Anti-enforcement injunction granted by the New Zealand court

For litigants embroiled in cross-border litigation, the anti-suit injunction has become a staple in the conflict of laws arsenal of common law courts. Its purpose being to restrain a party from instituting or prosecuting proceedings in a foreign country, it is regularly granted to uphold arbitration or choice of court agreements, to stop vexatious or oppressive proceedings, or to protect the jurisdiction of the forum court. However, what is a party to do if the foreign proceeding has already run its course and resulted in an unfavourable judgment? Enter the anti-enforcement injunction, which, as the name suggests, seeks to restrain a party from enforcing a foreign judgment, including, potentially, in the country of judgment.

Decisions granting an anti-enforcement injunction are “few and far between” (Ecobank Transnational Inc v Tanoh [2015] EWCA Civ 1309, [2016] 1 WLR 2231, [118]). Lawrence Collins LJ (as he then was) described it as “a very serious matter for the English court to grant an injunction to restrain enforcement in a foreign country of a judgment of a court of that country” (Masri v Consolidated Contractors International (UK) Ltd (No. 3) [2008] EWCA Civ 625, [2009] QB 503 at [93]). There must be a good reason why the applicant did not take action earlier, to prevent the plaintiff from obtaining the judgment in the first place. The typical scenario is where an applicant seeks to restrain enforcement of a foreign judgment that has been obtained by fraud.

This was the scenario facing the New Zealand High Court in the recent case of Kea Investments Ltd v Wikeley Family Trustee Limited [2022] NZHC 2881. The Court granted an (interim) anti-enforcement injunction in relation to a default judgment worth USD136,290,994 obtained in Kentucky (note that the order was made last year but the judgment has only now been released). The decision is noteworthy not only because anti-enforcement injunctions are rarely granted, but also because the injunction was granted in circumstances where the foreign proceeding was not also brought in breach of a jurisdiction agreement. Previously, the only example of a court having granted an injunction in the absence of a breach of a jurisdiction agreement was the case of SAS Institute Inc v World Programming Ltd [2020] EWCA Civ 599 (see Tiong Min Yeo “Foreign Judgments and Contracts: The Anti-Enforcement Injunction” in Andrew Dickinson and Edwin Peel A Conflict of Laws Companion – Essays in Honour of Adrian Briggs (OUP, 2021) 254).

Kea Investments Ltd v Wikeley Family Trustee Limited involves allegations of “a massive global fraud” perpetrated by the defendants – a New Zealand company (Wikeley Family Trustee Ltd), an Australian resident with a long business history in New Zealand (Mr Kenneth Wikeley), and a New Zealand citizen (Mr Eric Watson) – against the plaintiff, Kea Investments Ltd (Kea), a British Virgin Islands company. Kea alleges that the US default judgment is based on fabricated claims intended to defraud Kea. Its substantive proceeding claims tortious conspiracy and a declaration that the Kentucky judgment is not recognised or enforceable in New Zealand. Applying for an interim injunction, the plaintiff argued that “the New Zealand Court should exercise its equitable jurisdiction now to prevent a New Zealand company … from continuing to perpetrate a serious and massive fraud on Kea” (at [27]) by restraining the defendants from enforcing the US judgment.

The judgment is illustrative of the kind of cross-border fraud that private international law struggles to deal with effectively: here, alleged fraudsters using the Kentucky court to obtain an illegitimate judgment and, apparently, frustrate the plaintiff’s own enforcement of an earlier (English) judgment, in circumstances where the Kentucky court is unwilling (or unable?) to intervene because Kea was properly served with the proceeding in BVI.

Gault J considered that the case was “very unusual” (at [68]). Kea had no connection to Kentucky, except for the defendants’ allegedly fabricated claim involving an agreement with a US choice of court agreement and a selection of the law of Kentucky. Kea also did not receive actual notice of the Kentucky proceedings until after the default judgement was obtained (at [73]). In these circumstances, the defendants were arguably “abusing the process of the Kentucky Court to perpetuate a fraud”, with the result that “the New Zealand Court’s intervention to restrain that New Zealand company may even be seen as consistent with the requirement of comity” (at [68]).

One may wonder whether the Kentucky Court agrees with this assessment – that a foreign court’s injunction restraining enforcement of its judgment effectively amounts to an act of comity. In fact, Kea had originally advanced a cause of action for abuse of process, claiming that the alleged fraud was an abuse of process of the Kentucky Court. It later dropped the claim, presumably due to a recent English High Court decision (W Nagel (a firm) v Chaim Pluczenik [2022] EWHC 1714) concluding that the tort of abuse of process does not extend to foreign proceedings (at [96]). The English Court said that extending the tort to foreign proceedings “would be out of step with [its] ethos”, which is “the Court’s control of its own powers and resources” (at [97]). It was not for the English court “to police or to second guess the use of courts of or law in foreign jurisdictions” (at [97]).

Since Gault J’s decision granting interim relief, the defendants have protested the Court’s jurisdiction, arguing that Kea is bound by a US jurisdiction clause and that New Zealand is not the appropriate forum to determine Kea’s claims. The Court has set aside the protest to jurisdiction (Kea Investments Ltd v Wikeley Family Trustee Limited [2023] NZHC 466). The Court also ordered that the interim orders continue, although the Court was not prepared to make a further order that the defendants consent to the discharge of the default judgment and withdraw their Kentucky proceedings. This, Gault J thought, was “a bridge too far” at this interim stage (at [98]).