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Lun v Kong: confusion about subject-matter jurisdiction

Cross-border adjudicatory jurisdiction can be split into two types: personal jurisdiction and subject-matter jurisdiction. Personal jurisdiction is the main vehicle for determining whether a New Zealand court will exercise jurisdiction over a particular defendant. Subject-matter jurisdiction plays a more targeted role. For example, a New Zealand court may lack subject-matter jurisdiction to hear a claim involving questions of title to foreign land. As a concept, subject-matter jurisdiction has – at least traditionally – been much less visible than personal jurisdiction. But it has received increased attention in the New Zealand courts over the past few years (see, eg, Almarzooqi v Salih [2021] NZHC 330, [2021] NZFLR 501; Mao v Findlay [2022] NZHC 521 at [51]; Johnston v Johnston [2020] NZHC 2887, [2020] NZFLR 594 at [38]).

Subject-matter jurisdiction is an important concept (see CLNZ, ch 2.E). It can play a useful role in shaping the proper reach of the court’s adjudicatory powers. However, because of its complex interrelationship with choice of law, it is important that the functions of subject-matter jurisdiction are clearly understood and carefully circumscribed. Without a good grasp of the concept, there is a risk of methodological confusion. This risk was highlighted by Goddard J in Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [50], where his Honour cautioned that the term should not be used where the issue concerned the law applicable to the claim – for example, the question of whether a particular statutory provision can be applied to a case involving foreign facts (for a more detailed analysis of this particular point, see CLNZ at [2.334]).

This kind of confusion is evident from a recent case, Lun v Kong [2023] NZHC 1317. Here, the concept of subject-matter jurisdiction ended up unduly encroaching on the territory of choice of law and thus confusing the proper nature of the court’s enquiry. The plaintiff, Mr Lun, alleged that the defendant, Mr Kong, had committed a breach of trust in relation to shares issued in a Chinese company. The question before the Court was whether New Zealand was the appropriate forum to determine the claim.

There was no real basis for arguing that the New Zealand Court lacked subject-matter jurisdiction to determine the dispute. In particular, Associate Judge Taylor had no trouble rejecting an argument by the defendant that the claim concerned corporate arrangements within China (which would have been under the exclusive jurisdiction of the Chinese courts and thus given rise to a true question of subject-matter jurisdiction) (at [75]). Nevertheless, the Court proceeded to consider – on a more general basis – whether New Zealand had subject-matter jurisdiction to determine the dispute, prompted (presumably) by counsel’s submissions to that effect.

In a brief analysis, the Judge relied on a number of connecting factors to conclude that the Court did have subject-matter jurisdiction: the fact that the parties’ arrangements giving rise to the alleged trust/fiduciary obligations were “mostly connected with New Zealand” or were “brought into existence in New Zealand”, and the fact that both parties lived in New Zealand and the defendant was a New Zealand citizen (at [76]). To the extent that this reasoning suggests that a New Zealand court will lack subject-matter jurisdiction over a claim unless it is the forum most closely connected to the claim, it is incorrect. There is no general limitation on the court’s subject-matter jurisdiction based on a requirement of closest connection.

The concept of (closest) connection is an important organising principle in the conflict of laws, but its principal relevance is to the questions of choice of law (ie, what system of law governs the claim, which depending on the nature of the issue may be the legal system of the country most closely connected to the claim) and of the appropriate forum or forum non conveniens, which determines whether the court will exercise personal jurisdiction (since the connections between the claim and New Zealand will influence the question of whether it is the appropriate forum for the trial of the action).

The discussion of subject-matter jurisdiction did not add anything to the Court’s analysis. What is more, it detracted from the more relevant questions of choice of law and appropriate forum. There was a disagreement between the parties as to the proper characterisation of the claim and the implications of this for choice of law purposes. The plaintiff argued that the claim involved a trust issue, that this issue was governed by New Zealand law, and that the applicability of New Zealand law favoured New Zealand as the appropriate forum. The defendant made competing arguments. The Court did not address the question of choice of law head-on, but closer engagement with this question would have been valuable, and might also have aided in the Court’s identification of the appropriate forum.

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