The High Court grants claim for breach of a promise to pay a mahr
By Maria Hook (University of Otago)
Is a claim for the breach of a deferred mahr agreement enforceable in a New Zealand court? This question arose in the context of proceedings between Ms Almarzooqi and Mr Salih, which was the subject of previous posts on this blog. The High Court has now granted Ms Almarzooqi’s claim ([2022] NZHC 1170): parties may indeed be held to a promise to pay a mahr upon divorce.
In a succinct judgment, Simon France J held that the agreement was governed by the law of UAE but that, whatever its proper law, the mahr had become payable.
- On the proper law point, his Honour considered it particularly relevant that the parties had travelled to UAE to be married there in accordance with Sharia traditions (at [22], [26]). The intended residence in New Zealand was given less weight, partly because the obligation to pay the mahr “is unaffected by the place of residence” and “becomes relevant once the marriage is ended” (at [23]). Finally, despite the universality of the nikah (and the mahr), it was also relevant that UAE law – unlike New Zealand law – was a system reflecting Sharia principles (at [25], cf Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] 1 AC 50 (HL) for an interesting parallel).
- Regardless of whether UAE or New Zealand law was applicable, his Honour held that the mahr had become payable upon divorce ([40] and [45]). The particular ground of divorce was immaterial. In other words, the court was not required to consider whether the plaintiff was in fact entitled to obtain a divorce under Sharia law.
Notably, the defendant did not dispute that the promise to pay the mahr was to be characterised as contractual. He also did not argue that enforcement of such a promise – whether pursuant to foreign law or New Zealand law – would be contrary to public policy in principle. The Court therefore did not consider these questions, noting only that a different characterisation was arguable (referring to this post).
The confined nature of the issues must be borne in mind when assessing the precedential weight of the decision. Yet, despite this caveat, the fact remains that the Court was happy to enforce the promise, on the basis of a contractual approach. For the reasons explored in my previous post, this may well be the most appropriate solution to the problem of the mahr.
Child support and family maintenance under the 2007 Hague Convention
By Maria Hook (University of Otago)
As we have previously noted on this blog, many areas of private international law benefit from international cooperation and harmonisation. The recovery of child or spousal maintenance is no exception. A person who seeks to recover maintenance from a person in another country may face significant hurdles. They may find, for example, that they are entitled to maintenance in their own country of residence but that a decision to that effect is not recognised or enforceable in the debtor’s country; or they may lack the resources or expertise to bring an application in a (to them) foreign country. The worst-case scenario is that the other party avoids all liability simply because they are located in another country.
In a previous post we shared the news of New Zealand’s signing of the Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance (concluded 23 November 2007, entered into force 1 January 2013) (the Convention). With 43 contracting States (including the European Union, the United Kingdom, Brazil and the United States), the Convention offers a well-established framework to facilitate the cross-border recovery of maintenance. New Zealand has now ratified the Convention and given effect to it by way of an Order in Council under s 215 of the Child Support Act 1991.
The purpose of this post is to provide a brief overview of the main features of this new regime. As between contracting States, it will largely replace the obligations assumed under the United Nations Convention on the Recovery Abroad of Maintenance (UNCRAM) (signed 20 June 1956, entered into force 25 May 1957) and the Commonwealth Scheme. It does not affect the bilateral agreement with Australia on child and spousal maintenance as given effect in Child Support (Reciprocal Agreement with Australia) Order 2000.
What does the Convention do?
The Convention has three main functions. First, it provides for the recognition and enforcement of maintenance decisions of other contracting States. A decision must be recognised and enforced if it falls within one of the six bases of recognition and enforcement set out in Art 20(1). These bases are broad in scope. It is sufficient, for example, that either the respondent or the creditor was habitually resident in the contracting State at the time proceedings were instituted. The obligation to recognise and enforce maintenance decisions is subject only to the narrow exceptions listed in Art 22 (for example, that recognition and enforcement would be manifestly incompatible with public policy).
The effect of these rules is to make maintenance decisions more enforceable as between contracting States. Under New Zealand common law, the only decisions that are generally enforceable in New Zealand are judgments for a fixed sum of money (Maria Hook and Jack Wass The Conflict of Laws in New Zealand (LexisNexis, 2020) at 5.C.3). Administrative decisions are unenforceable, as are decisions for the periodic payment of maintenance. The grounds for recognition and enforcement are more narrowly conceived, too, requiring the respondent’s presence or submission. Similarly, UNCRAM and the Commonwealth Scheme do not apply to administrative decisions and, in fact, UNCRAM does not directly provide for the recognition and enforcement of maintenance at all, focusing instead on cooperation in the establishment of maintenance decisions (at 9.181).
