Independent Trustee Services Ltd v Morris

LEGISLATION CITED : Uniform Civil Procedure Rules 2005

Davis v Turning Properties Pty Ltd [2005] NSWSC 642 Emanuel v Symon [1908] 1 KB 302 Federal Finance and Mortgage Ltd v Winternitz (unreported SC (NSW), 9 November 1989) General Steam Navigation Co v Guillou (1843) 11 M & W 877 CASES CITED : Houlditch v Marquis of Donegal (1834) 2 Cl & F 470; 6 ER 1232 Rainford v Newell-Roberts [1962] IR 95 Roussillon v Roussillon (1880) 14 Ch D 351 Schibsby v Westenholz (1870) LR 6 QB 155 White v Verkouille [1990] 2 Qd R 191

PARTIES : Independent Trustee Services Ltd Anthony James Morris

COUNSEL : Pl: Mr Parker SC / Mr Zahra Def: No appearance

SOLICITORS : Pl: Clayton Utz, Sydney Def: No appearance.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

SC 2010/236266 INDEPENDENT TRUSTEE SERVICES LTD v ANTHONY JAMES MORRIS JUDGMENT 1 HIS HONOUR: The plaintiff by summons of 15 July 2010 claimed relief with the effect of enforcing in New South Wales Judgments and Orders made in the High Court of Justice of England and Wales on 1 and 2 July 2010 by Justice Peter Smith. 2 The evidence shows that the defendant was duly served with the summons in the present proceedings. He has not appeared. Further, he has been served with the Notice of Motion filed by the plaintiff on 6 October 2010 which is before me today. His name was called outside the court earlier today and he did not appear. Those who appeared for the plaintiff have told me that he has not given any indication in any communication to them that he would do so. 3 At an earlier stage in these proceedings he applied for an order dismissing the proceedings, it would seem on the basis that New South Wales was an inconvenient forum and on other bases, but he was not successful. 4 The Uniform Civil Procedure Rules authorise him to make that application without filing an appearance. In the course of his application which was heard by Justice Ball on 29 July 2010 some statements were made by counsel on his behalf which are material to my later consideration and I will return to them later. 5 At later interlocutory stages in these proceedings he was directed by a Registrar to file an appearance, but the time available under that direction has passed and he has not done so. In effect the Notice of Motion now before me seeks summary disposal of the proceedings on the footing that they are undefended. 6 The plaintiff filed an earlier Notice of Motion to a similar effect dated 10 September 2010 but does not proceed on that Notice of Motion and it is dismissed. 7 The documents I have seen are the Summons, the Notice of Motion, the following affidavits; Robert Lancaster of 19 July 2010 (which shows service of the summons); affidavit of Norman Trevor King of 19 October 2010 (which shows service of the Notice of Motion); affidavit of David Kilmaine Percy De Ferrars of 15 July 2010, which gives the history and many particulars of the proceedings in the United Kingdom; the affidavit of Scott Anthony Grahame, which sets out the history of the proceedings in New South Wales; Mr Grahame's further affidavit of 13 October 2010 to like effect. With this affidavit Mr Grahame produces a copy of submissions made on behalf of the defendant before Justice Ball. The affidavits of Mr King and Mr Grahame of 6 October 2010 are now filed in court by leave. I have also seen the affidavit of Hetal Kotecha of 23 September 2010. The deponent is an officer of the plaintiff and his evidence includes material showing the basis of a calculation of the amount now claimed; that affidavit too is filed in court. 8 The plaintiff tenders and I take notice of the Court's record of transcript of proceedings before Justice Ball of 29 July 2010 and that will be marked Interlocutory Exhibit A. 9 The particular Orders of the High Court of Justice which are the basis of the present application for summary disposal are these: 10 On 24 May 2010 Justice Peter Smith made Orders at the conclusion of the hearing when Judgment was reserved. These Orders include in Order 3 that a number of defendants including the now defendant "... file and serve on the Claimant no later than 18 June 2010 an account of the use and application of, and any profits, investment income, growth and interest earned on, the assets of the Impacted Schemes, from their recovery or receipt by each of those Defendants to the taking of the account".

