The case of the day is Wikeley v. Kea Investments, Ltd., [2024] NZCA 609. I learned of it from a post at Conflict of Laws by Maria Hook of the University of Otago.

Kenneth Wikeley sued Kea Investments in Kentucky for breach of contract. The contract in question was a Coal Funding and JV Investment Agreement. Wikeley sought more than $100 million in damages for the alleged breach.

Wikeley served process on Kea by service on its registered agent in the British Virgin Islands. Apparently the registered agent negligently failed to notify Kea of the claim, and the case eventually went to a default judgment. Kea moved to set aside the judgment on the grounds that it had been obtained by fraud, but the Kentucky court denied the motion, reasoning, in a very short order, that since Kea had been properly served, “the Court need not determine if there is meritorious defence raised by the Defendant.” The New Zealand court gently took issue with this reasoning, but I will say that the Kentucky court was doing what courts in default judgment situations do all the time and what they should do. The whole point of a default judgment is to create a path to a final judgment when the defendant is obligated to answer a complaint but doesn’t, and there would be little point if a defendant, having had a default judgment entered against it, could have the judgment set aside by showing that it had a defense to the case. On the other hand, Kea was not served personally, but was served via a registered agent that failed to notify Kea of the proceedings. And fraud is different. Maybe the ordinary rules about default judgments have to yield in cases where the claim is that the judgment was obtained by fraud.

Kea appealed, and the Kentucky appeal was pending.

Kea then sought a worldwide anti-suit injunction in the New Zealand High Court, arguing that the Coal Funding agreement was a forgery. The judge granted the injunction, and Wikeley appealed.

The court, correctly in my view, held that the injunction should not have entered. It recognized the implications of worldwide anti-suit injunctions for comity and pointed to the availability of appellate remedies in Kentucky. Why shouldn’t a New Zealand court trust the Kentucky courts to address the question on appeal? That question reminds me of the question of case-specific exceptions to the rule of recognition of foreign judgment in cases of fraud. In principle, if the foreign judiciary is “good enough” overall, why should we create case-specific defenses to recognition and enforcement?

I hope that the Kentucky courts will take seriously the concerns of comity when they take up the appeal. After all, the New Zealand courts have said, “we think this judgment was obtained by fraud, but we want to be good neighbors and let Kentucky handle it.” So the Kentucky judges should feel some obligation to handle it, either by finding that there was a fraud and reopening the judgment, or else by explaining in a persuasive way why there was not a fraud. Comity, after all, is a two-way street.

Image credit: Michal Klajban (CC BY-SA)