffs filed a Complaint for Damages (the Complaint) in the US Court against the first defendant and Froyer Trading claiming damages for breach of written contract, breach of oral contract, breach of fiduciary duty, breach of implied covenant of good faith and fair dealing, conversion, fraud and constructive fraud. The Complaint also sought partnership dissolution and an accounting (the US Court Action). The breach of written contract allegations included claims that the first defendant had failed to construct the attractions in a manner consistent with the Partnership Agreement, had failed to share the profits, had failed to provide an accounting and had failed to reimburse Premier and/or Catalyst for their out-of-pocket expenses associated with the partnership. The plaintiffs claimed damages in the amount of “not less than $US1 million”.

12 The allegations of breach of oral contract were in relation to oral contracts between the first defendant and Catalyst whereby Catalyst agreed, for payment by Froyer Trading, to furnish goods and services in conjunction with the SAL Attractions. It was alleged that Catalyst had provided the goods and services and Froyer Trading had refused to pay for those goods and services. Catalyst claimed $US36,530.97.

13 The plaintiffs’ claims for breach of fiduciary duty against the first defendant alleged that he failed to provide an accounting, failed to provide pertinent factual and financial information of the partnership and failed and refused to disclose facts relevant to the operation of the partnership. The plaintiffs also claimed that the first defendant had failed to compensate them in accordance with the partnership agreement. The Complaint stated that the plaintiffs were unaware of the specific damages but claimed they believed the damages were in excess of $US1 million.

14 The Complaint alleged that the first defendant had breached the implied covenant of good faith and fair dealing by failing to provide an accounting, failing to divide the profits or reimburse the out of pocket expenses and failing to inform the plaintiffs of the progress, methods and means for completion of the project. The plaintiffs claimed damages in excess of $US1 million.

15 The Complaint also alleged that in the “Fall” of 1997 the first defendant confirmed the projected profit of $US1.5million and that he converted those profits for his own use and benefit. The plaintiffs claimed in excess of $US1 million. The Complaint also made a claim in respect of the plaintiffs’ costs in retaining attorneys to pursue the converted partnership assets. It alleged the first defendant acted with oppression, fraud and malice by reason of which the plaintiffs claimed they were entitled to punitive damages of not less than $US10 million.

16 The plaintiffs alleged the first defendant promised to share the profits equally and at the time he made the promise he had no intention of performing it. The plaintiffs alleged they contributed their expertise, contacts and ideas to the project in reliance upon the promise. The plaintiffs claimed damages in the amount of $US1 million and punitive damages in the amount of $US10 million.

17 The Complaint alleged a breach of the confidential relationship and claimed that in January 1998 the plaintiffs discovered that the first defendant would not provide an accounting and would not divide the profits equally. The plaintiffs claimed an amount of $US1 million and punitive damages in the amount of $US10 million.

18 The punitive damages claimed in respect of the alleged conversion, fraud and constructive fraud are referred to in the final prayer for relief in the Complaint as “punitive and exemplary damages”. The Complaint claims that the first defendant undertook a course of conduct that deliberately cut Marble and Schnabel out of the project and minimised their roles in the business venture. It alleged that the first defendant contracted directly with third parties without the advice or input of Marbel and Schnabel, met Marble’s contacts and proceeded to deal with them directly, cutting Marble out of the workflow and proceeded to develop the attractions with little or no input from Marble and Schnabel. It also alleged that the first defendant consulted with his partners only when contact with them could not be avoided, did not provide them with pertinent factual and financial information, concealed from them all the project costs and budget information and acted in a manner which was inconsistent with the Partnership Agreements. It alleged that the first defendant misrepresented facts to third parties, misappropriated designs, failed to pay vendors and engaged in a pattern of conduct that harmed the plaintiffs and damaged their business reputations.

19 On 6 July 1998 the first defendant and Froyer Trading filed a Motion to Dismiss for Failure to State a Claim upon which Relief could be granted. On 6 August 1998 the US Court denied that motion. On 26 August 1998 the first defendant and Froyer Trading filed an Answer and Counterclaim in the US Court action. The Answer and Counterclaim admitted that the first defendant was a resident in Sydney, Australia and that he conducted business in the County of Los Angeles, California. It also admitted that the US Court had jurisdiction over the parties and that the venue was proper.

