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[1994] ZASCA 177
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Jones v Krok (721/92) [1994] ZASCA 177; 1995 (1) SA 677 (AD); [1995] 2 All SA 30 (A) (29 November 1994)
IN THE SUPREME COURT OF SOUTH AFRICA
(APPELLATE DIVISION)
In the matter between:
PATRICIA ELIZABETH JONES
Appellant
and
SOLOMON KROK
Respondent
CORAM
: CORBETT CJ, VAN HEERDEN, KUMLEBEN, NIENABER JJA et OLIVIER
AJA
DATE OF HEARING
: 16 May 1994
DATE
OF JUDGMENT
: 29 November 1994
J U D G M E N T
/
CORBETT CJ
:
2
CORBETT CJ:
In the Court a quo, the Transvaal Provincial Division, the
appellant sought provisional sentence against the respondent on a foreign
judgment. The action was opposed and opposing and replying affidavits were
filed. The case was heard by Roux J, who dismissed the
action with costs and
refused leave to appeal. An application for leave to appeal in terms of sec
21(3) of the Supreme Court Act
59 of 1959 was referred to this Court for
argument. Counsel were directed to present full argument on the merits, as well
as argument
on the application for leave to appeal, so as to enable this Court,
if leave were granted, to determine the appeal. This was done.
The judgment on which provisional sentence was claimed was delivered by the
Superior Court of the State of California for the County
of Los Angeles ("the US
Court") in favour of the appellant. In terms of it (a) the respondent, Arlene
Krok and Sharon Feuer were
ordered to pay to the appellant "compensatory
damages" in the sum of
3
US$13 670 987 and (b) each of them was ordered to pay to the appellant, in
addition, "punitive or exemplary" damages in differing
amounts. In respondent's
case the amount was US$12 000 000. All these awards carried interest at the rate
of ten per cent per annum
from the date of the "verdict" to the date of payment.
A (duly authenticated copy of the order of the US Court was annexed to the
provisional sentence summons.
The basic facts, as they appear from the summons and the affidavits, are
hardly in dispute and may be summed up as follows. The respondent
is a wealthy
South African businessman and part-owner of a large pharmaceutical company,
known as Twins Pharmaceutical. Arlene Krok
and Sharon Feuer are his; daughters.
According to the appellant, she first met Arlene Krok and her father in 1980.
This meeting led
to the establishment of a company in California known as A-Plus
Products Inc ("A-Plus"), which was incorporated with the object of
marketing and
distributing certain
4
products for children and infants. The appellant obtained a 20% interest in
A-Plus, the other 80% being held by Arlene Krok and Sharon
Feuer. Nevertheless,
A-Plus was, so appellant alleged, under respondent's sole direction and
control.
It was further alleged by appellant that in 1987 she was invited by
respondent to participate in a joint venture with himself and
his daughters to
market and distribute certain feminine personal care products in the United
States. This was to be done through
the medium of a new company, Epilady USA Inc
("Epilady"), which would utilize A-Plus's employees, offices, warehouse,
telephone,
credit and bank account. Appellant would be expected to market and
sell Epilady's products to the "mass merchandisers". In return
appellant would
be entitled to a 20% share in the profits of Epilady.
Appellant claimed that she accepted this offer and that a joint venture along
these lines came into being. She permitted Epilady to
utilize A-Plus's
aforementioned facilities; and she made
5
numerous sales trips on Epilady's behalf and represented Epilady's interests
at a number of trade shows in 1987 and 1988. In 1989
and after the business run
by Epilady had generated "enormous profits" respondent denied that there was a
joint venture or that appellant
was entitled to a share of Epilady's
profits.
Appellant thereafter instituted action in the US Court against the
respondent and his daughters based upon an alleged breach by them
of the joint
venture agreement. The action was defended by respondent and Arlene Krok and
Sharon Feuer. Epilady had also been cited
as a defendant, but at the time of the
trial was "in bankruptcy" and did not take an active part therein. The main
defence of the
defendants was that no joint venture such as that alleged by
appellant was ever entered into and that there was no basis upon which
appellant
could be entitled to a share of the profits of Epilady. In addition, certain
legal points were raised.
The case was tried before a judge and jury. The trial ran
6 for some 22 days and culminated in the jury finding for the appellant
and awarding compensatory damages in the: sum decreed by the
judgment of
the Court, to which reference has already been made. In
addition to seeking compensatory damages, appellant also claimed
punitive damages against the defendants on the ground of alleged
fraud and conversion of Epilady's assets. This issue was tried
separately, after the finding that the defendants had breached the joint
venture agreement and were liable in compensatory damages had been
made by the jury. In this connection reference was made in one of the
affidavits, filed on behalf of the appellant in the provisional sentence
proceedings, to sec 3294 of the California Civil Code which provides,
under the heading "Exemplary Damages", inter alia, as follows:
"In an action for the breach of an obligation not arising from contract, where
it is proven by clear and convincing evidence that
the defendant has been guilty
of oppression, fraud, or malice, the plaintiff, in addition to the
actual
7
damages, may recover damages for the sake of example and by way of punishing the
defendant."
At the end of this second phase of the
trial the jury awarded amounts of punitive or exemplary damages against the
three defendants
individually. The jury award was, it seems, subsequently
reduced with plaintiffs consent and the final figure in respondent's case
was
US$12 000 000.
The written judgment or order of the US Court is dated 31 July
1991. In pursuance of an appeal as of right, respondent, his daughters
and
Epilady on 12 August 1991 lodged appeals to the Court of Appeal of the State of
California, Second Appellate District("the US
Court of Appeal") against the
"entirety" of the judgments and orders granted against them. At the time when
the action for provisional
sentence was dealt with by Roux J (viz 10 April 1992)
this appeal was pending. This was still the position when this Court heard
the
matter.
