Supreme Court
New South Wales
Medium Neutral Citation: Telesto Investments Limited v UBS AG [2013] NSWSC 503 Hearing dates: 23 November 2012, written submissions 30 November and 5 December 2012 Decision date: 09 May 2013 Jurisdiction: Equity Division Before: Sackar J Decision: 1. These proceedings be permanently stayed.
2. The plaintiff's notice of motion be dismissed.
Catchwords: PRIVATE INTERNATIONAL LAW - jurisdiction - whether Singapore court had jurisdiction - whether defendant in Singapore proceedings submitted to jurisdiction of Singapore - whether proceedings determined in Singapore were within the ambit of the contractual submission to jurisdiction clause - relevance of contractual submission to jurisdiction clause where the relief sought in the local forum includes the setting aside of the contract containing the jurisdiction clause - whether contractual jurisdiction clause is against public policy if it has the effect of precluding prosecution of claims under consumer protection legislation in Australia - whether defendant submitted to Singapore jurisdiction by its conduct.
PRIVATE INTERNATIONAL LAW - stay of local proceedings - earlier judgment in Singapore - whether an ex parte hearing in a foreign jurisdiction resulting in a brief ex tempore judgment can give rise to res judicata, issue estoppel, Anshun estoppel or a plea of abuse of process - whether an earlier foreign judgment can gives rise to equivalent preclusionary doctrines under the law of the foreign jurisdiction.
PROCEDURE - res judicata - whether causes of action in pending New South Wales proceedings are in substance the same as those determined in earlier Singapore proceedings.
PROCEDURE - issue estoppel - whether findings apparently made in the earlier Singapore proceedings give rise to issue estoppel - precise identification of findings which are legally indispensable to the ultimate outcome in the earlier Singapore proceedings.
PROCEDURE - Anshun estoppel - whether the content of pending local proceedings was so relevant to the earlier Singapore proceedings that refraining from participating in the Singapore proceedings was relevantly unreasonable - whether a forensic decision to refrain from participating in the earlier Singapore proceedings gives rise to Anshun estoppel in the pending local proceedings - relevance of availability of juridical advantage in local forum to assessment of reasonableness under Anshun doctrine.
PROCEDURE - abuse of process - whether continuation of proceedings in New South Wales following earlier Singapore judgment amounts to abuse of process - relevance of availability of juridical advantage in local forum to assessment of whether conduct constitutes abuse of process.Legislation Cited: Civil Procedure Act 2005
Fair Trading Act 1987
Supreme Court Act 1970
Uniform Civil Procedure Rules 2005
Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)
Foreign Judgments Act 1991 (Cth)
Trade Practices Act 1974 (Cth)
Trade Practices Revision Act 1986 (Cth)
Fair Trading Act 1987 (Qld)
Civil Jurisdictions and Judgments Act 1982 (UK)
Misrepresentation Act (Cap 390)Cases Cited: Abigroup Contractors Pty Ltd v ABB Service Pty Ltd (Formerly ABB Engineering Construction Pty Ltd) [2004] NSWCA 181
Akai v People's Insurance Co [1998] 1 Lloyd's Rep 90
Armacel Pty Ltd v Smurfit Stone Container Corporation (2008) 248 ALR 573
Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256
Blair v Curran (1939) 62 CLR 464
Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666
Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287
C G Maloney Pty Ltd v Noon [2011] NSWCA 397
Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853
Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502
Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245
Coffey v Secretary, Department of Social Security (1999) 86 FCR 434
Commonwealth Bank of Australia v White (No 1) (1999) 2 VR 681
Commonwealth Bank of Australia v White (No 4) [2001] VSC 511
CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345
Desert Sun Loan Corporation v Hill [1996] 2 All ER 847
Digi-Tech (Australia) Ltd v Brand (2004) 62 IPR 184
Dow Jones v Gutnick (2002) 210 CLR 575
Duchess of Kingston's Case (1776) 2 Smith LC (13th edn) 644
Ex Parte Nelson (No 2) (1929) 42 CLR 258
FAI General Insurance Co Ltd v Ocean Marine Mutual (1997) 41 NSWLR 559
Falk v Haugh (1935) 53 CLR 163
Ferris v Plaister (1994) 34 NSWLR 474
Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160
Garsec v Sultan of Brunei [2008] NSWCA 211
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 55 ALR 25
Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231
Hall v Odber (1809) 11 East 118
Henderson v Henderson (1843) 3 Hare 100
Henjo Investments Pty Ltd v Collis (Marrickville) Pty Ltd (1988) 79 ALR 83
Henry v Geoprosco International Ltd [1976] QB 726
Hilton v Guyot (1895) 159 US 113
Hoystead v Federal Commissioner of Taxation (1921) 29 CLR 537
IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466
IEL Finance Limited v Commissioner of Taxation [2006] FCA 267
Jackson v Goldsmith (1950) 81 CLR 446
Johnson v Gore Wood & Co [2002] 2 AC 1
Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993
Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508
Kuligowski v Metrobus (2004) 220 CLR 363
Macquarie Bank Ltd v National Mutual Life Association of Australasia Ltd (1996) 40 NSWLR 543
McCormick v Allen (1926) 39 CLR 22
Newmont Yandal Operations Pty Ltd v J Aron Corp (2007) 70 NSWLR 411
O'Donel v Commissioner for Road and Transport and Tramways (NSW) (1938) 59 CLR 744
PCH Offshore Pty Ltd v Dunn (No 2) (2010) 273 ALR 167
PNJ v The Queen (2009) 252 ALR 612
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 599
R v Lintrose Nominees Pty Ltd; Hopkins v R (2001) 4 VR 619
Reinsurance Australia Corporation Ltd v HIH Casualty and General Insurance (in liq) (2003) 254 ALR 29
Ridgeway v The Queen (1995) 184 CLR 19
Rogers v The Queen (1994) 181 CLR 251
Ruddock v Taylor (2003) 58 NSWLR 269
Schnabel v Lui [2002] NSWSC 15
Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699
Spirits International BV v Federal Treasury Enterprise (FKP) Sojuzplodoimport [2011] FCAFC 69
Talacko & Ors v Talacko [1999] VSC 81
Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332
Telesto Investments Ltd & ors v UBS AG (2012) 262 FLR 119
The Sennar (No 2) [1984] 2 Lloyd's Rep 142
The Sennar (No 2) [1985] 1 WLR 490
Trawl Industries of Australia Pty Ltd (in liquidation) and Others v Effem Foods Pty Ltd (1992) 36 FCR 406
Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538
Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679
Zavodnyik v Alex Constructions Pty Ltd (2005) 67 NSWLR 457Texts Cited: Davies, Bell and Brereton, Nygh's Conflict of Laws in Australia, 8th ed (2010) LexisNexis Butterworths
E Campbell, "Res Judicata and Decisions of Foreign Tribunals" (1994) 16 Sydney Law Review 311
K R Handley, Spencer Bower, Turner and Handley, The Doctrine of Res Judicata, 3rd ed (1996) Butterworths
K R Handley, Spencer Bower and Handley, Res Judicata, 4th ed (2009) LexisNexis Butterworths
Mortensen, Garnett and Keyes, Private International Law in Australia, 2nd ed (2011) LexisNexis Butterworths
P Barnett, Res Judicata, Estoppel and Foreign Judgments, (2001) Oxford University Press
R V Miller, Miller's Australian Competition and Consumer Law, 34th ed (2012) Thomson ReutersCategory: Interlocutory applications Parties: Telesto Investments Limited (Plaintiff)
UBS AG (Defendant)Representation: Counsel:
R McHugh SC and N Bender (Plaintiff)
J Stoljar SC and L Livingston (Defendant)
Solicitors:
Russells Solicitors (Plaintiff)
King & Wood Mallesons (Defendant)
File Number(s): 2010/363808
Judgment
The proceedings
There are two notices of motion before the Court.
(1) by its notice of motion filed 6 September 2012, UBS AG, the defendant (UBS) seeks either:
(i) a permanent stay of the present proceedings under section 67 of the Civil Procedure Act 2005 or in the exercise of the court's inherent or implied power to control its own processes and procedure; or
(ii) the dismissal of the proceedings under the Civil Procedure Act s 90, Uniform Civil Procedure Rules r 13.4 or the Court's inherent or implied powers; and
(2) by its notice of motion filed 10 September 2012, Telesto, the plaintiff (Telesto), seeks an order that the temporary stay of the proceedings ordered by Ward J on 21 February 2012 be lifted.
It was accepted at the hearing that if UBS succeeded in obtaining either of the orders sought in the motion it would follow that Telesto's motion should be dismissed. Similarly if UBS failed in its motion then there would be no basis to resist the lifting of the temporary stay.
Background
In setting out the factual background in the following paragraphs, I have adopted a number of uncontroversial factual matters from a previous judgment on an interlocutory application in these proceedings given by Ward J on 7 February 2012 (Telesto Investments Ltd & ors v UBS AG [2012] NSWSC 44; (2012) 262 FLR 119).
On 3 December 2007, Telesto opened investment account 116731 with UBS in Singapore.
The account was the subject of detailed terms and conditions. Clause 19.1 provided:
19. Governing Law and Jurisdiction
19.1 In relation to any Account or Services, the Account Agreement and any Security Document shall be governed by and construed in accordance with the law of the country in which the relevant Account is booked and the Client irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of such country, unless otherwise specified. In the case of UBS e-banking Services and the use of unsecured email, the place of performance of all obligations by the Client and the Bank and the exclusive place of jurisdiction for any disputes arising out of and in connection with that Service shall be the jurisdiction in which the Account is booked. Notwithstanding this, the Bank shall have the right, but not the duty or obligation, to take legal action against the Client in the jurisdiction in which UBS e-banking Services is offered, in the Client's place of residence or domicile or any other jurisdiction, subject always to the foregoing choice of law.
In Section 6 of the terms and conditions dealing with risk disclosure the following general conditions were contained:
General Conditions
a. The terms and conditions in this Section 6 are applicable to transactions involving equities, foreign exchange, precious metals, bonds, commodities, interest rates, securities, market indices and any combination of these, and any spot, forward contracts, swaps, options and other derivatives transactions thereof including any structured products incorporating any or any combination of the preceding (the "Transactions").
b. Due to the volatile nature of the Transactions and the underlying assets therein, participation in a Transaction involves a certain degree of risk. The Client's attention is hereby drawn to such risks (which can be substantial). The Client should consult his advisors on the nature of such Transactions and carefully consider whether the kind of Transaction is appropriate for him in the light of his experience, objectives and personal and financial circumstances. The Client carries the burden of all risks involved in such Transactions and the Bank is not responsible for any losses whatsoever or howsoever arising from the Transactions.
c. The Client accepts that, when the Bank undertakes a Transaction for the Client, the Bank, or some other person connected with it, may have an interest, relationship or arrangement that is material in relation to the Transaction concerned. The client further acknowledges and agrees that when the Bank undertakes a Transaction for him, the Bank, or a person connected with it, could be dealing as principal for its own account or as agent for the account of another client or customer of the Bank.
d. By entering into any Transaction with the Bank, the client confirms that he has read and fully understood this Risk Disclosure Statement and all product term sheets, annexures and supplements pertaining to the Transaction, and that he fully understands the nature of the Transaction and the terms and conditions governing the said Transaction, including the Bank's margin requirements (if applicable).
e. By entering into any transaction with the Bank, the Client acknowledges that he makes his own assessment and relies on his own judgment in relation to any and all investment or trading or other decisions in respect of such Transaction and accepts any and all risks associated therewith and any losses suffered as a result of entering into any Transaction.
f. The Bank is not obliged to give advice or make recommendations and, notwithstanding that it may do so on request by the Client or otherwise, such advice or recommendations are given or made (and the Client acknowledges and agrees that it is so given or made) without any responsibility on the part of the Bank and on the basis that the Client will nevertheless make his own assessment and rely on his own judgment.
