BETWEEN : THE OFFICIAL RECEIVER OF THE STATE OF ISRAEL in his capacity as LIQUIDATOR NORTH AMERICA BANK LTD (IN LIQ)

THE OFFICIAL RECEIVER OF THE STATE OF ISRAEL in his capacity as LIQUIDATOR NORTH AMERICA BANK LTD (IN LIQ)

Practice and procedure - Forum non conveniens - Principles for stay of counterclaim - Main trial in proceedings in Israel - No new principles

Akai Pty Ltd v People's Insurance Company Limited (1996) 188 CLR 418

Balkanbank v Taher [1995] 2 All ER 904

Bonython v Commonwealth of Australia [1951] AC 201

Connell v Reynolds (1993) 9 WAR 27

CSR Limited v Cigna Insurance Australia Ltd (1997) 71 ALJR 1143

Eshelby v Federated European Bank Limited [1932] KB 254

Guaranty Trust Company of New York v Hannay & Company [1915] 2 KB 536

Messier-Dowty Limited v Sabena SA (No 2) [2000] EWCA 25; [2001] 1 All ER 275

Saker v Creative Land Management Pty Ltd [2000] WASC 44

Spiliada Maritime Corporation v Cansulex Limited (The Spiliada) [1987] 1 AC 460

State of Victoria v Hansen [1960] VicRp 90; [1960] VR 582

1 In Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538 the Court said at 565:

"There may well be circumstances in which the primary judge may conclude that it is desirable to give detailed reasons balancing the particular weight to be given to the presence or absence of particular connecting factors and explaining why the local forum is or is not a clearly inappropriate one. Ordinarily, however, it will be unnecessary for the primary judge to do more than briefly indicate that having examined the material in evidence and having taken account of the competing written and oral submissions, he or she is of the view that the proceedings should or should not be stayed on forum non conveniens (ie 'clearly inappropriate forum') grounds'."

2 Although there is a siren-like attraction towards the brevity indicated by the High Court, having regard to the issues in this case, I have concluded that detailed reasons are more appropriate.

3 The Court has before it a number of applications.

4 For ease of understanding, because there are different proceedings, I shall refer to the parties by name.

5 In CIV 1360 of 2001 the Official Receiver applies to stay further proceedings on the claim and counterclaim on the basis that Western Australia is not the convenient forum for resolution of the issues between the parties.

6 In CIV 1995 of 2001 the Official Receiver applies to stay those proceedings for similar reasons.

7 In CIV 1995 of 2001 the plaintiffs seek an order consolidating the action with CIV 1360 of 2001.

8 For convenience the argument in respect of each application was dealt with at the one time and the parties addressed comprehensively in relation to each application.

9 There are some common factors in relation to each application and there are also points of difference.

CIV 1360 of 2001: The Official Receiver's application to stay proceedings

10 The parties are not in dispute as to the appropriate legal principles which are set out in a number of fairly recent decisions of the High Court.

11 In Oceanic Sun Lines Special Shipping Company Inc v Fay [1988] HCA 32; (1988) 165 CLR 197, Deane J held at 247 - 248:

"That power [to stay on inappropriate forum grounds] is a discretionary one in the sense that its exercise involves a subjective balancing process in which the relevant factors will vary and in which both the question of the comparative weight to be given to particular factors in the circumstances of a particular case and the decision whether the power should be exercised are matters for individual judgment; and to a significant extent, matters of impression. The power should only be exercised in a clear case and the onus lies upon the defendant to satisfy the local court in which the particular proceedings have been instituted that it is so inappropriate a forum for their determination that their continuation would be oppressive and vexatious to him."

12 In Voth v Manildra Flour Mills Pty Ltd (supra) the High Court settled the differences of opinion between the Justices in Oceanic Shipping Co by approving (at 564 - 565) the approach just quoted of Deane J.

13 In Henry v Henry [1996] HCA 51; (1995-1996) 185 CLR 571 the majority expanded to a degree what had been said in Voth as follows:

"It was also held in Voth that, in determining whether the local court is a clearly inappropriate forum, 'the discussion by Lord Goff in Spiliada [1987] AC 460 at 564-565 of relevant "connecting factors" and "a legitimate personal or juridical advantage" provides valuable assistance.' In this last regard, Lord Goff of Chieveley expressed the view that legitimate personal or juridical advantage is a relevant but not decisive consideration, the fundamental question being 'where the case may be tried "suitably for the interests of all the parties and for the ends of justice".'"

