Grant v Arena Alceon NZ Credit Partners LLC: the reach of s 261 of the Companies Act
By Jack Wass (Stout Street Chambers)
The Court of Appeal will this week hear an appeal on the question of whether s 261 of the Companies Act 1993 – which permits a liquidator to obtain documents and information about the affairs of an insolvent company – has extraterritorial effect. In Grant v Arena Alceon NZ Credit Partners LLC [2023] NZHC 3048, Associate Judge Gardiner held that the liquidators had not overcome the presumption against extraterritoriality, so that a liquidator could not make a demand under that section to a person who was overseas, and the court did not have the power to order an overseas person to comply with such a demand.
It is established that the court does have that power in relation to directors of the insolvent company, who by taking appointment have submitted themselves to New Zealand law: Grant v Pandey [2013] NZHC 2844.
The Associate Judge recorded that she was initially attracted to the idea that s 261(1)—which empowers the liquidator to demand documents that belong to the company—might have extraterritorial effect, while s 261(3)—which confers a broad power to require anyone “having knowledge of the affairs of the company” do things, including attending to be examined on oath—does not. But the Judge was ultimately satisfied that the liquidators could not overcome the presumption against extraterritoriality on either limb, emphasising that the liquidators’ powers were not conditioned by a need to obtain court permission first, and exposed the recipient to criminal sanctions. Where courts in England and Australia have been prepared to interpret similar provisions as having extraterritorial effect, they have emphasised the court’s power to decline to make an order where there is an insufficient connection with the jurisdiction to justify extraterritorial relief operates as a safety valve. Although under the New Zealand legislation the court has a role if the recipient refuses to comply and the liquidators seek an order under s 266, the Judge found that the logically prior question is whether s 261 has extraterritorial effect in the first place, which must involve a binary inquiry.
In its most recent consideration of cross-border statute problems, the Court of Appeal emphasised that legislation does not operate extraterritorially (in the sense used in Poynter v Commerce Commission [2010] NZSC 38, [2010] 3 NZLR 300) where the matter that is being regulated is within New Zealand, even if the defendant is (and acted) overseas: see Body Corporate No DPS 91535 v 3A Composites GmbH [2023] NZCA 647 at [70] where it was the supply of goods to New Zealand consumers that provided the necessary link. Likewise, the Court emphasised the importance of conducting the necessary statutory interpretation exercise in light of the choice of law rules or principles.
Here, one might argue that both of those principles might have a role to play in considering the distinction between s 261(1) and (3) suggested by the Associate Judge. As to the latter, there is much to be said for the proposition that a power that is essentially equivalent to an extraterritorial subpoena would have to conferred expressly by Parliament in circumstances where subpoenas themselves are not enforceable outside the territory. But so far as the power under s 261(1) to obtain documents of the company is concerned, there is room for argument: the fact that the recipient of the notice may hold the document overseas does not change the fact that it is a document that belongs to the New Zealand company, and the general choice of law rule is that the affairs of a company are governed by the law governing its incorporation (Hook & Wass at [10.17]). While there is an argument to be made, the better view may remain that remedies under the Model Law on Cross-Border Insolvency are a more principled way of dealing with the problem, and that if a gap still persists it is for Parliament to fill it expressly.
2024 Supplement to the Conflict of Laws in New Zealand
The first edition of The Conflict of Laws in New Zealand was published in 2020. Since then, there have been a number of important cases and developments of relevance to the field. To ensure that CLNZ remains up-to-date, LexisNexis have kindly agreed to the publication of a supplement, which is available for free on this blog. Just click on the link at the bottom of the right-hand sidebar of this blog to get your copy.
Australasian Association of Private International Law
(By Professor Reid Mortensen)
The Australasian Association of Private International Law (‘AAPrIL’) is being established to promote understanding of private international law in Australia, Aotearoa New Zealand, and the nations of the Pacific Islands. By ‘private international law’ (or ‘conflict of laws’), we mean the body of law that deals with cross-border elements in civil litigation and practice, whether arising internationally or, in the case of Australia, intra-nationally.
To make AAPrIL a reality, we need your help. Please join us by attending the first general meeting of members of AAPrIL, which will be held online on Thursday 11 July 2024. The meeting is necessary to establish AAPrIL, approve a Constitution, and elect AAPrIL’s first officers.
The beginnings of our Association
The proposal to establish AAPrIL comes from an organising group* of Australian and New Zealand scholars and practitioners who have been working together in private international law for a long period.
We believe that there is a need for a permanent regional organisation to provide support for regular events and conferences on private international law, and to help coordinate, manage and publicise them. Our vision for AAPrIL is that it will:
- Regularly distribute a newsletter on recent decisions, legislative developments and publications, and on hot topics and upcoming events on private international law in Australasia.
- Organise proposals and submissions for law reform in private international law.
- Promote the study of private international law in universities.
- Provide a forum for the exchange of information and opinions, debate and scholarship on private international law in Australasia.
- Connect with other private international law associations worldwide.
The proposed Association already has a website and a LinkedIn page.
To our delight, the Honourable Dr Andrew Bell, Chief Justice of New South Wales, has agreed to serve as patron of the Association. His Honour is well-known as co-author of Nygh’s Conflict of Laws in Australia, and the author of many other publications on private international law. Before being appointed to judicial office, he had a significant Australia-wide practice in cross-border litigation and international arbitration.
How do you join?
You can join the Australasian Association of Private International Law by signing up on the Membership page of AAPrIL’s website.