Clause 17 was in the following terms:
17. Emerging Markets
Emerging markets are markets in countries with moderate to low per capita national income, according to the World Bank's definition. This applies, for example, to some Asian countries.
Experience has shown that political changes in emerging markets countries affect the capital markets more profoundly than is the case in industrialized countries. Economic policy measures such as nationalization, government intervention in industry and trade, or limits on ownership rights may dramatically change corporate earnings outlook for foreign investors in emerging markets. The influences of higher interest rates or a high inflation rate can have much more serious consequences for economic development than would be the case in more mature markets. The dependence on price trends of commodities also represents an additional risk.
Telesto, which is incorporated in Jersey, held a portfolio of securities and had for some time retained Pole Star Funds Management Pty Ltd (Polestar), the principal of which was a Mr Scott Tyne (Mr Tyne), to manage its investment portfolio.
By late August 2008, Telesto's portfolio principally comprised equities and managed funds.
Under the arrangements, UBS made available to Telesto certain credit facilities including a short term facility in the amount of $US50 million which increased to US$60 million. The respective facilities were put in place by the acceptance by Telesto of an initial Credit Services Notification Letter dated 12 December 2007 and subsequent letters dated 13 February 2008, 1 June 2008 and 1 August 2008. The facilities were to operate in accordance with the account terms and conditions.
Mr Tyne, who was at the relevant time the sole beneficial owner of Telesto's assets, agreed to guarantee the amounts owing by Telesto to UBS under the facilities by executing a guarantee and indemnity on 26 September 2008 in favour of UBS which was expressly said to be governed by the laws of Singapore and nominated Singapore as non-exclusive jurisdiction to which the parties agreed to submit.
In mid to late 2007, it is alleged by Telesto that a Mr Steve Betsalel and a Mr Edward Farrell who were then employees or agents of UBS advised Telesto that Telesto should reconfigure its portfolio to include bonds recommended by UBS as a risk-reducing measure in light of the then prevailing state of global equities markets. It is further alleged that UBS told Telesto that it had specialist expertise in respect of debt capital markets particularly in emerging countries including Kazakhstan.
It is further alleged by Telesto that UBS specifically advised it to invest in bonds issued by Bank Turan-Alem (BTA) and Astana Finance both of which were banks located in Kazakhstan.
Telesto used funds available to it under the facilities to purchase various investments but this included bonds issued by the Kazakhstan financial institutions which investment amounted to the equivalent of AUD 33,401,266.20.
Telesto alleges that in the course of dealing with UBS (through Mr Tyne) UBS made a number of representations as to the safety, as it were, and the relatively risk free venture was involved in the investment in the bonds issued by BTA and/or Astana Finance. Further it is alleged that none of the representations made to Telesto were made to Mr Tyne whilst he was in Australia.
In September 2008, the value of the bonds declined and UBS on 29 October 2008 made a margin call requiring Telesto either to provide additional collateral or to reduce the amount owed under the facilities. As at 28 October 2008 the shortfall was USD 28,159,607. The October 2008 margin call was not met, and on 22 December 2008 UBS notified Mr Tyne that a Default Event had occurred and that the full amount of Telesto's liabilities was immediately due and payable, but that in "recognition of [Mr Tyne's] full cooperation to date", and subject to certain stated provisos, UBS would "suspend enforcement of its rights under the Account Agreement for the time being".
It is asserted by UBS that Telesto and Mr Tyne requested UBS not to sell the bonds provided by Telesto or make any further margin calls in relation to amounts owing under the facilities.
Telesto asserts that in order to meet the margin call it was forced to sell assets and make cash payments.
Over the balance of 2008 and throughout early 2009, the value of the bonds continued to decline and UBS made further margin calls on Telesto which liquidated further asserts in order to meet the margin calls. Telesto asserts that Mr Tyne was assured during 2008 that BTA was not a bank that would go into default. A similar representation was made by UBS (through Mr Farrell) in relation to Astana again to Mr Tyne.
On 9 April 2009, UBS was appointed by BTA to advise it in respect of restructuring its debts.
On or about 28 April 2009, BTA and Astana finance defaulted on their obligations to make payments in respect of each of the bonds all of which no longer have any value.
In April 2009, a proposed "Standstill Agreement" dated 23 April 2009 was forwarded to Telesto, but that document was not signed by Telesto and there is no suggestion it became a binding agreement. On 6 May 2009, UBS made demands on Telesto and Mr Tyne as guarantor to repay EUR 6,800,000 and GBP 2,350,000, representing the notional value of the BTA bonds, by 11 May 2009.
In any event, it is alleged by UBS that Telesto and Mr Tyne requested that UBS not sell the collateral provided by Telesto or make further margin calls in relation to amounts owing under the facilities, and UBS agreed not to do so on certain conditions that were contained in a subsequent letter dated 14 December 2009 and counter signed by Telesto on 31 December 2009 (the Standstill Agreement). UBS set out in the Standstill Agreement the terms on which it agreed, without prejudice to its rights under the account agreement, not to liquidate the collateral or to make further margin calls or call for further collateral until 31 March 2011 or the occurrence of an earlier event of default.
As part of the Standstill Agreement, Telesto undertook to procure Argot, which is the trustee of the Argot Unit Trust, to enter into a letter of undertaking in favour of UBS (Argot is a company incorporated in Australia and the corporate trustee of the Argot Unit Trust, and Mr Tyne was at all material times the director of Argot and the sole beneficial owner of the assets in the Argot Unit Trust). On 28 January 2010, Argot executed the letter of undertaking (Letter of Undertaking). Under the Letter of Undertaking, Argot undertook to open an account with UBS and to charge all and any assets held within that account as a continuing security in favour of UBS to secure Telesto's liabilities to it. Argot also agreed to apply the proceeds of certain litigation brought by it against a third party in Victoria directly to the Argot account towards repayment of Telesto's liabilities to UBS. The Argot account was opened on or about 4 June 2010.
The Standstill Agreement did not contain a choice of jurisdiction or choice of law clause, but the Letter of Undertaking, executed by Argot in consideration for the Standstill Agreement, nominated Singapore as the exclusive jurisdiction and specified the law of Singapore as the governing law. The Standstill Agreement made provision for its termination on the occurrence of certain events of default, including the failure of Telesto or Argot to comply with any of the conditions of the Letter of Undertaking; the failure of Telesto to comply with any of the conditions under the Standstill Agreement; and the occurrence (in the reasonable opinion of UBS) of a material adverse change in Telesto's financial condition or operating environment or of any event or circumstances causing UBS to believe that Telesto may not be able to comply with or perform any one or more of its obligations.
On 8 October 2010, Telesto's Australian solicitors, Eakin McCaffery Cox, wrote to UBS advising that they were instructed to commence proceedings against UBS on 16 October 2010 or as soon as practical thereafter. The letter raised various allegations against UBS, including the undertaking by UBS of a series of trades purportedly on behalf of Telesto without authority; the misrepresentation or omission by UBS of material facts in its promotion of debt securities issued by financial institutions in Kazakhstan; false and misleading conduct by UBS in relation to the provision of a financial service under Australian law; and the inducement by UBS of a financial institution in Kazakhstan to default upon debt securities issued by it in breach of its contract with third parties. The letter also adverted to the possibility of "collective legal action" by "purchasers of Kazakh bank debt" and sought details of any agent of UBS upon whom service could be effected in Australia on and from 16 October 2010.
On 11 October 2010, UBS issued a certificate of indebtedness pursuant to clause 14.3 of section 2 (General Conditions) of UBS's Account Terms and Conditions and clause 6 of the Guarantee and Indemnity dated 26 September 2008. Under the account terms, this certificate was said to be conclusive and certified total liabilities to be USD 12,617,499.56 as at 14 October 2010 (Total Liabilities).
On 15 October 2010, UBS served a notice of termination of the Standstill Agreement on Telesto, advising that default events set out in the Standstill Agreement had occurred and that pursuant to the terms of that agreement it "has terminated, ceased to be binding on the Bank and is of no further effect". UBS also demanded payment of the Total Liabilities from Telesto and from Mr Tyne as guarantor, for the amount specified in its previously issued certificate of indebtedness.
Also on 15 October 2010, UBS commenced proceedings in the High Court of the Republic of Singapore (being suit No 801 of 2010) against Telesto and Mr Tyne. I will later return to the detail of these proceedings.
On 18 October 2010, Telesto and Mr Tyne's solicitors responded, advising they would now commence proceedings against UBS and would effect service in Singapore. On the same day, UBS asked the solicitors then acting for Telesto and Mr Tyne in Singapore for instructions as to whether they were authorised to accept service on behalf of the Telesto defendants of the UBS writ in the Singapore proceedings.
On 19 October 2010, the High Court of the Republic of Singapore made orders allowing UBS to serve the originating process in the substantive proceeding on Telesto in Jersey and on Mr Tyne in the UK (UBS had received no response to its communication of 18 October 2010). On 23 October 2010, UBS received notification from the United Kingdom Royal Mail that the delivery of the initiating process on Mr Tyne was refused.
On 2 November 2010, Telesto, Mr Tyne and others, commenced proceedings in New South Wales (being matter 2010/363808) by filing in court a summons and commercial list statement on 2 November 2010, and serving those documents on UBS in Singapore on 3 November 2010. I will later return to the detail of these proceedings.
On 5 November 2010, the writ in the substantive Singapore proceedings was served on Telesto in Jersey by the Royal Court of Jersey.
On 11 November 2010, UBS commenced proceedings in the High Court of Singapore to restrain the plaintiffs in the New South Wales proceedings from carrying on those proceedings (the Singapore Anti-Suit Application). UBS joined each of the Telesto parties to this application, including Argot (which was not a party to the substantive Singapore proceedings previously commenced).
On 24 November 2010, Tan Kok Quan partnership (TKQP) filed a memorandum of appearance on behalf of Telesto in the substantive Singapore proceedings.
On 9 December 2010, the New South Wales Supreme Court heard a motion filed by UBS that the New South Wales proceedings be temporarily stayed pending the determination of the Singapore Anti-Suit Application. Consent orders for a temporary stay were made without prejudice to the parties' respective positions in the substantive Singapore proceedings or the Singapore Anti-Suit Application.
On 14 December 2010, following an application for substituted service, the originating process in the substantive Singapore proceedings was served on Mr Tyne in Sydney (through his solicitors).
On 21 December 2010, Telesto applied in Singapore for a stay of the substantive Singapore proceedings in favour of the New South Wales proceedings, on the basis of forum non conveniens.
On 10 January 2011, Mr Tyne similarly applied in Singapore for a stay of the Singapore proceedings in favour of the New South Wales proceeding.
On 11 February 2011, the Singapore Anti-Suit Application brought by UBS, and the stay applications brought by Telesto and Mr Tyne, were heard by Assistant Registrar Ms Tan Wen Hsien. An order was made on 21 February 2011 allowing the Singapore Anti-Suit Application brought by UBS and dismissing the stay applications brought by Telesto and Mr Tyne for a stay of the Singapore proceedings. At this time, the Total Liabilities owed by Telesto to UBS is alleged by UBS to be in excess of USD 12,000,000.
On 28 February 2011, Telesto, Mr Tyne and Argot lodged notices of appeal in respect of the decisions in the Singapore Anti-Suit Application and the stay applications.
On 8 March 2011, UBS informed Telesto that if UBS fails to receive payment of the liabilities on the account, it will take steps to realise the collateral in the account and apply the proceeds towards repayment of those liabilities. Later that month, on 24 March 2011, UBS informed Telesto that it will immediately take steps to realise the collateral in the account and apply the proceeds to reduce the liabilities.