11 His Lordship obviously contemplated that when that account was filed some measure, such as inquiry, would be undertaken to establish what, if anything, was due upon the account, but those measures have not begun because the now defendant did not comply. In effect the plaintiff now asks that this Court take up the inquiry thus begun. 12 In his Lordship's Orders of 1 July 2010 it was further ordered, among many orders dealing with the liability of most of the many defendants in the proceedings in England, as follows: In order 2 it was declared to the effect that a number of defendants including the now defendant dishonestly assisted in breaches of trust referred to in paragraph 1 of those orders in transferring £52m out of the pension schemes listed in appendix 1 to the Particulars of Claim.

13 Then in order 3 it was declared to the effect that a number of defendants including the now defendant were "... liable for knowing receipt to the extent that they received assets of the Impacted Schemes or the traceable proceeds thereof". 14 I see these Orders as intended to establish, and finally establishing, entitlement of the plaintiff to remedies against the now defendant, leaving for further consideration the ascertainment of the quantum of recovery. 15 Order 8 of 1 July 2010 is specifically directed to the liability of the now defendant and it is in these words: The sixth defendant to pay the Claimant forthwith the sum of £52,000,000 (a) (as to the entire sum) by way of equitable compensation for dishonest assistance, and

(b) (as to £4,938,068) as liability for knowing receipt.

Plus interest at 2% p.a. above base rate compounded with monthly rests from the dates that the elements of this sum were transferred out of the Impacted Schemes, such interest assessed in the sum of £6,270,570.48 and continuing at a daily rate of £11,397.26.

