Plaintiff v Defendant

[2008] VSC 470

PRIVATE INTERNATIONAL LAW - Foreign judgments - Effect and enforcement - Foreign Judgments Act 1991 (Cth) - Application to set aside registered Singaporean judgments - Whether enforcement contrary to public policy - Whether substantial injustice - Application to set aside dismissed.

1 Jenton Overseas Investment Pte Ltd (in creditors' voluntary liquidation) ("Jenton") obtained a judgment after a trial in the High Court of the Republic of Singapore against one of its former directors, Henry George Townsing. The judgment was for the sum of NZ$2,677,303 with interest and costs.[1] On 12 March 2007 the Court of Appeal of the Republic of Singapore dismissed an appeal by Mr Townsing with costs.[2]

2 Mr Townsing was represented at both the trial and the appeal. He gave evidence at the trial and called other evidence including expert evidence. According to the judgment at first instance he was extensively cross-examined. It is not apparent from the judgment how long the trial at first instance took, but it does appear that there were a significant number of witnesses called and detailed submissions made. Similarly, it is apparent from the Court of Appeal decision that detailed submissions were made both orally and in writing on behalf of Mr Townsing.

3 On 28 August 2007 Hollingworth J in this Court registered the judgment of the High Court and the judgment of the Court of Appeal. The registration order was made pursuant to the Foreign Judgments Act 1991 (Cth). The Republic of Singapore is a country to which Part 2 of the Foreign Judgments Act applies pursuant to reg 4 of the Foreign Judgments Regulations 1992 (Cth). The Supreme Court of Singapore, consisting of the Court of Appeal and the High Court, are superior courts within the meaning of the Foreign Judgments Act pursuant to those regulations.

4 Under s 7 of the Foreign Judgments Act a party against whom a registered judgment is enforceable may seek to have the registration of the judgment set aside. Under subsection (2) the Court must set aside the registration of the judgment in certain specified circumstances, one of which is where "the enforcement of the judgment ... would be contrary to public policy".

5 By a summons filed on the 6 March 2008 Mr Townsing sought an order that the registration of the Singaporean judgments be set aside on the ground that enforcement would be contrary to public policy, and on another ground which was later abandoned.

6 Chesterman J has recently observed that the scope of the public policy ground in s 7 (2) of the Foreign Judgments Act is unclear and that there is little authority to offer guidance.[3] The concept of the court refusing to recognise or enforce a foreign judgment on public policy grounds is one drawn from the common law. It is of assistance to consider the principles applicable at common law. I begin this consideration with two oft-quoted passages concerning public policy considerations in this context, one from the United States of America and one from Australia.

7 In Loucks v Standard Oil Co of New York Cardozo J said:[4]

"A right of action is property. If a foreign statute gives the right, the mere fact that we do not give a like right is no reason for refusing to help the plaintiff in getting what belongs to him. We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home ... The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep rooted tradition of the common weal."

8 In the sixth edition of his work Conflict of Laws in Australia, published in 1995, Professor Nygh said:[5]

"A foreign judgment may be contrary to public policy because it is founded on a law which is not acceptable to the public policy of the forum, such as a judgment for the wages of a prostitute or an order for maintenance of a child not confined to minority or other specified period ...

A foreign judgment may also be contrary to public policy because it was obtained in a manner obnoxious to the law of the forum such as duress, or undue influence ... Foreign judgments affecting personal status eg divorces, annulments and adoptions have also been denied recognition under the discretionary power to refuse recognition if such orders have been obtained in circumstances abroad, or have an effect on a party in the forum which is 'contrary to substantial justice'."

9 An authority particularly relied upon by counsel on behalf of Mr Townsing, which did concern adoption, is Bouton v Labiche.[6] In that case the New South Wales Court of Appeal had to consider whether to recognise an adoption order made in the Supreme Court of Mauritius. Section 46 of the Adoption of Children Act 1965 (NSW) provided that a court might refuse to recognise a foreign adoption where "the procedure followed, or the law applied, in connection with the adoption involved a denial of natural justice or did not comply with the requirements of substantial justice". Kirby P (as he then was) explained that the concepts of "substantial justice" and "contrary to natural justice" had been "picked out" of common law judgments and adopted by Parliament as the test to be applied.[7] He suggested that s 46 in many ways restated the common law principles and said that relevantly those principles include:[8]

"2 The interests of comity are not served if the courts of the common law are too eager to criticise the standards of the courts and tribunals of another jurisdiction or too reluctant to recognise their order, which are, and remain, valid by the law of the domicile ...