20 The first defendant and Froyer Trading denied the allegations of wrongdoing and denied the plaintiffs’ entitlement to any damages. The Answer then pleaded thirty four affirmative defences. Those affirmative defences were (1) a claim that the plaintiffs had failed to state facts sufficient to constitute a cause of action against the defendants; (2) a claim that the complaint was barred because the plaintiffs had commenced and continued the suit without any facts or other reasonable basis supporting the purported claims and solely for the purpose of harassing and/or inducing improper payment and/or settlement from the defendants; (3) a claim that the defendants had done every act and made every statement referred to in the Complaint reasonably and in good faith; (4) a claim that the plaintiffs had knowingly and voluntarily relinquished and waived any and all of their rights arising from the allegations in the complaint; (5) a claim that the plaintiffs conduct estopped them from asserting the purported claims alleged in the Complaint; (6) a claim that the plaintiffs were guilty of unclean hands; (7) a claim that any loss and damage suffered by the plaintiffs was a direct and proximate result of the acts and omissions of the plaintiffs or persons for whom the defendants were not responsible; (8) a claim that the events and happenings in connection with the matters alleged in the Complaint were proximately caused and contributed to by the plaintiffs or independent intervening negligent and/or intentional and/or unlawful conduct of independent third parties and/or their agents; (9) a claim that the plaintiffs recovery was barred or decreased due to the right of set-off of the amount the plaintiffs allegedly owed the defendants and/or unlawfully or wrongly charged the defendants; (10) a claim that there was a failure to mitigate; (11) a claim that the defendants had insufficient knowledge or information to form a view as to whether they had additional defences and a reservation of their position to amend; (12) a claim that the plaintiffs’ Complaint was barred by the applicable Statute of Limitations and various sections of the Code of Civil Procedure; (13) a claim that the Complaint was uncertain; (14) a claim that the Complaint was barred to the extent that the plaintiffs failed to allege the existence of any terms and conditions of any contract between the plaintiffs and the defendant; (15) a claim that the plaintiffs had failed to satisfy all the terms and conditions of the agreements; (16) a claim in laches; (17) a claim that the plaintiffs had breached the implied covenant of good faith and fair dealing; (18) a claim that the plaintiffs' causes of action were barred on the basis that performance was commercially impracticable; (19) a claim that the plaintiffs had induced the defendants to enter into the contracts through fraud; (20) a claim that the Complaint was barred by reason of a failure of consideration; (21) a claim that the plaintiffs released the defendants from any obligation under the contracts; (22) a claim that the plaintiffs had received payment under the contracts; (23) a claim that the plaintiffs’ causes of action were barred to the extent that collateral estoppel applied; (24) a claim that any conditions that had not been performed by the defendants had not been so performed because the plaintiffs had prevented the defendants from performing them; (25) a claim that the plaintiffs’ causes of action were barred as the contracts were executed without any consideration; (26) a claim that the plaintiffs’ causes of action were barred by reason of the application of the Statute of Frauds; (27) a claim that the contracts referred to in the Complaint were unenforceable as they were contrary to the provisions of express law or good morals; (28) a claim that the oral contracts were modified; (29) a claim that the written contracts were modified; (30) a claim that the plaintiffs’ causes of action were barred because the object of the contract was impossible to perform; (31) a claim that the plaintiffs actions were barred because of mistake by the parties on the basic assumption underlying the contract; (32) a claim that the plaintiffs’ cause of action was barred on the basis of the condition subsequent to the contract which never occurred thereby discharging the defendants; (33) a claim that the plaintiffs’ causes of action were barred on the basis that there was no privity of contract and (34) a claim that the plaintiffs failed to name an indispensable party to the action.

21 There were no particulars provided in the Answer in relation to any of these affirmative defences. The Counterclaim positively claimed that the Court had jurisdiction and that the venue was proper. The Counterclaim alleged that installation of the attractions had never been completed and that the plaintiffs had materially breached both partnership agreements by performing their respective obligations in a sub-standard and incompetent manner. The defendants claimed damages in excess of $US6 million.

22 On 7 July 1998 the first defendant and Froyer USA, Froyer Asia and FSN commenced proceedings by filing a Complaint against Marble, Catalyst and Catalyst II, in the Superior Court for the State Court of California for the County of Los Angeles (the State Court Action). The claim in the State Court action related to the Film contract. The Complaint alleged that the contract was entered into in October 1996 and modified in 1997. It was alleged that the parties agreed to invest in the film production and that each would own a 25% interest in the production. This was allegedly later modified to Froyer USA holding a 35.5% interest, SAL holding a 25% interest and Catalyst II holding a 37.5% interest. It was alleged that Marble guaranteed the production of the film with quality assurance within a budget of $US950,000.

23 The first defendant claimed that the film was considered to be of low quality and numerous complaints regarding the quality and the content of the film were received from SAL. There was also a claim that the plaintiffs, the defendants in that action, solicited business opportunities from other parties with the film and that they had retained computer systems and camera and production equipment which they were renting out to third parties. There were claims of breach of contract, breach of implied covenant of good faith and fair dealing, conversion, and a claim for an injunction and an accounting to the first defendant for the profits made by the plaintiffs in the renting of the equipment. The claims included monetary damages, punitive and exemplary damages, attorneys’ fees and all the costs of the suit.

24 On 6 August 1998 Marble, Catalyst and Catalyst II filed a Notice of Removal of Action of the State Court Action and the State Court Action was automatically removed to the US Court. At the time of the removal of the State Court Action to the US Court none of the defendants objected to the US Court exercising jurisdiction over them in the removed State Court Action. They did not move to remand or contest the Notice of Removal for lack of diversity jurisdiction or on any other grounds. On 14 April 1999 the US Court, on its own motion, consolidated the State Court Action with the US Court Action. No party objected to the Consolidation Order.

25 On 18 September 1998 a Joint Report of Early Meeting of Counsel was filed reporting that counsel for the parties had met on 28 August 1998. The Counsel were Michael D. Morin, of Margolis and Morin, who appeared for Premier, Schnabel, Catalyst and Marble and Scott Warmuth who appeared for the first defendant and Froyer USA. The joint report noted that the parties had attempted to discuss settlement but that they lacked sufficient information to be able to “meaningfully engage” in such discussions. It was noted that the parties anticipated that approximately 10 days would be required for the trial of the matter.