By contrast, the Convention is designed to capture maintenance in all its forms (Art 19), from countries that have a sufficiently close connection to the matter (see Art 20(1)). Not only does this mean that foreign maintenance decisions can more easily be enforced in New Zealand; New Zealand decisions, too, will enjoy more widespread recognition overseas. It is estimated that the Convention will enable recovery of about $7.7 million in outstanding child support payments (Ministry of Foreign Affairs and Trade National Interest Analysis: Hague Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance at [20]).
The second main function of the Convention is to provide for administrative cooperation between contracting States in the establishment, management, enforcement and collection of maintenance (Chapters II and III). This framework builds and improves on mechanisms that were first introduced under UNCRAM (see Alegría Borrás and Jennifer Degeling Explanatory Report on Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance (HccH) at [2], [4]), and it replaces UNCRAM insofar as the two Conventions coincide (Art 49). Cooperation takes place through a system of Central Authorities established under the Convention.
An important focus of cooperation is the transmission of applications for maintenance, which makes it easier for claimants to access maintenance in (to them) foreign legal systems. A claimant resident in Country A (the requesting State) can apply through the Central Authority in Country A to obtain a maintenance decision in Country B (the requested State). The Convention does not, however, provide for uniform rules of jurisdiction (see Art 10(3)). This means that it is a matter for the law of Country B whether it has jurisdiction to make a maintenance decision (for example, on the basis that the child or the debtor is resident in the country). The Convention merely restricts proceedings for maintenance where there is an existing decision from a country that is a party to the Convention and the creditor is habitually resident in that country (Art 18).
The third function of the Convention is to ensure that processes for the cross-border recovery of maintenance are accessible, efficient and simple. This means, for example, that foreign maintenance decisions are to be registered or declared enforceable “without delay” (Art 23), and that registration or enforcement does not ordinarily require an application to the court (see Art 23, cf Art 24). In New Zealand this task falls to the Inland Revenue.
Scope: child support and spousal maintenance
The primary focus of the Convention is on child support, and it is in this area that the Convention will have the greatest impact. In addition, New Zealand has opted to extend the entire Convention to spousal maintenance, with the result that all of its features will be available vis-à-vis countries that have done the same (Art 2). Some parts of the Convention are automatically applicable to spousal maintenance (all parts except for Chs II and III on cooperation and establishment of a system of Central Authorities, which, however, apply to applications for recognition and/or enforcement that form part of a claim for maintenance arising from a parent-child relationship (Art 2(1)(b)).
The Convention also gives States the option to extend the Convention to maintenance obligations arising from other family relationships (Art 2(3)). New Zealand has not entered a declaration to that effect even though, under New Zealand law, maintenance is available outside of spousal and parent-child relationships (ie civil unions and de facto relationships). This omission may in part be explained by the reluctance of other contracting States. The European Union, for example, has refrained from extending the Convention to other family relationships, undertaking instead to “examine the possibility” of doing so within seven years (compare Brazil, which has extended the Convention to obligations to provide maintenance “arising from collateral kinship, direct kinship, marriage or affinity, including, in particular, obligations in respect of vulnerable persons”). Given that any extension would only become effective in the case of matching declarations, there would have been limited immediate practical benefit in New Zealand extending the scope of the Convention to civil unions or de facto relationships. Be that as it may, it is a shame that New Zealand did not take the opportunity to lead the way by being one of the first countries to extend the Convention in this manner, which might have provided an incentive for other countries to follow suit.
Implementation of the Convention
The Convention is given effect by the Child Support (Reciprocal Agreement with Hague Convention Countries) Order 2021, made under s 215 of the Child Support Act 1991. The Order achieves this largely by providing that the definitions of “child support” and “domestic maintenance” in s 2(1) of the Act have effect as if they included “payments required to be made under administrative assessments or court orders made by a contracting State” (see Schedule 2).
