Skip to Navigation Skip to Content Skip to Search Skip to Site Map Menu
Search

Author Archives: Maria Hook

Zuru v Glassdoor and international judicial assistance

By Jack Wass (Stout Street Chambers)

International civil procedure has broken into the mainstream news cycle with the US District Court ordering disclosure of the identity of former employees of a New Zealand company who posted scathing reviews of the company online.

Glassdoor, a company headquartered in California, enables employees to post anonymous reviews of their employer. One or more employees posted highly critical reviews of the New Zealand toymaker Zuru. Before Zuru could bring defamation proceedings, it had to find out the identity of the reviewers. It applied for a subpoena in the US District Court for the Northern District of California requiring the website to disclose this information. Magistrate Judge Alex Tse granted the order, opening up the potential for Zuru to bring defamation proceedings against employees who had posted under what they must have thought was a cloak of anonymity.

Debate has swirled over the implications of the decision for employees, employers and the role of online reviews more generally – see, for example, https://thespinoff.co.nz/the-bulletin/22-07-2022/the-implications-of-the-glassdoor-decision-for-new-zealandershttps://www.theguardian.com/world/2022/jul/19/glassdoor-ordered-to-reveal-identity-of-negative-reviewers-to-new-zealand-toymaker and https://www.stuff.co.nz/business/129328682/order-for-glassdoor-to-reveal-employee-identities-could-make-website-unviable.

But the decision is also an illustration of international judicial cooperation in action, and the extent to which the conflict of laws is designed to ensure that national borders do not provide a barrier of immunity. Zuru invoked § 1782, a provision of the US Code that enables a district court to assist in gathering evidence to assist proceedings in a foreign court.  Whatever one’s opinion of the merits of allowing Zuru to sue (or intimidate) disgruntled former employees, the purpose of that mechanism (and the equivalent rules in New Zealand’s Evidence Act 2006) is to ensure that the trial court is able to decide the case with the benefit of all the evidence it requires, so that a defendant cannot hide behind the fact that relevant evidence happens to be in a server in another country.

In making his decision, Judge Tse was alert to the competing policy concerns. He had to consider the relevant New Zealand authorities to satisfy himself that a claim in defamation under New Zealand law was tenable, and concluded that the reviewers’ expected reliance on a defence of honest opinion was a matter for trial that did not justify refusing disclosure in the first place. It remains to be seen whether Zuru will pursue a defamation action, or whether it was a sensible public relations decision to embark on the exercise in the first place, but the decision is a useful illustration of the practical significance of international civil procedure.

Does New Zealand consumer legislation apply to a claim against a foreign manufacturer?

In Body Corporate Number DPS 91535 v 3A Composites GmbH [2022] NZHC 985, the High Court recently concluded that neither the Consumer Guarantees Act 1993 (CGA) nor the Fair Trading Act 1986 (FTA) applied to a claim against a German manufacturer of cladding products.

The defendant, 3A Composites GmbH (3AC), was a German manufacturer of a cladding product installed on the plaintiffs’ buildings. The plaintiffs alleged that the product was highly flammable because it contained aluminium composite panels with a polyethylene core. Panels of this kind were the main reason why the fire at Grenfell Tower in London had spread so rapidly. The plaintiffs brought proceedings against 3AC, as well as the importers and distributors of the cladding in New Zealand. They alleged negligence, breach of s 6 of the CGA and breaches of the FTA. In response, 3AC protested the New Zealand court’s jurisdiction.

The High Court upheld 3AC’s protest in relation to the CGA and FTA causes of action, on the basis that they fell outside of the territorial scope of the Acts. In relation to the CGA, the Court concluded that the Act did not apply to an overseas manufacturer like 3AC that did not have a presence in New Zealand (see [38]–[47]). In relation to the FTA, the Court concluded that the Act did not apply to 3AC’s allegedly misleading or deceptive conduct, apparently on the basis that the conduct did not fall within s 3(1) extending the Act to “conduct outside New Zealand” (at [117]).

An analysis of the decision is available in the latest issue of the New Zealand Law Journal: Maria Hook “Does New Zealand consumer legislation apply to a claim against a foreign manufacturer?” [2022] NZLJ 201. The note argues that the Court misapplied the principle of territoriality and that, on a closer examination of the statutes – combined with an application of the general principles of the conflict of laws – the claims were at least arguably covered by New Zealand law.

ABLI-HCCH webinar: Cross-Border Commercial Dispute Resolution – HCCH 2005 Choice of Court and 2019 Judgments Conventions (27 July 2022) 

Readers of this blog may be interested that the Singapore-based Asian Business Law Institute (ABLI) and the Permanent Bureau of the Hague Conference on Private International Law (HCCH) are co-hosting a webinar on the HCCH 2005 Choice of Court Convention and the 2019 Judgments Convention on Wednesday, 27 July. Details about the webinar can be found here. New Zealand is not currently a party to either Convention, but there are good reasons why it should consider joining both schemes.  One of the speakers will be Justice David Goddard of the Court of Appeal, who chaired the Diplomatic Session that adopted the Judgements Convention.

The High Court grants claim for breach of a promise to pay a mahr

By Maria Hook (University of Otago)

Is a claim for the breach of a deferred mahr agreement enforceable in a New Zealand court? This question arose in the context of proceedings between Ms Almarzooqi and Mr Salih, which was the subject of previous posts on this blog. The High Court has now granted Ms Almarzooqi’s claim ([2022] NZHC 1170): parties may indeed be held to a promise to pay a mahr upon divorce.

