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The Conflict of Laws in New Zealand: News and Comment

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Contributions must be original unpublished works and submission of contributions will be held to imply this.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.

Choice of non-State Law in International Commercial Contracts: A New Zealand Perspective

By Jeanne-Marie Bonnet (LLB student at the University of Otago)

In early 2015, Members of the Hague Conference on Private International Law formally adopted their Principles on Choice of Law in International Commercial Contracts (the “Hague Principles”), a normative soft-law instrument designed to promote party autonomy in contracting relationships. As a normative instrument, the Hague Principles provide a blueprint approach to the proper law of contract through codifying general global practice and effectively equating arbitration and litigation proceedings. The Hague Principles propose pragmatic solutions to conflict of law issues through codifying international “best practice” for commercial contracts (see the foreword to the Hague Principles at 7).

Nevertheless, “best practice” may well be a judgment call with a distinctly European flavour (see Gilles Lhuilier “Les Principes sur le Choix de la Loi applicable aux Contrats Commerciaux Internationaux de la Conférence de La Haye: L’Emergence des ‘Best Practices‘” (2016) Int’l Bus. L.J. 103 at 103). The Hague Principles present an unprecedented approach to the selection of non-State law as the proper law in litigation. This approach has been heavily criticised for being uncertain, as well as creating potentially inconsistent outcomes when interacting with tacit choice of law and dépeçage (see Brooke Marshall “The Hague Choice of Law Principles, CISG, and PICC: A Hard Look at a Choice of Soft Law” (2018) 66 Am. J. Comp. L. 175 at 196-202). This post will focus generally on whether the possibility of selecting non-State law would be a worthwhile change to the New Zealand approach to the conflict of laws. It suggests that maintaining the status quo is likely the most desirable response in this case, given the novelty of the Hague Principles and the lack of precedent that exists regarding their interpretation and application.

1 Selection of non-State law
The New Zealand approach to proper law is summed up in Vita Foods Products Inc v Unus Shipping Co Ltd [1939] AC 277 (PC). Where party intention as to the proper law is bona fide and legal, and there are no public policy concerns as to the choice of law, the selected law shall govern the contract. Additionally, New Zealand has some overriding mandatory rules which curb party autonomy in choosing the proper law, such as s 137 of the Credit Contracts and Consumer Finance Act 2003.

Selection of non-State law as the proper law for litigation is globally unprecedented (see Marta Pertegás and Brooke Adele Marshall “Party Autonomy and its Limits: Convergence through the New Hague Principles on Choice of Law in International Commercial Contracts (2014) 39 Brook. J. Int’l L. 975 at 996). New Zealand recognises the ability of parties to select non-State law in cases of arbitration under the Arbitration Act, and also party ability to incorporate non-State rules into a bargain (see CMV Clarkson and Jonathan Hill The Conflict of Laws (4th ed, Oxford University Press, Oxford, 2006) at 209). Nevertheless, New Zealand shares in the global reluctance to recognise non-State rules as the proper law in litigation. This reluctance still exists, and is evident in the drafters of the Rome I Regulation rejecting non-State law as possible proper law to be selected by parties (compare Article 3 of the Rome I Proposal to Article 3 of the Regulation eventually adopted).

2 Article 3 of the Hague Principles
Article 3 proposes broader party autonomy in permitting the selection of non-State rules or principles as the proper law, effectively giving equal status to codified domestic law (“hard law”) and non-State law for the first time in cases of litigation

While there has been criticism that this broad drafting could lead to the selection of non-neutral laws such as sharia or halakha as the proper law, in my opinion this is unlikely given their continual rejection in current arbitration (see Michael Douglas and Nicholas Loadsman “The Impact of the Hague Principles on Choice of Law in International Commercial Contracts” (2017) 19(1) Melbourne Journal of International Law 1 at 9; Brooke Marshall “Reconsidering the Proper Law of the Contract” (2012) 13 Melbourne Journal of International Law 505 at 536; and Clarkson and Hill at 209). Furthermore, these laws may be too vague to fall within Article 3 requirements of being “generally accepted.”

