The proceedings commenced in the Commercial List were part of an ongoing dispute between the appellant law firm, Michael Wilson & Partners Limited, and three of its former partners, Mr Robert Nicholls (bankrupt and now deceased), Mr David Slater (bankrupt) and Mr John Emmott, the respondent. The appellant's application is supported by affidavits sworn by Mr Michael Wilson, an employee of Michael Wilson & Partners Limited and head of its branch office in Kazakhstan. The disputes arose when Mr Nicholls, Mr Slater and Mr Emmott left Michael Wilson & Partners in 2006 and, through entities established by them (to which I will refer as the Temujin entities), provided legal and corporate advisory services in Kazakhstan in competition with Michael Wilson & Partners, taking a number of its clients with them.
The terms on which Mr Emmott had joined the firm were recorded in an agreement governed by the laws of England and Wales which included an arbitration clause providing that any dispute would be resolved by arbitration in London. The agreements with Mr Nicholls and Mr Slater, however, were governed by the laws of New South Wales. As might be expected, the disputes have accordingly resulted in a number of actions being brought in different jurisdictions. They include arbitration proceedings in the United Kingdom against Mr Emmott and proceedings in New South Wales against Mr Nicholls, Mr Slater and the Temujin entities.
The course of the various proceedings is set out in detail in the judgment of Ball J. In short, the arbitration proceedings resulted in awards in favour of Mr Emmott. That was because, although he was found to have been in breach of fiduciary duties and in breach of contract, he was also found to be entitled to the value of his 33 per cent shareholding in the appellant, the value of which exceeded the award against him.
After the final award was handed down in the arbitration proceedings, Mr Emmott was successful in obtaining from the English Commercial Court worldwide freezing orders against the appellant in the amount of £3,209,613 and USD841,213. The appellant has applied in the United Kingdom to have those orders discharged and that is one of the grounds for the stay application. The appellant argues that the value of its assets presently frozen vastly exceeds any liability it has to Mr Emmott and that the freezing orders (in combination with the requirement to provide security for costs and the November costs order) are hampering its prosecution of this appeal and (assuming the appeal is allowed) the proceedings in the Commercial List.
The appellant was more successful in the proceedings in New South Wales. Those proceedings resulted in substantial judgments in favour of the appellant against Mr Nicholls, Mr Slater and the Temujin entities. The appellant was later successful in placing the two individual defendants into bankruptcy and the Temujin entities into liquidation. As already noted, Mr Nicholls is now deceased.
The premise of the proceedings in the Commercial List is that Mr Nicholls, Mr Slater and the Temujin entities had valuable causes of action against Mr Emmott. The appellant has taken an assignment from the trustees in bankruptcy and the liquidators of the Temujin entities of the relevant rights. In the proceedings in the Commercial List, the appellant sought relief against Mr Emmott in its own right and as assignee of those rights. The originating process (an amended summons and a commercial list statement) was served on Mr Emmott outside Australia. He sought an order that service of those documents be set aside and alternatively a stay of the proceedings on the basis that New South Wales is an inappropriate forum to determine the dispute.
Ball J granted a permanent stay. His Honour said at [70]:
"There has been extensive litigation between [the appellant] and Messrs Nicholls, Slater and Emmott both here and in England, as well as other jurisdictions, relating to events that primarily took place in Kazakhstan. The only real connection that the underlying disputes have with Australia is that Mr Nicholls and Mr Slater's employment contracts with MWP were governed by New South Wales law and both were at times residents of Australia, although not at the time of the events giving rise to any of the claims sought to be advanced in these proceedings. The proceedings between Messrs Nicholls and Slater and [the appellant] have been resolved; and with the resolution of that dispute, the principal connections the underlying dispute had with Australia no longer exist or at least are not relevant. Those with an interest in the current dispute reside either in the United Kingdom or Kazakhstan. All the relevant events occurred in Kazakhstan and relate to legal and consulting firms operating there. Having regard to those matters, it could not be said that in all the circumstances this Court should assume jurisdiction over what remains of the dispute."
