StoneX Financial Inc. v Ambrose

Federal Court of Australia|2024-05-07|Before: Derrington J

The respondents' interlocutory application filed on 29 January 2024 be dismissed.
Pursuant to s 8(3) of the International Arbitration Act 1974 (Cth), the Court declares that the applicant is entitled to enforce the award of the National Futures Association in Case No. 19-ARB-104, dated 12 May 2023, against Linda Ambrose and Graham Ambrose individually, and as joint trustees of the Ambrose Superannuation Benefits Fund, as if it were a judgment of this Court.
Judgment be granted in favour of the applicant against the respondents in the terms of the award, namely that the Ambrose Superannuation Benefits Fund, Linda Ambrose, and Graham Ambrose are jointly and severally liable for the following award and shall pay to the applicant US$710,764.42, plus interest. The judgment comprises the following amounts: (a) compensatory damages, US$500,287.39; (b) pre-judgment interest, US$137,579.03; (c) post-judgment interest accruing at a rate of US$85.67 per day from 14 April 2023 until the date the judgment is paid; (d) attorney's fees, US$65,398.00; and (e) costs and fees for filing, hearing and motion fees paid by the applicant to the National Futures Association, US$7,500.00.
The respondents pay the applicant's costs of this proceeding, and of the interlocutory application filed on 29 January 2024, on an indemnity basis. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE RELEVANT AGREEEMENTS 5 In establishing the trading account with the applicant, the following documents were executed by the respondents: (1) a primary account owner information, primary account holder's financial information, and account ownership form; (2) the arbitration agreement; (3) a futures and exchange traded options customer agreement (Customer Agreement); (4) a trustee certification of investment powers; and (5) a managed account agreement, power of attorney, and third party controller statement. 6 The arbitration agreement provides, relevantly, that: This Futures & Exchange-Traded Options Customer Agreement (the "Agreement") is entered into as of the date below between the undersigned Customer and the FCM Division of INTL FCStone Financial Inc., acting in its capacity as a futures commission merchant ("FCM"), (each referred to individually as a "Party" or collectively, the "Parties") to enable the Customer to establish a non-discretionary account, unless additional documents are executed relating to a discretionary account, for the purchase and sale of futures contracts, option contracts thereon, commodity futures, cash commodities forward contracts, currency conversions, on-exchange foreign currency-denominated financial instruments, cleared swaps and transactions related thereto ("Commodity Interests"). This Agreement shall be continuous and shall cover all of the Customer's accounts established at any time or closed and re-established from time to time, irrespective of any change at any time in FCM personnel or an assignment, reorganization, consolidation or merger of the FCM, and shall inure to the benefit of FCM and its successors and assigns, binding upon Customer and its estate, executors, administrators, legal representatives, successors and assigns. 7 Clauses 7 and 9 of the Customer Agreement state: 7. Indemnification. Customer agrees to Indemnify, defend and hold harmless FCM and its directors, officers, employees, and agents from and against any Losses (including reasonable attorney's fees) caused directly or indirectly by (a) Customer's failure, breach of, or failure to perform any provision of this Agreement or refusal to fully and timely comply with any provision of this Agreement or applicable law; (b) any actions of any Agent or third party selected by Customer which affect Customer's account; (c) Customer's failure to timely deliver any security, commodity, or other property previously sold by FCM on Customer's behalf, (d) any taxes imposed on FCM on any property held in Customer's account; or (e) any misstatement of Customer's representations and warranties contained in this Agreement or any other documentation delivered by Customer to FCM that is untrue or ceases to be true and correct as of the date of this Agreement and for any failure of any transaction executed with respect to Customer's account. Customer additionally agrees to pay promptly to FCM all reasonable attorney's fees incurred by FCM (i) in the enforcement of any of the provisions of this Agreement, or (ii) in any action, claim or demand filed by Customer arising out of this Agreement or any other Agreements between FCM and Customer. […] 9. Debit Balances, Commissions and Other Costs. Customer agrees to pay, and authorizes FCM to debit its account for, (i) the amount of any trading loss, debit balance or deficiency in any of Customer's accounts; (ii) all FCM commissions and other charges in effect from time to time, (iii) all commissions, fees and other costs incurred in connection with Commodity Interests executed, carried and/or cleared by FCM, including but not limited to, introducing broker and floor brokerage, clearing, exchange and National Futures Association ("NFA") fees, (iv) all costs incurred by FCM in connection with taking and/or making deliveries, and (v) all regulatory, exchange and other self-regulatory fees, fines, penalties and charges, and any taxes incurred or imposed with respect to Commodity Interests or other transactions in or for Customer's accounts and any other service-related fees charged to Customer's account, including, but not limited to, wire transfer fees, statement fees and transaction fees. If Customer's account is transferred to another futures commission merchant, transfer commissions and/or service fees may be charged. Customer agrees that all demands for debits owing FCM shall be me with twenty-four (24) hours following either of (i) Customer's receipt of FCM's oral request for payment or (ii) FCM's delivery to Customer of FCM's written request for payment (except as payment may be modified with respect to wire and telephone requests for margin fund). If, after such 24-hour period the amount in Customer's account is not sufficient to pay outstanding fees and FCM deems it necessary to take collection action, Customer shall hold FCM harmless for all Losses incurred in connection with such collection and shall reimburse FCM for the debit and all costs incurred, including reasonable attorneys' fees, in connection with such collection actions. Customer agrees to pay interest on debits and deficiencies at an annual rate of 1% over the prime rate as published by the Wall Street Journal on the date such debit or fee was incurred. 8 By the trustee certification of investment powers document, Mr and Mrs Ambrose identified themselves as 'Authorised Individuals' for the purpose of giving instructions or orders to the applicant by cll 7 and 9, as the trustees: … jointly and severally, personally, and as Trustees, indemnify and hold the FCM division of INTL FCStone Financial Inc. harmless from any liability for effecting transactions of the type specified above pursuant to instructions given by any of the Authorised individuals listed under Item Number 7 above.

