Jani-King Franchising, Inc v Jason [2013] QSC 155

[1] On 16 May 2011 Jani-King Franchising, Inc ("Jani-King") obtained a judgment against Wong Ee Waur Carl Jason ("Mr Wong") in the sum of $944,725 (plus interest and costs) in the District Court of Dallas County, Texas, United States of America.

[2] On 1 August 2012 Jani-King commenced proceedings in this Court based on that judgment.

[3] In its statement of claim Jani-King pleads that:

(a) Judgment was entered by the District Court of Dallas County, Texas on 16 May 2011;

(b) The judgment was final and conclusive and disposed of all claims and proceedings between the parties;

(c) The District Court of Dallas County, Texas had and it exercised jurisdiction over Jani-King because Jani-King voluntarily submitted to that jurisdiction;

(d) The judgment is for an amount that is fixed or readily calculable;

(e) Jani-King was the plaintiff in the proceeding before the District Court of Dallas County, Texas and Mr Wong was a defendant to the proceeding who is jointly and severally liable to pay the judgment debt along with other defendants named in the Texas proceedings; and

(f) Mr Wong has failed or refused to pay the judgment sum.

[4] The matters set out in the paragraph immediately above are the preconditions necessary for a foreign judgment creditor to succeed on an action for debt at common law.[1] The judgment of the Texas Court is not one to which Part 2 of the Foreign Judgments Act 1991 (Cth) ("the Act") applies. Thus, it is not a judgment which may be registered under that statute and enforced as a result of registration.

[5] The Queensland proceedings were served on the applicant on 23 December 2012. No defence was filed.

[6] On 30 January 2013 default judgment was obtained against Mr Wong.

[7] Mr Wong, by an application filed on 15 March 2013, now seeks to set aside that default judgment.

[8] Rule 290 of the Uniform Civil Procedure Rules ("UCPR") provides:

"290 Setting aside judgment by default and enforcement

The court may set aside or amend a judgment by default under this division, and any enforcement of it, on terms, including terms about costs and the giving of security, the court considers appropriate."

[9] There are three considerations which are material to an application of this type. They are:

(a) Has there been a satisfactory explanation for the failure to file a defence?

(b) Has there been an absence of delay in applying to set aside the judgment? and

(c) Has the defendant demonstrated a prima facie defence on the merits?[2]

[10] While those three considerations will be taken into account, it is not necessary that each of them be proved in every application of this type. The most important factor is whether or not a prima facie defence on the merits has been demonstrated. It will be rare for a default judgment not to be set aside where such a defence has been demonstrated.[3]

[11] Mr Wong accepts that he was served on 23 December 2012. His reason for not filing within time was that he left Australia on 8 January 2013 and did not return until 26 February 2013. He says that he was and remains unable to afford representation.

[12] Mr Wong does not explain why, in the period between service and when he left Australia, he could not have filed a defence. The mere fact of not being able to afford representation is insufficient to provide an explanation given that the warnings contained in the originating documents are clear and unambiguous. Mr Wong presents as an intelligent man. His written submissions and oral argument demonstrate that he has an adequate grasp of the requirements of the UCPR.

[13] He does not say that he misunderstood the requirement to file within a particular time. He has not satisfactorily explained the delay.

Any delay in seeking to set aside the judgment in default?

[14] Jani-King does not argue that there was any delay. The application was filed within three weeks of Mr Wong's return to Australia and, in any event, the real debate between the parties is as to whether or not there is a prima facie defence.

[15] Mr Wong has not exhibited a draft defence which he would file if his application were successful. His affidavit material and his submissions relate solely to the issue of jurisdiction. That is not surprising. The basis for Jani-King's claim in this jurisdiction is not concerned with the contractual relationships between the parties but the existence of a judgment in its favour. Jurisdiction is the only point available to Mr Wong in these circumstances.

[16] Much of the evidence concerning the procedural requirements of the Texas courts and the proper interpretation of the rules of those courts was given in an affidavit of Jonathon Hyman, a Texan lawyer and a shareholder in the firm which represented Jani-King in the Texas proceedings. No objection was taken to his statements of opinion so far as they concerned the procedural laws of Texas.