There is initially no membership fee to join. At the meeting to establish AAPrIL, there will be a proposal to set membership fees for 2024-2025 at:
Individual members: AUD 100
Corporate members: AUD 300
Student members: AUD 20
However, membership fees for 2024-2025 will not be requested until after the first general meeting.
What will happen at the general meeting on Thursday 11 July?
Those who join as members by 18 June 2024 will be sent a notice of meeting for the general meeting on 11 July 2024. The agenda will include proposed resolutions:
- To establish the Australasian Association of Private International Law.
- To adopt the Constitution of the Association. If members have any questions about the proposed Constitution before the meeting, could you please direct them to me: mortensen@unisq.edu.au.†
- To appoint the President, Treasurer and Secretary of the Association, and potentially an Australian Vice-President, a New Zealand Vice-President and Pacific Islands Vice-President. If any member wishes to propose another member for one of these offices, please email your nomination to me: mortensen@unisq.edu.au.†
- To set membership fees for the financial year 2024-2025.
The organising group will also present plans for the activities of the Association.
We are looking forward to this exciting development for those of us who are rightly fascinated by private international law. We hope you will join us!
Best wishes
Professor Reid Mortensen
On behalf of the AAPrIL interim executive
*******
* The organising group comprises Dr Michael Douglas (Bennett, Perth), Professor Richard Garnett (University of Melbourne), Associate Professor Maria Hook (University of Otago), Professor Mary Keyes (Griffith University), Professor Reid Mortensen (University of Southern Queensland), Ms Cara North (Corrs Chambers Westgarth, Melbourne) and Mr Jack Wass (Stout Street Chambers, Wellington).
† I will be on leave from 3-14 June 2024, but will answer any enquiries that are made in that period as soon as possible afterwards.
High Court declares asymmetric jurisdiction clause in viagogo’s terms and conditions an unfair term under the FTA
The High Court recently decided that a foreign jurisdiction clause in a contract entered into with New Zealand consumers was an unfair term: Commerce Commission v Viagogo AG [2024] NZHC 713. The Commerce Commission had sought relief against viagogo AG, a company incorporated in Switzerland, under the Fair Trading Act 1986 (FTA). viagogo operates a global website for the re-sale of tickets to live events. The terms and conditions entered into with New Zealand consumers included a Swiss jurisdiction and choice of law clause. The Commerce Commission argued that the clause was an unfair contract term under s 46L of the FTA. Peters J agreed, but only insofar as the clause related to jurisdiction (rather than choice of law). On that basis, Peters J was wiling to declare that the jurisdiction clause was an unfair contract term, to the extent that it applied to consumers within the reach of the FTA (at [227]).
A term is unfair under s 46L if the court is satisfied that it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and it would cause detriment (whether financial or otherwise) to a party if it were applied, enforced, or relied upon.
Unfairness of the jurisdiction clause
The jurisdiction clause provided that “[a]ll disputes arising out of or in connection with this Agreement … shall be resolved exclusively by the competent Courts of Geneva, Switzerland”, while also reserving an option for viagogo “of taking legal action against You at Your domicile”. In other words, the clause provided for the exclusive jurisdiction of the Swiss courts, except that viagogo could choose to bring proceedings in New Zealand. This is known as an asymmetric jurisdiction clause (see generally Brooke Marshall Asymmetric Jurisdiction Clauses (OUP, 2023)).
Peters J was satisfied that this clause would give rise to significant imbalance in the parties’ rights and obligations under the contract, and that it would cause detriment to the consumer if relied upon (at [209]). This was mainly because of the asymmetrical nature of the agreement (at [210]) and because requiring a consumer to sue in Geneva “rules out any prospect of litigation against it by a consumer” (at [211]), presumably because it is not realistic, as a matter of practicality, that a consumer would go to the trouble of pursuing viagogo in Switzerland. In the absence of the jurisdiction clause, on the other hand, a consumer could commence proceedings in New Zealand, “probably in the Disputes Tribunal”, with relatively little effort and expense (at [210]).
The Judge was also satisfied that the clause was not reasonably necessary to protect a legitimate interest of viagogo. viagogo argued that it had a legitimate interest to confine litigation against it to its home jurisdiction, referring to some Australian authorities in support (at [212]). Peters J dismissed this argument, referring to the particular context of the case (at [217]). The “likely scenario” was that claims against viagogo would relate to events held in New Zealand and would involve local witnesses. There was “no obvious reason” why viagogo could not participate in New Zealand proceedings, “whether by audio visual link or by appointing a representative to attend any hearing on its behalf”. The dispute could be “determined quickly by the Disputes Tribunal” (at [217]).
The Court’s emphasis on the potential role of the Disputes Tribunal is interesting. Considering the practical difficulties faced by consumers to obtain access to justice, and the complexities of cross-border litigation, it made sense to place reliance on the fact that there seemed to be a quick and cost-effective option available to consumers in New Zealand (that would not impose an undue burden on viagogo). However, it is not clear that the Disputes Tribunal would have jurisdiction over claims against foreign defendants such as viagogo. Personal jurisdiction over defendants that do not have a presence in New Zealand depends on there being a statutory basis for service outside of the jurisdiction. The Disputes Tribunal Rules 1989 do not seem to contemplate this possibility.