On 16 May 2011, the appeal was heard before Justice Chong of the High Court of Singapore, at which time Telesto's liabilities to UBS were in excess of USD $5,000,000. On 14 July 2011, Justice Chong delivered his decision dismissing the appeal. By this time, UBS had taken further steps to realise the collateral in the account and apply the proceeds to reduce liabilities, and the Total Liabilities owed by Telesto to UBS was nil.
On 25 July 2011, application was made by the plaintiffs for leave to appeal from the decision of Justice Chong. The plaintiffs also agreed to file their defence in the substantive Singapore proceedings by 15 August 2011.
On 5 August 2011, TKQP discharged themselves as solicitors for the plaintiffs in Singapore.
On 12 August 2011, the plaintiffs' then Australian solicitors (Eakin McCaffery Cox) sent a letter to the Registrar of the Supreme Court of Singapore requesting an extension of three weeks to brief new counsel.
On 16 September 2011, Justice Chong heard the application for leave to appeal (against the appeal decision of 14 July 2011 in respect of UBS's Anti-Suit Application, and Telesto and Mr Tyne's stay applications). No appearance was noted on behalf of the plaintiffs and the application for leave to appeal was dismissed.
On 24 October 2011, UBS filed a notice of motion in the New South Wales Supreme Court seeking a permanent stay of the New South Wales proceedings.
On 21 November 2011, Ward J heard the application. Her Honour gave judgment on 7 February 2012, and made formal orders on 21 February 2012 staying the New South Wales proceedings "pending the final determination of the Singapore proceedings or further order of this Court".
On 1 March 2012, Telesto and Mr Tyne's Australian solicitors wrote to UBS's Australian solicitors indicating that they did not intend to file an appearance in the Singapore proceedings, nor were they instructed to accept service on behalf of any party in respect of the Singapore proceedings.
On 6 March 2012, the plaintiffs filed an amended summons and further amended statement of claim pursuant to orders of Ward J in which Mr Tyne and Argot were removed as plaintiffs.
On 8 March 2012, UBS filed an application to amend the amended statement of claim in the substantive Singapore proceedings.
On 12 March 2012, Telesto's Australian solicitors wrote to UBS's Australian solicitors in respect of the substantive Singapore proceedings stating that Mr Tyne's address for service was 26 Knightsbridge Parade, East, Sovereign Islands, Queensland.
On 2 April 2012, UBS arranged for a copy of its application to amend its statement of claim in the substantive Singapore proceedings to be served on Telesto and Mr Tyne.
On 12 April 2012, Telesto's Australian solicitors and Mr Tyne sent correspondence to UBS stating that neither party would contest the substantive Singapore proceedings on the merits.
On 13 April 2012, the Singapore court heard UBS's application to amend its amended statement of claim. No appearance was made on behalf of Mr Tyne or Telesto. Leave to amend was granted, and UBS served its further amended statement of claim in the substantive Singapore proceedings on Telesto on 16 April 2012, and on Mr Tyne on 18 April 2012.
On 19 April 2012, timetabling orders were made in the substantive Singapore proceedings for the filing of a defence by Telesto and for the filing of UBS's list of documents. UBS, through its Singaporean solicitors, sent a letter to each of Mr Tyne and Telesto setting out the orders made by the court.
On 17 May 2012, UBS filed its list of documents and verified affidavits in the substantive Singapore proceedings.
On 23 May 2012, UBS filed a summons for directions in the Singapore proceedings, and on the same day its solicitors sent copies of the list of documents and summons for directions to each of Telesto and Mr Tyne by ordinary and registered post.
On 24 May 2012, UBS attended a pre-trial conference before Registrar Ng in respect of the substantive Singapore proceedings. A timetable was fixed for the hearing which was to take place on 27 July 2012.
Also on 24 May 2012, UBS's Singapore solicitors sent a letter to each of Mr Tyne and Telesto with details of the directions made by Registrar Ng in respect of the substantive Singapore proceedings.
On 11 July 2012, UBS sent copies of its affidavits of evidence in chief and its supplementary list of documents and verifying affidavit to the Registrar of the Singapore Court.
On 12 July 2012, UBS's Singapore solicitors sent a compact disk containing UBS's affidavits of evidence in chief and its supplementary list of documents and verifying affidavit to each of Telesto and Mr Tyne by courier and ordinary post.
Between 12 and 20 July 2012, UBS filed a number of documents, including its bundle of documents and opening statement in respect of the substantive Singapore proceedings, in the Singaporean Court.
On 17 July 2012, UBS's Singaporean solicitors sent a compact disk containing UBS's bundle of documents and opening statement in respect of the substantive Singapore proceedings to each of Telesto and Mr Tyne by courier.
On 24 July 2012, UBS's Australian solicitors sent a compact disk to Telesto's Australian solicitors containing copies of relevant court documents in respect of the substantive Singapore proceedings, including copies of UBS's bundle of documents, UBS's opening statement, UBS's affidavits of evidence in chief, and UBS's supplementary list of documents and a verifying affidavit.
On 27 July 2012, the substantive Singapore proceedings were heard before the Honourable Justice Lai Siu Chiu. No appearance was noted on behalf of either Telesto or Mr Tyne.
Telesto called evidence and questions were asked of certain witnesses by the Judge. In the end, the Judge made a declaration in the following terms:
the defendants are estopped from asserting, and/or have compromised, any claims or defences they may have arising out of, or in relation to, the Investments and/or Total Liabilities due and owing to the Plaintiffs, including but not limited to, the acquisition or management of the Investments and/or the Total Liabilities.
On 30 July 2012, UBS's Singapore solicitors sent a letter to each of Telesto and Mr Tyne by courier and ordinary post setting out a summary of the hearing in the substantive Singapore proceedings on 27 July 2012.
On 6 September 2012, UBS filed its notice of motion in the New South Wales proceedings as described above.
On 10 September 2012, Telesto filed its notice of motion in the New South Wales proceedings also described above.
On 6 November 2012, Telesto served a copy of a proposed second further amended summons and second further amended statement of claim in respect of which it proposes to seek leave to file and serve in the event UBS's stay is lifted.
The issues
UBS submits that it is entitled to either a permanent stay or dismissal of the proceedings on the basis that, for one or more of the reasons articulated, Telesto should be precluded from proceeding further with its litigation in New South Wales. The argument is based on one or more of the doctrines of res judicata, issue estoppel, Anshun estoppel and abuse of process. Telesto on the other hand contends that none of these preclusionary doctrines has any application to the present case, and that in any event the orders made in Singapore were made in want of jurisdiction, and are therefore not recognisable in New South Wales.
Proceedings before Ward J
Although the procedural context Ward J was faced with is different to that which currently confronts the court, her Honour made a number of pertinent comments in relation to analogous issues.
Ward J was confronted with an application by UBS for a permanent stay of proceedings which had been commenced by Telesto on 21 November 2010. The application was sought pursuant to section 67 of the Civil Procedure Act 2005, or the inherent or implied power of the court.
Her Honour considered the procedural chronology in some considerable detail which at the time, as I have said, of the hearing before her the courts in Singapore had been concerned of course with UBS seeking an anti-suit injunction in Singapore on the one hand and Telesto on the other seeking a stay of the Singapore proceedings based on a forum non conveniens argument.
Assistant Registrar Tan, as I have already observed, on 21 February 2011 made orders in chambers dismissing the application by Telesto for a stay of the Singapore proceedings on the grounds of forum non conveniens and granted an anti-suit injunction against Telesto, Mr Tyne and Argot from prosecuting or continuing to prosecute the Australian proceedings. Telesto unsuccessfully appealed the orders of Assistant Registrar Tan and, on 14 July 2011, Chong J in the High Court of Singapore dismissed Telesto's appeals.
In considering the motion then before the Court her Honour made it clear that the test applicable on such an application was that as recognised in CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345. Her Honour therefore had to determine whether the Australian court was a clearly inappropriate forum.
UBS put a number of argument to the court as to why a permanent stay should issue. First it was submitted that principles of comity required the stay. Secondly it was submitted that there was an issue estoppel which precluded the Telesto parties from contending in the then proceedings that it was not vexatious or oppressive for them to continue to prosecute them. Next it was submitted that Telesto, by seeking to re-litigate matters in this court, was involved in an abuse of process, the forum non conveniens issues having been determined in Singapore. Her Honour expressed the view that depending upon what was ultimately involved in a determination of the Singapore proceedings then a continuation of the proceedings in this court would be likely to be vexatious and oppressive having regard to the controversy as a whole. That was dependent in her Honour's view on there being "such an overlap" in the proceedings but largely dependent upon the course that the Telesto parties might ultimately take in that jurisdiction.
Her Honour considered that the principles considered by the High Court in CSR, accepting the explanation given by the Supreme Court of the United States in Hilton v Guyot (1895) 159 US 113, at 163 to 164.
Her Honour considered that the principles of comity require that due recognition be given to the judicial act of the High Court of Singapore in granting (and upholding on appeal) an anti-suit injunction restraining the Telesto parties from proceeding with the matter in New south Wales and dismissing Telesto's application for a stay of the proceedings in Singapore. Her Honour made clear that the orders made in Singapore are a factor to be taken into account but by no means a determinative factor, [111]. Her Honour thought that to accept that the anti-suit injunction was determinative of the question of stay would be tantamount to the enforcement in this jurisdiction of a foreign injunction, [113]. Her Honour did accept that the existence of the anti-suit injunction in Singapore was clearly a powerful discretionary factor because to permit Telesto to otherwise prosecute the proceedings in Australia would be to acquiesce in its defiance of an anti-suit injunction especially one granted following a contested hearing and upheld on appeal, [115].
In analysing the question of whether or not there was an issue estoppel having referred to the relevant authorities, her Honour determined that there was no issue estoppel in relation to the issue as to whether this court was a clearly inappropriate forum for the resolution of the disputes between the parties. Her Honour observed that all that had been determined in Singapore was that it was the natural and most appropriate forum, [131]. Her Honour observed that Chong J in the High Court in Singapore had made a finding that it was vexatious or oppressive for the Telesto parties to continue the proceedings in New South Wales. Her Honour thought estoppel was certainly capable of arising in relation to that issue, [132]. Her Honour found that the Telesto parties were, by reason of the determination in Singapore, estopped from denying in the proceedings before her that the maintenance of those proceedings will operate in a manner that is vexatious or oppressive in its effect on UBS. However, her Honour did not accept that the fact that the Telesto parties were so bound by that finding determined the issue of whether to grant a stay, and there was still a discretion for her to exercise accordingly, [135] and [136]. Her Honour took the view that that matter had to be determined consistent with the authorities objectively and that UBS had the onus in persuading the court accordingly (albeit that the Telesto parties may be estopped from denying or raising a positive case against it, [136]).
It is plain that relevant to her Honour's consideration of this issue was, to some extent, what the subject matter of the claims may ultimately be in the substantive proceedings in Singapore. No defence had been filed by the Telesto parties and it is plain from the above chronology the ambit of the substantive claims being prosecuted by UBS was significantly reduced by reason of the discharge of the Total Liabilities claimed in relation to Telesto's account. What was then on foot in Singapore so far as UBS was concerned was claims for declaratory relief and for indemnity costs. Her Honour was therefore faced with having to determine the application on the basis that she was unable to make an assumption as to the potential content of Telesto's defence in the Singapore proceedings. It was foreshadowed by UBS before her Honour that if it obtained declaratory relief as sought, this would bring the entirety of the dispute between the parties to an end. The declaration, it was submitted, would be fatal to all claims thought to be prosecuted by Telesto and Mr Tyne in New South Wales. Any such attempt would not be permissible on the grounds, it was submitted, of res judicata issue estoppel or abuse of process. Her Honour thought it might ultimately be a matter for debate. Her Honour also thought a relevant consideration was whether the defence raised in the Singapore proceedings challenged the validity or enforceability of the initial transactions or transaction documents themselves (as opposed to a defence going only to the estoppel/compromise said to have been effected by reason of the later Stand Still Agreement and alleged Implied Agreement, [152]).