16 The plaintiff does not seek judgment in this Court for the full amount as there have been credits of various kinds. 17 Notwithstanding the terms of the order 8, which appear to be open to a reading of which the daily rate of interest is not affected by part payment or other credits, I regard reference to the daily rate as no more than an illustration and not precluding calculation of interest at the rate referred to and compounded, but with credits brought into account at appropriate dates and corresponding reductions in the interest. 18 In effect, the plaintiff seeks a money judgment based on order 8 as a judgment given in England, the judgment itself being the cause of action. The plaintiff also seeks orders which would give remedies carrying out the determinations about liability for dishonest assistance and knowing receipt, the first step towards the determination of which was taken by Order 3 of 24 May 2010. 19 The plaintiff's counsel also told me that the plaintiff was ready to base its case on the underlying causes of action and grounds of suit which were upheld by Justice Peter Smith, that is to say, to satisfy this Court that the same conclusion should be reached here as was reached by Justice Peter Smith. I do not regard this as an exercise which it is necessary to undertake because for reasons which I will state I am of the view that the decisions reached by Justice Peter Smith should be given effect according to the principles on which the Court ordinarily acts in actions based on judgments in other jurisdictions. 20 With respect to Order 8, which I regard as a judgment for payment of money, the first basis on which it is contended that I should recognise and give effect to the judgment in England is that it falls within a ground of recognition that the now defendant is a United Kingdom citizen. Evidence shows plainly that he is a United Kingdom citizen; he holds a United Kingdom passport issued in 2003 and current until 2013, which it should be inferred was relied on by him in his travels to and entry into Australia. 21 Further it should be understood that his citizenship is not some relic of an early stage of his life, but is an active part of his present situation on which he relies for international travel and for other purposes. It appears clearly that the High Court of Justice in England proceeded on a different basis of jurisdiction than simple reliance on his United Kingdom citizenship. A number of measures were taken to serve English process on him here. A Judge of that Court at an early stage made an order in effect ratifying some relatively informal steps which had been taken. Soon afterwards the now defendant communicated with the plaintiff's solicitors in England in terms which clearly showed that he well knew of the English process, and at a later stage, after some months, actual delivery to him of the English process was effected. 22 I take it that the Court in England acted on some extension of classic principles in which the exercise of jurisdiction is based on service within the jurisdiction, extensions familiar here as similar principles are acted on in Australia in the exercise of jurisdiction based on service outside Australia. However the ground of recognition put forward is the now defendant's United Kingdom citizenship, accompanied by proofs and observations which show that it is an active citizenship. 23 Instances of the now defendant's reliance on that status include assertions made on his behalf by his senior counsel before Justice Ball, in written submissions which relied heavily and recurringly on his status as a United Kingdom citizen and on influences which that was said to have on his position under the law of the United Kingdom and, in particular, in relation to the English proceedings and other possible proceedings there arising out of the same events. Observations of a similar kind were developed at some length and relied on by his senior counsel during the hearing of the proceedings before Justice Ball. If and insofar as it is necessary that his citizenship should be active, that requirement is fully met in the present case. 24 Counsel have referred me to observations in several decisions in England in the Court of Queens Bench, in the Court of Appeal and elsewhere to the effect that citizenship of a foreign country is a recognised ground of jurisdiction on which the effectiveness of foreign judgments is accepted under the common law. In Schibsby v Westenholz (1870) LR 6 QB 155 the judgment of the Court of Queens Bench given by Justice Blackburn contains observations on the grounds of jurisdiction of foreign judgments in the exercise of which are recognised in the common law of England. Justice Blackburn's observations referred to the earlier decision of General Steam Navigation Co v Guillou (1843) 11 M & W 877 at 894 (Baron Parke) which appeared to show that allegiance to the foreign country in which jurisdiction was exercised was a basis upon which recognition would be accorded. This was expressed a little obliquely and was not essential for the decision in Schibsby v Westenholz, but the observations were made by a Judge of high reputation speaking on behalf of the whole Court of Queens Bench and are entitled to considerable respect. In Roussillon v Roussillon (1880) 14 Ch D 351 Fry J considered the implications of this passage and stated the result, it should be said in rather clearer terms than appeared from the judgment of Blackburn J. After referring to that and other authorities Fry J said at 371; "What are the circumstances which have been held to impose upon the defendant the duty of obeying the decision of a foreign Court?"

After referring to case law, his Lordship went on: "The Courts of this country consider the defendant bound where he is a subject of the foreign country in which the judgment has been obtained; where he was resident in the foreign country when the action began; where the defendant in the character of plaintiff has selected the forum in which he is afterwards sued; where he has voluntarily appeared; where he has contracted to submit himself to the forum in which the judgment was obtained..." (and his Lordship went on to consider another possible case.)

25 In Emanuel v Symon [1908] 1 KB 302 the Court of Appeal considered the subject. At page 309 Lord Justice Buckley stated: "… these are five cases in which the Courts of this country will enforce a foreign judgment: (1) where the defendant is a subject of the foreign country in which the judgment has been obtained;..."

