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Fraud in a foreign court as a basis for anti-enforcement relief

By Maria Hook

(Please note that I am the sole author of this post. It is not the work of Jack Wass, co-editor of this blog, who acts as counsel in Kea.)

On 5-6 November, the Supreme Court will hear an appeal against the Court of Appeal’s decision in Wikeley v Kea Investments Ltd [2024] NZCA 609, [2024] 3 NZLR 901 to set aside a permanent injunction restraining enforcement of a default judgment obtained in the Kentucky Circuit Court (a so-called “anti-enforcement injunction”). The Court of Appeal upheld the High Court’s finding that the claim in the Kentucky court formed part of a global conspiracy to defraud Kea, but it concluded that an anti-enforcement injunction would be premature because Kea had not exhausted its right of appeal in Kentucky (“absent exhaustion by Kea of its remedies in Kentucky … comity requires the New Zealand courts to keep their powder dry”: at [194]).

I have written about this case before, including about the Court of Appeal’s decision (see here). The purpose of this post is to comment on the upcoming appeal, and to alert readers to a recent Honours dissertation that provides a more detailed analysis of the Court of Appeal’s reasoning, and that, with the author’s kind permission, is attached to this post here: Campbell Kidd “Cheeky Like the Kea: A New (Zealand) Approach to Anti-Suit Injunctions” (Honours Dissertation submitted in partial fulfilment of the requirements of the degree of Bachelor of Laws (Honours) at the University of Otago – Ōtākou Whakaihu Waka, 2025).

I               Requirement to exhaust rights of appeal in Kentucky after New Zealand court has made findings of fraud

The question before the Supreme Court is “whether the Court of Appeal was correct to discharge the permanent anti-suit and anti-enforcement injunctions” ([2025] NZSC 75 at [2]). The scope of the appeal explicitly excludes the findings of the High Court and Court of Appeal that the Kentucky default judgment was the result of fraud and conspiracy (see [2025] NZSC 76). The issue before the Supreme Court, therefore, is whether, in circumstances where the New Zealand court had jurisdiction to determine the question of fraud and found that the defendants had committed the fraud, the application for anti-enforcement relief, too, should have been granted.

The Court of Appeal considered that it would be inconsistent with comity to grant permanent anti-enforcement relief prior to Kea exhausting its right of appeal in Kentucky. However, Kidd convincingly argues that a requirement to “exhaust remedies” in the foreign court would actually be inconsistent with the principle of comity (at 13-17). The Court of Appeal’s decision that Kea must first pursue the appeal was not motivated by a desire to defer to the Kentucky court’s view of the legitimacy of the judgment (but cf the Court of Appeal’s judgment at [177]). In Kidd’s words, if “[a]ny subsequent decision made by the [Kentucky court] will only be respected if it arrives at the same conclusion”, the New Zealand court is essentially “acting as if it were an appellate court [for Kentucky]” (at 5). Deference to the Kentucky court would be entirely “performative” and, in the words of Leggatt LJ, “patronising” (The “Angelic Grace” [1995] 1 Lloyd’s Rep 87 at 95). The US cases cited by the Court of Appeal bear out this point, to the extent that they were cases concerned with the internationally wrongful acts of states (at 10-11).

In these circumstances, the findings of fraud should have gone hand in hand with the grant of anti-enforcement relief (cf Kidd at 33). The Court of Appeal emphasised that an anti-enforcement injunction must be a measure of last resort (at [185]). Yet the whole point of the conspiracy claim was to prevent the wrongful enforcement of the judgment (and to obtain compensation for the loss suffered along the way). The Court of Appeal upheld the declaration that the judgment was obtained by fraud (the practical purpose of which was to make it easier to resist enforcement in BVI); the award of damages for costs incurred in defending the fraudulent proceeding; and the order placing WFTL in interim liquidation to prevent further unlawful conduct (including attempts to enforce the judgment). In fact, because the Court of Appeal upheld the order to place WFTL in interim liquidation, it is difficult to see how WFTL would have been in a position to oppose an argument in the Kentucky court that the judgment should be set aside (see Kidd at 32-33). In that sense, the court’s findings of fraud were intended to be definitive (and it is possible that they might even have definitive effect in the Kentucky court based on an issue estoppel).