14 The onus of satisfying the court that the Supreme Court of Western Australia is a clearly inappropriate forum rests on the Official Receiver.

15 The material which I have taken into account consists of the pleadings and various affidavits which have been sworn from time to time. In stating background facts, unless otherwise indicated, I should not be taken as making any particular finding but doing no more than setting out so much of the narrative as is necessary to understand these reasons. Some of this material is taken from the pleadings and is admitted.

16 Mr Raveh is an Israeli citizen who once resided in Herzlia Pituach in Israel and is now also an Australian citizen who has lived in Western Australia.

17 On 27 October 1985, Mr Raveh borrowed the sum of $3,900,000.00 from the North America Bank Ltd. Interest was payable on that amount.

18 On 5 January 1988, the North America Bank went into liquidation. The Official Receiver, an Israeli State instrumentality, whose functions include the supervision of insolvent companies, was appointed as Liquidator of the Bank.

19 In 1985, Mr Raveh was appointed Protector and became a beneficiary of the Interlaken Trust. In September 1990, the Interlaken Trust was amended. Mr Raveh was a member of the Primary A Fund Beneficiary Class and until 2 March 2001 the A Fund Protector. Whether he, or members of his family, had a beneficial interest under the Interlaken Trust is in issue between the parties. Briefly, Mr Raveh contends that he had no beneficial interest.

20 In 1993, Mr Raveh defaulted in the repayment of the balance of the loan due and owing to the Bank in terms of the 1985 agreement.

21 On 12 August 1993, Mr Raveh and the Official Receiver entered into an agreement for compromise of the debt on the basis of a payment of $US750,000 to be paid in instalments through to 30 June 1997. The agreement provided that Mr Raveh owed the North America Bank the sum of $US2,951,950.60 together with interest at the rate of 16 per cent per annum from 1 October 1992, the interest being compounded.

22 Clause 4 states that if the settlement sum was paid in full on the due date and Mr Raveh performed all his obligations under the deed, the Official Receiver shall not be entitled to any further amount from the Mr Raveh in respect of the debt, subject to cl 8 of the settlement agreement.

"In any legal proceedings between the Bank Liquidator and/or the Bank and Raveh, whether in Israel or abroad, the laws of the State of Israel shall apply in all respects relating to the legal proceedings between the Bank Liquidator and/or the Bank and Raveh."

24 This is disputed by Mr Raveh who says that the law of Israel applies only to the construction of the settlement agreement.

25 On the execution of the settlement agreement, Mr Raveh provided an affidavit as an integral part of the settlement agreement.

26 Paragraph 9 of the affidavit provided as follows:

"Apart from the assets set forth in my affidavit and apart from additional assets of a total value of up to $US100,000,000 I do not have any assets of any description, whether fully owned or partially owned, whether directly or indirectly, including an asset held an (sic) registered in the name of an attorney and/or agent and/or trustee and/or relative, and including land, chattels, money, goods, rights under insurance policies, shares, claims, rights, benefits, profit or any other asset of whatsoever description, whether an existing right or a future right or whether a certain right or conditional right."

27 The agreement provided that in the event any of the statements in the affidavit or a part of any such statement was untrue, and the difference between that stated and the reality was material, the provisions of cl 4 did not apply and the provisions of cl 5 applied. This meant that Mr Raveh would be held to be indebted to the Official Receiver for the full amount.

28 Mr Raveh duly paid the instalments under the settlement agreement.

Legal proceedings in Israel and Western Australia

29 On 14 March 1999, as the result of certain information, the Official Receiver obtained orders in the District Court of Jerusalem authorising it to conduct an investigation into Mr Raveh's affairs.

30 On 20 September 2000, the Official Receiver obtained leave of the District Court of Jerusalem to commence action against Mr Raveh.

31 On 24 September 2000, the Official Receiver obtained an interlocutory Mareva order against Mr Raveh in the District Court of Tel Aviv-Jaffa. That injunction was confirmed on 24 December 2000 and is an order with worldwide effect.

32 The statement of claim in the District Court in Jerusalem, in summary, alleges that Raveh gave false information in an affidavit concerning his assets. As a result, the Liquidator is entitled to enforce the clause which would require payment of the full debt, an amount presently in excess of $US8 million.

