In an exciting new conflict of laws case, the New Zealand High Court has granted an interim anti-enforcement injunction in relation to a default judgment worth USD136,290,994 obtained in Kentucky (Kea Investments Ltd v Wikeley Family Trustee Limited  NZHC 2881). The decision was made in November last year but has only now been released. It seems to be the first time that the New Zealand court has granted an (interim) anti-enforcement injunction.
The case involves allegations of “a massive global fraud” perpetrated by the defendants – a New Zealand company (Wikeley Family Trustee Ltd), an Australian resident with a long business history in New Zealand (Mr Kenneth Wikeley), and a New Zealand citizen (Mr Eric Watson) – against the plaintiff, Kea Investments Ltd (Kea), a British Virgin Islands company. Kea alleges that the US default judgment is based on fabricated claims intended to defraud Kea. Its substantive proceeding claims tortious conspiracy and a declaration that the Kentucky judgment is not recognised or enforceable in New Zealand. Applying for an interim injunction, the plaintiff argued that “the New Zealand Court should exercise its equitable jurisdiction now to prevent a New Zealand company … from continuing to perpetrate a serious and massive fraud on Kea” (at ) by restraining the defendants from enforcing the US judgment.
The whole judgment is well worth a read. It is illustrative of the kind of cross-border fraud that private international law struggles to deal with effectively: here, alleged fraudsters using the Kentucky court to obtain an illegitimate judgment and, apparently, frustrate the plaintiff’s own enforcement of an earlier (English) judgment, in circumstances where the Kentucky court is unwilling (or unable?) to intervene because Kea was properly served with the proceeding in BVI.
More specifically, Gault J’s decision is notable because anti-enforcement injunctions – injunctions to restrain a defendant from enforcing a judgment already obtained overseas – are rarely granted. That is because “the New Zealand Court has great respect for the work of foreign courts” and “[t]o grant an injunction which will interfere, even indirectly, with the process of a foreign court is therefore a strong step for which a clear justification is required” (at ). The main exception, however, are cases involving fraud (for cases involving foreign judgments obtained in breach of an agreement, see Tiong Min Yeo “Foreign Judgments and Contracts: The Anti-Enforcement Injunction” in Andrew Dickinson and Edwin Peel A Conflict of Laws Companion – Essays in Honour of Adrian Briggs (OUP, 2021) 251), and Gault J accepted counsel’s submission that this was “one of the rare cases” where an anti-enforcement injunction was justified (at ).
Gault J considered that the case was “very unusual” (at ). Kea had no connection to Kentucky, except for the defendants’ allegedly fabricated claim involving an agreement with a US choice of court agreement and a selection of the law of Kentucky. Kea also did not receive actual notice of the Kentucky proceedings until after the default judgement was obtained (at ). In these circumstances, the defendants were arguably “abusing the process of the Kentucky Court to perpetuate a fraud”, with the result that “the New Zealand Court’s intervention to restrain that New Zealand company may even be seen as consistent with the requirement of comity” (at ).
One may wonder whether the Kentucky Court agrees with this assessment – that a foreign court’s injunction restraining enforcement of its judgment effectively amounts to an act of comity. In fact, Kea had originally advanced a cause of action for abuse of process, claiming that the alleged fraud was an abuse of process of the Kentucky Court. It later dropped the claim, presumably due to a recent English High Court decision (W Nagel (a firm) v Chaim Pluczenik  EWHC 1714) concluding that the tort of abuse of process does not extend to foreign proceedings (at ). The English Court said that extending the tort to foreign proceedings “would be out of step with [its] ethos”, which is “the Court’s control of its own powers and resources” (at ). It was not for the English court “to police or to second guess the use of courts of or law in foreign jurisdictions” (at ).
Since Gault J’s decision granting interim relief, the defendants have protested the Court’s jurisdiction, arguing that Kea is bound by a US jurisdiction clause and that New Zealand is not the appropriate forum to determine Kea’s claims. The Court has set aside the protest to jurisdiction (Kea Investments Ltd v Wikeley Family Trustee Limited  NZHC 466). In its judgment, the Court traverses a number of issues that may be of interest to readers, to be discussed in a future post. For now, it is worth noting that the Court has ordered that the interim orders continue, although the Court was not prepared to make a further order that the defendants consent to the discharge of the default judgment and withdraw their Kentucky proceedings. This, Gault J thought, was “a bridge too far” at this interim stage (at ).