This was not a scenario, for example, where the court decided the question of fraud purely for the purposes of determining the domestic effects of a foreign judgment, in the context of a defence to a claim for enforcement in New Zealand (see the Court of Appeal’s judgment at [154]). In such a scenario the court might have said that its own determination of the fraud should determine the enforceability of the judgment in New Zealand, but that the validity of the judgment more generally should be decided by the Kentucky courts in the first instance (because the Kentucky courts may legitimately disagree with the findings of fraud or its relevance). But that is not the scenario that played out in Kea. If an anti-enforcement injunction was an appropriate remedy at all, there seemed to be no principled reason in this case to delay relief, once the court had exercised jurisdiction over the claim and made the findings of fraud. Indeed, Kidd argues that delay makes the New Zealand court’s involvement more concerning (at 17-8).

II             The New Zealand court’s jurisdiction to make findings of fraud

Does this mean that the New Zealand court should have been more circumspect when deciding to exercise jurisdiction over the fraud in the first place? Neither the High Court nor the Court of Appeal thought so, and this question is not before the Supreme Court. However, it is useful to ask why it was appropriate for the New Zealand court to determine the question instead of deferring to the Kentucky court, because the answer also helps to explain why the grant of an anti-enforcement injunction in this case will not turn the New Zealand court into an “international police officer” (see Kidd at 21-22).

Nature of the jurisdictional question  

The High Court concluded that it was the appropriate forum to determine the conspiracy claim. The Court of Appeal rejected the appeal against jurisdiction, although it clarified that the question of appropriate forum should not determine whether there was jurisdiction to grant an injunction and shifted its focus to comity instead (see the Court of Appeal’s judgment at [174], Kidd at 24-5). New Zealand was necessarily the appropriate forum for the conspiracy claim, which could not exist in the Kentucky courts because it was premised on the fraudulently obtained Kentucky judgment. It was also the appropriate forum to grant the injunction, if there was a basis for it.

The jurisdictional question that was largely left implicit was whether the New Zealand court had, and should exercise, jurisdiction over a conspiracy claim that was based on fraud committed in the Kentucky court. This question is concerned with the parameters of the New Zealand court’s jurisdiction vis-à-vis the validity of a foreign judgment. It is possible to frame this question in the language of appropriate forum (was New Zealand or Kentucky the appropriate forum to decide whether the judgment was valid/obtained by fraud?). However, a more fitting characterisation is that the question is concerned with subject-matter jurisdiction (see Conflict of Laws in New Zealand, ch 2 at E, H1, H4). Why did the New Zealand court have subject-matter jurisdiction over a fraud perpetrated in a foreign court, and why was it right to exercise it?

There are a number of reasons why this focus on subject-matter jurisdiction is helpful. First, it helps to tease out considerations that can easily get lost in a standard inquiry into the appropriate forum. The core concern is not with the identification of the appropriate forum to hear an action. It is with subject-matter limitations on the court’s jurisdiction to determine an issue. If the issue falls within the exclusive subject-matter jurisdiction of the foreign court, the question of appropriate forum does not arise. If both courts have subject-matter jurisdiction, a binary choice of appropriate forum may miss the point – rather, the relevant question may be at what point the New Zealand court ought to become involved.

Second, it avoids the strict bifurcation into “jurisdiction to make findings of fraud” and “jurisdiction to grant an anti-enforcement injunction”. The analysis in Part I shows that, once the court had made its findings of fraud, it was too late to refuse an injunction (because at that point the sole purpose of the injunction seemed to be to give the Kentucky court another opportunity to arrive at the same conclusion). There had to be a vehicle at the jurisdictional stage to air the relevant comity concerns. Subject-matter jurisdiction provides this vehicle. Once the New Zealand court grapples explicitly with its subject-matter jurisdiction over a fraudulent foreign judgment, the relevant comity concerns rise to the fore (cf Kidd at 27-31).

