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Author Archives: Maria Hook

The Supreme Court affirms orthodox approach to the application of foreign law

By Jack Wass (Stout Street Chambers)

The Supreme Court has recently confirmed the approach that the courts should follow where a question of foreign law appears on the facts of a case, but the parties have failed to plead foreign law.

In earlier Blog posts, we explained that where the parties have failed to plead or prove foreign law, then the general rule is that the court can and must apply the substantive law of New Zealand in default. Although courts in recent years have recognised that this default rule may sometimes be displaced, this has only been permitted in three categories of case: where the plaintiff’s claim positively relies on foreign law and they have failed to establish it; where case management considerations make it necessary for the parties to address foreign law; or where New Zealand law is inherently local and cannot be applied to foreign facts. We explain these principles in more detail in Chapter 3 of The Conflict of Laws in New Zealand.

In Schaeffer v Murren [2020] NZSC 98, the trial had been conducted on the basis of the New Zealand law of negligent misstatement and the Fair Trading Act 1986 (except for one cause of action based on a Nevada statute). The Court of Appeal rejected the proposition that the High Court ought to have applied Nevada law to all issues, and because Nevada law had not been proved by the plaintiffs the claim should have failed. The Supreme Court dismissed an application for leave, confirming the orthodox position described in The Conflict of Laws in New Zealand that where the parties have not pleaded foreign law then the court is entitled and required to decide the case on the basis of New Zealand law. Although acknowledging that there were exceptions to the default rule, these were not engaged on the facts.

While only a leave decision, the Court’s judgment is a valuable affirmation of the orthodox approach to the application of foreign law. The scope of the exceptions to the default rule remains an interesting issue for determination in a later case.

Pre-judgment charging orders against overseas defendants: reasons for leaving

By Jack Wass (Stout Street Chambers)

It is now established that the High Court has the power to grant interim relief without notice against foreign defendants. The High Court has recently considered a different question: does the fact that the defendant is outside New Zealand create a basis for ordering interim relief in advance of trial?

The court’s power to grant interim relief

The High Court may grant a wide range of orders to protect a plaintiff’s ability to enforce a judgment on the merits. Some of these orders are designed to preserve assets before trial, “in order to improve the prospect of the court being able to do justice between the parties after a determination of the merits at a trial” (Commerce Commission v Viagogo AG [2019] NZCA 472 at [7]). These include freezing orders and interim injunctions. Other orders are granted after judgment has been obtained to secure property for the discharge of the judgment debtor’s obligations. These include attachment orders, sale orders and possession orders.

Charging orders straddle this distinction, because they can be granted both before and after judgment. Although a charging order does not create a proprietary interest in the charged property, it has the effect converting the plaintiff’s in personam claim for a sum of money into a security interest by charging the property with payment of the judgment sum and preventing the debtor from disposing of the property without paying the plaintiff. It constitutes an “interest” in terms of the Land Transfer Act 2017 and a security interest in terms of the Insolvency Act 2007. By contrast, a freezing order operates strictly in personam (see McGechan on Procedure at [HR17.40.03]).

Pre- and post-judgment charging orders

Where a plaintiff has already obtained judgment and had it sealed, they may obtain a charging order as of right (r 17.42). In such a case, a judge has already determined that the defendant owes a liquidated sum to the plaintiff, and the plaintiff has a prima facie right to enforce that judgment which justifies granting them an interest in the defendant’s assets. While the court also has the power to grant pre-judgment charging orders, it must be satisfied that “the liable party, with intent to defeat either his or her creditors or the entitled party or both,– (a) is removing, concealing, or disposing of the liable party’s property; or (b) is absent from or about to leave New Zealand.”

This condition was recently considered by the High Court in ASI Global Investments Inc v Yousef [2020] NZHC 1983. The applicant had begun substantive proceedings against the respondent in Switzerland. He sought leave to obtain a pre-judgment charging order over a Northland forestry block to secure payment of the anticipated Swiss judgment.

Duffy J refused the order. The judge accepted evidence that the respondent had taken steps overseas which demonstrated an intent to defeat creditors, and apparently that unless interim relief were granted then the applicant’s ability to enforce any judgment against the Northland property might be defeated. But there was no evidence that the respondent’s presence outside New Zealand had anything to do with his intent to defeat creditors, particularly if he had never been here in the first place. The judge concluded:

Before I can draw the necessary linkage between the respondent’s absence from New Zealand and his intent in terms of r 17.41, I would need to be informed of the respondent’s movements to and from New Zealand and how they may be connected with the acquisition of the subject land as well as any potential alienation of that land. It must necessarily be the case in these days of global transactions that persons who reside overseas buy land in New Zealand as an investment [without residing here]. In such circumstances I do not consider it can readily be inferred that they remain absent from New Zealand because they intend to defeat creditors or other entitled persons who may otherwise seek to attach their New Zealand based assets.

The judge indicated that she was willing to reconsider the application if the applicant could produce specific evidence that demonstrated the necessary link between the limbs of r 17.41.

The judgment is consistent with earlier authority emphasising that even where the defendants had left New Zealand recently, the applicant must show that they did so with the necessary intent (Amplexus Ltd v Liao [2016] NZHC 924). By contrast, where Australian residents arranged for construction of a house platform in New Zealand but failed to pay, then apparently returned to Australia and put the property up for sale, the court was satisfied that they had left the country with the intention of defeating their creditors (AHS Construction Ltd v Andrews [2019] NZHC 1779).

The significance of the debtor leaving the country

The effect of these requirements is that the applicant must demonstrate that a purpose of the respondent in leaving the country was to make it more difficult for creditors to enforce their rights. That higher standard may be justified by the more extensive rights afforded to the holder of a charging order, by comparison with a freezing order which operates strictly in personam (although as I note below, the effect can be the same). Nevertheless, the requirement substantially narrows the scope for the application of pre-judgment charging orders, particularly where the respondent has never been in New Zealand. Where there is proof of an intention to defeat creditors (but not proof that the respondent is actually disposing of property sufficient to satisfy r 17.41(a)), and the respondent’s presence outside New Zealand may make it easier for them to evade their creditors, it is arguable whether Parliament intended to require proof of a conscious causative nexus between the two facts.

It is not only in the context of pre-judgment charging orders that the court may take into account the respondent’s departure from the country. Section 40 of the Senior Courts Act 2017 empowers the court to issue a warrant to arrest a defendant if they are satisfied that the plaintiff has a good cause of action against the defendant, and there are reasonable grounds to suspect that the defendant is about to leave the country with the intention of evading payment of the amount claimed. This replaced the old prerogative writ of ne exeat regno (most famously sought to restrain the All Blacks leaving New Zealand on a tour of South Africa in Parsons v Burk [1971] NZLR 244).