26 In this case, as in Roussillon v Roussillon and as I understand it in Schibsby v Westenholz, recognition was not founded on the ground of allegiance or citizenship and the observation should be understood to be obiter dictum. However this view appears repeatedly in judgments on appeal given by judges of considerable reputation; such observations are not made lightly. It has been pointed out by text writers and elsewhere that direct authority for that proposition is not cited in any of these cases. I would add that allegiance or citizenship has not, in any event for some centuries, been a ground upon which English courts themselves have assumed jurisdiction. 27 Many text writers, so it would seem, have felt dissatisfied with this view. Their views were collected in the High Court of the Irish Republic in Rainford v Newell-Roberts [1962] IR 95 by President Davitt, who after careful consideration of the text writers as well as case law to which I referred and other case law, declined to act on that basis and to recognise a judgment which had been given in the United Kingdom against a citizen of the United Kingdom, but not based on service within the United Kingdom. In New South Wales in Federal Finance and Mortgage Ltd v Winternitz (unreported, 9 November 1989) Sully J acted on the basis which the English decisions support in recognising and enforcing a judgment given against a United States citizen in the State of Hawaii. His Honour did not refer to Rainford v Newell Roberts and based his decision principally on what he referred to as "the celebrated statement of principle" made by Lord Justice Buckley in Emanuel v Symon. 28 Notwithstanding the absence of citation in the English authorities of any case in which this ground of jurisdiction has been contested and upheld after argument, I am of the view that I should follow them. Ordinarily a decision of the Court of Appeal of England and Wales on a common law question not affected by statutory interpretation or constitutional or other considerations special to Australia ought be followed unless there is some sound basis for concluding that it was erroneous. Justice Sully has followed Emanuel v Symon. I must respectfully say that I have not found the judgment of Davitt P in Rainford v Newell-Roberts persuasive to any extent which would justify my not following the opinion repeatedly expressed in England. Notwithstanding the absence of authority specifically deciding the point, it seems to me very unlikely that these repeated statements were made without reliance on knowledge of practice decisions which may not have attracted a great deal of attention or found their way into law reports but were known to those distinguished judges. 29 In my view I should recognise and give effect to the money judgment in para 8 of Justice Peter Smith's orders of 1 July 2010. 30 Adoption of the declaratory orders and orders to account does not raise quite the same point when I am asked to recognise and make orders based on them. The order which I am now asked to make is "an order that an account be taken before an Associate Justice, on the basis of wilful default, of the dealings by the defendant his servants and agents with the £52,000,000 paid out of the Impacted Schemes referred to in Order 1 of the High Court of Justice, Chancery Division of 1 July 2010 and the traceable proceeds thereof". 31 If the declarations and order to account had been made by this Court and there had not been compliance, such an order would be made as a matter of course to give effect to the earlier decision. The English declaratory orders establish finally that there have been dishonest assistance and knowing receipt, and the interlocutory character of the order for the now defendant to give an account does not diminish the final character of those determinations. 32 Still, the orders do not have the concrete form of money judgments addressed in the authorities I have so far referred to. Rather this Court is asked to take up the controversy determined as far as it has been in England and take the next steps, as it were, in the same litigation. 33 Counsel have referred me to authorities which show that a Court of Equity will lend assistance to the enforcement of a foreign judgment also in a Court of Equity, without requiring as a prerequisite of enforcement here that the foreign order be made a judgment of the court here, but requiring that the court here be satisfied that there is a sufficient connection between the defendant and the jurisdiction in which the foreign order was made to justify recognition of the foreign court's order. The law was, in my view, satisfactorily restated in White v Verkouille [1990] 2 Qd R 191 by Justice McPherson. His Honour made a characteristically careful review of instances in case law where equity courts had acted in this way. The case law is derived, not altogether clearly, from the decision of the House of Lords in Houlditch v Marquis of Donegal (1834) 2 Cl & F 470; 6 ER 1232. 34 In effect Justice McPherson decided to recognise the appointment by a court in Nevada in the United States of a receiver and to allow that receiver to pursue enforcement in Queensland of rights determined by the court in Nevada. 35 The concept of a sufficient connection to justify recognition is not at all a well defined concept but I have no doubt that it is satisfied in the present case where the now defendant is usually to be found in New South Wales and has been able to conduct legal business here for a limited purpose while the substantial merits of the litigation have been determined fully and carefully in the United Kingdom, a country whose citizenship he claims, actually has and at times relied on. I regard it as appropriate to take up enforcement of the decision already reached. 36 In this view I am fortified by observations of Justice Campbell in Davis v Turning Properties Pty Ltd [2005] NSWSC 642 at para 35. 37 For these reasons I propose to make the order and to take up in this Court the exercise of taking an account on the basis of wilful default which the decision already reached in the High Court of Justice in England and Wales fully justifies. 38 I turn to address the calculation of the amount of the money judgment which should now be entered. I would like counsel's assistance on this.

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