It has already been pointed out that the Convention does not include uniform rules of jurisdiction. In other words, the question whether New Zealand authorities have the power to make a maintenance decision continues to be determined under New Zealand law. Sections 5(1)(d) and 6(1)(b) of the Act set out the jurisdictional requirements for making a child support assessment. In particular, a child will only qualify for child support if they are either a New Zealand citizen or ordinarily resident in New Zealand, and child support may only be sought from a parent “who is a New Zealand citizen or is ordinarily resident in New Zealand”, or from a parent who is ordinarily resident in a country with which New Zealand has entered into a reciprocal agreement for enforcement of child support”. The Order purports to extend these grounds of jurisdiction, by stating that ss 5(1)(d) and 6(1)(b) of the Act have effect as if they included a child and parent who are “habitually resident in a contracting State”. Given that the Convention itself does not provide for uniform rules of jurisdiction, the rationale for extending ss 5(1)(d) and 6(1)(b) in this way is unclear.
New Zealand’s continued failure to sign the Hague Service Convention
By Jack Wass
A recent High Court judgment demonstrates the real costs of New Zealand’s poor record on accession to international civil cooperation treaties. The Hague Service Convention was concluded in 1965 and enables the service of originating documents overseas for the purpose of civil proceedings. It has been signed by dozens of countries, and is particularly important when dealing with civil law countries who regard service as a sovereign act that cannot be effected by private parties, but requires official sanction.
In Huang v Huang [2021] NZHC 2902, Campbell J found that the Court did not have jurisdiction in a case involving property investments in Auckland because the proceedings had been served in China contrary to the law of that country. If New Zealand were a party to the Service Convention, that problem would not have arisen. Although it ultimately made no difference on the facts (because the judge found that New Zealand wouldn’t have been the appropriate forum for the trial), it illustrates the real practical consequences of New Zealand’s failure to accede to what should be an uncontroversial convention.
Conflict of laws in New Zealand courts: retirement of Associate Judge Bell
By Jack Wass and Maria Hook
Most practitioners and judges only encounter the conflict of laws (or private international law) intermittently. The subject can be seen as an arcane corner of civil procedure, or a set of complications that must be passed before getting to the real issues on the merits. However, Associate Judge Bell is one judge that has always known a conflicts problem when he sees one – and has been prepared to engage with the principles underlying a cross-border problem, even if the parties were not.
With the news of the Associate Judge’s retirement, this post notes some of the Associate Judge’s contributions to the subject in New Zealand.
At the cutting edge of conflicts debate is the question of how common law courts should deal with allegations that foreign courts lack the independence that we regard as the hallmark of a recognised legal system. Associate Judge Bell examined this subject by reference to overseas authority in Hebei Huaneng Industrial Development Co Ltd v Shi [2020] NZHC 2992, where he articulated the different approaches the courts should take to such an allegation, depending on whether it is raised prospectively (on a dispute as to jurisdiction) or after the fact (on an application to enforce a foreign judgment). With a further judgment on the subject having just been released ([2021] NZHC 2687) and the case apparently going to trial, this will not be the last word but represents an important guide to the proper approach.
One topic with which all Associate Judges are familiar is the enforcement of foreign judgments, since most applications are brought by way of summary judgment. Yoonwoo C & C Development Corp v Huh [2019] NZHC 2986 is typical of the Associate Judge’s approach: having cited the Court of Appeal’s “helpful” outline of the basis on which foreign judgments were enforced, the Associate Judge proceeded to explain—by reference to cases as old as 1760—the basis of enforcement actions in the historical writs, or the historical phenomenon of “jamming of other obligations into actions in debt and indebitatus assumpsit”.
Jurisdiction matters, too, are a staple for Associate Judges and are another area that has benefited from Associate Judge Bell’s nuanced reasoning. In Perpetual Trustee Co Ltd v Downey (2011) 21 PRNZ 28, for example, the Associate Judge carefully outlined the proper approach to be taken to the enforcement of exclusive jurisdiction agreements, referring to English, Australian and New Zealand authorities, and distinguishing clearly between the court’s discretion not to apply an exclusive jurisdiction clause and the question of forum non conveniens (at [32]) – a distinction that is often ignored in practice. Having laid the groundwork in this way, the Judge was then able to explain with great clarity why an exclusive jurisdiction clause could not prevail over Part 16 of the Companies Act 1993.
