Supreme Court gives its reasons for a worldwide anti-enforcement injunction

On Friday, the NZ Supreme Court released its reasons for the orders it made last November, which prevent a US judgment from being enforced anywhere in the world. That is an extraordinary remedy. Why did the Court say it was justified here?

First, a recap. Entities associated with Kenneth Wikeley obtained a default judgment in Kentucky for US$123 million against Kea Investments, an entity associated with Sir Owen Glenn. The NZ High Court found that the judgment had been obtained by fraud, because a “Coal Agreement” used to obtain judgment had been forged.

The Wikeley company that obtained the Kentucky judgment was incorporated in New Zealand, and so Kea sought relief from the NZ courts.

At first instance, the NZ High Court granted a worldwide anti-suit and anti-enforcement injunction against Wikeley and his New Zealand company, preventing them from enforcing the Kentucky judgment. The NZ Court of Appeal discharged the injunction, saying that it was “exorbitant”, and that comity required NZ courts to “keep their powder dry” until Kea had exhausted its appeal rights in Kentucky.

The Supreme Court disagreed, and in a unanimous decision reinstated the injunction.

The Court rejected the proposition that an anti-enforcement injunction requires “exceptional circumstances”, as a number of earlier cases had suggested. What matters is whether the defendant’s conduct in the foreign court was “wrongful” – that is, unconscionable, vexatious or oppressive. Fraud, said the Court, “presents no difficulty” in establishing unconscionability.

The Supreme Court also rejected the Court of Appeal’s test, which required cogent evidence that the foreign court had exceeded its jurisdiction, breached natural justice, or acted incompatibly with NZ’s fundamental policies. It said that this test wrongly focused on the quality of justice in the foreign court, rather than on what the defendant had done.

What about comity and deference to other courts? The Supreme Court ruled that comity “has a measure of elasticity” and “does not entail blind deference”. Every jurisdiction involved in a cross-border fraud has an interest in stopping it, and so the NZ courts’ orders “enhance, rather than erode, comity”.

The Court also rejected the requirement that Kea first exhaust its remedies in the Kentucky court before coming to the NZ courts. It said that waiting to see whether the foreign court does the “correct” thing is “not only invidious but the reverse of comity”.

Ultimately, the Supreme Court concluded that Wikeley’s fraud “clearly justified and necessitated” the anti-suit and anti-enforcement orders, and mitigated ordinary comity concerns. As the Court put it: “If not in this case, then when? If not by the New Zealand High Court, then by whom?”