The appeal is from that order.
Mr Wilson, who appears for the appellant, provided lengthy written submissions and also addressed the Court at length orally. Without derogating from the careful detail of those submissions, for present purposes the appellant's contentions as to the relevant background can fairly be summarised in a number of key propositions:
1. Mr Emmott has no liability to his lawyers for legal costs and accordingly has no basis for claiming costs from the appellant; the orders for costs and for security for costs ought not to have been made and the security already provided should be released;
2. the orders for costs and security for costs are operating in a way that is unjust because they are enabling Mr Emmott, who has the benefit of the worldwide freezing orders against the appellant, to stultify its prosecution of valuable causes of action against him. The appellant asserts that the overall position "in Australia and elsewhere in the world" is that Mr Emmott owes the appellant "US$14 million of final and binding judgment debts" for which he is jointly and severally liable as a partner in the "Temujin Partnership";
3. in light of established facts and Mr Emmott's conduct of other proceedings in the United Kingdom, it is an abuse of process for him to resist submitting to the jurisdiction of the courts of New South Wales.
[2]
Stay application
Prayer 4 in the appellant's amended notice of motion is wordy and argumentative, seeking an order in the following (unusual) terms:
"4. In accordance with section 67 of the Civil Procedure Act 2005 (as amended), the relevant provisions of the UCPR, and other applicable law, rules and regulations, to stay [orders 5 to 8 set out above], the Order of 23 March 2020 (the "Second Order"), and the Respondent's Notice of Motion of 22 March 2020, until, whichever of the following is the later to occur:
a) The final outcome and determination is known of [the appellant's] applications of 14 January 2019 (as amended in March and April 2019), and of 7 February 2020, all of which applications are currently before the Commercial Court of the Queen's Bench Division of the English High Court to revoke, cancel, discharge, release, reduce and/or vary the English freezing order to which [the appellant] is currently subject, to order an inquiry into the loss, damages, costs and expenses which the Respondent has caused [the appellant], since 2012 and/or so as to expressly entitle [the appellant] to apply and utilise its assets and monies (including, without limitation, those currently on deposit in Australia, New Zealand, the CFO and elsewhere), in relation to these proceedings in light of the judgment of the Master of the Rolls, Sir Terence Etherington, Underhill and Jackson LJ's in the English Court of Appeal in favour of [the appellant], and against the Respondent of 31 July 2018 at [2018] EWCA Civ. 51, and related Order of Lords Reed, Hodge and Lloyd-Jones in the Supreme Court of the United Kingdom of 31 July 2018, by all of which the Respondent is bound; and/or
b) The end of the State of Emergency in Kazakhstan that was declared on 15 March 2020, by the President of the Republic of Kazakhstan pursuant to his Decree No. 285 (enclosed in its Russian original), pursuant to which Presidential Decree, the entire City of Almaty was placed in lock-down (so that all courts, state agencies, schools, universities, hotels, markets, restaurants, cafes, public places closed and access to and from the City was physically barred by military and police). In addition, and as further emergency measures, on 27 March 2020, the Akimat and State Emergency Committee of the City of Almaty issued a Resolution (also enclosed in its Russian original) requiring all people to stay at home, in quarantine and stopping the work of all businesses (including that of [the appellant]), save only for certain very limited exceptions such as banks headquarters, food, medical, utility supplies, police and other vital services, as a result of which [the appellant's] offices have been and are prevented from working, none of [the appellant's] staff are allowed to attend its offices, and where [the appellant's] staff do not all have remote access, and are not all able to continue working, remotely, or otherwise, until after the state of emergency is over, and the pandemic crisis measures adversely affecting [the appellant] have ceased."
In short, the appellant seeks a stay of the several processes that currently threaten the fate of the appeal (the orders requiring the payment of costs and the provision of additional security and the respondent's motion to have the proceedings dismissed for failure to comply with those orders) pending:
1. the determination of the applications in the United Kingdom to rescind, revoke and vary the English freezing orders (which it is said are wrongly impeding the appellant's prosecution of the appeal); and
2. the end of the State of Emergency in Kazakhstan declared in response to the COVID-19 coronavirus pandemic. The appellant argues that the lockdown in Kazakhstan and the impact of the pandemic is impeding the appellant's capacity to conduct its business and to prosecute the appeal.