In his judgment Roux J, after expressing reservations
as
8
to whether provisional sentence was "the proper vehicle" for enforcing
foreign judgments, proceeded to consider whether the judgment
which appellant
sought to enforce was a final one. After referring to certain expert evidence on
the law of California, placed before
the Court on affidavit, the learned Judge
came to the conclusion that while the appeal was pending the judgment of the US
Court was
not a final one. This was sufficient to dispose of the action, but the
Judge a quo proceeded to consider certain other aspects of
the case. He held
that the award of punitive damages was not only not part of our law, but also
offended against public policy and
that a foreign order for such damages would
not be enforced by our Courts. He further held that even the award of what was
termed
"compensatory damages" in the order of the US Court rested "upon the same
foundations" as those which supported the assessment and
award of punitive
damages and that it would be contrary to public policy to encumber a person,
subject to the jurisdiction of the
Court a quo, with liability for such an
9
award. Finally, he emphasized the "potentially Gilbertian situation" which
would arise if the Court were to grant judgment on claims
which, translated into
the currency of this country, would total about R77 million, and thereafter the
appeal to the US Court of
Appeal were to succeed. This potential situation
weighed, together with other considerations, against the granting of provisional
sentence. The learned Judge refused to postpone the action to await the
conclusion of the appeal in California, as was suggested
by appellant's counsel,
saying:
"In my view the Plaintiff, when she issued this summons, either had or did not
have a cause of action and on that basis I must consider
the
matter."
Prior to the hearing of the
application/appeal by this Court counsel were asked to deal in argument with the
question as to whether,
in the light of the decisions in Zweni v Minister of law
and Order
1993 (1) SA 523
(A) and Trope and Other v South African
10
Reserve Bank
[1993] ZASCA 54
;
1993 (3) SA 264
(A), it was competent for leave to appeal to be
granted against an order refusing provisional sentence. This was done and the
first
question to be determined is whether any appeal can lie in this case and
accordingly, whether it is competent for leave to be granted.
In Zweni's
case, supra this Court undertook a comprehensive review of the question as to
whether a decision of a court is an appealable
"judgment or order" in terms of
sec 20(1) of the Supreme Court Act 59 of 1959 and the principles to be applied
in resolving this
question in individual cases. On pages 531 H - 533 F of the
report of the case Harms AJA (who delivered the judgment of the Court)
summed up
the position in nine numbered paragraphs. For the purposes of this case I would
emphasize and quote the following portions
of this summary:
"5. Section 20(1) of the Act no longer draws a distinction between 'judgments or
orders' on the one hand and
11 interlocutory orders on the other. The distinction now is between Judgments
or orders' (which are appealable with leave) and decisions
which are not
'judgments or orders' (Van Streepen & Germs (Pty)Ltd v Transvaal Provincial
Administration
1987 (4) SA 569
(A)).
7. In determining the nature and effect of a judicial pronouncement, 'not merely
the form of the order must be considered but also,
and predominantly, its
effect' (South African Motor Industry Employers' Association v South African
Bank of Athens Ltd 1980(3) SA
91 (A) at 96H).
8. A 'judgment or order' is a decision which, as a general principle, has three
attributes, first the decision must be final in effect
and not susceptible of
alteration by the Court of first instance; second, it must be definitive of the
rights of the parties; and,
third, it must have the effect of disposing of at
least a substantial portion of the relief claimed in the main proceedings (Van
Streepen & Germs (Pty) Ltd case supra at 586 I - 587 B; Marsay v Dilley
[1992] ZASCA 114
;
1992
(3) SA 944
(A) at 962 C-F). The second is the same as me oft-stated requirement
that a decision, in order to qualify as a judgment or order,
must grant definite
and distinct relief (Willis Faber Enthoven
(Pty)
12
Ltd v Receiver of Revenue and Another
[1991] ZASCA 163
;
1992 (4) SA 202
(A)at214D-G)."
Later in his judgment Harms AJA elaborated on
the
distinction between an appealable judgment or
order and a decision
which is not appealable (termed for convenience "a
ruling"). He
stated (at 535 G - 536 C):
"How then have our Courts determined whether a given decision amounts to a
ruling? A few criteria have crystallised over the years.
The first is the lack
of finality: unless 21 decision is res judicata between the parties and the
Court of first instance is thus
not entitled to reconsider it, it is a ruling.
It was immaterial that it was unlikely that that Court would ever change its
view
or its decision, provided that it was open to it to do so (see Union
Government(Minister of the Interior) Registar of Asiatics v
Naidoo AD 50; Hutton
& Pearson NNO v Hitzeroth and Others
1967 (1) SA 111
(E) at 114 D - 115 B;
Pfizer Inc v South African Druggists Ltd (supra at 263); Constantia Insurance Co
Ltd v Nohamba (supra at 36H-F);
Government Mining Engineer and Another case
supra at 698 A-701 E).
13
Another relevant consideration was whether the appeal might turn out to be of
no practical consequence because the Court could, in
the final result, find in
favour of the would-be appellant. See the Dickinson and Another case supra at
428 in fine; Klep Valves
(Pty) Ltd v Saunders Valve Co Ltd
1987 (2) SA 1
(A) at
41. Stated somewhat differently, a decision is a ruling if it does not affect
the relief sought in the main action - Nxaba
v Nxaba (supra); Heyman v Yorkshire
Insurance Co Ltd
1964 (1) SA 487
(A) at 490 H-491 C; Holland v Deysel
1970 (1)
SA 90
(A) at 93 A-C - or because no relief was granted on that claim. (Union
Government (Minister of the Interior) and Registrar of Asiatics
(supra at
50-51)). See also Levco Investments (Pty) Ltd v Standard Bank of SA Ltd
1983 (4)
SA 921
(A) at 928.
In the light of these tests and in view of the fact that a ruling is the
antithesis of a judgment or order, it appears to me that,
generally speaking, a
non-appealable decision (ruling) is a decision which is not final (because the
Court of first instance is entitled
to alter it), nor definitive of the rights
of the parties nor has the effect of disposing of at least a substantial portion
of the
relief claimed in the main proceedings."
I turn now to an application of these principles to the facts
14
of the present case. Here the decision in respect of which the appellant
seeks leave to appeal is, as I have indicated, the dismissal
of an action for
provisional sentence claimed on a foreign judgment.