More generally, the decision provides useful ammunition to any consumer seeking to bring proceedings in New Zealand despite the existence of a foreign jurisdiction clause, especially where the clause is asymmetric. The more obvious route for consumers might be to rely on the court’s common law discretion not to give effect to a jurisdiction clause, on the basis that there are strong reasons for not doing so: The Eleftheria [1970] P 94 (Prob) at 99–100; see Karpik v Carnival plc [2023] HCA 39). This does not mean, however, that consumers may not also attempt to attack the validity of the jurisdiction clause directly under s 46L (assuming that s 46L would be applicable to determine the validity of the clause as an overriding mandatory rule), although a claim under s 46L would probably be less fact-specific (and, depending on the facts, may be more difficult to make out).
No unfairness of the choice of law clause
The same clause in viagogo’s terms and conditions also provided that the contract would “be governed by and interpreted in accordance with the Swiss laws, with the exclusion of its conflict of laws rules…”. The Commerce Commission argued that this part of the clause was unfair “because it imposes a prohibitive layer of cost on a consumer, being the cost of taking legal advice on Swiss law” (at [219]).
Peters J did not accept this argument. A consumer, when bringing proceedings against viagogo in New Zealand, would not be under an obligation to plead Swiss law. It would be up to viagogo to adduce evidence of the content of Swiss law if it wanted to rely on it (at [221]).
There was also no evidence to show that the application of Swiss law would give rise to a significant imbalance in the parties’ rights and obligations when compared to New Zealand law (at [221]). In fact, it was not clear what the proper law of the contract would be in the absence of the clause. It “would not inevitably be New Zealand law” (at [223]).
Three points in particular may be of interest here.
The first is that it is not inconceivable that a decision by viagogo to plead Swiss law could come with additional expense for New Zealand consumers. If viagogo decided to plead Swiss law, and Swiss law was found to be applicable, New Zealand law would no longer apply by default, and the presumption of similarity, too, may be unavailable to a consumer: see Brownlie v FS Cairo (Nile Plaza) LLC [2021] UKSC 45, [2022] AC 995 at [113]-[153].
The second point is that Peters J’s reasoning demonstrates a potential willingness to apply s 46L to the substantive effects of choice of law agreements. For example, if there was evidence that, under Swiss law, the consumer would have significantly fewer rights than under New Zealand law, then the clause could be considered unfair under s 46L, assuming that the objective proper law of the contract would actually be New Zealand law. However, it is not clear whether s 46L ought to be applied in this manner. The function of choice of law agreements is not to create rights and obligations under the chosen law (see Maria Hook The Choice of Law Contract (Hart Publishing, 2016 at ch 8, pt IIIA and ch 5, pt IIIB(2)), so it may not be right to say that the agreement would “cause a significant imbalance in the parties’ rights and obligations arising under the contract”.
Third, if a consumer sought to rely on s 46L to argue that a foreign choice of law clause is unenforceable, it might be faced with an argument that the foreign law, as the putative chosen law, should govern the validity of the clause, as opposed to New Zealand law. However, the consumer would still be able to argue that s 46L applies to the choice of law clause as an overriding mandatory rule (see The Conflict of Laws in New Zealand at 4.156).
Fourth, the Commerce Commission apparently did not argue that the choice of law clause was misleading, on the basis that consumers may consider themselves unable to seek relief under the FTA or the Consumer Guarantees Act 1993 (CGA) (cf Australian Competition and Consumer Commission v Valve Corporation (No. 3) [2016] FCA 196). It is unlikely that the choice of law clause would make relief under the FTA and the CGA unavailable. In a way, the continued availability of relief under these statutes might have been another reason why the choice of law clause was not unfair in substance, and may offer an additional explanation why the Court was not too concerned about the clause.
Concluding remarks
The judgment is a useful addition to the New Zealand jurisprudence on cross-border consumer contracts. New Zealand does not have general rules restricting the enforceability of dispute resolution clauses in consumer contracts per se. This approach is different from the approach taken in the European Union. The European Rome I Regulation, for example, submits consumer contracts to the law of the consumer’s place of habitual residence (provided the other party pursues their commercial or professional activities in that place, or directs their activities to that place); and it allows a choice of law to the extent that it will benefit the consumer (see art 6). Similar protections are available in relation to jurisdiction, under the Brussels I Regulation. In the absence of such general provisions, it is especially important that courts make use of the varied tools that are available to them to regulate the enforceability of jurisdiction and choice of law agreements in consumer contracts.
Carr v Peters: a potential case of trans-Tasman defamation
By Jack Wass (Stout Street Chambers)
A trans-Tasman controversy arose this week, when Australia’s former foreign minister, Bob Carr, accused New Zealand’s foreign minister and deputy prime minister, Rt Hon Winston Peters, of defamation. The allegation arose out of comments Peters made on Radio New Zealand’s Morning Report during a discussion of the Aukus partnership and the role of China in the region.
Carr has reportedly written to Peters threatening to bring defamation proceedings. Peters responded that this was not his “first legal rodeo”, and indeed he has given his name to a number of important decisions on the tort in New Zealand.
1News reports that Mr Carr intends to bring proceedings in New Zealand (rather than New South Wales, where he might have been be met by an argument that New Zealand was the appropriate forum).
The more interesting question is what law the New Zealand Court would apply in determining whether the statement was defamatory or is protected by privilege. Peters will no doubt argue that he should be judged according to New Zealand law when speaking in his official capacity about matters relevant to New Zealand’s public interests on a New Zealand radio station; Carr might argue that where Peters made comments calculated to damage his reputation, he should answer for them under the law of the place where Carr will suffer that damage. While both New Zealand and New South Wales law recognise defences of honest opinion and qualified privilege for political statements, it would not be safe to assume the outcome would necessarily be identical under both laws.
