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BETWEEN
ONE WORLD CHALLENGE LLC AND
S S L REEVES
Appearances:
I J Thain and G Weir for the Plaintiff Judgment: 23 April 2004 JUDGMENT OF MASTER H SARGISSON
[1]
The plaintiff, One World Challenge LLC, needs little introduction. It
was incorporated in early 2000 to manage the challenge for the last America's
Cup regatta on behalf of the Seattle Yacht Club. [2]
The defendant, Sean Reeves, is a yacht racing consultant and has a considerable
history with the America's Cup. He worked with Team New Zealand during
two America's Cup campaigns, but he left Team New Zealand in early 2000
and joined One World. [3]
Mr Reeves has a company called 'Victory 2000 Limited', of which he is
sole direction and shareholder. Both he and the company entered into a
number of agreements with One World, commencing with a written agreement
in June 2000, which covered his yacht racing consultancy services. 4]
There was a subsequent service agreement and a confidentiality and non-competition
agreement, in which Mr Reeves agreed not to disclose or disseminate any
of One World's confidential information or to make copies of any confidential
information without a legitimate business need or to use confidential
information for the benefit of any party other than One World. Under the
confidentiality agreement, he also agreed that, at the end of his contract,
he would promptly deliver to One World all confidential documents and
information without retaining any copies. [5]
The contract between One World and Mr Reeves came to an end in May 2001,
when it was agreed between them that Mr Reeves' involvement with One World's
campaign would end. A 'separation' agreement was signed. Mr Reeves was
paid $US600,000 as separation pay, and bound to observe, on an ongoing
basis, the terms of the confidentiality agreement. 6]
In the events that followed the separation, One World came to believe
that Mr Reeves had offered to sell its confidential design information.
Proceedings followed in the United States, in the course of which One
World made application for summary judgment against Mr Reeves, seeking
damages for breach of contract and reimbursement of legal costs under
the terms of the confidentiality agreement. [7]
Mr Reeves was not successful in his defence and the US court entered judgment
against Mr Reeves, as follows: [8]
In broad terms, the US court found, on the basis of admissions by Mr Reeves,
that he had retained copies and disclosed information which, in accordance
with the court's findings, came within the definition of confidential
information in the confidentiality agreement. The court held, in effect,
that the case was a simple matter of a breach of contract in respect of
which One World was entitled to damages and costs under the terms of the
contract. [9]
Mr Reeves did not file an appeal against the judgments or seek any other
kind of reconsideration of them. It is common ground that the time for
any appeal or motion for reconsideration has now expired. It was also
common ground that Mr Reeves has paid nothing towards satisfaction of
the US judgments. [10]
One World now seeks judgment in this court against Mr Reeves to enforce
the US judgments. Specifically, it seeks orders: [11]
Mr Reeves opposes the application. He says that he has an arguable defence
to an application for summary judgment, contrary to One World's assertion. [12]
Mr Reeves accepts that the judgments are final and conclusive foreign
judgments and that such judgments are, in the normal course of events,
recognised and enforced by this court; but he points out that there are
exceptions to that rule. It is his case that he has a defence which falls
within recognised exceptions, for two reasons. These are: [13]
There is no dispute that One World has demonstrated that it has a prima
facie right to the judgment that it seeks and that, in order to succeed
in his opposition, Mr Reeves must show that he has a tenable defence. [14]
Therefore, what I must consider is whether there is a tenable argument
that: [15]
It is not necessary to discuss at length the principles that apply to
the enforcement of foreign judgments. Both counsel were agreed that the
relevant principles are set out in the English text Dicey & Morris
on the Conflict of Laws (13th ed, 2000), and that they have been adopted
in New Zealand. The authoritative statement on the law in New Zealand
is set out in Von Wyl v Engeler [1998] 3 NZLR 416. In that case, the Court
of Appeal said: [16]
In general terms, an order for a foreign judgment will be enforceable
in New Zealand subject to three basic requirements: [17]
There are limited exceptions. In the present case, the only two exceptions
relied on are: [18]
A foreign judgment is enforceable despite, and cannot be impeached for,
an error of law or fact (Dicey's r 41). [19]
A foreign judgment cannot be re-examined on its merits. This is the case
even if the foreign court has made an obvious mistake which appears on
the face of the judgment: Godard v Gray (1870) LR 6 QB 139. [20]
This principle is consistent with the public interest that there should
be an end to litigation and the principle that no one should be sued twice
on the same ground. [21]
Cases where the public policy exception has been upheld include: Re Macartney
[1921] 1 Ch 522 (contrary to public policy to enforce an affiliation order
not limited to minority); Israel Discount Bank of New York v Hadjipateras
[1984] 1 WLR 137 (CA) (undue influence, duress and coercion may come within
the ambit of the public policy defence); Vervaeke v Smith [1983] 1 AC
145 (HL) (recognition of overseas judgment invalidating a sham marriage
would be against public policy); and Soleimany v Soleimany [1998] 3 WLR
811 (CA) (a foreign arbitration award purporting to enforce an illegal
contract was not enforceable as being contrary to public policy). [22]
Finally, it is to be noted that this exception to the general rule is
a narrow one and is rarely applied. As stated by Lord Simon in Vervaeke
v Smith [1983] 1 AC 145, 164 (HL): [23]
At the hearing, Mr Spring indicated that none of the three jurisdictional
