NZ splits from UK on enforcement of foreign judgments

In its recent decision Michael Wilson & Partners Ltd v Thomas Ian Sinclair [2016] NZCA 376 the New Zealand Court of Appeal has allowed the execution in New Zealand of a foreign costs judgment, despite ongoing litigation between the parties in other jurisdictions. This represents a departure from the English approach of preserving the status quo while litigation continues.

Context

The New Zealand enforcement proceedings in Michael Wilson are merely the latest step in a decade of complex litigation and arbitration between two former business partners. The litigation has appeared in courts and arbitral tribunals in the United Kingdom, the United States, the British Virgin Islands and the Bahamas. The primary subject of the litigation is the ownership of shares in Max Petroleum Plc (Max), an oil company operating in Kazakhstan.

The issue before the New Zealand courts was the enforcement of several cost orders (totalling approximately NZ$3 million) from proceedings in the Bahamas.

Mr Sinclair had been unsuccessful initially in his attempt to join MWP to the proceeding and then on multiple appeals, resulting in six costs judgments against him. It is these costs judgments that MWP seeks to enforce against Mr Sinclair’s property in Wellington.

At the time of the New Zealand enforcement proceedings, there were still various pieces of litigation in train in the UK involving Mr Sinclair, Mr Emmott and MWP.

So, the question for the New Zealand Courts was whether to enforce the Bahamian costs orders while those UK proceedings were continuing.

New Zealand’s Statutory Background

Section 56 of the Judicature Act 1908 creates a regime for the enforcement of foreign judgments in New Zealand. Justice Harrison summarised this regime as follows:
Providing a memorial is filed in accordance with s 56(3), the High Court has power to order execution of the foreign judgment. The onus then shifts to the judgment debtor to “show sufficient cause” why execution should not issue. [1]
The New Zealand courts have recognised several grounds on which a judgment of a foreign court may not be regarded as final and conclusive, and therefore provide sufficient cause to prevent enforcement: For example, where the judgment was obtained by fraud. However, it is conceptually possible for a party to raise other grounds that may be regarded as sufficient cause.[2]

High Court

In the New Zealand High Court Mr Sinclair sought to show sufficient cause to discharge the onus created by s 56(3) of the Act. He argued that, if successful in the UK proceedings, he would be entitled to recover the costs from MWP pursuant to a previous undertaking given by MWP. Justice Mallon was unconvinced by this argument as it failed to satisfy any of the conventional criteria on which the onus could be discharged.

However, Mallon J invoked Rule 17.29 of the High Court Rules, which allows the court to award a stay on the grounds that enforcement would result in a “substantial miscarriage of justice”. Her Honour was clearly influenced by the UK High Court’s decision that a stay should be granted. On these grounds she therefore granted an interim stay, pending the outcome of MWP’s appeal in the English High Court.

Court of Appeal

The Court of Appeal conclusively overruled the High Court. In doing so it has departed from the approach of the UK Courts.

The Court of Appeal held that the High Court rules are subordinate to s 56 of the Judicature Act 1908. Section 56 creates a mechanism for the enforcement of foreign judgments, whereas Rule 17.29 creates a basis for the stay of enforcement of New Zealand judgments - its jurisdiction does not extend to final judgments from foreign jurisdictions.[3]

Further, the Court disagreed that enforcement would create a substantial miscarriage of justice. The Court of Appeal rejected this, instead holding that the Bahamian orders are:
… final, binding and conclusive between the parties, [therefore] … Mr. Sinclair's liability for the costs awarded in the Bahamas are now beyond challenge. [4]
The Court expressly rejected the English approach of maintaining the status quo whilst litigation ground onwards in other jurisdictions:
We acknowledge the temptation to follow the English line of preserving the status quo while the litigation between these parties grinds inexorably onwards. However, we are satisfied that MWP is entitled to execute its final and binding judgments against Mr Sinclair without further delay or awaiting the result of litigation which may never proceed further or conclude in Mr Sinclair’s favour. Enforcement of MWP’s right should not be suspended indefinitely against the uncertain contingency of future litigation. And there is no evidence that execution of MWP’s judgments in New Zealand in satisfaction of his indisputable liability to the company would cause Mr Sinclair a substantial miscarriage of justice, or that he would not be able to pursue his claims against MWP in England. [5]
On these grounds, the High Court’s stay was set aside and the matter remitted to the High Court on the technical issue of whether MWP has filed a sufficient “memorial” under section 56(3).

A pragmatic approach

The Court of Appeal’s approach recognises that it is not a New Zealand court’s role to assess the merits or otherwise of continuing overseas litigation when presented with a simple judgment debt enforcement application.

Given the possibility of litigation dragging on in multiple jurisdictions, the decision is appealing for its pragmatism.

[1] Michael Wilson & Partners Ltd v Thomas Ian Sinclair [2016] NZCA 376 at [19].
[2] Kemp v Kemp [1996] 2 NZLR 454 (HC) at 459.
[3] Above n 1 at [32] – [33].
[4] Above n 1 at [35].
[5] Above n 1 at [37].

Image courtesy of Matt J Newman
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