As is explained in 2
LAWSA (first reissue) par 476, the present position in South Africa is that a
foreign judgment is not directly
enforceable, but constitutes a cause of action
and will be enforced by our courts provided (i) that the court which pronounced
the
judgment had jurisdiction to entertain the case according to the principles
recognised by our law with reference to the jurisdiction
of foreign courts
(sometimes referred to as "international jurisdiction or competence"); (ii) that
the judgment is final and conclusive
in its effect and has not become
superannuated; (iii) that the recognition and enforcement of the judgment by our
courts would not
be contrary to public policy; (iv) that the judgment was not
obtained by fraudulent means; (v) that the judment does not involve
the
enforcement of a penal or revenue law of the foreign state; and (vi)
15
that enforcement of the judgment is not precluded by the provisions of the
Protection of Business Act 99 of 1978, as amended. (See
generally 2 LAWSA (first
reissue) paras 477 and 478; Forsyth, Private International law, 2 ed, pp 336 et
seq and the authorities
cited.) Apart from tills, our courts will not go into
the merits of the case adjudicated upon by the foreign court and will not
attempt
to review or set aside its findings of fact or law (Joffe v Salmon
1904
TS 317
, 319; 2 LAWSA (first reissue) par 476).
One of the recognised procedures for the enforcement in our courts of a
foreign judgment is provisional sentence. The Judge a quo
did not elaborate on
his reasons for questioning the appropriateness of provisional sentence as a
vehicle for enforcing a foreign
judgment, save to remark later in his judgment
that it was not clear to him what the principal action or case was when
provisional
sentence was sought on a foreign judgment. Be that as it may, there
are many reported cases, commencing with Hollard v Taylor (1885)
16
2 SAR68 and Lipman and Herman v Kohler (1888)5 SC 420 and culminating with
Reiss Enigeering Co Ltd v Insamcor (Pty)Ltd
1983 (1) SA 1033
(W) in which it has
been accepted that provisional sentence is a competent procedure. Indeed, as
early as 1904 Innes CJ stated that
provisional sentence was "the ordinary
procedure" when relief was sought "in this country" in respect of foreign
judgments (Joffe
v Salmon at 318; see also the remarks of Bale CJ as to the
practice in Natal, in Russell v King
(1909) 30 NLR 209
, at 210). Provisional
sentence was moreover the procedure adopted in recent cases involving the
enforcement of foreign judgments
in Transkei (Corona v Zimbabwe Iron & Beef
Co Ltd
1985 (2) SA 423
(Tk AD) and Namibia (Westdeutsche Landesbank Girozentrale
(Landesbausparkasse)v Horsch
1993 (2) SA 342
(Nm HC).
It is true that provisional sentence requires a liquid document upon which
the action is founded; and a liquid document may be generally
defined as a
written instrument signed by the
17
defendant or his agent evidencing an unconditional acknowledgement of
indebtedness in a fixed sum of money (Harms, Civil Procedure
in the Supreme
Court, at 217; see also Rich and Others v lagerwey 1974(4) SA 748 (A), at 754
C-H; Wollach v Barclay National Bank
Ltd
1983 (2) SA 543
(A) ). A foreign
judgment does not comply with this definition, but it would appear that the
practice of granting provisional sentence
on such a judgment evolved on the
basis that the judgment of a court is prima facie the clearest possible proof of
a debt due by
the party condemned and that the latter must be taken in law to
have acknowledged his indebtedness in the amount of the judgment
(see
Inter-Union Finance Ltd v Franskraalstrand (Edms) Bpk and Others
1965 (4) SA 180
(W), at 181 F-H and the cases there cited, particularly Morris and Berman v
Cowan (l)
1940 WLD 1
, at 9-10). As I have said, the Judge a quo dismissed the
action for provisional sentence, primarily on the ground that the foreign
judgment relied upon by the appellant was not a final one; and the critical
18 question is whether this decision is to be regarded as an
appealable
judgment or order or as a mere ruling. The first
criterion for !
distinguishing the one from the other stated in Zweni's case, supra, is
whether the decision is -
"... final in effect and not susceptible of alteration by the
Court of first instance" (at 532 J).
Conversely, a
characteristic of a ruling is lack of finality so that -
"..... unless a decision is res judicata between the parties and the Court of
first instance is thus not entitled to reconsider it,
it is a ruling" (at 535
G).
In support of his submission that the decision
of the Court a quo refusing provisional sentence was a non-appealable ruling,
respondent's
counsel referred to the case of Oliff v Minnie
1952 (4) SA 369
(A).
The question which arose in that case was whether a decision refusing
provisional sentence on a second mortgage bond was an
interlocutory order, in
which event, as the law then stood, leave
19
was required before this Court could entertain an appeal in the matter. This
Court came to the conclusion that the order refusing
provisional sentence was
interlocutory. Centlivres CJ said (at 374 G - 375 C):
"Proceedings for provisional sentence are, as the
word
'provisional' indicates, interlocutory in their nature and
have
always been so regarded by South African Courts.
If provisional sentence is
granted, the defendant can,
subject to paying the debt due to the plaintiff
and
obtaining from the plaintiff security de restituendo, go
into the
principal case and obtain a reversal of the order
for provisional sentence.
Similarly as Menzies, vol. 1
in his notes on Provisional Sentence, para. 8,
says:
'Where provision (sic) has been refused, the
summons will stand as the summons in the action, and the proceedings take place
as if
provisional
sentence had never been claimed.'
This statement of the law was approved by BUCHANAN,
A.C.J.,
in the Cape Court of Appeal in Reed v Reed, 3
Buch. AC. 261 at p. 264.
Van Zyl in
his Judicial Practice (2nd ed., p. 96) says:
'Whether provisional sentence has been refused or granted, the disappointed
party can always go into the principal case, provided
that the refusal of the
provisional sentence is not owing to a bad or defective summons; and the summons
will, if
20
good, stand as the summons for the principal case and the proceedings may take
place as if provisional sentence had never been
claimed.'
In my view Van Zyl correctly stated the; law . . . . It
seems to me that the
correct view is, as suggested by Van
Zyl, that the provisional sentence
summons is discharged
only if the Court has found that the provisional
sentence
summons is bad or defective. It seems to be obvious
that a bad or
defective summons cannot stand as a
summons in the principal cause."
Turning to the facts of the case before the Court
(which
had been heard at first instance by Brink
J), Centlivres (Cf proceeded (at 375 G - 376 B):
"Before BRINK, J., there was no dispute as to the facts and the decision turned
entirely on a question of law. It was contended on
behalf of the plaintiff that
to suggest that she might have gone into the principal case involves the
suggestion that she was obliged,
before she could seek further remedy to submit
the case again to the same tribunal, even to the same Judge, and go through the
farce
of endeavouring to procure a reversal of the
judgment.
