You are here:
AustLII >>
Databases >>
Supreme Court of New South Wales >>
2012 >>
[2012] NSWSC 583
[Database Search]
[Name Search]
[Recent Decisions]
[Noteup]
[Download]
[Context] [No Context] [Help]
Bhushan Steel Ltd v Severstal Export GmbH [2012] NSWSC 583 (31 May 2012)
Last Updated: 1 June 2012
|
Case Title:
|
Bhushan Steel Ltd v Severstal Export GmbH |
|
|
|
Medium Neutral Citation:
|
|
|
|
|
Hearing Date(s):
|
5 December and 6 December 2011 |
|
|
|
Decision Date:
|
|
|
|
|
Jurisdiction:
|
|
|
|
|
Before:
|
|
|
|
|
Decision:
|
See paragraph 177 and 178 |
|
|
|
Catchwords:
|
FREEZING ORDER - mareva order - foreign
proceedings - Uniform Civil Procedure Rules (NSW) rule 25.14 - good arguable
case - sufficient
prospects of judgment being entered - sufficient prospects of
judgment being registered - danger of judgment being unsatisfied |
|
|
|
Legislation Cited:
|
|
|
|
|
Cases Cited:
|
|
|
|
|
Texts Cited:
|
Ritchies, 'Uniform Civil Procedure NSW' LexisNexis
Butterworths (loose leaf service) Davies, Bell and Brereton, 'Nygh's
Conflict of Laws in Australia' (8th ed. 2010) |
|
|
|
Category:
|
|
|
|
|
Parties:
|
Bhushan Steel Limited - plaintiff Severstal Export
GMBH - defendant |
|
|
|
Representation
|
|
|
|
|
Counsel: Dr A Bell SC, J Watson -
plaintiff C Colquhoun - defendant |
|
|
|
- Solicitors:
|
Solicitors: Jones Day - plaintiff Mallesons
- defendant |
|
|
|
File number(s):
|
|
|
|
Publication Restriction:
|
|
JUDGMENT
- The
plaintiff's summons seeks relief in the form of freezing orders in aid of
foreign proceedings being Proceedings No. CS (OS) 297/2007
which are before the
High Court in Delhi (Indian proceedings), pursuant to UCPR 25.14 or any inherent
jurisdiction of the Court.
- The
defendant submits that the orders sought in the summons should not be
made.
- Gzell
J on 13 October 2011 made interlocutory orders restraining the defendant
Severstal Export GMBH (Severstal) from removing or
disposing of its assets from
and in Australia. Those orders are continuing by consent.
Background Facts
- The
plaintiff Bhushan Steel Limited (Bhushan) is a company incorporated in India and
is India's third largest manufacturer of secondary
steel products in that
country. It has an asset base of more than $US 4 billion and a market
capitalisation of around $US 2 billion.
Its assets are principally in India but
it has some assets in Australia. Shares in Bhushan are traded on the Bombay
Stock Exchange
and the National Stock Exchange.
- Bhushan
Steel (Australia) Pty Limited (Bhushan Steel) is a wholly owned subsidiary of
Bhushan registered in New South Wales. Bhushan
Steel presently holds
approximately 73.6% of the issued shares in Bowen Energy Limited (Bowen) an
Australian coal and mineral exploration
company listed on the Australian
Securities Exchange. Bhushan Steel Australia holds interest in a number of
mining tenements in Queensland.
- Severstal
is a company incorporated in Switzerland which carries on business as an
exporter of steel products. It sells approximately
3 million metric tonnes of
steel per year and has an annual turnover of approximately US$1.5-2 billion. It
is a company in the Severstal
Group which is listed on the stock exchanges of
Moscow and London.
- Between
17 August 2004 to 18 February 2005 Bhushan placed a number of orders for the
sale and supply by Severstal of hot rolled steel
coils. These orders were placed
through the defendant's agent in India, Mahindra Intertrade Limited
(Mahindra).
- The
details of the first three of these orders were as follows:
- Contract no
41387 dated 17 August 2004 for the sale by Severstal of 2,000 metric tonnes of
hot rolled steel coils (order 1); shipment
by 15 November 2004
- Contract no
42134 dated 23 November 2004 for the sale by Severstal of 3,000 metric tonnes of
hot rolled steel (order 2); shipment
by 15 February 2005
- Contract no
50002 dated 16 December 2004 for the sale of 8,500 metric tonnes of hot rolled
steel coils (order 3); shipment by 15 March
2005
- In
the period from 27 December 2004 to 5 January 2005 Severstal (or its agent)
delivered to Bhushan steel ordered under order 1; and
in the period from 31
March 2005 and 19 April 2005 the defendant, (or its agent) delivered to Bhushan
the steel ordered under order
2.
- In
the period from 3 February 2005 to 18 February 2005 the plaintiff placed two
further orders with Mahindra for the sale and supply
by Severstal of hot rolled
coils to Bhushan. The details of these orders are as follows:
- Contract 50487
dated 3 February 2005 for the sale of 7,000 metric tonnes of hot rolled steel
coils (order 4); shipment by 31 May 2005;
and
- Contract 50625
dated 18 February 2005 for the sale of 2,000 metric tonnes of hot rolled steel
coils (order 5); shipment by 31 May
2005.
- In
the period from 22 May 2005 to 23 June 2005 the defendant delivered to the
plaintiff the steel ordered under order 3.
- In
the period 1 July 2005 to 30 August 2005 the defendant delivered to the
plaintiff the steel ordered under orders 4 and 5.
- Each
of the contracts referred to above contained a claims procedure requiring claims
in respect of visible defects to be made within
30 days of the bill of lading
date and claims in respect of invisible defects to be made within 60 days of the
bill of lading date.
The bill of lading for the delivery of the steel pursuant
to contract 5002 was issued on 26 March 2005, and the bills of lading for
the
delivery of steel pursuant to contracts 50487 and 50625 were issued on 29 May
2005.
- It
was also a requirement of each of those contracts that Bhushan issue a letter of
credit in favour of Severstal prior to the delivery
of the steel. It is not in
dispute that Bhushan issued letters of credit accordingly. Payment was thereby
made for all of the orders
referred to above.
- On
6 January 2005 it seems there was an internal email between the quality control
manager at Bhushan to another manager at Bhushan
about certain defects that were
apparently observed in some of the steel delivered.
- On
27 and 28 January 2005 there was a meeting at Bhushan's premises in India
between its representatives and those of Severstal. There
were discussions about
quantity, quality and price and it is asserted by Bhushan that defects were
pointed out to Severstal's team
and assurances were given by them about future
shipments. There are disputes about this evidence.
- On
or about 9 March 2005 Bhushan and Severstal entered into a contract pursuant to
which the defendant agreed to supply 7,000 metric
tonnes of hot rolled steel
coils to the plaintiff for shipment by 15 June 2005. This was contract 50754.
The letter of credit was
to be issued by 25 April 2005.
- On
7 April 2005 Mr V C Singhal of Mahindra sent an email to Mr Shanker Batra an
employee of Bhushan seeking confirmation that the
letter of credit for contract
no 50754 would indeed be issued by 25 April 2005.
- On
26 April 2005 Mr Singhal by email requested Mr Batra to expedite the issue of
the letter of credit as the materials were likely
to be ready soon.
- On
3 May 2005 Mr Singhal again sent an email to Mr Batra indicating that the order
was ready and based upon what he had been told
by Mr Batra namely that the
letter of credit would be ready, by 7 March 2005 he again asked for expedition
of the process.
- On
4 May 2005 a fax was sent by Mr Singhal to Mr Batra indicating the 7,085.80
metric tonnes of steel ordered pursuant to the contract
was ready and again
indicated that the opening of the letter of credit was awaited.
- On
1 June 2005 Mr Batra sent an email to Mr Singhal. Mr Batra informed Mr Singhal
that the market prices of hot rolled steel in India
and internationally were
dropping and as they were contemplating long term business with the defendant a
request was made to review
pricing. Mr Batra requested that Mr Singhal use his
good offices with Severstal to get the best possible price.
- On
17 June 2005 Henseler, Nusser and Partner (Henseler), Severstal's German lawyers
sent a letter to Bhushan stating that Severstal
would not be in a position to
renegotiate the price agreed for the steel and requesting the plaintiff to open
a letter of credit
or pay the agreed price by the latest 27 June 2005. If
payment by either method was not effected within the relevant time the defendant
via its German lawyers indicated that it would rescind the contract and resell
the materials and recover such damages as was owed
by Bhushan.
- On
or about 29 June 2005 Henseler sent a letter to Bhushan terminating the contract
and stating that its client would resell the steel
and make a claim against
Bhushan for any damages suffered.
- Following
29 June 2005 Severstal sold the steel the subject of contract 50754 to a third
party for approximately US$1,795,830 less
than the price agreed with the
plaintiff. Severstal also incurred additional storage fees in respect of the hot
rolled steel coils
of US$129,104.25.
- On
or about 1 September 2005 Severstal commenced proceedings in Germany in the
Local Court of Dusseldorf in relation to contract 50754.
The Court initially
made attachment orders in Severstal's favour. However on 31 October the Court
handed down a judgment declining
to hear the matter. An appeal was taken to the
Higher Regional Court which affirmed the local Court's refusal to hear the
matter.
- On
26 October Bhushan sent letters to Severstal alleging that that steel delivered
pursuant to contracts 50002, 50487 and 50625 were
defective and enclosing
reports from SGS India Private Limited (SGS) each dated 24 October 2005. SGS is
a company independent of
Bhushan which provides inspection and testing services.
Bhushan is relying upon these reports in the Indian proceedings.
- On
11 November 2005 Severstal sent responses to the letters from Bhushan. The
responses alleged that the SGS reports related to defects
said to be found in
cold rolled coils rather than hot rolled coils supplied by Severstal and that in
any event the claims were made
outside of the claims period under the
contracts.
- On
9 June 2006 Severstal brought proceedings against Bhushan for a breach of
contract 50754 in the Geneva District Court, Switzerland.
Bhushan submitted to
the jurisdiction of the Geneva District Court.
- On
or about 8 January 2007 Bhushan commenced proceedings against Severstal in the
Delhi High Court seeking damages in relation to
the alleged defective steel
provided by Severstal under orders 3, 4 and 5. The amount of the claim is for
approximately AU $3,128,230
plus interest. These proceedings are being defended
and are part heard.