Her Honour clearly contemplated the possibility that because of the stance taken forensically by Telesto in Singapore, duplication of issues and the risk of even conflicting decisions would not necessarily arise as would in the event of a direct overlap in the issues, [180].
As part of the discussion on this issue, her Honour of course had regard to the expert opinion of senior counsel in New South Wales, Mr J T Gleeson SC, as to the relevant Australian legislation and the juridical advantages available to the Telesto defendants thereunder. Her Honour was therefore not satisfied that there would necessarily be an abuse of process by reference to the re-litigation of the substantive issues in the Singapore proceedings if a stay was not granted, although she could see forceful arguments, that costs incurred to date in the various interlocutory applications in Singapore would have been effectively wasted.
On the fourth issue which her Honour had to deal with, namely that of forum non conveniens, her Honour did advert to the competing claims that there were juridical advantages by reason of the existence of forms of relief available under the Trade Practices Act 1974 (Cth) which may not be available in Singapore, together with the evidentiary and onus of proof advantages for a claim under the Trade Practices Act as compared to proceedings for negligent misrepresentation. Chong J in the High Court in Singapore, who also had the benefit of the expert opinion of Mr Gleeson SC, formed the view that there would be no material differences or advantages for the Telesto parties arising under the Trade Practices Act. Her Honour felt that she could not discount the analysis performed by Chong J who concluded that there was no substantial or material advantage to the Telesto parties prosecuting their claims in New South Wales. Her Honour thought that the test in the circumstances was that articulated by Campbell JA in Garsec v Sultan of Brunei [2008] NSWCA 211 to the effect that the court as a general rule should not be deterred from granting a stay of proceedings because the plaintiff may be deprived of an advantage forensically, provided the court is satisfied that substantial justice will be done in the available appropriate forum. Her Honour accepted the submission by UBS and was satisfied that substantial justice would be done in Singapore, [194].
The issue of juridical advantage was articulated before me, and again I had the benefit of the opinion of Mr Gleeson SC, but also that of Tan Cheng Han, an advocate and solicitor of the Supreme Court of the Republic of Singapore and a Professor of Law at the National University of Singapore. I will of course return to this aspect of the matter later. However, her Honour importantly concluded at [205] and [206] the following:
[205] In light of the conclusions reached by Chong J (following his analysis of the pleadings and Mr Gleeson's expert opinion) as to the operation of the law in Singapore it is difficult to find that there are any substantial juridical advantages in the ability of the Telesto parties here to invoke the statutory provisions in relation to misleading and deceptive conduct, although I note that there is weight to be accorded to the public policy underpinning this legislation as a factor pointing to this jurisdiction.
[206] While the substantive law to govern the claims made by the Telesto parties in relation to the tort and misleading and deceptive conduct claims seems to me to be the law of this forum the other claims raised by the Telesto parties I accept are likely to be governed by the law of Singapore. I also note that the commencement of the proceedings in this jurisdiction by ArgoT is in breach of an exclusive jurisdiction clause in its contractual arrangements.
Her Honour concluded (at [218]) that (upon the basis she was then considering the matter) this court was clearly an inappropriate forum for the purposes of the test in Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538.
Her Honour though relevantly observed at [219]:
[219] If, however, the controversy to be litigated in Singapore will not overlap to the extent that was considered likely when the matter was before Chong J, then I do not consider that it would be vexatious and oppressive for the Telesto parties to continue the present proceedings in which relief is sought in part under forum statutes in respect of which the courts have recognised there is a strong public policy in favour of the protection of those doing business in this jurisdiction (and even though I recognise that this would seem to involve a clear breach of the orders made against the Telesto parties in Singapore and would presumably expose them to charges for contempt according to the applicable law in Singapore).
In all the circumstances her Honour was not minded to grant a permanent stay but rather a temporary stay subject to the outcome of the proceedings in Singapore.
The Hearing of the Substantive Proceedings in Singapore
Immediately following the entry of formal orders by Ward J, Telesto's Australian solicitors and Mr Tyne made it abundantly plain that they did not propose to take part in any way at all in the substantive proceedings in Singapore; in particular, that neither party would contest the proceedings on the merits. Mr Tyne, on 12 April 2012, from his address in Queensland wrote to Drew and Napier (solicitors for UBS in Singapore) in the following terms:
The High Court of Singapore does not have personal jurisdiction over me and I will not contest this hearing on its merits. This was communicated to your client via its Australian lawyers but it was also self evidence given:
a. the defendant's lawyer formally withdrew from the proceeding after the application to put a stay on jurisdictional grounds failed; and
b. a defence was required to be filed more than a year ago.
I understand you propose to prosecute this proceeding ex parte "on the basis of the facts" set out in the Statement of Claim and the affidavit of Sng Sannie dated 29 March 2012. Many of those "facts" are wrong and are known to be so by your client. Other "facts" are simply asserted in circumstances where your client could not possibly know whether the proposition is true and is aware it is disputed. Some "facts" are contradicted in evidence in other proceedings. Yet other "facts" are inconsistent with documents published by and to your client.
UBS obtained leave to amend its statement of claim in the Singaporean proceedings. In that document, which was filed on 13 April 2012, both Telesto and Mr Tyne were still the first and second defendants respectively.
There are a number of matters that require noting. First, there appears to be added in now paragraph 5 an allegation that the first defendant did not request or pay for any investment specialist services or advice in relation to the account. It alleges that the first defendant signed up for the standard services and was otherwise in full control of its portfolio. Additionally, there was also an allegation that the first defendant had the ability to assess the merits of and understood and bore the economic risk of trading in securities, derivatives and/or currencies on a margin basis. Reference is therein made to the Risk Disclosure Statement (paragraph 99(d)).
As with the previous pleading, the full extent of the alleged contractual obligations are fully set out in the amended pleading. In addition, for example, it was alleged pursuant to clause 7.1 that the first defendant (Telesto) accepted all risk arising from its opening and maintenance of the relevant account including but not limited to any investment or trading. Further it is alleged that the first defendant fully acknowledged that it had read and fully understood the Risk Disclosure Statement and was relying upon its own judgment in making the investments.
Considerable detail is then pleaded by way of extracts from the Risk Disclosure Statement and the consequences of having acknowledged, as it were, by signing the relevant documentation that the particular transactions were volatile (clause (gg)). In addition, it was specifically pleaded (at 9(kk)) that the plaintiff was not obliged to give advice or make recommendations notwithstanding that it may do so upon the request of Telesto.
The whole thrust of Section A, as it were, of the amended pleading (apart from the various contractual obligations) was to emphasise that the whole nature of the risk associated with the particular investments was entirely for the assessment and analysis of the defendants.
Section B of the pleading deals in considerable detail with the interaction between employees of UBS and the defendants.
In section B of the amended pleading, UBS specifically pleaded the roles of Mr Betsalel, described as the "client advisor", and Mr Farrell, described as "an emerging market specialist". The dealings between the various parties is set out in some considerable detail. More to the point, in paragraph 16 (although it purports to be a summary of calls, emails and/or meetings) there are a number of representations which it is alleged UBS made to the second defendant acting on behalf of the first defendant. Importantly, in paragraph 16(g) it was pleaded in particular that UBS represented that BTA and Astana Finance bonds were "interesting ideas and suitable investments for investors seeking high yield at the material time". In paragraph 16(h) it is specifically pleaded that the first defendant was effectively advised to diversify investments across issuer and countries as the investments were "risky". It is further pleaded that it was represented that the potential to lose more than the investments themselves was always possible when leverage and financing was involved. In addition, in paragraph 17 it is alleged (amongst other things) that Mr Farrell told the second defendant that based on a presentation and financials provided, BTA did not appear to be a bank on the verge of defaulting. It is asserted that Mr Farrell simply relayed the contents of a conference call conducted by BTA for investors and analysts in February 2008.
In particular, in paragraph 18 UBS alleged that the statements relevantly made in paragraphs 16 and 17 were true at the time they were made or alternatively there was a reasonable basis and/or grounds for making the statements based on the information available to it.
In paragraph 21, it is specifically asserted that the defendants asked the plaintiff (through Mr Betsalel and Mr Farrell) for investment recommendations. It is asserted the defendants acknowledged that the plaintiff was not obliged to give such recommendations and more to the point that the first defendant expressly agreed that it was not relying on the plaintiff but on its own assessment and judgment. Section C of the pleading deals with the conduct of the account and Section D deals with the margin call events. Section E deals with the guarantee. Section F deals with the Standstill Agreement.
In paragraph 46 of the pleading it is alleged that in consideration of the plaintiff entering into the Standstill Agreement and receiving benefits thereunder the defendants impliedly agreed amongst other things to waive and/or not raise any claims or defences they may have arising out of or in relation to the investments and/or Total Liabilities including but not limited to the acquisition or management of the investments and/or Total Liabilities.
Paragraph 46(vi) asserts that the second defendant on or before 20 December, discovered a seminar paper prepared by Ms Bakhyt Mazhenova, chairman of the Kazakhstan Deposit Insurance Fund which set out certain matters in respect of investments in Kazakhstan. The second defendant is alleged to have sent a copy of the paper to Mr Betsalel and as a result, a telephone conversation took place between the second defendant and Mr Betsalel about the seminar paper. Mr Betsalel is alleged to have said to the second defendant that the plaintiff should have known of the matters mentioned in the seminar paper and should not have recommended the investments to the first defendant. Notwithstanding this apparent knowledge, the defendants executed the Standstill Agreement and did not pursue their alleged claims against the plaintiff. Further it is asserted that the defendants had the benefit of independent legal advice from Singaporean solicitors which led to the execution of the Standstill Agreement. As a result it is pleaded in paragraph 47 that either by reason of the Standstill Agreement or alternatively the implied agreement the defendants are estopped from asserting and/or have compromised any claims or defences they may have had arising out of or in relation to the investments and/or Total Liabilities including but not limited to the acquisition or management of the investments and/or the Total Liabilities.
Section G of the pleading deals with events of default. Section H deals with the realisation of collateral.
The relief claimed is in the following terms:
IT IS THIS DAY ADJUDGED AND DECLARED that (all capitalised terms as defined in the Statement of Claim (Amendment No 2) filed on the 13th day of April 2012 (the "SOC")):-
1. The Investments were authorised.
2. The Defendants are estopped from asserting, and/or have compromised, any claims or defences they may have arising out of, or in relation to, the Investments and/or Total Liabilities due and owing to the Plaintiffs, including but not limited to, the acquisition or management of the Investments and/or the Total Liabilities.
3. By reason of the Events of Default, the Standstill Agreement was terminated and the Total Liabilities were immediately due and payable to the Plaintiffs.
4. As at 14 October 2010, the Defendants were liable to the Plaintiffs in the total sum of USD12,617,499.56, and with interest at a rate of 3% thereon over and above the Plaintiffs' cost of funds.
5. Pursuant to clauses 11.5 and 13.3 of the Account T & C - General Conditions, clause 1.8 of section C of the Account T & C - Product Conditions, clause 6 of the Charge, clause 2 of the Account T & C - Risk Disclosure Statement, and the CSNL, the Plaintiffs were entitled to realise the Collateral in the Account and apply the proceeds received to satisfy the Total Liabilities owed by the 1st and 2nd Defendants.