In yet another oral judgment, the Associate Judge contributed to the deeply controversial topic of jurisdiction of cross-border intellectual property claims, which has vexed common law courts to the highest level. In Jedis Ltd v Vodafone New Zealand Ltd [2012] NZHC 2448, the judge not only made observations about how the existing cases should properly be read, but went as far as discussing the implications under Australian constitutional law of the case being heard in Australia, and English authority on the extent to which it would serve a useful purpose to bring a foreign defendant into the proceeding.
We could point to numerous other cases along similar lines – discussing trans-Tasman proceedings (Leeds v Richards [2016] NZHC 1191, [2016] NZAR 1016), cross-border restitutionary claims (Fruit Shippers Ltd v Petrie [2020] NZHC 749), the law applicable to corporate identity (Addleman Trustee Ltd v Lambie [2021] NZHC 2504) and the meaning of fraud (Guangzhou Dongjiang Petroleum Science & Technology Development Co Ltd v Kang [2020] NZHC 3068). While counsel might not have always welcomed it, New Zealand law is better for the contributions of the Associate Judge on these topics.
Cross-border insolvency: joint hearing by New Zealand Court of Appeal and Federal Court of Australia
By Jack Wass (Stout Street Chambers)
Readers may be interested to know that on Thursday 23 September 2021, the New Zealand Court of Appeal will be sitting in a joint hearing with the Full Court of the Federal Court of Australia.
Earlier this year, the High Court of New Zealand and the Federal Court of Australia gave judgment on parallel applications for directions concerning the distribution of funds held by Halifax Investment Services Pty Ltd and its New Zealand subsidiary. The hearing of those applications was conducted by VMR with counsel in Sydney and Auckland; witnesses were sworn and examined in both proceedings, and the parties agreed that the judges could deliberate jointly. The upcoming hearing is of appeals against those judgments, to be heard by Kós P, Cooper and Goddard JJ in New Zealand, and Middleton, Beach and Moshinsky JJ in Australia.
Cross-border insolvency cries out for international judicial cooperation; significant strides have been made under the UNCITRAL Model Law on Cross-Border Insolvency, while the legal barriers between New Zealand and Australia have been substantially lowered by the Trans-Tasman Proceedings Acts. The use of joint hearings is a welcome and pragmatic development of the techniques and procedures introduced by those regimes.
Submissions on cross-border adoption and surrogacy
A little while ago, the Ministry of Justice published a Discussion Document on Adoption in Aotearoa New Zealand (June 2021), which includes sections on overseas and intercountry adoption. Submissions are due by the end of this month.
The Law Commission is conducting a review of surrogacy that includes issues of cross-border surrogacy. Submissions on the Issues Paper Te Kōpū Whāngai: He Arotake / Review of Surrogacy (IP 47, 29 July 2021) are due by 23 September.
Enforcement of a promise to pay a mahr: characterisation and public policy in the context of Almarzooqi v Salih
By Maria Hook (University of Otago)
In Almarzooqi v Salih [2021] NZCA 330, the Court of Appeal recently considered whether a judgment by a Dubai court ordering the defendant, Mr Salih, to pay a marriage dower was enforceable in New Zealand at common law. The High Court had refused enforcement on the basis that the Dubai Court did not have personal jurisdiction over Mr Salih, and the Court of Appeal upheld the High Court’s decision.
We have outlined the background to the proceeding in a previous post on this blog. Ms Almarzooqi, the claimant, and Mr Salih met on an Islamic dating site. Ms Almarzooqi was living in Australia at the time, and Mr Salih was living in New Zealand. They subsequently got married in Dubai in accordance with Islamic law, which involved the parties entering into a contract of marriage (nikah). This contract provided that Mr Salih would pay Ms Almarzooqi a deferred dower (also known as a mahr) of about $212,000 in the event of Mr Salih’s death or the parties’ divorce. The marriage did not last long. Ms Almarzooqi, a citizen of the United Arab Emirates (UAE), moved to New Zealand to live with Mr Salih, who had both Iranian and New Zealand citizenship. After a few months the couple separated, and Ms Almarzooqi eventually returned to UAE to file for divorce on the ground of domestic abuse. The Dubai Court awarded a default judgment in Ms Almarzooqi’s favour, ordering Mr Salih to pay the mahr. Ms Almarzooqi subsequently returned to New Zealand, where she continues to reside, and issued proceedings in the High Court, pleading two causes of action: enforcement of the UAE judgment, and a claim for breach of the contract of marriage.