[3]
Stay pending determination of the application to vary the English freezing orders
Mr Wilson's submissions and evidence on this issue rested on contestable assertions the resolution of which, even if it were possible on the state of the evidence, would be inappropriate on the present application. He submitted, in substance, that the appellant's claims against Mr Emmott are so well- established and beyond dispute that "obviously" the appellant has no interest in delay. He submitted, however, that given that the appellant has "more than US$10m of its assets wrongly tied up", its ability "to continue with these proceedings, and this appeal, is significantly restrained until such freezing order is cancelled and lifted."
The submission asserted the correctness of what appears to be a tendentious account of the history of the disputes between the parties and, more importantly, paid no regard to the existence of the November orders. It is one thing to foreshadow an orderly challenge to orders of the court; it is another to proceed on the assumption that orders were wrongly made and may be disregarded with impunity. The issue whether the orders should be set aside is not before me; that will be determined at the hearing in August. However, in determining whether to grant a stay, it is appropriate to recall that the orders were made following a late, contested application for an adjournment of the hearing and, as I was informed, after full argument.
Indeed, the respondent stated that the appellant's argument on the occasion of the adjournment application included reliance on the indemnity principle. If that is correct, the argument was at least implicitly rejected by the Court in the making of orders 5-8, which are properly seen as the price of the adjournment. It is apparent from prayer 1 of the appellant's amended notice of motion and the submissions before me that the appellant will seek to rehearse the same argument at the hearing in August.
The evidence relied upon by the appellant ranged broadly over the lengthy history of litigation between the parties but there was no evidence that the appellant is not presently in a position to comply with the November orders. Indeed, the evidence was to the contrary. The material relied upon by the respondent included a letter dated 9 April 2020 from his English solicitors noting the application to vary the English freezing order and saying:
"Please note, that, entirely without prejudice to all our client's defences to your application dated 8 January 2020, our client is prepared to consent to the use of funds on deposit in your name with St Georges Bank Sydney for the sole purposes of providing the further security of A$12,500 and the payment of costs of A$10,000 as ordered by the New South Wales Court of Appeal.
If you accept our offer, then we shall prepare an appropriate consent order for lodging with the High Court in London."
Mr Wilson's explanation for not accepting that offer was that he fears that, if the appellant were to do so, the respondent would seek to have it dealt with for contempt of court. He said that, after the first amount of security for costs was provided by consent, "what then happened, astonishingly, is Mr Emmott turned around in London and said that by giving a guarantee by consent we were in contempt of the English freezing order". He submitted on that basis that "…we can't trust or rely on one word of what Mr Emmott says". However, there was no suggestion that, on the previous occasion, Mr Emmott had consented to the provision of security against the frozen assets or that his lawyers had provided a letter in the terms set out above. I am not persuaded that there is any rational basis for the appellant not to accept that offer so as to enable it to comply with the November orders.
I appreciate that, in order to prosecute the appeal, the appellant will also wish to have access to additional funds in order to pay lawyers of its own. Mr Wilson said: "we're not allowed to spend our own moneys in pursuing the Australian proceedings, where we cannot therefore instruct a large firm of solicitors and spend the money we need to on counsel to pursue this appeal, even though we've been forced to do that by judgments and orders".
The assertion as to being "forced to do that" reflects Mr Wilson's conviction that the proceedings below were "mandated" by decisions of the English courts that Australia is the appropriate forum for the resolution of the outstanding disputes between the appellant (in the various capacities in which it brought the proceedings) and Mr Emmott. Whatever the position of the English courts, their orders could not of course compel the Supreme Court of New South Wales to hear the matter. Further, while I appreciate that it is the subject of the proposed appeal, the appellant's submission ignored the existence of the decision of Ball J.