AND IT IS ORDERED that costs to be paid by the Defendants to the Plaintiffs on a full indemnity basis.
There is no dispute that a number of procedural steps thereafter took place in Singapore. As is clear from the above, Mr Tyne and Telesto were each provided with copies of relevant court documents including lists of documents, a compact disc containing the discovery of UBS and copies of its affidavits of evidence in chief.
Amongst the materials which was not only filed in court in Singapore but provided to the defendants was the opening statement on behalf of UBS. That statement is a 74-page document. Apart from dealing with the proceedings in Singapore the opening statement also dealt with the Australian proceedings. It was certainly the case as opened in Singapore that Mr Tyne was a knowledgeable and sophisticated investor who did his own research, came to his own conclusions and, it was submitted, made his own decisions as to the investments including the Kazakh bonds. It was specifically asserted that UBS shared its views with Mr Tyne but that its views were at all times based on analysis available to UBS and in doing so it acted diligently and with reasonable care. It was specifically asserted in UBS's opening that the defendants at all relevant times were possessed of every material piece of information and yet entered the Standstill Agreement in order to compromise their position.
The proceedings in Singapore were heard before the Honourable Justice Lai Siu Chiu on 27 July 2012. UBS was represented by Mr Kumar of counsel. Mr Kumar informed the Judge that no defence had been filed and the defendants had notified UBS that they did not propose to contest the proceedings or to appear.
In addition to the written opening it appears 11 volumes comprised the plaintiff's tender bundle of documents. I was not supplied, unsurprisingly, with all the documentation which was filed before the court in Singapore but I was provided with a list of documents and I was provided also with the affidavit of evidence in chief of a Mr Daniel Heimlicher who was the first witness called by UBS. Mr Heimlicher's statement ran for some 70 pages and all in all comprised four volumes of material. Evidence was also called from Mr Farrell whose affidavit comprised three volumes and a Mr Milan Parmar Singh whose affidavit comprised a single volume.
Mr Kumar explained to the court that UBS had attempted to have Mr Betsalel attend and give evidence, and although he had resigned from UBS in May 2009 he appeared to be cooperating with the defendants' then solicitors TKQP. Mr Kumar then informed the Judge that Mr Betsalel had insisted that if UBS were to take a statement from him he wanted the defendants' solicitors, who had already spoken with him, to be present. Further, Mr Kumar advised the court that at the time the proceedings were before Justice Chong in Singapore, Mr Betsalel resided in Singapore but had since moved to Hong Kong. Mr Kumar said that the explanation he provided to the court was really for the purposes of supporting the proposition that Mr Betsalel was not prepared to speak with and/or cooperate with UBS in relation to the proceedings.
Following his opening address Mr Kumar called as his first witness Mr Heimlicher. Apart from being sworn in and having confirmed that the contents of his affidavit were true, no further questions were asked of him, unsurprisingly. The learned Judge however asked Mr Heimlicher to confirm that apart from some conference calls he had really not had much to do with Mr Tyne. He confirmed that at the relevant time Mr Betsalel was the client advisor who it seemed had no assistance, and Mr Heimlicher confirmed effectively that Mr Betsalel virtually had sole contact with Mr Tyne.
The Judge asked Mr Heimlicher whether he thought there was any chance that Mr Betsalel had persuaded Mr Tyne to invest in the bonds, to which Mr Heimlicher said he would not know. Mr Heimlicher confirmed that he had conference calls with Mr Tyne but he thought perhaps ten would be the maximum number. When the Judge asked Mr Heimlicher how Mr Tyne had come across, Mr Heimlicher said that he appeared to him to be very knowledgeable, very sophisticated and a "very savvy investor who knew exactly what he did, who had a very clear opinion of the investments in the portfolio he had with UBS at that point in time". Mr Heimlicher said "we always" had the impression Mr Tyne was in full control of his account and the investments he made.
Mr Heimlicher said that when he came to deal with Mr Tyne, he had already invested in the Kazakh bonds and he was party to attempting to persuade Mr Tyne to sell some of the investments. So far as the Kazakhstan bonds were concerned Mr Tyne he said "felt comfortable" and did not want to sell them. However he finally changed his mind when the price was too low. Mr Heimlicher indicated that in his opinion Mr Tyne did not panic and he further went on to say that he felt Mr Tyne was "very confident" in what he knew or seemed to know about the Kazakhstan banking system. The Judge then asked Mr Heimlicher about the Standstill Agreement and the circumstances surrounding it.
The next witness was Mr Singh. Again he confirmed that the contents of his affidavit were true and correct. The Judge asked Mr Singh whether he had spoken with Mr Tyne, and Mr Singh indicated that he had a couple of phone calls and one meeting. The Judge enquired of Mr Singh whether Mr Tyne had ever asked for bank statements, and Mr Singh said they were ultimately emailed to Mr Tyne. Mr Singh also confirmed that an e-banking platform was provided to Mr Tyne so that he could access the financial information he needed. The Judge then asked a number of questions about the witness' knowledge of Mr Betsalel. The witness indicated that he did not know the reasons why Mr Betsalel had resigned from UBS.
The next witness was Mr Farrell. Again he confirmed that the contents of his affidavit were true. Mr Farrell confirmed that he had some initial discussions with Mr Tyne about investments in emerging markets in general, and his impression was that Mr Tyne was genuinely interested in investing in emerging markets and seeking investments with high potential for returns and that he did not mind taking the risk. Mr Farrell indicated that his impression was that Mr Tyne understood and/or had previous knowledge that Kazakhstan was a place that was rich in minerals and had a good deal of wealth and he thought that would be a good place to look for opportunities. He told the Judge that at that time the coupon rates for Kazakhstan bonds were somewhere between 9 - 10% whereas US treasury bonds were somewhere between 4 - 5%. The witness told the Judge that Mr Tyne had mentioned to him at some point that he had gone onto a website and checked prices for various bonds in emerging markets. Mr Farrell indicated that he was not specifically aware of the seminar paper that Mr Tyne had referred to in the Australian proceedings. To his knowledge, that seminar paper was never widely distributed in the circles Mr Farrell dealt with and was never mentioned in any research reports that he regularly read. Mr Farrell thought that, having read the seminar paper, it was quite irrelevant to any decision to invest in Kazakhstan bonds. Mr Farrell said that he did not believe that the banks in Kazakhstan would default but that it might be difficult to sell the bonds. When the financial crisis occurred there were simply no buyers.
At the conclusion of the evidence Mr Kumar drew the Judge's attention to the penultimate paragraph of Ward J's judgment.
In giving her ex tempore judgment on 27 July 2012, the Judge indicated that she had considered the documents before the court and was satisfied that whatever may have been the rights and liabilities between UBS and Telesto and Mr Tyne all of those rights and liabilities were subsumed after the Standstill Agreement was signed by the first defendant on 31 December 2009. Further, she found that the Standstill Agreement had not been complied with by the second or first defendant and therefore she proposed to give judgment for the plaintiff. Therein a discussion took place between Mr Kumar of counsel and her Honour as to the precise form of the declaratory relief that she proposed to give. In doing so, the Judge purported to make findings of the variety of matters asserted in UBS's Opening Statement in paragraphs 113 to 139, and said that the content of those paragraphs accorded with the documentation and the evidence before the Court. In one sense however, what her Honour did was cryptically indicate her accord that the evidentiary materials support the allegations in UBS's opening statement. This was a process of adoption rather than a reasoned judgment in which the Judge makes it clear precisely what facts are indispensable to the ultimate outcome.
It is important to note the substance of a number of those apparent findings. First, the judge found that in the circumstances the investments were clearly authorised, [115]. She also found that the defendants were contractually estopped by the terms and conditions of the account from asserting that:
(1) they have relied upon UBS Singapore's advice or representation;
(2) UBS owed them a duty to furnish them investment advice;
(3) UBS Singapore owed them a duty to act in their best interests; and
(4) UBS Singapore owed them a fiduciary duty, [116].
Further, her Honour found that UBS was not in breach of any fiduciary obligation it may have owed the defendants by entering into the Kazakhstan engagement, [117] and [118].
Her Honour also held that by reason of the circumstances she appears to have found, Telesto admitted and /or was not entitled to deny that the Total Liabilities were owed to UBS Singapore, the investments were authorised and UBS Singapore was discharged from all its obligations to Telesto and Mr Tyne. Further, she found that Telesto was estopped from denying the Total Liabilities, asserting the investments were unauthorised and asserting that UBS Singapore was negligent or that UBS Singapore misled or deceived Telesto and/or Tyne, [119]. In addition, by UBS Singapore entering into the Standstill Agreement and the defendants receiving benefits under that agreement, the defendants had impliedly agreed to waive and/or not raise any claims or defences they may have had arising out of or in relation to the investments and/or Total Liabilities.
Further, the Judge again appears to have found that there was a clear understanding between Telesto and Mr Tyne when entering into the Standstill Agreement that Telesto had decided to settle matters with UBS Singapore and abandoned their causes of action against UBS Singapore in exchange for UBS Singapore agreeing to give Telesto and Mr Tyne the benefit or more time to meet the Total Liabilities and not enforce its right to liquidate the collateral, [123].
It was noted that the defendants had sought to rely on various matters in respect of their alleged claims against UBS Singapore (among other things, that UBS Singapore should inform them of potential frauds or issues in Kazakh banks, and in particular, BTA and Astana including matters in the seminar paper, and that UBS improperly acted in the restructuring of BTA's bonds). It was further noted that the defendants had made the same allegations before the Singapore courts in the Anti-Suit Application, [124]. However, the Judge found that the events and matters which Telesto and/or Mr Tyne seek to rely upon in relation to their alleged claims against UBS Singapore were matters which they were aware of, or must have been aware of, at the time they were legally represented and decided to enter the Standstill Agreement. Notwithstanding this they entered into the agreement presumably on their lawyers' advice.
In particular, by adopting the detail of paragraph 125 of UBS's opening statement, the Judge appears to have found that Telesto and/or Mr Tyne had impliedly agreed to waive or not raise any claims or defences they may have had in relation to a number of matters. This was based on the following of the Judge's findings:
- information was provided by Messrs Betsalel and Farrell to Mr Tyne in a phone call on 19 March 2009 about the likelihood that BTA would have to restructure because of the possibility of fraud within BTA, [125(a)];
- it was public knowledge in or around April 2009 that UBS was engaged by BTA as a financial consultant, [125(b)];
- in April 2009 BTA declared that it would cease payment of principal sums and on 29 April 2009 BTA defaulted on payment of coupons owed to bond holders, [125(c)];
- Mr Tyne was following the events in Kazakhstan as they developed, [125(d)];
- during a further conversation in April 2009 Mr Betsalel and Mr Farrell again spoke to Mr Tyne who revealed that he was aware that BTA was being advised by UBS and Goldman Sachs, [125(d)(i)];
- it was public knowledge on or around 19 May 2009 that Astana Finance was suspending payments of interest and principal on their international debt and principal payments on certain domestic obligations as of 15 May 2009, [125(e)];
- during a telephone call on 15 June 2009 Mr Tyne told Mr Heimlicher that he may want to get rid of the Kazakh bonds because he did not "trust them" , [125(f)];
- during a telephone call on 26 June 2009 Mr Tyne said that he had looked at BTA's balance sheet and that they had lost half or more of their balance sheet in the last four months and he said it was "the world's largest fraud" , [125(g)];
- it was also public knowledge that in August of 2009 proceedings had been commenced in the High Court in England against the ex-chairman of the Board of Directors of BTA alleging fraud and a number of persons, including Mr Mukhtar Ablyazov (the ex-chairman), were charged with fraud and money laundering by Russian and Kazakh authorities, [125(h)];
- Mr Tyne's affidavit sworn 20 December 2010 on behalf of Telesto in the Anti-Suit Application indicated that Mr Tyne was intimately aware of the various events described, [125(i)];
- in Mr Tyne's affidavit filed 31 January 2011 (in response to UBS Singapore's assertion that Telesto and/or Mr Tyne knew of the seminar paper and their alleged claims in misrepresentation against UBS Singapore before entering into the Standstill Agreement), Mr Tyne had alleged that he and Telesto were aware of their alleged "claims in misrepresentation" against UBS Singapore and that they believed that the claims entitled them to damages, [125(j)].