The High Court dealt with the former claim first, declining the application to enforce the judgment on the basis that the Dubai Court did not have personal jurisdiction over Mr Salih ([2020] NZHC 2441). In this post, I provide a brief analysis of the Court of Appeal’s judgment, before turning in more depth to the remaining issues now facing the parties in the context of Ms Almarzooqi’s claim for breach of contract.
I Whether the Dubai Court had jurisdiction over Mr Salih for the purposes of enforcement of the Dubai Court’s judgment
The plaintiff made two main arguments on appeal. First, it argued that the Dubai Court did not require personal jurisdiction over Mr Salih because its decision to enforce the mahr was a decision in rem. Second, it argued that the Dubai Court had jurisdiction on the basis of the principle of reciprocity, which would have required the New Zealand court to recognise the Dubai Court’s jurisdiction based on New Zealand rules of personal jurisdiction.
The Court of Appeal rejected both arguments. It acknowledged that reciprocity (or connection) played some relevance in the context of the recognition of foreign judgments as to status (at [33], [41]-[58], citing The Conflict of Laws in New Zealand (CLNZ) at 5.96 and 9.4). However, the decision to enforce the mahr was not a decision as to status, or, indeed, a decision in rem (see the explanation of the concepts of personal jurisdiction and subject-matter jurisdiction at [41], citing CLNZ at 2.32-2.33). This meant that there was no basis for departing from the general principle that “New Zealand courts do not recognise the jurisdiction of a foreign court over a non-resident by reference to the principles, reflected in rr 6.27-6.29 [of the High Court Rules], in determining whether they have jurisdiction over a non-resident” (at [33], citing CLNZ at 5.96).
Although the Court of Appeal’s conclusion was correct, the case demonstrates the unduly restrictive nature of New Zealand’s existing framework for the enforcement and recognition of foreign judgments. The Dubai Court, as the Court that had also granted the divorce, was clearly the appropriate forum to determine the enforcement of the mahr (this is also implicit in s 182 of the Family Proceedings Act 1980, discussed further below). In these circumstances, it is unfortunate that the plaintiff’s only option now is to bring her claim again in the New Zealand court.
II Ms Almarzooqi’s claim for breach of contract
This claim may raise some difficult questions, covered briefly in my previous post on the proceeding. In particular, the court might be faced with the following issues:
- How are claims for the enforcement of a deferred mahr agreement to be characterised for choice of law purposes?
- Based on this characterisation, what is the applicable choice of law rule and how is it to be applied to the case at hand? (For example, if the matter is characterised as contractual, what is the proper law of mahr agreements?)
- If the applicable law is New Zealand law, are mahr agreements enforceable as a matter of substantive law?
- If the applicable law is foreign law, and assuming that the agreement is enforceable pursuant to that law, is it nevertheless unenforceable on the basis that application of that law would be contrary to New Zealand public policy?
In this post, I offer some further thoughts on how these questions could be resolved in a New Zealand court.
A How are claims for the enforcement of a deferred mahr agreement to be characterised for choice of law purposes?
The process of characterisation requires the court to have regard to the purposes or functions of the competing choice of law rules, as well as the function(s) of the substantive rules of law that would be applicable as a result of those choice of law rules. The goal is to identify the most appropriate law to govern the issue, which means that the court must be prepared to re-frame the issue from a conflict of laws perspective, unconstrained by particular notions or distinctions of domestic law: see Raiffeisen Zentralbank Österreich AG v Five Star General Trading LLC [2001] EWCA Civ 68, [2001] QB 825 at [27]-[29]; Haugesund Kommune v Depfa ACS Bank [2010] EWCA Civ 579, [2012] QB 549 at [41]-[47]; CLNZ at 4.B.2.
This exercise is particularly challenging in the context of the deferred mahr, which has been said to serve a range of functions (that may, moreover, vary between regions, cultures and legal systems). On the one hand, the deferred mahr can make up for modest or inexistent entitlements by the wife to relationship property or statutory maintenance. In Islamic legal systems, the mahr therefore serves at least a supplementary function to support the wife financially following her divorce. On the other hand, the mahr has also been ascribed a transactional function. Although provision of a mahr is compulsory, it is based on a contract and involves a promise by the husband to pay a certain sum of money or make a specified gift. The wife negotiates the amount (or size) of the mahr in light of – amongst other things – the social and economic costs that she will suffer in the case of divorce. More fundamentally, the mahr may be said to be given in exchange for the husband’s unilateral right of divorce; and if the wife wishes to end the marriage, she can use the mahr as a bargaining tool to obtain her husband’s consent to the divorce by agreeing to forego part or all of the mahr.