I am not persuaded that the impact of the English freezing order is such as to warrant staying the November orders or the hearing of the respondent's motion seeking dismissal of the appeal.
[4]
The COVID-19 coronavirus pandemic
Nor am I persuaded that the impact of the coronavirus pandemic warrants such a stay. Whatever the current status of the State of Emergency in Kazakhstan, the appellant's evidence has not persuaded me that the pandemic crisis measures are adversely affecting its capacity to prepare for the August hearing. The lengthy argument before me revealed that the work to prepare for that hearing is all but done. The appellant sought that date (instead of a July date previously reserved by the Registrar) not because Mr Wilson could not prepare for a hearing in July due to lockdown measures but because the firm had another client hearing that day. At the hearing before me, the appellant argued the merits of many of the points to be raised at the hearing in August, at length and in detail. If the respondent's application is unsuccessful, the future course of the appeal and the application for leave to appeal can be assessed at that point.
[5]
The respondent's application concerning the notice to produce
The appellant's entitlement to take the step of serving a notice to produce at a time when the prosecution of the appeal is stayed by force of order 8 in the November orders may be doubted. However, the respondent did not take that point. Accordingly, with some equivocation, I have determined that it is appropriate to determine the motion on the assumption that the stay of prosecution does not preclude the appellant from issuing a notice to produce relied upon in aid of a challenge to that very order.
The principal basis on which the respondent sought to be excused from producing documents in answer to the notice to produce was that he has not submitted to the jurisdiction of the Court and has at all times contested its jurisdiction. That issue was determined in the respondent's favour by Ball J.
A substantial portion of the appellant's submissions was directed to contesting the merits of Ball J's decision and the entitlement of the respondent to deny that he is not domiciled in Australia. In the proceedings before Ball J, counsel for the appellant expressly disavowed any contest on the issue of domicile. Mr Wilson asserted at the hearing before me that counsel had no authority to make that concession but the fact is that it was made and there is now a judgment upholding Mr Emmott's position that he is not amenable to the Court's jurisdiction.
The respondent relied in this context on the decision in News Corporation Ltd v Lenfest Communications Inc (1996) 40 NSWLR 250 at 260-261; [1996] NSWSC 474. He acknowledged that the decision is not binding on this Court but a similar principle has been recognised at the appellate level in the Federal Court. The order sought by the respondent is in the same terms as the order made in that case.
Lenfest was a case where, as here, a notice to produce had been served on a foreign defendant who was contesting the court's jurisdiction. Giles CJ Comm D held (in relation to Part 36, rule 16 of the Supreme Court Rules, the predecessor to UCPR 21.11), that the rule requiring production in response to a notice to produce was "not to be read down so that it does not empower the service of the notice to produce … but is controlled by (here) the provision for an order otherwise": at 260. The position under rule 21.11 is relevantly the same; the rule requires a party upon whom a notice to produce has been served to produce the documents unless the Court orders otherwise.
After weighing the competing considerations of the defendant's active commercial pursuits within the jurisdiction (a factor also relied upon here) and the importance of respect for another State's sovereignty, his Honour said at 261:
"…a foreign defendant served outside Australia should not lightly be subjected to the jurisdiction of this Court, but more important should not have imposed upon him one of the Court's compulsory processes in aid of establishing the jurisdiction itself."
In my view, the decision in Lenfest provides support for the conclusion that Mr Emmott should not be obliged to produce the documents. The notice to produce can properly be regarded as a step in aid of the appellant's attempt to establish jurisdiction (by challenging the adverse decision of Ball J on that issue).
The appellant submitted that the position is different in the present case in that the respondent must be taken to have submitted to the Court's jurisdiction by taking steps in the proceedings including applying for security for costs, applying for its costs and filing the notice of motion seeking to be excused from complying with the notice to produce. I note that there is an element of paradox in the appellant's reliance on the last matter, the respondent's application concerning the notice to produce. If principle holds that the Court may excuse compliance with a notice to produce on the application of a party served outside Australia on the basis that the party challenges the Court's jurisdiction, the principle would be self-defeating if the making of such an application was taken to be a submission to jurisdiction.