Choice of codified soft law
The commentary to the Hague Principles gives examples of potential non-State law selections as including the United Nations Convention on Contracts for the International Sale of Goods (the CISG) and the UNIDROIT Principles of International Commercial Contracts (the UPICC). New Zealand, as a party to the Vienna Convention, adopted the CISG in 1995. Obligations under the Convention have already been domestically incorporated through schedule 4 of the Contract and Commercial Law Act (previously through the Sale of Goods (United Nations Convention) Act 1994), meaning that parties are already able to select the CISG as the proper law in commercial contracts. As such, this essay will focus on parties’ new options for selection of non-State law, in particular using the example of the UPICC. In my opinion, the main barrier to using instruments like the UPICC as the proper law is lack of precedent when interpreting and applying its principles.

The UPICC contain imprecise and abstract terms such as “reasonableness” and “good faith.” While not uncommon in contracts, there is no precedent as to how these terms (or any of the other rules contained in the UPICC) should be interpreted as the proper law in the context of litigated disputes. The uncertainty as to the meaning of these terms may well be part of the reason why the express example of allowing selection of the UPICC was rejected at the drafting stage of the Rome I Regulation, although it was left open for parties to incorporate some of these elements into their contracts (see Clarkson and Hill at 209).

A further issue with many of these terms is that they are previously unknown to, or not usually employed in, common law jurisdictions (or even non-French jurisdictions in general – see Michael Bonell “The Law Governing International Commercial Contracts and the Actual Role of the UNIDROIT Principles” (2018) 23(1) Uniform Law Review 15 at 22; and Ingeborg Schwenzer “Global Unification of Contract Law” (2016) 21 Rev. dr. unif. 60 at 67). In fact, the UPICC may not be a good fit with common law jurisprudence per se and have generally not been warmly accepted in the UK. For example, according to Hoffmann LJ in Chartbrook Limited v Persimmon Homes Limited [2009] UKHL 38 at [39], the UPICC rules are a reflection of the French philosophy of contract law rather than English (and therefore common law) values. Moreover, even the drafting style of the UPICC is a reflection of civil law rather than common law codes.

The use of UPICC as the proper law of a contract may therefore not align with the New Zealand common law context or ideals upheld in the domestic approach to the law of contract. The public policy exception will likely not be able to remedy unsatisfactory situations when New Zealand values are not given effect to in these cases, as the terms parties choose to govern themselves are unlikely to “shock the conscience” of a reasonable New Zealander (according to the test laid down in Reeves v OneWorld Challenge LLC [2006] 2 NZLR 184 at [67] and affirmed in New Zealand Basing Ltd v Brown [2017] NZLR 93 (CA) at [62]).

Furthermore, New Zealand courts would have limited access to precedent or interpretive resources since New Zealand is not a part of the UNIDROIT organisation and has not acceded to the UPICC. Even if New Zealand were a part of all the relevant organisations, if the UPICC were chosen as the proper law necessary precedent does not exist for New Zealand to look to in complex cases (see Geneviève Saumier “The Hague Principles and the Choice of Non-State Rules of Law to Govern an International Commercial Contract” 40 Brook. J. Int’l L. 1 at 26). Generally, the UPICC are used to orientate courts as to admissible practices in international commercial contracts. The New Zealand view on the UPICC is likely summed up in Hideo Yoshimoto v Canterbury Golf International Limited [2001] 1 NZLR 523 (CA), where they are viewed as simply a restatement of global practice and an interpretive tool for international commercial law instruments such as the CISG (see the comments of Thomas J at [89]). The UPICC were never intended to be anything more than a codification of the best approach to international contract law, and are therefore not equipped to act as the operative proper law. While a useful normative instrument (for example when reforming and drafting legislation) the UPICC are not suited to governing contracts.