For helpful commentary on the functions of the mahr (including from a comparative perspective), see P Fournier “Flirting with God in Western Secular Courts: Mahr in the West” (2010) 24 International Journal of Law, Policy and the Family 67; K Spencer “Mahr as Contract: internal pluralism and external perspectives” (2011) 1 Oñati Socio-legal Series; S Rutten “The Struggle of Embedding the Islamic Mahr in a Western Legal System” in R Mehdi and J Nielsen (eds) Embedding Mahr (Islamic Dower) in the European legal system (DJØF Publishing, Aarhus, 2011) 113; N Yassari “The Islamic Mahr in German Courts: Characterization in Private International Law and Accommodation in German National Family Law” R Mehdi and J Nielsen (eds) Embedding Mahr (Islamic Dower) in the European legal system (DJØF Publishing, Aarhus, 2011) 193; D Schawlowski “The Islamic Mahr in German and English Courts” (2010-2011) 16 Yearbook of Islamic and Middle Eastern Law 147; JR Bowen “How Could English Courts Recognise Shariah?” (2010) 7 University of St Thomas Law Journal 411. For a recent German judgment grappling with the question of the characterisation of the mahr for the purposes of private international law, see the German Federal Court’s in BGH XII ZB 380/19, 18 March 2020 (and for a short commentary on the decision in English, see this blog post by Matthias Lehman).
(i) The particular issue to be characterised
How the mahr is to be characterised for choice of law purposes should depend on the particular issue that has arisen before the court. For example, if the question is whether the mahr may operate as an agreement to contract out of an obligation to share or divide relationship property, then the question relates to the property consequences of personal relationships (see CLNZ at 9.C.2). Similarly, if the question is whether the mahr may contract out of statutory obligations to pay maintenance, the question clearly falls within the choice of law rule governing maintenance obligations (see CLNZ at 9.C.3). More difficult are cases where the mahr is sought to be recognised as part of a settlement of the spouses’ property or financial obligations following divorce or separation. For example, an issue might arise whether a particular asset is to be treated as the wife’s separate property to reflect her entitlement to the mahr, or the court might have to determine whether the mahr should be a factor in determining the overall fairness of the property allocation. It seems that a characterisation based on the property consequences of the relationship would again be appropriate, albeit with a possible incidental question whether there is an enforceable obligation to pay the mahr in the first place.
This latter question is the principal issue arising in Almarzooqi, which is solely about the enforcement of a promise to pay the mahr, unrelated to any claims to specific property or statutory maintenance. The claim is brought in contract. However, based on the principles of characterisation outlined above, the form of the action is not in itself determinative of the question of characterisation (cf the following comment in my previous post, which, on reflection, does not adequately reflect the need for an internationalist and functional approach to characterisation: “if there were a basis in New Zealand contract law to give effect to deferred dowry contracts … then it is very likely that characterising the issue as contractual for the purposes of the conflict of laws was the right approach”). Because the mahr does not form part of New Zealand domestic law, contract may simply be the only available vehicle to bring the claim. Having regard, then, to the functions of the mahr outlined above, the question is whether the husband’s personal obligation to pay the mahr is best characterised as a matter relating to the property consequences of relationships, maintenance or contract.
(ii) Choice of law rules governing the property consequences of personal relationships?
There are some functional differences between relationship property laws and the obligation to pay the mahr. The function of relationship property laws is to allocate property between parties to a personal relationship. The obligation to pay the mahr, however, is not tied to property that is in existence at the time of divorce or separation. Moreover, there are limited functional similarities between mahr agreements and relationship property agreements (see Spencer at 13-14). Unlike relationship property agreements, mahr agreements do not seek to protect certain assets from a spouse. Their effect is transactional – that is, they envisage a transfer of assets – and it is in this sense that they may also be said to serve a function that, in New Zealand, would be the domain of the default rules of the Property (Relationships) Act 1976 (PRA).
