XPlore Technologies Corporation of America v Tough Corp Pty Ltd [2008] NSWSC 1267

  • A judgment on a judgment!

This case concerns an attempt to enforce a Texas default judgment against an Australian company. The Australian company successfully resisted the application on the basis that the Texas judgment was obtained in a manner inconsistent with the rules of natural justice and/or obtained by fraud.

XPlore supplied wireless tablet personal computers and certain other computer or computer-related equipment to Tough Corp. Tough Corp was unhappy with the quality of the equipment and did not pay. Correspondence between the parties followed.

XPlore filed a Petition against Tough Corp in a District Court in Texas. Pursuant to the Texas Civil Practice and Remedies Code the Petition was delivered to the Texas Secretary of State which was good or effective service on a foreign corporation "doing business" in Texas. Some days later the Texas Secretary of State forwarded the Petition to Tough Corp by registered mail with a covering letter in the following terms:

"YOU HAVE BEEN SUED. You may employ an attorney. If you or your attorney do not file a written answer with the clerk who issued this citation by 10.00am on the Monday next following the expiration of twenty days after you were served this citation and petition, a default judgment may be taken against you."

Tough Corp, it seems, calculated time from when it had received the letter. XPlore calculated it from the time it delivered the Petition to the Texas Secretary of State. A motion was made for default judgment. At the hearing, the trial judge asked whether XPlore had any communication from Tough Corp, in relation to the lawsuit, and XPlore said not, which was incorrect.

After Tough Corp was made aware of the existence of the default judgment it filed an appeal against it in the Texas Third Court of Appeals. It also brought a motion in the NSW Supreme Court to have enforcement of the default judgment stayed.

Justice Rothman noted that foreign judgments may, under the common law, be enforced as a claim for a liquidated sum relying on the foreign judgment as a debt with two exceptions: first, if there has been a denial of natural justice and second, where the foreign judgment has been obtained by fraud. In this case, Justice Rothman in his discretion considered that there were grounds to grant a stay. He agreed with Tough Corp. He noted it was alleged that the letter quoted above was misleading and that there had been a lack of time between the receipt of the initiating documents and the issue of the foreign judgment meaning that it was at least arguable that Tough Corp had not had a sufficient opportunity to prepare or present a defence.

Further, the judge thought that the second exception relating to fraud was relevant. Fraud includes a situation where the foreign court was misled into coming to the decision that it did. In Justice Rothman's view a court may be misled by a statement from the bar table or its equivalent in an application for default judgment. He thought that the answer to the question from the trial judge, as to communication with Tough Corp, was significant and the trial judge had been misled.

Bearing in mind that there was an appeal in Texas and the necessity and desirability of a just, quick and cheap resolution of the real issues between the parties, Justice Rothman thought that it would be more efficient, just and inexpensive for the Appeal Court in Texas to deal with the issues. In the circumstances, a stay was granted.

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