26 On 22 March 1999 the plaintiffs filed a Notice of Motion to compel production of documents, to compel deposition of the first defendant and a request for sanctions. That Notice of Motion included a Memorandum of Points and Authorities and a declaration of Mr Morin in support of the Motion. It is apparent from those documents that the plaintiffs had sought the discovery of documents in August 1998 and October 1998. In August the defendants produced 452 pages of documents and a further 642 pages in October 1998. The plaintiffs reviewed the documents and ascertained that the defendants had failed to produce any documents of an accounting nature. The plaintiffs were unable to find documents showing any payments to the defendants for the construction of the rides, payments by the defendants to the contractors, contracts for the work performed and any other documents relating to the costs and income of the projects.

27 The Memorandum also referred to the plaintiffs’ attempts to take a deposition from the first defendant. They had been informed that the first defendant lived in Australia but that he travelled to Los Angeles approximately monthly. The time for taking the deposition was fixed for 25 November 1998. On 24 November 1998 the plaintiffs were advised that the first defendant would not be appearing for deposition. On that day counsel for the plaintiffs and defendants met and conferred in relation to the defendants failure to produce the accounting documentation. A request was made for the defendants to produce all such documentation by 10 December 1998. A further date for the deposition of the first defendant was jointly agreed for 13 January 1999. The defendants failed to produce additional documentation by 10 December 1998.

28 It was not until 10 September 1999 that the first defendant attended for his deposition. After a few hours of testimony the first defendant stated that he felt very sick and the deposition process was terminated with the plaintiffs’ counsel indicating that the deposition could continue after the weekend. The first defendant’s counsel telephoned the plaintiffs’ counsel on the weekend and informed him that the first defendant would not be attending for the further deposition. Although the plaintiffs’ counsel requested a date upon which the deposition could resume no date was provided to him.

29 On 20 December 1999 the first defendant filed a second Notice of Motion and Motion to Dismiss for Lack of Subject Matter Jurisdiction. In response to the defects in the plaintiffs’ complaint, referred to in the first defendant’s Motion and Moving papers, the plaintiffs filed a Third Amended Complaint.

30 On 24 December 1999 the plaintiffs received a letter from the defendants’ counsel indicating that the first defendant had just been released from a two and a half week period of hospitalisation due to a “manic episode” and that he had to restrict his overseas travel for the next two months.

31 On 10 January 2000 the US Court issued a tentative ruling granting the first defendant’s Motion to Dismiss and accepted the plaintiffs’ Third Amended Complaint for filing. That Third Amended Complaint was against the first defendant, Froyer Asia, Froyer USA, Froyer Trading and FSN.

32 On 1 February 2000 the first defendant and Froyer USA filed a Third Notice of Motion and Motion to Dismiss for Lack of Subject Matter Jurisdiction in relation to the Third Amended Complaint. On 6 March 2000 a hearing was held before trial judge, Judge Pregerson. Counsel for both plaintiffs and defendants appeared at the hearing and argued the Motion. On 10 March 2000 Judge Pregerson issued an order denying the defendant’s Motion to Dismiss.

33 On 15 May 2000 the Magistrate Judge, the Honourable Ann I. Jones (Jones MJ) conducted a telephonic status conference to set the time for hearing regarding the first defendant’s mental condition, his ability to travel and his ability to comply with the court’s discovery orders. The hearing was fixed for 31 May 2000. The first defendant did not appear on 31 May 2000. The plaintiffs claimed that the first defendant’s failure to comply with the court’s orders was wilful, in bad faith and unrelated to his medical condition. In support of that claim the plaintiffs relied upon two witnesses, Patricia Rolling a customer service representative from Cathay Pacific Airways and Tom Parker, a former special Agent-in-Charge at the Los Angeles field office of the Federal Bureau of Investigation. Ms Rolling gave evidence that established that the first defendant travelled regularly on Cathay Pacific Airways between Sydney, Australia, Hong Kong and Los Angeles, California during the years 1998 and 1999. Mr Parker’s evidence established that the first defendant travelled out of Australia on eight occasions in 1998 and six occasions during 1999.

34 On 8 June 2000 Jones MJ filed a Report and Recommendation for submission to Judge Pregerson pursuant to the United States Code Annotated (USC) Title 28 636 and General Order 194 of the US Court. The Report referred to the procedural history including the first defendant’s failure to provide discovery and the first defendant’s failure to complete his deposition. Jones MJ found that the plaintiffs had suffered irreparable prejudice from the first defendant’s failure to comply with the court’s orders and to provide discovery. It was apparent from one of the persons who had provided a deposition for the plaintiff, Vincent Chung, who was Froyer USA’s Director and Corporate Officer, that the first defendant was the only person who had knowledge regarding the various Lui entities and their involvement in the transactions in issue in the litigation.

35 The Report also referred to the fact that with only three days remaining for discovery the first defendant had provided the plaintiffs with no documents or other evidence showing what payments were made for the work performed, what monies were paid to the first defendant for services, what services the defendants had performed or any profits earned on the project. Jones MJ then said:

Defendants’ failure to provide evidence regarding these basic facts effectively precluded plaintiffs’ ability to develop the material evidence underlying this dispute, or to resolve this dispute on the merits.