1. Nevertheless, the courts of the common law ... have reserved to themselves the right to refuse to recognise decrees and orders of foreign courts and tribunals ... where:

(a) the order impugned offends against local ideas of substantial justice ...

(b) the decree or order has been obtained in the foreign court or tribunal contrary to the requirements of procedural fairness or natural justice ... ."

10 In Stern v National Australia Bank[9] Tamberlin J dealt with an argument that a Californian judgment should not be enforced because to do so would be contrary to Australian public policy. The public policy said to be enlivened was that Australian companies should not, outside Australia, engage in conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth). It was submitted that if they did so it would be offensive to Australian public policy to permit enforcement of a judgment obtained by a person who had contravened s 52 without giving the person misled the opportunity to pursue the s 52 claim, unless an equivalent defence or claim was available in the foreign jurisdiction. This was not a case where the Foreign Judgments Act applied and it was decided on common law principles.

11 Tamberlin J rejected the public policy argument. He quoted the passages from Cardozo J and from Professor Nygh which I have quoted earlier. He also quoted the following passage from Cheshire and North's Private International Law:[10]

"A transaction that is valid by its foreign governing law should not be nullified on this ground unless its enforcement would offend some moral, social or economic principle so sacrosanct in English eyes as to require its maintenance at all costs and without exception."

12 Tamberlin J's conclusion was expressed as follows:[11]

"The thread running through the authorities is that the extent to which the enforcement of the foreign judgment is contrary to public policy must be of a high order to establish the defence. A number of the cases involve questions of moral and ethical policy; fairness of procedure, and illegality, of a fundamental nature.

...

In the present case, having regard to the authorities referred to, I am not satisfied that even assuming it was not possible to raise the defence under s 52 or a corresponding provision in California at the time of the judgment, that either the Californian law or the enforcement of the Californian judgment would be so inconsistent or repugnant to the policy underlying the provisions of the TPA that enforcement should be refused."[12]

13 In De Santis v Russo[13] Atkinson J of the Supreme Court of Queensland had before him an application to set aside the registration of a judgment of the Italian Court of Appeal under s 7 of the Foreign Judgments Act. A number of grounds were relied upon, one of which was the public policy ground. The applicant in that case was the heir of a person who had been adjudged to have child maintenance obligations in Italy. Under Italian law these obligations could include restitution for past expenses, could be imposed after the parent's death, could be imposed upon the parent's heir without limitation to the assets inherited, and could extend beyond the child's minority. The applicant argued, amongst other things, that these features of Italian law were contrary to public policy.

14 Atkinson J quoted the passage I have quoted from Cardozo J and expressed his agreement with the observations made by Tamberlin J in Stern v National Australia Bank. He also referred to the analysis of the author, P B Carter, who he said had analysed the circumstances in which public policy will be invoked.[14] The three circumstances were these:

(1) If the content of a rule of otherwise applicable foreign law was unacceptably repugnant, the example given being rules permitting contracts for the sale of slaves.

(2) If the court is required to act in a way that would jeopardise national interests.

(3) Where enforcement of a foreign judgment would lead to an "unacceptably unjust result in the particular case".

"Applying the criteria set out by Tamberlin J in Stern v National Australia Bank, it is not possible to say that the decision in the instant case so offends the essential principles of justice and morality that its registration should be set aside. Neither should registration of the judgment be set aside in the exercise of the court's discretion on the grounds that it would lead to an unacceptably unjust result." [footnotes omitted]

