Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2014] NSWCA 375
• Hearing dates: 27 October 2014
• Decision date: 27 October 2014
• Before: Basten JA

Decision

(1) Orders (2) and (3) below are made conditional upon the applicant -

(a) undertaking to pursue with expedition its application for special leave to appeal to the High Court in matter number S274 of 2014, and

(b) acknowledging that the effect of these orders is:

(i) to allow the Republic of Nauru access to all and any funds standing to its credit in any account other than those identified in Schedule A attached hereto, in accordance with its contractual arrangements with Westpac Banking Corporation; and

(ii) to relieve Westpac Banking Corporation of any obligation under the garnishee order issued 10 September 2014 to withhold payment of moneys otherwise standing to the credit of the Republic of Nauru in any account other than those identified in Schedule A attached hereto and to allow Westpac to pay such moneys to or at the direction of the Republic of Nauru in accordance with its contractual arrangements with the Republic of Nauru.

(2) Subject to the undertaking and acknowledgments contained in (1) above, and subject to any order of the High Court of Australia, extend the stay order (2) and order (3) (in respect of compliance with the garnishee order) made on 23 October 2014 until the determination of the application for special leave to appeal to the High Court.

(3) The reference to the garnishee order in orders (2) and (3) of the stay order and compliance order made on 23 October 2014 is limited to the accounts identified in Schedule A to the notice of motion filed by the applicant (to be attached to these orders).

(4) Grant each party liberty to apply on three days' notice if any variation of these orders is sought before their expiration.

(5) Vary principal order (1)(iii) made on 23 October 2014 by adding after the word "Nauru" the words "and Westpac Banking Corporation".

(6) Direct that the costs of the notice of motion filed on 24 October 2014 be costs in the proceedings in this Court, payable in accordance with principal order 1(iii) made on 23 October 2014.

(7) These orders shall be entered forthwith.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: PRACTICE AND PROCEDURE - extension of stay pending application for special leave to appeal to High Court - factors relevant in extending stay - whether application for special leave has any prospects of success - whether stay necessary to protect subject matter of litigation - where the balance of convenience lies - undertaking by the applicant to pursue application for special leave expeditiously
• Legislation Cited: Foreign States Immunities Act 1985 (Cth), Pt IV; Judiciary Act 1903 (Cth), s 35A
• Cases Cited: Jennings Construction Limited v Burgundy Royale Investments (No 1) [1986] HCA 84; 161 CLR 681; Rinehart v Welker [2012] NSWCA 1; 83 NSWLR 347
• Category: Consequential orders
• Parties: Firebird Global Master Fund II Ltd (Applicant); Republic of Nauru (First Respondent); Westpac Banking Corporation (Second Respondent)
• Representation: Counsel: Mr TGR Parker SC/Mr JAC Potts (Firebird Global Master Fund II Ltd); Mr RA Dick SC/Mr DJ Barnett/Ms N Oreb (Republic of Nauru); Mr R Harris (Westpac Banking Corporation); Solicitors: Clayton Utz (Firebird Global Master Fund II Ltd); Ashurst (Republic of Nauru); Allens (Westpac Banking Corporation)
• File Number(s): CA 2014/290988; CA 2014/293924

Decision under appeal

• Jurisdiction: 9111
• Citation: [2014] NSWSC 1358
• Date of Decision: 2014-10-03 00:00:00
• Before: Young AJA
• File Number(s): SC 2012/147600

Judgment

1 BASTEN JA: On 23 October 2014, the Court delivered its principal judgment in this matter. In the proceedings commenced by Firebird Global Master Fund II Ltd ("Firebird"), the appellant was granted leave to appeal but the appeal was dismissed and the summons filed by Firebird in the Common Law Division was dismissed. The result was that the registration of the foreign judgment obtained by Firebird against the Republic of Nauru ("Nauru") was set aside, as was a garnishee order, issued on 10 September 2014, in favour of Firebird against Westpac Banking Corporation ("Westpac"). The effect of those orders would be to release both Westpac and Nauru from any constraints on dealing with the moneys the subject of some 30 accounts held by Nauru with Westpac, Sydney.

2 Against the possibility that Firebird might seek special leave to appeal to the High Court, a stay was ordered which expires at 5pm (Sydney time) today. The Court also ordered, as part of the stay, that the garnishee order not be complied with during the period of any stay with respect to the order setting aside the garnishee order.

3 On 24 October 2014, Firebird filed an application for special leave to appeal in the High Court's Sydney registry. Today Firebird filed a notice of motion in this Court seeking an extension of the stay order made on 3 October 2014 until further order. The continuation of the stay was, however, limited to certain accounts held by Westpac which were identified in schedule A to the notice of motion.