Section 40 was formerly found in s 55 of the Judicature Act 1908. That section did not require the plaintiff to show that the defendant was leaving the country to evade payment, but that their absence would “materially prejudice the plaintiff in the prosecution of those proceedings” (for example by making them unavailable as a witness). It is not clear whether Parliament intended that change (see Hook and Wass The Conflict of Laws in New Zealand at [3.205]).

Freezing order?

There remains a question whether the court’s broad jurisdiction to grant interim relief is capable of addressing the dilemma in which the applicant found itself. It appears from the judge’s summary of the evidence that the applicant was concerned that it would have no means of monitoring compliance with a freezing order, other than after the fact. It appears that the particular value of the property was in cutting rights, and the applicant was concerned that the respondent might exploit these rights and dispose of the proceeds without the applicant’s knowledge.

The court has a broad power to fashion interim relief to meet the requirements of justice. The freezing order is merely one – particularly famous, sophisticated and codified – instance of this inherent jurisdiction. Any third party on notice of an injunction who assists in its breach commits a contempt of court. A freezing order should be capable of preventing the transfer of title to the land itself out of the respondent’s name. While recognising the difficulties of monitoring activity on a remote forestry block, one would have hoped that it would be possible to fashion interim relief that is designed to put anyone who might be involved in a large-scale cutting operation on notice that to assist would be a breach of the High Court’s orders.

Enforcement of a promise to pay a deferred dower/dowry

When parties enter into a marriage or a marriage-like relationship, they do so with the expectation that the relationship will last. Parties make financial decisions and adjust their economic expectations in light of the union they have entered into. So when the relationship does not last, most legal systems provide for rules to ensure a fair financial outcome between the parties. In New Zealand, we have laws on the allocation of relationship property and on the payment of maintenance, including rules to give effect to “pre-nuptial agreements”, relationship property agreements and maintenance settlements. Needless to say, such agreements or arrangements might differ in style and substance from those customarily relied upon – and given effect to – in other countries, even though they may serve similar functions. In some Muslim countries, for example, it is customary to enter into a marriage contract that entitles the wife to a “deferred” dower or dowry, which becomes payable upon divorce.

The High Court recently considered whether such an arrangement would be enforceable in the New Zealand courts, in the context of an application for security for costs (Almarzooqi v Salih [2020] NZHC 1049). Associate Judge Johnston answered this question in the negative. In this post, I ask whether the Judge was right.

I should note at the outset that I am using the term “dowry” in this post, simply because that is the term that is used in the judgment. It seems, however, that common law jurisdictions have customarily used the term “dowry” to refer to a payment made by a bride’s family, while the term “dower” has been used for arrangements of the type considered here (that is, a payment made by a husband or his family to this wife).

Background

Ms Almarzooqi, the claimant, sought recovery of a “dowry” from Mr Salih. Ms Almarzooqi and Mr Salih had been married in the United Arab Emirates (UAE), which involved the parties entering into a contract of marriage. This contract provided that Mr Salih would pay Ms Almarzooqi a “deferred dowry” 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 UAE citizen with New Zealand residency, moved to New Zealand to live with Mr Salih, who had both Iranian and New Zealand citizenship. After a month of living together the parties separated, and Ms Almarzooqi eventually returned to UAE to file for divorce. The UAE Court awarded a default judgment in Ms Almarzooqi’s favour, ordering Mr Salih to pay the deferred dowry. Ms Almarzooqi subsequently issued the present New Zealand proceedings, pleading two causes of action: enforcement of the UAE judgment, and a claim for breach of the contract of marriage.

Mr Salih applied for an order for security for costs. In the context of determining that application, Associate Judge Johnston considered the likelihood of Ms Almarzooqi’s claims being successful, and concluded that the prospect of enforcing the marriage contract was “very poor” (at [53]).

The Court’s reasoning

In relation to the first cause of action, Associate Judge Johnston concluded that the UAE judgment was not enforceable under the common law rules for the enforcement of foreign judgments because the UAE Court had not had personal jurisdiction over Mr Salih when determining the claim. Counsel for Ms Almarzooqi argued that Mr Salih had submitted to the UAE Court’s jurisdiction by voluntarily appearing in the proceeding. The Associate Judge rightly rejected that argument. The marriage contract itself could not be construed as an agreement to submit to the jurisdiction of the UAE courts; and while Mr Salih had attempted to file a response to Ms Almarzooqi’s proceeding, the registrar in the UAE court had refused to accept the documents. The Associate Judge noted that “[i]t would be ironic if, having been prevented from submitting to the jurisdiction, Mr Salih was somehow deemed to have done so by the very actions that were thwarted by the rejection of this documentation” (at [39]).

In Pawson v Claridge HC Auckland CIV-2009-404-4367, 25 June 2010, Associate Judge Sargisson had previously considered whether an application for an extension of time that was rejected by the foreign court and struck from the file amounted to a submission to that foreign court’s jurisdiction. The Judge did not reach a conclusion on the matter, noting that it was arguable that the defendants should have specifically reserved their right to object to the court’s jurisdiction when entering the appearance. Her Honour did not specifically consider whether it was also arguably relevant that the application had been rejected and struck from the file. But in any case, Associate Judge Johnston expressed the view that “the court having struck the defendant’s appearance from the file, the defendant is entitled to be treated as not having entered any appearance at all” (at [40), and that the present facts were distinguishable because Mr Salih’s defence had not even been accepted for filing.

Whether an appearance that has been struck from the file may nevertheless amount to a submission to jurisdiction must surely depend on the facts of the particular case. However, the conclusion that Mr Salih had not submitted because his documents had never been accepted for filing appears to me to be unassailable. (It may be useful to note at this point that it is a curious feature of the rules for enforcement and recognition of judgments that, when determining whether the foreign court had personal jurisdiction over the defendant, the New Zealand court applies much stricter standards than it would apply to itself.)

It is the Court’s reasoning in relation to the second cause of action that I want to focus on here. This was Ms Almarzooqi’s claim for the debt alleged to arise from the contract of marriage. With the UAE judgment unlikely to be enforceable in New Zealand, the only way for Ms Almarzooqi to obtain relief in practice was to bring the claim afresh in the New Zealand court. The marriage contract provided that Mr Salih would pay Ms Almarzooqi a “deferred dowry” of about $212,000 in the event of Mr Salih’s death or the parties’ divorce. This promise was apparently enforceable under UAE law but, according to the Associate Judge, would not be enforceable under New Zealand law (see at [50] and following). Thus, the question was whether UAE law or New Zealand law applied.

The Court proceeded on the assumption that the question whether the promise was enforceable had to be resolved by the proper law of the contract. In other words, the Court characterised the issue as being contractual in nature, with the result that the choice of law rules relating to contract were applicable. The Court summed up these rules by stating that “in the absence of express agreement as to the proper law, the legal system with the closest connection with the dispute will be treated as the proper law of the contract” (at [47]). Here, the most important factor in identifying the law with the closest connection with the dispute was “the reality that [the parties] intended to, and did, reside in New Zealand”, and that the parties “must have intended the contract to govern their married life [in New Zealand]” (at [47]-[48]).