Third, the question of jurisdiction need not be narrowly focused on the jurisdiction to grant anti-enforcement relief. In circumstances where steps to enforce the foreign judgment have already been successful, anti-enforcement relief would serve no purpose, but it is conceivable that a claimant would seek damages instead, claiming the loss of the enforced judgment sum. To the extent that such damages would effectively reverse the effect of the foreign judgment, they raise similar concerns to anti-enforcement injunctions, and the jurisdiction to grant either relief ought to be developed coherently. In other words, the lens of subject-matter jurisdiction brings into view cases that would benefit from coherent, non-siloed analysis.

Taking an even broader perspective, there is value in comparing fraud claims with fraud-adjacent claims like the tort of abuse of process (see Kidd at 30). There is authority for the proposition that the court does not have subject-matter jurisdiction over torts alleging an abuse of process in foreign proceedings” (W Nagel (a firm) v Chaim Pluczenik [2022] EWHC 1714 at [96]; Mao v Findlay [2022] NZHC 521). In the latter case of Mao, the plaintiff sought damages caused by a freezing order in China that was allegedly wrongfully obtained, and the High Court considered that it did not have “subject matter jurisdiction for matters of Chinese procedure” (at [51]). If it is true that the court lacks subject-matter jurisdiction over a foreign abuse of process (but see Kidd at 31, citing Patel v Minerva Services Delaware, Inc and others [2024] EWHC 172 at [35]-[41]), what is so special about fraud that a New Zealand court may be prepared to intervene?

Connection to fraud in foreign court

On the face of it, a claim that a foreign judgment was the result of fraud is most closely connected to the foreign court itself. It is the foreign court that was used as the means for the fraud, and it is the foreign court that can immediately bring the fraud to an end by setting aside the judgment. The same reasoning applies to other types of cases that may ultimately warrant the grant of anti-suit relief (because a foreign court has an undeniable connection to questions about the validity or appropriateness of its own jurisdiction). From a systemic perspective, it makes sense that the validity of a judgment is determined by the court that has issued it. Private international law would be at risk of unravelling if courts routinely entertained claims for relief to reverse the effects of foreign judgments that claimants say should not have been granted in the first place.

In Kea, there is an argument that the connection to Kentucky lacks meaning because the connection is itself the outcome of the fraud. Kea was dragged into the Kentucky court, based on a fabricated set of facts to justify the court’s jurisdiction over the fraudulent claim. However, the fact that the claim was a fiction does not mean that the Kentucky court’s connection to the fraud is somehow illegitimate (although it probably weakens the relative strength of the connection, see Kidd at 34-35). The Court of Appeal was right to question, therefore, “why it should be considered vexatious or oppressive for these issues to be addressed in a United States court” (at [194]). The fraudulent and oppressive nature of the fraudulent claim need not infect the foreign court’s jurisdiction over the question of fraud (in the same way, for example, that a claim brought in breach of a New Zealand jurisdiction clause does not infect the foreign court’s jurisdiction to determine the validity or effectiveness of the clause).

So why does the foreign court not enjoy exclusive subject-matter jurisdiction to determine the question of fraud? Why might there be a basis for the New Zealand court to become involved? The answer lies in the nature of fraud, as well as its connection to New Zealand based on the New Zealand court’s jurisdiction over the defendant.

Interestingly, the Court of Appeal doubted that fraud on its own could justify the grant of an injunction. Instead, the Court focused on “natural justice” as a potential ground for relief (at [183]), distinguishing Ellerman Lines Ltd v Read [1928] 2 KB 144 (CA) on the basis that “there [was] no contractual jurisdiction clause that the New Zealand Court was seeking to enforce” (at [187]). But for the reasons explored in Part I, it is not clear why a breach of natural justice should be a condition for the court’s jurisdiction to grant the injunction, once the court has found that the pursuit of a foreign proceeding amounts to a tortious conspiracy by fraudulent means. In principle, the considerations that justify jurisdiction over the fraud also justify the grant of relief. Taken to its logical conclusion, the Court of Appeal’s reasoning suggests that it would be worse to suffer a breach of a jurisdiction clause than to be dragged into a foreign court on the basis of a fraudulent claim (including a forged jurisdiction clause in favour of the foreign court).