4 The basis of the application to this Court was in accordance with the procedure approved in Jennings Construction Limited v Burgundy Royale Investments (No 1) [1986] HCA 84; 161 CLR 681, namely, that an application for a stay pending determination of a special leave application to the High Court, should be made to the Court from which the appeal is to be brought. The principles to be applied by this Court are set out in Rinehart v Welker [2012] NSWCA 1; 83 NSWLR 347 at [42] ff. These require the Court to grant a stay only in exceptional circumstances and subject to the usual considerations that apply to stays pending appeal. These considerations are, first, the necessity to protect the subject matter of the litigation; secondly, the prospects of success on an appeal and, thirdly, the balance of convenience having regard to both the detriment likely to be caused to the applicant and to the respondent, respectively, were the stay to be granted or not granted.

5 The application for special leave to appeal is also accompanied by a schedule which identifies each of the 30 Westpac accounts, the subject of the garnishee order. Accounts numbered 1-17 are included in Part 1 of the schedule and are described as "Excluded Accounts". An account numbered 18 is included in Part 2 and simply described as "Term Deposit". Part 3 identifies accounts numbered 19-26, generically described as "Business Accounts". Part 4 includes four "Residual Accounts".

6 The special leave application seeks leave to appeal from part only of this Court's judgment, being so much of the judgment as held that the judgment of the Tokyo District Court in favour of Firebird against Nauru not be registered, but did not seek special leave to appeal from so much of the order dismissing the applicant's appeal as related to the primary judge's order, setting aside the garnishee order, as it operated against the excluded accounts. The orders sought from the High Court include an order setting aside the orders made by the primary judge "except insofar as those orders set aside the garnishee order against the Excluded Accounts".

7 The precise effect of the order sought is uncertain. The garnishee order issued on 10 September 2014, was in the following terms:

(1) It is ordered that all debts that are due or accruing from the garnishee [Westpac] to the judgment debtor [Nauru] at the time of service of this order are attached to the extent of $31,242,825.81 to answer a judgment in these proceedings.

(2) You are ordered to pay any amounts so attached to the judgment creditor [Firebird] within 14 days after the date on which the order is served on the garnishee or, if the debt attached is a debt that falls due after that date, within 14 days after the date on which the debt becomes due.

8 The discrimination between the accounts identified in Parts 1, 2, 3 and 4 in the schedule to the special leave application appears to reflect, in part, an acceptance on the part of Firebird that the accounts identified in Part 1 are property of Nauru against which enforcement cannot be had, in accordance with Pt IV of the Foreign States Immunities Act 1985 (Cth). The order sought in the notice of motion is thus intended to allow Nauru access to moneys in each of the accounts other than those numbered 1-9 in schedule A to the notice of motion, being those identified in Parts 2 and 3 of the leave application, but not those identified in Parts 1 and 4. The accounts identified in schedule A to the notice of motion do not include the residual accounts in Part 4 of the application for special leave to appeal, a factor which has some significance in assessing the considerations to be applied on this application.

9 With respect to the tests required to be applied by Rinehart, it is appropriate to consider first the prospects of success. Those have to be considered in terms of the criteria for granting special leave to appeal, set out in the Judiciary Act 1903 (Cth), s 35A. These include whether the proceeding to which the judgment relates involves a question of law of public importance, whether because of its general application or otherwise, whether it is necessary to deal with differences of opinion between different courts as to the state of the law and whether the interests of the administration of justice generally, or in the particular case, require consideration by the High Court.

10 There are a number of aspects of these proceedings which are unusual, if not unique in the jurisprudence in this country. Without attempting to isolate and identify each of them, they involve the interrelationship of two statutes of the Commonwealth Parliament. They are statutes which reflect international conventions and public international law principles, one of which relates to the immunity of foreign states from being impleaded in a local court. They involve matters about which it is fair to say that there have been different views expressed in superior courts in other countries.

11 So far as the public interest requirements of s 35A are concerned, there are reasonable prospects of the applicant satisfying this element of the test for special leave to appeal.

12 With respect to the merits of the particular case, there are, as the respondent has pointed out, some differences of approach to be noted between the challenge with respect to the registration of the judgment and the challenge with respect to the operation of the garnishee order against specific items of property. Nevertheless, as was noted in the judgments delivered in this Court, there are respectable arguments to be put on either side and these are matters as to which the High Court might well be willing to grant special leave to appeal.

13 The circumstances of this case suggest that the orders sought by Firebird should not be unlimited but should be limited to the period during which the special leave application is outstanding. Accordingly, it is neither necessary nor appropriate to consider the prospects of success were special leave to be granted. That matter can be dealt with at a later time if necessary.

14 So far as the second requirement is concerned, that is the necessity to protect the subject matter of the litigation, these proceedings are somewhat unusual. There is no issue as to the entitlement of Firebird to a judgment against Nauru: it has such a judgment. The question is whether it is able to register it and execute against property of Nauru in this State. The subject matter of the litigation is thus in substance and practicality, the availability of the property, namely, the moneys held by Westpac in the name of the Republic of Nauru in Sydney. It is clearly arguable that at least part of the funds should be frozen to preserve the subject matter of the litigation; that may best be achieved by continuing the stay, on terms.

