El-Kharouf v El-Kharouf [2004] NSWSC 187 | Case summary

JUDGMENT 1 His Honour: Although these proceedings were commenced in 2001, they underwent some radical changes, amounting to a fresh start, only in the year 2003, when leave was granted to add the second, third and fourth defendants and a further amended statement of claim was filed on 27 February 2003. What has now come before the Court is an application made on behalf of the first, second and third defendants for a stay of proceedings on the forum non conveniens ground that this Court is a clearly inappropriate forum for the trial of certain claims raised by the further amended statement of claim. 2 The further amended statement of claim is a long and complicated document which indicates at the outset that the first defendant, whose wife is the second defendant, was born in Jordan some fifty-three years ago and that he is a first cousin of the plaintiff. At one time, they lived in the same house sharing a room in Amman. The third defendant is a registered General Partnership in accordance with the laws of the Hashemite Kingdom of Jordan in which the first and second defendants are partners. It was formed to manufacture detergents and other household products and at all material times it is alleged to have carried on its business in Jordan, Saudi Arabia and Iraq. By virtue of the Companies Law of Jordan, it is a corporation, but the partners are jointly and severally liable for the third defendant's debts. 3 It is alleged that in January 1999 the first and second defendants emigrated to Australia and that, following their doing so, they caused the business of the third defendant to be discontinued. The latter allegation is in dispute, in so far as the defendants say the third defendant continued to carry on business in Jordan until the middle of the year 2000. The fourth defendant is a company registered in New South Wales on 21 April 1999 to manufacture detergents, shampoos and disinfectants, of which the first and second defendants were appointed directors. 4 It is then alleged in the further amended statement of claim that the plaintiff, who is a Jordanian citizen, is the Chief Financial Officer of Arab Bank plc of Jordan and the General Manager of Finance, Accountancy of its Geneva based subsidiary. There is also a separate subsidiary in Australia, Arab Bank Australia Limited. 5 The further amended statement of claim goes on to allege what, for the purposes of the present application, has been designated "the first cause of action". This relates to a contract termed in the pleading a joint venture agreement between the plaintiff and the third defendant made about 12 September 1997, pursuant to which it is alleged three payments totalling US$250,000 were made by the plaintiff to the third defendant. It is alleged that a term of the joint venture agreement was that the third defendant would pay to the plaintiff one third of the profits arising from its operations, and it is alleged (but disputed by the defendants) that as at November 1999 the one third share of the profits was US$150,000. A term of the joint venture agreement is then alleged that it could be terminated by the plaintiff by six months notice at the expiry of which the third defendant would pay to the plaintiff the amount of the plaintiff's contribution to the third defendant and also the amount of the plaintiff's profit share; and a further term is alleged that in the event the third defendant ceased to operate its business the third defendant would forthwith pay these amounts to the plaintiff; and it is alleged that on 30 June 1999 the plaintiff gave notice terminating the joint venture agreement with effect from 31 December 1999; and further, that on a date unknown the third defendant ceased to operate the business. It is then alleged that in breach of the joint venture agreement the third defendant failed to pay the amount of the plaintiff's contribution and also the amount of the plaintiff's profit share. Upon this footing, the first cause of action is the claim for payment of the plaintiff's contribution in the sum of US$250,000. 6 On the basis of the same allegations, the second cause of action is a claim for US$150,000 alleged to be the one third share of profits due under the joint venture agreement. 7 What is designated the third cause of action relates to an alleged guarantee of promissory notes in the sum of US$159,750. This liability is pleaded under paragraphs 32 - 60 and 63 - 67 of the further amended statement of claim. It is alleged that moneys were borrowed from Arab Bank plc at its Gardens Branch in Amman in the sum of US$150,000 in January 1998, and from one Snounou in the sum of US$50,000 on about 5 January 1999. Then it is alleged that a promissory note payable to Arab Bank plc Gardens Branch in the sum of US$90,000 was dishonoured by the first defendant on 31 March 1999, as was a further promissory note in the sum of US$10,000 on 1 June 1999. About 13 July 1999, it is pleaded, the first defendant promised to pay US$400,000 to the plaintiff, being the previously claimed contribution of US$250,000 plus US$100,000 borrowed from the Arab Bank plc Gardens Branch and US$50,000 from Snounou repayment of which had been guaranteed by the plaintiff. Then it is alleged that about 14 July 1999 the first defendant agreed with the plaintiff to give three promissory notes of equal value to Arab Bank plc Gardens Branch to be guaranteed by the plaintiff in respect of the indebtedness related to Snounou, and on 1 August 1999 the first defendant did execute three promissory notes each in the sum of US$51,666 on behalf of the third defendant and also as guarantor, and the plaintiff executed as a second guarantor. These three promissory notes are the subject of proceedings in a Jordanian Court to which reference will be made. 8 Various further arrangements, or attempted arrangements, are then pleaded, and in paragraph 45 it is alleged that about 2 April 2000 the first defendant agreed to pay to the plaintiff US$57,000 by monthly instalments of US$10,000 per month commencing on 30 August 2000. Particulars of this allegation refer (inter alia) to a letter from the first defendant's father (who lives in Jordan and is an octogenarian) and the plaintiff to the first defendant dated 1 April 2000. 