This tension has long existed in cross-border defamation cases, since both the place of the statement and the place of the damage will have obvious relevance. Unlike the United Kingdom, there is no special rule for defamation claims under the Private International Law (Choice of Law in Tort) Act 2017. That Act says that where the events in a tort claim arise in two different countries, the court applies “the law of the country in which the most significant element or elements of those events occurred” unless it is “substantially more appropriate for the law of another country” to apply, and there is a general safety-valve where the court can refuse to apply foreign law if it would conflict with principles of public policy (generally a high threshold). There is a sense in which these questions are question-begging, and ultimately the judge would have to make a judgement call about what connecting factor should be given the most weight in the circumstances. There is a prospect (whether appropriate or not) that that judgement itself might be informed by the Judge’s view of whether the statement in question was defensible.
Carr might elect to sue under New Zealand law and avoid this debate. If he does not, the court may well conclude that while New South Wales might be the place where the most significant element of the tort occurred, it is nevertheless more appropriate that a New Zealand court applies New Zealand law to political statements made by a New Zealand politician.
A-Ward Ltd v Raw Metal Corp Pty Ltd: no anti-suit injunctions to enforce jurisdiction agreements under the TTPA
The High Court recently decided that there is no role for anti-suit injunctions under the Trans-Tasman proceedings regime to enforce jurisdiction agreements falling within the scope of the regime: A-Ward Ltd v Raw Metal Corp Pty Ltd [2024] NZHC 736. This is an issue on which the secondary literature had been divided. An analysis of the judgment is available at conflictoflaws.net: https://conflictoflaws.net/2024/no-role-for-anti-suit-injunctions-under-the-ttpa-to-enforce-exclusive-jurisdiction-agreements/
Seminar: Hague Conventions on International Civil Procedure – Pathway to Adoption
This Friday (12 April) at 3 pm, Jack Wass and Maria Hook will be giving a seminar at the University of Otago on their project “Hague Conventions on International Civil Procedure – Pathway to Adoption”. This project, which is funded by the Borrin Foundation, explores a pathway for New Zealand to adopt four key treaties on international civil procedure developed by the Hague Conference on Private International Law – the Service Convention 1965, the Evidence Convention 1970, the Choice of Court Convention 2005, and the Judgments Convention 2019. The purpose of the project is to try and dislodge the inertia within the executive that has resulted in consideration of these Conventions stalling, by producing a briefing paper and draft legislation for the implementation of the treaties. The seminar will focus on the proposed pathway for adoption of the Conventions and discuss its potential effectiveness in encouraging New Zealand’s participation in international treaties (as well as in achieving law reform more generally).
There is a Zoom link available for anyone who would like to attend the seminar but is unable to do so in person. Please contact me if you would like to attend. It would be great to see you there.
The Court of Appeal on the enforceability of the nikah in New Zealand
The case of Almarzooqi v Salih has had a difficult history. Involving a claim under an Islamic nikah for the payment of a mahr, Ms Almarzooqi first sought to enforce a judgment from a Dubai court that had granted the order for payment. The Court of Appeal refused enforcement of the Dubai judgment on the basis that the court did not have personal jurisdiction over Mr Salih ([2021] NZCA 330, [2021] NZFLR 501). Leave to appeal to the Supreme Court was declined ([2021] NZSC 161, [2021] NZFLR 606). The plaintiff was left with no other option but to bring her claim again in the New Zealand court. The High Court held in the plaintiff’s favour ([2022] NZHC 1170), concluding that the agreement was governed by the law of UAE but that, whatever its proper law, the mahr had become payable. Mr Salih appealed, and the Court of Appeal has now decided that the case is not over yet, allowing the appeal and remitting the case to the High Court for reconsideration ([2023] NZCA 645).
The crux of the Court of Appeal’s decision was that the question of the nikah’s enforceability was governed by New Zealand law; that, pursuant to New Zealand law of contract, the nikah could not be properly interpreted without reference to its cultural context, including general principles of Sharia law; and that there was not sufficient evidence to undertake this interpretive task reliably in this case, due to the particular way the case had developed. Specifically, the question was whether, based on the general principles of Sharia law as applied as part of the factual matrix under New Zealand law of contract, the nikah required the defendant to pay the mahr by reason only of the fact of the divorce (or whether the plaintiff was required to make out specific grounds for divorce and, if so, whether she could do so on the facts).
Facts
I have outlined the facts of the case in previous posts on this blog (see here and here and here). Ms Almarzooqi, the plaintiff, and Mr Salih met on an Islamic dating site. Ms Almarzooqi was living in Australia at the time, and Mr Salih was living in New Zealand. They subsequently got married in Dubai in accordance with Islamic law, which involved the parties entering into a contract of marriage (the nikah). This contract provided that Mr Salih would pay Ms Almarzooqi a deferred mahr of about $230,000 in the event of Mr Salih’s death or the parties’ divorce. Ms Almarzooqi, a citizen of the United Arab Emirates (UAE), moved to New Zealand to live with Mr Salih, who had both Iraqi and New Zealand citizenship. After a few months the couple separated. Ms Almarzooqi subsequently obtained an order for divorce from the Dubai court on the ground that Mr Salih had mistreated her, as well as an order for payment of the mahr.
Promises to pay a mahr are enforceable under New Zealand law
The most important conclusion of the judgment – which is not, incidentally, a conflicts point – is that promises to pay a mahr are in principle enforceable under New Zealand law. This is a fascinating issue that is of practical importance to Muslim communities in New Zealand (see [13]).