In a succinct judgment, Simon France J held that the agreement was governed by the law of UAE but that, whatever its proper law, the mahr had become payable.

  • On the proper law point, his Honour 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], cf Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] 1 AC 50 (HL) for an interesting parallel).
  • Regardless of whether UAE or New Zealand law was applicable, his Honour held that the mahr had become payable upon divorce ([40] and [45]). The particular ground of divorce was immaterial. In other words, the court was not required to consider whether the plaintiff was in fact entitled to obtain a divorce under Sharia law.

Notably, the defendant did not dispute that the promise to pay the mahr was to be characterised as contractual. He also did not argue that enforcement of such a promise – whether pursuant to foreign law or New Zealand law – would be contrary to public policy in principle. The Court therefore did not consider these questions, noting only that a different characterisation was arguable (referring to this post).

The confined nature of the issues must be borne in mind when assessing the precedential weight of the decision. Yet, despite this caveat, the fact remains that the Court was happy to enforce the promise, on the basis of a contractual approach. For the reasons explored in my previous post, this may well be the most appropriate solution to the problem of the mahr.

Child support and family maintenance under the 2007 Hague Convention

By Maria Hook (University of Otago)

As we have previously noted on this blog, many areas of private international law benefit from international cooperation and harmonisation. The recovery of child or spousal maintenance is no exception. A person who seeks to recover maintenance from a person in another country may face significant hurdles. They may find, for example, that they are entitled to maintenance in their own country of residence but that a decision to that effect is not recognised or enforceable in the debtor’s country; or they may lack the resources or expertise to bring an application in a (to them) foreign country. The worst-case scenario is that the other party avoids all liability simply because they are located in another country.

In a previous post we shared the news of New Zealand’s signing of the Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance (concluded 23 November 2007, entered into force 1 January 2013) (the Convention). With 43 contracting States (including the European Union, the United Kingdom, Brazil and the United States), the Convention offers a well-established framework to facilitate the cross-border recovery of maintenance. New Zealand has now ratified the Convention and given effect to it by way of an Order in Council under s 215 of the Child Support Act 1991.

The purpose of this post is to provide a brief overview of the main features of this new regime. As between contracting States, it will largely replace the obligations assumed under the United Nations Convention on the Recovery Abroad of Maintenance (UNCRAM) (signed 20 June 1956, entered into force 25 May 1957) and the Commonwealth Scheme. It does not affect the bilateral agreement with Australia on child and spousal maintenance as given effect in Child Support (Reciprocal Agreement with Australia) Order 2000.

What does the Convention do?

The Convention has three main functions. First, it provides for the recognition and enforcement of maintenance decisions of other contracting States. A decision must be recognised and enforced if it falls within one of the six bases of recognition and enforcement set out in Art 20(1). These bases are broad in scope. It is sufficient, for example, that either the respondent or the creditor was habitually resident in the contracting State at the time proceedings were instituted. The obligation to recognise and enforce maintenance decisions is subject only to the narrow exceptions listed in Art 22 (for example, that recognition and enforcement would be manifestly incompatible with public policy).

The effect of these rules is to make maintenance decisions more enforceable as between contracting States. Under New Zealand common law, the only decisions that are generally enforceable in New Zealand are judgments for a fixed sum of money (Maria Hook and Jack Wass The Conflict of Laws in New Zealand (LexisNexis, 2020) at 5.C.3). Administrative decisions are unenforceable, as are decisions for the periodic payment of maintenance. The grounds for recognition and enforcement are more narrowly conceived, too, requiring the respondent’s presence or submission. Similarly, UNCRAM and the Commonwealth Scheme do not apply to administrative decisions and, in fact, UNCRAM does not directly provide for the recognition and enforcement of maintenance at all, focusing instead on cooperation in the establishment of maintenance decisions (at 9.181).

By contrast, the Convention is designed to capture maintenance in all its forms (Art 19), from countries that have a sufficiently close connection to the matter (see Art 20(1)). Not only does this mean that foreign maintenance decisions can more easily be enforced in New Zealand; New Zealand decisions, too, will enjoy more widespread recognition overseas. It is estimated that the Convention will enable recovery of about $7.7 million in outstanding child support payments (Ministry of Foreign Affairs and Trade National Interest Analysis: Hague Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance at [20]).

The second main function of the Convention is to provide for administrative cooperation between contracting States in the establishment, management, enforcement and collection of maintenance (Chapters II and III). This framework builds and improves on mechanisms that were first introduced under UNCRAM (see Alegría Borrás and Jennifer Degeling Explanatory Report on Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance (HccH) at [2], [4]), and it replaces UNCRAM insofar as the two Conventions coincide (Art 49). Cooperation takes place through a system of Central Authorities established under the Convention.

An important focus of cooperation is the transmission of applications for maintenance, which makes it easier for claimants to access maintenance in (to them) foreign legal systems. A claimant resident in Country A (the requesting State) can apply through the Central Authority in Country A to obtain a maintenance decision in Country B (the requested State). The Convention does not, however, provide for uniform rules of jurisdiction (see Art 10(3)). This means that it is a matter for the law of Country B whether it has jurisdiction to make a maintenance decision (for example, on the basis that the child or the debtor is resident in the country). The Convention merely restricts proceedings for maintenance where there is an existing decision from a country that is a party to the Convention and the creditor is habitually resident in that country (Art 18).