Choice of non-codified soft law
The issues of precedent and interpretation are magnified in the context of non-codified non-State law. Despite the Hague Principles expressly giving examples of codified non-State law in the commentary to Article 3, the possibility remains for non-codified rules to be chosen by parties. Prima facie, a set of non-codified rules of law such as the lex mercatoria can meet the requirements of Article 3 through being a “neutral and balanced sets of rules” which are “generally recognised” in certain regions. However, in a New Zealand context this will likely be a step too far into legal uncertainty.

According to Roy Goode (in “Usage and its Reception in Transnational Commercial Law” (1997) 46 ICLQ 1 at 2), the lex mercatoria is “by nature uncodified, non-statutory and non-conventional.” Uncodified rules are necessarily less certain than codified non-State rules, since principles are difficult to clearly articulate and will likely vary in interpretation between jurisdictions. The difficulty with principles such as these is that they do not represent the commitment of institutions to promulgate specific, unambiguous and desirable behaviours or norms (Goode at 5). Codified rules find success through uniformity of approach. For example, the success of the CISG as a global instrument is largely due to global efforts and vigilance in maintaining uniformity of interpretation and application (see Larry DiMatteo “The Scholarly Response to the Harmonization of International Sales Law” (2012) 30 J.L & Com. 1 at 21). In contrast, non-codified soft law often develops spontaneously in an ad hoc manner. In my opinion, these characteristics make non-codified soft law too uncertain. They pose a great risk of producing inconsistent and unsatisfactory results. This risk is likely why even under the broad freedoms afforded by legislation such as the Rome I Regulation, parties are prohibited from selecting uncodified principles such as the lex mercatoria.

Saumier (at 28-29) argues that there is minimal risk in adopting this broader freedom for party autonomy, and that courts will be well-equipped to deal with this additional aspect in contracting disputes. This argument may well be stronger in a common law context, where courts frequently deal with uncodified principles of law. However, despite New Zealand courts often dealing with unwritten rules, in my opinion they are not well-placed to deal with principles such as the lex mercatoria. Principles such as the lex mercatoria develop less gradually or predictably than case law precedent, meaning that experience in interpreting an evolving common law is not directly applicable or helpful. Selection of non-codified non-State law would therefore be an added complication to the complexity of conflict of law disputes which New Zealand may not be well-suited to deal with.

3 General fit within New Zealand conflict of laws
In order for adoption of the Hague Principles to be worthwhile, the potential uncertainty that Article 3 would introduce into the legal system must be offset by advantages. Besides giving greater effect to party autonomy, in my opinion it is difficult to see any benefit this selection of proper law would bring to the New Zealand jurisdiction. New Zealand would likely only adopt the Hague Principles in order to bring the domestic approach to conflict of laws into alignment with that of other nations, and as such any inconsistencies with the selection of non-State law would be counter-balanced with benefits of a global harmonised approach to private international law.

However, in my opinion there is little reason to believe that this harmonisation would occur. In the short term, New Zealand’s law will only be analogous with that of Paraguay (Paraguay is the only country that has yet adopted the Hague Principles, using them largely unchanged as a basis for their new law on international contracts: see Ley No. 5393 sobre el derecho aplicable a los contratos internacionales, enero 20, 2015, GACETA OFICIAL DE LA REPUBLICA DEL PARAGUAY [G.O.] 13 (2015)).

In the longer term, even if the Hague Principles were to be widely adopted, in my opinion complete harmonisation is unlikely to occur. As already mentioned, part of the success of the CISG is that the Convention’s application and interpretation is vigilantly watched over by various bodies to maintain consistency and uniformity. This is only possible because of the CISG’s status as a convention (see Schwenzer at 74). The Hague Principles were never designed to have this status since their purpose is only to provide a blueprint of desirable commercial practice. Therefore, over time if States were to domestically adopt parts of the Hague Principles, this incorporation would only result in a harmonised approach across jurisdictions for a very brief and limited time. Eventually, divergence in interpretation and application would occur, since there is no mechanism for ensuring a consistent, rigid and unified approach to and application of the Hague Principles. The Hague Principles would be subtly changed by State courts through continual interpretation within existing jurisdictional and structural norms, leading to greater fragmentation of international contract law rather than harmonisation (see Schwenzer at 70-71).