- On
or about 18 June 2009 the Geneva District Court issued judgment in favour of the
defendant pursuant to which Bhushan was ordered
to pay Severstal US $1,795,830
plus interest of 5% per annum from 25 October 2005, US $129,104.25 plus interest
of 5% from 31 October
2005 and legal costs in the amount of CHF
$100,000.
- On
or about 20 August 2009 Bhushan lodged an appeal against the Geneva District
Court judgment with the Geneva Court of Appeal.
- On
or about 15 January 2010 the Geneva Court of Appeal issued a judgment in favour
of Severstal and ordered Bhushan to pay the amounts
which it had been ordered to
pay by the Geneva District Court.
- On
or about 4 June 2010 the Geneva Court of Appeal issued a certificate in respect
of the Geneva Court of Appeal Judgment confirming
that the judgment was final
and conclusive and that Severstal was entitled to enforce that
judgment.
- On
or about 22 July 2010 Severstal obtained leave from the District Court of
Haarlem in the Netherlands to enforce the Geneva Court
of Appeal judgment in the
Netherlands and on 26 July 2010 third party debt orders were issued in those
proceedings against a number
of third parties. However the third parties gave
notices that they did not have a legal relationship with Bhushan or that they
would
owe monies to Bhushan. As there were no assets in the Netherlands against
which enforcement could follow no further steps have been
taken in those
proceedings.
- Nevertheless
on 1 October 2010 Kneppelhout and Korthals NV, Severstal's Dutch lawyers made
demand upon Bhushan for payment of the
amount due under the Geneva Court of
Appeal judgment. Bhushan did not respond to the request.
- On
22 February 2011 Severstal issued proceedings against Bhushan seeking
registration of the Geneva Court of Appeal judgment in the
Supreme Court of NSW
pursuant to section 6(1) of the Foreign Judgments Act 1991
(Cth).
- On
23 February 2011 Severstal sought and obtained a freezing order in respect of
the Australian assets of Bhushan and Bhushan Steel
Australia. Bhushan did not
appear at the return dates for the freezing orders on 28 February 2011 or 7
March 2011.
- On
3 March 2011 the Supreme Court of NSW made orders registering the Geneva Court
of Appeal judgment under the Foreign Judgments Act, but permitting Bhushan to
apply to set aside the registration of the judgment within 14 days of the notice
of registration.
- However
by notice of motion dated 25 March 2011 Bhushan sought a stay of the enforcement
of the Supreme Court of NSW judgment and
a setting aside or variation of the
freezing order.
- On
12 September 2011 Simpson J made orders dismissing Bhushan's notice of motion
with costs. No appeal was lodged against Simpson
J's orders by
Bhushan.
- In
the proceedings before Simpson J Bhushan did not oppose recognition of the Swiss
judgment. It accepted that the judgment was clearly
one that Australian Courts
would recognise.
- The
stay having been refused, Bhushan paid the Swiss judgment sum to the solicitors
for Severstal on 13 October 2011 being AU $2,532,993.76
by
cheque.
- As
a result of the payment to Severstal's solicitors Bhushan currently therefore
has assets in Australia. Bhushan has a claim against
Severstal in India which is
as I have observed already on foot and part heard, in which the plaintiffs seek
approximately AU $3,128,130.00
plus interest.
The Contentions of the Parties
- Bhushan
seeks relief provided for under Uniform Civil Procedure Rules 2005 (NSW)
(UCPR) 25.14 in aid of the Delhi claim. Severstal (and there does not appear to
be any issue about this) has no assets in India.
Bhushan intends, it says, to
enforce any Indian judgment it obtains against Severstal's Australian assets.
- The
rule pursuant to which the plaintiff moves is in the following
terms:
25.14 Order against judgment debtor or prospective judgment debtor or third
party (cf Federal Court Rules Order 25A, rule 5)
(1) This rule applies if:
(a) judgment has been given in favour of an applicant
by:
(i) the court, or
(ii) in the case of a judgment to which subrule (2) applies-another court, or
(b) an applicant
has a good arguable case on an accrued or prospective cause of action that is
justiciable in:
(i) the court, or
(ii) in the case of a cause of action to which subrule (3) applies-another
court.
(2) This subrule applies to a judgment if there is a sufficient prospect that
the judgment will be registered in or enforced by the
court.
(3) This subrule applies to a cause of action if:
(a) there is a sufficient prospect that the other court will give judgment in
favour of the applicant,
and
(b) there is a sufficient prospect that the judgment will be registered in or
enforced by the court.
(4) The court may make a freezing order or an ancillary order or both against
a judgment debtor or prospective judgment debtor if
the court is satisfied,
having regard to all the circumstances, that there is a danger that a judgment
or prospective judgment will
be wholly or partly unsatisfied because any of the
following might occur:
(a) the judgment debtor, prospective judgment debtor or another person
absconds,
(b) the assets of the judgment debtor, prospective judgment debtor or another
person are:
(i) removed from Australia or from a place inside or outside Australia, or
(ii) disposed of, dealt with or diminished in value.
(5) The court may make a freezing order or an ancillary order or both against
a person other than a judgment debtor or prospective
judgment debtor (a "third
party") if the court is satisfied, having regard to all the circumstances, that:
(a) there is a danger that a judgment or prospective judgment will be wholly
or partly unsatisfied because:
(i) the third party holds or is using, or has exercised or is exercising, a
power of disposition over assets (including claims and
expectancies) of the
judgment debtor or prospective judgment debtor, or
(ii) the third party is in possession of, or in a position of control or
influence concerning, assets (including claims and expectancies)
of the judgment
debtor or prospective judgment debtor, or
(b) a process in the court is or may ultimately be available to the applicant
as a result of a judgment or prospective judgment, under
which process the third
party may be obliged to disgorge assets or contribute toward satisfying the
judgment or prospective judgment.
(6) Nothing in this rule affects the power of the court to make a freezing
order or ancillary order if the court considers it is in
the interests of
justice to do so.
- Bhushan
submits that the requirement that there be a good arguable case (UCPR
25.14(1)(b)) is comfortably satisfied. It is also submitted
that that threshold
is a low one. It is further submitted that the notion of good arguable case is a
lesser standard for example
than prima facie cause of action.
- It
is contended that the Delhi proceedings are at a relatively advanced and mature
stage. In those proceedings Bhushan's case is supported
by reports prepared by
SGS which opine upon the defects in some of the steel delivered. It is submitted
that the notion of sufficient
prospects in r 25.14(3)(a) does not relate to the
strength or quality of the case but rather to the prospect of an actual judgment
materialising. It is also submitted that any Indian judgment will be enforceable
in Australia (r 25.14(3)(b)).
- It
is submitted that the assets, namely the amount currently deposited in
Severstal's solicitors trust account would be removed from
Australia or disposed
of unless Severstal is restrained. It is submitted that Severstal has no assets
in India and its position elsewhere
particularly Switzerland is
problematical.
- With
Bhushan prepared to give the usual undertakings to damages it is contended that
all of the discretionary factors weigh in favour
of the grant of the relief
sought.
- In
broad terms Severstal submits that many of the arguments that Bhushan advances
before the Court on this occasion are substantially
the same if not identical to
those which were advanced before Simpson J and which she rejected. It is
therefore submitted that the
judgment of Simpson J gives rise to an issue of
estoppel and/or it would be an abuse of process to permit Bhushan to raise the
same
issues before the Court on this occasion.
- Severstal
urges that the Court should move with some considerable caution in granting the
freezing order requested. It is further
contended that one should be sceptical
about the assertion that Bhushan has a good arguable case in the Indian
proceedings. It is
merely an assertion to that effect. Severstal contends it has
very good defences in the Indian proceedings. It contends that the
SGS reports
for example relate to cold rolled steel coils and not the hot rolled steel coils
supplied, but in any event the steel
was not defective.
- Severstal
says that it is by no means clear that a judgment in Bhushan's favour in India
would necessarily be enforced in Australia.
India it is submitted is not a
country in respect of which part 2 of the Foreign Judgments Act
applies.
- It
is further contended by Severstal that I should reject the notion that there is
any possibility that a judgment will be wholly
or partly unsatisfied. It is said
there is simply no evidence of any real danger that Severstal would not meet its
obligation if
judgment were granted against it in India.
- Lastly
Severstal submits that the freezing order is an exceptional remedy really
directed to minimising the possibility of an unscrupulous
defendant seeking to
render itself "judgment proof". In the absence of any evidence of the
possibility of frustration of the Court's
process and where the outcome of the
litigation is entirely uncertain the Court is urged to exercise its discretion
against granting
a relief claim.
Issue Estoppel / Abuse of Process
- Severstal
points to a number of factors in support of the argument that the judgment of
Simpson J gives rise to an issue estoppel
or alternatively that it would be an
abuse of process to permit Bhushan to re-litigate the same issues in support of
the application
for the freezing order.
- Severstal
points to the fact that Bhushan's application in this Court was for a stay of
the enforcement of the judgment and it did
not seek to set aside the
registration of that judgment as indeed it was entitled to under s 7 of the
Foreign Judgments Act. Severstal relies upon submissions made by Bhushan's
Counsel before Simpson J and a concession (contained in paragraphs 23 and 24
of
the submissions before her Honour) to the effect that the issues agitated in the
Indian and Geneva proceedings were "substantially
identical". It was also
pointed out that Counsel for Bhushan contended that the litigation in New Delhi
and the litigation in Geneva
arise from a common substratum of
fact.
- It
is of course rightly pointed out by Bhushan that the arguments immediately
referred to above put by it were not accepted by the
judge. For example she did
not accept that there was a common substratum of fact between the proceedings in
Geneva and India. She
was of course otherwise unpersuaded that the conclusion of
the proceedings in India could be seen as imminent and further she rejected
Bhushan's submission that Severstal should have sought to enforce the Geneva
judgment in India rather than Australia.
- Severstal
submits that what Bhushan seeks to do here is to advance "substantially the same
grounds" as it did before Simpson J in
support of the freezing order. Therefore
the judgment of Simpson J in the exercise of her discretion rejecting the stay
should operate
as an issue estoppel in respect of the "issues" before her and
that Bhushan should not be permitted to raise the same issues again.
Reliance is
placed upon Blair v Curran [1939] HCA 23; (1939) 62 CLR 464, Ramsay v Pigram
[1968] HCA 34; (1968) 118 CLR 271 and Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363.
- Alternatively
Severstal submits that it would be an abuse of process for Bhushan to relitigate
the same issues. A number of authorities
are referred to in the written outline
(paragraph 47 of Severstal's submissions).