33 Within that claim the Official Receiver asserts a number of facts which it says makes the affidavit false. They relate to the purchase of a house at Herzlia Pituach by Dumara Pty Ltd, an Australian registered company which acts as a trustee, and the purchase of a house in Hobbs Avenue, Dalkeith, by the same company. Mr Raveh and his wife have used both premises as residences.

34 The Official Receiver also relies upon Mr Raveh's association with the Interlaken Trust and a statement of claim made by Mr Raveh in the Chancery Division in England in 1988 wherein he stated:

"All companies and their assets, within the group, are ultimately held by Ragus (as trustees) for the beneficiaries of the trust which I have mentioned. This trust was constituted as a unit trust known as Vantage Trust (subsequently the Vantage Capital Trust 'VCF'). It was in fact established for me in early 1985... At present all 100 units in the VCF presently in issue are held on behalf of the ultimate beneficiaries by Kalgoorlie Proprietors Incorporated ... But it has been accepted all around that at all material times since January 1986 that the beneficial entitlement thereto has been as outlined above, that is: myself (51 units) Von Planta (25 units), and Laitt 24 units."

35 Mr Raveh and his wife have filed a defence to the Israeli District Court proceedings alleging that the Bank, acting fraudulently, caused them to enter into agreements in October 1985 and in August 1993 which retroactively were only intended to transfer moneys to the Bank without a legal or other right since the defendants do not, and never have had any debt to the Bank.

"The investigation concerning Raveh showed that during a long period, since mid-80's until present days, Raveh has held and still holds, many Australian and English companies, which are connected to each other, and which cross holding each other's shares. In addition, their financial value is considerable. Raveh is the ultimate beneficial owner of these companies."

"Paragraph 31 of the statement of claim is totally denied - the matters pleaded therein are absurd."

Claims about interests in the Interlaken and Dumara Trusts are denied.

38 The Israeli proceedings are currently set down for trial in November 2002.

CIV 1360 of 2001: Western Australian proceedings

39 Following the obtaining of the worldwide Mareva order from the District Court of Israel, the Official Receiver commenced action in Western Australia by way of writ of summons dated 14 March 2001.

40 The indorsement of claim sought a Mareva order up to the value of $US8 million, pending the final resolution of proceedings in the State of Israel in the District Court of Tel Aviv-Jaffa in Civil Action 002586 of 2000.

41 The application for a Mareva order was opposed and was argued before Murray J on 16 March 2001: The Official Receiver of the State of Israel in his capacity as the Liquidator North America Bank Ltd (In Liq) v Raveh [2001] WASC 72. Murray J dismissed the application on that day. Murray J held at par 23]:

"Here the plaintiff proposes no more to invoke the jurisdiction of this Court than, if a final judgment is obtained in the District Court of Israel, to have the judgment registered here."

42 His Honour referred to the Foreign Judgments Act 1991 (Cth) and its regulations before proceeding at par 26 and par 27:

"26 The difficulty in my opinion for the plaintiff in this case is that the only procedure involving this Court would be the application to register the judgment. In such a case under s 6(3) of the Act, the Supreme Court 'is to order the judgment to be registered.' The outcome would be a final order which would have no other connection with the processes of this Court and which would be made in no sense in reliance upon an underlying right or cause of action pursued in this Court. The enforcement processes which might follow upon registration would in no sense be for the purpose of enforcing the recognition by this Court in its final order of any such underlying right or cause of action.

27 In the factual circumstances to which I have referred, no such substantive proceedings could be issued out of this Court to enforce or sue upon the compromise agreement in respect of the debt incurred in Israel. A Mareva order, as I have said, in my opinion rests upon the foundation of principle that it is not to enforce foreign process, but to operate upon a defendant who seeks to evade or acts in a way calculated to defeat the enforcement in this Court of a substantive right pursued by the plaintiff in this Court. It is not to the point, in my view, to consider whether or not the world-wide Mareva order obtained in Israel would be efficacious against the Western Australian property of the defendant. In my opinion the order may not be replicated in this Court as an exercise of the power to grant interlocutory relief because it has, and can have, no connection with the enforcement of a substantive right in proceedings taken by the plaintiff in this Court."