Application of New Zealand law

Whether a deferred dowry would be enforceable under New Zealand substantive law

The Associate Judge’s reasoning may be open to criticism on two fronts. The first concerns the Judge’s assessment that New Zealand substantive law would be hostile to the enforcement of a promise to pay a deferred dowry. I raise this question first because the answer may have implications for the second question, which is whether the Judge was right to conclude that New Zealand law – rather than the law of UAE – was applicable to the claim. In particular, the approach taken to the enforcement of a dowry as a matter of New Zealand substantive law is relevant to the proper characterisation of the claim for the purposes of choice of law.

I wonder whether it is truly right to say, as the Associate Judge did, that the New Zealand regime relating to marriage, maintenance and the division of relationship property is “entirely inconsistent with the terms of the contract of marriage” in this case (at [51]). It seems that the arrangement might not be caught by s 4 of the Property (Relationships) Act 1976, which excludes the rules and presumptions of the common law and of equity to the extent they apply to “transactions between spouses or partners in respect of property” (emphasis added). Perhaps there would be jurisdiction under s 182 of the Family Proceedings Act 1980 to vary the terms of the agreement, but that does not mean that New Zealand law is “entirely inconsistent” with the concept of a deferred dowry. I would be very interested to hear from family lawyers/academics on this.

To add a further comparative angle, it seems that the English Court of Appeal has been willing to enforce a promise to pay a deferred dowry as a matter of English contract law, through the incorporation of the relevant rules of Shariah within English law (Uddin v Choudhury [2009] EWCA Civ 1205; see John R Bowen “How Could English Courts Recognise Shariah?” (2010) 7 University of St Thomas Law Journal 411 at 422 and following for an interesting analysis). English courts have also been willing to give weight to cultural factors when exercising their discretion under s 25 of the Matrimonial Causes Act 1973. In Otobo v Otobo [2002] EWCA Civ 949, the Court of Appeal said that an English judge determining the question of ancillary relief pursuant to English law should “give due weight to [foreign] factors and not ignore the differential between what [the spouses] might anticipate from a determination in London as opposed to a determination in [the foreign country]” (at [57], see NA v MOT [2004] EWHC 471 (Fam) for another example). In Quereshi v Quereshi [1971] 2 WLR 518, the Court enforced a deferred dowry in the context of recognising an extra-judicial divorce effected at the Pakistan High Commission.

Whether the promise to pay the dowry was governed by New Zealand law or the law of UAE

Proper law of the contract: The second point of criticism concerns the Associate Judge’s choice of law analysis. Assuming the Judge was right to characterise the issue as contractual (a question which I will consider briefly below), it seems to me that there was considerable strength in the argument that the proper law of the contract was the law of UAE.

New Zealand courts have not always been consistent in the way they have identified the proper law of a contract. Some courts have effectively applied three distinct connecting factors: express intention, implied intention and the place with the closest and most real connection (which is consistent with English authority: Bonython v Commonwealth of Australia [1951] AC 201 (PC) at 219; Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50 (HL)). Others, like the Associate Judge in this case, have subsumed the relevance of implied intention within the identification of the law with the closest connection, treating the two enquiries as interchangeable (see, eg, McConnell Dowell Constructors Ltd v Lloyd’s Syndicate 396 [1988] 2 NZLR 257 (CA) at 272–273 per Cooke P).

Either way, to the extent that the purpose of the proper law is to give effect to the parties’ expectations, it seems that the law of UAE should have been a serious contender here. The parties had entered into the arrangement in the UAE, in accordance with local rules and customs, in circumstances where they must have appreciated that the concept of a dowry was foreign to New Zealand law. There is a point about cultural autonomy here. In this day and age, the conflict of laws should take seriously its role of protecting a person’s interest in cultural and religious self-determination. In fact, there is common law authority that an agreement to pay a deferred dowry that is valid under the proper law of the agreement is enforceable in the English court by way of an action for breach of contract. In Shahnaz v Rizwan [1965] 1 QB 390, the Divisional Court upheld such a contractual right to be paid a deferred dowry where the parties had been married in India in accordance with “Mohammedan law”. In a considered judgment, Winn J grappled with the policy questions raised by this issue, noting at 401-2:

“As a matter of policy, I would incline to the view that, there being now so many Mohammedans resident in this country, it is better that the court should recognise in favour of women who have come here as a result of a Mohammedan marriage the right to obtain from their husband what was promised to them by enforcing the contract and payment of what was so promised, than that they should be bereft of those rights and receive no assistance from the English courts.”

This is not to say that the contrary position – that a marriage contract is most closely connected to the law of the place where the parties are resident – is ill-founded. In particular, a good argument can be made that, insofar as contracts involving potentially vulnerable parties are concerned, identification of the proper law should rest on more objective factors that recognise, for example, a community’s interest in regulating the personal relationships of those who are members of that community. But this was not the approach adopted by the Associate Judge in the present case. Rather, the Judge appeared to be reasoning backwards, concluding that the parties must have intended to subject themselves to New Zealand law because the concept of a dowry was so outlandish that it would never be enforceable here (see [53]).

The bigger question of characterisation: The final question that I want to raise is whether the Court was right to characterise this issue as one relating to contract. The argument before the Court had proceeded on that basis, and we have already seen that there is authority to support that approach (Shahnaz v Rizwan [1965] 1 QB 390, where the Divisional Court specifically considered the question of characterisation). In fact, if there were a basis in New Zealand contract law to give effect to deferred dowry contracts (cf Uddin v Choudhury [2009] EWCA Civ 1205), then it is very likely that characterising the issue as contractual for the purposes of the conflict of laws was the right approach.

An alternative view is that marriage contracts are not simple contracts. As the Associate Judge pointed out himself, the concept of a deferred dowry seems to fulfil functions that, in the New Zealand legal system, would be performed by laws on the division of relationship property and maintenance. The task of the conflict of laws is to identify the law that is most appropriate to govern the issue, having regard to the functions of the competing substantive laws (Dicey, Morris and Collins at [2-039]). It is possible, therefore, that the question of the enforceability of the dowry in this case should have been characterised as an issue relating to the property consequences of the relationship, or maintenance, with the result (potentially) that New Zealand law would have been applicable. For an interesting discussion of this question more generally, see Diana Schawlowski “The Islamic Mahr in German and English Courts” (2010-2011) 16 Yearbook of Islamic and Middle Eastern Law 147.

Conclusion

As I mentioned at the beginning of this post, the question of the merits of Ms Almarzooqi’s claim arose in the context of an application for security for costs. It would be prudent, therefore, not to attach too much weight to the Associate Judge’s reasoning – the precedential value of the decision may be limited. Nevertheless, it is important to remember that such decisions have real consequences for the parties involved. Ms Almarzooqi would be forgiven for having second thoughts about proceeding with her claim. That would be a shame – in my view, her claim deserves an opportunity for in-depth analysis.