- Before
coming to the authorities on these questions it is important to revisit what
precisely was before the courts in Switzerland
and India, prior to considering
the detail of the matter which was dealt with by Simpson J.
The Swiss Proceedings
- In
the judgment of the Court at first instance in Geneva dated 18 June 2009 it is
abundantly plain that the particular proceeding
concerned contract 50754 only.
Further as is obvious from the judgment the question for determination was
whether according to Swiss
law or as the trial judge said "more precisely the
United Nations Convention on Contracts for International Sale of Goods"
Severstal
was correct in law in rescinding the relevant contract. The second
question clearly was whether it was entitled to a claim in damages
for the
difference between that which it had recouped by reselling the relevant shipment
of steel and the contract price it had with
Bhushan.
- It
was asserted by Bhushan in those proceedings that it was not contractually bound
to Severstal because Severstal had not countersigned
the order confirmation by
hand and that a subsequent letter sent by Bhushan of 1 April 2005 amounted to a
revocation of its prior
offer to acquire the goods. It was further added that
the mitigating resale of the goods was too long after the event and that storage
costs had not been proven. More particularly it was contended by Severstal that
it had received certain defect notices that were
too late and related to goods
which had been accepted and utilised by Bhushan. In addition the letter of 1
April 2005 which had been
relied upon was fabricated for the purposes of the
proceedings and had never been received by Severstal or its agent, Mahindra. The
reason Bhushan had refused to execute the contract so Severstal asserted was
because it wanted to renegotiate the agreed price due
to fall in market prices
and not because of any defects in the quality of the steel.
- In
its case in reply Bhushan more particularly asserted that the norms established
by the parties were such that they only intended
to be bound contractually when
handwritten signatures had been placed on orders hence as that had not occurred
here the disputed
sale was not valid and legally binding. Severstal it was said
should have delayed opening the letter of credit supplied by Bhushan
which it
should have done in mitigation of its damages claim. Further it was asserted
that the letter of 1 April was indeed genuine
and postal receipt for the
despatch of the letter to Severstal agent Mahindra established its authenticity.
- The
learned trial judge considered whether or not Bhushan was contractually bound
and further noted that Bhushan in the course of
the proceedings no longer
claimed that it had revoked the contract because there was no evidence that the
letter of 1 April was actually
delivered to the claimant or its representative.
The trial judge seems to have found that Bhushan indeed did desire to
renegotiate
a lower price due to a fall in the price of steel which was refused
by Severstal. The trial judge then made an express finding that
the parties were
validly bound by "order confirmation no. 50754".
- Further
by reason of the fact that Bhushan did not pay the contractually agreed price at
the agreed time the judge considered that
that should be regarded as a
fundamental breach of the contract within the relevant Convention. The trial
judge rejected the criticism
of Severstal for having prematurely opened the
letter of credit, and found the damages were substantiated and awarded the
relevant
sum with interest and costs.
- The
trial judge it seems had before her evidence in relation to the dealings between
the parties in respect of other orders. What
is reasonably apparent from her
judgment is that the question of quality and in particular surface defects
featured in a number of
respects. First and foremost there was an internal email
between the quality control manager of Bhushan and another Bhushan manager
dated
6 January 2005 when certain defects were discussed. It is also apparent the
meeting took place in India between representatives
of Severstal and those of
Bhushan on 27 and 28 January 2005 when as the learned trial judge points out
there were discussions about
quantity, quality and price. There was evidence
before the judge from Severstal that during the visit representatives of Bhushan
had requested that the surface of the goods be improved. Those representing
Severstal alleged they insisted it was not possible and
Bhushan's
representatives said they would "live" with the defects.
- Evidence
was given by a witness Mr Reincke (an employee of Liberty Steel who was an agent
of Severstal). Employees of Mahindra were
also present at that meeting. They
corroborated Mr Reincke. However there was clearly evidence called by Bhushan
from two witnesses
both with the surname Sharma and both former employees of
Bhushan who indicated by their evidence it seems a contrary version of
events.
They asserted that various persons on behalf of Severstal had indicated that
they would do what they could to improve the
quality of the steel and that there
would no longer be any problem. They gave evidence about the nature of the
defects which caused
crumbling and irregular appearance. Further they gave
evidence it seems that the coils had been returned to Bhushan by its clients
and
despite assurances given by Severstal on 27 January 2005 the problem was not
resolved.
- It
appears that the evidence concerning the alleged defects was not raised by
Bhushan as a defence but rather it appears to explain
its conduct. It is also
plain that the trial judge determined the matter without regard to who in fact
was telling the truth about
the meeting in January 2005 or whether or not the
letter of 1 April for example was in fact authentic or not. Those matters were
purely collateral to those proceedings. The judgment really was to the effect
that Bhushan was validly bound by the contract and
that it had tried to
renegotiate price because of a downturn in steel prices and resistance on the
part of its customers. It was
therefore it seems unnecessary for the judge to
make any determination in relation to defects or indeed the level of defects or
indeed
the credit of the respective witnesses.
- The
decision of the Court of Appeal in Geneva was handed down on 20 January 2010.
That Court appears to have accepted all of the factual
materials that were
before the trial judge. The central question in the appeal appears to be
whether, as Bhushan asserted that according
to usage established between the
parties, their intention was that they would only be contractually bound when
both of them had signed
the order confirmation by hand and that the order in
relation to this particular shipment had not been signed therefore it was not
a
valid contract.
- The
Court of Appeal found that Swiss law was the applicable law and that Bhushan by
its letter of 9 March 2005 to the appellant had
made an offer which was accepted
by Severstal but modified in relation to the date for the opening of the letter
of credit. The Court
observed that although 5 previous order confirmations had
the signatures of both parties upon them that was insufficient in order
to
establish that the parties were making the validity of the contract conditional
upon a requirement of form to the effect that
a handwritten signature was
essential. In all the circumstances the Court confirmed the trial judge's view
that there was a concluded
contract. As each of the relevant events post dated
the alleged letter of 1 April 2005, on any view it could have had no effect in
revoking the contract. The balance of the judgment thereafter dealt with whether
or not Severstal's conduct was reasonable in the
way in which it went about
selling (at a lower price) the goods following the refusal by Bhushan to take
delivery. In general terms,
the Court confirmed the reasonableness of
Severstal's behaviour in all of the circumstances. It accordingly confirmed the
trial judge's
judgment.
The Indian Proceedings
- The
proceedings in India, in the High Court in Delhi were commenced on 8 January
2007. In those proceedings Bhushan as plaintiff claims
damages against Severstal
and Mahindra. The suit relates only to contracts numbers 50002, 50487 and 50625.
The narrative set out
in the plaintiff's claim, (more specifically described as
a suit for recovery) asserts quite explicitly that following the delivery
of the
first two orders (contract no. 42134 and 50002) received in Bhushan's factory
between 27 December 2004 and 5 January 2005
it was found that there were defects
in the surface quality and there is what is described as "slivers". It is
asserted that due
to the surface defects it was not possible to use the coils
for the purpose and use for which they were purchased i.e. cold rolling,
which
in turn was for use in inner and outer panels in automobiles. It is asserted
that the plaintiff informed Mahindra (as agent
for Severstal). It is asserted
that during the January 2005 visit by representatives of Severstal they noted
the defects and apparently
it will be asserted gave assurances that they would
take care of those defects in future lots. Bhushan asserts that it used the hot
rolled steel coils of 1F grade supplied by Severstal to make cold rolled steel
coils to be used in automobile manufacture.
- Bhushan
pleads that by reason of it intending to have a long term relationship with
Severstal and upon the assurance there would be
no defects in future lots it
made, it put in two further orders (50487 and 50625) and it is further pleaded
that Bhushan negotiated
and agreed to pay the particular price for specified
goods of specified quality.
- As
a result of the defects it was not possible to use the coils for the purpose for
which they were intended and they were used for
the preparation of galvanised
sheets which have a much lower commercial value than the outer or inner panels
for use in automobile
manufacture. Having complained about the defects again and
having informed Severstal that the steel could not be used for the designated
purpose, it required a further inspection which was denied. As a result Bhushan
appointed SGS to provide expert opinion and give
a report. SGS prepared numerous
reports in relation to coils from each of the relevant orders. In respect of the
shipments which
totalled in all 18,108.50 metric tonnes approximately 8,111.63
metric tonnes were found to be defective.
- It
is pleaded that there was contractual obligation to guarantee surface quality to
a minimum of 95%. Further it is suggested that
the surface defects were
impossible to ascertain with the naked eye and can only be observed after they
are put in the process of
converting the hot rolled coils to cold rolled coils.
Bhushan asserts that it has fully paid for the three orders but that the payment
amongst other things was made pursuant to a misrepresentation, and that
Severstal has been unjustly enriched.
- It
is also asserted that the periods of time designated pursuant to the contract
namely 30 days and/or 60 days for the purposes of
raising matters of defects are
unreasonable given the nature of the defects. In all the circumstances Severstal
is estopped from
relying upon the time frames specified in the claims procedure
clause and that a further estoppel arises because of the assurances
given by
Severstal or its agent and that it would be unconscionable and contrary to law
that the provisions of the contract in that
regard be relied upon.
- The
original defence filed on behalf of Severstal in these proceedings places a
number of matters in issue. First it is asserted that
no cause of action is
disclosed. This is initially put on the basis of the claims procedure and that
the defects were not pointed
to within the agreed time frame. It is further
asserted that the proceedings are inappropriate because of (implicitly) the
Swiss
proceedings. Further it is asserted that foreign law governs the
termination of the contractual issues and therefore (again implicitly)
India is
an inappropriate forum. There are other matters raised and then there is a
detailed response on the merits which amongst
other things denies the assertions
in relation to the various assurances provided by Severstal's employees.
- Severstal
has filed an amended statement in the Indian proceedings which does not add
substantially to its original defence.
- By
order of the High Court in Delhi, Justice S Ravindra Bhat on 3 December 2010
framed the issues which that court will determine:
"After hearing counsel for the parties and with their consent, following
issues are framed:-
(i) Whether this Court has territorial jurisdiction to entertain and try the
present suit?
(ii) Whether the suit is barred by Section 13 CPR and/or res judicata on
account of the judgment and decree dated 18.06.2009 by the Geneva Court?
(iii) Were the goods supplied to the plaintiff by the first defendant
defective and not in conformity with the contract vis-à-vis
their quality
and specifications?
(iv) Whether the suit is time barred in law and/or agreed upon by any terms
of the contract?
