By Maria Hook (University of Otago)
In the aftermath of the Whakaari/White Island tragedy, questions are now being raised regarding the potential civil liability of the cruise line, Royal Caribbean (see Anne Gibson “The Culpability Question” (NZ Herald, 12 December 2019); “Royal Caribbean liability for volcano deaths may turn on ‘act of God’ defense” (Reuters, 13 December 2019)). In this note I intend briefly to outline the cross-border considerations relevant to these questions. These arise because many of the victims are overseas residents (including Australian and US residents); Royal Caribbean is an overseas company incorporated in the United States; and the cruise commenced in Australia.
Cover under ACC
The first point to note is that under New Zealand law physical injuries or death caused by the eruption are covered by the Accident Compensation Act 2001, regardless of whether the victims were tourists or New Zealand residents. The Act provides no-fault compensation for all “personal injury” suffered in New Zealand, as provided for in s 20 of the Act.
However, entitlements available to non-residents are more limited. In particular, non-residents do not usually qualify for compensation for loss of income (the Act covering loss of “earnings” that is income derived for the purposes of the Income Tax Act 2007); and costs incurred outside New Zealand for any rehabilitation are excluded (see s 128, which is subject to costs for attendant care as provided for in s 129). Entitlements under the Act are also likely to be much lower than an award for civil damages. So while the ACC scheme covers the victims’ medical costs in the immediate aftermath of the tragedy, that is likely to be the extent of the entitlements for tourists who will ultimately return home.
This raises the question whether Royal Caribbean may still be held civilly liable for personal injuries or death suffered by its passengers. In a purely domestic context s 317 of the Act would apply to bar proceedings for damages arising out of personal injury covered by the Act (with the exception of proceedings for exemplary damages). But the effect of the bar is less clear-cut in cases involving foreign elements.
Personal injury bar: proceedings in New Zealand
Even though Royal Caribbean is an overseas company, there is a clear basis for the New Zealand court to assume jurisdiction over a civil tort claim (such as for negligence) relating to injuries or death suffered by its passengers. Assuming that Royal Caribbean does not have a presence in New Zealand (such as a place of business), and therefore may not be served here as of right, claimants could rely on r 6.27(2(a) of the High Court Rules to serve the company out of New Zealand on the basis that “the damage was sustained in New Zealand”. The New Zealand court would still have a discretion whether to assume jurisdiction. In particular, the court may give effect to an agreement between the parties to select the courts of another country (such clauses being standard practice in contracts of this kind), or the court may conclude that New Zealand is not the appropriate forum to hear the claim.
If the New Zealand court assumed jurisdiction over the claim, the crucial question to answer would be whether the claim would in any case be barred by s 317 of the Act. This question depends on two factors: first, whether New Zealand law or foreign law applies to the tort claim; and second, whether s 317 would apply to override the law applicable to the claim if it is not New Zealand law.
Under the Private International Law (Choice of Law in Tort) Act 2017, the law applicable to the claim would probably be the law of New Zealand. Section 8 provides that the law governing a tort is the law of the country in which the events constituting the tort in question occur. It further specifies, in subs (2)(a), that where elements of those events occur in different countries, the applicable law in relation to personal injury or death is the law of the country where the individual was when they sustained the injury. Here, that country is New Zealand. If s 8 applied, the law applicable to the claim would be New Zealand law, with the result that s 317 would be applicable. It would be unnecessary in such a case to go on and ask whether s 317 has overriding mandatory effect.
However, depending on the facts of the case, there might at least be an argument that s 8 should not apply. Royal Caribbean’s terms and conditions almost certainly included a choice of law clause selecting a foreign law to govern any disputes between the parties. Section 11(2)(c) provides that the Act does not preclude “recognition or development of a choice of law rule giving effect to an agreement as to the applicable law”; so it is theoretically possible that a New Zealand court may decide to give effect to the parties’ choice of law. Moreover, s 9(1) provides that the general rule is displaced if the court determines that it is “substantially more appropriate” for the law of another country to be the applicable law. In determining whether there is a substantially more appropriate law to be applied, the court would have regard to a range of factors, including (probably) the choice of law clause and factors relating to the parties that suggested their relationship was more closely connected to the United States or Australia.
If the court determined that the applicable law was not New Zealand law, s 317 would still apply if it was interpreted as having overriding mandatory effect. Whether s 317 has overriding mandatory effect is a matter of argument. The Justice and Electoral Committee did not regard it as necessary to amend the Private International Law (Choice of Law in Tort) Bill by conferring express overriding mandatory effect on the personal injury bar (see Campbell McLachlan, Jack Wass and Maria Hook “Submission on the Private International Law (Choice of Law in Tort) Bill”: available at www.parliament.nz). So claimants remain free to argue that foreign law affords them a right to claim damages for personal injury that is covered under New Zealand’s no-fault regime. However, Parliament appears to have contemplated that personal injury litigation should not form part of the New Zealand legal landscape where ACC cover is available (see (26 July 2017) 724 NZPD 19556; see also Ministry of Justice “Departmental Report on the Private International Law (Choice of Law in Tort) Bill” at [42]: available at www.parliament.nz.). So New Zealand courts would likely conclude s 317 applies in all proceedings in New Zealand.
This means that s 317 would also be applicable to any contract claim that the victims would otherwise be able to pursue in the New Zealand courts (to the extent that such a claim would seek damages for personal injury). The law applicable to cross-border contracts is the law the parties intended to be applicable or else the law with the closest and most real connection (New Zealand Basing Ltd v Brown [2016] NZCA 525, [2017] 2 NZLR 93 (CA) 102 at [30] (reversed on different grounds)). If, based on this rule, the law governing the contract was foreign law (for example, because there was a choice of law clause in the contract selecting foreign law), but s 317 was interpreted as having overriding mandatory effect, s 317 would apply to bar the claim.
Personal injury bar: proceedings overseas
Whether a foreign court would exercise jurisdiction over the claim is a matter for the conflict of laws of that country. However, it is clear that US courts would have jurisdiction, because Royal Caribbean is headquartered there; and if the company has a place of business in Australia, then so would the Australian courts. Again, a jurisdiction agreement would be a relevant factor.
But this does not mean that s 317 would necessarily be inapplicable to such a proceeding. Depending on the applicable choice of law rules, and the effectiveness of any choice of law clause, the law to be applied by the foreign court may still be New Zealand law. For example, Australian courts might apply the law of the place where the tort was committed, which could well be New Zealand law (see John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503, Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491). If so, s 317 would probably apply as part of New Zealand law, on the basis that it is a rule of substance rather than procedure (see James Hardie and Company Pty Ltd v Hall (1998) 42 NSWLR 554; Amaca Pty Ltd v Frost (2006) 67 NSWLR 635 at [65]; Allen v DePuy International Ltd [2015] EWHC 926). Alternatively, if the claim was brought in contract, courts might give effect to a choice of law clause in the contract, which would probably result in the application of a law other than New Zealand law.
It follows that a claimant’s chances of bringing a civil suit against Royal Caribbean would be greater overseas than they are here. If the foreign court determines that the claim is governed by a law other than New Zealand law, then s 317 will not apply. However, it is not out of the question that a foreign court would apply New Zealand law and, therefore, give effect to s 317.