16 In Norsemeter Holdings AS v Boele (No 1)[16] Einstein J had before him an application for summary judgment, one part of which was founded on a decision of the Court of Appeal in Norway. The defendant there had been successful at first instance in Norway, but had been unaware of an appeal due to the "aberrant behaviour" of his legal counsel in Norway from whom he had withdrawn instructions. On the appeal, the first instance decision had been reversed and orders had been made by the Norwegian Court of Appeal which were sought to be enforced on the summary judgment application. One of the grounds relied upon in resisting summary judgment was public policy. Einstein J held there was a conflict in that particular case between the fundamental principle of natural justice that a person should have notice and an opportunity to be heard on the one hand, and the principle that a party who has submitted to the jurisdiction of a foreign court must also submit to regulation in accordance with that court's procedures. In the case before him Einstein J held that the first principle must defer to the second because of the need to avoid injustice to the opposite party who had observed the practices and procedures in the foreign forum. He observed:

"Regrettably this must be at the expense of relevant prejudice to a party who fails to observe those practices and procedures albeit without personal fault."[17]

17 Einstein J accepted the plaintiff's submission in that case that it added nothing to the defendant's case on natural justice to invoke public policy. In that context he quoted a long passage from Tamberlin J in Stern v National Australia Bank, which included the passages from Professor Nygh and Cardozo J which I have previously quoted.

18 Counsel for Mr Townsing contended before me that the public policy ground applied to situations in which the foreign judgment contravened natural justice and also where there had been "substantial injustice". Reliance was placed on Kirby P's observations in Bouton v Labiche and Atkinson J in De Santis v Russo in submitting that the public policy ground extended to circumstances of substantial injustice which, it was submitted, would include a situation where a person had been granted a right to be heard and had been represented but where the court had ignored that person's critical arguments.

19 Counsel for Jenton conceded that the public policy ground might extend beyond cases where there had been a want of due process and might extend to a judgment based on a law repugnant to Australian public policy, to other circumstances where the application of the law had led to a repugnant result, and to circumstances where there had been substantial injustice to such an extent that the Australian courts would not permit enforcement here. They emphasised that what was required in these circumstances, however, was something fundamental and of a "high order".

20 It seems to me that the authorities reveal that the courts are slow to invoke public policy as a ground for refusing recognition or enforcement of a foreign judgment. There are few instances in which a foreign judgment has not been recognised or enforced on this ground. There are good reasons for this. There are, as Kirby P puts it, the "interests of comity" to maintain. The respect and recognition of other sovereign states' institutions is important. This is especially so when acting under the Foreign Judgments Act where the registration and enforcement procedures apply on the basis that there is "substantial reciprocity of treatment" for Australian judgments in the foreign forum.[18] There is also a need for caution because of the inherent volatility of the notion of "public policy". As Atkinson J points out in De Santis v Russo, "what is contrary to public policy in one era might not be considered contrary to public policy in another".[19]

21 This is not a case where what is suggested is that there has been a denial of natural justice in the sense that there was no notice given or no opportunity to participate in the hearing. It is worth noting, however, that even where that is the basis for the public policy ground the task of the applicant in persuading the court not to enforce the foreign order is a difficult one, as exemplified by the judgment of Einstein J in Norsemeter Holdings AS v Boele (No 1). What is submitted here is that the public policy ground is enlivened because there has been substantial injustice.

22 I accept that substantial injustice, either because of the existence of a repugnant law or because of a repugnant application of the law in a particular case, may invoke the public policy ground. But it will only do so where the offence to public policy is fundamental and of a high order. For the public policy ground to be invoked in this context enforcement must offend some principle of Australian public policy so sacrosanct as to require its maintenance at all costs.

23 The submissions made on Mr Townsing's behalf on this application, as developed orally, focused on the Court of Appeal judgment. The submission was that the public policy ground was enlivened here because, on analysis, the Court of Appeal had completely failed to address the critical issue, so that on that issue Mr Townsing had not in truth had a hearing at all.

24 In order to understand the submission it is necessary to say something about the facts of the transactions which gave rise to the proceedings in Singapore.

25 The relevant transactions are complex. They are set out in detail in both the decision at first instance and in the Court of Appeal's decision. I will not set them out again here in any detail.

26 In brief, a group of companies known as the Normandy Group decided in about 2000 to invest in a business in New Zealand owned by a company named NQF Limited ("NQF"), of which Jenton was the parent company. Jenton itself was associated with two Singaporean solicitors, P K Wong and Mark Wong. Jenton had a number of creditors, including a creditor named Chye Seng Tannery Private Limited ("Chye Seng") who was owed in excess of S$1,000,000.