(v) Whether the plaintiff is entitled to any amount claimed in the suit or
any other amount?
(vi) Whether the plaintiff is entitled to interest, if so, on what amount, at
what rate and for what period?
(v) Relief".
- As
will be apparent later in this judgment the above proceedings are part heard
and, as far as the Court is aware, are still proceeding.
It would appear that no
preliminary points have been taken by way of strike out or to otherwise have
determined any preliminary points.
The matter is proceeding on the merits and
all other issues it seems.
The Proceedings Before Simpson J
- In
the proceedings before Simpson J it was agreed that the application by Bhushan
in those proceedings was made pursuant to s 135(2)(c) of the Civil Procedure
Act 2005 (NSW) (CPA) which states as follows:
135 Directions as to enforcement
(1) The court may, by order, give directions with respect to the enforcement
of its judgments and orders.
(2) Without limiting subsection (1), the court may make any of the following
orders:
(a) an order authorising the Sheriff to enter premises for the purpose of
taking possession of goods under a writ of execution,
(b) an order prohibiting the Sheriff from taking any further action on a
writ,
(c) an order prohibiting any other person from taking any further action,
either permanently or until a specified day, to enforce
a judgment or order of
the court,
(d) an order requiring the Registrar-General to cancel any recording of a
writ for the levy of property that, under section 105 of the Real Property Act
1900 , has been made in the Register under that Act, either generally or in
relation to specified land.
- The
proceedings before Simpson J involved Bhushan seeking that certain orders made
by Davies J on 23 February 2011 (the freezing orders)
be set aside and further
that there be a stay of execution of the Geneva Court of Appeal judgment which
was registered pursuant to
the Foreign Judgments Act 1991 (Cth) section 6
on 3 March 2011. Simpson J had evidence before her which in part has been
replicated in the proceedings before me, in particular
materials which dealt
with the description and progress of the proceedings in Geneva and in India.
- Bhushan
put forward several arguments. First that the Geneva proceedings and the Delhi
proceedings had a substantial common substratum
of fact. Whilst her Honour found
that the commonality lay in the identity of the parties in both Geneva and in
Delhi and that the
issues concerned contracts for the sale of steel there was
otherwise in fact no common substratum of fact. The second argument was
that
Severstal had made no effort to enforce its judgment in India where Bhushan had
undoubted substantial assets. Again her Honour
rejected that argument on the
basis that a judgment creditor was able to seek to execute upon a judgment in a
jurisdiction most convenient
to it, a jurisdiction most closely connected to the
litigation or any jurisdiction where a judgment debtor held assets. Her Honour
found that it was entirely a matter for the choice for the judgment creditor.
Lastly there was a complaint that Severstal had unreasonably
refused to accept a
bank guarantee offered by Bhushan. Her Honour did not regard Severstal's
rejection given the state of the Delhi
proceedings as unreasonable and declined
in the exercise of her discretion to order a stay of execution. She also refused
to vary
the freezing order.
The Principles
- On
the question of issue estoppel Dixon J made some pertinent remarks in Blair v
Curran at 531 - 533:
A judicial determination directly involving an issue of fact or of law
disposes once for all of the issue, so that it cannot afterwards
be raised
between the same parties or their privies. The estoppel covers only those
matters which the prior judgment, decree or order
necessarily established as the
legal foundation or justification of its conclusion, whether that conclusion is
that a money sum be
recovered or that the doing of an act be commanded or be
restrained or that rights be declared. The distinction between res
judicata and issue estoppel is that in the first the very right or cause of
action claimed or put in suit has in the former proceedings passed
into
judgment, so that it is merged and has no longer an independent existence, while
in the second, for the purpose of some other
claim or cause of action, a state
of fact or law is alleged or denied the existence of which is a matter
necessarily decided by the
prior judgment, decree or order.
Nothing but what is legally indispensable to the conclusion is thus finally
closed or precluded. In matters of fact the issue estoppel
is confined to those
ultimate facts which form the ingredients in the cause of action, that is, the
title to the right established.
Where the conclusion is against the existence of
a right or claim which in point of law depends upon a number of ingredients or
ultimate
facts the absence of any one of which would be enough to defeat the
claim, the estoppel covers only the actual ground upon which
the existence of
the right was negatived. But in neither case is the estoppel confined to the
final legal conclusion expressed in
the judgment, decree or order. In the
phraseology of Coleridge J. in R. v. Inhabitants of the Township of
Hartington Middle Quarter, the judicial determination concludes, not merely
as to the point actually decided, but as to a matter which it was necessary to
decide and which was actually decided as the groundwork of the decision itself,
though not then directly the point at issue. Matters
cardinal to the latter
claim or contention cannot be raised if to raise them is necessarily to assert
that the former decision was
erroneous.
In the phraseology of Lord Shaw, "a fact fundamental to the decision
arrived at" in the former proceedings and "the legal quality of the fact" must
be taken as finally
and conclusively established (Hoystead v. Commissioner of
Taxation). But matters of law or fact which are subsidiary or collateral are
not covered by the estoppel. Findings, however deliberate and
formal, which
concern only evidentiary facts and not ultimate facts forming the very title to
rights give rise to no preclusion.
Decisions upon matters of law which amount to
no more than steps in a process of reasoning tending to establish or support the
proposition
upon which the rights depend do not estop the parties if the same
matters of law arise in subsequent litigation.
The difficulty in the actual application of these conceptions is to
distinguish the matters fundamental or cardinal to the prior decision
or
judgment, decree or order or necessarily involved in it as its legal
justification or foundation from matters which even though
actually raised and
decided as being in the circumstances of the case the determining
considerations, yet are not in point of law
the essential foundation or
groundwork of the judgment, decree or order.
- Barwick
CJ in Ramsay v Pigram at 276 said:
Longstanding authorities, in my opinion, warrant the statement that as a
mechanism in the process of accumulating material for the
determination of
issues in a proceeding between parties, an estoppel is available to prevent the
assertion in those proceedings of
a matter of fact or of law in a sense contrary
to that in which that precise matter has already been necessarily and directly
decided
by a competent tribunal in resolving rights or obligations between the
same parties in the same respective interests or capacities
or between a privy
of each or between one of them and a privy of the other in each instance in the
same interests or capacity. The
issue thus determined as distinct from the
course of action in relation to which it arose must have been identical in each
case.
Of its nature such an estoppel must be available to and operative in
respect of each party; or, as it says, estoppels must be mutual.
- In
Kaligowski v Metrobus at 373 the High Court (comprising Gleeson CJ,
McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ) said:
In his speech in Carl Zeiss Stiftung v Rayner & Keeler Ltd [No 2],
Lord Guest, after noting that the doctrine of issue estoppel had been accepted
by Australian courts for a number of years, indicated
that, for the doctrine to
apply in the second set of proceedings, the requirements were:
"(1) that the same question has been decided; (2) that the judicial decision
which is said to create the estoppel was final; and,
(3) that the parties to the
judicial decision or their privies were the same persons as the parties to the
proceedings in which the
estoppel is raised or their privies."
- As
Justice Fullagar said in Brewer v Brewer [1953] HCA 19; (1953) 88 CLR 1 at
15:
Issue-estoppel applies only as to issues. There is no estoppel as to
evidentiary facts found in the course of determining the affirmative
or negative
of an issue. There is nothing to prevent a party from tendering in a later
proceeding in relation to a particular issue
facts negatived in an earlier
proceeding when they were tendered in relation to a different issue.
Discussion
- The
application made before Simpson J necessarily involved her exercising a
discretion. Her Honour was clearly unimpressed with each
of the arguments put
forward by Bhushan. Here it has not been advanced that somehow or other I should
take into account the similarity
between the Geneva and the Delhi proceedings.
The whole focus of the current application is upon whether in relation to the
Indian
proceedings the criteria set out in r 25.14 UCPR have been met. That
necessarily involves a careful consideration of the Indian proceedings
and the
evidentiary materials there advanced. The second argument which Simpson J
rejected was the fact that Severstal had made no
effort to register the Geneva
judgment in India. That is again not advanced here but equally that fact cannot
be gainsaid. Lastly
her Honour did not accept the arguments advanced as to why
Severstal should have accepted the bank guarantee. Again that matter does
not
arise here.
- In
any event in the exercise of her discretion Simpson J did not find any of the
arguments alone or in combination as sufficiently
weighty to exercise a
discretion in favour of a stay of the Geneva judgment pursuant to s 135(2)(c)
CPA. The exercise before Simpson
J was a wholly different exercise to the one
which the Court is here concerned with in my view. The issues here are entirely
different
notwithstanding the evidentiary materials clearly overlap to some
extent.
- The
factors I need to address (as opposed to the evidence) are of course very
different.
- I
am of the view that there is no issue estoppel arising which prevents Bhushan
from bringing these proceedings.
Abuse of Process
- As
I understand the argument put on abuse of process it was really based upon the
same assertion, namely that what was involved before
me is a reagitation of the
same matters before Simpson J. Whilst I agree some of the factual matters are
similar, the issues now
before the Court give rise to different considerations
altogether. The question of the nature of the Indian proceedings from the
point
of view whether there is a good arguable case is but one important example.
Simpson J did not give consideration likewise to
other factors in UCPR
25.14.
- The
onus of satisfying a Court that there is an abuse of process lies of course on
the party alleging it. The onus is "a heavy one"
to use the words of Scarman LJ
in Goldsmith v Sperrings Ltd [1977] 1 WLR 478 at 498.
- As
Hunt CJ at Common Law said in Haines v ABC [1995] NSWSC 136; (1995) 43 NSWLR 404 at
414:
The issue determined in the earlier case which is sought to be litigated in
the later case must be one which the party propounding
it in the latter lost in
the former.
- Again
I do not see that the issue which Simpson J had to determine in the proceedings
then before her, namely whether the factors
advanced by Bhushan together or
alone required an exercise of discretion on her part that the execution of
Severstal's judgment should
be stayed, bear upon what the Court is involved with
here. For similar reasons as above on the question of estoppel I do not regard
these proceedings as amounting to an abuse of process.
The Exercise of Power under UCPR 25.14
- UCPR
25.14 (which was introduced in the Court on 5 June 2006) is similar in terms to
Federal Court Rule, Order 25A, r 5, (which came
into operation on 1 August
1979).
- I
have not been referred to any cases that have directly considered the questions
raised in this case in respect of UCPR 25.14.