21
There is no substance in this
contention. The plaintiff
could have applied for leave to appeal and, if she
had
done so, I have no doubt that in the circumstances of this
case,
BRINK, J., would have granted leave to appeal, or
she could have gone into
the principal case. If she had
done this, the provisional sentence
proceedings having
been interlocutory, the judgment in those
proceedings
would not have been res judicata. Even if the same
Judge heard
the principal case as heard the provisional
sentence proceedings it would have been free to him to depart from his previous
decision. See Blaaubosch Diamonds Ltd. v. Union Government
supra. There is no
doubt, however, that in a case such as this, where the sole issue is a legal
issue, further proceedings by way
of appeal are preferable to proceedings by way
of the principal case but, as leave to appeal has not been granted, this Court
has
no jurisdiction to entertain the appeal.
Tills matter must, therefore, stand over to enable the plaintiff to apply within
twenty-one days of this judgment to the Court a
quo for leave to
appeal."
It will immediately be apparent from these
extracts from the judgment of Centlivres CJ that in that case the Court was
dealing
22
with a situation very different from that obtaining in the present case.
There the issue was whether the refusal of provisional sentence
amounted to an
interlocutory order, with me result that if it did leave to appeal was required.
It is evident that, since there was
no dispute as to the facts and the decision
turned entirely on a question of law, the Court favoured the idea of an appeal
in preference
to proceedings by way of the principal case. Moreover, the Court
rejected the argument that it would be a farce to have to proceed
with the
principal case, on the ground that the plaintiff in that case could have applied
for leave to appeal, which would doubtless
have been granted by the trial
Judge.
Here the position is entirely different. This is an application for leave to
appeal; and the issue is whether, even with leave, the
appellant can come on
appeal. Here the argument based on practical considerations, viz the farce of
having to proceed with the principal
case on a point of law, cannot be answered
in the way it was
23
in Oliff's case. This reveals an unsatisfactory state of affairs and may
require a reappraisal of the whole approach in Oliff's case.
In this
connection there are two other points to be made. Firstly, in Oliff's case,
supra, the antithesis was between decisions which
could be appealed as of right
and those which amounted to interlocutory orders, which required leave to
appeal. Today, in view of
the fact that leave to appeal is required in all civil
cases, the antithesis is, as pointed out by Harms AJA in Zweni's case (see
par 5
quoted above) between judgments or orders which are appealable with leave and
decisions which are not judgments or orders,
viz rulings, which are not
appealable at all.
Secondly, I draw attention to the decision in Barclays National Bank Ltd
1986
(1) SA 355
(C). In this case Herman J (Tebbutt J concurring) referred to the
provisions of Rule 8(8) of the Uniform Rules of Court which read
as follows:
"Should the court refuse provisional sentence it may
order
24
the defendant to file a plea within a stated time and may make such order as to
the costs of the proceedings as to it may seem just.
Thereafter the provisions
of these rules as to pleading and the further conduct of trial actions shall
mutatis mutandis apply."
Berman J, having noted that
no such provision existed when Oliff's case was decided and having analysed this
sub-rule, came to the
conclusion (at 358 I) that -
". . . where provisional sentence is refused and no order is made in terms of
which the defendant is permitted to file a plea, the
provisional sentence
summons is dismissed and the proceedings are at an
end."
He proceeded (at 359 C-F):
"But even if the Court has a discretion to order a plaintiff to file a
declaration where it has refused provisional sentence (which
is to be doubted)
it will only do so where provisional sentence proceedings are appropriate, viz
where as subrule 1 provides - '
... by law any person may be summoned to answer
a claim
25
made for provisional sentence. . .; where, that is, a creditor has liquid proof
of his claim against his debtor, or - put another
way - the claim is founded on
a liquid document.
.... Put simply, provisional sentence is intended for the limited purpose of
providing a creditor with speedy relief in certain circumscribed
and
well-defined circumstances, i e where he is armed with a liquid document. Where
he sues for provisional sentence upon an illiquid
document and his action is
dismissed, it is finally dismissed."
Only the
passage quoted from page 359 is relevant for present purposes, I am inclined to
agree with what was stated therein, but in
any event it seems to me that where a
plaintiff seeks provisional sentence on a document (annexed to his summons - see
Uniform Rule
8(3) ) which lacks liquidity, then the summons is "bad or
defective" in the sense referred to in Oliff's case and where provisional
sentence is refused on this ground, the provisional sentence summons will not
stand as summons in the principal case and the proceedings
are at an end. In my
opinion, it makes no difference
26
whether such lack of liquidity appears ex facie the document sued on or
whether it is demonstrated by evidence in the affidavits.
(Cf Sirioupoulos v
Tzere
1979 (3) SA 1197
(O), at 1200 H).
I revert to the facts of the case
under consideration. Roux J refused provisional sentence primarily on the ground
that the judgment
of the US Court was not final. At this stage I do not enter
into the merits of that decision. If a foreign judgment lacks the finality
required in order for it to be enforced by our courts, then, in my view, it is
not a liquid document; and where provisional sentence
is refused on this ground
of lack of liquidity, then, in accordance with what I have stated above, the
summons must be regarded as
bad and the proceedings at an end. If the
provisional proceedings are at an end, then the judgment or order dismissing the
action
must be regarded as having the finality necessary to qualify as a
judgment or order, as opposed to a ruling. The other requirements,
viz that it
be definitive of the rights of the parties and have the effect of disposing of
at least
27
a substantial portion of the relief claimed in the proceedings, are clearly
satisfied.
For these reasons, I hold that the order of Roux J is appealable,
provided that the necessary leave is granted.
I now proceed to the merits of the application/appeal. As I have already
stated, the Judge a quo non-suited the appellant on the ground
that, inasmuch as
the judgment of the US Court was on appeal to the US Court of Appeal, the
judgment was not a final one and, therefore,
could not be enforced by our
courts.