27 It was initially intended that a Normandy group company, Normandy Nominees Pte Limited ("Normandy"), which was incorporated in the British Virgin Islands and was a subsidiary of a UK company named Normandy Finance & Investments Limited ("Normandy UK"), would take up an equity position in Jenton for S$2,000,000. After irregularities were discovered in Jenton's accounts, the arrangement was restructured. A new company, Newmans Group Holdings Pty Ltd ("NGH"), was incorporated in Australia and Jenton became its wholly owned subsidiary. The equity contribution of S$2,000,000 had already been paid. Agreements were entered into whereby the obligation to repay the S$2,000,000 was assumed exclusively by NGH. This assumed debt obligation was referred to as the "Series 1 Notes". A further debt obligation was later entered into which is referred to as the "Series 2 Notes".

28 Security was taken in favour of Normandy over the assets of NGH. Charges were also executed by both Jenton and NQF in favour of Normandy. It was eventually held that those two charges did not secure NGH's obligation to Normandy but rather only secured obligations of Jenton and NQF to Normandy. In addition, the Series 2 Notes were the subject of a charge executed by NQF, and Jenton executed a first ranking debenture in NGH's favour ("the Jenton debenture"). The Jenton debenture was never registered and, as Jenton was in liquidation by the time of the proceedings in Singapore, this was a critical matter in the ultimate outcome of the various proceedings because the Jenton debenture was void against the liquidators.

29 In early 2003 Chye Seng called up its debt thereby setting off a series of events which ultimately led to the receivership of NGH, the liquidation of Jenton, the liquidation of NQF, and the proceedings in Singapore brought against Mr Townsing by Jenton's liquidators.

30 The operating assets of the Newmans group (comprised of NGH, Jenton and NQF) were in New Zealand and were owned by NQF. In May 2004 NQF sold its assets and as a consequence received a sum of money on 4 June 2004. Mr Townsing then carried out a series of transactions whereby NZ$2,677,300 (almost all the sum received) was transferred from NQF to Normandy UK. By these transactions, the debt owed by NGH to Normandy was repaid out of the funds of NQF, Jenton's wholly owned subsidiary. At the time Mr Townsing undertook these transactions he was a director of both Jenton and NQF. Jenton's liquidators' claim against Mr Townsing was for breach of his duties as a director of Jenton.[20]

31 There was an issue in the proceeding at first instance in Singapore as to whether or not, on a proper construction of the various agreements and security instruments, Normandy was indeed a secured creditor of NQF. At first instance it was held that it was not. That issue was not pursued further on the appeal.

32 A related argument was also put by Mr Townsing, both at first instance and in the Court of Appeal. This was that there was no breach of duty on his part because Normandy was legally entitled to NQF's money even though its debt was not secured by the terms of the NQF charge as executed. The argument was that Normandy was entitled to NQF's money:

(1) because it was entitled to rectify the NQF charge so that it secured NGH's obligation; or

(2) because Normandy was a secured creditor of Jenton as it was entitled to rectify that charge in the same way; or

(3) it was entitled to the money through the cumulative operation of the unregistered Jenton debenture and the NGH charge.

33 The way this argument was put in the Court of Appeal was as follows, and in this respect the Court of Appeal quoted Mr Townsing's counsel:

"The [a]ppellant cannot be in breach of fiduciary duty for paying a secured creditor what that secured creditor [was] legally entitled to."

34 The Court of Appeal addressed the issue of whether Normandy was legally entitled to NQF's money in some detail. In the Court of Appeal Mr Townsing's counsel advanced the three reasons why Normandy had been entitled to that money that I set out above. The Court of Appeal rejected all of these arguments. It held that the issue of Normandy's entitlement to rectification was irrelevant as neither Normandy nor NQF were parties to the proceeding. The Court of Appeal reasoned that to proceed on the basis of an entitlement to rectification would be to entertain litigation by proxy. It also gave other reasons why the rectification arguments must fail, including what the judges of the Court of Appeal considered to be an inconsistent provision in the conditions of the Series 1 and Series 2 Notes, and because of the discretionary nature of rectification referring in particular to the "clean hands" principle.

