Background
Kea Investments Limited, a British Virgin Islands company associated with Sir Owen Glenn, was targeted by an elaborate cross-border fraud involving a forged “Coal Agreement”. The supposed agreement purported to commit Kea to fund American coal investments and to submit to Kentucky law and jurisdiction.
Wikeley Family Trustee Limited, a New Zealand company controlled by Kenneth Wikeley, relied on that fictitious agreement to obtain a Kentucky default judgment against Kea for USD 123.75 million plus interest and costs. Kea did not initially respond because its registered agent failed to bring the proceeding to its attention. After learning of the judgment, Kea challenged it in Kentucky and commenced proceedings in New Zealand.
The New Zealand High Court found that the agreement, judgment and related assignments formed part of a fraudulent conspiracy. It issued permanent orders requiring the respondents to procure discharge of the Kentucky judgment, prohibiting reliance on or enforcement of the judgment and agreement worldwide, and preserving New Zealand jurisdiction over the family trust. The Court of Appeal upheld the fraud findings but discharged those injunctions on international-comity grounds while Kea’s Kentucky appeal remained pending.
The Court’s Holding
The Supreme Court unanimously allowed Kea’s appeal and reinstated the High Court’s permanent injunctions. A court may restrain a person subject to its jurisdiction from exploiting a foreign judgment procured by fraud. Such an injunction operates personally against the judgment creditor rather than as an order directed to the foreign court.
The Court held that the established fraud fundamentally reframed the comity analysis. Judicial cooperation against cross-border fraud enhances rather than undermines comity, particularly where foreign process was invoked through a forged instrument and false assertions of jurisdiction and liability. The interim liquidation of Wikeley Family Trustee Limited provided an additional reason for relief because independent, court-appointed liquidators controlled the fraudulent judgment creditor and could lawfully act only to unwind the fraud.
Kea was not required to exhaust its Kentucky remedies before obtaining relief in New Zealand. Prolonging the Kentucky proceedings was itself an operative part of the fraudulent scheme, and without prompt New Zealand orders control of the judgment and related assets could have been moved beyond the Court’s jurisdiction.
Key Takeaways
- New Zealand courts may restrain parties within their personal jurisdiction from enforcing or exploiting a foreign judgment procured by established fraud.
- International comity does not invariably require a claimant to exhaust appeals or other remedies in the foreign court before seeking an anti-suit or anti-enforcement injunction.
- Fraud and the court-supervised liquidation of the foreign judgment creditor can materially alter the comity analysis and justify orders requiring steps to discharge the judgment.
Why It Matters
The decision confirms that comity is not a shield for cross-border fraud. When foreign proceedings are used as an instrument of fraud, New Zealand courts may act against persons and entities within their jurisdiction even though the relief affects how a foreign judgment may be used abroad.
The Court also imposed substantially increased costs: NZD 250,000 plus usual disbursements against the first, second, fourth and fifth respondents, and NZD 30,000 plus usual disbursements against Wikeley in favor of the interim liquidators. It dismissed Wikeley’s application to stay enforcement.