9 The pleading continues in paragraph 53 that the first defendant undertook to the plaintiff on about 11 May 2000 to effect payment of moneys due by the third defendant to Arab Bank plc Gardens Branch in respect of certain promissory notes, and in subsequent paragraphs further payments by the plaintiff to Arab Bank plc and arrangements are alleged. 10 It is on the basis of these allegations that the plaintiff makes his claim to be entitled pursuant to a guarantee of promissory notes in the previously mentioned sum of US$159,750. 11 What is designated the fourth cause of action is more briefly stated: it is that pursuant to Jordanian law the first and second defendants are liable personally for the obligations of the third defendant in respect of the sums of US$250,000, US$150,000 and US$159,750. 12 Further causes of action, designated the fifth and sixth causes of action, relate to claims against the first and second defendants arising out of quite separate dealings involving Arab Bank Australia Limited, Parramatta Branch, and the fourth defendant, an Australian company. No application is made to me in respect of these causes of action, although I was advised in the course of argument by counsel for the defendants that it was proposed to seek leave to amend the defences so far filed to raise defences under the Cheques Act 1986 (Cwlth) in relation to the claims made against the fourth defendant. 13 Many of the factual matters alleged in the statement of claim have not been put in dispute by the defendants, but it is clear there is a wide area of dispute relating to issues which appear to have taken their origin in a joint venture agreement involving the plaintiff, a Jordanian citizen resident for some time in Geneva but present in Amman when the agreement was entered into, and an incorporated entity under Jordanian law of which the members were Jordanian citizens then resident in Jordan. The entity in question, the third defendant, traded at the time in Jordan and Iraq (at an earlier time it had also traded in Saudi Arabia), but it has never traded in Australia. An important issue in the proceeding is whether the third defendant made a relevant profit out of operations which, the evidence discloses, were conducted in Iraq. The first defendant swore that these operations involved confiscations under the Baathist Regime then governing Iraq and I understand it to be the defendants' case that serious losses were incurred as a result. Although the plaintiff disputes this, it seems plain to me that the defendants are correct in contending that local evidence will be a necessity if the competing claims about profits or losses are to be fairly investigated. The meaning, too, of the agreement under which "profits" and "contributions" are provided for, and in the context of which these and other expressions are to be understood, requires elucidation in the light both of an understanding of the Arabic language as used in commerce in Jordan and of Jordanian law. 14 Senior counsel for the plaintiff chose to cross-examine the first defendant at some length rather than to rely upon the pleadings and written material to indicate the issues. This approach does not seem to me to be consistent with what was said in the joint judgment in Voth v Manildra Flour Mills Proprietary Limited (1990) 171 CLR 538 at 565, but since it was adopted, the Court obtained evidence indicating the way in which the bare bones of the pleadings would be likely to be fleshed out at a hearing. This indicated that the defendants would be relying on the implications of a joint venture under Jordanian law and perhaps also, so far as the understanding of the evidence is concerned, pursuant to Jordanian commercial practice. It appears to be the defendants' case that some or all of the promissory notes and other obligations can be related to the joint venture in which the plaintiff himself was involved. It was not in dispute that the substantive law governing the case is Jordanian law, and that the transactions to which that law must be applied all took place in Jordan. 15 So far as concerns the three promissory notes dated 1 August 1999, each in the sum of US$51,666, which are alleged to have been made on behalf of the third defendant and guaranteed by both the first defendant and the plaintiff, these are the subject of a suit brought in the Court of Justice at Amman by the plaintiff against the first, second and third defendants, bearing the Court number 3215 of 2001 and thus presumably commenced in 2001. That suit has been the subject of active proceedings which are currently ongoing. The defendants say it is being "vigorously defended", and some of the issues in it have been the subject of at least three separate hearings during the year 2003. 