36 Jones MJ noted that although “expressly admonished” in two court orders that his failure to appear at the hearing may result in a recommendation of case-terminating sanctions, the first defendant did not appear at the hearing on 31 May 2000. There was however a copy of a facsimile declaration submitted to the Court in which the first defendant stated “during the period October 1998 through to November 1999, I travelled abroad from Australia”, which Jones MJ found flatly contradicted the first defendant’s prior statements about his ability to leave Australia. Jones MJ compared the representations that had been made to the Court by the first defendant’s counsel as to the first defendant’s inability to leave Australia with the first defendant’s travel records which established that at relevant times he had already left Australia for other parts of the world. The recommendation stated:

Despite continued representations over the past two years that defendant Lui was too ill to travel, and too ill to assist counsel in the production of documents, or preparation of discovery responses, defendant Lui spent almost one half of 1998 travelling outside of Australia and over one third of 1999.

37 Jones MJ concluded that the first defendant’s Bipolar Disorder did not render him disabled for the entire duration of the discovery in the case and that there were ample periods of time during which he was capable of assisting in discovery and travelling to the United States in order to comply with the Court’s orders. Jones MJ also concluded that the first defendant had intentionally interfered with the Court’s order that he produce his passport. The Court concluded that although the first defendant had been diagnosed as suffering from an affective disorder the condition had been effectively controlled with medication and there was no medical basis for the first defendant’s failure to produce documents as ordered by the Court or for the first defendant’s failure to appear as ordered by the Court. The Court also concluded that the first defendant’s mental condition did not cause the repeated failure to comply with discovery obligations. The Report continued:

Defendants have been given repeated opportunities to comply with this court’s orders. Defendants have been twice warned of the possible consequences of their failure to comply with this court’s orders. Defendants, however, have continued to exhibit complete disregard and indifference to these warnings, the orders of the court, and their discovery obligations. The effect of defendants’ conduct has been to thwart plaintiffs’ legitimate attempts to obtain basic, legitimate discovery. Without this discovery, plaintiffs cannot proceed to litigate this case on the merits. The defendants’ conduct cannot be attributable to any mental disability on the part of the defendant Lui. Record clearly demonstrated defendants’ flagrant bad faith and wilful disregard of this court’s orders and defendants’ discovery responsibilities.

38 Jones MJ recommended granting the plaintiffs’ Motion for Sanctions pursuant to Rule 37 of the Federal Rules of Civil Procedure, striking the defendant’s answer to the plaintiffs’ third Amended Complaint and dismissing the first defendant’s complaint “with prejudice”.

39 On 28 June 2000, Judge Pregerson concurred with and adopted Jones MJ’s findings and conclusions and ordered, inter alia, that the defendants’ Answer to the plaintiffs’ Third Amended Complaint be “stricken” and the first defendants’ Complaint be dismissed “with prejudice”. That order was filed on 7 July 2000.

40 On 14 September 2000 the US Court (Judge Pregerson), on its own Motion, issued an order in the following terms:

On June 28, 2000, the Court entered an Order striking the defendant’s answer to the complaint ( see June 28, 2000 Order, adopting Magistrate Judge’s June 8, 2000 Report and Recommendation). The Court hereby sets the hearing to determine the amount of damages for September 22, 2000 at 9.00am. The Court had previously informed the parties that the defendant would not be allowed to participate in this hearing. The Court now finds that the defendant must be given the opportunity at the hearing to contest the amount, extent or type of relief sought or, if the pleadings are insufficient, to argue that the plaintiffs’ claims should be dismissed because the pleadings fail to assert a claim upon which relief may be granted.

41 On 22 September 2000 that hearing proceeded. Mr Morin was trial counsel for the plaintiffs. The first defendant, Froyer Asia, Froyer Trading, Froyer USA and FSN were represented by two attorneys from the Law Offices of Scott Warmuth, counsel of record for all defendants in the action. Counsel for the defendants cross-examined all the plaintiffs’ witnesses at that trial. Counsel for the defendants presented no evidence at the trial. At the close of trial the defendants’ counsel made final submissions on behalf of the defendants opposing any relief being granted to the plaintiffs.

Final Judgment

42 On 20 November 2000 Judge Pregerson delivered his judgment entitled “Final Judgment” which was entered on 28 November 2000. During the pre-trial process the plaintiffs had served Requests for Admission (RFA) on the first defendant and the other defendants. All defendants failed to respond and in those circumstances the plaintiffs’ Requests were deemed admitted. There were a number of Admissions which Judge Pregerson recorded in his judgment as follows:

17. By virtue of his failure to respond to Plaintiffs’ Requests for Admission, and the Order finding such requests to be deemed admitted, defendant Lui has admitted: that he entered into a Partnership Agreement with plaintiffs (RFA, no.1), that he received payment for the work performed for SAL on the Time Machine and Top Secret projects (RFA, no.3), that he has not provided his partners with an accounting for the money he received (RFA, no.5), that he has not provided his partners with an accounting for the money he expended in performing work on the Time Machine and Top Secret projects (RFA, no.6), and that the Time Machine and Top Secret projects had been completed and are in operation (RFA, nos 7, 8, 9, 11). Defendant Lui has further admitted that he is an officer of Froyer Asia, Froyer USA, Froyer Holdings Pty Ltd and FSN Top Secret (RFA, nos 13, 14, 15, 16), that he has an ownership interest in each of the Lui entities (RFA, nos 17, 18, 19, 20), and that he represented to Steven Marble that he was the owner of Froyer Asia, Froyer Trading, Froyer USA, Froyer Holdings Pty Ltd and FSN Top Secret (RFA, nos 21, 22, 23, 24, 25). Defendant Lui has admitted that he was paid in full by SAL for the Time machine and Top Secret projects (RFA, nos 31, 32) and that the costs of performance under the Time Machine and Top Secret contracts were less than the contract price paid to him by SAL (RFA, nos 29, 30, 37, 38).
18. Each of the Lui entities has admitted they were partners to the Partnership Agreement with Plaintiffs (RFA, no.1), and that each of the Lui entities has ownership interest in each of the other Lui entities (RFA, nos. 17, 18, 19, 20).
19. Lui and the Lui entities have all admitted that they promised to reimburse Premier Rides for the costs and expenses it incurred in securing the Time Machine and Top Secret contracts, and they have all admitted that they had not reimbursed Premier for same.

43 Judge Pregerson found that the first defendant had made false representations to the plaintiffs in relation to a number of matters. They were representations that he would consult with them prior to making any financial decisions, that he would provide them with copies of communications relating to the partnership, that he would divide all job profits equally with them, that he would provide them with an accounting of all partnership business and that he would consult with them regarding all important partnership decisions. Judge Pregerson also found that the first defendant concealed from the plaintiffs and failed to disclose to them that he did not intend to allow them to be actively involved in all aspects of construction of the rides and that the first defendant and the other defendants did not build the rides as designed and budgeted. Judge Pregerson concluded that the first defendant had refused to pay the plaintiffs any of the job profits for the partnership totalling $US2,790,655. His Honour also found that the plaintiffs had lost the opportunity to make not less than two sales of the Top Secret Ride, the gross revenues from which would have been $US4,474,800. His Honour applied a 26% profit rate to reach a total of $US1,163,448.

44 Judge Pregerson also found that the plaintiffs had lost the opportunity to make three sales of the Time Machine that would have resulted in revenue of $US12,276,000. His Honour applied the 26% rate of profit on the resale and was satisfied that the plaintiffs were entitled to an award for loss of profits in the amount of $US3,191,760.

45 Judge Pregerson concluded that the first defendant and the Lui entities intentionally engaged in wrongful conduct designed to interfere with and disrupt the plaintiff’s economic relationship with SAL. His Honour said:

86. The purpose of punitive damages is ..‘to penalise wrongdoer in a way that will deter them and others from repeating the wrongful conduct in the future’”. Luz Chavez v Keat (1995) 34 Cal. App. 4th 1406, 1410 (citation omitted)
87. In assessing punitive damages, courts look at a three-prong test: (1) the nature and responsibility of Defendants’ wrongdoing; (2) the amount of compensatory damages; and (3) the wealth of the Defendants. Neal v Farmers Ins. Exch . (1978) 21 Cal. 3d 910, 928
88. In this case, the nature and reprehensibility of Defendants’ wrongdoing, resulting in fraud, is substantial. Defendants made intentional misrepresentations to plaintiffs and deliberately concealed material facts from plaintiffs, all to plaintiffs’ detriment.
89. The amount of compensatory damages for fraud is also substantial, and totals to more than $2,000,000.
90. Although courts traditionally look to the defendants’ net worth to determine the wealth of the Defendants, where, as here, the Defendants have deliberately interfered with Plaintiffs’ ability to obtain discovery, such an examination is not required. Davidov Co v Issod (2000) 78 Cal. App 4th 597. When a Defendant fails to obey a court order and deprives the Plaintiff the opportunity to meet his burden of proof, multiplying the compensatory damages by four to calculate punitive damages is appropriate. Id .

91. Plaintiffs have established that Defendants engaged in fraud by clear and convincing evidence.
92. Plaintiffs Schnabel and Marble are hereby awarded punitive damages in the total amount of $8,710,416; $4,355,208 is awarded to Schnabel and $4,355,208 to Marble.

46 Pursuant to his findings Judge Pregerson made the following orders:

1. Judgment be entered against Defendants Kevin Y. Lui, Froyer Holdings Development and Trading Company, Froyer Holdings (Asia) Limited, Froyer Holdings USA, Inc. and FSN Top Secret Productions, Inc., and each of them, jointly and severally, and in favour of Plaintiffs as follows:

a. For plaintiff Premier, damages in the amount of $55,263.00, plus prejudgment interest at the rate of seven percent (7%) per annum from March 26, 1998 until the date judgment is entered, plus interest as provided by law from the date judgment is entered until paid;

b. For Plaintiff Catalyst, damages in the amount of $193,883.72, plus prejudgment interest at the rate of seven percent (7%) per annum from March 26, 1998 until the date judgment is entered, plus interest as provided by law from the date judgment is entered until paid;

c. For Plaintiff Schnabel: (1) breach of contract damages in the amount of $930,125.30, plus prejudgment interest at the rate of seven percent (7%) per annum from March 26, 1998 until the date judgment is entered; (2) fraud damages in the amount of $2,177,604.00; (3) nominal damages of $1.00 for interference with prospective economic advantage; (4) punitive damages in the amount of $4,355,208; and (5) interest as provided by law from the date judgment is entered until paid;

d. For Plaintiff Marble: (1) breach of contract damages in the amount of $930,125.30, plus prejudgment interest at the rate of seven percent (7%) per annum from March 26, 1998 until the date judgment is entered; (2) fraud damages in the amount of $2,177,604.00; (3) nominal damages of $1.00 for interference with prospective economic advantage; (4) punitive damages in the amount of $4,355,208; and (5) interest as provided by law from the judgment is entered until paid.