It is unquestionably correct, as I have indicated, that it is a legal
requirement of any action to enforce a foreign judgment in a
South African court
that the judgment be final and conclusive (see Joffe v Salmon, supra, at 318;
Ismail v Stradling
1911 TPD 428
, at 431; Greathead v
1946 TPD 404
, at 407-8). In
Greathead's case Ramsbottom J, when considering the meaning of the words "final
and conclusive" in this context, referred
to the following
28
remarks of Lord Herschell and Lord Watson in the English case of Nouvion v
freeman and another
(1890) 15 App Cas 1
(HL):
"My Lords, I think that in order to establish that such a judgment has been
pronounced it must be shewn that in the Court by which
it was pronounced it
conclusively, finally, and for ever established the existence of the debt of
which it is sought to be made conclusive
evidence in this country, so as to make
it res judicata between the parties. If it is not conclusive in the same Court
which pronounced
it, so that notwithstanding such a judgment the existence of
the debt may between the same parties be afterwards contested in that
Court, and
upon proper proceedings being taken and such contest being adjudicated upon, it
may be declared that there existed no
obligation to pay the debt at all, then I
do not think that a judgment which is of that character can be regarded as
finally and
conclusively evidencing the debt, and so entitling the person who
has obtained the judgment to claim a decree from our Courts for
the payment of
that debt."
(Per Lord Herschell at 9.)
". . . no decision has been cited to the effect that an
29
English Court is bound to give effect to a foreign decree
which is liable to be abrogated or varied by the same Court which issued
it.. .
. In order to its receiving effect here, a foreign decree need not be final in
the sense that it cannot be made the subject
of appeal to a higher Court; but it
must be final and unalterable in the Court which pronounced it: and (if
appealable the English
Court will only enforce it, subject to condition which
will save the interests of those who have the right of appeal."
(Per Lord Watson, at 13. The words emphasized by me were not quoted by
Ramsbottom J, but are included because of their relevance in
this case.)
Ramsbottom J accepted these dicta as correct statements of our law. They are
certainly authoritative as far as English law is concerned.
(See Halsbury's Law
of England, 4 ed, vol 8, par 734; Dicey and Morris The Conflict of laws, 11 ed,
pp 426, 428-9; Cheshire and North's
Private International law, 12 ed, pp
365-7.)
In English law it is accepted that the requirement of
30
finality means that the judgment must be final in the particular court which
pronounced it. Such finality is not affected by the fact
that the judgment is
liable to be reversed on appeal or even by the fact that there is an appeal
pending, unless a stay of execution
has been granted in the foreign country
pending the hearing of the appeal. (See Halsbury, op cit, par 734; Dicey and
Morris, op cit
pp 429-30; Cheshire and North, op cit, p 367; Colt Industries,
Inc v Sarlie (No 2)
[1966] 3 All ER 85
(CA) at 86 F - 87 C, 88 E-H; Berliner
Industriebank Aktiengesellschaft v Jost
[1971] 2 All ER 1513
(CA), at 1518 c-h.)
Where, however, the foreign judgment is subject to appeal then it would seem
that an English court will in general
only enforce it subject to conditions
which will save the interests of those who have the right of appeal (see (dictum
of Lord Watson
in Nouvion v Freeman and Another, supra, quoted and emphasized
above) and may order a stay of the English proceedings pending an
appeal. (See
authorities just quoted and Scoff v Pilkington
[1862] EngR 363
;
(1862) 121 ER 978
, at
31
989.) The English rule is that the onus of proof that the judgment is final
and conclusive lies on the party asserting it (Halsbury,
op cit, par 734, note
1; cf Carl-Zeiss-Stiftung v Rayner and Keeler Ltd and Other (No 2)
[1966] 2 All
ER 536
(H), 560 I, 587 D-E). Commonwealth countries practising the common law
appear to have adopted the same principles. For instance,
Castel, Canadian
Conflict of Laws, 2 ed, at par 163, sums up the Canadian position as
follows:
"The judgment must be final in the particular court in which it was pronounced.
A judgment otherwise final is not the less so because
it may be the subject of
an appeal to a higher court, or because an appeal is actually pending, unless a
stay of execution has been
granted in the foreign legal unit pending the hearing
of the appeal. Where no such stay has been granted, the judgment may be enforced
in Canada, but in a proper case the Canadian court may order a stay of the local
proceedings pending an appeal."
And Sykes and Pyles,
Australian Private International Law 2ed, at
32
110-11, state:
"A foreign judgment can be final and conclusive even though it is subject to an
appeal and even though an appeal is actually pending.
However enforcement in the
forum can be stayed pending the outcome of an
appeal."
(See also Nygh, Conflict of Laws in
Australia, 3 ed, at 86, who states that the court lias, a discretionary power to
stay proceedings.)
In the United States of America the question of the
recognition and enforcement of foreign judgments arises both in regard to (i)
sister State and Federal judgments and (ii) in regard to the judgments of
foreign nations. Many of the principles regulating recognition
and enforcement
apply equally to both (i) and (ii). (See American Restatement of the Conflict of
Laws 2d, introduction to sec 92,
p 272.) One such principle is that -
"A judgment will not be recognized or enforced in other states
insofar as it is not a final determination under the
33
local law of the state of rendition."
(Restatment,
sec 107, p 320.)
The position where an appeal lies; is enunciated in the Restatement,
sec 107, p 321, as follows:
"When appeal taken. It is for the local law of the state of rendition to
determine whether a judgment is final even though it is
subject to appeal or has
been appealed. If an appeal is taken which, by the local law of the state of
rendition, vacates the judgment,
no action can be maintained on the judgment in
another state. If, by the local law of the state of rendition, the appeal does
not
vacate the judgment, action will lie on the judgment in another state.
Usually, however, the courts of the state in which enforcement
of the judgment
is sought will either stay their judgment, or stay execution thereof, pending
the determination of the appeal."
(See also 47
American Jurisprudence 2d, sec 1269, pp 260-1; 50 Corpus Juris Secundum, secs
904, 906). The term "vacate" in this context
means to annul or set aside
(Black's Law Dictionary sv
34
"vacate").
The position in Scots Law, which in general has a greater
affinity for the Civil Law than the Common Law, is set out by Anton Private
International Law, at 586-7. The principles appear to accord with English Law,
both as to the need for finality and the effect of
a pending appeal.
As I
have indicated, our courts have adopted the principle that in order to be
enforced here a foreign judgment must be final and
conclusive; but there is a
dearth of authority on what the position is when there is an appeal pending
against the foreign judgment.