Call for papers (New Zealand Yearbook of International Law)

The New Zealand Yearbook of International Law (Brill), launched in June 2004, is an annual, internationally refereed publication intended to stand as a reference point for legal materials and critical commentary on issues of public and private international law. The Yearbook serves as a valuable tool in the determination of trends, state practice and policies in the development of international law with particular regard to New Zealand, the Pacific region, the Southern Ocean and Antarctica.

Editors call for both short notes and commentaries, and longer in-depth articles, for publication in next volume of the Yearbook, which will be published in early 2021.

Notes and commentaries should be between 3,000 to 7,000 words. Articles may be from 8,000 to 15,000 words.

The Editors seek contributions on any current topic in public or private international law. The Editors particularly encourage submissions that are relevant to the Pacific, the Southern Ocean and Antarctica, and New Zealand.

Submissions will be considered on a rolling basis. However, the *closing date for submissions for Volume 17 is 15 June 2020.

Contributions must be original unpublished works and submission of contributions will be held to imply this. Manuscripts must be word-processed and accepted papers should comply with the fourth edition of the Australian Guide to Legal Citation. The Guide is available online
at: https://apc01.safelinks.protection.outlook.com/?url=http%3A%2F%2Flaw.unimelb.edu.au%2Fmulr%2Faglc%2Fabout&data=02%7C01%7Cmaria.hook%40otago.ac.nz%7Cbeb5e66ea5474d27404c08d7f0a65eb3%7C0225efc578fe4928b1579ef24809e9ba%7C1%7C0%7C637242469677040258&sdata=HfuRkC2FxC9%2F1f7UyxlR2ZdEqrZD%2FjMruXPXq9CsrL8%3D&reserved=0.

Submissions should be provided in English, using MS Word-compatible word processing software, and delivered by email to the General Editor at janjakob.bornheim@canterbury.ac.nz

High Court decision on anti-suit injunctions

In Lu v Industrial and Commercial Bank of China (NZ) Ltd [2020] NZHC 402, Fitzgerald J was recently faced with the question whether to grant an anti-suit injunction restraining proceedings for the recovery of a debt in China. This is only the second time a New Zealand court has had occasion to determine an application for such an injunction. In the first case, Jonmer Inc v Maltexo Ltd (1996) 10 PRNZ 119, the High Court had granted an injunction to restrain proceedings in Texas, on the basis that the Texan proceedings were oppressive because they seemed to be motivated by a desire to hold on “to a legalistic right” rather than the existence of any legitimate advantages in that forum (at 123). In granting the injunction, the Court adopted the principles set out in Société Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 1 AC 871 (PC), which also formed the basis for Fitzgerald J’s reasoning in Lu v Industrial and Commercial Bank of China (NZ) Ltd. The judgment in Lu confirms that New Zealand courts are likely to adopt the English approach to anti-suit injunctions and provides an updated summary of that approach. In this note, I offer a brief analysis of the decision while cautioning against the introduction of anti-suit injunctions into the New Zealand conflict of laws.

Background
The plaintiffs, Ms Lu and her husband Mr Mao, were Chinese residents. Ms Lu had borrowed a large sum of money from the defendant, the New Zealand branch of the Industrial and Commercial Bank of China (the Bank), to finance the purchase of a property in Auckland. The loan was secured by a mortgage over the property. The loan documents between Ms Lu and the Bank were expressed to be governed by New Zealand law but did not contain a jurisdiction agreement. Ms Lu soon defaulted under the agreement. The Bank brought proceedings against her and her husband in China to recover the debt (on the basis that the debt was owed jointly by the spouses). The plaintiffs then brought proceedings against the Bank in New Zealand, claiming that the Bank had breached a number of duties in the way it had dealt with the plaintiffs and the property.

In the context of this New Zealand proceeding, the plaintiffs applied for an order enjoining the Bank from continuing the Chinese proceedings (an anti-suit injunction). The application was brought on the basis that New Zealand was the appropriate forum for determining the Bank’s claim and that the Bank’s pursuit of the Chinese proceedings was vexatious and oppressive. The defendant applied for a strike-out of the plaintiffs’ New Zealand proceeding. Fitzgerald J granted the Bank’s application for strike-out and refused the plaintiffs’ application for an anti-suit injunction.

Principles
According to her Honour, the principles relating to anti-suit injunctions were “reasonably well-settled” (at [100]). The ultimate question was whether “the ends of justice require the injunction to be granted” (at [101]). As part of this inquiry, the court had to be satisfied that New Zealand was the natural forum for the claim and that the commencement or continuation of the foreign proceedings was vexatious, oppressive or otherwise unconscionable (at [103]). The jurisdiction had to be exercised “sparingly and with caution” because the injunction may be viewed as an indirect inference with the foreign court’s process (at [102]).

For the purposes of determining whether the Chinese proceeding was vexatious, oppressive or otherwise unconscionable, Fitzgerald J accepted that the court “should not become distracted by labels” but “must apply its own notion of the principle of unconscionability” (at [103]). Her Honour listed a number of examples that might meet this threshold (at [104]), as well as examples that would not meet the threshold (at [105]). The former included the situation where the foreign claim is “doomed to fail” or is brought in bad faith, or where there is no good reason for trying the proceeding abroad. Conversely, where there are genuine reasons for bringing the proceeding in the foreign jurisdiction (for example, because the claimant receives an advantage that is not available in the forum), the claimant’s conduct would not usually be treated as vexatious, oppressive or unconscionable.

Decision
In relation to the first threshold question of the natural forum, Fitzgerald J proceeded on the assumption that New Zealand was the natural forum for the resolution of the parties’ entire dispute. It was true that the Chinese court had dismissed the plaintiffs’ protest to jurisdiction, and that the New Zealand court should generally respect a determination by a foreign court that it was forum conveniens (at [115]). However, the foreign court must have “acted on principles similar to those that obtain here”; otherwise the New Zealand court “must consider whether the result is consistent with those principles” (at [115] citing Amchem Products Inc v British Columbia (Workers’ Compensation Board) [1993] 1 SCR 897 at 932).

In this case there was insufficient evidence of the basis of the Chinese Court’s decision (at [117]). The New Zealand Court could not be satisfied that the Chinese Court acted on principles similar to those that a New Zealand court would have applied to determine the appropriate forum. In these circumstances, Fitzgerald J was prepared to assume that New Zealand was the natural forum.