The third function of the Convention is to ensure that processes for the cross-border recovery of maintenance are accessible, efficient and simple. This means, for example, that foreign maintenance decisions are to be registered or declared enforceable “without delay” (Art 23), and that registration or enforcement does not ordinarily require an application to the court (see Art 23, cf Art 24). In New Zealand this task falls to the Inland Revenue.

Scope: child support and spousal maintenance

The primary focus of the Convention is on child support, and it is in this area that the Convention will have the greatest impact. In addition, New Zealand has opted to extend the entire Convention to spousal maintenance, with the result that all of its features will be available vis-à-vis countries that have done the same (Art 2). Some parts of the Convention are automatically applicable to spousal maintenance (all parts except for Chs II and III on cooperation and establishment of a system of Central Authorities, which, however, apply to applications for recognition and/or enforcement that form part of a claim for maintenance arising from a parent-child relationship (Art 2(1)(b)).

The Convention also gives States the option to extend the Convention to maintenance obligations arising from other family relationships (Art 2(3)). New Zealand has not entered a declaration to that effect even though, under New Zealand law, maintenance is available outside of spousal and parent-child relationships (ie civil unions and de facto relationships). This omission may in part be explained by the reluctance of other contracting States. The European Union, for example, has refrained from extending the Convention to other family relationships, undertaking instead to “examine the possibility” of doing so within seven years (compare Brazil, which has extended the Convention to obligations to provide maintenance “arising from collateral kinship, direct kinship, marriage or affinity, including, in particular, obligations in respect of vulnerable persons”). Given that any extension would only become effective in the case of matching declarations, there would have been limited immediate practical benefit in New Zealand extending the scope of the Convention to civil unions or de facto relationships. Be that as it may, it is a shame that New Zealand did not take the opportunity to lead the way by being one of the first countries to extend the Convention in this manner, which might have provided an incentive for other countries to follow suit.

Implementation of the Convention

The Convention is given effect by the Child Support (Reciprocal Agreement with Hague Convention Countries) Order 2021, made under s 215 of the Child Support Act 1991. The Order achieves this largely by providing that the definitions of “child support” and “domestic maintenance” in s 2(1) of the Act have effect as if they included “payments required to be made under administrative assessments or court orders made by a contracting State” (see Schedule 2).

It has already been pointed out that the Convention does not include uniform rules of jurisdiction. In other words, the question whether New Zealand authorities have the power to make a maintenance decision continues to be determined under New Zealand law. Sections 5(1)(d) and 6(1)(b) of the Act set out the jurisdictional requirements for making a child support assessment. In particular, a child will only qualify for child support if they are either a New Zealand citizen or ordinarily resident in New Zealand, and child support may only be sought from a parent “who is a New Zealand citizen or is ordinarily resident in New Zealand”, or from a parent who is ordinarily resident in a country with which New Zealand has entered into a reciprocal agreement for enforcement of child support”. The Order purports to extend these grounds of jurisdiction, by stating that ss 5(1)(d) and 6(1)(b) of the Act have effect as if they included a child and parent who are “habitually resident in a contracting State”. Given that the Convention itself does not provide for uniform rules of jurisdiction, the rationale for extending ss 5(1)(d) and 6(1)(b) in this way is unclear.

New Zealand’s continued failure to sign the Hague Service Convention

By Jack Wass

A recent High Court judgment demonstrates the real costs of New Zealand’s poor record on accession to international civil cooperation treaties. The Hague Service Convention was concluded in 1965 and enables the service of originating documents overseas for the purpose of civil proceedings. It has been signed by dozens of countries, and is particularly important when dealing with civil law countries who regard service as a sovereign act that cannot be effected by private parties, but requires official sanction.

In Huang v Huang [2021] NZHC 2902, Campbell J found that the Court did not have jurisdiction in a case involving property investments in Auckland because the proceedings had been served in China contrary to the law of that country. If New Zealand were a party to the Service Convention, that problem would not have arisen. Although it ultimately made no difference on the facts (because the judge found that New Zealand wouldn’t have been the appropriate forum for the trial), it illustrates the real practical consequences of New Zealand’s failure to accede to what should be an uncontroversial convention.

Conflict of laws in New Zealand courts: retirement of Associate Judge Bell

By Jack Wass and Maria Hook

Most practitioners and judges only encounter the conflict of laws (or private international law) intermittently. The subject can be seen as an arcane corner of civil procedure, or a set of complications that must be passed before getting to the real issues on the merits. However, Associate Judge Bell is one judge that has always known a conflicts problem when he sees one – and has been prepared to engage with the principles underlying a cross-border problem, even if the parties were not.

With the news of the Associate Judge’s retirement, this post notes some of the Associate Judge’s contributions to the subject in New Zealand.

At the cutting edge of conflicts debate is the question of how common law courts should deal with allegations that foreign courts lack the independence that we regard as the hallmark of a recognised legal system. Associate Judge Bell examined this subject by reference to overseas authority in Hebei Huaneng Industrial Development Co Ltd v Shi [2020] NZHC 2992, where he articulated the different approaches the courts should take to such an allegation, depending on whether it is raised prospectively (on a dispute as to jurisdiction) or after the fact (on an application to enforce a foreign judgment). With a further judgment on the subject having just been released ([2021] NZHC 2687) and the case apparently going to trial, this will not be the last word but represents an important guide to the proper approach.