The Court of Appeal confirmed that there was no reason why the nikah should not be enforceable on a contractual basis, referring to authorities from other common law jurisdictions ([69]-[91]). The nikah satisfied the pre-requisites for an enforceable contract, so “the mere fact it was entered into in the context of a religious ceremony should not, in itself, preclude it being enforceable as a contract at civil law” ([92]). Statutes like the Property (Relationships) Act 1976 (PRA) or the Domestic Actions Act 1975 (DAA) were no barrier to that conclusion ([94]-[99]). The nikah in this case was not entered into for the purpose of contracting out of the PRA ([98]), although this did not mean that a nikah could not be taken into account when making determinations under the PRA more generally ([99], see also here). The nikah was also not an agreement to marry, which meant the DAA was irrelevant ([94]). Finally, the nikah was not void as contrary to public policy ([100]-[101], referring to Radmacher v Granatino [2010] UKSC 42, [2011] 1 AC 534 in support of the conclusion; and see also here).
However, “[g]reat care” was needed when courts “embark on the task of interpreting a contract made within a particular cultural context” ([104]). The Court considered there were “some parallels with cases decided within the context of tikanga” (with the important difference, presumably, that tikanga is an independent source of law in Aotearoa New Zealand). This meant that nikah “cannot properly be interpreted in any given case without reference to that [cultural] context” ([105]) and required evidence about the general principles of Sharia law. The Court did not explain whether this approach effectively reflects the traditional doctrine of incorporation by reference, which allows parties to incorporate non-national law or principles into their contract to the extent permitted by New Zealand law (see Shamil Bank of Bahrain EC v Beximco [2004] EWCA Civ 19, [2004] 1 WLR 1784).
More specifically, the Court required evidence of general Sharia law as relevant under New Zealand law of contract, not the law of UAE. That is because there were differences in Sharia law as applied in different countries ([106]). Under UAE law, the reason for the divorce was irrelevant to the obligation to pay the mahr, but this did not mean that the position under New Zealand law would be the same. The Court did not elaborate on the interrelationship between general principles of Sharia as applied under New Zealand law, and general principles of contract interpretation. Based on the latter, it seems that there would be a good argument that the parties did not intend the mahr to depend on the reason for divorce, in light of the terms of the written document and the fact that a no-fault divorce would be available to them in the UAE and in New Zealand.
The proper law of the nikah
Insofar as questions of the conflict of laws are concerned, the Court of Appeal’s decision is interesting for two reasons: its (implicit) acceptance that the question of the nikah’s enforcement was to be characterised as contractual for choice of law purposes (for further analysis of this question, see here); and its particular approach to the identification of the proper law.
In relation to the latter, the Court set out the general test for the identification of the proper law of a contract: that the law governing a contract is the law the parties intended to be applicable or, in the absence of a choice by the parties, the law with the closest and most real connection. Interestingly, the Court did not seem to see a role for implied choice, saying that “in the absence of an express choice of law the task for the Court is to identify the jurisdiction with the closest and most real connection to the contract” (at [30]). The New Zealand position on implied choice of law has not been entirely clear (and the boundaries between express choice, implied choice and closest connection can be blurred in individual cases), but the evidence is now mounting that New Zealand courts treat implied choice as being of lesser general importance than some other common law courts (see Maria Hook and Jack Wass The Conflict of Laws in New Zealand (LexisNexis, 2020) at [6.13]-[6.16]).
The Court rejected the argument that the parties had made an express choice of UAE law. While the nikah showed an intention to be bound by Sharia law, this “did not equate to an express choice of UAE law” ([55]).
The law with the closest and most real connection was to be determined by reference to all the relevant circumstances, including “the place the contract was entered into and the circumstances in which it was entered into”, the form of the contract, the place of performance, and “the enforceability of the contract in the two jurisdictions, and any barriers to that process” (at [30]).
In the High Court, Simon France J had considered it particularly relevant that the parties had travelled to UAE to be married there in accordance with Sharia traditions (at [22], [26]). The intended residence in New Zealand was given less weight, partly because the obligation to pay the mahr “is unaffected by the place of residence” and “becomes relevant once the marriage is ended” (at [23]). Finally, despite the universality of the nikah (and the mahr), it was also relevant that UAE law – unlike New Zealand law – was a system reflecting Sharia principles (at [25]).
The Court of Appeal, on the other hand, considered that “the place where the contract would be performed, and the parties’ residency were significant” ([61]). There was an expectation that the couple would live permanently in New Zealand, and “[t]here was no reason to play down this aspect by suggesting that they might not do so” ([62]). If the marriage ended, the place of payment was likely to be New Zealand ([63]). What is more, there was a widespread practice of Muslim couples marrying by nikah in New Zealand in a domestic context, and New Zealand law was able to give effect to Sharia law concepts as part of the factual matrix of the contract. In these circumstances, the Court was “cautious” about the Judge’s reliance on the fact that UAE was a system reflecting Sharia principles ([66]-[67]). The parties married in the UAE to satisfy the wishes of the plaintiff’s family that “the couple marry in the UAE in a religiously appropriate ceremony”. The motivation for marrying in the UAE was not to “[secure] access to UAE law” ([68]).