In the case of Rosenstrauch v Korbf
1931 GWL 102
the point was mentioned. This was an application to set aside an attachment
which had been granted to found jurisdiction to enable
A to sue B on a judgment
given by the Tribunal of Commerce in Antwerp in favour of A. One of the points
taken was that an appeal
was being prosecuted against the judgment of the
tribunal. In concluding that A
35
nevertheless had a prima facie cause of action, Blaine AJ stated:
"If the judgment was final in the Tribunal of Commerce, and there is nothing
before me to suggest that it was not, then it is none
the less so because it is
subject to appeal. Dicey in his Conflict of Laws (3rd ed., p. 448) says: . . . a
foreign judgment may be
final and conclusive, though it is subject to an appeal,
and though an appeal against it is actually pending in the foreign country
where
it is given'. And Halsbury's Laws of England (vol. VI. par. 418), is to the same
effect."
The problem which may arise where a foreign
judgment is under appeal was referred to obliquely in Dale v Dale
1948 (4) SA
741
(C), at 744. There the actual point taken (by the defendant) was that an
order of the High Court of Justice in England relating to
the payment of
maintenance was not a final judgment, that proceedings had been instituted to
have it set aside and that accordingly
it could not be enforced here. It was
held that the point was well taken. De Villiers AJP (with whom Newton Thompson J
concurred)
stated (at p
36
744):
"The fact that a judgment given in England may be under appeal in England would
not necessarily prevent this; Court from enforcing
such a judgment. Cf Pollak
Jurisdiction, p 224, and the cases there cited. It is conceded that this Court
has a discretion in (the
matter, and I imagine that that discretion must well be
exercised in favour of a person who pleads as the defendant has done here;
because from a practical point of view a most anomalous situation might arise.
This Court may have enforced that judgment which,
in turn, might subsequently
have been upset by the English Courts, with the result that the original
liability has been discharged
in England and yet remains of full force and
effect here by virtue of this Court's enforcement of that order at what might be
described
as an intermediate stage in the English
litigation."
It is thus evident that what the
attitude of our courts should be when a person seeks to enforce a foreign
judgment which is final
in form but is subject to a pending appeal is still a
fairly open
37
question. It has been argued in academic writings that a foreign judgment
should not be regarded as final and conclusive until it
is unassailable
("rechtskräftig") by ordinary remedies, including appeal and review; and in
this connection reference has been
made to the position under German law. (See
Hahlo, The South Africa Law of Husband and Wife, 4 ed, at 662 (appendix by
Ellison Kahn);
article by H R Hahlo in
(1969) 86 SALJ 354-5
; Spiro in
(1968) 1
CILSA 487
; and see also Martin Wolff, Private International Law, 2 ed, par 242
(6).) The rule in German law is embodied in section 328 of the
Code of Civil
Procedure. Wolff adds that the French courts mostly share the view of the German
courts, "though the question is not
firmly settled". In my limited researches I
have not been able to confirm this.
I have carefully considered the question. It seems to me that for reasons to
be stated the general principles and rules which our
courts should apply in
regard to proceedings for the enforcement of a
38
foreign judgment which is subject to appeal are as follows:
(1) The fact that the judgment is subject to appeal or even that an appeal is
pending in the foreign jurisdiction does not affect
the finality of the
judgment, provided that in all other respects it is final and conclusive.
(2) Where, however, it is shown that the judgment is subject to such an appeal
or that such an appeal is pending, the court in this
country which is asked to
enforce the judgment enjoys a discretion and in the exercise thereof may,
instead of giving judgment in
favour of the plaintiff, stay the proceedings
pending the final determination of the appeal or appeals in the foreign
jurisdiction.
(3) Although the onus of proving that a foreign judgment is final and conclusive
rests upon the party seeking to enforce it (see
2 LAWSA (first reissue), par
477, and the authorities there cited; Estate H v Estate H
1952 (4) SA 168
(C),
at 173 D; cf Reiss
39
Engineering Co Ltd v Insamcor (Pty) Ltd, supra, at 1035 A -1036 H; Halsbury,
op cit, per 734, n.1), it seems to me that, where this
onus has been discharged,
it is up to the defendant to place before the court the facts relating to me
impending appeal and such
other relevant facts as may persuade the court to
exercise its discretion in favour of granting a stay of proceedings. (4) In
exercising
this discretion the court may take into account all relevant
circumstances, including (but not confined to) whether an appeal is
actually
pending, the consequences to the defendant if judgment be given in favour of
plaintiff and thereafter (possibly after the
judgment has been satisfied) the
appeal succeeds in the foreign jurisdiction and whether the defendant is
pursuing the right of appeal
genuinely and with due diligence. As a rule,
however, the court will refuse to assess the merits and dements of the appeal
and its
prospects of success in the
40
foreign court.
The main reason for adopting these rules is that
they conform broadly to such authority as there is in our law and to the legal
position
in the vast majority of the foreign jurisdictions to which I have
referred. As to the latter it seems to me that there is merit in
our legal
system falling into line, both from a practical point of view and in the general
interests of comity. While the German
approach has a certain logical appeal, it
seems to me that there could be practical difficulties in implementing it and
particularly
in determining when a foreign judgment has become unassailable by
ordinary remedies. Moreover, in my view, a party armed with an
otherwise final
and conclusive foreign judgment should be entitled, prima facie, to relief in
our courts. On the other hand, the
disadvantages and inequity of a defendant
being ordered to pay a sum of money in terms of a foreign judgment, which later
is expunged
or altered on appeal are manifest. For that reason the court should
enjoy the discretion to stay
41
the proceedings which I have outlined above. Certain of the foreign
authorities to which I have referred speak of a stay of execution
of the
judgment of the court in which the foreign judgment is enforced, as an
alternative to the stay of the proceedings for enforcement.
In my view, a stay
of proceedings is preferable. The court should remain in control of the
situation and the court should decide
when the foreign appellate procedure lias
been exhausted and when, in the exercise of its discretion, the stay of
proceedings should
be terminated. There may, for example, be disputes of fact as
to whether the appellate procedure has been exhausted or as to what
the effect
of the appeal has been. The appeal may be allowed in part and the amount of the
plaintiffs claim reduced. There may be
disputes about the precise effect of the
appellate court's judgment.