One topic with which all Associate Judges are familiar is the enforcement of foreign judgments, since most applications are brought by way of summary judgment. Yoonwoo C & C Development Corp v Huh [2019] NZHC 2986 is typical of the Associate Judge’s approach: having cited the Court of Appeal’s “helpful” outline of the basis on which foreign judgments were enforced, the Associate Judge proceeded to explain—by reference to cases as old as 1760—the basis of enforcement actions in the historical writs, or the historical phenomenon of “jamming of other obligations into actions in debt and indebitatus assumpsit”.

Jurisdiction matters, too, are a staple for Associate Judges and are another area that has benefited from Associate Judge Bell’s nuanced reasoning.  In Perpetual Trustee Co Ltd v Downey (2011) 21 PRNZ 28, for example, the Associate Judge carefully outlined the proper approach to be taken to the enforcement of exclusive jurisdiction agreements, referring to English, Australian and New Zealand authorities, and distinguishing clearly between the court’s discretion not to apply an exclusive jurisdiction clause and the question of forum non conveniens (at [32]) – a distinction that is often ignored in practice. Having laid the groundwork in this way, the Judge was then able to explain with great clarity why an exclusive jurisdiction clause could not prevail over Part 16 of the Companies Act 1993.

In yet another oral judgment, the Associate Judge contributed to the deeply controversial topic of jurisdiction of cross-border intellectual property claims, which has vexed common law courts to the highest level. In Jedis Ltd v Vodafone New Zealand Ltd [2012] NZHC 2448, the judge not only made observations about how the existing cases should properly be read, but went as far as discussing the implications under Australian constitutional law of the case being heard in Australia, and English authority on the extent to which it would serve a useful purpose to bring a foreign defendant into the proceeding.

We could point to numerous other cases along similar lines – discussing trans-Tasman proceedings (Leeds v Richards [2016] NZHC 1191, [2016] NZAR 1016), cross-border restitutionary claims (Fruit Shippers Ltd v Petrie [2020] NZHC 749), the law applicable to corporate identity (Addleman Trustee Ltd v Lambie [2021] NZHC 2504) and the meaning of fraud (Guangzhou Dongjiang Petroleum Science & Technology Development Co Ltd v Kang [2020] NZHC 3068). While counsel might not have always welcomed it, New Zealand law is better for the contributions of the Associate Judge on these topics.

 

Cross-border insolvency: joint hearing by New Zealand Court of Appeal and Federal Court of Australia

By Jack Wass (Stout Street Chambers)

Readers may be interested to know that on Thursday 23 September 2021, the New Zealand Court of Appeal will be sitting in a joint hearing with the Full Court of the Federal Court of Australia.

Earlier this year, the High Court of New Zealand and the Federal Court of Australia gave judgment on parallel applications for directions concerning the distribution of funds held by Halifax Investment Services Pty Ltd and its New Zealand subsidiary. The hearing of those applications was conducted by VMR with counsel in Sydney and Auckland; witnesses were sworn and examined in both proceedings, and the parties agreed that the judges could deliberate jointly. The upcoming hearing is of appeals against those judgments, to be heard by Kós P, Cooper and Goddard JJ in New Zealand, and Middleton, Beach and Moshinsky JJ in Australia.

Cross-border insolvency cries out for international judicial cooperation; significant strides have been made under the UNCITRAL Model Law on Cross-Border Insolvency, while the legal barriers between New Zealand and Australia have been substantially lowered by the Trans-Tasman Proceedings Acts. The use of joint hearings is a welcome and pragmatic development of the techniques and procedures introduced by those regimes.

Submissions on cross-border adoption and surrogacy

A little while ago, the Ministry of Justice published a Discussion Document on Adoption in Aotearoa New Zealand (June 2021), which includes sections on overseas and intercountry adoption. Submissions are due by the end of this month.

The Law Commission is conducting a review of surrogacy that includes issues of cross-border surrogacy. Submissions on the Issues Paper Te Kōpū Whāngai: He Arotake / Review of Surrogacy (IP 47, 29 July 2021) are due by 23 September.

Enforcement of a promise to pay a mahr: characterisation and public policy in the context of Almarzooqi v Salih

By Maria Hook (University of Otago)

In Almarzooqi v Salih [2021] NZCA 330, the Court of Appeal recently considered whether a judgment by a Dubai court ordering the defendant, Mr Salih, to pay a marriage dower was enforceable in New Zealand at common law. The High Court had refused enforcement on the basis that the Dubai Court did not have personal jurisdiction over Mr Salih, and the Court of Appeal upheld the High Court’s decision.

We have outlined the background to the proceeding in a previous post on this blog. Ms Almarzooqi, the claimant, 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 (nikah). This contract provided that Mr Salih would pay Ms Almarzooqi a deferred dower (also known as a mahr) of about $212,000 in the event of Mr Salih’s death or the parties’ divorce. The marriage did not last long. Ms Almarzooqi, a citizen of the United Arab Emirates (UAE), moved to New Zealand to live with Mr Salih, who had both Iranian and New Zealand citizenship. After a few months the couple separated, and Ms Almarzooqi eventually returned to UAE to file for divorce on the ground of domestic abuse. The Dubai Court awarded a default judgment in Ms Almarzooqi’s favour, ordering Mr Salih to pay the mahr. Ms Almarzooqi subsequently returned to New Zealand, where she continues to reside, and issued proceedings in the High Court, pleading two causes of action: enforcement of the UAE judgment, and a claim for breach of the contract of marriage.