In relation to the requirement that the Chinese proceedings be vexatious, oppressive or unconscionable, Fitzgerald J was “far from persuaded” that this requirement was satisfied (at [118]). The Bank, as creditor, had a legitimate interest to pursue the plaintiffs in their home jurisdiction where they had assets (at [119]) and where any judgment would ultimately be enforceable (at [121]). The Bank also had the advantage of freezing orders in China, which may not have been granted in New Zealand (at [123]). The plaintiffs argued that they would not be able to raise their own claims in the Chinese proceedings. But in light of the advantages and benefits available to the Bank in China, Fitzgerald J did not attach much weight to the risk of parallel proceedings (ie the Bank’s claim in China and the plaintiffs’ claim for damages in New Zealand) (at [125]). There was also “nothing inherently wrong” with the Bank pursuing a claim against Mr Mao available to it under Chinese law, even if the claim “might be seen as somewhat surprising from a New Zealand law perspective” (at [120]).

Comment
The judgment offers a clear and concise summary of the principles that have shaped the jurisdiction to award anti-suit injunctions in other common law jurisdictions. On the basis of these principles, it would be difficult to argue with Fitzgerald J’s conclusion that the Bank did not act vexatiously, oppressively or unconscionably in pursuing the Chinese proceedings.

More generally, it may be asked whether New Zealand courts should, in fact, adopt the same approach to anti-suit injunctions that has been taken in overseas common law courts, or whether it should apply an even higher bar to the exercise of the discretion. What makes New Zealand courts entitled to decide whether it is appropriate for a foreign court to exercise jurisdiction? The question of jurisdiction is shaped by a multitude of principles and policies. In most cases, nothing is gained by applying local principles and policies to the question whether a foreign proceeding should go ahead, which is a call best left to the respective forum and its courts (cf the approach adopted in most civil law jurisdictions: see Turner v Grovit (C-159/02) [2004] ECR I-3565; Allianz SpA v West Tankers Inc (C-185/07) [2009] ECR I-663).

For example, common law courts routinely issue anti-suit injunctions to hold parties to a contractual obligation not to sue in a particular forum (Dicey Rule 39(4)). But what may appear, to the New Zealand court, as a blatant attempt to evade an exclusive jurisdiction agreement in favour of a more favourable law applicable in the foreign court, might be construed by the foreign court as a legitimate reliance on that forum’s public policies (see, eg, Akai Pty Ltd v People’s Insurance Co Ltd [1998] 1 Lloyd’s Rep 90 and Akai Pty Ltd v The People’s Insurance Co Ltd (1996) 188 CLR 418). Taking an internationalist approach to the conflict of laws, there is a good argument that the New Zealand court should simply trust the foreign court to do the right thing.

Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance

By Maria Hook (University of Otago)

Late last year, New Zealand signed the Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance (signed 23 November 2007, entered into force 1 January 2013, signed by New Zealand 26 November 2019). In theory, the decision to sign up to the Convention should not come as a surprise. The Convention’s Drafting Committee was chaired by a New Zealander (Justice Doogue), and the case for a multilateral approach to the recognition and enforcement of maintenance decisions is overwhelming. But given New Zealand’s track record at the Hague Conference on Private International Law, the news that it now intends to become a party to the 2007 Convention is cause for celebration. Under the current law, foreign orders for the periodic payment of maintenance are only enforceable in New Zealand if they are from Australia, or from another Commonwealth country, or from South Africa, California or Hong Kong (for the enforcement of accrued maintenance at common law, see Eilenberg v Gutierrez [2017] NZCA 270, [2017] NZFLR 471, Jack Wass [2017] NZLJ 410). Under the 2007 Convention, on the other hand, there are broad grounds for the recognition and enforcement of foreign maintenance orders (see Chapter V). The Convention also establishes “a comprehensive system of co-operation between the authorities of the Contracting States” (see Art 1); and it facilitates the process of making applications for maintenance in other Convention countries, largely replacing the United Nations Convention for the Recovery of Maintenance Abroad (signed 20 June 1956, entered into force 25 May 1957), to which New Zealand is a party.

It will be interesting to follow New Zealand’s next steps in acceding to the Convention. There are a few question marks at this stage. In particular, it is not clear whether New Zealand will enter a declaration to extend Chapters II and III of the Convention, which provide for the cooperation of authorities and the transmission of applications, to spousal maintenance (as well as child support: see Art 2). It is also unclear whether New Zealand will extend the application of the Convention more generally to relationships not falling within the mandatory scope of the Convention (such as registered partnerships and de facto relationships) (see Art 2). In any case, implementation of the Convention will provide a valuable opportunity for reforming Part 8 of the Family Proceedings Act 1980 on overseas maintenance (or even the Act’s private international law rules more generally).

The Court of Appeal’s decision in Christie v Foster

On this blog we have previously reported on the High Court’s decision in Foster v Christie [2018] NZHC 3103, dealing with the question whether a dispute over New Zealand land must be heard in New Zealand. The Court of Appeal has now overturned the decision ([2019] NZCA 623). For a case note on the decision, see here.

Whakaari/White Island, civil liability and the conflict of laws

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.

Without notice injunctions against foreign defendants: Part III

By Tim Stephens (Barrister, Stout Street Chambers)

Followers of this blog will know that twice in the last 12 months or so, Jack Wass has addressed the question of whether the court has jurisdiction to grant interim relief without notice against foreign defendants. The recent decision of the Court of Appeal in Commerce Commission v Viagogo AG [2019] NZCA 472 supplies a satisfying concluding chapter to this story.

Jack’s first post had called into question a line of authority that had emerged in the 20 years following the decision of the Court of Appeal in Advanced Cardiovascular Systems Inc v Universal Specialties Ltd [1997] 1 NZLR 186 (CA). A series of High Court cases had held that a court cannot grant any form of interim relief until the respondent has been served and, further, until any actual or intimated protest has been determined (Rimini Ltd v Manning Management and Marketing Pty Ltd [2003] 3 NZLR 22 (HC); Hamilton v Infiniti Capital Andante Ltd HC Auckland CIV-2008-404-2304, 7 May 2008; and Discovery Geo Corp v STP Energy Pte Ltd [2012] NZHC 3549, [2013] 2 NZLR 122).

Jack’s second post in February of this year had addressed the decision of the High Court in Commerce Commission v Viagogo AG [2019] NZHC 187, where this line of authority had arisen for consideration again. In the High Court, Justice Courtney had followed Advanced Cardiovascular Systems and the subsequent High Court cases, and refused to grant an interim injunction on a without notice basis restraining Viagogo from targeting New Zealand consumers with its ticket reselling services. Because Viagogo was a foreign corporation, her Honour held that the Court had no jurisdiction to grant interim relief unless and until Viagogo was served.

In his second post, Jack pointed out that Advanced Cardiovascular Systems involved quite a different situation from the facts in Viagogo. Advanced Cardiovascular Systems concerned an application for summary judgment, which, although interlocutory, is an application where the substantive rights of the defendant might be finally determined. Jack believed that the question of jurisdiction must always be analysed in light of the specific context in which interlocutory relief has been sought, particularly where prior notice to the defendant may compromise the effectiveness of the court’s orders. Jack’s conclusion was that the issue justified reconsideration by the Court of Appeal.