- The
approach adopted by judges in the Federal Court to identical or substantially
identical provisions as are contained in UCPR 25.14
ought to guide how this
Court should approach its task. As the High Court said in Farah Constructions
Pty Ltd v Say -Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at 151 - 152
[135]:
Intermediate appellate courts and trial judges in Australia should not depart
from decisions in intermediate appellate courts in another
jurisdiction on the
interpretation of Commonwealth legislation or uniform national legislation
unless they are convinced that the
interpretation is plainly wrong. Since there
is a common law of Australia rather than of each Australian jurisdiction, the
same principles
apply in relation to non-statutory law.
- The
phrase "good arguable case" is one which has its original source so it appears
in an argument put by Sir Andrew Clark KC in the
Privy Council in Vitkovice
Horni a Hutni Tezirstvo v Korner [1951] AC 869 at 875 which was acknowledged
by Lord Simonds. (see pages 879 - 880). That of course was not a case involving
a freezing order but
one involving service outside the jurisdiction. But Denning
MR called the phrase in aid in Rahman (Prince Abdul) v Abu-Taha [1980] 1
WLR 1268.
- In
Ninemia Maritime Corp v Trave Schiffahrts GmbH & Co KG (the
Niedersachsen) [1984] 1 All ER 398 at 404, Mustill J in discussing the
notion as applicable in the context of a mareva order said:
"In these circumstances, I consider that the right course is to adopt the
test of a good arguable case, in the sense of a case which
is more than barely
capable of serious argument, and yet not necessarily one which the Judge
believes to have a better than 50% chance
of success"
- I
observe that the Court of Appeal ([1984] 1 All ER 413) upheld his Lordship's
articulation of the test. Kerr LJ who wrote the judgment for the Court said at
415:
"A 'good arguable case' is no doubt the minimum which the plaintiff must show
in order to cross what the judge rightly described as
the 'threshold' for the
exercise of the jurisdiction. But at the end of the day the court must consider
the evidence as a whole in
deciding whether or not to exercise this statutory
jurisdiction".
- In
relation to the Federal Court rule equivalent, Edmonds J in Curtis v NID Pty
Ltd [2010] FCA 1072 commented that the threshold is a very low one. He
applied the test as articulated by Mustill J in Ninemia. He also observed
at [6] of the decision that that test had been applied by Barrett J in
Westpac Banking Corporation v McArthur [2007] NSWSC 1347 at [22] and also
by White J in Errigal Ltd v Equatorial Mining Ltd [2006] NSWSC 953 at
[26] and again by McDougall J in Pure Logistics v Scott [2007] NSWSC 595
at [12]. I should add to those the decision of Ward J in Hu v PS Securities
Pty Ltd (as trustee of the Joseph Family Trust) and Another [2011] NSWSC 98
at [25] and [26].
- It
is clear from the test enunciated by Mustill J that his Lordship was sketching a
spectrum of possible strengths. The analysis is
to be arrived at by way of a
preliminary appraisal of the plaintiffs case and by no means does a court nor
indeed could a court engage
prematurely in a trial of the action and in no way
should it pre-empt the decision of the agreed tribunal. (See Ninemia at
404 per Mustill J).
The Evidence
- Both
Bhushan and Severstal have filed evidence before the Court which not only
involves expressions of opinion on the part of their
respective lawyers as to
the case but also pleadings and other materials which have been filed in the
Indian proceedings.
- There
is evidence from a Mr Sriharsh Bundela, Bhushan's lawyer in India who was
admitted in 2003. He has appeared in all jurisdictions
within India including
the Supreme Court of India. He describes in some little detail the process that
has been ongoing in India
which covers the filing of evidence and the cross
examination of various persons which is currently part heard. The proceedings
are
being heard before Mr J P Sharma, a former judge who now performs the role
of what is described as a Local Commissioner. At the conclusion
of the evidence
the matter will go before a judge for final arguments who will then reserve the
decision. It was anticipated that
that process would be likely to proceed during
February 2012. That has clearly not yet occurred.
- Mr
Bundela says that following a reserved decision the unsuccessful party can
within 30 days exercise a right of appeal. Mr Bundela
estimates that such an
appeal would get on within 3 - 6 months. Again the unsuccessful party can seek
leave to appeal to the Supreme
Court of India within 90 days of the appeal
judgment but he expresses the view that leave would be
exceptional.
- Mr
Bundela expresses the view that in his opinion Bhushan has a good arguable case
which does no more than call in aid established
causes of action. He also points
out that there is a rule of court (CPC, Order 7, rule 11) which permits
defendants to assert that
the plaintiff's case does not disclose any cause of
action or in some way or other is barred by law. He points out that Severstal
has not made such application but were it to have done so it would have failed.
He also points out that if Severstal had sought to
enforce the Swiss Judgment in
India it would have been stayed pending the outcome of the proceedings in
India.
- Bhushan
also relies upon a number of affidavits from a Mr Manish Ranjan. Mr Ranjan was
also admitted as a lawyer in 2003 and works
in-house for Bhushan as part of its
legal group. He is instructed to give the undertaking as to
damages.
- Mr
Ranjan describes in general terms the proceedings in India and contrasts them
with the proceedings in Switzerland. He sets out
the detail of the three steel
orders which are the subject of the Indian proceedings and the various delivery
dates of those shipments.
He asserts, as is relatively clear from the pleadings
file, that Bhushan makes a number of assertions in relation to the orders the
subject of the proceedings. First that they were not of the quality contracted
for and hence there was a misrepresentation in relation
to the quality of the
goods. As the goods had been paid for Severstal is unjustly enriched. In any
event an estoppel claim is made
which it is suggested prevents Severstal from
relying upon the claims procedure otherwise contained in the terms of the
contract.
Further he points out that Bhushan pleads an implied term (contrary to
the claims procedure) by which Bhushan as a matter of law
it is asserted should
have been given a reasonable time to inspect and test the shipments.
- It
is clear from the material that Bhushan has made an application that Severstal
provide security in relation to the Indian proceedings
which application is
opposed by Severstal. This matter is yet to be determined.
- It
is also pointed out (which is not controversial) that Bhushan has no assets in
Switzerland and more to the point that Severstal
had never sought to enforce the
Swiss judgment in India.
- Mr
Ranjan makes clear that Bhushan, in the event that it is successful in India,
will instruct its Australian solicitors to enforce
the Indian judgment in
Australia and execute against Severstal's assets.
- In
further affidavit material Mr Ranjan asserts that Bhushan will contend that the
steel was meant to be processed in the cold rolling
unit at Bhushan's factory in
order to sell it to the automotive manufacturers for use in making outer and
inner panels of motor vehicles.
He refers to the description in the orders and
in particular to the surface quality asserted to being 95% guaranteed. He says
that
Bhushan will contend that this was a guarantee that the surface quality of
the coils would be 95% free of surface defects.
- He
then sets out the detail of examinations undertaken by an organisation called
SGS which in broad terms expresses views in various
reports that the 95% figure
was not met in respect of a large number of random coils tested in respect of
the three relevant orders
that are concerned with the Indian proceedings. The
SGS reports are before the Indian Court.
- He
goes into further detail about the process and contends that Bhushan will prove
that at the cold rolling mill, the cold rolling
process is applied to hot rolled
coils to produce steel for various processes. Bhushan will contend that
Severstal knew that the
steel would have had the cold rolling process applied to
it by reason of its delivery destination (to the relevant plant) and its
end use
which it is asserted Severstal at all times knew. Bhushan will contend that this
is clear from the contract specification
namely that the steel be "IF Grade"
which is commonly understood in the industry as required for the use in the
automobile manufacturing
process. It is further suggested that the process to
which Bhushan subjected the coils would have had no impact on the properties
of
the hot rolled coils and could not have produced the defects which were
ultimately identified by SGS. Until (Bhushan contends)
the hot rolled coils had
been processed the defects were otherwise invisible.
- Mr
Ranjan refers to the claims procedure for visible and invisible defects and
acknowledges that Severstal asserts that Bhushan's
claims are made outside the
relevant periods contained in the orders. Bhushan however will contend that such
terms in all the circumstances
were unreasonable and "commercially invalid" and
hence the claims procedure was not binding upon Bhushan.
- Bhushan
also relies upon the affidavit of a former justice of the Delhi Court, Usha
Mehra who describes the Indian legal system as
having a well established and
independent judiciary. She remarks for example that the Commissioner who was
taking the evidence can
make observations as to demeanour. From the materials
she has prepared it is clear that the proceedings are proceeding regularly.
- Severstal
has filed material from a Mr Deo Sharma who is the lawyer appearing for them in
the Indian proceedings. He has been in practice
in India since 1992. Although he
identifies similar steps that have been described by Mr Bundela as may well be
taken in the process
he opines that the time frame for the resolution of various
matters will take much longer. For example in lieu of suggesting that
the trial
process may come to an end by February 2012 his view is that it may well not be
concluded before October this year. He
also expresses the view that the period
to get an appeal on may well take longer and perhaps may not be concluded for up
to ten to
twelve months after the appeal is argued. If the matter were given
leave to the Supreme Court of India he expresses the view that
it may take a
number of years before matters are concluded.
- He
disagrees with Mr Bundela's expression of opinion that Bhushan has a good
arguable case and indeed goes further and expresses the
view that the Delhi
Court is likely to dismiss Bhushan's suit.
- Mr
Sharma contends that Severstal could have enforced and sought to execute upon
its Swiss judgment in India and that had it attempted
to do so it would have
succeeded. I should say in passing this by no means explains why Severstal did
not seek to do so but rather
sought (as Simpson J believed was its right) to
elect to do so in Australia.
- Mr
Sharma points out again, which is tolerably clear from the terms of Severstal's
defence, that Bhushan's proceedings are not maintainable
and he asserts Bhushan
has suppressed relevant material from the Delhi Court. It is further pointed out
that Severstal seeks to assert
that the matter has in fact been the subject of a
determination, adversely to Bhushan, in Switzerland and hence for that reason
the
suit is not maintainable in India.
- Materials
have also been filed on behalf of Severstal from a Mr Skrotzki, manager of
Severstal who is resident in Switzerland. He
not only gives evidence about the
steel process in circumstances where it is clearly likely to give rise to a
dispute about precisely
what Bhushan did and how the defects were detected but
also of course gives evidence (contained in a confidential exhibit) about
Severstal's financial position in Switzerland.
- What
is clear from all the evidence is that the Indian proceedings are well advanced
and evidence has been both filed and cross examination
has been partly completed
of at least Bhushan's witnesses.