The Court examined the issue carefully. Nevertheless, there are aspects of the reasoning that invite further analysis. For example:
- The (objective) proper law of the contract must be determined by reference to the circumstances as they existed at the time the contract was entered into. At that point, the plaintiff had not yet started her life in New Zealand, although the expectation was that the couple would live here. It is easy to imagine circumstances in which the parties could have changed their plans of settling in New Zealand (say, because of a job offer in Australia). In such circumstances, would it be unfair to subject a party in the plaintiff’s position to New Zealand law, to which she would have had no meaningful connection? This suggests that the expected place of residence ought to be treated with some caution, although the Court of Appeal was unpersuaded by the point. To the extent that the nikah is designed to protect the interests of the wife, it may also be appropriate to give greater weight to connecting factors that are focused on the wife, such as the country of the wife’s nationality or residence (here, the UAE).
- It does not seem unreasonable to assume that parties who enter into a contract would ordinarily expect that contract to be governed by a law that is well suited to give meaning to the contract. Here, UAE law seemed to have a clear answer to the question whether the fact of divorce was enough to trigger the obligation to pay the mahr. The position under New Zealand contract law, based on general principles of Sharia law, is more complex. In these circumstances, could the application of New Zealand law be understood as defeating the parties’ reasonable expectations as to choice of law? The Court of Appeal did not think so, emphasising the widespread practice of Muslim couples marrying by nikah in a New Zealand domestic context. However, the fact that Muslim couples in New Zealand are able to do so under New Zealand law, does not change the fact that, in a cross-border setting, foreign law might be a better fit and provide a more straightforward answer.
Some lingering characterisation issues
One of the main grounds of defence, which was only introduced on appeal, was whether the nikah was unenforceable as being contrary to the DAA and PRA. The Court rejected these arguments. From a conflicts perspective, it may be worth noting that the Court addressed these issues on the basis that the proper law of the nikah was New Zealand law. In other words, the Court seemed to suggest that the issues would not have arisen if the proper law had been UAE law (see [16]). However, it is not clear that issues under the DAA or PRA should be subject to the proper law of the contract (see here), although on the facts these characterisation questions were irrelevant.
Department of Corrections v Fujitsu: is the Australian CCA (potentially) applicable in a New Zealand court?
The High Court recently upheld a claim by the Department of Corrections (the Department) against Fujitsu New Zealand Ltd (Fujitsu) for breach of contractual warranties in the amount of close to $4 million: Chief Executive of the Department of Corrections v Fujitsu New Zealand Limited [2023] NZHC 3598. Fujitsu had promised to provide staff rostering software to the Department with “out of the box” functionality. It turned out that the software, which was supplied by Dassault Systèmes Australia Pty Ltd (Dassault), required expensive customisation to meet the Department’s requirements. This was contrary to Fujitsu’s representations to the Department, and also contrary to Dassault’s representations to Fujitsu.
In this note, I want to focus on the cross-border aspects of Fujitsu’s consequential claims against Dassault. Fujitsu advanced its claims under both the Australian Competition and Consumer Act 2010 (CCA) and its New Zealand equivalent, the Fair Trading Act 1986 (FTA). A potential advantage of the CCA, for Fujitsu, was that – unlike the FTA – it did not allow parties to contract out of liability, in circumstances where Fujitsu and Dassault had included exclusion and limitation of liability provisions in their contract. The case had connections to Australia, because Dassault was an Australian company, and some of the allegedly wrongful conduct occurred, at least partly, in Australia. Unsurprisingly, Dassault took the position that the CCA could not be relied upon.
Cooke J decided that the CCA was not applicable because it conferred exclusive jurisdiction on the Federal Court of Australia (at [251]), and that the exclusion and limitation of liability clauses were generally effective under the Fair Trading Act 1986 (except in relation to one of Dassault’s misrepresentations, concerning payment of a licence fee).
The question whether foreign statutes are available to New Zealand litigants is not entirely straightforward. This is not the first time that a New Zealand court has had to grapple with the issue. However, there are some useful general principles that courts may turn to, which are outlined in this note.
The decision
Dassault argued that the CCA could not be applied because the relevant choice of law rules identified New Zealand law as the law governing the issue (at [246]). Thus, regardless of whether the issue was characterised as tortious or contractual, New Zealand law was applicable, and the question whether the CCA was applicable on its terms did not arise. Moreover, the CCA could not apply on its terms, because s 138 conferred exclusive jurisdiction on the Federal Court of Australia.
Cooke J disagreed that the issue was “to be resolved by choice of law analysis” (at [247]). Considering that Dassault’s conduct occurred partly in Australian and partly in New Zealand, it was possible “that both the FTA and CCA could apply to Dassault’s conduct”. Hence, it was “not a matter of determining which law applies under choice of law principles” (at [247]). Rather, it was a matter of statutory interpretation, “much as it is when the Court interprets New Zealand legislation with apparent extra-territorial effect”, in cases such as Brown v New Zealand Basing Ltd [2017] NZSC 139, [2018] 1 NZLR 245.
The CCA has been construed as having a broad scope of cross-border application. Section 5 extends the application of the Act to the engaging in conduct outside Australia by companies incorporated or carrying on business in Australia, and in a case delivered shortly before Cooke J’s judgment, the High Court of Australia confirmed that s 5 is not subject to further limitations, whether they are implied (unilateral) cross-border limits or common law choice of law rules: Karpik v Carnival plc [2023] HCA 39. In any case, some of Dassault’s conduct had taken place in Australia.