On their own, these concerns would not be determinative. There is an argument that courts should take a relationship-focused and inclusive approach to choice of law governing the property consequences of personal relationships, enabling the court to make a holistic assessment of a couple’s property and financial obligations at the end of their relationship (M Hook “A First Principles Approach to Couples’ Property in the Conflict of Laws” (2019) 15 Journal of Private International Law 257). However, this is not currently the approach taken in New Zealand. The existing choice of law rules on relationship property are property-focused and fragmented. They are also largely inward looking, and as will be seen in the next sections on maintenance and contract, a lex fori rule would not be the most appropriate choice of law rule for mahr agreements.
It is true that application of the same governing law to both issues (ie the property consequences of personal relationships and the husband’s obligation to pay the mahr) would assist the court in reaching an overall fair and coherent result. If the issues are split across two (or more) governing laws, there is a risk that the applicable rules will be difficult to reconcile. However, on balance, this does not seem to be a sufficient reason to characterise the husband’s obligation as going towards the question of relationship property (but cf Yassari).
(iii) Choice of law rules governing maintenance?
This leaves the question whether the obligation is more properly characterised as relating to contract or maintenance. Islamic legal systems provide for rights of maintenance that are distinct from the wife’s entitlement to the mahr. In Almarzooqi, for example, the Dubai Court’s order to pay the mahr was in addition to a requirement to pay a certain amount of “alimony”. However, this does not necessarily mean that the two should be characterised differently for choice of law purposes (but cf Yassari at 208). There is clearly an overlap in functions because both provide the wife with financial support in case of divorce.
Yet there are differences, too. Maintenance is focused on offering a degree of minimum protection, which is assessed on the basis of the applicant’s needs and the respondent’s ability to pay (s 64, Family Proceedings Act 1980). Thus, in New Zealand, statutory maintenance rights are considered to be of such public importance that they are always governed by the law of the forum. The mahr, on the other hand, gives effect to the parties’ bargaining, regardless of the husband’s ability to pay, and may go well beyond covering the wife’s needs. Like maintenance, it also raises issues of public policy. By enforcing the mahr, the law contributes to the regulation of the parties’ personal relationship (more specifically, of the terms of the parties’ marriage and their potential divorce). In New Zealand, divorce – like maintenance – is governed by the law of the forum. Does this mean that the enforcement of the mahr raises questions of such a sensitive nature that it should be characterised as falling within the lex fori rule?
(iv) Choice of law rules governing contract?
On balance, I think that contract choice of law rules offer a better fit, even though the mahr is a compulsory component of the marriage contract. Applying contract choice of law rules to determine whether there is an obligation to pay the mahr would not interfere with the scope of the lex fori rule for maintenance and divorce. In other words, a foreign proper law of the mahr would not take away any minimum protections provided by the New Zealand rules on maintenance, or restrict the parties’ access to divorce under New Zealand law. In these circumstances, there is limited justification for immediately prioritising New Zealand family values over the interests of the spouses (and, to some extent, of the community or communities to which they are closely connected). It would be more appropriate, therefore, to apply a law that reflects the reality of the parties’ lives and expectations at the time they entered into the agreement (cf Art 8(4), Hague Protocol on the Law Applicable to Maintenance Obligations (signed 23 November 2007, entered into force 1 August 2013)). Contract choice of law rules are sufficiently flexible to achieve this.
This approach, which was adopted in Shahnaz v Rizwan [1965] 1 QB 390 (DC) and in Almarzooqi v Salih [2020] NZFLR 251, would also avoid some of the problems that courts have encountered when attempting to incorporate the mahr into Western family law. Because New Zealand substantive law is not familiar with the mahr, application of the lex fori can have the effect of distorting its function (see, in particular, Fournier). Under contract choice of law rules, on the other hand, the applicable law may be a law that is familiar with the concept, and conflict of laws rules on the proof of foreign law would ensure that the court’s assessment is based on adequate evidence. Moreover, the court would have an easier task when determining whether certain rules or incidents of the mahr are inconsistent with values of New Zealand family law. For example, a court might be unable to accept that, as a matter of New Zealand substantive law, a wife should not be entitled to the mahr because she was the one who initiated a (consent-based) divorce; but it might be comfortable accepting such a proposition as a matter of foreign law and refusing to invoke the public policy exception (see below).
B If the matter is characterised as contractual, what is the proper law of mahr agreements?
Contract choice of law rules generally call for the application of the law the parties intended to be applicable or, in the absence of an intention to that effect, the law of the country with which the contract is most closely connected (CLNZ at 6.B.1).