Background 9 In the week of 12 November 2018, the first respondent incurred trading losses, which resulted in a debit balance in its trading account with the applicant. Accordingly, on 26 March 2019, the applicant commenced an arbitration before the National Futures Association (NFA), based in Chicago, Illinois, by lodging a statement of claim seeking payment of the balance due, and interest and costs. That arbitral body was, as I have already mentioned, identified in the arbitration agreement. 10 The existence of an arbitration agreement was pleaded by the applicant in its statement of claim. This fact was admitted, in the respondents' defence. The existence of a written arbitration agreement entered into by all respondents cannot be doubted. The respondents never argued that the dispute was incapable of being resolved by arbitration, or that the NFA was not the arbitral body identified in the agreement. The respondents sought the appointment of a three-person panel, and that the hearing occur in Los Angeles, California. Both of these requests were accommodated by the applicant. 11 However, once the US based attorney withdrew in February 2023, the respondents did not respond to any communications from the NFA, and did not comply with the orders of the panel. Their participation in the arbitration stopped, putting them in default of the panel's orders.

The award 12 On 18 May 2023, the applicant and respondents were served by email with a copy of the award. Under the award, the respondents are jointly and severally liable to pay US$710,764.42, plus post-award interest. 13 Since being served with the award, no application has been made by the respondents, and they are now time-barred from bringing any such application to either: (a) modify the award pursuant to s 10(c) of the Code of Arbitration; or (b) bring an application pursuant to ss 10, 11 and 12 of the Federal Arbitration Act, 9 USC ss 1-16 (1990) to vacate, modify or correct the award. 14 The award has not been complied with to any extent by any of the respondents.