Allowing selection of non-State law as the proper law would also mean that New Zealand must abandon well-established conflict of laws precedents in the area of contract law. New Zealand already derives much of its approach to issues of private international law from its common law neighbours. Given that New Zealand has never been a pioneer in this area, in my opinion adoption of the Hague Principles’ broad approach to party autonomy is likely a step too far into legal uncertainty.

4 Conclusion
Currently, selection of proper law in New Zealand must be legitimate, in good faith and legal. At first glance, the Hague Principles’ promulgation of the ability to select non-State law as the proper law does not undermine these principles. Non-State law can be all these things. However, the ability to select non-State law as the proper law introduces great uncertainty into the New Zealand conflict of laws setting.

The step towards allowing non-State law to govern litigated disputes will force New Zealand to develop precedent, given the absence of available interpretive resources and sources of authority to draw on. Moreover, given that New Zealand is not often a forerunner in the field of private international law, it may not be beneficial for New Zealand to adopt this approach and “fly blind” into the judicial future. In fact, in light of the judicial tendency noted by Petra Butler (in “CISG and International Arbitration – A Fruitful Marriage?” (2014) 17 Int’l Trade & Bus. L. Rev. 322 at 356) of courts to ignore the international element in uncertain or difficult cases and favour domestic law, blindly attempting to navigate the unchartered waters of the Hague Principles without precedential guide may lead to undesirable developments in the New Zealand conflict of laws context. This is a real risk given that the Hague Principles are so new and there is almost no precedent as to their use, scope and interpretation.

Given the increased internationalisation of global commerce, the goal of the Hague Principles in harmonising international commercial contracting is likely necessary and appropriate. However, for New Zealand, Article 3 presents a stark change to the proper law’s status quo. Moving forward, the most appropriate response is likely a cautious one. In my opinion, it would be best to observe the adoption of the Hague Principles in other common law jurisdictions before following suit.

Commerce Commission v Viagogo AG: without notice injunctions against foreign defendants

By Jack Wass, Stout Street Chambers

Introduction

The New Zealand courts have no inherent jurisdiction over foreign defendants; a plaintiff must first serve the proceedings on the defendant in accordance with the High Court Rules. But it may be difficult or impossible to serve the defendant, particularly where they are obstructive or hard to locate. If a plaintiff requires urgent intervention from the Court, to freeze assets or to prevent the defendant committing harmful conduct, the court has the power to make an order “without notice” – in other words, before the defendant is served.

How can these principles be reconciled where the plaintiff seeks urgent interim relief against a foreign defendant?

The Commerce Commission has received hundreds of complaints about the online ticket agency Viagogo. It brought proceedings alleging that Viagogo violates the Fair Trading Act 1986. Viagogo is a company incorporated in Switzerland, operating through a website in New Zealand but with no physical presence here. The Commerce Commission sought an interim injunction preventing Viagogo from making certain misleading representations while the substantive case proceeds.

Viagogo has not yet been served, and it will apparently take six months to serve it through consular channels in Switzerland. It is aware of the proceedings, however, and sent a lawyer to the hearing. The interim injunction hearing thus proceeded on a “Pickwick basis”, which means that the defendant is permitted to make submissions even though formally it has not been served.

In a judgment released on 18 February 2019 (Commerce Commission v Viagogo AG [2019] NZHC 187), Courtney J held that the High Court had no jurisdiction to make an interim injunction. Even if the Fair Trading Act 1986 applied to Viagogo, the Court’s jurisdiction over a foreign defendant depends on service. The Court could not make any orders against Viagogo until it had been formally served in Switzerland. If the circumstances were truly urgent, the plaintiff could request permission for “substituted service” through alternative means (which would often be email). Otherwise the Court had no jurisdiction.