As to the submission that the respondent must be taken to have submitted to the Court's jurisdiction by applying for costs and security for costs, the respondent submitted that there was authority to the contrary. The parties were accordingly granted leave to send any relevant authorities to the Court after the hearing. The terms of the leave granted to the appellant were as follows:
"I've given leave to [the respondent] to send authorities through on that issue, I said to him not to make any submissions but just to send to me the authorities with the point references, meaning referring to specific paragraphs. Could you please do the same, no submissions, just the authorities?"
I later added leave to include in that note a reference to a paragraph described in Mr Wilson's oral submissions as follows:
"the English Court of Appeal, Gross, Jackson and Rose LJJ found in para 9 'On 20 December 2006, Mr Emmott entered into a secret agreement with Mr Nicholls and Slater, providing for the establishment of a rival business, the Temujin partnership'."
Mr Wilson evidently misconceived the scope of the leave granted and provided five and a half further pages of closely typed written submissions. As the AVL link by which he appeared (from Kazakhstan) at the hearing was at times distorted, it is possible that he misheard what I said on that issue. Accordingly, for abundance of caution, I have considered those submissions (which, in any event, were in large measure directed to non-issues or else repetitive of points made during the hearing).
The particular issue on which I sought further assistance was whether there was any authority to support or refute the respondent's submission that he is not to be taken to have submitted to the jurisdiction by seeking orders for costs and security for costs or by filing the notice of motion seeking to be excused from compliance with the notice to produce (the second issue on which leave to file a supplementary note was granted to Mr Wilson related to the correction of something said in submissions by counsel for the respondent which otherwise goes to the merits of the appeal, not the applications before me; that issue does not require further consideration).
In his supplementary submissions, Mr Wilson repeated his submission that the respondent has taken "steps" in the jurisdiction and therefore has submitted himself to the jurisdiction of this Court, or waived any objection to the jurisdiction of the Court and that of the Court below. He submitted that those steps were "entirely inconsistent with [the respondent's] purported refusal to submit to the jurisdiction, despite being domiciled in Australia since birth, as he confirmed personally to the tribunal on cross-examination".
Both parties provided authorities on that issue. The respondent also relied on a helpful discussion in M Davies, A S Bell and P L G Brereton, Nygh's Conflict of Laws in Australia (LexisNexis Butterworths, 9th ed, 2014). None of that material provides a clear answer addressing the precise facts of this case or rule 12.11(4) of the Uniform Civil Procedure Rules 2005 (NSW), which provides that the making of an application to set aside the service of an originating process does not constitute submission to the jurisdiction of the court. To the extent that any clear principle can be discerned from the authorities relied upon by the respondent, it is that the right to object to jurisdiction (in the language of rule 12.11, the right to apply to set aside service without submitting to jurisdiction) may be taken to have been waived where a "fresh step" or voluntary act of the party asserting that right unequivocally evinces an intention to abandon or not to assert it: Laurie v Carroll (1958) 98 CLR 310 at 335; [1958] HCA 4; National Commercial Bank v Wimbourne (1987) 11 NSWLR 165 at 176; Protec Pacific Pty Ltd v Steuler Industriewerke GmbH [2007] VSC 93 at [51]. However, those authorities must be considered in the context of the rule 12.11, which confers an express right to apply to set aside service without submitting to jurisdiction. Where (as here) that right has been exercised and a conditional appearance entered, an argument for waiver would have to be based on an unequivocal act evincing an intention to abandon the right to contest jurisdiction under the protection of a conditional appearance.