15 So far as the balance of convenience is concerned, there are again unusual aspects of this case. The applicant is a foreign corporation which does not, so far as the Court is aware, have a place of business in New South Wales or Australia. The respondent is a sovereign State. In other words, it is difficult to be sure that undertakings from either party in relation to the continuing maintenance of the status quo, would be readily enforceable in the event that there was breach. That is not to suggest that there would be breach on either side, were undertakings to be given. It is only to note that the Court would not willingly engage in imposing a condition on parties which was not readily within its powers to enforce in the event that there was breach.

16 With respect to detriment to Firebird if a stay is not granted, the subject matter of the litigation, which is according to the respondent needed for the operation of the government of Nauru on an ongoing basis, would readily be available to Nauru and Firebird would be left without the possibility of recovery in this jurisdiction which makes it worthwhile to pursue a special leave application.

17 So far as detriment to Nauru is concerned, the situation is less clear. The evidence indicates that Nauru needs significant sums of money (in its own terms) in order to maintain its obligations to its people and to pay debts as they fall due. The basis upon which revenue is being expended is, however, not known, nor indeed, is the rate at which some part of that revenue may be replenished from those to whom services are provided. In particular, that information is unavailable with respect to the provision of fuel to the people of Nauru, which is paid for on a cost basis. It has also been suggested that Nauru is suffering some continuing detriment while the proceedings remain on foot if it cannot have access to its funds. That is no doubt true, at least in respect of the administrative arrangements, and no doubt, to some extent, there have been delays in the payments made in respect of existing liabilities.

18 The funds which would become available to Nauru if the accounts which are identified in Parts 1 and 4 of the schedule to the special leave application are now to be released would appear to be sufficient, given its cash reserves, to permit it to make most if not all of its ongoing payments during the period over which the stay proposed by Firebird would remain in operation. That period of course is not known with certainty. It is appropriate that Firebird provide an undertaking to pursue expedition in the High Court and to pursue its proceedings there expeditiously. It is possible, in accordance with a broad understanding of the way in which matters are listed in the High Court, that the special application may be heard by March 2015. That would leave a matter of some months, unfortunately including the holiday period, which will elapse whilst the proposed stay is on foot. On that basis, the detriment to Nauru would appear to be manageable.

19 Having regard to these factors, I am satisfied that it is appropriate to grant a limited and conditional stay of the orders made by the Court. It is necessary for the parties to consider the nature of the orders which may be made.

20 Having given the parties, including Westpac, an opportunity to consider in draft, the orders which follow, in light of the foregoing reasons, I now make the following orders:

(1) Orders (2) and (3) below are made conditional upon the applicant -

(a) undertaking to pursue with expedition its application for special leave to appeal to the High Court in matter number S274 of 2014, and

(b) acknowledging that the effect of these orders is:

(i) to allow the Republic of Nauru access to all and any funds standing to its credit in any account other than those identified in Schedule A attached hereto, in accordance with its contractual arrangements with Westpac Banking Corporation; and

(ii) to relieve Westpac Banking Corporation of any obligation under the garnishee order issued 10 September 2014 to withhold payment of moneys otherwise standing to the credit of the Republic of Nauru in any account other than those identified in Schedule A attached hereto and to allow Westpac to pay such moneys to or at the direction of the Republic of Nauru in accordance with its contractual arrangements with the Republic of Nauru.

(2) Subject to the undertaking and acknowledgments contained in (1) above, and subject to any order of the High Court of Australia, extend the stay order (2) and order (3) (in respect of compliance with the garnishee order) made on 23 October 2014 until the determination of the application for special leave to appeal to the High Court.

(3) The reference to the garnishee order in orders (2) and (3) of the stay order and compliance order made on 23 October 2014 is limited to the accounts identified in Schedule A to the notice of motion filed by the applicant (to be attached to these orders).

(4) Grant each party liberty to apply on three days' notice if any variation of these orders is sought before their expiration.

(5) Vary principal order (1)(iii) made on 23 October 2014 by adding after the word "Nauru" the words "and Westpac Banking Corporation".

(6) Direct that the costs of the notice of motion filed on 24 October 2014 be costs in the proceedings in this Court, payable in accordance with principal order 1(iii) made on 23 October 2014.

(7) These orders shall be entered forthwith.

21 I note that Firebird, by its senior counsel, has given orally in court the undertaking and the acknowledgment set out at (1) above.

SCHEDULE "A"

No	Account Name	Account Number	Account Balance
1.	Republic of Nauru Term Deposit		AUD$5,000,000.00
Airline accounts:
2.	Yaren Aircraft Leasing Co		USD$9.83
3.	Palco		AUD$124,140.89
4.	Yaren Aircraft Leasing Co		AUD$1,680.73
Phosphate compensation account:
5.	Rehabilitation Fund A		AUD$113,887.49
Fuel accounts:
6.	USD Ron Treasury		USD$7,770,836.48
7.	Japan NPGA		AUD$475,974.98
Utilities account:
8.	RON Utilities Authority		AUD$487,187.72
Loan account:
9.	CIE - Nauru GEF Small GRA		AUD$31,766.42
Total AUD: $6,234,646.23 Total USD: $7,770,846.31

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Amendments

04 November 2014 - Amended paragraphs: Schedule A

Decision last updated: 04 November 2014