The High Court dealt with the former claim first, declining the application to enforce the judgment on the basis that the Dubai Court did not have personal jurisdiction over Mr Salih ([2020] NZHC 2441). In this post, I provide a brief analysis of the Court of Appeal’s judgment, before turning in more depth to the remaining issues now facing the parties in the context of Ms Almarzooqi’s claim for breach of contract.

I   Whether the Dubai Court had jurisdiction over Mr Salih for the purposes of enforcement of the Dubai Court’s judgment

The plaintiff made two main arguments on appeal. First, it argued that the Dubai Court did not require personal jurisdiction over Mr Salih because its decision to enforce the mahr was a decision in rem. Second, it argued that the Dubai Court had jurisdiction on the basis of the principle of reciprocity, which would have required the New Zealand court to recognise the Dubai Court’s jurisdiction based on New Zealand rules of personal jurisdiction.

The Court of Appeal rejected both arguments. It acknowledged that reciprocity (or connection) played some relevance in the context of the recognition of foreign judgments as to status (at [33], [41]-[58], citing The Conflict of Laws in New Zealand (CLNZ) at 5.96 and 9.4). However, the decision to enforce the mahr was not a decision as to status, or, indeed, a decision in rem (see the explanation of the concepts of personal jurisdiction and subject-matter jurisdiction at [41], citing CLNZ at 2.32-2.33). This meant that there was no basis for departing from the general principle that “New Zealand courts do not recognise the jurisdiction of a foreign court over a non-resident by reference to the principles, reflected in rr 6.27-6.29 [of the High Court Rules], in determining whether they have jurisdiction over a non-resident” (at [33], citing CLNZ at 5.96).

Although the Court of Appeal’s conclusion was correct, the case demonstrates the unduly restrictive nature of New Zealand’s existing framework for the enforcement and recognition of foreign judgments. The Dubai Court, as the Court that had also granted the divorce, was clearly the appropriate forum to determine the enforcement of the mahr (this is also implicit in s 182 of the Family Proceedings Act 1980, discussed further below). In these circumstances, it is unfortunate that the plaintiff’s only option now is to bring her claim again in the New Zealand court.

II   Ms Almarzooqi’s claim for breach of contract

This claim may raise some difficult questions, covered briefly in my previous post on the proceeding. In particular, the court might be faced with the following issues:

  • How are claims for the enforcement of a deferred mahr agreement to be characterised for choice of law purposes?
  • Based on this characterisation, what is the applicable choice of law rule and how is it to be applied to the case at hand? (For example, if the matter is characterised as contractual, what is the proper law of mahr agreements?)
  • If the applicable law is New Zealand law, are mahr agreements enforceable as a matter of substantive law?
  • If the applicable law is foreign law, and assuming that the agreement is enforceable pursuant to that law, is it nevertheless unenforceable on the basis that application of that law would be contrary to New Zealand public policy?

In this post, I offer some further thoughts on how these questions could be resolved in a New Zealand court.

A   How are claims for the enforcement of a deferred mahr agreement to be characterised for choice of law purposes?

The process of characterisation requires the court to have regard to the purposes or functions of the competing choice of law rules, as well as the function(s) of the substantive rules of law that would be applicable as a result of those choice of law rules. The goal is to identify the most appropriate law to govern the issue, which means that the court must be prepared to re-frame the issue from a conflict of laws perspective, unconstrained by particular notions or distinctions of domestic law: see Raiffeisen Zentralbank Österreich AG v Five Star General Trading LLC [2001] EWCA Civ 68, [2001] QB 825 at [27]-[29]; Haugesund Kommune v Depfa ACS Bank [2010] EWCA Civ 579, [2012] QB 549 at [41]-[47]; CLNZ at 4.B.2.

This exercise is particularly challenging in the context of the deferred mahr, which has been said to serve a range of functions (that may, moreover, vary between regions, cultures and legal systems). On the one hand, the deferred mahr can make up for modest or inexistent entitlements by the wife to relationship property or statutory maintenance. In Islamic legal systems, the mahr therefore serves at least a supplementary function to support the wife financially following her divorce. On the other hand, the mahr has also been ascribed a transactional function. Although provision of a mahr is compulsory, it is based on a contract and involves a promise by the husband to pay a certain sum of money or make a specified gift. The wife negotiates the amount (or size) of the mahr in light of – amongst other things – the social and economic costs that she will suffer in the case of divorce. More fundamentally, the mahr may be said to be given in exchange for the husband’s unilateral right of divorce; and if the wife wishes to end the marriage, she can use the mahr as a bargaining tool to obtain her husband’s consent to the divorce by agreeing to forego part or all of the mahr.