Cooke J acknowledged that “[t]he starting point for Fujitsu was promising” (at [248]). However, there was “an insurmountable difficulty with Fujitsu’s argument”, which was s 138, which conferred exclusive jurisdiction on the Federal Court of Australia. This provision “means what it says”, even though it was “no doubt primarily directed to the question of state and/or federal jurisdiction” (at [251]). The effect of the provision, as interpreted by the Australian courts themselves, was “that nobody can bring proceedings under the CCA in any other Court” and that “[t]he High Court of New Zealand is in no different position from any of the State Courts of the Commonwealth”. Cooke J here referred to the decision in Home Ice Cream Pty Ltd v McNabb Technologies LLC [2018] FCA 1033, where the Federal Court granted an anti-suit injunction in relation to US proceedings on the basis that the CCA claim was not available in the United States.
The result was that the FTA alone was applicable, with the result that the parties’ ability to exclude and limit liability was not, in principle, excluded.
The application of foreign law depends on choice of law
The first point is that foreign law cannot usually be applicable in a New Zealand court unless the court has given effect to a choice of law rule designating the foreign law as the law that governs the issue. Cooke J’s assumption that the approach in Brown v New Zealand Basing Ltd [2017] NZSC 139, [2018] 1 NZLR 245 applies equally to foreign statutes was incorrect. In other words, foreign statutes cannot apply on their own terms (Maria Hook and Jack Wass The Conflict of Laws in New Zealand (LexisNexis, 2020) at [4.127]). As the High Court of Australia has noted only recently, “whether Australian law, and Australian judgments, are recognised in other jurisdictions, and in what circumstances, is a matter for foreign law” (Karpik v Carnival plc [2023] HCA 39 at [50]).
In theory, there may be exceptions to this principle – for example, some scholars argue that there are (defined) circumstances in which courts may need to give effect to foreign overriding mandatory rules (see Uglješa Grušić “Some Recent Developments Regarding the Treatment of Overriding Mandatory Rules of Third Countries” [2020] ELTE Law Journal 89). Yet the general principle must surely be correct. It would not be right for New Zealand courts to apply foreign law simply because a foreign legislator has deemed its application to be appropriate. What about, for example, a Ruritanian statute that is intended to apply universally, to cases that have no connection to the forum whatsoever? This is an extreme example, but it illustrates the point. Or what if Dassault was incorporated in France, and French law provided that exclusion clauses in contracts with French companies must always be given effect?
In this context, choice of law rules serve a quasi-constitutional function. Dispensing with them, as Cooke J here did, was not an option, even though this means that foreign statutes are (potentially) treated differently from domestic ones.
No concurrent application of New Zealand and foreign law
The second point, which follows from the first, is that New Zealand law and foreign law do not usually apply cumulatively (see Hook & Wass at [6.91]). The very purpose of choice of law is to identify the law of the country that is best suited to govern a matter. Thus, where the respective claims (under New Zealand and foreign law) are concerned with the same issue, and New Zealand law applies, there is no need to go on to ask whether choice of law rules also lead to the application of foreign law.
Where New Zealand law applies unilaterally, as it does in the case of the FTA (see s 3), the start and the end point is New Zealand law, unless the case falls outside of the cross-border scope of the statute. In this latter scenario, if New Zealand law has been found not to be applicable, it would then be necessary to characterise the issue to identify the relevant choice of law rule (eg, tort or contract), in order to determine whether the claim can nevertheless be brought under foreign law.
This approach is not only principled but also convenient. If New Zealand and foreign law were able to apply cumulatively, then how would a court resolve a potential conflict of laws? For example, if Cooke J had found that s 138 was no bar to the CCA’s application in New Zealand, how would his Honour have approached the enforceability of the exclusion and limitation of liability provisions, which were effective in principle under the FTA but not the CCA?
This point is contrary to Cooke J’s view that both the FTA and CCA could apply to Dassault’s conduct, unless his Honour was referring to the relevance of the CCA in a hypothetical Australian proceeding. Cooke J’s approach is not, in fact, unprecedented. In Murren v Schaeffer [2018] NZHC 3176, the Court apparently assumed that the Nevada Deceptive Trade Practices Act applied in New Zealand on its own terms, with the result that the claimants were entitled to judgment under both the US Act and the FTA. In effect, this would mean that a plaintiff gets to pick the legislation that is most favourable to them. The better view, therefore, is that the approach adopted in Murren v Schaeffer was incorrect.
The subject-matter jurisdiction of the New Zealand court to apply a foreign statute
In certain circumstances, the New Zealand court may not have subject-matter jurisdiction to determine a claim based on foreign law. This is primarily a question of New Zealand law. For example, it may not be appropriate for a New Zealand court to apply foreign consumer legislation tailored to the market demands of the particular forum (but see Hook & Wass at [6.90]).
Even though the question is primarily a question of New Zealand law, foreign law, too, may become relevant, if it purports to exclude a foreign court’s jurisdiction to give effect to it. There is an argument that such foreign provisions should play no role in a New Zealand court, based on the general principle that the New Zealand court does not usually give effect to foreign rules of the conflict of laws (in other words, the court does not usually apply the principle of renvoi). However, an appropriate compromise may be to treat the foreign law as self-limiting (Hook & Wass at [4.129]-[4.130]). The question whether a foreign statute is self-limiting would then be a question of statutory interpretation (assuming, of course, that the foreign law has already been identified as being applicable as a matter of choice of law).
