J P Morgan Chase Bank N.A. v PT Indah Kiat Pulp and Paper Corporation

The Proceedings 1The plaintiff, JP Morgan, by its Commercial List Summons seeks recognition and enforcement of a judgment of 13 September 2010 of the United States District Court for the Northern District of Illinois Eastern Division by entry of judgment against: (a) The first defendant (PT Indah) for US$32,156,331.55 (b) The second defendant (PT Pabrik) for US$21,340,006.22 (c) The third defendant (APP) for US$53,496,337.77 2The plaintiff also seeks an order for an amount of interest calculated on the rate applicable to the judgment in accordance with rules applicable in the US District Court, namely 0.26 percent per annum, and interest after judgment on outstanding amounts at that rate until the judgment is paid in full. 3By a motion dated 17 July 2012 on the other hand, the first and second defendants seek a declaration under UCPR 12.11(1)(c) but service has not been effected upon them. 4The plaintiff concedes that it has not properly served the first and second defendants. Orders therefore ought to be made in accordance with the motion dated 17 July 2012 in favour of those defendants. It is accepted, however, that the third defendant has been properly served. 5The third defendant accepts that subject to its application for a stay, the criteria for recognition of the District Court judgment in New South Wales has been established on the facts of the case. The third defendant accepts therefore that the District Court judgment is final in a relevant sense despite an appeal having been lodged. 6PT Indah and PT Pabrik are Indonesian companies engaged in the manufacture of paper goods in Indonesia for export. APP is their holding company and is a Singaporean corporation. 7In 1986 APP and Beloit Corporation (Beloit) of Delaware entered into contracts for the sale and purchase of paper-making machinery manufactured by Beloit. In 1997 PT Indah and PT Pabrik assumed the obligations of APP as permitted by those contracts. 8On 25 April 1998 PT Indah and PT Pabrik in each case with APP as guarantor executed promissory notes in favour of Beloit as the supplier of two paper manufacturing machines. The notes were executed in the context of a dispute about the supply and quality of the paper-making manufacturing machines. 9The circumstances and efficacy of the execution of the notes are disputed by the defendants. The notes were assigned by Beloit Corporation to the plaintiff's predecessor in title, Bank One, (formerly First Chicago Bank). 10Further promissory notes which replaced and superseded the original notes were executed by PT Indah and PT Pabrik on 24 September 1998. The efficacy of those notes and the circumstances of their execution is also disputed by each of the defendants. APP executed a guarantee in relation to those notes. 11On 30 September 1998 Beloit assigned the notes and apparently its rights under the guarantee to the plaintiff's predecessor in title. It is accepted that the law which governs at least the credit agreements between the various parties is the law of Illinois. 12It is asserted by the plaintiff that since 11 October 2000 PT Indah and PT Pabrik have wrongly failed to pay interest under the notes. 13On 14 September 2001 Bank One issued notices of default and accelerated the obligation of PT Indah and PT Pabrik to pay or repay the notes in full. Notice of default of the guarantee was also given to APP. 14On 30 August 2002 Bank One filed proceedings in the US District Court against each of the defendants. 15On 7 October 2002 APP filed an appearance. On 12 June 2003 it filed its defence. On 13 March 2006 PT Indah and PT Pabrik each filed an appearance and on 12 April 2006 they filed their defences. No objection was taken by any of the defendants to the jurisdiction of the US District Court. 16On 22 December 2008 the plaintiff applied for summary judgment in the District Court proceedings. On 14 October 2009 Chief Judge Holderman of the US District Court gave summary judgment in the plaintiff's favour on the pleadings reserving the issue of quantum. 17On 21 April 2010 Chief Judge Holderman gave judgment in favour of the plaintiff in the sum of US$50,746,712.03. On 13 September 2010 the US District Court revised the judgment on quantum and gave judgment in favour of the plaintiff against the defendants in the amounts sought in these proceedings. 18On 13 October 2010 all defendants filed a notice of appeal to the Seventh Circuit Court of Appeals. Oral argument was finally heard on 22 November 2011. The Court reserved its decision and is yet to give judgment. 19There have been subsequent appeals by the defendants from rulings on procedural steps taken, for example, in relation to the issue of discovery which are ancillary to the enforcement of the District Court judgment. At no time however has any defendant sought a stay in the US District Court. 20In 2011, the plaintiff sought recognition of the District Court judgment in Singapore. Assistant Registrar Liew on 17 January 2012 recognised the District Court judgment but ordered that there be a stay pending the completion of the appeal proceedings in the Seventh Circuit Appeals Court. The plaintiff appealed that decision but the appeal was dismissed by Kwang J of the Supreme Court of Singapore. 21The plaintiff contends that not only should the US District Court judgment be recognised and therefore entered in New South Wales, but the plaintiff should be permitted to enforce the judgment and thereby seek to recover such monies as it may be able. There is currently no evidence before the Court that any defendant has any assets in this jurisdiction. AAP on the other hand invites the Court to exercise a discretion not to recognise the judgment and hence permit its enforcement. The defendant submits that the proceedings generally ought to be stayed pending a decision of the appeal in the United States. 22The United States is not a country to which Part II of the Foreign Judgments Act 1991 (Cth) applies, accordingly, recognition and enforcement is sought pursuant to the common law. 23It is submitted by the plaintiff that the criteria requirements required by the common law have been satisfied since the judgment between the parties was for a fixed sum, the parties are the same and it should be recognised as final and conclusive. Further it was given by a Court of competent jurisdiction in an in personam action. As I have already observed, APP accepts the criteria have indeed been satisfied, subject only to what it has submitted in relation to a stay, and therefore cannot oppose recognition. 24The plaintiff submits that judgment for the claimed amount should be entered and that an order should also be made for an amount of interest. Further, the plaintiff requests that the proceedings against the first and second defendants be stood over to a date to be fixed in order to enable service to be effected. 