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Australia – Memorandum Of Guidance between the DIFC Courts And The New South Wales Supreme Court.

26 September, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Dispute Resolution

 

NSW Supreme Court of Australia and Dubai International Financial Centre’s Court sign a Memorandum of Guidance setting out broadly the parties’ understanding of the enforcement of each party’s money judgments in the other party’s courts.

 

The links between the courts of Australia and the Dubai International Financial Centre (DIFC) have been strengthened by the signing of a Memorandum of Guidance (the Memorandum) between the DIFC Courts and the New South Wales Supreme Court of Australia (the NSW Supreme Court). The Memorandum, signed on 9 September 2013, sets out broadly the parties’ understanding of the enforcement of each party’s money judgments in the other party’s courts. Judgments from other Australian Courts will not be enforced in the DIFC Court under the provisions of the Memorandum.

 

While the Memorandum is not legally binding on either court, it is a welcome development towards achieving greater certainty for judgment creditors seeking to enforce a money judgment from one court against a debtor’s assets in the other.

 

Recognition of foreign judgments

 

A judgment issued from one court is considered a “foreign” judgment in the other; this has implications for enforcement. Although it is clear that the Memorandum does not alter existing legal rights, the Memorandum represents the first time an Australian court has entered into an understanding to consult and cooperate with the DIFC Courts on the enforcement of each party’s money judgments in the other’s courts.

 

In the absence of an enforcement treaty between the United Arab Emirates and Australia and with the UAE not being a court to which the Foreign Judgments Act 1991 (Cth) applies, how judgments are likely to be enforced between the NSW Court and the DIFC has been an issue of uncertainty. On one view, such uncertainty can undermine business confidence in the effective administration of justice in commercial disputes through the DIFC Courts. In agreeing the terms of the Memorandum, the NSW Court and the DIFC Courts evidently recognise the benefit to users of either court in achieving greater certainty over enforcement of judgments between them. The Memorandum represents another milestone laid in the growth of the DIFC Courts and demonstrates its momentum in forging relations with foreign courts. 

 

Pre-requisites for enforcement:

 

  • only “money judgments” can be enforced;
  • all judgments must be final and conclusive;
  • enforcement will not be possible for any judgment ordering the payment of taxes, penalties or fines;
  • the originating court must have had jurisdiction to determine the subject matter of the dispute; and
  • the parties to the enforcement proceeding must be the same as the parties to the judgment.

 

In respect of jurisdiction, this will depend upon applicable DIFC law for the DIFC Courts judgment, and on the applicable Australian law for the NSW Supreme Court judgment. In particular, the requirements as to the jurisdiction of both courts appear to be narrow. Accordingly, the enforcing court will only have jurisdiction to hear the dispute in circumstances where the party against whom the judgment was given:

 

  • at the time of the proceedings were commenced, was present in the jurisdiction of the original court; or
  • was the claimant or counter-claimant in the proceedings; or
  • submitted to the jurisdiction of the original court; or
  • agreed, before commencement, to submit to the jurisdiction of the original court.

 

If the above 5 pre-requisites are satisfied, the only grounds for challenge may include (but will not be limited to):

 

  • evidence that the judgment was obtained by fraud;
  • if the judgment is contrary to public policy; and
  • where the DIFC or NSW Supreme Court considers the proceedings were conducted in a manner contrary to the principles of natural justice.

 

Importantly, neither the NSW Supreme Court nor the DIFC Court is entitled to re-examine the merits of the judgment, and no judgment may be challenged on the basis that there is an error of law or fact.

 

Once a judgment has been recognised, the judgment creditor will be able to enforce the judgment in either the DIFC or the NSW Supreme Court and will be entitled to pursue enforcement actions that include:

 

  • third party debt orders (requiring third parties who are indebted to the judgment debtor to pay the sum owed to the judgment creditor);
  • charging orders;
  • orders for possession of land;
  • orders for sale of property;
  • disclosure orders in respect of assets;
  • seizure of property orders;
  • committal orders for contempt of court; and
  • insolvency orders.

 

As more and more businesses enter into cross-border transactions, it is important for all companies to assess litigation and recovery risks. This Memorandum reduces some of the risks associated for both Australian companies operating in the DIFC, and for DIFC companies operating in Australia.

 

Clyde & Co

 

For further information, please contact:

 

Rebecca Kelly, Partner, Clyde & Co
[email protected]

 

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