For helpful commentary on the functions of the mahr (including from a comparative perspective), see P Fournier “Flirting with God in Western Secular Courts: Mahr in the West” (2010) 24 International Journal of Law, Policy and the Family 67; K Spencer “Mahr as Contract: internal pluralism and external perspectives” (2011) 1 Oñati Socio-legal Series; S Rutten “The Struggle of Embedding the Islamic Mahr in a Western Legal System” in R Mehdi and J Nielsen (eds) Embedding Mahr (Islamic Dower) in the European legal system (DJØF Publishing, Aarhus, 2011) 113; N Yassari “The Islamic Mahr in German Courts: Characterization in Private International Law and Accommodation in German National Family Law” R Mehdi and J Nielsen (eds) Embedding Mahr (Islamic Dower) in the European legal system (DJØF Publishing, Aarhus, 2011) 193; D Schawlowski “The Islamic Mahr in German and English Courts” (2010-2011) 16 Yearbook of Islamic and Middle Eastern Law 147; JR Bowen “How Could English Courts Recognise Shariah?” (2010) 7 University of St Thomas Law Journal 411. For a recent German judgment grappling with the question of the characterisation of the mahr for the purposes of private international law, see the German Federal Court’s in BGH XII ZB 380/19, 18 March 2020 (and for a short commentary on the decision in English, see this blog post by Matthias Lehman).

(i) The particular issue to be characterised

How the mahr is to be characterised for choice of law purposes should depend on the particular issue that has arisen before the court. For example, if the question is whether the mahr may operate as an agreement to contract out of an obligation to share or divide relationship property, then the question relates to the property consequences of personal relationships (see CLNZ at 9.C.2). Similarly, if the question is whether the mahr may contract out of statutory obligations to pay maintenance, the question clearly falls within the choice of law rule governing maintenance obligations (see CLNZ at 9.C.3). More difficult are cases where the mahr is sought to be recognised as part of a settlement of the spouses’ property or financial obligations following divorce or separation. For example, an issue might arise whether a particular asset is to be treated as the wife’s separate property to reflect her entitlement to the mahr, or the court might have to determine whether the mahr should be a factor in determining the overall fairness of the property allocation. It seems that a characterisation based on the property consequences of the relationship would again be appropriate, albeit with a possible incidental question whether there is an enforceable obligation to pay the mahr in the first place.

This latter question is the principal issue arising in Almarzooqi, which is solely about the enforcement of a promise to pay the mahr, unrelated to any claims to specific property or statutory maintenance. The claim is brought in contract. However, based on the principles of characterisation outlined above, the form of the action is not in itself determinative of the question of characterisation (cf the following comment in my previous post, which, on reflection, does not adequately reflect the need for an internationalist and functional approach to characterisation: “if there were a basis in New Zealand contract law to give effect to deferred dowry contracts … then it is very likely that characterising the issue as contractual for the purposes of the conflict of laws was the right approach”). Because the mahr does not form part of New Zealand domestic law, contract may simply be the only available vehicle to bring the claim. Having regard, then, to the functions of the mahr outlined above, the question is whether the husband’s personal obligation to pay the mahr is best characterised as a matter relating to the property consequences of relationships, maintenance or contract.

(ii) Choice of law rules governing the property consequences of personal relationships?

There are some functional differences between relationship property laws and the obligation to pay the mahr. The function of relationship property laws is to allocate property between parties to a personal relationship. The obligation to pay the mahr, however, is not tied to property that is in existence at the time of divorce or separation. Moreover, there are limited functional similarities between mahr agreements and relationship property agreements (see Spencer at 13-14). Unlike relationship property agreements, mahr agreements do not seek to protect certain assets from a spouse. Their effect is transactional – that is, they envisage a transfer of assets – and it is in this sense that they may also be said to serve a function that, in New Zealand, would be the domain of the default rules of the Property (Relationships) Act 1976 (PRA).

On their own, these concerns would not be determinative. There is an argument that courts should take a relationship-focused and inclusive approach to choice of law governing the property consequences of personal relationships, enabling the court to make a holistic assessment of a couple’s property and financial obligations at the end of their relationship (M Hook “A First Principles Approach to Couples’ Property in the Conflict of Laws” (2019) 15 Journal of Private International Law 257). However, this is not currently the approach taken in New Zealand. The existing choice of law rules on relationship property are property-focused and fragmented. They are also largely inward looking, and as will be seen in the next sections on maintenance and contract, a lex fori rule would not be the most appropriate choice of law rule for mahr agreements.

It is true that application of the same governing law to both issues (ie the property consequences of personal relationships and the husband’s obligation to pay the mahr) would assist the court in reaching an overall fair and coherent result. If the issues are split across two (or more) governing laws, there is a risk that the applicable rules will be difficult to reconcile. However, on balance, this does not seem to be a sufficient reason to characterise the husband’s obligation as going towards the question of relationship property (but cf Yassari).

(iii) Choice of law rules governing maintenance?

This leaves the question whether the obligation is more properly characterised as relating to contract or maintenance. Islamic legal systems provide for rights of maintenance that are distinct from the wife’s entitlement to the mahr. In Almarzooqi, for example, the Dubai Court’s order to pay the mahr was in addition to a requirement to pay a certain amount of “alimony”. However, this does not necessarily mean that the two should be characterised differently for choice of law purposes (but cf Yassari at 208). There is clearly an overlap in functions because both provide the wife with financial support in case of divorce.

Yet there are differences, too. Maintenance is focused on offering a degree of minimum protection, which is assessed on the basis of the applicant’s needs and the respondent’s ability to pay (s 64, Family Proceedings Act 1980). Thus, in New Zealand, statutory maintenance rights are considered to be of such public importance that they are always governed by the law of the forum. The mahr, on the other hand, gives effect to the parties’ bargaining, regardless of the husband’s ability to pay, and may go well beyond covering the wife’s needs. Like maintenance, it also raises issues of public policy. By enforcing the mahr, the law contributes to the regulation of the parties’ personal relationship (more specifically, of the terms of the parties’ marriage and their potential divorce). In New Zealand, divorce – like maintenance – is governed by the law of the forum. Does this mean that the enforcement of the mahr raises questions of such a sensitive nature that it should be characterised as falling within the lex fori rule?

