XPlore Technologies Corporation of America v Tough Corp Pty Ltd

(iv) The parties have liberty, otherwise, to restore the matter to the list on five days' notice.

CATCHWORDS : FOREIGN JUDGMENT - default judgment obtained in United States - enforcement - allegations of fraud and denial of natural justice - appeal lodged and written arguments delivered - arguable defence available - proceedings for enforcement of judgment stayed until appeal determined

LEGISLATION CITED : Texas Civil Practice and Remedies Code

Ainslie v Ainslie [1927] HCA 23; (1927) 39 CLR 381 Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 Dunlop Pneumatic Tyre Company Ltd v AG fur Motor und Motorfahrzeugbau vorm Cudell & Co [1902] 1 KB 342 (CA) Keele v Findley (1990) 21 NSWLR 444 Littauer Glove Corp v FW Millington (1920) LTD (1928) 44 TLR 746 (KB) CASES CITED : Malaysia-Singapore Airlines Ltd v Parker (1972) 3 SASR 300 National Commercial Bank v Wimborne (1979) 11 NSWLR 156 RDCW Diamonds Pty Ltd v Da Gloria [2006] NSWSC 450 Schnabel v Lui [2002] NSWSC 1184 Sullivan v The Department of Transport (1978) 20 ALR 323 Yoon v Song [2000] NSWSC 1147; (2000) 158 FLR 295

PARTIES : XPlore Technologies Corporation of America (Plaintiff) Tough Corp Pty Ltd (Defendant)

COUNSEL : Dr C S Ward (Plaintiff) J Stevenson SC / J Williams (Defendant)

SOLICITORS : Henry Davis York Lawyers (Plaintiff) Clayton Utz Lawyers (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

14063/2008 XPlore Technologies Corporation of America v Tough Corp Pty Ltd

JUDGMENT 1 HIS HONOUR: Xplore Technologies Corporation of America seeks to enforce a default judgment issued by the District Court of Texas, Travis County on 18 April 2008 (the "Texas judgment"). For that purpose they commenced these proceedings by summons on 7 August 2008. The defendant, Tough Corp Pty Ltd, moved the Court to stay the proceedings, essentially, on the basis that the Texas judgment was obtained in a manner inconsistent with the rules of natural justice and/or obtained by fraud. Short History 2 It is unnecessary and inappropriate for this Court to deal with the merits of the issues before the Court in Texas. The following matters are only those necessary to understand the nature of the proceedings before this Court. The authorities are clear that, under the common law, this Court will enforce a foreign judgment in circumstances where the foreign court had jurisdiction, without an examination of the merits of the proceedings or judgment. 3 The justiciable issue between the parties in Texas is an issue relating to that which we would call contract and/or sale of goods. XPlore supplied wireless tablet personal computers and certain other computer or computer-related equipment to Tough Corp. This occurred in or about 2007. Tough Corp disputed the quality of the equipment and alleged that the equipment, or some of it, was not fit for the purpose for which it was acquired and/or did not meet the warranties in relation to quality and description. 4 As one would expect, there was an exchange of correspondence between XPlore and Tough Corp relating to these matters and, to be fair to both sides, attempts to resolve the issue. 5 On 26 February 2008, XPlore's Texas lawyers, Jackson Walker LLP, sent a letter of demand by email and FedEx directly to Tough Corp in Australia. The letter of demand referred to Henry Davis York as its Australian agents appointed or instructed to assist in the collection efforts for what was alleged to be the moneys owed. 6 On 20 March 2008, XPlore filed a Petition against Tough Corp in the District Court of Travis County, Texas. Pursuant to what is alleged to be the proper operation of s 17.044 of the Texas Civil Practice and Remedies Code the Petition was delivered to the Texas Secretary of State and, such service, it seems, is good or effective service on a foreign corporation "doing business" in Texas. No attempt was made, at that stage, to effect personal service on Tough Corp or take any steps, formal or informal, to advise Tough Corp of the commencement of the proceedings. 7 On 28 March 2008, in accordance with what seems to be the usual procedure, the Texas Secretary of State forwarded the Petition to Tough Corp by registered mail. A return receipt was requested. This letter was received in Australia on 16 April 2008 and delivered to Tough Corp on 17 April 2008. 8 The covering letter to the initiating documents for the Texas proceedings was in the following terms: "CITATION THE STATE OF TEXAS CAUSE NO. D-1-GN-08-000942

vs. TOUGH COP. PTY LTD., A/K/A TOUGH PTY LTD. A/K/A TOUGH CORP

TO: TOUGH CORP. PTY LTD., a/k/a TOUGH PTY LTD., a/k/a TOUGH CORP. BY SERVING THE TEXAS SECRETARY OF STATE 1019 BRAZOS STREET AUSTIN, TEXAS 78701

YOU HAVE BEEN SUED. You may employ an attorney. If you or your attorney do not file a written answer with the clerk who issued this citation by 10:00 A.M. on the Monday next following the expiration of twenty days after you were served this citation and petition, a default judgment may be taken against you.