Discussion
- Severstal
suggests that were a Court called upon to exercise jurisdiction to grant a
freezing order in support of an accrued cause
of action justiciable in a foreign
Court the Court should do so with caution. This is especially so it is submitted
in circumstances
where the question of whether the applicant has a good arguable
case is dependent on issues arising under foreign law. It is also
submitted that
Mr Bundela's evidence should not be regarded as independent and is incomplete.
This may well be true but it is some
evidence, although perhaps of limited
weight.
- It
is also submitted that Severstal has good defences to the claim advanced by
Bhushan. In that regard reliance is again placed upon
the affidavit of Mr Deo
Sharma who acts for Severstal in the Delhi proceedings. He is really in the same
position as Mr Bundela,
namely the lawyer on the other side. Nonetheless he
expresses the view that the Court is likely to dismiss Bhushan's suit. No
reasons
are really advanced, except to say there are good
defences.
- It
is of course submitted that as the claims were not advanced by Bhushan until 26
October 2005 (outside the claims period under the
relevant contracts) that
provides in itself a good defence. I observe only in passing that of course
Bhushan relies upon representations
made to it as giving rise to certain
estoppels. But it is not for me at this stage of the analysis to engage in a
preliminary appraisal
of the case and in particular come to any view as to
whether such evidence will be accepted. That would be quite inappropriate for
obvious reasons.
- What
the Court is confronted with simply are proceedings which are ongoing and part
heard and where Severstal has made it seems no
attempt to either have the
proceedings struck out or have any preliminary point determined. Quite the
contrary. Whilst Severstal
will no doubt put all arguments it wishes to put
before the Delhi Court that will as far as I am informed be done simultaneously
with arguments on the merits.
- In
relation to the defects period Bhushan in its pleadings in the Delhi proceedings
effectively claims that for various reasons those
time periods were impractical
and/or unreasonable and therefore unenforceable. In that regard I was referred
to a decision of the
Supreme Court of India in the matter of Satyabrata Ghose
v Mugneeram Bangur & Co and Anor [1953] INSC 70; [1954] SCR 310 where on page 317,
Merkherjea J discusses the principles relating to the impossibility of
contractual performance under chapter IV
of the Indian Contract Act and which
arguably provides an answer to the claims procedure provisions. In that regard,
his Honour noted:
Section 56 occurs in Chapter IV of the Indian Contract Act which relates to
performance of contracts and it purports to deal with
one class of circumstances
under which performance of a contract is excused or dispensed with on the ground
of the contract being
void. The section stands as follows:
"An agreement to do an act impossible in itself is void.
A contract to do an act which after the contract is made, becomes impossible,
or by reason of some event which the promisor could
not prevent, unlawful,
becomes void when the act becomes impossible or unlawful.
Where one person has promised to do something which he knew, or, with
reasonable diligence, might have known, and which the promisee
did not know to
be impossible or unlawful, such promisor must make compensation to such promisee
for any loss which such promisee
sustains through the non-performance of the
promise."
The first paragraph of the section lays down the law in the same way as in
England. It speaks of something which is impossible inherently
or by its very
nature, and no one can obviously be directed to perform such an act. The second
paragraph enunciates the law relating
to discharge of contract by reason of
supervening impossibility or illegality of the act agreed to be done. The
wording of this paragraph
is quite general, and though the illustrations
attached to it are not at all happy, they cannot derogate from the general words
used
in the enactment. This much is clear that the word "impossible" has-not
been used here in the sense of physical or literal impossibility.
The
performance of an act may not be literally impossible but it may be
impracticable and useless from the point of view of the object
and purpose which
the parties had in view; and if an untoward event or change of circumstances
totally upsets the very foundation
upon which the parties rested their bargain,
it can very well be said that the promisor found it impossible to do the act
which he
promised to do
- Severstal
on the other hand as I have observed says amongst other things that the SGS
reports relate to cold rolled steel coils and
not hot rolled steel rolls as
supplied. As Dr Bell pointed out, there are a number of answers to this, one of
which is the estoppel/misrepresentation
case which is clearly open on the facts.
Assurances were it is asserted, made about rectification of the defects and
relied upon
to Bhushan's detriment.
- Bhushan's
case will have to involve the Indian Court deciding who to accept in a number of
areas of conflicting testimony. At the
moment it has available to it a number of
witnesses who will give evidence as to various assurances provided to it
especially in
late January 2005 by representatives of Severstal. Severstal will
contest that evidence.
- Although
Severstal will assert the claims procedure provides a defence to Bhushan's case,
Bhushan not only has the benefit of the
estoppel argument but the arguable
benefit of a decision of the Supreme Court of India. If it can persuade the
Court about the nature
of the defects and the impracticability or
unreasonableness in complaining within the specified time it clearly stands a
prospect
of success. On any view of the facts as I understand them I consider it
can be comfortably said that its case is "more than barely
capable of serious
argument". There of course is evidence of Mr Bundela but to a large extent it is
rebutted by Mr Sharma. However
the fact that Severstal has not attempted to stop
the case in its tracks carries in my mind some force either because it has no
particular
faith in any of his preliminary arguments or considers on balance a
court would be unlikely to entertain such an argument as has
been asserted by Mr
Bundela. I consider consistent with the authorities Bhushan has satisfied the
threshold of a "good arguable case".
Sufficient Prospects of a Judgment
- UCPR
25.14(3)(a) requires Bhushan to establish that there is sufficient prospects
that the Delhi High Court will give judgment in
its favour. Further it has to
establish that there is sufficient prospect that the judgment will be registered
or enforced in New
South Wales. (25.14(3)(b)).
- It
is submitted by Bhushan that 25.14(3)(a) does not relate to the strength or
quality of the case in the proceedings but rather to
the prospect of an actual
judgment materialising. UCPR 25.14 can be invoked when a cause of action has not
accrued, indeed the cause
of action might only be prospective. It can also be
called in aid whether the proceedings that are prospective are to occur
domestically
or internationally. Here of course proceedings have been commenced,
are part heard, some evidence has been taken and the matter is
ongoing. There is
no reason to doubt that the Delhi Court will not indeed deliver judgment at some
point which will (subject to appeal)
bind the parties. The process has been
regularly commenced and is proceeding in a manner this Court can clearly
identify with. The
adversarial system is engaged and there are rights of
appeal.
- The
analysis in relation to UCPR 25.14(3)(a) does not require me to decide that
Bhushan will succeed and obtain a judgment but only
that there are sufficient
prospects that it will. On the materials I consider I am able to find that there
are sufficient prospects
it will do so and that it will show that it has
suffered loss. The loss of course will have to be computed on the basis perhaps
that
some of the product was used which involved Bhushan obtaining less
commercial value by utilising those goods than it might otherwise
have done if
the goods were of the required specification. But its loss has already been
specified in the pleadings.
- In
Ritchies 'Uniform Civil Procedure NSW' at 7386.12 [25.14.5], the authors
note 'sufficient prospect of success' has been used in the sense
of "good
arguable case." The authors therefore imply that ss (3) and (4) of rule 25.14
apply a similar threshold to both legal and
factual matters of the foreign cause
of action:
The reference to "sufficient prospect" in r 25.14(3) suggests that the "good
arguable case" expression has been used in that sense
in the present rule. This
standard is consistent with the approach taken in Cardile v LED Builders Pty
Ltd (1999) 198 CLR 380 at 408; 162 ALR 294; [1999] HCA 18; BC9902073 ("a
reasonably arguable case on legal as well as factual matters").
- The
authors also note that the approach to be taken in relation to the discretionary
considerations is similar to the approach taken
in the exercise of other
analogous discretionary powers, such as leave to proceed under r 11.4 and
summary judgment under r 13.1
of the UCPR and reference is made to Agar v
Hyde [2000] HCA 41; (2000) 201 CLR 552.
- In
Agar v Hyde the High Court comprising Gaudron, McHugh, Gummow and Hayne
JJ noted that in applying the discretionary consideration of "insufficient
prospects of success" the Court does not undertake an assessment of the case on
its merits, nor does the Court predict the outcome
of the case, at [58] -
[60]:
58. First, and most fundamentally, what is the criterion which is to be
applied? Are proceedings to be terminated upon a prediction
(on what almost
invariably will be less evidence and argument than would be available at trial)
of the "likely" or "probable" outcome
of the proceeding? That cannot be so. It
would be wrong to deny a plaintiff resort to the ordinary processes of a court
on the basis
of a prediction made at the outset of a proceeding if that
prediction is to be made simply on a preponderance of probabilities. And
if it
is not to be enough to persuade the court that it is more probable than not that
the case against a defendant will fail, and
some higher test (less than that now
applied in applications for summary judgment) is to be applied, how is that test
to be described?
The attachment of intensifying epithets, such as "very" or
"highly", offers little useful guidance for those judicial officers who
would
have to apply the test and who would have to do so, often enough, in a busy
practice list. Such a test would be unworkable.
59. Secondly, as the present proceedings show, the application of some
different, and lower, test in favour of overseas defendants
would lead to
unacceptable results. It would mean that proceedings must continue to trial
against those defendants who happen to
have been served with the originating
process within the jurisdiction, but can be brought to a summary end by those
who are served
overseas even where the claims against the local and overseas
defendants are identical.
60. For these reasons, the same test should be applied in deciding whether
originating process served outside Australia makes claims
which have such poor
prospects of success that the proceeding should not go to trial as is applied in
an application for summary
judgment by a defendant served locally.
- In
Arena Management Pty Ltd v Campbell Street Theatre Pty Ltd (No 2) [2010]
NSWSC 1230 Palmer J having previously dismissed the plaintiffs originating
process was called to determine the question of costs. His Honour
queried
whether "a prudent liquidator, with the benefit of commercial common sense and
experience" ... had a sufficient prospect
of success to justify (bringing the
proceedings) (at [24]) his Honour noted at [25]:
What is a "sufficient prospect" in the context of this question does not mean
only "fairly arguable" - that is a low threshold to
surmount if one is resisting
an application for summary dismissal of proceedings. However, a liquidator, like
a trustee, is dealing
with other people's money and he or she must look at the
ultimate result of the proceedings, not merely whether it will survive an
application for summary dismissal.
- The
decision of Palmer J was the subject of an appeal in the Court of Appeal
judgment Joubert v Campbell Street Theatre Pty Ltd (In liquidation)
[2011] NSWCA 302. Their Honours did not appear to disagree with his Honour's
articulation of the test but rather his Honour's application to the facts
of the
case, in allowing the appeal.