I turn again to the facts of the present case. The papers before the Court
include affidavits by a number of experts on Califonian
law, some filed on
behalf of the appellant, some on behalf
42
of the respondent. They all appear to be well-qualified and experienced
lawyers and entitled to be regarded as experts. It is not
necessary to assess
their relative merits since their testimony does not reveal any material areas
of dispute. From their evidence
the legal position under Californian law in
regard to the judgment given by the US Court appears to be as follows:-
(1) Where a judgment is for money or directs the payment of money (as is the
position here), the fact that an appeal has been lodged
and is pending does not
cause the effect of the judgment to be suspended or stayed unless and until a
security bond or undertaking
is posted. The undertaking has to be for double the
amount of the judgment or order, unless given by "an admitted surety insurer",
in which event it must be one and one-half times the amount of the judgment or
order (sec 917.1 of the Californian Code of Civil
Procedure).
(2)
It
is common cause that in this case no such bond
or
43
undertaking has been furnished. Consequently the judgment of the US Court is not
suspended or stayed. The result of this is that
even pending the appeal the
appellant could seek to enforce it and by a certain procedure create a lien on
any real property owned
by the judgment debtor.
(3) The judgment of the US Court is final, unalterable and conclusive in that
Court. That Court cannot recall, modify or alter the
judgment. The judgment can
be reversed, modified or altered only by the US Court of Appeal on appeal to it.
Moreover, pending the
appeal, all proceedings in the trial court are stayed
pending the decision of the US Court of Appeal.
(4) Although the judgment is thus conclusive of the rights and duties of the
parties pending the appeal, it is technically not regarded
by Califonian law as
having the effect of res judicata.
Nevertheless, according to one of appellant's experts (Mr Kaufman)
-
44
". . . there is no real reason it should be, because the appellant is not
entitled to relitigate the issues of the case in any California
court pending
the appeal. Any attempt to do so would be met with a demurrer on the grounds of
another action pending (California
Code of Civil Procedure, section 430.10(c)
and the new action would either be dismissed or stayed during the pending
appeal. (Childs
v Eltinge (1973) 29 Cal. App. 3rd 843, 848.) Thus a money
judgment is conclusive of the parties' rights and duties during the appeal
period even though technically not entitled at that point to res judicata
effect."
There does not appear to be any dispute about this.
(5) There is no further automatic right of appeal from the decision of the US
Court of Appeal to the California Supreme Court. The
latter Court has a
discretion as to whether to hear such an appeal. There are a limited number of
grounds upon which it exercises
its discretion in favour of hearing the
appeal.
In certain of the affidavits filed on
behalf of the
respondent the experts concerned have stated that in terms of
45
Califonian law the judgment of the US Court is not considered, pending
appeal, to be "final". I have carefully studied these affidavits
in the light of
the other expert evidence and it seems to me that what they in fact say is that
the judgment is not "final" for the
purposes of the principle of res judicata;
and that is common cause. Mr Kaufman has pointed out, however, that Califonian
law uses
the term "final judgment" in several different senses and a judgment
may be final for one purpose but not for another. Thus the judgment
in question
is "final" for the purposes of enforcement and for an appeal to lie (since only
a final judgment may be appealed), but
does not give rise to res judicata.
This being the effect of the judgment of the US Court according to the law of
California, the question is whether such a judgment
should be regarded in our
law as final and conclusive in the context of the enforcement of foreign
judgments. As I have already indicated,
the fact that, when the action for
enforcement was heard by
46
the Court a quo and when the appeal was heard by this Court, the judgment of
the US Court was under appeal to the US Court of Appeal,
does in itself not
prevent the judgment being final and conclusive in our law, though it may
entitle the respondent to certain equitable
relief. In so far, therefore, as the
Judge a quo may have based his decision that the judgment was not final and
conclusive simply
on the fact that such an appeal was pending, this was an
incorrect approach.
It is possible, however, that the learned Judge's decision was based rather
on the fact that, according to Califonian law, the judgment
of the US Court was
not final in the sense that it did not give rise to res judicata in California.
And this is indeed one of the
arguments advanced by respondent's counsel before
us for denying the judgment finality.
It is true that in Nouvion v freeman, supra, Lord Herschell (in the passage
from his speech quoted above) did say that
47
for a foreign judgment to be final and conclusive it must conclusively,
finally and for ever have established the existence of the debt so as to
make it res judicata between the parties. It is to be rioted, however,
that this is the only reference to judicata in the speech of Lord
Herschell; and that in none of the other three speeches (by Lords
Watson, Bramwell and Ashbourne) is there any mention of res
judicata.
Moreover, in the paragraph of his speech immediately
following the passage quoted above Lord Herschell said (at 9-10):
"The principle upon which I think our enforcement of foreign judgments must
proceed is this: that in a Court of competent jurisdiction,
where according to
its established procedure the whole merits of the case were open, at all events,
to the parties, however much
they may have failed to take advantage of them, or
may have waived any of their rights, a final adjudication has been given that
a
debt or obligation exists which cannot thereafter in that Court be disputed, and
can only be questioned in an appeal to a higher
a higher tribunal. In such a
case it may well be said that giving credit to the Courts of another country we
are prepared to take
the fact
that
48
such adjudication has been made as establishing the existence of the debt or
obligation. But where, as in the present case, the adjudication
is consistent
with the nonexistence of the debt or obligation which it is sought to enforce,
and it may thereafter be declared by
the tribunal which pronounced it that there
is no obligation and no debt, it appears to me that the very foundation upon
which the
Courts of this country would proceed in enforcing a foreign judgment
altogether fails." (My emphasis.)
Furthermore, it
seems to me that Lord Herschell's reference to res judicata was not in a general
sense, but with reference to further
proceedings between the same persons on the
same issues in the same court as gave the original judgment; and that the real
thrust
of the decision in Nouvion's case is that a judgment is not final and
conclusive unless it is final and unalterable in the court
which pronounced it
(see particularly Lord Watson in the passage quoted earlier in this
judgment).