The legislation 15 I accept that the threshold requirements under the International Arbitration Act have been met. In this regard, I observe that Australia is a state which has adopted the Convention. 16 As a contracting state, Australia is obliged under Article 3 to recognise and enforce arbitral awards to which the Convention applies. The International Arbitration Act provides the legal framework for the performance of that obligation. 17 As to the application of the International Arbitration Act, this Court has previously summarised in Siemens WLL v BIC Contracting LLC [2022] FCA 1029 at [18] that: Enforcement of an arbitral award under s 8 of the International Arbitration Act requires that the award be a "foreign award". In s 3(1), "foreign award" is defined to mean "an arbitral award made, in pursuance of an arbitration agreement, in a country other than Australia, being an arbitral award in relation to which the Convention applies". 18 The terms "arbitral award" and "Convention" are also defined at s 3(1) of the International Arbitration Act. By Article 1 of the Convention, it applies to the recognition and enforcement of arbitral awards "made in the territory of a State other than the State where the recognition and enforcement of such awards are sought and arising out of differences between persons, whether physical or legal". 19 An "award made in another State is a 'foreign award' for the purposes of the International Arbitration Act even if the State in which the award made is not a Contracting State to the Convention". Nevertheless, the United States is such a Contracting State, and that evidence is consistent with the decision in International Relief and Development Inc v Ladu [2014] FCA 887, where Kenny J found, at [45], the United States to be a Convention Country, as defined in s 3(1) of the International Arbitration Act. 20 The award in this case is both a foreign award for the purposes of s 8 of the International Arbitration Act, and an arbitral award under the Convention, because it: (1) was made within the territory of the United States, in California; (2) is sought to be recognised and enforced in another state, namely Australia; (3) was made pursuant to an arbitration agreement which is in writing; and (4) deals with a legal difference between the parties, being the respondents' liability to pay the applicant money under the terms of their agreement. 21 As such, this award may be enforced by this court under s 8(3) of the International Arbitration Act. There are two evidentiary preconditions or requirements for the enforcement of a foreign award under s 9 of the International Arbitration Act and each of these requirements are met in this case in the following ways. 22 First, as to the requirement in s 9(1)(a) that the applicant produce to the Court the duly authenticated original award or duly certified copy, a copy of the award certified by an officer of the NFA and signed by each of the panel members is in evidence before the Court at Annexure MQR3 to the affidavit of Mr Martin Quinn Ryan filed on 21 November 2023 (First Ryan Affidavit). 23 Secondly, the requirement in s 9(1)(b) that the applicant produce to the Court the original arbitration agreement under which the award purports to have been made or a duly certified copy is also in evidence before the Court, at Annexure MQR11 to the First Ryan Affidavit. 24 Those preliminary conditions to recognition and enforcement being met, the Court must enforce the foreign award unless there is evidence of any of the circumstances mentioned as a ground of refusal in ss 8(5) or 8(7) of the International Arbitration Act. None has been raised in any evidence before this court.

The application for enforcement 25 This application was first heard on an ex parte basis as permitted by r 28.44(3) of the Federal Court Rules 2011 (Cth). On 7 December 2023, Stewart J heard that application and made orders by which: (a) the applicant was to serve the respondents with the relevant material; (b) the respondents were to file an application to oppose enforcement within 28 days of being served; (c) the originating application was listed for further hearing on 31 January 2024; and (d) at that hearing, if the respondents did not apply against enforcement, the Court stated it would give judgment in favour of the applicant. 26 On 30 January 2024, the respondents filed an interlocutory application opposing enforcement. The grounds which that application raised as a basis to resist enforcement were limited to s 8(5)(c) - concerning notice of the arbitration - and s 8(7)(b) - concerning public policy. 27 On 31 January 2024, the matter came back before Stewart J. In addressing the Court as to their need for an adjournment, counsel for the respondent accepted that further time was required for the respondents to put on material to substantiate their application. Noting that submission, his Honour made orders requiring: (a) the respondents to put on further evidence and brief submissions by 21 February 2024; and (b) the applicants put on any further evidence and brief submissions in response by 13 March 2024. 28 The time for compliance with those orders was extended by two weeks by order of 7 February 2024. However, on 28 February 2024, the respondents' solicitor filed a Notice of Intention to Cease to Act (Form 7), and a Notice of Ceasing to Act (Form 8). 29 Despite filing the application opposing enforcement at the last minute, and thereby denying the applicant judgment on 31 January 2024, the respondents have not prosecuted that application in the time and manner ordered by the Court, or at all. They have not filed a Notice of Address for Service (Form 10) in accordance with r 4.05(2) of the Rules once their solicitor ceased acting.