Attached is a copy of the ORIGINAL PETITITON AND SUIT ON A SWORN ACCOUNT of the PLAINTIFF in the above styled and numbered cause, which was filed on MARCH 20, 2008 in the 98TH JUDICIAL DISTRICT COURT of Travis County, Austin, Texas.

ISSUED AND GIVEN UNDER MY HAND AND SEAL of said Court at office, March 20, 2008 ." 9 Tough Corp, it seems, took the notification and requirement to file a written answer by "10:00 A.M. on the Monday next following the expiration of twenty days after you were served this citation and petition", as 12 May 2008. It seems, in accordance with the law and practice in Texas, that the date of service was 24 March 2008 and the Monday following 20 days after service would be either Monday 14 April 2008 (if the time could expire on a Sunday) or Monday 21 April 2008. 10 It seems that XPlore took the view that the 20 days expired on Sunday 13 April and the written answer was required by Monday 14 April, because on Friday 18 April 2008 XPlore filed a motion for default judgment in Texas. 11 It seems that the Texas District Court took the same view, because default judgment issued. During the course of the proceedings, an exchange occurred between the trial judge and the legal representative for XPlore. On questioning by the trial judge as to whether XPlore or its counsel had received oral or written communication from Tough Corp, in relation to the lawsuit, the legal representative stated that "although XPlore and its counsel had attempted to contact Tough to resolve the dispute on numerous occasions prior to filing the lawsuit, Tough had never responded to any of those requests for communication, either before or after the lawsuit was filed." 12 It is sufficient to say that the above statement is incorrect. Further, no attempt had been made to inform Tough Corp of the motion for default judgment and, as previously stated, default judgment issued. 13 On 30 April 2008, Tough Corp was first made aware of the existence of the default judgment and, on 3 June 2008, it filed an appeal against the default judgment in the Texas Third Court of Appeals. Since then, the matter has proceeded in the Texas Appeal in accordance with the normal program and, on best estimates, it is expected that a decision in the Texas Appeal (which is generally done on the papers) can be expected in early 2009. 14 In the meantime, as has been explained already, the proceedings for enforcement in New South Wales have been commenced and the motion for stay filed and agitated. Principles for Enforcement of Foreign Judgments 15 Foreign judgments may, under the common law, be enforced as a claim for a liquidated sum relying on the foreign judgment as a debt. Once it is shown that the foreign court had jurisdiction over the defendant, in those proceedings, the Court will not allow the parties to agitate the merits of the matter before the foreign court, at least to the extent that it is a matter with which the foreign court was capable of dealing: see RDCW Diamonds Pty Ltd v Da Gloria [2006] NSWSC 450 at [26], [28]-[32]. 16 The foreign judgment may be enforced as a liquidated sum, being the debt arising from the judgment in Texas, or simply, in terms, to enforce the Texas judgment, or as a third option, as a suit on the original cause of action. In the last mentioned course of conduct, there is no merger of action because the foreign judgment is not, at common law, a judgment of record and the plaintiff, in the enforcement proceedings, can rely on one or more genus of estoppel to prevent the agitation of the defences that were taken or were available in the foreign proceedings: Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853; Malaysia-Singapore Airlines Ltd v Parker (1972) 3 SASR 300; Ainslie v Ainslie [1927] HCA 23; (1927) 39 CLR 381. 17 The abovementioned principles apply equally to default judgments as they do to any other kind of judgment: Schnabel v Lui [2002] NSWSC 1184; RDCW Diamond, supra. 18 In the current proceedings, there is no challenge to the jurisdictional competence of the Texas Court. Nor is there a challenge to the competence of the Texas Court to issue judgment. Further, there is no challenge on the basis that Tough Corp is not, for the purposes of private international law, carrying on business in Texas: see Dunlop Pneumatic Tyre Company Ltd v AG fur Motor und Motorfahrzeugbau vorm Cudell & Co [1902] 1 KB 342 (CA); National Commercial Bank v Wimborne (1979) 11 NSWLR 156; Littauer Glove Corp v FW Millington (1920) LTD (1928) 44 TLR 746 (KB). 