By Jack Wass (Stout Street Chambers)
Principle and expediency sometimes collide in the conflict of laws. This note discusses one example: where the court is asked to grant interim relief – such as a freezing order – on a without notice basis against a foreign defendant.
It is a basic principle of New Zealand private international law that the court has no inherent jurisdiction over defendants who are beyond the territorial jurisdiction of the court. While the court has inherent jurisdiction to regulate the conduct of persons within the territory, personal jurisdiction over foreign defendants derives from service of originating process. Proceedings may only be served outside the jurisdiction with statutory authority. This authority is found in delegated form in rules 6.27 and 6.28 of the High Court Rules.
Since the 1970s, the English and New Zealand courts have recognised a power to grant freezing orders – a form of interim relief originally known as Mareva injunctions – where there is cause to suspect that a (prospective) judgment debtor may dissipate their assets, and thus frustrate the plaintiff’s ability to enforce their judgment. The freezing order is a personal remedy (in other words, it acts in personam and not in rem).
The earliest cases (Mareva Compania Naviera SA v International Bulk Carriers SA [1975] Lloyd’s Rep 509 (CA) and Nippon Yusen Kaisha v Karageorgis [1975] 1 WLR 1093 (CA) in England, and Hunt v BP Exploration Company (Libya) Ltd [1980] 1 NZLR 104 (HC) in New Zealand) involved assets in New Zealand and a defendant overseas. Applications for freezing orders are usually made on a without notice (or ex parte) basis – that is to say, the court is asked to make an order before the application is served on the defendant, so that the defendant is not given the opportunity to dispose of the assets in the meantime. The New Zealand courts routinely make freezing orders against foreign defendants on a without notice basis (for a recent example, see Kuyt v Kuyt [2018] NZHC 619).
On its face, this is difficult to reconcile. If the court has no inherent jurisdiction over foreign defendants, and its power to regulate their conduct depends on service in accordance with statutory authority, how does the court have jurisdiction to freeze a person’s assets before the proceedings have been served?
The position in Australia seems to be that the court has no power to grant a freezing order where the defendant to the substantive proceedings is outside the jurisdiction until they have been served with originating process, at least where the substantive proceedings will be heard in Australia (ANZ Grindlays Bank plc v Fattah (1991) 4 WAR 296). Kós observes that ‘it remains essential that the defendant is properly made a party to the proceedings’ (‘Freezing and seizing orders’ in Blanchard (ed) Civil Remedies in New Zealand (2 ed, Thomson Reuters, 2011) at 304). And in Discovery Geo Corporation v STP Energy Pte Ltd [2013] 2 NZLR 122, which involved an application for interim relief in support of an arbitration that would have operated in the same way as a freezing order, Kós J doubted whether the court would have jurisdiction until the applicant had been served, and any protest to jurisdiction determined.
This question as analysed in Equipment Finance Ltd v C Keeton Ltd (1999) 13 PRNZ 319 (HC). The court held that it would be sufficient to establish ‘interim jurisdiction’ against non-resident defendants that they could properly be named as parties to the substantive action and the applicant would have the right to serve them outside the jurisdiction in due course, and there is a good arguable case that New Zealand will be the appropriate forum. While the defendants retain the right to object to jurisdiction on the usual grounds, this does not deprive the court of the ability to grant interim relief in the meantime. This approach is implicitly endorsed by rules 32.2(1), which empowers the court to grant without notice freezing orders without distinguishing between resident and non-resident defendants. Indeed the ability to grant effective interim relief has become particularly important now that rule 32.5 expressly empowers the court to grant interim relief in support of foreign proceedings (where the New Zealand court will never assume jurisdiction over the substance of the dispute).
A separate question arises where the defendant has been served, but has filed a protest to jurisdiction. There is a line of New Zealand authority holding that the court has no jurisdiction to grant interim relief – of any kind – where a protest to jurisdiction is intimated or outstanding. The first case in this line concerned an application for summary judgment, where the substantive nature of the application necessarily assumes jurisdiction (Advanced Cardiovascular Systems Inc v Universal Specialties Ltd [1997] 1 NZLR 186 (CA)). Nevertheless, the principle was expressed to apply to interlocutory applications generally and has been so applied by the High Court in subsequent cases (see eg Rimini Ltd v Manning Management and Marketing Ltd [2003] 3 NZLR 22 (HC)).
As Goddard & McLachlan have argued, this does not follow as a matter of principle, since interim relief does not necessarily presume jurisdiction over the substance, and it has the potential to seriously undermine the utility of freezing orders against foreign defendants (Goddard & McLachlan Private International Law: Litigating in the Trans-Tasman Context and Beyond (NZLS, 2012) at 95). It is open to the Court of Appeal to clarify the scope of the principle recognised in Advanced Cardiovascular, and to preserve the utility of without notice interim relief.