35 In dealing with the matter in this way, the Court of Appeal was addressing the issue in the terms put by Mr Townsing's counsel.

36 The written submissions filed in support of the application before me attacked the Court of Appeal's analysis on the basis that the conclusions it reached on the rectification arguments were very clearly wrong. The written submission recorded what Mr Townsing's argument in Singapore had been in the following terms:

"Mr Townsing argued in the Singapore courts that transferring the money from NQF to Normandy was proper because NQF had given Normandy a charge securing NGH's debt to Normandy."

The complaint articulated in the written submission was as follows:

"The court not only ignored the fact that Normandy had a clear entitlement to have the relevant securities rectified (reasoning that this right was not relevant as Normandy was not a party to the proceeding) but also ignored the fact of the deed of rectification ... ."

Thus, the written submission in support of this application came very close to a submission that registration should be set aside because the Court of Appeal ought to have decided the appeal differently and ought to have accepted the submissions that Normandy was a secured creditor because it was entitled to rectification.

37 The submission made in writing had the potential shortcoming, emphasised in the written submissions filed on behalf of Jenton, that the application to set aside the registration had the appearance of an appeal from the Singapore Court of Appeal.

38 The reliance in the written submission filed on behalf of Mr Townsing upon the Singaporean courts having "ignored the fact of the deed of rectification" faced an insuperable obstacle. The Court of Appeal judgment records the fact that counsel for Mr Townsing before them had expressly disavowed reliance on that deed.[21]

39 The submissions made orally before me on behalf of Mr Townsing advanced an attack on the Court of Appeal judgment on a basis which was subtly, but significantly, different to that set out in the written submission.

40 In the oral submissions before me the attack on the Court of Appeal judgment was not focused upon their reasons for rejecting the rectification argument, but rather on the submission that the way in which the Court approached the issue was fundamentally misconceived. What was submitted before me orally was that the Court of Appeal erroneously approached the issue by analysing whether it was possible for that Court to determine a kind of a notional rectification claim. What they should have done, it was submitted, was taken the facts concerning the common intentions of the parties, which it was said were undisputed, into account in assessing whether Mr Townsing had breached his directors' duties. It was submitted that this was something the Court of Appeal completely failed to do, and that Mr Townsing had accordingly not really had a hearing at all.

Analysis of criticism of the Singaporean judgments

41 I have read and considered the judgment of the High Court and the judgment of the Court of Appeal. There are issues addressed in those judgments to which I have not referred. They each undertake a detailed review of the relevant facts.

42 I do not accept the criticism made of the Court of Appeal judgment. Further, I am not persuaded that Mr Townsing's criticism, even if I had accepted it, would be sufficient, in accordance with the applicable legal principles, to warrant the setting aside of the registration of this judgment.

(1) The Court of Appeal dealt with the matter on the basis of the way in which it was argued before them on Mr Townsing's behalf. The case that Mr Townsing argued was that Normandy was legally entitled to the money which Mr Townsing transferred from NQF to Normandy UK. The Court of Appeal quoted his counsel on this point. Mr Townsing can not now complain because the Court of Appeal dealt with his case in the way in which it was argued on his behalf. The judgment at first instance indicates that the approach Mr Townsing took in the Court of Appeal was also consistent with the way he had pleaded his defence,[22] the way his case was argued at first instance,[23] and the way the first instance judge dealt with it.[24]

(2) It oversimplifies the factual position to submit, as was submitted before me, that it was indisputable that there was a common intention that NQF should be liable for and give security for the NGH debt and that there had been a mistake of the kind which would entitle Normandy to rectification. There are observations in the Court of Appeal judgment which support that approach.[25] But, the Court of Appeal was dealing with the matter in the way it had been argued, and a fuller picture emerges from the judgment at first instance. There, the issue of what was the factual substratum of the rectification argument is more open to debate.[26] In this respect I particularly refer to the trial judge's observations upon Mr Townsing's failure to call the solicitor who drew the relevant charges to give evidence that a mistake had indeed been made. I also refer to the complexity of the Wongs' position. Whilst it seems they conceded there was a common intention that Normandy should have security over the Newmans group, they also maintained that they had never agreed to NQF guaranteeing NGH's obligation and that they refused to sign proffered deeds of rectification because to do so would have given Normandy additional security.