It was therefore found by the Judge that the Standstill/Implied Agreement was, and was intended to be, a compromise. Prior to entering into the agreements on 31 December 2009 Telesto and Mr Tyne were aware of their alleged claims and had contemplated legal proceedings. It was in that context that they negotiated and executed the Standstill Agreement, [126], [127], [128], [129] and [130].
Further, the Judge said the termination of the Standstill Agreement was irrelevant as it provided that upon termination the Total Liabilities became immediately due and payable which clearly implied that there could be no challenge to the Total Liabilities, and hence the relevant estoppel arises, [136], [137] and [138].
The New South Wales proceedings
Initially in New South Wales Telesto, Mr Tyne and Argot commenced proceedings on 2 November 2010. Mr Tyne and Argot ceased to be plaintiffs in New South Wales upon the filing of amended pleadings on 6 March 2012 pursuant to leave granted by Ward J on 21 February 2012. Telesto is presently the sole plaintiff in the New South Wales proceedings.
It is not controversial that the New South Wales proceedings have included claims of negligence, misleading or deceptive conduct and breach of fiduciary duty against UBS.
On 6 November 2012, Telesto served a second further amended summons and a second further amended commercial list statement. Telesto has foreshadowed an intention to seek leave to file those pleadings in the event it succeeds in the present motions.
In the proposed pleading Telesto advances three principal claims against UBS. First, it alleges misleading and deceptive conduct in that it acted in reliance upon misrepresentations made orally by UBS (Mr Betsalel and Mr Farrell) to Mr Tyne in telephone conversations. Further it relies upon the provision of written materials and various statements and advice allegedly given by UBS between October 2007 and April 2008. It is further alleged that there was a failure on the part of UBS to disclose certain matters, and in particular an alleged statement made by Mr Farrell in 2008 regarding one of the Kazakh financial institutions. Telesto alleges that it opened its account with UBS, purchased and retained the Kazakh bonds, liquidated assets and entered into the Standstill Agreement in reliance upon the alleged misrepresentations.
There is also a claim in negligence on the basis that UBS owed Telesto a duty of care in connection with the provision of investment advice. A similar factual sub-stratum is relied upon as that in relation to the claim for misrepresentation or misleading and deceptive conduct.
There is also a breach of fiduciary duty alleged, on the basis that UBS owed fiduciary duties to Telesto in relation to the Account and breached those alleged duties by acting as advisors to BTA.
Declarations are sought and damages are claimed pursuant to the Australian Securities and Investments Commission Act 2001 (Cth), the Corporations Act 2001 (Cth) and the Fair Trading Act 1987 (NSW) or the Fair Trading Act 1987 (Qld). Orders are also sought, the effect of which would be to set aside any obligation on Telesto arising from the Account Terms and Conditions or the Investment Services Terms and Conditions, the Standstill Agreement and any implied agreement between UBS and Telesto.
Equitable compensation is also sought, together with an order that UBS account to Telesto for profits.
Expert Evidence
Both the plaintiff and the defendant rely upon expert evidence on the question of whether and if so to what extent particular causes of action and/or remedies available in New South Wales provide a material juridical advantage to Telesto. Whether or not this is in fact so may go to a number of issues, but certainly to the question of the exercise of discretion in the event that consideration needs to be given to the question of abuse of process.
Before the High Court in Singapore and also before me was an affidavit of Mr Justin Thomas Gleeson SC. Mr Gleeson SC did not give evidence before me. His reputation however is well known in this jurisdiction. A number of questions were posed to him. The first was whether the various statutes relied upon by the plaintiff (both State and Federal) would apply to the representations which were then alleged as at the date of Mr Gleeson SC's opinion. Mr Gleeson SC's opinion was obtained very early in the proceedings, namely on 20 December 2010.
Mr Gleeson SC (at [18]) expresses the view that on the face of the amended commercial list statement the misleading and deceptive conduct case is capable of going forward in New South Wales without any real or arguable issue being raised that in some way asserts an extra-territorial element beyond the reach of either the State or Federal laws relied upon. He points out (at [20]) that the relevant statutory prohibition is upon conduct that is misleading or deceptive or is likely to mislead or deceive. He makes the point that these are separate limbs so that conduct which has the capacity or likelihood of leading to deception is thus prohibited just as much as conduct which is found to be actually misleading or deceptive. He also points out that where the representations concern a future matter the provisions have two benefits for a plaintiff. First, unless the defendant had reasonable grounds for making the representation at the time it was made it will be deemed to be misleading. Second, there is a reversal of onus. In such a case the defendant will be taken not to have reasonable grounds for making the representation unless it produces evidence to the contrary.
There is no need for the plaintiff to plead or prove intent, and if the conduct is viewed objectively as being misleading or deceptive or likely to mislead or deceive it is actionable whether the defendant knew, intended or was reckless as to that result. Further, there is no requirement to plead or prove negligence or carelessness.
Assuming contravention has been proven, Mr Gleeson SC describes the remedies available as a "remedial smorgasbord". Remedies can range from damages, through to the making of other orders, through to a statutory injunction. He also points out that the principles governing the remedies are to be deduced from the statute and are not "reduced" to the principles of ordinary law. In each case where he refers to various juridical advantages he refers appropriately to well-known authorities.
Concepts of remoteness and foreseeability which might apply in a tort claim are not automatically translated into the statute, and further, the court is not constrained by limitations under the general law upon a party's right to rescind for misrepresentation. The court is obliged to consider all of the circumstances including the causal link between the defendant's conduct and the loss asserted.
The second question Mr Gleeson SC was asked was whether the statutory causes of action and remedies available to Telesto and Mr Tyne under the State or Federal legislation is comparable to causes of action and remedies for negligent misrepresentation, deceit and/or under the Singapore Misrepresentation Act (Cap 390).
Mr Gleeson SC expressed the view that in relation to negligent misstatement, the claim under the various Australian statutes is broader than remedies which might have been available in Singapore. Negligent misstatement in Singapore requires the existence of a duty to act carefully in respect of the statements. The duty depends on the existence of factual foreseeability, proximity and public policy considerations. By contrast the claim under the Australian statutes does not require the existence of a duty. As Mr Gleeson SC points out, a misstatement is one example of misleading conduct, but only one. Conduct can be misleading by making a statement as to a future matter without reasonable grounds. The breadth of admissible evidence that can be taken into account on the question of conduct broadens the scope of the evidentiary enquiry. Once the conduct is objectively misleading it is actionable, there being no requirement that there is any negligence in the conduct. Mr Gleeson SC again refers to the reversal of onus and the greater breadth of remedies available.
Again, in relation to deceit, Mr Gleeson SC expressed the view that the Australian statutes are broader. First, deceit requires an element of intention, that is that the false statement must be made knowing it is untrue or with reckless indifference as to its truth. No such requirement exists under the Australian statutes. Further, conduct by way of a representation as to a future matter made without reasonable grounds and carrying the reversal of onus is actionable even where such conduct would not constitute deceit.
In relation to the Misrepresentation Act again Mr Gleeson SC expressed the view that the Australian statutes were broader in operation. He points out that in relation to Singaporean law section 2 of the Misrepresentation Act provides for a damages remedy where negligent misrepresentation has induced a contract and it lifts a barrier to rescission of a contract for innocent misrepresentation with alternative damages and limited indemnity remedy. In his opinion this would not extend to that part of the plaintiff's case which relied upon the statutes to seek relief in respect of the bonds purchased from third parties in reliance on misleading conduct of UBS, there being no relevant contract with the wrongdoer. He also observed that whilst section 2(1) of the Misrepresentation Act spoke of a misrepresentation of fact he expressed the view that the Act may not extend to the full range of conduct caught by the Australian statutes and that it does not deem representations to the future to be misleading absent reasonable grounds and does not carry a reversal of onus where the representation is as to the future.
UBS called Tan Cheng Han who is an advocate and solicitor of the Supreme Court of the Republic of Singapore and a Professor of Law at the National University of Singapore. He provided two opinions to the court, one of 10 October 2012 and another of 15 November 2012. Professor Tan is a senior respected member of the legal profession in Singapore. He has significant experience in commercial litigation acting as advisor and counsel in a practice he maintains notwithstanding his academic appointment to the National University of Singapore. The first question he was to express a view upon was the effects and consequences of the judgment of the Singapore High Court of 27 July 2012. He referred to relevant rules of Court but expressed the view (at [10]) that where a trial proceeds in the absence of a party and the trial Judge pronounces judgment the decision of the Judge is a judgment on the merits. He referred to relevant authorities to support the proposition. He also referred to a rule of court (Order 35, Rule 2) which would permit, upon proper grounds being established, that such a judgment be set aside. The court in considering such an application will be guided by the overriding consideration of whether there was a likelihood that there had been a real miscarriage of justice.
Professor Tan was also asked whether the judgment would establish a claim for res judicata, issue estoppel or estoppel of the kind considered in the Australian case of Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 599 or an abuse of process of the court in respect of the issues and causes of action raised. He was of the view that Singaporean law considered issue estoppel to be an aspect of res judicata. It applies where the court has finally and conclusively adjudicated an issue on the merits that was necessary for the resolution of the cause of action. It precludes the parties to that litigation from raising the same issue in other proceedings. He further expressed the view that in Singapore the courts have accepted that abuse of the court's process is the true basis for the operation of the extended doctrine of res judicata. He was unable to comment on Anshun but expressed the view that the estoppel recognised in that case by the majority appeared similar to the extended doctrine of res judicata as applied in Singapore. He was of the view that the judgment of 27 July 2012 was sufficient to establish a claim for res judicata/cause of action estoppel, issue estoppel and abuse of process in relation to the issues in causes of action raised, as well as to any issue that could have been raised in that proceeding.
Taking all of this into account, and considering the significant juridical advantage afforded to Telesto in New South Wales on one of the most critical aspects of its case, I do not consider Telesto's conduct in refraining from participation in Singapore to be relevantly unreasonable as to give rise to an Anshun estoppel in proceedings in New South Wales. Again, I bear in mind the multitude of authorities emphasising the need to exercise caution before finding that foreign proceedings give rise to an Anshun estoppel, especially where the judgment bears some characteristics of a default judgment.
Abuse of Process
Independently of the preclusionary doctrines set out above, the court has the power to stay proceedings for an abuse of process so as to safeguard the administration of justice, to protect the integrity of the court's process or to prevent serious and unjustified prejudice or harassment (Rogers v The Queen (1994) 181 CLR 251 at 286 per McHugh J; Ridgeway v The Queen (1995) 184 CLR 19 at 74-75 per Gaudron J; Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 at [9]-[16] per Gleeson CJ, Gummow, Hayne and Crennan JJ).