[17] Jani-King relies on the findings of the Texas court that it had jurisdiction to deal with the matter and to give judgment against Mr Wong. While that is important, it does not resolve the issue of jurisdiction.

[18] Section 11 of the Act deals with judgments which can not be registered under Part 2 of that Act. The Texas judgment can not be registered under Part 2. Section 11 provides:

"For the purposes of proceedings brought in Australia for the recovery of an amount payable under a judgment given in an action in personam by a court of a country, not being a judgment to which Part 2 applies, the court is not taken to have had jurisdiction to give the judgment merely because the judgment debtor:

(a) entered an appearance in proceedings in the courts; or

(b) participated in proceedings in the court only to such an extent as was necessary;

for the purpose only of one or more of the following:

(i) property seized or threatened with seizure, in the proceedings; or

(ii) property subject to an order restraining its disposition or disposal;

(e) inviting the court in its discretion not to exercise its jurisdiction in the proceedings."

[19] Section 11(a) and (d) are relevant in this case. It must be observed that, while s 11 sets out when a foreign court will not be taken to have jurisdiction, it provides that such a conclusion will only be available where a judgment debtor has done only those things set out in the section - "the court is not taken to have had jurisdiction to give judgment merely because the judgment debtor" takes one or more of the steps in s 11. This is similar to the provisions of s 7(5) of the Act.[4]

[20] Section 7 was considered in de Santis v Russo[5]. That case concerned a judgment which was registered under Part 2 of the Act. Ms de Santis sought to set that aside. In considering an appeal refusing that application McPherson JA relied upon the principle that the question whether a foreign court has jurisdiction falls to be determined according to the forum court and not the foreign court: Henry v Geoprosco International Ltd,[6] Von Wyl v Engeler.[7]

[21] In order to determine this point it is necessary to set out, briefly, some material concerning the action against Mr Wong in Texas and the steps he took in response.

[22] The action in Texas was commenced in March 2005 against Mr Wong and two companies which he controlled. In those proceedings Jani-King sought damages for fraudulent representation concerning a regional franchise agreement entered into between Jani-King and one of the companies controlled by Mr Wong. It was alleged by Jani-King that Mr Wong (and the companies) fraudulently misrepresented its gross revenues to Jani-King so as to avoid royalty payments and fraudulently established separate businesses for the purposes of performing other services without reporting revenues from such services to Jani-King.

[23] Mr Wong sought an order from the Texas court dismissing the proceeding on the ground that the court did not have jurisdiction. He contended that the court could not deal with him because he was not a resident of the State of Texas. His application for what was described as a "special appearance" was dismissed by Judge Thomas in March 2006. (A "special appearance" has similar characteristics to a conditional notice of intention to defend under r 144 of the UCPR.)

[24] In April 2006 Judge Thomas informed the parties that, the parties not having referred her to a relevant decision of the Texas Supreme Court, further submissions were required on the "special appearance" issue. Jani-King provided further submissions. It is not clear whether Mr Wong did. In any event, in May 2006 Judge Thomas vacated the denial of Mr Wong's "special appearance". Other orders were made for discovery and Jani-King became entitled to seek further discovery from Mr Wong "related to the question of whether [the Texas court] can maintain personal jurisdiction over Defendant Wong Ee Waur Carl Jason." The parties stipulated that the applicant's "participation in jurisdictional discovery would not serve as a waiver of his special appearance."

[25] Discovery took place and Mr Wong took part in oral depositions in July 2010. In each case Mr Wong was careful to premise his participation in those proceedings with a reservation of his right to challenge the jurisdiction of the Texas court. There were other proceedings, though, in which that reservation was not expressed.