43 Following that decision, Mr Raveh issued a counterclaim in the proceedings on 6 April 2001. The counterclaim related to the Interlaken Trust and the Dumara Trust and claimed:

"1. A declaration that he [Raveh] has at all material times had no interest other than a contingent beneficial interest in the property of the Interlaken Trust;

2. A declaration that as at the 16 August 1993, and at all material times proximate thereto, the assets of the Interlaken Trust had no value;

3. A declaration that as at the 16 August 1993, and at all material times proximate thereto the plaintiff had no interest in the House [Hobbs Avenue];

4. A declaration that the plaintiff has no interest in the Israeli House;

5. A declaration that as at the 16 August 1993 and at all material times proximate thereto, the plaintiff did not hold assets which had a total value exceeding $US100,000;

6. Further and other relief."

44 The Official Receiver filed a statement of claim on 11 May 2001 which set out the facts and claimed relief in terms of the writ. On 17 May 2000, Mr Raveh filed a defence and counterclaim, and on 4 May 2001 the Official Receiver filed a defence to counterclaim.

45 On 13 June 2001 the Official Receiver filed an application for orders as follows:

"1. The Plaintiff have leave to discontinue the action;

2. The Defendant's application for summary judgment dated 6 April 2001 be dismissed;

3. There be no order as to costs in respect of the action or the Defendant's application for summary judgment;

4. The Defendant's counterclaim be dismissed or permanently stayed on the grounds of forum non conveniens;

5. The Defendant pay the Plaintiff's costs of this application in any event."

It is this application, with others, that has been argued before me.

46 On behalf of the Official Receiver, it is argued that there are a number of connecting features to Israel which render the Supreme Court of Western Australia a clearly inappropriate forum. They include the fact that the parties are domiciled in and the defendant is a citizen of Israel; the issues in the Israeli proceedings include, but are more extensive than the issues in the counterclaim; the evidence required in the Israeli proceedings include, but are more extensive than, the evidence required in the counterclaim; the 1993 agreement which is to be construed according to Israeli law, and a declaration within the agreement, cl 8.6.1, Mr Raveh's real financial situation is not within the knowledge of anyone who is acquainted with him and in touch with him in Australia and; finally, and importantly, the determination of the defendants' counterclaim will not finally determine the substantive issues in the Israeli proceedings nor will it shorten or in any way materially assist the Israeli court in reaching its decision on the substantive issues between the parties in the Israeli proceedings.

47 As to whether a finding by the Supreme Court of Western Australia would create an issue estoppel, there is a conflict in the evidence as to Israeli law. Dr Weinroth, who is Mr Raveh's solicitor, asserts that issue estoppel or res judicata would apply, while Mr Pines, who is the Official Receiver's solicitor, in instructions which he has given to Western Australian solicitors, asserts that the Western Australian proceedings would not be determinative of the Israeli proceedings. I am unable to determine the question one way or the other, which is regrettable. Although the Official Receiver carries the burden of proof, this particular issue is not one which neatly fits into the concept.

48 On behalf of Mr Raveh, it is submitted that he is a resident in Western Australia. All his business and personal property interests are in Western Australia and the question of his entitlement, if any, as a beneficiary under the Interlaken Trust, or the Dumara Trust, depends on Western Australian law. The Interlaken Trust specifically provides that the proper law applicable to the trusts shall be the law of Western Australia. The assets of the Interlaken Trust include controlling shareholdings in Peters & Brownes Foods Limited, two Western Australian cattle stations, and a stock-feed company. It is also submitted that the law of Israel does not know or recognise the concept of a discretionary trust and that the Israeli courts will apply Australian law to determine the rights of the beneficiaries. In short, it is convenient that the Supreme Court of Western Australia determine the issue.

49 It is true that there is a substantial geographical connection with Western Australia and it may be necessary for witnesses from Western Australia to give evidence in proceedings in Israel.

50 However, the substance of the dispute between the parties entirely concerns the law of Israel. The dispute has arisen because of the agreement and affidavit. Without that genesis there would be no Western Australian proceedings. It is alleged against Mr Raveh that he gave false information in an affidavit thereby breaching a deed, the construction of which is subject to Israeli law. Whether the information in his affidavit was in fact false is ultimately a question of fact, or perhaps mixed fact and law, depending upon the construction of the Interlaken Trust and the Dumara Trust.

51 The counterclaim seeks negative declarations. The granting of a negative declaration is very much a matter of discretion, the more so when there is no other substantive relief sought and the issue upon which the declaration is sought is the same issue as that which must be litigated in the Israeli court.