16 The defendants claim that a defence of the proceeding brought in this Court would involve the calling of witnesses almost all of whom are in Jordan and some of whom would need to give evidence through interpreters. Apart from the high cost of flying witnesses to Australia, and supporting them in Australia for the duration of their necessary stay here, there would be the difficulty that it might not be possible to ensure the attendance of all of them: they would not be able to be subpoenaed; and there would be no assurance that Australian immigration authorities would permit entry to all of them for the purpose of their giving evidence. The plaintiff contended that not every witness nominated by the defendants would in fact be required to deal with the issues raised in the case, but there was no denial of the proposition that the defendants might be unable to secure the attendance of some witnesses who would be required. The age and health of the first defendant's father, in particular, might debar his travel to Australia for the case. In these circumstances, an Australian hearing would be likely to place the first, second and third defendants in an unequal position in the forensic contest. 17 It is necessary to refer to the legal principles by which I must be guided in dealing with this application. A succession of High Court cases has determined that Australian courts must decide applications for a stay on forum non conveniens grounds by the application of a test different from that generally adopted in the common law world: Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247 - 248; Voth v Manildra Flour Mills Proprietary Limited; Henry v Henry (1996) 185 CLR 571; CSR Limited v Cigna Insurance Australia Limited (1997) 189 CLR 345; Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491. In the last of these cases (at 504), the joint judgment of Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ summarises the position: "In Voth , this Court adopted for Australia the test propounded by Deane J in Oceanic Sun, namely, that a stay should be granted if the local court is a clearly inappropriate forum, which will be the case if continuation of the proceedings in that court would be oppressive, in the sense of 'seriously and unfairly burdensome, prejudicial or damaging', or, vexatious, in the sense of 'productive of serious and unjustified trouble and harassment'. It was also held in Voth that, in determining whether the local court is a clearly inappropriate forum, 'the discussion by Lord Goff in Spiliada Maritime Corporation v Cansulex Ltd (1987) AC 460 at 477 - 478, 482 - 484 of relevant "connecting factors" and "a legitimate personal or juridical advantage" provides valuable assistance'. In this last regard, Lord Goff of Chieveley expressed the view that legitimate personal or juridical advantage is a relevant but not decisive consideration, the fundamental question being 'where the case may be tried "suitably for the interests of all the parties and for the ends of justice"'." 18 It should not, of course, be overlooked that what is involved in the application of this statement of principle is an exercise of discretion concerned with the inherent power of the Court to protect its processes against any attempt to use them in a way that is likely to be productive of injustice. In the joint judgment in Voth, for example, reference is made (at 566) to "the exercise of the court's discretion" in a passage which is also picked up in Henry (at 589); and in CSR Limited v Cigna (at 391) it is pointed out that "the power to stay proceedings on grounds of forum non conveniens is an aspect of the inherent or implied power which, in the absence of some statutory provision to the same effect, every court must have to prevent its own processes being used to bring about injustice". This point is also referred to in Renault (at 503), where it is said "the ultimate consideration is the prevention of injustice". 19 That in an earlier proceeding in Jordan the plaintiff should himself have chosen to sue the same defendants who now seek relief in the present application, upon a cause of action which is closely connected with all of the claims in the Australian proceeding the subject of this application, and is precisely duplicated by a significant part of those claims, is a matter of considerable importance. Counsel for the plaintiff sought to avoid this difficulty by referring to the 5th edition (1957) of Cheshire on Private International Law at 123 where the statement is made that "it is not prima facie vexatious to commence two actions about the same subject-matter, one here and one abroad". However in the 13th edition (1999) of the same work at 349 it is said: "The weight to be attached to the factor of multiplicity of proceedings will depend on the circumstances of the case. It is not a decisive factor in the sense of automatically making a foreign forum clearly more appropriate and shifting the burden of proof to the claimant to justify trial in England. It does not matter, in principle, whether the action was commenced first in England or abroad; this is merely an accident of timing. However, it is seemingly relevant whether it is a case of the same claimant starting proceedings in two different jurisdictions or a case where the claimant in one jurisdiction is the defendant in another jurisdiction and vice versa. In the former case the claimant will generally be forced to elect the country in which he wants trial. If he elects for trial abroad the court will