(3) The burden of the submission made before me is that the courts in Singapore had failed to undertake a fundamental task, namely the assessment of Mr Townsing's motivations and actions in the circumstances as they existed and as he apprehended them to be at the time. It seems to me that it is only possible to make this criticism of the Court of Appeal because the Court dealt with Mr Townsing's appeal on the basis upon which it was argued; namely, that the issue was whether Normandy had a legal entitlement to the money Mr Townsing transferred, the argument being that in those circumstances there could be no breach of duty. Notwithstanding that, the Court of Appeal did assess Mr Townsing's conduct and motivation,[27] and the issue had been dealt with in the first instance judgment.[28] The suggestion that the courts in Singapore failed to address the issue of whether Mr Townsing had breached his directors' duties in the circumstances as they existed at the time, and as he perceived them to be when he procured that the transfers be made, is not correct in my view. The judge at first instance found that Mr Townsing breached his fiduciary duties because he acted at a time when he was a director of NQF and Jenton exclusively for the purpose of advancing Normandy's position. The Court of Appeal characterised his conduct in the same way.

44 The application to set aside registration of the judgments is dismissed.

[1] Jenton Overseas Investment Pte Ltd v Townsing [2006] SGHC 31. Hereinafter referred to as "Jenton Overseas Investment v Townsing (first instance)".

[2] Townsing v Jenton Overseas Investment Pte Ltd (in creditors' voluntary liquidation) [2007] SGCA 13. Herinafter referred to as "Townsing v Jenton Overseas Investment (appeal)".

[3] Bank Polska v Opara and Anor [2007] QSC 1, [16].

[4] (1918) 224 NY 99, 110-1.

[5] P E Nygh, Conflict of Laws in Australia (6th ed, 1995) 157.

[6] (1994) 33 NSWLR 225.

[7] (1994) 33 NSWLR 225, 235.

[8] (1994) 33 NSWLR 225, 234.

[9] [1999] FCA 1421.

[10] Cheshire and North, Private International Law (12th ed, 1992) 129.

[11] [1999] FCA 1421, [143] and [147].

[12] On appeal the Full Federal Court concluded that the conduct of the bank did not constitute a breach of s 52 of the TPA, that there was no factual basis for the public policy argument put forth by the appellants and that therefore it was unnecessary to consider the submissions on the matter: Stern and Anor v National Bank Australia Ltd [2000] FCA 294; (2000) 171 ALR 192, [71]. The Full Federal Court judgment states at [78] that the Court found no error of principle in Tamberlin J's judgment.

[13] [2000] QSC 65.

[14] [2000] QSC 65 at [21] referring to P. B. Carter, "The Role of Public Policy In English Private Law" (1993) 42 ICLQ 1. See specifically pages 3-5 of Carter.

[15] [2000] QSC 65, [22].

[16] [2002] NSWSC 370.

[17] [2002] NSWSC 370, [41].

[18] Foreign Judgments Act 1991 (Cth), s 5(1).

[19] [2000] QSC 65, [20].

[20] The issue of the potential application of the principle in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 was addressed by the Court of Appeal but it had been raised too late in the proceeding and Mr Townsing was not permitted to rely upon it. No complaint as to this was made before me.

[21] Townsing v Jenton Overseas Investment (appeal), [35].

[22] Jenton Overseas Investment v Townsing (first instance), [53].

[23] Jenton Overseas Investment v Townsing (first instance), [90].

[24] Jenton Overseas Investment v Townsing (first instance), [104].

[25] Townsing v Jenton Overseas Investment (appeal), [39] and [43].

[26] Jenton Overseas Investment v Townsing (first instance), [31], [59], [68], [96] - [98], [116] - [117], [119], [123] and [160] - [161].

[27] Townsing v Jenton Overseas Investment (appeal), [46].

[28] Jenton Overseas Investment v Townsing (first instance), [130], [132] and [136].