Can the application for enforcement be refused? 30 On 13 March 2024, I made orders listing the matter for final hearing today, and ordered the respondents be served with those orders by email on 13 March 2024, and by registered post by 15 March 2024. It was also ordered that, should the respondents appear today, they would not be permitted to rely on any evidence at this final hearing, unless they obtain leave of the Court to do so. That order has become redundant by the failure of the respondents' appearance today. 31 Consequently, it is unnecessary, as I have said, for the Court to consider refusal under s 8(5), because consideration of those grounds must be requested and proved by the respondents and, as they have not appeared to read their interlocutory application, there is no such request, and there is no proof. 32 Additionally, I find that there is no basis upon which the enforcement of the award in this case would be contrary to public policy. To the extent the respondents might have wished to challenge their indebtedness under any such grounds in relation to the underlying transactions, there was an opportunity to do so at arbitration, and they elected not to participate in that process. Nevertheless, the discretion to set it aside under s 8(7)(b) is not enlivened. The requirements for recognition and enforcement of award therefore being proved, the orders for enforcement should be made. 33 Pursuant to r 28.44(2)(b)(i) of the Rules, the applicant was required by affidavit to state the extent to which the award had not been complied with as at the date of the application. Mr Ryan has deposed to the fact that, as at that date, the award had not been complied with to any extent by any of the respondents. 34 Similarly, pursuant to r 28.44(2)(b)(ii) of the Rules, the applicant was required by affidavit to state the usual or last known place of residence or business of the respondents. That requirement is satisfied by paragraph 5 of the affidavit of Mr Ryan filed on 24 April 2024, which lists the last known place of residence of the respondents at 24 Piccadilly Circuit, Highland Park, Queensland, 4211. 35 It is appropriate to note that the applicant now seeks indemnity costs, pursuant to cl 7 of the Customer Agreement.

DISPOSITION 36 Consequently, the orders of the court are: (1) The respondents' interlocutory application filed on 29 January 2024 be dismissed; (2) Pursuant to s 8(3) of the International Arbitration Act, the Court declares that the applicant is entitled to enforce the award of the National Futures Association in case number 19-ARB-104, dated 12 May 2023, against Linda Ambrose and Graham Ambrose individually, and as joint trustees of the Ambrose Superannuation Benefits Fund, as if it were a judgment of this Court; (3) Judgment is granted in favour of the applicant against the respondents in the terms of the award, namely that the Ambrose Superannuation Benefits Fund, Linda Ambrose, and Graham Ambrose are jointly and severally liable for the following award and shall pay to the applicant US$710,764.42, plus interest. The judgment comprises the following amounts: (a) compensatory damages, US$500,287.39; (b) pre-judgment interest, US$137,579.03; (c) post-judgment interest accruing at a rate of US$85.67 per day from 14 April 2023 until the date the judgment is paid; (d) attorney's fees, US$65,398.00; and (e) costs and fees for filing, hearing and motion fees paid by the applicant to the National Futures Association, US$7,500.00. (4) The respondents pay the applicant's costs of this proceeding, and of the interlocutory application filed on 29 January 2024, on an indemnity basis. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Sarah C Derrington.

International Arbitration Act 1974(Cth)ss 3(1), 8, 8(3), 8(5), 8(7), 9, 9(1)

Federal Court Rules 2011(Cth)rr 28.44(2), 28.44(3), 4.05(2)

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