then dismiss the English proceedings. It is also relevant to look at the motivation behind the commencement of the foreign proceedings and the progress made in them." In the context, the reference to motivation relates to such factors as the practice sometimes followed of commencing a proceeding in another country simply to preserve rights that might otherwise be lost under a statute of limitations. That has not been suggested here, and seems to be negatived by the active prosecution of the proceeding in Jordan, which also raises the application to the present case of the point made in the final words of the passage I have quoted. This more modern statement of the rule is also consistent with that adopted in Dicey and Morris on The Conflict of Laws 13th edition (2000) (edited by Lawrence Collins) at 12-031, where reference is made to Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank Ltd [1989] 3 All ER 65, a decision of Browne-Wilkinson VC (as he then was) which was affirmed by the Court of Appeal on 23 February 1990 (unreported). 20 But in an Australian court it is sufficient to refer to the joint judgment of Dawson, Gaudron, McHugh and Gummow JJ in Henry at 590 - 591, where it was said: "Foreign proceedings usually call for consideration in a context in which they involve the same or related factual issues as those involved in the local proceedings, but not the same legal issue and, perhaps, not the same parties. Even in cases of that kind it may sometimes be appropriate to grant a temporary stay of the local proceedings to allow the factual issues to be determined in the other jurisdiction. There are more compelling considerations in favour of a stay of the local proceedings if, as can happen, there are proceedings in another country which has jurisdiction to entertain those proceedings and the proceedings are between the same parties and with respect to the same issue or controversy. Parallel proceedings in another country with respect to the same issue may be compared with multiple proceedings with respect to the same subject matter in different courts in Australia. In Union Steamship Co of New Zealand Ltd v The Caradale (1937) 56 CLR 277 at 281, Dixon J observed of that latter situation that '[t]he inconvenience and embarrassment of allowing two independent actions involving the same question of liability to proceed contemporaneously in different courts needs no elaboration'. From the parties' point of view, there is no less - perhaps, considerably more - inconvenience and embarrassment if the same issue is to be fought in the courts of different countries according to different regimes, very likely permitting of entirely different outcomes. It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue. And although there are cases in which it has been held that it is not prima facie vexatious, in the strict sense of that word, to bring proceedings in different countries, the problems which arise if the identical issue or the same controversy is to be litigated in different countries which have jurisdiction with respect to the matter are such, in our view, that, prima facie, the continuation of one or the other should be seen as vexatious or oppressive within the Voth sense of those words. It does not follow that, because one or other of the proceedings is prima facie vexatious or oppressive within the Voth sense of those words, the local proceedings should be stayed. However, it does follow that the fact that there are or, even, that there may be simultaneous proceedings in different countries with respect to the same controversy is highly relevant to the question whether the local proceedings are oppressive in the sense of 'seriously and unfairly burdensome, prejudicial or damaging', or, vexatious, in the sense of 'productive of serious and unjustified trouble and harassment'. And it also follows that courts should strive, to the extent that Voth permits, to avoid that situation." In the light of this passage and of the judgment of Browne-Wilkinson VC to which I have referred, Nygh and Davies on Conflict of Laws in Australia 7th edition (2002) at 7.20 suggest: "A plaintiff who institutes proceedings in Australia having first sued on the same claim abroad is likely to face a successful application to have the Australian proceedings stayed under Voth principles, because suing in Australia in these circumstances is 'prima facie vexatious or oppressive in the strict sense of those terms'." 21 In CSR Limited v Cigna Insurance Australia Limited (at 399), the joint judgment referred to the principle which finds the duplication of proceedings in a foreign court and an Australian court to be prima facie vexatious or oppressive within the meaning of Voth, and pointed out that in the instant case the issues in the proceedings were not actually the same. However, their Honours went on (at 400-401) to state: "In cases such as the present, where different issues are involved in the local and foreign proceedings, albeit that the different proceedings arise out of the same sub-stratum of fact, the question is not whether the Australian court is a clearly inappropriate forum for the litigation of the issues involved in the Australian proceedings. Rather, the question must be whether, having regard to the controversy as a whole, the Australian proceedings are vexatious or oppressive in the Voth sense of those terms, namely, that they are 'productive of serious and unjustified trouble and harassment' or 'seriously and unfairly burdensome, prejudicial or damaging'."