If that be a correct interpretation of Nouvion v
freeman,
49
then, in my view, it would follow that where a foreign judgment has dealt
fully with the merits of the dispute between the parties
and it cannot be set
aside or in any way varied by the court which pronounced it, it is Anal and
conclusive for the purposes of enforcement
by the law of the forum; and that
those are the only relevant criteria. If, however, I am incorrect in this view,
then in my opinion
this is the approach which this Court should adopt and to
that extent it should decline to follow the persuasive authority of Nouvion
v
Freeman. If this approach be adopted, then the fact that, unlike the position in
many countries (including our own, see 9 LAWSA
par 346), such a foreign judgment
does not give rise to res judicata by the law of that foreign country, should
not prevent it being
regarded as final and conclusive for the purposes of
enforcement.
The only authority on this point that I have been able to rind is the
Canadian case of Four Embarcadero Center Venture et alof v Mr
Greenjeans Corp.
et al
64 OR (23d) 746
, a decision of the High
50
Court of Ontario. The facts in that case bear a remarkable resemblance to
those in the present case. It was also an action to enforce
(in the High Court
of Ontario) a money judgment given in California which was under appeal. Similar
expert evidence as to Califonian
law had been given, including the rule that,
pending the appeal, the judgment, though unalterable by the Court which
pronounced it,
did not give rise to res judicata. The Court carefully analysed
Nouvion v Freeman and relevant Canadian judgments following Nouvion's
case and
came to the conclusion that the absence of res judicata by Califonian law did
not prevent the judgment being held to be
final and conclusive for the purposes
of enforcement in Ontario.
To sum up the position: the foreign judgment in the present case dealt
finally with the dispute between the parties; having once given
judgment, the US
Court had no power, pending the appeal, to set aside, alter or reconsider its
judgment; and pending the appeal,
51
no security bond or undertaking having been posted, the
judgment could be enforced in California. In the circumstances, the foreign
judgment was, in my opinion, final and conclusive in terms of our law. For the
reasons given this conclusion is not affected by the
fact that according to
Califonian law the judgment (did not bring about res judicata. And in this
connection it may be pointed out
that, even though technically res judicata did
not arise, a rule similar to Lis alibi pendens would have prevented the issues
of
the case being re-litigated while the appeal was pending. Finally, the fact
that no bond or undertaking has been posted renders it
unnecessary to consider
what the position would have been had the judgment been stayed or suspended by
the provision of such a bond
or undertaking (see Berliner case, supra, at 1518
d-f; Cheshire and North op cit, at 366).
In view of this conclusion, the Court a quo erred in holding that the foreign
judgment was not final and conclusive.
The other ground upon which the appellant was non-suited
52
in the Court below was, as I have indicated, that the award of punitive or
exemplary damages is by our law contrary to public policy.
This was held by Roux
J to preclude the appellant from recovering
either
of the amounts of
damages awarded by the US Court. The amount of US$12 000 000 clearly was awarded
as punitive damages; but the amount
of US$13 670 987 was described in the
judgment of the US Court as "compensatory damages" and was evidently awarded in
order to recompense
the appellant for breach of the joint venture agreement.
Nevertheless, Roux J held that the award of this latter amount -
". . . rested upon the same foundations as those which support the assessment
and award of punitive damages".
He continued:
"If I consider the ends to which our Courts go to determine damages for breach
of contract the apparently arbitrary approach of the
Califonian Court is quite
unacceptable. So unacceptable is it that it will be contrary to public policy to
lumber a person, subject
to
53
this Court's jurisdiction, with liability in terms of such an
award."
In my view, there was no valid basis on the
papers for these findings by the Court a quo; and, in any event, they seem to
involve
entering into the merits of the case adjudicated upon by the US Court,
which as I have pointed out is not permissible. Accordingly,
public policy
afforded no ground for denying the; appellant relief in respect of the amount of
US$13 670 987.
The award of US$12 000 000 does pertinently raise the question whether or not
our courts will enforce an award of punitive damages
made by a foreign court,
but in all the circumstances I prefer not to deal with this question at this
stage. It does not affect the
order which this Court must make. The appeal
(together with the application for leave to appeal) must be allowed at least in
respect
of the amount of US$13 670 987 and, as I shall show, it is appropriate
that the order of the Court a quo be set aside and an order
staying the
54
proceedings be substituted. Moreover, it is premature, pending the; appeal,
to decide the public policy issue. The decision of the
US Court of Appeal may
render this unnecessary. Finally, in such further proceedings as there may be
once the stay has terminated
the parties may wish to place additional evidence
before the Court upon this issue in respect of both the amounts awarded.
The next question is what order should be substituted for that of the Court o
quo. As I have held, in circumstances such as these
the court has a discretion,
which this Court must now exercise, to stay the proceedings pending the appeal.
It seems to me that in
this case the immensity of the sums of money involved is
by itself sufficient to justify a stay. In addition, however, there is the
factor, alluded to above, viz the attack upon the awards of damages as being
contrary to public policy. There should be the opportunity
for this to be fully
canvassed before any substantive order is made on appellant's claims.
55
The period of the stay requires some consideration. It seems unlikely (on the
expert evidence) that in the event of the appeal to
the US Court of Appeal being
unsuccessful or only partially successful, there will be a further appeal to the
California Supreme
(Court, but this possibility should not be ignored and should
be taken into account in the formulation of the stay order.
As to costs, the appellant has achieved substantial success in this Court and
is entitled to the costs of appeal. The costs of the
proceedings in the Court a
quo, however, should in my view stand over for determination by the Court which
finally decides this action.
It is accordingly ordered as follows:
1. The order of the Court a quo refusing leave to appeal is set aside with costs
and the application for leave to appeal is granted
with costs, including in each
instance the costs of two counsel.
2. The appeal is allowed with costs, such costs to
include
56
the costs of two counsel.
3. The order of the Court a quo is set aside and there is substituted therefor
the following:
"(a) Plaintiffs action for provisional sentence is stayed pending the final
determination of the pending appeal to the Court of Appeal
of the State of
California, Second Appellate District, and the exhaustion of any further right
of appeal by either party to the litigation
in the courts of California, United
States of America.
(b) The costs of the action for provisional sentence are to stand over for
determination by the court which finally hears the action
after the termination
of the stay."
M M CORBETT VAN HEERDEN
JA) KUMLEBEN JA) CONCUR NIENABER JA) OLIVIER AJA)