However, the chances of overturning the case law that had become established in the High Court since Advanced Cardiovascular Systems looked slim. By its nature, the court’s jurisdiction to grant interim relief on without notice basis is almost always considered when the circumstances are extremely urgent. Submissions are prepared by counsel under significant time pressure. Judgments are delivered by judges without the opportunity for extended reflection. And any appeal is likely to be overtaken by events, so appeals are infrequently pursued.

In Viagogo the stars aligned. Service of the proceedings needed to occur through consular channels in Switzerland and was going to take six months. The Commerce Commission saw the issue as a significant matter of principle that was likely to come up again in the future. And, most importantly for our story, the Commission had now seen Jack’s posts.

Together with James Every-Palmer QC, Jack was instructed on the appeal, and set about advancing to the Court of Appeal why Advanced Cardiovascular Systems had been misunderstood, and why the High Court has jurisdiction to grant interim relief without notice, whether the respondent is physically located in New Zealand or overseas. The Court of Appeal agreed, and the appeal was allowed.

At the heart of the Court of Appeal’s analysis is the idea that the High Court has a number of different kinds of jurisdiction and, while interconnected, they are conceptually distinct. In one sense of the term, the court has jurisdiction to hear and finally determine a substantive claim against a particular person. This kind of jurisdiction—personal jurisdiction—is probably the usual sense that people have in mind when using the expression. This, however, is how problems arise. Casual use of the term “jurisdiction” can operate to import rules from one kind of jurisdiction to another, when policy reasons underlying the rules in the former kind of jurisdiction are not present in the latter.

In the case of personal jurisdiction, valid service of the proceedings on the defendant is a prerequisite for the exercise of the jurisdiction because of the finality of orders affecting the defendant which might follow. Service on a defendant may occur inside or outside New Zealand. If proceedings are served on a defendant outside New Zealand, the rules about service out become a means for determining whether the case is an appropriate one for the court to exercise the personal jurisdiction extraterritorially. The defendant can protest the personal jurisdiction of the New Zealand court, and any protest must be determined before the court can move to determine the substantive claim.

The court’s jurisdiction to grant interim relief is connected to the court’s personal jurisdiction, but it is also separate from it and has its own considerations. The power to grant interim relief is necessarily linked to the existence of a proceeding that has been, or is to be, filed. But it is not the case that the court has no jurisdiction to grant interim relief until the defendant has been served.

This is clearly so with domestic defendants: freezing orders, search orders, and the explicit language of the general provisions in rule 7.53 all contemplate interim orders being granted against a New Zealand-based defendant before service of proceedings. In the context of interim relief, the interest in formally notifying the defendant of the proceedings frequently gives way to the interest in the court being able to do effective justice between the parties when the court comes to decide the claim on its merits.

The Court of Appeal held that the position is no different with overseas defendants. There is nothing in the language of rule 7.53 or the rest of the High Court Rules which limits the Court’s broad power to grant interim relief in connection with existing or prospective proceedings in this way. The courts have routinely issued injunctions against foreign defendants before service in order to ensure that the court is able to work effective justice between the parties following trial. Freezing orders are a clear and simple example but there are any number of others.

The key insight of the Court of Appeal’s approach in Viagogo is therefore that the concept of jurisdiction is not monolithic. In the end, “jurisdiction” means the legal power of the court to hear and determine the specific question before it, and make orders in relation to that question. Different rules about the parameters of particular jurisdictions might apply, depending on their context.

This approach provides the answer to the queasiness felt by judges in the series of High Court cases that came after Advanced Cardiovascular Systems—particularly given that protests had been filed or intimated in each of those cases. In Discovery Geo Corp v STP Energy Pte Ltd [2012] NZHC 3549, [2013] 2 NZLR 122, the Judge had baulked at the concept of prima facie (or “provisional” or “interim”) jurisdiction that had been utilised in earlier authorities. The Judge said (at [43]):

I do not accept that in this case there is prima facie jurisdiction, even if that is a relevant concept … [The defendant] must have the right to file a proper protest, and evidence in support of it. The Court will then consider whether it has jurisdiction. It should not now proceed on the basis that it should make interim orders, however innocuous they perhaps might be, on the basis it might have jurisdiction.

The response of the Court of Appeal in Viagogo ([2019] NZCA 472) was to focus on the sense in which the term “jurisdiction” is used in the context of the rules governing service out and protests. The objection to jurisdiction contemplated by the rules is an objection to the court to hear and finally determine the case on its merits, not any other jurisdiction. The Court of Appeal said (at [79]):

For example, and at the risk of stating the obvious, the court has jurisdiction to hear and decide an application under r 5.49(3) to dismiss the proceeding, or an application under r 5.49(5) to set aside the appearance under protest. That is, the court has jurisdiction to determine whether it should proceed to exercise jurisdiction to determine the substantive claim. The court can make a range of orders that are ancillary to (preliminary) determinations of this kind, such as case management orders.

None of this was to say that, in the context of interim relief, the jurisdiction of the court to hear and determine the substantive claim was irrelevant. On the contrary, it is the prospect of an eventual determination in favour of the plaintiff that justifies preserving the position until the court has had an opportunity to finally determine the matter. If the court’s personal jurisdiction in respect of the substantive claim is not clear cut, the court will need to consider, as one factor in the assessment of the overall interests of justice, the likelihood of whether or not a hearing on the merits before the New Zealand court will take place.

All of which brings us to a final point, which Jack had also made in his earlier post about Viagogo. In the High Court, Justice Courtney had suggested that the plaintiff could obtain orders for substituted service if the circumstances were truly urgent. Jack had doubted that substituted service was a panacea and queried whether it should be used this way. The purpose of this procedure is to enable the court to deal with defendants who are evading service or cannot be located by any of the usual methods. It is not an alternative means of dealing with questions about extraterritorial jurisdiction. The Court of Appeal agreed, saying that as a matter of principle they did not consider that substituted service can be used to do an “end run” around the rules in relation to service of proceedings on defendants outside New Zealand.

Our story therefore ends with a welcome rationalisation of the principles and cases in this area, in a clear and comprehensive judgment that will provide guidance to counsel and judges when the issue arises in urgent circumstances again.

The Law Commission’s Review of the Property (Relationships) Act 1976

By Maria Hook (University of Otago)

The Law Commission recently released its final Report on the review of the Property (Relationships) Act 1976 (Review of the Property (Relationships) Act 1976 – Te Arotake i te Property (Relationships) Act 1976). The Report proposes significant changes to New Zealand’s current conflict of laws rules relating to relationship property contained in ss 7 and 7A of the Act. In a nutshell, the Commission recommends that:

– the unilateral choice of law rule in s 7 be replaced with a multilateral choice of law rule that applies “the law of the country to which the relationship had its closest connection”;
– this multilateral choice of law rule be subject to any agreement by the parties to apply foreign law, which is defined to include implied choice of law agreements and even substantive agreements made in accordance with foreign law;
– where the Act applies pursuant to these rules, the court’s subject-matter jurisdiction extend to both movable and immovable property wherever located (and that this include the power to make in personam orders in relation to property situated outside New Zealand); and
– the Family Court have jurisdiction to determine claims governed by foreign law.