Ordinarily, provisions such as s 138 are interpreted as having a purely domestic focus. In Rimini Ltd v Manning Management and Marketing Pty Ltd [2003] 3 NZLR 22 (HC), for example, Randerson J concluded that the definition of “Court” in the Contractual Mistakes Act 1979, which referred to the High Court, a District Court or a Disputes Tribunal, did not preclude the Supreme Court of New South Wales from granting remedies under the Act (see also Amaca Pty Ltd v Frost (2006) NSWCA 173, (2006) 67 NSWLR 635). In Thomas v A2 Milk Company Ltd (No 2) [2002] VSC 725, the Supreme Court of Victoria considered Rimini when determining that the FTA and the Financial Markets Conduct Act 2013 (NZ) should not be construed as conferring exclusive jurisdiction on New Zealand courts (for my blog post on this, see here).
Interestingly the Federal Court in Home Ice Cream Pty Ltd v McNabb Technologies LLC [2018] FCA 1033 did not seem to follow this approach when, in relation to a claim under the CCA, it restrained proceedings brought by the defendant in the United States because “[t]he only court which is capable of determining the questions which [the plaintiff] seeks to litigate (other than the High Court of Australia in exercising its appellate jurisdiction) is the Federal Court of Australia …” (at [19]). Thus, based on the evidence of Australian law before Cooke J, s 138 was arguably intended to be self-limiting in an international sense. So if the FTA had not been applicable, and Cooke J had found Australian law to be the governing law, his Honour would have been correct to exclude the application of the CCA (in the absence of contrary evidence on the meaning of s 138), assuming that it is right that the application of foreign territorial provisions does not fall foul of the principle against renvoi.
Lun v Kong: confusion about subject-matter jurisdiction
Cross-border adjudicatory jurisdiction can be split into two types: personal jurisdiction and subject-matter jurisdiction. Personal jurisdiction is the main vehicle for determining whether a New Zealand court will exercise jurisdiction over a particular defendant. Subject-matter jurisdiction plays a more targeted role. For example, a New Zealand court may lack subject-matter jurisdiction to hear a claim involving questions of title to foreign land. As a concept, subject-matter jurisdiction has – at least traditionally – been much less visible than personal jurisdiction. But it has received increased attention in the New Zealand courts over the past few years (see, eg, Almarzooqi v Salih [2021] NZHC 330, [2021] NZFLR 501; Mao v Findlay [2022] NZHC 521 at [51]; Johnston v Johnston [2020] NZHC 2887, [2020] NZFLR 594 at [38]).
Subject-matter jurisdiction is an important concept (see CLNZ, ch 2.E). It can play a useful role in shaping the proper reach of the court’s adjudicatory powers. However, because of its complex interrelationship with choice of law, it is important that the functions of subject-matter jurisdiction are clearly understood and carefully circumscribed. Without a good grasp of the concept, there is a risk of methodological confusion. This risk was highlighted by Goddard J in Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [50], where his Honour cautioned that the term should not be used where the issue concerned the law applicable to the claim – for example, the question of whether a particular statutory provision can be applied to a case involving foreign facts (for a more detailed analysis of this particular point, see CLNZ at [2.334]).
This kind of confusion is evident from a recent case, Lun v Kong [2023] NZHC 1317. Here, the concept of subject-matter jurisdiction ended up unduly encroaching on the territory of choice of law and thus confusing the proper nature of the court’s enquiry. The plaintiff, Mr Lun, alleged that the defendant, Mr Kong, had committed a breach of trust in relation to shares issued in a Chinese company. The question before the Court was whether New Zealand was the appropriate forum to determine the claim.
There was no real basis for arguing that the New Zealand Court lacked subject-matter jurisdiction to determine the dispute. In particular, Associate Judge Taylor had no trouble rejecting an argument by the defendant that the claim concerned corporate arrangements within China (which would have been under the exclusive jurisdiction of the Chinese courts and thus given rise to a true question of subject-matter jurisdiction) (at [75]). Nevertheless, the Court proceeded to consider – on a more general basis – whether New Zealand had subject-matter jurisdiction to determine the dispute, prompted (presumably) by counsel’s submissions to that effect.
In a brief analysis, the Judge relied on a number of connecting factors to conclude that the Court did have subject-matter jurisdiction: the fact that the parties’ arrangements giving rise to the alleged trust/fiduciary obligations were “mostly connected with New Zealand” or were “brought into existence in New Zealand”, and the fact that both parties lived in New Zealand and the defendant was a New Zealand citizen (at [76]). To the extent that this reasoning suggests that a New Zealand court will lack subject-matter jurisdiction over a claim unless it is the forum most closely connected to the claim, it is incorrect. There is no general limitation on the court’s subject-matter jurisdiction based on a requirement of closest connection.
The concept of (closest) connection is an important organising principle in the conflict of laws, but its principal relevance is to the questions of choice of law (ie, what system of law governs the claim, which depending on the nature of the issue may be the legal system of the country most closely connected to the claim) and of the appropriate forum or forum non conveniens, which determines whether the court will exercise personal jurisdiction (since the connections between the claim and New Zealand will influence the question of whether it is the appropriate forum for the trial of the action).
The discussion of subject-matter jurisdiction did not add anything to the Court’s analysis. What is more, it detracted from the more relevant questions of choice of law and appropriate forum. There was a disagreement between the parties as to the proper characterisation of the claim and the implications of this for choice of law purposes. The plaintiff argued that the claim involved a trust issue, that this issue was governed by New Zealand law, and that the applicability of New Zealand law favoured New Zealand as the appropriate forum. The defendant made competing arguments. The Court did not address the question of choice of law head-on, but closer engagement with this question would have been valuable, and might also have aided in the Court’s identification of the appropriate forum.