2. The partnership is hereby dissolved.

47 On 22 December 2000 the first defendant, Froyer Trading, Froyer USA and FSN filed a Notice of Appeal from the Final Judgment in the Court of Appeals for the Ninth Circuit. That Appeal is pending.

United States Rules

48 The relevant rules of the Federal Rules of Civil Procedure in relation to the judgment obtained in the US Court are contained in the United States Code Annotated (USC) and include Rules 37, 55, 59, 60 and 1963. Those rules are set out in full in the Schedule to this judgment.

49 A party may apply by motion for orders compelling an opposing party to provide disclosure or discovery. This includes an order designating the time for the taking of a deposition. The US Court has power to impose sanctions for non-compliance with the orders and includes a power to “strike” an Answer and/or dismiss a Counterclaim with prejudice (Rule 37). These are the harshest sanctions available under Rule 37 and are used in “rare situations”: Securities and Exchange Commission v Hasho 134 F.R.D. 74 (S.D.N.Y. 1991).

50 The Rules provide for the entry of what is known as a “default” if a party against whom a judgment or affirmative relief is sought fails to plead or otherwise defend the case pleaded against it (Rule 55 (a)). If the defendant has been “defaulted” the plaintiff is able to obtain the entry of “default judgment” by the Clerk of the Court if the claim is for a “sum certain” or for an amount that by computation can be made certain (Rule 55 (b)(1)). In all other cases a party entitled to a default judgment can apply to the Court for the entry of default judgment (Rule 55 (b)(2)). A party against whom a default judgment has been entered and who demonstrates “good cause” may have the judgment set aside (Rule 55 (c)).

51 Within 10 days of the entry of judgment a party may file a Motion for a new trial and/or for orders altering or amending a judgment (Rule 59). The Court can also on its own Motion order a new trial for any reason that would justify granting one on a party’s Motion (Rule 59 (d)). On its own Motion or on the Motion of a party the US Court is able to correct “clerical mistakes” in a judgment (Rule 60(a)).

52 The US Court may, on Motion and on such terms as are just, relieve a party from a final judgment (1) for mistake, inadvertence surprise or excusable neglect, (2) for newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b), (3) for fraud, misrepresentation, or other misconduct of an adverse party, (4) if the judgment is void, (5) if the judgment has been satisfied, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application and (6) for any other reason justifying relief from the operation of the judgment (Rule 60 (b)).

53 Any Motion seeking relief from a final judgment for reasons (1), (2) or (3) of Rule 60 (b) must be made not more than one year after entry of the judgment and in respect of the other reasons within a “reasonable time”. A Motion for relief from a final judgment does not affect the finality of the judgment or suspend its operation (Rule 60 (b)).

54 A judgment entered in the US Court may be registered by filing a certified copy of the judgment in any other district when the “judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown”. A judgment so registered has the same effect as a judgment of the court of that district and may be enforced in a like manner. This procedure is in addition to other procedures provided by law for the enforcement of judgments (Rule 1963).

Expert Witnesses

55 There was no issue between the parties that an expert in foreign law may give evidence as to what the foreign law is: Idoport Pty Ltd v National Australia BankLtd (2000) 50 NSWLR 640 at [5]. Neither party suggested that the expert witnesses were not experts.

56 In these proceedings the plaintiff relied upon the evidence of Mr Morin and retired Judge H Lee Sarokin (Judge Sarokin). The first defendant relied upon the evidence of Frank Frisenda. Mr Morin and Mr Frisenda are both Attorneys at Law admitted to practice before all Courts in the State of California and the United States District Court for the Central District of California. Judge Sarokin was a United States District Court Judge, between 1979 and 1994 and a United States Circuit Judge (Third Circuit) from 1994 until his retirement in 1996.

57 Both Mr Morin and Mr Frisenda appeared for the parties at various stages of the proceedings in the US Court. Mr Kunc submitted that in these circumstances preference should be given to the evidence of Judge Sarokin who had no involvement with the parties or the litigation prior to being approached to give expert evidence.

58 Mr Morin gave evidence that the US judgment is a final judgment of the US Court and has not been stayed or satisfied and is enforceable according to its terms in all of the United States of America. The filing of an appeal does not operate as a stay of enforcement of the judgment. In order to stay enforcement of a judgment an appellant must file a bond in an amount sufficient to satisfy the judgment or make an application for a stay of enforcement of the primary judgment. In this case there has been no application for a stay nor has a bond been lodged. Mr Morin’s opinion was that the judgment was not a default judgement. The order made on 7 July 2000 was an order striking the first defendant’s answer. No default was entered under Rule 55. In those circumstances Mr Morin’s opinion was that the provisions of Rule 55(c) that provide for relief from a default, if a judgment by default has been entered, would not be applicable.