(iv) Choice of law rules governing contract?

On balance, I think that contract choice of law rules offer a better fit, even though the mahr is a compulsory component of the marriage contract. Applying contract choice of law rules to determine whether there is an obligation to pay the mahr would not interfere with the scope of the lex fori rule for maintenance and divorce. In other words, a foreign proper law of the mahr would not take away any minimum protections provided by the New Zealand rules on maintenance, or restrict the parties’ access to divorce under New Zealand law. In these circumstances, there is limited justification for immediately prioritising New Zealand family values over the interests of the spouses (and, to some extent, of the community or communities to which they are closely connected). It would be more appropriate, therefore, to apply a law that reflects the reality of the parties’ lives and expectations at the time they entered into the agreement (cf Art 8(4), Hague Protocol on the Law Applicable to Maintenance Obligations (signed 23 November 2007, entered into force 1 August 2013)). Contract choice of law rules are sufficiently flexible to achieve this.

This approach, which was adopted in Shahnaz v Rizwan [1965] 1 QB 390 (DC) and in Almarzooqi v Salih [2020] NZFLR 251, would also avoid some of the problems that courts have encountered when attempting to incorporate the mahr into Western family law. Because New Zealand substantive law is not familiar with the mahr, application of the lex fori can have the effect of distorting its function (see, in particular, Fournier). Under contract choice of law rules, on the other hand, the applicable law may be a law that is familiar with the concept, and conflict of laws rules on the proof of foreign law would ensure that the court’s assessment is based on adequate evidence. Moreover, the court would have an easier task when determining whether certain rules or incidents of the mahr are inconsistent with values of New Zealand family law. For example, a court might be unable to accept that, as a matter of New Zealand substantive law, a wife should not be entitled to the mahr because she was the one who initiated a (consent-based) divorce; but it might be comfortable accepting such a proposition as a matter of foreign law and refusing to invoke the public policy exception (see below).

B   If the matter is characterised as contractual, what is the proper law of mahr agreements?

Contract choice of law rules generally call for the application of the law the parties intended to be applicable or, in the absence of an intention to that effect, the law of the country with which the contract is most closely connected (CLNZ at 6.B.1).

Courts have refined the application of these rules in the context of particular contracts. For mahr agreements, courts should be prepared to consider the parties’ relative bargaining power and any information asymmetries when determining the validity of the choice of law agreement. In the absence of a valid agreement, they should give weight to the parties’ expectations, their cultural, religious and social connections, and the wider normative context or background of their marriage (including the place of the marriage).

The function of the mahr is to protect the interests of the wife, so the court should focus on connecting factors that are consistent with this function (see CLNZ, ch 4 at [8]; for an example of a choice of law rule that aims to protect a certain group of claimants, see Hague Protocol on the Law Applicable to Maintenance Obligations, Art 3). The country of the wife’s nationality or residence may assume particular relevance. It would also usually be in the wife’s interest that the mahr be governed by a law that knows and recognises the mahr (as opposed to a law that, say, treats the mahr as a purely moral commitment).

In Almarzooqi ([2020] NZFLR 251), in the context of the High Court’s determination of the plaintiff’s application for security of costs, the Associate Judge concluded that the proper law of the agreement was New Zealand law, because “the overwhelmingly most important consideration in this case is that, although the parties married and entered into their contract in the UAE, it was their joint intention at the tie that the contract would govern their relationship as a married couple in New Zealand” (at [47]). I have criticised this reasoning in my previous post but add here that the Court should have also had regard to the wife’s interest in the application of a law that knows the mahr and that is closely connected to her, which here seemed to be the law of the UAE.

C   If the applicable law is New Zealand law, are mahr agreements enforceable as a matter of substantive law?

If New Zealand law applies – whether by virtue of a lex fori rule or a multilateral choice of law rule – the question arises whether mahr agreements are in principle enforceable under rules of New Zealand family and contract law.

There is nothing in the Property (Relationships) Act, Family Proceedings Act or Child Support Act 1991 that would directly prohibit such an agreement. On the contrary, s 62(2) of the Child Support Act expressly recognises that liability to pay maintenance may arise under ordinary contractual principles (Townshend v Bellamy 3 June 2005, CIV-2004-483-393 (HC Wanganui) at [10]; see Margaret Briggs “Marital Agreements and Private Autonomy in New Zealand” in Jens Scherpe Marital Agreements and Private Autonomy in Comparative Perspective (Bloomsbury Publishing, 2012) 256 at 266).

There is also no general rule of contract that would prevent parties from entering into a binding marriage contract. In Radmacher v Granatino [2010] UKSC 42, [2011] 1 AC 534, Lord Phillips said:

“… the old rule that agreements providing for future separation are contrary to public policy is obsolete and should be swept away . . . If parties who have made such an agreement, whether ante- nuptial or post- nuptial, then decide to live apart, we can see no reason why they should not be entitled to enforce their agreement.”