[26] In early 2010 Jani-King sought to join another person as a defendant. This was opposed by Mr Wong and the corporate defendants. In their response to Jani-King's motion to join the other person there was no reservation of rights on Mr Wong's behalf. The submissions referred to both procedural and substantive reasons for not allowing the joinder and sought dismissal of the motion and an order that Jani-King pay Mr Wong's (and the other defendant's) "reasonable attorney's fees and expenses". This part of the proceedings was unrelated to Mr Wong's claim for a "special appearance". It demonstrates that Mr Wong engaged with the Texas court and went beyond "merely" entering an appearance to contest the jurisdiction of the court. On that basis s 11 of the Act is not engaged.

[27] Mr Wong had the advantage of an order made by the Texas court in April 2006 to the effect that his application for a "special appearance" would be reconsidered following completion of the discovery referred to above.

[28] That application was not reconsidered following discovery because Mr Wong failed to make a request for that reconsideration. Had similar circumstances existed in this jurisdiction, namely:

(a) that a defendant's conditional appearance had been struck out,

(b) that the defendant had been given leave to file a new conditional appearance, and

(c) that the defendant did not file a new conditional appearance

then such a defendant would be regarded as having abandoned the claim for a conditional appearance and a court in this jurisdiction would proceed to deal with the matter.

[29] In April 2011 the trial between the parties commenced. There was no appearance for any of the defendants and judgment was entered for the plaintiff. The Texas court found:

"Wong had notice of the trial setting but did not appear. The Court further finds that by failing to request and obtain a hearing on his special appearance, Wong has waived his special appearance and thereby submitted himself to the jurisdiction of the Court."

[30] In his written submissions Mr Wong referred to the decision of Lord Justice Buckley in Emanuel & Ors v Symon[8] where his Lordship said:

"In actions in personam there 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; (2) where he was resident in the foreign country when the action began; (3) where the defendant in the character of plaintiff has selected the forum in which he is afterwards sued; (4) where he has voluntarily appeared; and (5) where he has contracted to submit himself to the forum in which the judgment was obtained."

[31] Mr Wong argues that he did not voluntarily appear and that none of the other categories in the decision of Buckley LJ apply to him.

[32] The material from the Texas court shows that Mr Wong maintained his objection to the jurisdiction on a number of occasions but not all. Mr Wong does not say why he failed to take the action required to seek the reconsideration of his "special appearance". His failure to request the Texas court to reconsider his application has not been explained in any of the submissions by him either written or oral. This was at a time when Mr Wong was still represented by a United States lawyer.

[33] Mr Wong has only relied upon the jurisdictional argument with respect to the Texas court. He provided no argument on the merits of the case against him in Texas. Mr Wong has failed to demonstrate that he has a satisfactory explanation for the failure to file a defence or that he has a prima facie defence on the merits.

[34] The application is dismissed. Mr Wong is to pay Jani-King's costs of and incidental to the application on the standard basis.

[1] Emanuel v Symon [1908] 1 KB 302 and Blohn v Desser [1962] 2 QB 116.

[2] See, for example, National Mutual Life Association of Australasia Limited v Oasis Developments Pty Ltd [1983] Qd R 441.

[3] See National Mutual Life Association of Australasia Limited v Oasis Developments Pty Ltd [1983] Qd R 441 at 449; Cook v D A Manufacturing Co Pty Ltd [2004] QCA 52 at [16].

[4] Section 7(3)(a)(i) of the Act provides:

"(3) For the purposes of subparagraph (2)(a)(iv) and subject to subsection (4), the courts of the country of the original court are taken to have had jurisdiction:

(a) in the case of a judgment given in an action in personam:

(i) if the judgment debtor voluntarily submitted to the jurisdiction of the original court"

"(5) For the purposes of subparagraph (3)(a)(i), a person does not voluntarily submit to the jurisdiction of a court by:

(a) entering an appearance in proceedings in the court; or

(b) participating in proceedings in the court only to such extent as is necessary;

for the purpose only on one or more of the following:

(i) property seized, or threatened with seizure, in the proceedings; or

(ii) property subject to an order restraining its disposition or disposal;

(e) inviting the court in its discretion to exercise its jurisdiction in the proceedings."

[5] [2002] 2 Qd R 230; [2001] QCA 457

[6] [1976] QB 726

[8] [1908] 1 KB 302