- In
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar
Diocesan Bishop of Macedonian Orthodox Diocese of Australia
and New Zealand
[2008] HCA 42; (2008) 237 CLR 66, the High Court considered an appeal from orders by Palmer J
in response to a summons for judicial advice. Palmer J was asked to
reach a view
as to whether Counsel opinion demonstrated there were sufficient prospects of
success to warrant an association to defend
proceedings in a case. The High
Court approved the approach of Palmer J when the judge did not use the term
"sufficient prospects
of success" in apposition to a formed and expressed
opinion on the strength of the case to be weighed in balance. The High Court
noted the submission that Palmer J should have formed a view on the strength of
the case was hypercritical. In such an assessment,
the judge may form a
tentative view of strength, but the assessment is primarily a factual inquiry.
The High Court approved the approach
of Palmer J when the judge noted the
opinion must address the facts necessary to support the legal conclusions
reached and demonstrate
that the propositions of law relied upon are properly
arguable.
- The
High Court approved Palmer J's finding that such a judgment is founded on
considerations of the nature of the case and the issue
raised, the amounts
involved, including likely costs, whether costs are proportionate to the issues,
consequences of litigation and
in the case of a charitable trust, any relevant
public interest factors. (at 119 [162])
- The
High Court confirmed Palmer J appropriately distinguished the question of
whether propositions were properly arguable from the
question of whether there
were sufficient prospects.
- In
Sharman License Holdings Ltd v Universal Music Aust Pty Ltd [2005] FCA
802 Lindgren J considered an application for an extension of time for the filing
and serving of an application for leave to appeal from
an interlocutory
judgment. His Honour noted at [20] that the application for leave must have such
prospects of success as to render
the extension of time more than an exercise
in futility:
The application for leave to appeal must have such prospects of success as
not to render the extending of time an exercise in futility.
Since the test for
the granting of leave to appeal from an interlocutory judgment is that the
decision must be attended with sufficient
doubt to warrant its being
reconsidered by an appellate court, and that substantial injustice would result
if leave were to be refused,
supposing the decision to have been wrong
(Décor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 655; (1991) 33 FCR 397
at 398-400), in principle the question on an application for an extension of
time is whether this test has sufficient prospects of
being satisfied, to
warrant granting the extension. In practice, the debate and treatment of the
"arguable error" question on an
application for an extension of time, will be no
different from what the debate and treatment of it would be on the application
for
leave to appeal itself.
- On
the materials before the Court, having found a good arguable case in accordance
with Mustill J's formulation it is inexorable that
a court would conclude that
Bhushan has a sufficient prospect of obtaining a judgment in its favour. I
consider the better view is
that a court should not and cannot embark upon a
premature trial but a preliminary appraisal only. Agar ([58] - [60]). I
do not consider that the cases concerning trustees or liquidators are apposite
and I agree with the authors of Ritchie as to the nature of the
applicable test.
Sufficient prospects of enforcement of the judgment
- It
is also necessary for Bhushan to satisfy the Court there is sufficient prospects
that any judgment obtained in the Indian proceedings
will be registered in or
enforced by the Court (UCPR 25.14(3)(b)). India is of course not a country in
respect of which part 2 of the Foreign Judgments Act applies and here such a
judgment will be enforced or not pursuant to the common law.
- The
principles governing the enforcement of judgments are at common law well known.
In order to entitle a foreign judgment to recognition
at common law, four
conditions must be satisfied (Davies, Bell and Brereton, 'Nygh's Conflict of
Laws in Australia' (8th ed. 2010) ch 40, (see [40.2] in
particular)):
(a) The foreign court must have exercised a jurisdiction that Australian courts
recognise
(b) The foreign judgment must be final and conclusive
(c) There must be an identity of the parties; and
(d) If based on a judgment in personam the judgment must be for a fixed
debt
- These
criteria derive from a range of cases at common law and were approved for
example by the Full Court of the Supreme Court of
South Australia in Benefit
Strategies Group Inc v Prider [2005] SASC 194; (2005) 91 SASR 544. In Benefit
Strategies, Bleby J (with Vandstone and Anderson JJ agreeing) noted with
approval the referral of the trial judge to "the four well-established
common
law requirements for the recognition and enforcement of foreign judgments in
personam," (at 552 [18]).
- The
forum will recognise the foreign court has exercised jurisdiction if one of two
conditions are satisfied: (1) the defendant was
served with originating process
while present or resident of the foreign jurisdiction, or (2) the defendant has
voluntarily submitted
to that jurisdiction. A party may voluntarily submit to
the jurisdiction of the foreign court by either appearing as a party to the
foreign proceedings (Norsemeter Holdings AS v Boele (No 1) [2002] NSWSC
370 per Einstein J at [15] see also Emanuel v Symon [1908] 1 KB 302 at
309 per Buckley LJ) or by agreeing in advance to accept the jurisdiction of the
foreign court.
- Severstal
of course has in fact submitted to the jurisdiction of the Indian Court and
therefore that Court has jurisdiction in the
international law sense of a kind
that would make any judgment of the Indian Court enforceable in Australia at
common law. See Nygh's (especially 40.12 - 40.17).
- Nygh's
notes that the onus will be on the party seeking to rely upon the foreign
judgment. That party need establish the foreign court had
jurisdiction in the
international sense, and that the foreign judgment was final and conclusive
according to the law under which
it was pronounced (at 807,
[40.2]).
- Again
the notion of sufficient prospects imposes in my opinion a similarly low
threshold. The proceedings are ongoing and for example
both Bhushan and
Severstal will obviously be heard fully. In other words they will be accorded
natural justice. There is no suggestion
to the contrary. Each has a right of
appeal and potentially subject to being granted leave, an appeal to the Supreme
Court. Again
I consider Bhushan has satisfied the requirement of s (3)(b).
Is there a danger that the prospective judgment will go
unsatisfied
- This
Court has always had the ability (if need be by granting a freezing order) to
prevent an abuse or frustration of its process.
Cardile v LED Builders Pty
Ltd (1999) 198 CLR 380 at 389 - 390 [12] and 393 [26], Jackson v Sterling
Industries Ltd [1987] HCA 23; (1987) 162 CLR 612.
- In
granting relief, it is not the case that relief be granted only if there is
shown a positive intention to frustrate any judgment.
Cardile at
394.
- As
their Honours Gaudron, McHugh, Gummow and Callinan JJ said in Cardile at
405 - 406 [57] - [58]:
57. What then is the principle to guide the courts in determining whether to
grant Mareva relief in a case such as the present where
the activities of third
parties are the object sought to be restrained? In our opinion such an order
may, and we emphasise the word
"may", be appropriate, assuming the existence of
other relevant criteria and discretionary factors, in circumstances in which:
(i)
the third party holds, is using, or has exercised or is exercising a power
of disposition over, or is otherwise in possession of,
assets, including "claims
and expectancies", of the judgment debtor or potential judgment debtor; or (ii)
some process, ultimately
enforceable by the courts, is or may be available to
the judgment creditor as a consequence of a judgment against that actual or
potential judgment debtor, pursuant to which, whether by appointment of a
liquidator, trustee in bankruptcy, receiver or otherwise,
the third party may be
obliged to disgorge property or otherwise contribute to the funds or property of
the judgment debtor to help
satisfy the judgment against the judgment
debtor.
58. It is that principle which we would apply to this case. Its application
is a matter of law, although discretionary elements are
involved.
- In
Patterson v BTR Engineering (Aust) Ltd [1989] 18 NSWLR 319 at 325,
Gleeson CJ said, again in the context of a mareva order:
It is not difficult to imagine situations in which justice and equity would
require the granting of an injunction to prevent dissipation
of assets pending
the hearing of an action even though the risk of such dissipation may be
assessed as being somewhat less probably
than not.
- Bare
assertions that a defendant is likely to put any asset beyond the reach of the
plaintiff is not enough in itself. Ninemia Maritime Corp v Trave Schiffahrts
GmbH & Co KG (The Niedersachsen) [1984] 1 All ER 413 at 417 per Kerr
LJ.
- As
Meagher JA however said in Patterson at 326 - 327:
Mr Heydon QC for the appellant submitted, and Mr Bainton QC for the
respondent agreed, that the vast majority of defendants in litigation
behave
with propriety: in the "usual" case, therefore, the risk of improper dissipation
of assets must be close to nil. In these
circumstances, it cannot be the law
that a plaintiff who seeks the extraordinary relief of a Mareva injunction need
do no more than
demonstrate a risk slightly higher than nil.
What degree of proof is, then, required? Different judges have decided it in
different ways. Without wishing to drown in a sea of
semantics, I should have
thought that the plaintiff is required to prove, on a balance of probabilities,
that there is a real risk
of the dissipation of assets. Unhappily for the
appellant, in the present case the respondent proved just that
- Justice
Kenny in the Federal Court in Deputy Commissioner of Taxation v Hau Wang Bank
Berhad and Others [2010] FCA 1014; (2010) 80 ATR 449 at 453, approved a test that
requires a plaintiff to establish "a sufficient likelihood of risk which in the
circumstances of a particular
case justifies, an asset presentation order",
specifically adopting a decision of Justice Keifel in Lifetime Investments
Ltd v Commercial (Worldwide) Financial Services Pty Ltd and Another (2005)
FCA 226 at [14].
- As
Staughton LJ remarked in Republic of Haiti v Duvalier [1990] 1 QB 202 at
214:
The law on this topic has developed in recent years; and in particular a
distinction has emerged between pre-judgment and post-judgment
restraint. Our
courts are more willing to restrain a defendant from dealing with his assets
after, than before, judgment has been
given against him. (In passing, I would
say that an injunction granted after judgment should normally, in my view, be of
limited
duration; the plaintiff should be encouraged to proceed with proper
methods of execution; perpetual injunctions restraining a defendant
from dealing
with his assets until the crack of doom are undesirable.) This, of course, is a
pre-judgment case.
- It
is understandable why greater latitude would arguably apply in a pre-judgment
case. It follows especially if proceedings have not
been commenced the restraint
might be required for a significant period of time. The length of any restraint
of course may be influenced
by a number of factors, the strength of the case
being one. Commercial inconvenience or hardship another. The conduct of the
parties
and the history of the litigation yet another. As the High Court pointed
out in Cardile (409, [70]), a court would, consistent with general
principle, grant the minimum relief necessary to do justice between the parties
and should specify the circumstances in which the order will cease to
operate.
