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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.

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.

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.

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]).

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.

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