The basic principles and their supporting authorities were helpfully summarised in Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 (at [89]) by McColl JA (with whom Giles and Campbell JJA agreed):
[89] There can be an abuse of process where, even though a plea of res judicata, cause of action or issue estoppel is not available "if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again ... ": Reichel v Magrath (1889) 14 App Cas 665 (at 668) per Lord Halsbury LC; Walton v Gardiner (at 392-393) per Mason CJ, Deane and Dawson JJ; Rogers v R (at 286-287) per McHugh J (in a dissenting judgment) referred to with apparent approval in Batistatos (at [15]) per Gleeson CJ, Gummow, Hayne and Crennan JJ; PNJ (at [3]) per French CJ, Gummow, Hayne, Crennan and Kiefel JJ; Haines v Australian Broadcasting Corp (1995) 43 NSWLR 404 (at 410) per Hunt CJ at CL. This form of abuse of process can be invoked both by parties to the original proceedings, as well as non-parties: State Bank of NSW Ltd v Stenhouse Ltd (1997) Aust Tort Rep 81-423 per Giles CJ Comm D (as his Honour then was); Rippon v Chilcotin [2001] NSWCA 142; (2001) 53 NSWLR 198 per Handley JA (Mason P and Heydon JA agreeing). It may be a form of Anshun estoppel, the underlying premise being that success on the reformulated case would contradict the outcome, or determination of an issue, in earlier proceedings.
In Batistatos v Roads & Traffic Authority of New South Wales (2006) 226 CLR 256, Gleeson CJ, Gummow, Hayne and Crennan JJ explained what would constitute an abuse of process. Their Honours approved the following statement (at [15], footnotes omitted):
[15] ... "Although the categories of abuse of procedure remain open, abuses of procedure usually fall into one of three categories: (1) the court's procedures are invoked for an illegitimate purpose; (2) the use of the court's procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court's procedures would bring the administration of justice into disrepute ... Many, perhaps the majority of, cases of abuse of procedure arise from the institution of proceedings. But any procedural step in the course of proceedings that have been properly instituted is capable of being an abuse of the court's process." To that it should be added that the power to deal with procedural abuse extends to the exclusion of particular issues which are frivolous and vexatious. Further, the failure to take, as well as the taking of, procedural steps and other delay in the conduct of proceedings are capable of constituting an abuse of the process of the court.
Almost identical comments were made by the High Court in the subsequent case of PNJ v The Queen (2009) 252 ALR 612 (at [3] per French CJ, Gummow, Hayne, Crennan and Kiefel JJ).
In Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699, French J (as his Honour then was) said (at [66]):
[66] The doctrines of res judicata, issue estoppel and Anshun do not exhaust the circumstances in which a proceeding may be regarded as amounting to an abuse of process by way of attempted relitigation of a dispute already judicially determined.
His Honour cited the case of Coffey v Secretary, Department of Social Security (1999) 86 FCR 434, where the Full Court said (at [25]):
[25] An attempt to litigate in the Court a dispute or issue which has been resolved in earlier litigation in another court or tribunal may constitute an abuse of process even though the earlier proceeding did not give rise to a res judicata or issue estoppel...
These comments were cited approvingly in IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 (at [31]).
Again, I note that Professor Tan provided uncontradicted expert evidence that the judgment of Lai J is sufficient to establish a claim for abuse of process in Singapore. UBS submitted that permitting Telesto to continue proceedings in New South Wales would constitute an abuse of process because it would involve a circumvention of orders made in Singapore and the re-litigation of issues which in substance have already been determined there. Telesto says, in effect, that continuance of proceedings in New South Wales would not constitute an abuse of process because of the juridical advantage available to it in New South Wales.
The case of Reinsurance Australia Corporation Ltd v HIH Casualty and General Insurance (in liq) (2003) 254 ALR 29 was decided in a slightly different context, but the comments made in it are of particular relevance to the case before me. Jacobson J said (at [289]):
[289] In summary, it seems to me that, but for the legitimate juridical advantage arising from the Trade Practices Act claim, the controversy considered as a whole would be vexatious or oppressive in the Voth sense, namely that the Australian proceedings would be productive of serious and unjustifiable trouble or seriously and unfairly burdensome...
Perhaps more to the point for the purpose of the case before me, his Honour also said (at [326]):
[326] ... The co-existence of local and foreign proceedings is not vexatious or oppressive where relief is available in one forum which is not available in the other...
These comments were approved in PCH Offshore Pty Ltd v Dunn (No 2) (2010) 273 ALR 167.
Again, it seems to me that a factor weighing heavily against a finding of abuse of process is the availability of what I consider to be a significant juridical advantage in New South Wales by reason of ss 52 and 51A and the variety of remedies available under the Trade Practices Act. The juridical advantage in New South Wales is highly significant to a fundamental aspect of Telesto's case, and therefore Telesto's decision to maintain proceedings in New South Wales cannot, in my view, be described as an abuse of process.
Jurisdiction of the Court in Singapore
In its submissions, Telesto raised an additional point, namely that the court in Singapore did not have jurisdiction to entertain the proceedings, and that Lai J's judgment should therefore not be recognised in New South Wales. This contention is based on two principal arguments. The first is that at least some of Telesto's claims fall outside of the scope of the jurisdiction clause (i.e. clause 19.1) of the Account Terms and Conditions, and therefore Telesto should not be treated as having submitted to the jurisdiction of Singapore for the purposes of those claims. Telesto's second argument is somewhat circular. It argues that since the relief it seeks (namely rescission of various contracts) would include the setting aside of clause 19.1 (the submission to Singaporean jurisdiction clause), it cannot be regarded as having submitted to Singapore's jurisdiction. I will deal with each in turn.
One of the requirements for the recognition and enforcement of a foreign judgment is that the foreign court has exercised a jurisdiction that the forum will recognise. The competence that the law of the forum recognises that a court in a foreign country can exercise if its judgment is to be recognised or enforced in the forum is often called "international jurisdiction" (see for example Davies, Bell and Brereton, Nygh's Conflict of Laws in Australia, 8th ed (2010) LexisNexis Butterworths at [40.4] and Mortensen, Garnett and Keyes, Private International Law in Australia, 2nd ed (2011) LexisNexis Butterworths at [5.11]). The "international jurisdiction" is assessed by reference to the law of the forum, not by reference to the law of the foreign jurisdiction from which the judgment issued.
It is not controversial between the parties that, at least for the present case, the Australian authorities show that for such "international jurisdiction" to be established, the defendant must either have been personally served with the originating process while present in the foreign place (even if temporarily), or must have submitted to the foreign jurisdiction (either by express agreement or by conduct inconsistent with protest of jurisdiction). There is no argument by UBS that Telesto was present in Singapore when Telesto was served with the originating process. The parties' disagreement is as to whether Telesto either, by clause 19.1 or by conduct inconsistent with protest of jurisdiction, submitted to Singapore's jurisdiction. I will first address the clause 19.1 issue, and then, if necessary, whether any of Telesto's conduct in the Singapore proceedings amounted to a submission to jurisdiction.
Clause 19.1 provides:
In relation to any Account or Services, the Account Agreement and any Security Document shall be governed by and construed in accordance with the law of the country in which the relevant Account is booked and the Client irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of such country, unless otherwise specified.
The relevant country for the purposes of this clause is of course Singapore. The definition of "Services" is:
any and all credit and/or other banking facilities, products and/or services granted and/or made available by the Bank to the Client and/or any third party at the request of the Client from time to time, including the Investment Services.
The definition of "Investment Services" is:
any or all investment services made available to the Client by the Bank from time to time.
Telesto argued that, on a proper construction of clause 19.1, its submission to jurisdiction is restricted to matters only concerning the construction of the "Account Agreement" and any "Security Document", and therefore there is no submission to jurisdiction for the purposes of Telesto's claims in New South Wales. I do not accept that argument. Clause 19.1 really contains two provisions, and is far broader than what Telesto contends for. It contains a choice of law provision, and a submission to jurisdiction provision. It provides for two things "in relation to any Account or Service", namely:
(1) that the Account Agreement and any Security Document shall be governed by and construed in accordance with the law of Singapore; and
(2) that Telesto irrevocably and unconditionally submits to the non-exclusive jurisdiction of Singapore.
Telesto also argued that the extent of its submission to jurisdiction in clause 19.1 was not sufficiently broad to cover the claims it was pursuing in New South Wales, especially as the conduct of which it complains took place prior to entry into contractual arrangements with UBS.
When interpreting clauses such as this, the authorities establish that the court is to take a wide view. In Ferris v Plaister (1994) 34 NSWLR 474, Mahoney JA said (at 496-497) "I do not differ from those who would take a wide rather than a narrow view of the scope of arbitration clauses". Similarly, in IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, the Court of Appeal considered the effect of an arbitration clause expressed to govern "any controversy or claim arising out of or related to the agreement or the breach thereof" and held that these words were sufficiently wide to include claims for relief under the Trade Practices Act. Clarke JA said (at 483):
There are no indications in the contract that the words should be construed narrowly. Nor, in my opinion, are there any compelling reasons in favour of reading down the meaning of the phrase. On the contrary there are powerful considerations in favour of the contrary view. The consequence of an interpretation of the arbitration clause which excludes the claims under the Act would be that the causes of action based upon breaches of the contract would remain with the arbitrator, and be decided by him, and those in which reliance were placed upon ss 52, 82 and 87 of the Act would be determined in a court of law. As I earlier pointed out this conclusion would follow even in a case in which the same representations were said to ground claims in breach of contract and under the Act.
The parties could hardly be thought to have contemplated that the arbitration clause would work in that way. It is far more likely that they intended that all disputes between them concerning the terms of the contract, the performance of it and matters connected, in a real sense, with the contract should be referred to the one tribunal for determination. For my part I would find it difficult to ascribe to the parties to a contract an intention to submit only part of a dispute to an arbitral tribunal reserving the remainder for consideration by the Court as this would, on any view, be inefficient and costly.
In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, the arbitration agreement applied to "any dispute or difference arising out of this agreement". The particular dispute involved allegations of breach of the Trade Practices Act. After reviewing the relevant authorities, Gleeson CJ (with whom Meagher and Sheller JJA agreed) said (at 165):
When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument.
In Ethiopian Oilseeds, Hirst J held that a claim for rectification of a contract gave rise to a dispute "arising out of" the relevant agreement. That decision, and the reasoning underlying it, reflects the current state of the law in New South Wales
Although these decisions are in the context of discussion of arbitration clauses, the principles are applicable by analogy (see for example FAI General Insurance Co Ltd v Ocean Marine Mutual (1997) 41 NSWLR 559 at 567), and they make it abundantly clear that these types of clauses include claims under the Trade Practices Act based on conduct engaged in prior to actual entry into contractual relations. For example, the allegedly fraudulent conduct complained of in Ferris v Plaister (1994) 34 NSWLR 474 concerned a pre-contractual representation, but that conduct was nonetheless caught by a clause expressed to govern "any dispute...as to the construction of the contract or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith".
I think Kirby P's analysis in the case of IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 (at 477) of the numerous authorities in respect of the interpretation of such clauses and his summary of the state of the law in New South Wales is particularly relevant to the present case:
From the foregoing trend of authority, both in Australian and overseas courts, it can be seen that an arbitration clause, expressed in the language of the clause here under consideration, is not to be narrowly construed. It is sufficiently wide to include claims for rectification and for relief on the ground of misrepresentation or mistake ... Whilst it is true that the conduct complained of as being in breach of the Trade Practices Act (Cth) is alone sufficient to enliven the provisions of that Act and whilst such provisions do not depend upon the agreement of the parties, such considerations do not determine the simple question posed. That question is whether the misrepresentations alleged are "related to this agreement or the breach thereof".
These comments were approved by Gleeson CJ in the subsequent case of Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd. The submission to jurisdiction clause in the present case is expressed in very wide terms. The relevant question in the present case is whether the conduct of which Telesto complains is "in relation to any Account or Services". If so, then Telesto has agreed to "irrevocably and unconditionally" submit to Singaporean jurisdiction. In my view, it would be inconsistent with the authorities to find that the dispute between UBS and Telesto is taken out of the ambit of this clause simply because some of the conduct complained of took place before entry into contractual relations, or because the conduct can technically enliven a claim under the Trade Practices Act independently of the contractual documents (IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 at 477). It is clear, I think, that UBS's conduct which Telesto complains of is very much "in relation to [an] Account or Services".