matters are in issue in the present case. [24]
As to the first requirement, namely that the US court must have had jurisdiction
to give judgment, before the commencement of the US proceedings, Mr Reeves
had contractually bound himself to submit to the jurisdiction of the US
court. Each of the relevant agreements contain a clause in the following
terms, or to the like effect: [25]
In addition, clause 11 of the confidentiality agreement provides: [26]
The result is that Mr Reeves does not dispute that the relevant agreements
are governed by, and therefore to be interpreted in accordance with, the
laws of the State of Washington, or that disputes about the confidentiality
agreement are to be resolved by the relevant courts in USA. Nor does he
dispute that he resubmitted himself to the jurisdiction of the US court
by voluntarily appearing in the proceedings. [27]
As to the second and third requirements, there is no dispute that: [28]
There is also no dispute that overseas judgments meeting the above requirements
may be enforced by way of summary judgment. [29]
The first question I need to consider, therefore, is whether enforcement
in New Zealand of the US judgments would offend public policy here. [30]
In dealing with this question, I need to consider, first, the reasons
why Mr Reeves says public policy would be offended. These reasons are: [31]
For summary judgment purposes, counsel for Mr Reeves points out that he
does not have to prove that the information was obtained by One World
in the circumstances that Mr Reeves claims. [32]
Nevertheless, I do not agree that these matters would be sufficient reason
for me to find that it would be contrary to public policy in New Zealand
to enforce the US judgments, even assuming, as a matter of fact, that
the documents belonged to Team New Zealand and were obtained unlawfully. [33]
My reasons for this conclusion are as follows: [34]
In the circumstances, I do not accept that there is a tenable basis for
Mr Reeves' argument about public policy. 35]
I come next to Mr Reeves' argument about a breach or breaches of natural
justice. [36]
Mr Reeves contends that there were a number of breaches of natural justice
in the conduct of the hearing before the US court denying him the ability
to put forward one of his alleged defences: [37]
I do not think it is necessary to consider whether or not these grounds
amount to a breach of natural justice. The reason for this is that Mr
Reeves effectively had the benefit of the 'finding' to which he says he
would have been entitled had there not been these alleged breaches. This
is because in considering the application for summary judgment, the US
judge made it clear that, even if it was assumed that One World had unlawfully
obtained the documents, this would not alter the legal result. Mr Spring
nevertheless argued that his client could still have been disadvantaged
but could not point to a single specific example of a disadvantage his
client might have suffered as a result. [38]
In these circumstances, I find there could have been no breach of natural
justice or, in any event, no breach that was in any way material to the
outcome. [39]
For the above reasons, I find that One World has not only established
a prima facie case, but has demonstrated that Mr Reeves has not raised
a tenable defence in relation to the judgment for damages. [40]
Mr Reeves made a further argument in relation to the judgment for costs.
He contends that it would be contrary to public policy to enforce the
judgment because he did not have a fair hearing on the matter of costs.
The matters on which he relies are: [41]
It is true that the procedure adopted by the judge is markedly different
from the procedure adopted in New Zealand. It would not be acceptable
practice in New Zealand for a judge to invite counsel to write a draft
of the reasons that should be given for a judgment. [42]
However, as counsel for One World pointed out, it is clear that the judge
turned her mind to the content of the draft judgment and that she amended
it so that it met with her approval. It is also clear that this is standard
practice in the particular US jurisdiction. [43]
Furthermore, Mr Reeves elected not to take the opportunity available to
him to be heard on the matter of costs or to exercise any appeal rights.
As he put it, he was exhausted by the process at that stage. I am certainly
willing to accept that Mr Reeves found himself exhausted by the judicial
process in the US and that he did not take the steps that, in hindsight,
he no doubt wishes he did. However, failure to take steps does not amount
to a breach of natural justice and he can have no complaint that he was
not given an opportunity to be heard. [44]
In these circumstances, I am unable to accept his argument that he was
deprived of his right to natural justice in relation to the costs judgment. 45]
I come next to the request that I make an order that Mr Reeves pay interest
on the total judgment sum of $US1,053,497.60. It is not open to me to
award interest under US federal law and I decline to do so. However, the
judgment I have entered gives rise, as a matter of law, to a judgment
debt. One World is entitled to request interest on that debt pursuant
to the Court's discretion under s 87 of the Judicature Act 1908. In the
circumstances, I consider it just to grant interest on the two judgment
sums at the rates of 1.51% and 1.38% per annum respectively, calculated
from the date of the filing of One World's application in this Court to
the date of this judgment. (In view of counsel's indication that One World
is seeking interest at the lower rates, which would apply in the US, it
is appropriate that I adopt those rates.) [46]
If One World wishes to pursue the matter of interest for the interim period
from the date of the US judgment, then it will have to seek a further
order from the US court and take what steps it considers appropriate for
a further order for enforcement of that judgment. [47]
In view of the above, I make the following orders: Signed at on 23 April 2004 ____________________________ |