59 Mr Morin expressed the opinion that a motion brought pursuant to Rule 60(b) for relief from a judgment would have to be directed to the trial court which cannot hear a Motion as it no longer has jurisdiction. Mr Morin’s opinion was that once the notice of appeal is filed the trial judge is unable to entertain any motions. He was of the view that filing of an appeal is a jurisdictional event which divests the trial court of control over those aspects of the case involved in the appeal: US v Powell (9th Cir 1994) (24 F. 3d at 31). In cross-examination Mr Morin conceded that it is within the power of the Court of Appeals to remand the case to the trial Court for the purpose of filing a motion under Rules 55 or 60.

60 Mr Frisenda expressed the opinion that the US Court judgment was not enforceable in any foreign court because the plaintiffs had failed to comply with Rule 1963 of Title 28 of the US Code. He was of the view that registration was an essential procedure for litigants seeking to execute upon their judgments and in view of the plaintiffs’ failure to register the judgment for enforcement in a foreign District or a foreign court the judgment was not enforceable.

61 In his affidavit Mr Frisenda referred to what he regarded as certain fundamental defects in the judgment that rendered it “not conclusive” and therefore not enforceable. He was of the view that the judgment was not rendered under a procedure giving due process of law. He also expressed the opinion that the US Court lacked subject matter jurisdiction and personal jurisdiction over unserved defendants. He expressed the view that FSN was not served with the pleadings.

62 Mr Frisenda was also of the view that the doctrine of res judicata was a bar only where the earlier judgment was rendered by a court having proper jurisdiction and involved the same claim as the present suit and had reached final judgment on the merits and involved the same parties or their privies. Because the first defendant against whom the judgment was rendered did not have a “full and fair opportunity to litigate his claims before the court” Mr Frisenda expressed the view that due process was not followed and there was no res judicata.

63 Diversity jurisdiction requires that all parties to the action be “citizens of different states” or “citizens or subjects of a foreign state”. Mr Frisenda gave evidence that at trial level and on appeal the defendants asserted that the US Court lacked diversity jurisdiction to remove the State Court Action to the US Court. Additionally the defendants asserted that the US Court lacked diversity jurisdiction over the Third Amended Complaint. He expressed the opinion that the trial court had failed to join the partnership FSN Top Secret as a necessary and indispensable party. He expressed the view that the first defendant was entitled to bring a motion pursuant to Rule 60(b) to have the judgment set aside. In those circumstances it was submitted by the first defendant that the judgment is not final.

64 In support of his opinions Mr Frisenda relied upon the 1981 decision of the Supreme Court of the United States in Federated Department Stores, Inc. v Moitie 452 US 394 in particular upon the following portion of Rehnquist J’s judgment at 398:

There is little to be added to the doctrine of res judicata as developed in the case law of this Court. A final judgment on the merits of an action precludes the parties or their privies from re-litigating issues that were or could have been raised in that action….Nor are the res judicata consequences of a final, un-appealed judgment on the merits altered by the fact that the judgment may have been wrong or rested on a legal principle subsequently overruled in another case.

65 One of the cases cited in support of this last proposition in Rehnquist J’s judgment was Angel v Bullington 330 U.S 183,187 referred to in footnote [3] in support of the statement that the dismissal of an action for failure to state a claim under Federal Rule of Civil procedure 12 (b)(6) is a “judgment on the merits”. In that case Frankfurter J, in the lead opinion, said [at par 5] “It is a misconception of res judicata to assume that the doctrine does not come into operation if a court has not passed on the “merits”, in the sense of the ultimate substantive issues of a litigation. An adjudication declining to reach such ultimate substantive issues may bar a second attempt to reach them in another court of the State”.

66 In cross-examination Mr Frisenda suggested that the order striking the first defendant's Answer and the order dismissing the Counterclaim "with prejudice" was part of the Appeal. When asked to indicate where in the Appeal Brief such ground appeared Mr Frisenda could not do so other than to refer to a general ground of appeal in relation to the findings of fact and law. Mr Frisenda also gave evidence that the other defendants were not served with the process and had not appeared. In those circumstances Mr Frisenda expressed the view that the first defendant was unable to bring cross claims against those parties. Mr Frisenda said he had "never seen a judgment against a party where the party had not even been served with the summons", which he suggested had occurred in this case. He agreed that subject to what he referred to as "safeguards" the judgment was enforceable in California. The safeguards to which he referred apparently included ensuring that objection could be taken to certain assets being the subject of execution.

67 During cross-examination Mr Frisenda made a number of concessions. He agreed that the judgment was not a default judgment, with the consequence that Rule 55 did not apply (tr.35). Mr Frisenda gave evidence that the term "final judgment" has several different meanings in the United States of America. He said that the judgment was final with respect to the US Court and on review to the Court of Appeals of the Ninth Circuit. He agreed that the judgment was a judgment "on the merits" and that it was res judicata the issues between the parties (tr.36). He also agreed that as a matter of United States law, where there is a final judgment on the merits and where there is a res judicata, the enforceability is not affected if the judgment which gave rise to the res judicata is subject to appeal (tr. 36).