- As
Campbell J (as he then was) said in Davis v Turning Properties [2005]
NSWSC 742 at [35]:
The administration of justice in New South Wales is not confined to the
orderly disposition of litigation which is begun here, tried
here and ends here.
In circumstances where international commerce and international monetary
transactions are a daily reality, and
where money can be transferred overseas
with sometimes as little as a click on a computer mouse, the administration of
justice in
this State includes the enforcement in this State of rights
established elsewhere. As well, the ordinary course of administration
of justice
has long included a court making certain of its remedies available in aid of
proceedings in another court - the old equitable
remedies of a Bill of
discovery, a Bill to perpetuate testimony, and a Bill to take testimony de
bene esse pending a suit (Story, Commentaries on Equity Jurisprudence
13th ed 1886 para [1480] ff) provide examples of remedies being available in
Chancery in aid of proceedings in another court before
the other court has heard
a suit. After another court has heard and decided a suit, the title of a
foreign-appointed administrator
of an insolvent estate to movables is recognised
in Australia under the general law (Australian Mutual Provident Society v
Gregory (1908) 5 CLR 615), and can provide a sufficient basis for an
appointment of a receiver of immoveables within the jurisdiction (Re
Kooperman (1928) B & C R 49).
- To
exercise this jurisdiction the Court must be satisfied that there is a danger
that the prospective judgment will be wholly or partly
unsatisfied because
assets might be removed from Australia or dealt with or diminished in
value.
- Severstal
submits that Bhushan's case amounts to no more than a bare assertion. Severstal
submits further that there is no danger
as a matter of reality. Severstal says
that it has never shown any unwillingness to pay any judgment against it in the
Indian proceedings.
It also submits that if Bhushan needs to enforce the
judgment outside India there is evidence that it would be able to do so in
Switzerland.
- Severstal
relies upon Frigo v Culhaci [1998] NSWCA 88. This matter involved an
appeal from a District Court judge who had granted a mareva order. The Court
comprising Mason P, Sheller
JA and Sheppard AJA relied upon an earlier decision
of Patterson. Patterson like Frigo was a case involving a
Mareva order where of course the plaintiff at that time of the development of
the relevant jurisprudence needed
to establish a prima facie cause of action
against the defendant. That is to be contrasted with the present rule. In any
event, that
part of Frigo which is relied upon by Severstal is what the
Court said at 8 as follows:
A plaintiff must establish by evidence and not assertion that there is a real
danger that by reason of the defendant absconding or
removing assets out of the
jurisdiction or disposing of assets within the jurisdiction the plaintiff will
not be able to have the
judgment satisfied if successful in the proceedings.
There has been much debate as to the precise degree of risk which must be shown:
See generally Patterson. What is clear is that mere assertions that the
defendant is likely to put assets beyond the plaintiffs reach will not be
enough.
- There
is also no doubt that the purpose of such an order is not to require a defendant
to provide security as a condition of being
allowed to defend the action against
it. Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 at 625.
- Severstal
relies upon the affidavit of Mr Mumenthaler, a Swiss lawyer who represents
Severstal in Switzerland. He sets out the position
in relation to the
enforcement of foreign judgments in Switzerland. The position in Switzerland is
governed by the Swiss Federal
Act on International Private Law. Article 25(2)(b)
provides that a decision can only be recognised and enforced in Switzerland if
it is final and binding that is one that cannot be changed or annulled by a
Court of Appeal. The grounds of refusal are apparently
regulated exclusively by
article 27. He expresses the view that an Indian judgment could be recognised in
Switzerland if it complies
with the various prerequisites. He of course says
nothing about what attitude Severstal would take were Bhushan to attempt to
register
an Indian judgment in Switzerland. Pursuant to article 27, one of the
grounds in which, as he points out, a Swiss Court may refuse
to register the
Indian judgment is if the proceeding involves the same parties and the same
subject matter and was first brought
in Switzerland or adjudicated in
Switzerland. (See Mumenthaler, 28 October 2011 [13]).
- Severstal
also relies upon the affidavit of Mr Withold Skrotzki who was the manager of
Severstal Export who deposes to the fact that
Severstal is based in Switzerland
and carries on business as a trader and exporter of Russian steel. Mr Skrotzki
also asserts that
Severstal sells approximately 3 million metric tonnes of steel
per year and has a turnover of approximately USD$1.5 - 2 billion per
year. In a
further affidavit of his of 30 November 2011 and in particular in a confidential
exhibit he deposes to the substantial
assets in Switzerland.
- Bhushan
suggested that Severstal's financial status in Switzerland was problematical.
There is no doubt it has no assets in India.
The position in Switzerland
however, although initially on the evidence was somewhat ambiguous, was I
consider sufficiently exposed
by a late filed affidavit of Mr Skrotzki of 30
November 2011. That affidavit contains a confidential exhibit. There are a
number
of matters disclosed therein that may raise some further questions but as
a whole in my mind it exposes Severstal as having substantial
assets of various
kinds in Switzerland. That of course is not an end of the matter.
- In
his affidavit evidence filed on behalf of Bhushan Mr Ranjan (affidavit of 12
October 2011) says that as part of the Delhi proceedings
Bhushan has sought an
order requiring Severstal to provide security sufficient to cover any judgment.
Severstal has refused to provide
such security and the matter is to be
determined by the Court in Delhi in due course. He further asserts that
Severstal does not
have any assets in India. If successful in India and
Severstal fails to pay any judgment ultimately determined against it, he deposes
that Bhushan would instruct his current solicitors to have the Delhi judgment
recognised in Australia and executed upon Severstal's
assets in Australia. He
further deposes that there is no treaty or agreement between India and
Switzerland concerning the recognition
and enforcement of Indian judgments. He
also expresses his concern that if Bhushan is awarded a significant judgment in
its favour
in Delhi there is considerable uncertainty about Bhushan's ability to
enforce the judgment. In particular he expresses his concerns
that Severstal may
seek to remove its asset from Australia unless otherwise restrained.
- Mr
Ranjan was cross examined, if I may so mildly on his assertions concerning his
fears about enforcement against Severstal as follows:
Q: You say in your affidavit that you are fearful that Severstal would not be
in a position to pay any judgment obtained against Bhushan
Steel?
A: That is correct.
Q: Obtained by Bhushan Steel in the Indian proceedings?
A: That is correct.
Q: Can I put it out the opposite proposition; that Severstal would be in a
position to pay any such judgment?
A: Not to my knowledge, No.
- As
a passing observation I should remark that what is plainly apparent in these
proceedings and indeed all of the other proceedings
somewhat vividly described
in the materials before this Court is that for some years now the respective
parties had been feuding
around the world. They are both companies of some
substance but each in turn has sought to invoke by legitimate means strategies
designed to succeed in the litigation arena. At the moment the feud is hard
fought and I am entitled to infer that each side as I
have said would take every
legitimate course open to it. What may have commenced as a harmonious and hoped
for long-term commercial
relationship has soured many years ago, and it seems
commercial resolution is off the agenda and expensive ongoing disputation the
current strategy.
- There
is evidence, which I accept, that Bhushan intends to enforce the Indian judgment
if it is ultimately successful here in Australia.
The enforcement will be
governed by common law principles. There are assets in Australia. As I have
said, there are no assets of
Severstal in India although there is evidence of
substantial assets in Switzerland. Bhushan in my view however is entitled, as
was
Severstal, to seek to enforce any judgment it ultimately obtains in
whichever jurisdiction it can legitimately do so. Merely because
Severstal has
assets in Switzerland does not require Bhushan in the event of it being
successful in proceeding there.
- In
Switzerland it appears that a ground for a Swiss Court to refuse to recognise a
foreign judgment is that it (the foreign proceeding)
was "a proceeding involving
the same parties, the same subject matter was first brought in Switzerland or
adjudicated in Switzerland".
Severstal in its defence in India argues that the
proceedings are not maintainable there because they are indeed "between the same
parties, regarding contracts having the same subject matter". Arguably Severstal
would argue, consistent with the stance in India
that in the event that Bhushan
sought to enforce a judgment in Switzerland the matter had already been
determined. It would, I can
infer, invoke the operation of article 27. I am
entitled to infer that it would indeed pursue that strategy consistent with its
stance
in India especially when there is no suggestion it would not take that
course. This in my opinion is open not as mere speculation
but a reasonable
inference. Jones v Sutherland Shire Council [1979] 2 NSWLR 206 at 222 et
seq, per Mahoney JA.
- Severstal
clearly does have assets in Australia and there is no evidence that for the
moneys to remain in an interest bearing account
would cause any hardship to
Severstal or affect in any relevant way the running of its business otherwise.
- Unless
restrained, in my opinion on the evidence, it is reasonably open to infer that
Severstal would remove the asset from this jurisdiction.
There is clearly a real
risk that it will do so. It has no reason to keep the asset here. By that I do
not mean that it would do
anything that was illegitimate, quite the contrary,
but it is in no mood to cooperate with Bhushan for obvious reasons. An intention
legitimately to remove assets from a jurisdiction is no bar to relief.
Glenwood Management Group Pty Ltd v Mayo [1991] VicRp 45; [1991] 2 VR 49 at 53 per Young
CJ. In particular I have had regard to the way Severstal has conducted this
litigation all over the world. It has
been relentless, single minded and
unforgiving. The same can be said of Bhushan.
- In
this case it is clear that a judgment in Bhushan's favour cannot be enforced in
India but if judgment is obtained there are sufficient
prospects of enforcement
in Australia. Australia is a perfectly appropriate jurisdiction for that purpose
and Bhushan is entitled
to exercise its freedom of choice in that regard. I fail
to see what real prejudice flows to Severstal if a freezing order were to
be
continued. Whilst there are competing estimates about how much longer the Indian
proceedings may take, it is reasonable to assume
that it is likely they will
conclude sometime in the course of this year (at first instance at least).
Severstal would not be prevented
if there was a material change in circumstances
from applying to have the order varied or dissolved.
- I
consider that Severstal should initially be restrained until judgment is given
at first instance in India. As I have said, that,
on any of the estimates is
likely to occur this calendar year. Upon the delivery of judgment in those
proceedings the matter can
be reconsidered.
- In
all of the circumstances I am of the view that it is appropriate to make the
orders sought but with the qualification referred
to in paragraph [177] and I
would invite short minutes be prepared accordingly.
- I
would also invite the parties to have the matter relisted so that the question
of costs can be determined.
**********
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/nsw/NSWSC/2012/583.html