The practical implications of this approach are obvious, and the case gives rise to a number of interesting questions:

(1) Why is the Commission required to serve the proceedings through consular channels in Switzerland?
(2) It is right that the Court cannot grant interim relief without notice against foreign defendants?
(3) Can this problem be avoided by ordering substituted service?

Service of proceedings in Switzerland

A layperson may find it incredible that it would take six months to serve documents on Viagogo. The reason is that service is a formal process – an exercise of sovereignty – that must be completed in compliance with the law of the place where the defendant is located.

Under the High Court Rules, proceedings are usually served by “personal service”, where the documents are physically handed to the defendant in the manner familiar from television shows. Where the defendant is a company, the plaintiff could ordinarily serve them by leaving the documents at their registered office or even a branch. However it is also possible to serve a foreign defendant through any method of service that is permitted by the law of the place of service, or through official channels.

Rule 6.32(4) makes it clear, however, that service will be invalid if it is “effected contrary to the law of the country where service is effected.” Unlike New Zealand, many European countries regard service as an official act that cannot be completed by private lawyers or process servers. Valid service can only be effected through certain official channels.

Switzerland is such a country. Where there is no international agreement in place (and in this case there is not, because New Zealand has not ratified the Hague Service Convention 1965), then a plaintiff can only serve proceedings through consular channels (see Federal Office of Justice International Judicial Assistance in Civil Matters, 11 (https://www.rhf.admin.ch/dam/data/rhf/zivilrecht/wegleitungen/wegleitung-zivilsachen-e.pdf)). It is illegal to serve documents within Switzerland by any other means, including by post, under Article 271 of the Swiss Criminal Code.

It is presumably for this reason that the Commission conceded that Viagogo could only be served through consular channels.

One alternative should be kept in mind. A plaintiff is not restricted to suing a multinational company at its place of incorporation, but may also serve the proceedings on a branch office in a third country. This is because a company is regarded as being “present” wherever it has a fixed place of business. Where the third country has less restrictive rules about service of process, it may be much easier to serve the defendant in this way.

Can the Court grant interim relief without notice against foreign defendants?

The question of whether the New Zealand courts have jurisdiction to grant interim injunctions against foreign defendants before service is vexed.

This issue arises most often in the context of freezing orders (formerly known as Mareva injunctions), where the plaintiff wishes to freeze assets to prevent them being dissipated before judgment. The New Zealand courts often grant freezing orders without notice against foreign defendants, as do the English courts, although according to the approach adopted in Viagogo they have no jurisdiction to do so.

I discussed this issue in a blog post published in September 2018 (https://blogs.otago.ac.nz/conflicts/2018/09/29/does-the-court-have-jurisdiction-to-grant-interim-relief-without-notice-against-foreign-defendants/). In Discovery Geo Corporation v STP Energy Pte Ltd [2013] 3 NZLR 122, Kós J doubted whether the Court had any jurisdiction to grant an interim injunction until the defendant had been served, and the position appears to be the same in Australia (ANZ Grindlays Bank plc v Fattah (1991) 4 WAR 296.

A different approach was taken by the High Court in Equipment Finance Ltd v C Keeton Ltd (1999) 13 PRNZ 319. The Court found that it was sufficient for the plaintiff 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.

On these authorities there is a direct clash between pragmatism and principle. The service rules recognise that the New Zealand courts have no inherent jurisdiction to regulate the conduct of overseas defendants; to join a foreign defendant to proceedings is an extraterritorial exercise of sovereignty that should not be permitted without express statutory authority. On the other hand, the Equipment Finance approach recognises that it may not be possible to serve a foreign defendant in time, particularly where the circumstances are urgent, and protects the defendant’s position by requiring the plaintiff to demonstrate that it has a good arguable case that service out of the jurisdiction will be permitted in due course, and that New Zealand will be the appropriate forum (see for a useful discussion Tim Stephens and Sarah Armstrong Injunctions and Other Relief (NZLS Seminar, October/November 2018) at 50).