More specifically, common law courts have recognised in principle that mahr agreements may be enforceable as contracts (see, eg, Uddin v Choudhury [2009] EWCA Civ 120; Mohamed v Mohmend [2012] NSWSC 852; the decision in Shahnaz v Rizwan [1965] 1 QB 390 (DC) seemed to be based on an application of “Mohammedan law” as given effect by the law of India).

The reasons why enforcement of a deferred mahr may be contrary to public policy have been widely discussed in the literature: see, eg, Spencer for a useful account. There are challenging questions here to what extent the law is capable or willing to reflect the needs of a pluralist society. In a New Zealand context, an additional point is that s 182 of the Family Proceedings Act, which provides the court with powers to vary or cancel any agreement or settlement relating to marriage, would not be available where the spouses divorced abroad. This is unfortunate, because s 182 might prove to be a useful mechanism to deal with any public policy concerns arising from the enforcement of a mahr.

D   If the applicable law is foreign law, and assuming that the agreement is enforceable pursuant to that law, is it nevertheless unenforceable on the basis that application of that law would be contrary to New Zealand public policy?

If the promise to pay the mahr is governed by foreign law, the New Zealand court may still have to consider whether application of that law (or of particular provisions of that law) would be contrary to public policy. The threshold is often said to be a high one but may depend on a number of factors, including the connection of the case to New Zealand and the values that would ordinarily support the application of the foreign law (see CLNZ at 4.B.5(b)):

  • The more closely connected the case is to New Zealand, the more appropriate it may be to adopt a lower threshold. For example, English courts have readily invoked the public policy exception to deny enforcement to contracts in restraint of trade in circumstances where the case had a close connection to the forum (see, eg, Duarte v Black & Decker Corp [2007] EWHC 2720 (QB), [2008] 1 All ER (Comm) 401 at [56]-[63]). In Almarzooqi, the spouses were – and still are – resident in New Zealand, which might make it more appropriate to apply the exception than in a case that has overwhelmingly foreign connections.
  • The values that would ordinarily support the application of the foreign law should be evaluated in the context of the particular issue before the court. Where the issue is linked to general areas of public policy, the exception is a useful tool to modulate the effect of multilateral choice of law rules. The exception here operates as a more flexible alternative to lex fori rules or overriding mandatory rules. In this way, the public policy exception could play an important part in ensuring that mahr agreements need not be submitted to a general lex fori rule (see above). Where the spouses are divorced in New Zealand, the court would also be able to rely on s 182 of the Family Proceedings Act instead of the public policy exception (see above), assuming that s 182 has overriding mandatory force and is not merely self-limiting (see CLNZ at 4.4 and B.5.a.ii).

The overall question is whether the effects of upholding the mahr would be contrary to public policy in the circumstances of the particular case. There seem to be at least a couple of scenarios that might trigger the exception in this context:

  • The exception could be relied upon where enforcement of the mahr would have the effect of undermining the purpose of the agreement and distort the function of the mahr. This might occur, for example, where enforcement of the mahr would expose the husband to double liability (under the mahr and, say, New Zealand rules of relationship property), in circumstances where the parties had entered into the mahr on the assumption that the wife would have no entitlement to share in the husband’s property.
  • Depending on the facts of the case, the mahr might come close to a penalty for divorce (cf Mohamed v Mohmend [2012] NSWSC 852 at [53)). The fact that it is payable on divorce – directly disincentivising the husband from leaving the relationship – may not in itself be problematic. After all, relationship property laws and maintenance laws can have a very similar effect, discouraging a party from pursuing a separation because it would result in a significant reduction in wealth. But what if the relationship was a relationship of short duration, the divorce has had limited – or no – financial or social implications for the wife, and the wife had equal access to divorce (see Rutten at 4.2-4.3)? It is conceivable that the public policy exception could be triggered in such a case.

In Almarzooqi, the parties’ relationship was a relationship of short duration. The plaintiff obtained a fault-based divorce in the Dubai Court, and it is unclear whether she would have had a general right of divorce through the New Zealand court (this would have required that either she or the defendant was domiciled in New Zealand at the time: Family Proceedings Act, s 37(2)). What is more, divorce in accordance with Islamic law might have been the only culturally appropriate option for the parties. There has been no evidence so far of the financial or social implications of the divorce, but the fact that the plaintiff resides in New Zealand cannot be taken to mean that there were, or are, no such implications.

In the context of Ms Almarzooqi’s claim for enforcement of the UAE judgment, the High Court concluded that enforcement would not have been contrary to public policy because “New Zealand places a high value on cultural and religious autonomy” ([2020] NZHC 2441 at [62]). In my view, the Associate Judge was right to conclude that enforcement of a mahr would not in principle be contrary to public policy, but this does not mean that application of a foreign law giving effect to an obligation to pay a mahr may not be contrary public policy on the facts of the particular case.

 III   Conclusion

Courts face a challenging task when asked to enforce, or take account, of a promise to pay a mahr. Regardless of the particular approach that is adopted, it is crucial that courts are alive to the possible interrelationship between relationship property, maintenance and the obligation to pay the mahr, and that they make use of all available tools (including the principle of adaptation: CLNZ at 4.B.4(b)) to ensure the harmonious application of these different regimes. For example, an enforceable obligation to pay the mahr may be a factor in assessing the plaintiff’s entitlement to relationship property or maintenance, but courts should be very careful to conclude that the mahr amounts to a contracting out agreement. Fortunately, Almarzooqi v Salih does not seem to give rise to such concerns.