52 The Supreme Court of Western Australian can never be seised of the full dispute between the parties; it would be limited to one, albeit important, issue in the dispute. That issue is central, not peripheral, to the Israeli proceedings.

53 Proceedings to date appear to have been regularly conducted in Western Australia. This does not prevent a finding that the continuation of proceedings here will lead to oppression and injustice. Cases will vary and the question of "convenience" cannot be confined to particular categories. On some occasions the presence of witnesses and geographical connection will weigh heavily. In this case, the history of the proceedings and the relief sought decisively sways the exercise of my discretion. I conclude that the Supreme Court of Western Australia is a clearly inappropriate forum to grant the relief sought by the defendant by way of counterclaim when regard is had to the whole of the litigation in Israel. The Western Australian proceedings cannot dispose of the issues between the parties and the fact that the Supreme Court of Western may make a declaration, though of some relevance, is not in the circumstances very persuasive. As to the question of estoppel, I have put it to one side because of my strong impression that these proceedings are clearly Israeli proceedings and that any determination by the Supreme Court of Western Australia, whether by way of binding declaration of right or not, is not appropriate in all the circumstances. I would therefore grant the plaintiff's application for a stay.

54 The Official Receiver also seeks a stay of these proceedings.

55 These proceedings, commenced by writ issued 13 July 2001. The plaintiffs are Hugh McLernon, the first plaintiff, Gad and Esther Riki Sadeh Raveh as second plaintiffs, Michal, Dan and Ruth Raveh as third plaintiffs against KPMG Legal as first defendant and The Official Receiver the second defendant.

56 In these proceedings, an agreement has been reached with the first defendant, KPMG Legal, who presently hold on trust the sum of $13 million. It awaits instructions or orders to release the money. It is fair to say that KPMG have been influenced by the existence of the worldwide Mareva order. Whether the Official Receiver has threatened KPMG Legal will be an issue in the proceedings.

57 The proceedings concern the settlement of another action conducted in the Supreme Court by Mr Raveh and Mr McLernon against Lodi Holdings Pty Ltd, the trustee of the Interlaken Trust, and Mr Laitt. That action was ultimately settled by a deed of settlement on 13 April 2001. It is pleaded in these proceedings, CIV 1995 of 2001, that it was an express term of the deed of settlement that Lodi, in exercise of its powers as trustee of the Interlaken Trust, would distribute money representing part of the capital of the trust to Mr and Mrs Raveh and the other Primary A Fund beneficiaries. It is pleaded that as a result of threats by the Official Receiver the money was not paid.

58 There is an undoubted connecting link to the State of Israel and to the Israeli proceedings I have referred to above, particularly because those proceedings have given rise to the Mareva order.

59 Nevertheless, I conclude that the Supreme Court of Western Australia is not a clearly inappropriate forum for the following reasons. There are a number of Western Australian parties as well as Mr Raveh. The action concerns events in Western Australia and the settlement of proceedings in Western Australia. The issue in Western Australia is not identical to that issue to be decided in the Israeli court. There is currently a regularly issued Mareva order. Whether, and to what extent, that has prevented the final distribution in Western Australia, the subject of CIV 1995 of 2001, is a different issue from whether the order should have been granted in the first place in the Israeli proceedings I have previously set out. I therefore do not stay these proceedings.

60 Mr Raveh seeks an order to consolidate the two actions together. In view of the stay I have ordered in respect of CIV 1360 of 2001, an order for consolidation would be pointless. However, should my decision be subject to a successful appeal, I should state that if I had not ordered a stay, I would have made an order for consolidation. In other words if, contrary to my judgment, it were to be concluded that it was appropriate for CIV 1360 of 2001 to proceed in Western Australia, then in those circumstances there would be a common identity in the proceedings sufficient to justify their consolidation. The Official Receiver argues that an order for consolidation is premature. There is force in this submission because of the connection of the action brought by the Official Receiver against Mr Raveh which resulted in the Mareva order. However, in the orderly transaction of business there would be sufficient connection between the two actions that they should proceed in a consolidated form in due course, even if that course is some way off.

1. The Official Receiver's action to stay further proceedings on claim and counterclaim in CIV 1360 of 2001 is granted;

2. The Official Receiver's application to stay further proceedings in CIV 1995 of 2001 is dismissed;

3. Mr Raveh's application for consolidation of the two proceedings is dismissed.