In the absence of legislative reform, this remains an issue that justifies the consideration of the Court of Appeal. At the moment the only judgment from that Court is Advanced Cardiovasvular Systems Inc v Universal Specialties Ltd [1997] 1 NZLR 186, which involved a very different situation – an application for summary judgment, not an interim measure. The question must be analysed in the specific context of urgent interlocutory relief, particularly where prior notice to the defendant may compromise the effectiveness of the Court’s order.

Can the Court avoid this problem by ordering substituted service?

Rule 6.8 of the High Court Rules provides that if reasonable efforts have been made to serve a document by a method permitted under the Rules, the Court may direct that the document be brought to the attention of the defendant by other means, and be treated as being served. This mechanism is frequently used in the domestic context where the defendant is deliberately evading service; defendants will commonly be served by email or social networking site.

Substituted service will be no comfort to a plaintiff who wishes to obtain an order before the defendant is warned about the application, but could it be used in a case like Viagogo?

In Exportrade Corp v Irie Blue New Zealand Ltd (2013) 21 PRNZ 680, the Court of Appeal confirmed that substituted service was available on foreign defendants. The plaintiff would still need to show that the usual grounds for service were made out (either service without leave under Rule 6.27 or service with leave under Rule 6.28). It was not entirely clear from the Court’s judgment whether such service would be treated as service in New Zealand or outside New Zealand. This was clarified in 2017, when clause (2) was added to Rule 6.18:

(2) If a direction is given under subclause (1)(a) in respect of a document, the document must be treated as having been served at the place—
(a) at which the document is likely to have come to the attention of the person to be served; or
(b) where that person was or is likely to have been on the happening of the event or the expiry of the time specified under subclause (1)(a)(ii).

The Rules Committee explained that this amendment was not intended to affect the conditions for service out of the jurisdiction under Rules 6.27 and 6.28, but to clarify where the defendant is treated as having been served (Circular 105 of 2015). It means that a foreign company will almost always be treated as having been served in its place of incorporation or place of business.

English cases have suggested that substituted service may be used in the context of without notice applications. In Cecil v Bayat [2011] 1 WLR 3086 at [68] the Court of Appeal assumed that the courts had the power to grant an injunction without notice, and implied that substituted service may be appropriate to enable the injunction to be promptly served on the defendant (see also BVC v EWF [2018] EWHC 2674 (Admin) where substituted service was directed against a defendant in Switzerland).

It is doubtful whether substituted service should be used in this way as a matter of principle. The purpose of the rule 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 a means of avoiding jurisdictional rules. New Zealand law recognises that service should not be effected contrary to foreign law out of respect for the territorial sovereignty of the foreign state, and it is not appropriate to use substituted service to circumvent those rules. The UK Supreme Court has confirmed that substituted service cannot be ordered in a manner contrary to the law of the country where service will take place (Abela v Baadarani [2013] 1 WLR 2043).

The amendment to the High Court Rules makes this clear. Substituted service on a Swiss corporation who has no employees in New Zealand will be treated as having taken place in Switzerland. Since Swiss law prohibits service by any means other than consular channels, any form of substituted service would be invalid. It follows that substituted service is not an available solution to the problem created by Viagogo.

New Zealand Yearbook of International Law: Call for Papers

Posted on behalf of Jan Jakob Bornheim

The New Zealand Yearbook of International Law (Brill) is an annual, internationally refereed publication. The Editors call for both short notes and commentaries, and longer in-depth articles, for publication in Volume 16 of the Yearbook (2018), which will be published in 2019.

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 16 is 31 May 2019.

Contributions must be original unpublished works and submission of contributions will be held to imply this. Manuscripts must be word-processed and in compliance with fourth edition of the Australian Guide to Legal Citation. The Guide is available online at: http://law.unimelb.edu.au/mulr/aglc/about.

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.