I do not wish to provide a summary of the Commission’s reasoning here, which is to the point and well worth a read (see Chapter 19). Rather, I would like to share some of my initial thoughts on the recommendations. The proposed approach is an improvement on ss 7 and 7A, which are fraught with problems, and the Commission is to be applauded for making considered use of this opportunity for reform. But in my view the Commission’s recommendations reflect some controversial policy decisions, which will benefit from further discussion.

This post aims to make a modest start on this discussion. Many of the thoughts here expressed are developed in greater depth in an article in the Journal of Private International law, to be published this month, which examines New Zealand’s approach to couples’ property as a matter of first principles (Maria Hook “A First Principles Approach to Couples’ Property in the Conflict of Laws” (2019) 15(2) Journal of Private International Law 1 (forthcoming)).

The values underpinning conflict of laws rules on couples’ property
The Report offers two principal rationales for the proposed approach: the importance of meeting the parties’ reasonable expectations (paras 19.15, 19.17, 19.31, 19.34, 19.55); and the inexpensive, speedy, simple and just resolution of disputes (paras 19.9, 19.38). These principles are worth unpacking further. For example, what does it mean to say that application of the law with the closest connection to the relationship meets the parties’ “reasonable expectations”? Is it that the law with the closest connection is the law that a reasonable person in the parties’ position would have assumed to be applicable? To what extent is this assumption shaped by the respective parties’ interests in having a particular law applied? What are those interests, and how do we reconcile them where they diverge? Are we concerned with parties’ personal feelings of connectedness to any given country, and/or the legal system with which the parties jointly identify? Do socio-political factors play a role as well, so that we recognise the relationship as a social construct? Should we give effect at all to the interests of the wider community within which the relationship is embedded (and hence move away from a strict focus on the parties’ expectations, recognising instead that the expectations must be “reasonable” or legitimate)?

The Commission has provided some clues on these questions. It recommends a presumption that the law with the closest connection be the law of the last place of shared residence, and then lists a number of factors that a court may take into account when determining whether the presumption is displaced. The proposed factors include, for example, “the social and personal connections the partners have with the proposed country”, and the place where any immovable property is located. But the Commission has provided little guidance on why these particular factors are relevant, or how they are to be weighed. In order to work out these questions, it is necessary to ask – as a matter of first principles – what a meaningful connection looks like in the context of these types of disputes. In my view, engaging with this question may well offer more predictability and certainty than a rebuttable presumption in the form proposed by the Law Commission.

The issues covered by the proposed conflict of laws rules
Asking this question also helps to define the appropriate scope of the proposed conflict of laws rules: what are the kinds of issues that the rules should apply to? I have two main concerns about the Commission’s proposal in this regard.

The first concern is that the scope of the proposed multilateral choice of law rule is unclear. The Commission has proposed that, in the absence of choice, the law to be applied “to property disputes between partners” be the law of the country to which “the relationship” had its closest connection. The Report clarifies that the focus is on the relationship as opposed to the individual parties (para 19.34). But this still leaves important questions unanswered. Does the rule apply only to claims that plead rights to relationship or matrimonial property, or does it also extend to, for example, common law and equitable claims between partners, or to claims relying on a court’s statutory discretion to redistribute property upon the dissolution of a relationship (see, eg, Matrimonial Causes Act 1973 (England and Wales))? What about claims that do not distinguish between relationship property and maintenance? Does the rule really only apply where there is a “dispute” between the partners?

These questions are difficult questions of characterisation. Courts routinely have to engage in characterisation when faced with conflict of laws problems, so perhaps it is appropriate that at least some of these questions be left to the courts to work out. However, characterisation necessarily requires an engagement with the values underpinning the rule – which brings me back to my comment in the previous section: that we need to ask as a matter of first principles what a meaningful connection looks like in the context of claims relating to couples’ property.

The second concern is with the remaining two conflict of laws rules proposed by the Commission, relating to subject-matter jurisdiction and party choice. The concern is that the scope of these rules is too narrow because, curiously, they are expressed to be unilateral in nature. Thus, the rule on subject-matter jurisdiction provides that the court’s jurisdiction extends to immovable and movable property wherever located, but it applies only once the court has determined that New Zealand is the governing law (see R132). So where the proposed multilateral choice of law rule points to foreign law being applicable, there is nothing in the proposed rules that says that the court has universal subject-matter jurisdiction. Conversely, party choice seems to be relevant only to the extent that the parties have agreed to select foreign law (R134). There is nothing in the proposed rules that says that the court should give effect to a choice of New Zealand law. In both cases the rules proceed from the assumption that New Zealand law (and, more specifically, the Act) has already been identified as being applicable. This is despite the Commission’s rejection of unilateralism more generally in the context of s 7.

The reasoning behind these limitations is not clear. Insofar as subject-matter jurisdiction over foreign property is concerned, there is no reason why a court should have lesser powers under foreign law than New Zealand law (ie the Act). Surely the scope of the court’s subject-matter jurisdiction should be the same, regardless of whether New Zealand law or foreign law is applicable. Indeed, the Commission notes that it sees the proposed inclusion of foreign immovables as consistent with the decision of British South Africa Co v Compania de Moçambique [1893] AC 602 (HL) (see fn 37). But given that there is conflicting authority on this point (Burt v Yiannakis [2015] NZHC 1174, [2015] NZFLR 739 (HC), [55]ff, [73], cf [46]-[47]; Schumacher v Summergrove Estates Ltd [2013] NZHC 1387, [17]), it would be dangerous to assume that a New Zealand court tasked with determining a claim pursuant to foreign law would decide that it has jurisdiction to take into account foreign immovables. In other words, this is a point that would very much benefit from legislative clarification, so its express exclusion from the proposal at least requires justification.

Insofar as the second unilateral “hangover” is concerned, the parties’ ability to select the applicable law, there is again no obvious benefit to restricting the scope of the rule to foreign law. On the contrary, there is every reason why parties should be able to select the law of New Zealand (and hence the new Act) as being applicable, and to subject this choice to the same requirements of formation and validity as choices of foreign law. In fact, parties are currently able to do so under s 7A(1).