It is here, in the context of the court’s evaluation of its own jurisdiction in the face of competing connections to the fraud, that the plaintiff’s steps in the foreign court may need to be considered. Broadly speaking, there are two possible views.

On the first view, it is the connection to New Zealand that is stronger, so that the plaintiff should not be expected to take any steps in the foreign court to set the judgment aside. What matters is the New Zealand court’s view of the fraud. Justifications for prioritising the New Zealand connection may include that the connection to the foreign court is the outcome of the fraud and that New Zealand has a relatively strong connection to the fraud. In these circumstances, the plaintiff should not be made to run the risk of submitting to the foreign court’s jurisdiction. If the plaintiff submits to the foreign court, and the foreign court concludes that there was no fraud, this finding may have preclusive effect elsewhere, including in the New Zealand court (unless the controversial rule in Abouloff v Oppenheimer & Co (1882) 10 QBD 295 (CA) applies, which allows the New Zealand court to prioritise its own findings of fraud in the context of recognition and enforcement of the foreign judgment in New Zealand).

The strength of the evidence in support of the fraud may be a relevant consideration here. If the evidence in support of the fraud is especially strong so that, in the New Zealand court’s view, there is unlikely to be room for disagreement, the New Zealand court has no reason not to act. If the foreign court is on the same page as the New Zealand court, it will understand the New Zealand court’s exercise of jurisdiction as an act of cooperation (see Kea Investments Ltd v Wikeley Family Trustee Limited  [2022] NZHC 2881 at [68] per Gault J); and if the foreign court is not on the same page as the New Zealand court, the New Zealand court’s exercise of jurisdiction will turn out to have been both justified and necessary (see Kidd at 34). Of course, there is an argument that the New Zealand court should not get to decide that a different view of the fraud would be unreasonable, unless the New Zealand court is also the court that is otherwise more closely connected (see Kidd’s emphasis on the principle that courts are equally placed to determine justice between the parties in Section II(C); cf Amchem Products Inc v British Columbia (Workers’ Compensation Board) [1993] 1 SCR 897, where the core question of subject-matter jurisdiction was the continuation of a Texan proceeding, and the Supreme Court said that it was “preferable that the decision of the foreign court [on its exercise of jurisdiction] not be pre-empted” (at 931), and that the Canadian courts should not usually “arrogate to themselves the decision for both jurisdictions” where there is “a genuine disagreement” about the appropriate forum (at 932)).

On the second view, it is the connection to the foreign court that may have greater weight in the first instance, but the connection needs to give way if the foreign court considers the allegations of fraud to be irrelevant (and effectively declines to determine the allegations of fraud in substance). Kidd argues that an anti-enforcement injunction should only be granted where there is cogent evidence that the foreign court will not act, because only then is the presumption that the foreign court is seeking the common interest of administering justice rebutted (at 32-3).  In such cases, it is fine for the New Zealand court to “arrogate to [itself] the decision for both jurisdictions” (Amchem at 932) because, in the New Zealand court’s view, the policy of preventing fraud ought to be universally accepted.

In Kea, the claimant had applied to the Kentucky court to set aside the judgment, which the court refused. Should the New Zealand court have insisted that Kea pursue its right of appeal in the Kentucky court before determining the question of fraud? Neither the High Court nor the Court of Appeal thought so. Kidd argues that there was cogent evidence that the Kentucky court would not act (at 35). What is more, the delay would have increased the risk that the defendants successfully remove themselves from the New Zealand court’s control. In these circumstances, the New Zealand court had a responsibility to preserve and exercise its power to prevent the fraud (at 33).