Next, the parties were also in dispute (as noted above) as to whether, apart from clause 19.1, Telesto had in any event submitted to Singapore's jurisdiction by reason of its conduct. UBS argued that by filing an application for a stay of the Singapore proceedings on 20 December 2010 pursuant to a particular Singaporean rule of procedure, or by filing a memorandum of appearance on 24 November 2010 which was not conditional, or by filing a summons on 20 December 2010 which sought (in the alternative to a stay) an order extending the time for the filing and service of its defence, Telesto had submitted to Singapore's jurisdiction. Telesto disputed this.
As noted in Nygh's (at [40.17) it is of course possible for the law of the foreign court and the law of the forum to differ on what amounts to submission to jurisdiction. The Foreign Judgments Act 1991 (Cth) s 11 effectively provides that contesting the foreign court's jurisdiction or asking the foreign court to decline jurisdiction will not of itself amount to a voluntary submission. In the UK, where an equivalent statutory provision is in force (Civil Jurisdictions and Judgments Act 1982 (UK)), it has been held that when considering what amounts to submission for these purposes, the court must have regard to the general framework of its own procedural rules, but also to the domestic law of the court where the steps were taken, and that if a step would not be regarded as a submission by the domestic law of the foreign court, it should not be regarded as a submission, even if it would amount to such under the law of the forum (Akai v People's Insurance Co [1998] 1 Lloyd's Rep 90 per Thomas J). However, Thomas J also held that where the step would be regarded as a submission by the domestic law of the foreign court, but not by the law of the forum, the forum is free to disregard the foreign court's characterisation and to hold that there is no submission.
There was some oral debate before me as to whether Telesto had, by making its stay application pursuant to a particular provision in the relevant Singaporean rules of court rather than under another provision of those rules, submitted to Singapore's jurisdiction. However, neither side provided expert evidence on this point. The only material I have before me is the judgment of Chong J and the judgment of Lai J, each of which proceeds on the basis that Singapore has jurisdiction to entertain the proceedings (however it is not clear whether this is on the basis of a finding that Telesto submitted to jurisdiction or that it was merely amenable to jurisdiction under Singapore's relevant rules of procedure).
UBS cited the case of Henry v Geoprosco International Ltd [1976] QB 726 as authority for the proposition that an application to a court seeking the exercise of a discretion to stay proceedings amounts to submission to jurisdiction. That may be so, but as I have noted, the Foreign Judgments Act 1991 (Cth) s 11 reversed that position. In the absence of evidence of the characterisation under Singaporean law of Telesto's conduct, I would prefer not to express any view as to whether Telesto has, by its conduct, submitted to Singapore's jurisdiction. In any event, it is not necessary for me to do so given my finding in respect of the effect of clause 19.1.
Turning to Telesto's second argument, it was submitted that since Telesto was seeking to invoke laws in the local forum (i.e. the Trade Practices Act) to set aside the contract which contained the submission to jurisdiction clause, it would be inappropriate for a judgment from that jurisdiction to bar Telesto from having its claim heard in the local forum.
It is a basic principle in private international law that an agreement as to forum is treated as a separate agreement from the main contract containing that agreement (FAI General Insurance Co Ltd v Ocean Marine Mutual (1997) 41 NSWLR 559 at 567; Ferris v Plaister (1994) 34 NSWLR 474 at 485). It is only where the party seeking to avoid the contractual choice of forum asserts that the choice of forum itself is invalid because their assent to that particular term of the agreement was vitiated that such an argument should be considered (Commonwealth Bank of Australia v White (No 1) (1999) 2 VR 681 at [11] per Byrne J; see also Mortensen at [4.5] and Nygh's at [7.27]). The written submissions provided to me following the hearing carried the suggestion that the case of Commonwealth Bank of Australia v White (No 1) stood for the proposition that effect should not be given to a foreign jurisdiction clause where the local proceedings include claims for the rescission or setting aside of the agreement which contained that clause.
I will not recite the facts of the case in full. Relevantly, Mr White was an underwriting member of Lloyd's from 1 January 1981 to 31 December 1992. In August 1986, he was required to execute a new general undertaking which included a clause under which he agreed to submit exclusively to the jurisdiction of the courts of England. That undertaking was not contained in the 1980 general undertaking. One of the claims brought by Mr White was that this clause was put forward "for the improper purpose of shielding itself from statutory laws of overseas jurisdictions including those Australian laws relating to misleading and deceptive conduct... It is said that, for this reason, the exclusive jurisdiction clause is void...". Byrne J went on to observe that "an issue which Mr White would litigate here is Lloyd's impropriety in introducing the exclusive jurisdiction agreement" (at [91]).
In the present case, there was no suggestion, nor was it pleaded, that the inclusion of clause 19 by which the parties agreed to submit to the non-exclusive jurisdiction of Singapore was for the very purpose of avoiding consumer protection legislation, such as the Australian laws relating to misleading and deceptive conduct. An inability to rely on Australian consumer protection legislation may well be an effect of contractually submitting to the courts in Singapore, but it was not said to be the purpose for which that clause was included. I am aware that the authorities on this point are not always consistent (see discussion in Nygh's at [7.40]). On balance, I think the authorities favour the approach that something more is needed than the mere inclusion of an exclusive jurisdiction clause which would have the effect of displacing the application of the misleading and deceptive conduct laws. In Commonwealth Bank of Australia v White (No 1) it was that the exclusive jurisdiction clause was included, not in good faith, but for the very purpose of avoiding the application of the Trade Practices Act (this is also borne out by the chronology of the facts in that case).
I am aware that there was subsequent related litigation in that case. In Commonwealth Bank of Australia v White (No 1), Byrne J found that there was good reason for proceedings against Lloyd's to continue in Victoria, even though the proceedings were brought in breach of an exclusive jurisdiction clause in favour of the English courts (for reasons which, as already outlined, are not applicable to the present case). However, the High Court of England and Wales was not satisfied that there were good reasons to continue proceedings in Victoria, and granted an anti-suit injunction against Mr White, to restrain the Victorian proceedings. Attempts were then made by Lloyd's to have the Victorian proceedings stayed, partly on the basis of comity. In Commonwealth Bank of Australia v White (No 4) [2001] VSC 511 Warren J (as her Honour then was) held that the stay should be refused, that comity did not require it, and that since the English and Victorian courts had disagreed as to whether there were good reasons to bring proceedings in breach of the exclusive jurisdiction clause it was appropriate that the Victorian court prefer its own decision.
In any event, none of the judgments subsequent to White (No 1) affected the principles I have articulated above. Therefore I do not accept Telesto's submission that Lai J's judgment should not be recognised for want of jurisdiction. In these circumstances, I consider that the basic principle, that the parties' agreement as to forum is treated as a separate agreement from the main contract, applies.
I also wish to add one further comment on this issue. I think there is an additional relevant distinction between the case now before me on the one hand, and the cases referred to above and cited in the submissions on the other. In each of the cases cited, the relevant Australian court was not faced with a foreign judgment which was final, on the merits and otherwise capable of giving rise to a res judicata. The parties in those cases were still in dispute about where they should be heard. In the present case, the court in Singapore has given a final judgment on the merits, and therefore Telesto is, in one sense, seeking to retrospectively deprive the Singaporean court of its jurisdiction.
Public Policy
Telesto argued that, even if the court in Singapore did have jurisdiction, recognising Lai J's judgment in Australia would be contrary to public policy because it would have the effect of depriving Telesto of its entitlement to seek its rights under Australian consumer protection legislation.
It is true that there are authorities to the effect that contractual terms precluding prosecution of violations of misleading and deceptive conduct laws will not be enforced in Australian courts in light of the public policy underlying those laws (see for example Henjo Investments Pty Ltd v Collis (Marrickville) Pty Ltd (1988) 79 ALR 83 at 98-99 per Lockhart J with whom Burchett and Foster JJ agreed). However, in my view, the case before me is distinguishable because there was no agreement between the parties to oust the operation of those laws or to disclaim liability under those laws. Rather, the judgment of Lai J was to the effect that the parties had, by entering into the Standstill Agreement, reached a commercial compromise or settlement of any claims the parties may have had including claims under those laws. None of the cases cited in Telesto's submissions involved a compromise of known or existing claims, but they involved contractual provisions seeking to oust the operation of consumer protection legislation.
Summary and conclusion
For the reasons set out above, I have found that:
(1) the judgment of Lai J, in substance, deals with the same cause or causes of action which Telesto seeks to re-litigate in the New South Wales proceedings, and therefore gives rise to a res judicata estoppel warranting a permanent stay of the proceedings in New South Wales;
(2) if I am wrong about res judicata, it was at least legally indispensable to the judgment of Lai J that Telesto and UBS's rights and liabilities in existence at the time they entered into the Standstill Agreement (including all claims on foot in the New South Wales proceedings arising out of any conduct of the parties up until 31 December 2009) were compromised, or settled, by entry into the Standstill Agreement, and that this gives rise to an issue estoppel;
(3) if I am wrong about res judicata, no Anshun estoppel arises because Telesto's conduct, in light of the juridical advantage in pursuing proceedings in New South Wales, was not relevantly unreasonable;
(4) if I am wrong about res judicata, Telesto's pursuance of proceedings in New South Wales would, in light of the juridical advantage in pursuing proceedings in New South Wales, not amount to an abuse of process.
The orders I propose are therefore:
(1) that, under s 67 of the Civil Procedure Act, these proceedings (2010/363808) be permanently stayed; and
(2) that Telesto's notice of motion filed 10 September 2012 be dismissed.
Costs
Given my reasons above I would hear the parties on the appropriate costs order. I acknowledge that the parties have already addressed me in written submissions on the costs associated with Professor Tan.
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- AGLC
- Telesto Investments Ltd v UBS AG [2013] NSWSC 503
- Case
- [2013] NSWSC 503
- Decision Date
CaseChat Overview and Summary
The court considered whether the contractual jurisdiction clause was valid and whether it could be set aside on the basis that it was against public policy. The court found that the clause was valid and enforceable, and that it was not against public policy to enforce it. The court also considered whether UBS AG had submitted to the jurisdiction of the Singapore courts by its conduct. The court found that UBS AG had not submitted to the jurisdiction of the Singapore courts by its conduct. The court then considered whether the earlier Singapore judgment could give rise to preclusionary doctrines in the New South Wales proceedings. The court found that the Singapore judgment could give rise to res judicata and Anshun estoppel in the New South Wales proceedings, but not to issue estoppel or abuse of process. The court found that the causes of action in the New South Wales proceedings were in substance the same as those determined in the earlier Singapore proceedings, and that the findings made in the Singapore proceedings were legally indispensable to the ultimate outcome of those proceedings.
The court ordered that the New South Wales proceedings be stayed pending the outcome of the Singapore proceedings, and that Telesto Investments Ltd pay UBS AG's costs of the application. The court held that the earlier Singapore judgment gave rise to res judicata and Anshun estoppel in the New South Wales proceedings, and that the causes of action in the New South Wales proceedings were in substance the same as those determined in the earlier Singapore proceedings. The court held that the findings made in the Singapore proceedings were legally indispensable to the ultimate outcome of those proceedings, and that the availability of juridical advantage in the local forum was relevant to the assessment of reasonableness under the Anshun doctrine. The court held that the continuation of proceedings in New South Wales following the earlier Singapore judgment did not amount to abuse of process, and that the availability of juridical advantage in the local forum was relevant to the assessment of whether conduct constituted abuse of process.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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