68 Judge Sarokin expressed the opinion that the judgment entered by Judge Pregeson on 28 November 2000 did not constitute a default judgment. The judgment entered was not obtained as a result of a defendant’s failure to plead or otherwise defend. To the contrary, the defendants had an opportunity to be heard and to actively participate in the litigation. Rule 55(c) relief would therefore be unavailable as that Rule applies to protect against the entry of judgments where a party has not had an opportunity to be heard. Having regard to the concession made by Mr Frisenda in cross-examination that the judgment is not a default judgment, it is not necessary to consider Rule 55 any further.

69 Judge Sarokin was of the view that even if Rule 55 did apply, Rule 55 (c) requires a showing of “good cause” to set aside a default. He was of the opinion that the defendants could not demonstrate the required “good cause” because their contention, namely that the court erred by striking their answer and dismissing their complaint, does not fall within the grounds for relief specified in Rule 60(b). Rule 60 (b) requires the defendants to make an application within a “reasonable time” and, in the named circumstances in the Rule, before the expiration of the year after entry of the judgment. Judge Sarokin made the point that the defendants had been aware of the court’s orders striking their answer and dismissing their complaint since 7 July 2000 and had failed to take any action. It was submitted that if the defendants’ submissions were adopted no judgment could be enforced for a period of one year, merely because of a potential to file a motion to vacate.

70 Even if the defendants made an application under Rule 60 (b), and it was deemed timely, the application would not stay the plaintiffs’ right to enforce the judgment. Judge Sarokin said that theoretically the defendants could make an application to the Court of Appeals to remand the case to the US Court for the purpose of filing a motion under Rule 55(c) or 60(b). Such an application can only be made after the US Court indicates that it is inclined to grant such a motion, which Judge Sarokin thought was very unlikely in the circumstances of this case. In his 17 years of judicial experience he was not aware of any such motion being granted after an appeal had been filed.

71 Judge Sarokin was of the view that the judgment would constitute res judicata as to all issues that were raised in the pleadings. However he expressed the view that this was not relevant to the issue of the enforceability of the judgment under American Law because, absent the filing of a bond, the judgment remained enforceable. As to registration Judge Sarokin expressed the view that the term “may” within Rule 1963 was permissive not mandatory and that there is no provision that requires registration of a judgment before it can be enforced.

72 As to the failure to provide due process Judge Sarokin expressed the view that such an issue would have to be challenged on appeal. He had reviewed the appeal filed by the defendants and concluded that there is no challenge to the US judgment based on a lack of due process. He concluded therefore that any such arguments are deemed “waived”.

73 From the evidence of the experts and the Rules the following matters relevant to the issues before me are established in relation to the US law: (1) the US judgment is not a default judgment, (2) the US Judgment is res judicata the issues between the parties to the litigation, (3) it is open to the first defendant to make an application pursuant to Rule 60 (b) for relief from the US Judgment and (4) the trial court does not have jurisdiction to hear such an application under Rule 60 (b). Any application would have to be directed to the Court of Appeals which may or may not remand it to the Trial Court for hearing.

Issues

74 The United States of America does not form part of the international system providing for the reciprocal enforcement of judgments under the Foreign Judgments Act 1973. In these circumstances the plaintiffs’ claims to enforce the US judgment must be determined in accordance with the common law principles for the recognition and enforcement of foreign judgments. The intrinsic merits of the foreign judgment may not be called into question however there are certain pre-requisites that must be met before the foreign judgment will be recognised and enforced.

75 For the plaintiffs to obtain the orders they seek enforcing the US judgment they must establish (a) that the US Court possessed the necessary jurisdiction, (b) that the judgment was for a sum certain and (c) that the judgment was final and conclusive. The first two matters are not in issue. The real issue between the parties is whether the judgment was final and conclusive. If there is a finding on that issue in favour of the plaintiffs then the first defendant also claims that this Court would not enforce the judgment because it is in the nature of a penalty and was contrary to natural justice in that damages were quantified against the first defendant without a judicial assessment of the damages.

Final and Conclusive

76 It will generally be presumed that the foreign law is the same as the local law: Damberg v Damberg [2001] NSWCA 87 except to the extent that a material difference is proved: US Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 at 799. The plaintiffs bear the onus of establishing that the judgment is final and conclusive: Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853 at 927 and 970.

77 In this case, on this issue, the Court is primarily concerned to determine the status of the US judgment under the US law and that will depend upon the construction and the effect of the applicable US Rules. The test of finality is the treatment of the judgment by the foreign tribunal as res judicata. A default judgment may be enforceable as a final and conclusive judgment even though it is liable to be set aside in the very court that rendered it. The approach that has been adopted is that until the steps are taken to set the judgment aside the judgment is enforceable as a final and conclusive judgment.

(As amended Dec. 27, 1946, eff. Mar. 19, 1948; Dec. 29, 1948, eff. Oct. 20, 1949; Mar. 2 1987, eff. Aug. 1, 1987).

p

1963. Registration of judgments for enforcement in other districts

A judgment in an action for the recovery of money or property entered in any court of appeals, district court, bankruptcy court, or in the Court of International Trade may be registered by filing a certified copy of the judgment in any other district or, with respect to the Court of International Trade, in any judicial district, when the judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown. Such a judgment entered in favor of the United States may be so registered any time after judgment is entered. A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in like manner.

A certified copy of the satisfaction of any judgment in whole or in part may be registered in like manner in any district in which the judgment is a lien.

The procedure prescribed under this section is in addition to other procedures provided by law for the enforcement of judgments.


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Last Modified: 02/04/2002