25The plaintiff also insists that at best judgment should be entered, but perhaps execution stayed. It submits that if an appeal is ultimately successful on the part of one or other of the defendants, a permanent stay of execution can be ordered pursuant to order 67 of the Civil Procedure Act 2005 (NSW). 26The plaintiff does make the submission that the APP is very late to make its application for a stay, and it is submitted that it should have done so at the outset of proceedings. There has been extensive expert evidence of various sorts filed in relation to other issues and expense has been incurred. 27Both the plaintiff and the defendant referred me to the principles articulated by the Court of Appeal in Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 693-694. That authority supports the proposition that a party seeking a stay must demonstrate a reason or an appropriate case to warrant the exercise of a discretion in its favour. The mere filing of an appeal or application for leave to appeal of course would not be sufficient. It is equally clear from that authority that it is not necessary for the grant of a stay that there be special or exceptional circumstances. It is sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of a discretion. 28The plaintiff correctly asserts that it is entitled to the benefit of the judgment on the basis of the decision at first instance because it is presumed to be correct. It also submitted that there is no evidence of any prejudice to any of the defendants in particular to APP if a stay were refused. Nor is there any suggestion that the appeal would be rendered abortive or nugatory if the judgment debt were paid. It was also pointed out that APP makes no complaint about any inability to pay. The Court is invited to take the course that if funds are available it should impose upon the applicant the obligation to pay the whole or perhaps part of the judgment debt. 29True it is the defendants did not seek a stay in the United States but the procedural requirements in that jurisdiction would have required them to lodge what is described as a supersedeas bond for the whole of the judgment debt in order to secure a stay. I can accept that there would be sensible and rational commercial reasons why that course would not necessarily be a palatable one to adopt. 30The balance of convenience, it is submitted, weighs in favour of the plaintiff, and as a national United States bank there is no doubt that it would be able to repay any monies if the defendants were ultimately successful on the appeal. It is further submitted by the plaintiff that it has been out of its funds for 12 years having first demanded repayment as early as October 2000. On the estimates that have been given for the possibility of the timing of the appeal, it may be that the appellate process, if it ultimately went to the Supreme Court of the United States, may not be exhausted until some date late until 2013. 31I was invited initially to take into account various comments made by Chief Judge Holderman in striking out the case against the defendants. His Honour saw the position as quite clear and regarded none of the defences as tenable. However, APP on the other hand points to the fact that this Court is in no position to form any view as to the law in Illinois. I need not really spend any time on that for a number of reasons. First, the length of time that the appellate court has so far been reserved, although a degree of speculation may be involved in what I am about to say, indicates that at the very least, that Court did not see the matter as an open and shut case like Chief Judge Holderman. 32Secondly, in any event Mr Van Dyke, the attorney who appears for the defendants, has expressed the view that in his opinion the defendants have reasonable prospects on the appeal. That opinion has not been challenged. 33The defendants submit that if a judgment were entered in New South Wales and they were ultimately successful on the appeal, there would be certain difficulties procedurally, as I understood it, in relation to the judgment of New South Wales. I do not think that is correct as indeed a permanent stay would issue, one would think, as a matter of course if indeed the defendants were successful in their appeals in the United States. 34I do not see prejudice on either side of the equation here. I do regard both parties as either able to disgorge an amount in the case of JP Morgan if it is paid, or alternatively for the defendant to pay the judgment sum if ultimately the judgment stands. 35Although the plaintiff denies its relevance, APP points to the plaintiff's application made in the Court in Singapore where judgment has indeed been entered against APP but stayed pending the outcome of the appeal in the United States. The plaintiff draws a distinction between the law in Singapore and that in New South Wales. However, it has been accepted in argument that in Singapore a discretion was exercised both by the Registrar and by Kwang J on appeal in granting a stay. 36I observe that in both cases in Singapore no reasons were given but the brief note of argument indicates that two factors perhaps took some prominence. First, the expectation or hope that the appellate court would soon give judgment and secondly, that it was a very large sum of money to be paying, potentially unnecessarily. 37The two most significant factors in my mind taken separately, but certainly when taken together, and which have influenced the exercise of my discretion, are first the length of time it has taken the appellate Court to determine what the first instance Judge thought was an open and shut case. Clearly as I said already it cannot be suggested that they are of like mind. That is supported by Mr Van Dyke's opinion. 38Secondly, true it is this is a commercial contract where sophisticated parties are operating in an international market, and whilst the law in Singapore may have differences it is a significant matter in my mind that that Court, notwithstanding the fact that it entered judgment, determined to stay the execution of the judgment pending the outcome of the appeal in the United States. Whilst there is no requirement for comity, I do consider that uniformity or consistency of approach is a desirable outcome, all things being equal. 39For the above reasons I consider the appropriate course is that judgment should be recognised in Australia and entered accordingly for the amount specified. I also regard it as appropriate that an order be made staying those proceedings until the determination of the appeal in the Seventh Circuit Appeals Court, or in any motion for a re-hearing filed in that court. If the appeal is ultimately successful then I consider it would be appropriate for this Court to grant a permanent stay.