19 There are two exceptions to the enforceability of a foreign judgment under the common law. Those exceptions are if there has been a denial of natural justice and where the foreign judgment has been obtained by fraud, either on the part of the party seeking to rely upon the foreign judgment or on the part of the court pronouncing the judgment. The preferable view seems to be that fraud, on the part of the party in whose favour the judgment has been given, must be an allegation of fraud based on evidence not available in the foreign court itself: Keele v Findley (1990) 21 NSWLR 444 (per Rogers CJ Comm D). Is There an Arguable Defence That Would Warrant a Stay? 20 The determination by the Court to grant or refuse a stay is a matter within the discretion of the Court. It must be exercised judicially and on the basis of the injunctions of the legislature to seek to facilitate the just, quick and cheap resolution of the real issues between the parties. Such criteria include the resolution of the issues in the least costly manner and in a manner that most efficiently determines the issues. 21 Generally, in like circumstances, the most efficient and least costly manner of determining issues is to ensure that the foreign judgment is given full effect without permitting a party to re-agitate issues and without the capacity to agitate issues that could and should have properly been agitated before the foreign court. 22 In the current circumstances, Tough Corp submits that the procedure adopted by the Texas Court was a denial of natural justice. They do so because of what they allege is the misinformation in the letter, recited above, and the lack of time between the receipt of the initiating documents and the issue of the foreign judgment. 23 It is submitted, understandably, that receiving a document on 17 April 2008 that commenced proceedings in Texas did not give any time to file a document prior to 14 April 2008 and gave (with some allowance for time differences) little more than a day to appear in the proceedings in Texas (of which, I reiterate, no notice was received). 24 The rules of natural justice require a party to be given a proper opportunity to prepare and present its case. This proposition is trite. The opportunity so granted does not include the task of ensuring that a party takes best advantage of the opportunity granted: Sullivan v The Department of Transport (1978) 20 ALR 323 at 343 (per Deane J, with whom Smithers and Fisher JJ agreed on this issue). 25 It is at least arguable that Tough Corp have not had a sufficient opportunity to prepare or present a case in the circumstances outlined above. 26 Moreover, the second exception relates to the issue of fraud. Fraud in that context includes a situation where the foreign court was misled into coming to the decision that it did: Yoon v Song [2000] NSWSC 1147; (2000) 158 FLR 295 (per Dunford J). In my view, the Court may be misled either by evidence, or, particularly in the case of the issue of a default judgment, by a statement from the bar table or its equivalent. 27 I take the view that the question from the trial judge, as to the contact from the defendant, was significant in the formation of the view by the trial judge that default judgment should issue. The trial judge was misled about that contact. 28 On the basis of the above findings, albeit preliminary, it would seem that Tough Corp have an arguable defence in relation to the enforcement proceedings in this Court. 29 Bearing in mind that there is presently being considered an appeal in Texas, and bearing in mind the necessity and desirability of a just, quick and cheap resolution of the real issues between the parties, it would seem far more efficient, just and inexpensive for one court to deal with the issues. These issues are currently before the Appeal Court in Texas. 30 As a consequence, and balancing both the interests of both XPlore and Tough Corp and the desirability of having the matter resolved conclusively, these issues are best left to the Appeal Court in Texas. The best way to achieve that result is to grant a stay for a limited period. Significant delay in the outcome of the Texas Appeal may affect significantly the balancing of the interests of each party. 31 For the foregoing reasons, the Court makes the following orders:

(i) These proceedings be stayed until the earlier of (a) 4.30pm on 27 March 2009; or (b) the determination of proceedings in the Third Court of Appeals, Austin, Texas, in the name of Tough Corp Pty Ltd v XPlore Technologies Corporation of America, Cause No. 03-08-00368-CV;

(ii) Costs of this motion will be costs in the cause;

(iii) The parties are granted liberty, within seven days, to seek consequential orders to the foregoing and/or a different order for costs, by notification to the other party and my Associate. Such matter will be dealt with by written submissions;

(iv) The parties have liberty, otherwise, to restore the matter to the list on five days' notice.

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