22 In the last few minutes of his argument, senior counsel for the plaintiff put forward the proposition that, should the Court decide the plaintiff ought not to be permitted to litigate the issues in the Jordanian proceeding both there and in Australia at the same time, the plaintiff "would consent to a stay of that particular prayer for relief here." But he then contended the Court should not act upon this concession "because, as I have endeavoured to explain to your Honour, right through to all the cheques that have been sent to my client in Switzerland, drawn on bank accounts at Parramatta and North Parramatta, to enable one to be able to comprehend and deal with all of the matters pleaded in the defence to the claims on the cheques, you have to have a comprehensive understanding of the manner in which the relationship between the parties grew up over the period of time". This proposition concedes the ground taken by the first, second and third defendants that, not only do the Australian claims in question in the present application include claims that have for several years now been prosecuted in Jordan, and are being prosecuted there vigorously, but the remaining claims are inextricably intertwined with the claims brought in Jordan. Of course, in doing so, senior counsel for the plaintiff attempts to include as well the separate claims arising out of Australian cheques that are not the subject of the present application; but on the evidence before me I do not accept that this is correct - the Australian cheques, at least substantially, relate to quite different obligations, and, of course, they involve a different party, the fourth defendant. 23 As I have already indicated, one aspect of the present matter is that the law to be applied at any hearing of the proceeding will be Jordanian law. That, of course, is not decisive against the plaintiff, since a foreign law may be proved as a fact in an Australian court and, if it is not so proved, the Australian court will assume that the foreign law does not differ from the Australian law. In Regie Nationale Renault (at 521), the joint judgment states: "An Australian court cannot be a clearly inappropriate forum merely [emphasis added] by virtue of the circumstance that the choice of law rules which apply in the forum require its courts to apply foreign law as the lex causae ." But it is a material matter. Also in Regie Nationale Renault (at 499), the joint majority judgment cites a passage from John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 at 521: "The assumption of jurisdiction raises no question as to the law to be applied in deciding the rights and duties of the parties. That last question might, in some cases, affect whether the court should decline to exercise its jurisdiction and stay the proceedings." Having drawn attention to these statements, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ, for themselves, observed: "The answer to the question as to the law to be applied in deciding the rights and duties of Mr Zhang and the Renault companies affects the decision whether the Supreme Court should decline to exercise its jurisdiction and stay the action brought against the Renault companies." In Voth (at 566) Mason CJ, Deane, Dawson and Gaudron JJ made it clear that "in deciding whether it has been established that the chosen forum is clearly inappropriate, the extent to which the law of the forum is applicable in resolving the rights and liabilities of the parties is a material consideration". They added: "We agree with Gaudron J [in Oceanic Sun at 266] that the substantive law of the forum is a very significant factor in the exercise of the court's discretion, but the court should not focus upon that factor to the exclusion of all others." This is to make the centrality of Jordanian law in the present matter an important consideration to be weighed in the exercise of my discretion. 24 Although individual factors, once it is clear they may or should be taken into account in the exercise of a discretion, will not necessarily have the same weight in one decision that they had in another, it is interesting to note what the factors were that swayed the majority of the High Court to stay the local proceeding in Voth. In the joint judgment at 570 it is stated: "We turn therefore to consider the factors relevant in the present appeal to the exercise of the discretion whether or not to order that the action be stayed. In favour of a stay are the considerations that: the action has a substantial connexion with the law of Missouri; the relevant acts and omissions took place predominantly in Missouri; the appellant resides and works in Missouri and the professional standards of accountants in Missouri will therefore be relevant to his liability, if any; in large part the damage which the appellant was alleged to have caused was referrable to United States taxation law; and the greater part of the evidence in any trial of the action would be found in Missouri." Against these factors, their Honours weighed the residence of the plaintiffs in New South Wales; that the transactions had some connexion with New South Wales and with Australian revenue laws; and that, to a large extent at least, the damage was suffered in New South Wales. They acknowledged "the right of any plaintiff to bring an action in the courts of the jurisdiction wherein he or she resides" as a "legitimate personal or juridical advantage", and they took into account that the New South Wales plaintiff would be subjected to less favourable rules in respect of costs and interest in Missouri than in the Supreme Court of New South Wales. However, they concluded (at 571) that these matters were "not sufficient to resist the conclusion to which the other considerations irresistibly point, that New South Wales is clearly an inappropriate forum in which to permit the action to proceed". 25 Applying these principles to the circumstances of the present case, I conclude that it is right to exercise my discretion to order that the proceedings, so far as they involve the claims the subject of the application for a stay, be permanently stayed on the ground that the Supreme Court of New South Wales is a clearly inappropriate forum for their determination. There being no reason why costs should not follow the event, I make that order with costs. **********

El-Kharouf v El-Kharouf

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Parties

Cases Cited (7)

Cited By (2)