Mr Wilson relied on two cases to support the submission that Mr Emmott has waived that right. The first was White v Hardwick (1922) 23 SR (NSW) 6 at 10 (pages 56-61). That decision is referred to in Nygh's Conflict of Laws in Australia (at par 3.113) as authority for the proposition that "the defendant also submits by seeking interlocutory relief which is only consistent with an intention to contest the merits before entering an appearance." The passage relied upon by Mr Wilson was as follows (per Street CJ in Eq):
"… I should still think that the defendant is not entitled to object to the service. After being served he intimated his intention of applying for security for costs, and he applied for an extension of time for entering an appearance to enable him to do so. This was granted. I am clearly of opinion that, in these circumstances, it is too late now for him to object. He has waived any right that he had."
However, that case was decided before the introduction of rule 12.11. Further, the application for security for costs in the present case is for the costs of an appeal against a successful challenge to jurisdiction. I do not think that can be said to be "only consistent with an intention to contest the merits" of the action in the Commercial List.
The second authority relied upon by Mr Wilson was the decision in Lhoneux, Limon & Co v Hong Kong and Shanghai Banking Corporation (1886) 33 Ch D 446 at 448 where Bacon VC said:
"… I should say that the application for security for costs amounted to a waiver of any objection that might be taken as to the service of the writ."
That was not the ratio of the decision, which was that service of the originating process in London was effective because the defendant was carrying on business in London. The full sentence of which the above is an extract is:
"If I had any doubt about that part of the case, I should say that the application for security for costs amounted to a waiver of any objection that might be taken as to the service of the writ."
Further, that decision was also decided before the introduction of rule 12.11.
The critical inquiry is whether, by seeking costs and security for costs and in seeking to set aside the appellant's notice to produce, Mr Emmott has evinced an unequivocal intention to abandon the right to contest jurisdiction under the protection of a conditional appearance and so is to be taken to have submitted himself the jurisdiction of this Court and waived any objection to that jurisdiction. I do not consider that he has abandoned that right. His applications for costs and security for costs are ancillary to his objection to the Court's jurisdiction. As to the notice to produce, his application is reactive. He would have ignored the coercive effect of the notice at his risk; the prudent course was to move the Court for orders relieving him of any obligation to comply with it. In so doing, I do not think he is to be taken to have acted inconsistently with his objection to the Court's jurisdiction. On that basis, I consider, by analogy with the principles considered in Lenfest, that the respondent should not be required to comply with the notice to produce.
In case that conclusion is wrong, it is appropriate to consider the respondent's alternative grounds for objecting to the notice to produce. The respondent submitted that the notice fails to comply with UCPR r 21.10(1)(b) in that it fails clearly to identify any specific document which is relevant to a fact in issue. He further submitted that the categories of documents production of which is sought are so broad as to be oppressive or vexatious.
There is much force in those complaints. As noted by the respondent, each of the categories of documents sought in pars 1 to 4 is described as: "all documents and correspondence, however relating to" the engagement of present and former solicitors and Counsel. No specific document is clearly identified and it is not clear how the documents sought relate to any fact in issue. Further, in my view the categories sought are so broad as to be oppressive.
To the extent that the issues to be agitated at the August hearing invoke the indemnity principle (leaving aside for present purposes the question of the applicability of that principle in this jurisdiction), the appellant already has the conditional costs agreement between Duggan Legal and Counsel in relation to the appeal (Annexure "C" to affidavit PJ Duggan sworn 4 March 2020) and the costs agreement between Duggan Legal and the respondent in relation to the appeal (Annexure "D" to affidavit PJ Duggan sworn 4 March 2020).
Had I not been persuaded to make an order of the kind made in Lenfest, I would have set the notice aside on the alternative grounds argued by the respondent.
[6]
Orders
For those reasons I make the following orders:
1. The relief sought in prayer 4 of the appellant's amended notice of motion dated 6 April 2020 is refused.
2. Until further order, the respondent is not obliged to produce the documents referred to in the notice to produce served by the appellant on 20 April 2020.
[7]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 10 July 2020
McCALLUM JA: The appellant appeals from the decision of Ball J delivered on 8 March 2019 permanently staying proceedings brought by the appellant in the Commercial List of the Equity Division: Michael Wilson & Partners Ltd v Emmott [2019] NSWSC 218. This judgment determines two interlocutory applications in the appeal.