The concept of “foreign law agreements”
The conflict of laws often recognises the parties’ ability to choose the law applicable to their relationship. This choice is made, and given effect, in the form of a “choice of law agreement”. If the choice is valid, the chosen law then applies to determine the parties’ substantive rights and obligations. The Commission’s proposal seems to recommend the introduction of a new type of choice of law agreement, a “foreign law agreement”, which is expressed to include substantive agreements made “in accordance with the law of another country with respect to the status, ownership and division of some or all of their property” (R135). This is in addition to express and implied choice of law agreements. All three types of agreement are subject to the same “procedural requirements” of validity, that is, they must be in writing, signed by both partners and meet the legal requirements of a valid agreement under either the putative law or the law of the country with which the relationship has its closest connection (R137).

In my view, there is no need for an express reference to substantive agreements made pursuant to foreign law, which risks conflating questions of choice of law and substantive law. The reference seems to have been prompted by a concern that the current rules are unclear whether a court can uphold a substantive agreement made pursuant to foreign law that fails to satisfy the contracting out provisions in Part 6 of the PRA (see para 19.48). A more appropriate solution to this concern would be to clarify the meaning and effect of implied choice of law agreements (or, indeed, of the proposed multilateral choice of law rule, to the extent that this rule may identify foreign law as being applicable to the partners’ relationship).

Thus, the rules could specify that entry into a substantive agreement in accordance with the law of a particular country is one of the circumstances in which parties are taken to have made an implied choice of law. The chosen law would then apply to determine the existence and validity of the substantive agreement, rather than the “procedural requirements” set out in R137. Hence, there would be no unnecessary conflation of choice of law and substantive law. If there is a concern that substantive agreements should not be enforced unless they fulfil certain minimum requirements (for example, a requirement that they are in writing), then the appropriate course of action would be to introduce overriding mandatory rules to that effect. Conversely, if there is a concern that courts might treat the new equivalent of Part 6 as having overriding mandatory force (see para 19.48), then Parliament could clarify that the new rules do not apply to substantive agreements governed by foreign law.

(Similar observations apply to the Commission’s treatment of implied choice of law agreements, which seems to apply the “procedural requirements” of validity outlined in R137 to the substantive agreement giving rise the implied choice: see M Hook The Choice of Law Contract (Hart, 2016) at 179 on the often tricky relationship between implied choice and rules of formality.)

Choice of law agreements – safeguards
The freedom to select the applicable law is a powerful principle that should be accompanied by effective safeguards to protect vulnerable parties and relevant public policy interests. One of the main reasons for reforming ss 7 and 7A, in my view, is that s 7A does not provide sufficient safeguards in this regard. Unfortunately, the Commission’s proposal offers no substantial improvement on the status quo.

First, the proposed rules recognise – or continue to recognise – the power to make an implied choice of law (cf para 19.47, where the Commission notes that s 7A does not currently recognise implicit choices of law; but see Bergner v Nelis HC Auckland CIV-2004-404-149, 19 December 2005 at [24]; The Choice of Law Contract at Ch 7 s V.B.2). This means a party may be treated as having entered into a choice of law agreement in circumstances where the party did not have an opportunity to make a deliberate or well-informed choice. Courts have traditionally taken a very generous approach to inferring choice of law agreements. I have argued elsewhere that that approach is misconceived as a matter of contract law (See The Choice of Law Contract at Ch 6), but there is nothing in R135 to suggest that courts ought to break with the traditional approach and exercise restraint in inferring choices of law.

The Commission’s preference for recognising implied choices of law seems to be motivated by a concern that substantive agreements that are made in accordance with a particular foreign law, but that do not contain an express choice of law clause, may turn out to be unenforceable under ordinary choice of law rules (see para 19.60). If it is indeed desirable that substantive agreements (cf “foreign law agreements”, R135c) should be upheld in accordance with the law by reference to which they were made, it is the objective choice of law rule – the rule identifying the law in the absence of choice – that can be used to achieve this result. In other words, the law by reference to which the agreement was made will be the applicable law by virtue of being the law of the country with the closest connection to the relationship.

Second, R135 recommends that the choice of law agreement be valid if it satisfies either the putative chosen law or the law of the country with which the relationship has its closest connection. This lex validitatis approach makes it more difficult for a party to argue that the choice of law agreement is invalid. The rule favours the validity of the agreement, because even if it is invalid under the putative chosen law, it may still be valid (and hence enforceable) under the law of the country with which the relationship has its closest connection, and vice versa. In essence the rule allows for “double dipping”.

Third, the only direct rules of validity prescribed in R137 are that the agreement be in writing and signed by both partners. These rules do not go far enough. That is because the substantive law applicable to the choice of law agreement (ie the putative chosen law or the law of the country with which the relationship has its closest connection) ordinarily provides only general rules of agreement. In particular, substantive law rules dealing specifically with substantive agreements relating to couples’ property (such as the rules in Part 6 of the Act) do not usually apply to choice of law agreements, because choice of law agreements are not substantive agreements (for example, a choice of law agreement is not an agreement “with respect to the status, ownership, and division” of property” within the meaning of s 21 – unless, of course, the agreement is a substantive “foreign law agreement” as envisioned in R135c). Therefore, questions that are specific to the choice of law agreement must be resolved directly by the New Zealand conflict of laws. For example, it is unlikely that the applicable law could be used to impose a requirement that the parties obtain independent legal advice as to the meaning and effect of the choice of law agreement (see The Choice of Law Contract at 113, Ch 7 s VIII.B). Similarly, the applicable law often provides no rules relating to the parties’ capacity to enter into a choice of law agreement (see The Choice of Law Contract at Ch 7 s VI).

In my view, these are important matters that the New Zealand conflict of laws should regulate. Given the potentially far-reaching implications of choice of law agreements, it is concerning the parties would be able to enter into such an agreement without having obtained any legal advice as to its meaning or effect, or without needing to satisfy any requirements of legal capacity. For example, a stay-at-home partner could be bound by a choice of foreign law that has the effect of keeping the partners’ property entirely separate, when under the law of the country most closely connected to the relationship the partners’ property would have been shared equally. Such a choice should only be available if the partners were aware that the choice of foreign law would affect their respective entitlements in this way.

(To be clear, my argument here is not that the New Zealand conflict of laws should prescribe rules of validity for substantive “foreign law agreements” (see above). So there is no concern in this context, as the Commission suggests, that such rules “would impose a significant burden on the partners” and “invalidate many agreements that had been made pursuant to the law of the nominated country, undermining the autonomy of partners who enter into an agreement in good faith” (para 19.60)).

Fourth, the proposed rules do not provide for a power to set aside the choice of law agreement on grounds of procedural or substantive unfairness. Rather, any injustice will have to be cured in accordance with the general public policy exception, which imposes a high threshold (R139). Whether such a power is desirable is a difficult question (see The Choice of Law Contract at Ch 8 s III). There would be a real concern, for example, that the rule would lead to time-consuming mini-trials on the validity of choice of law agreements. But it is an option that is at least worth discussing, and its absence underscores the overall laissez-faire approach of the proposed rules.