Courts have refined the application of these rules in the context of particular contracts. For mahr agreements, courts should be prepared to consider the parties’ relative bargaining power and any information asymmetries when determining the validity of the choice of law agreement. In the absence of a valid agreement, they should give weight to the parties’ expectations, their cultural, religious and social connections, and the wider normative context or background of their marriage (including the place of the marriage).
The function of the mahr is to protect the interests of the wife, so the court should focus on connecting factors that are consistent with this function (see CLNZ, ch 4 at [8]; for an example of a choice of law rule that aims to protect a certain group of claimants, see Hague Protocol on the Law Applicable to Maintenance Obligations, Art 3). The country of the wife’s nationality or residence may assume particular relevance. It would also usually be in the wife’s interest that the mahr be governed by a law that knows and recognises the mahr (as opposed to a law that, say, treats the mahr as a purely moral commitment).
In Almarzooqi ([2020] NZFLR 251), in the context of the High Court’s determination of the plaintiff’s application for security of costs, the Associate Judge concluded that the proper law of the agreement was New Zealand law, because “the overwhelmingly most important consideration in this case is that, although the parties married and entered into their contract in the UAE, it was their joint intention at the tie that the contract would govern their relationship as a married couple in New Zealand” (at [47]). I have criticised this reasoning in my previous post but add here that the Court should have also had regard to the wife’s interest in the application of a law that knows the mahr and that is closely connected to her, which here seemed to be the law of the UAE.
C If the applicable law is New Zealand law, are mahr agreements enforceable as a matter of substantive law?
If New Zealand law applies – whether by virtue of a lex fori rule or a multilateral choice of law rule – the question arises whether mahr agreements are in principle enforceable under rules of New Zealand family and contract law.
There is nothing in the Property (Relationships) Act, Family Proceedings Act or Child Support Act 1991 that would directly prohibit such an agreement. On the contrary, s 62(2) of the Child Support Act expressly recognises that liability to pay maintenance may arise under ordinary contractual principles (Townshend v Bellamy 3 June 2005, CIV-2004-483-393 (HC Wanganui) at [10]; see Margaret Briggs “Marital Agreements and Private Autonomy in New Zealand” in Jens Scherpe Marital Agreements and Private Autonomy in Comparative Perspective (Bloomsbury Publishing, 2012) 256 at 266).
There is also no general rule of contract that would prevent parties from entering into a binding marriage contract. In Radmacher v Granatino [2010] UKSC 42, [2011] 1 AC 534, Lord Phillips said:
“… the old rule that agreements providing for future separation are contrary to public policy is obsolete and should be swept away . . . If parties who have made such an agreement, whether ante- nuptial or post- nuptial, then decide to live apart, we can see no reason why they should not be entitled to enforce their agreement.”
More specifically, common law courts have recognised in principle that mahr agreements may be enforceable as contracts (see, eg, Uddin v Choudhury [2009] EWCA Civ 120; Mohamed v Mohmend [2012] NSWSC 852; the decision in Shahnaz v Rizwan [1965] 1 QB 390 (DC) seemed to be based on an application of “Mohammedan law” as given effect by the law of India).
The reasons why enforcement of a deferred mahr may be contrary to public policy have been widely discussed in the literature: see, eg, Spencer for a useful account. There are challenging questions here to what extent the law is capable or willing to reflect the needs of a pluralist society. In a New Zealand context, an additional point is that s 182 of the Family Proceedings Act, which provides the court with powers to vary or cancel any agreement or settlement relating to marriage, would not be available where the spouses divorced abroad. This is unfortunate, because s 182 might prove to be a useful mechanism to deal with any public policy concerns arising from the enforcement of a mahr.
D If the applicable law is foreign law, and assuming that the agreement is enforceable pursuant to that law, is it nevertheless unenforceable on the basis that application of that law would be contrary to New Zealand public policy?
If the promise to pay the mahr is governed by foreign law, the New Zealand court may still have to consider whether application of that law (or of particular provisions of that law) would be contrary to public policy. The threshold is often said to be a high one but may depend on a number of factors, including the connection of the case to New Zealand and the values that would ordinarily support the application of the foreign law (see CLNZ at 4.B.5(b)):
- The more closely connected the case is to New Zealand, the more appropriate it may be to adopt a lower threshold. For example, English courts have readily invoked the public policy exception to deny enforcement to contracts in restraint of trade in circumstances where the case had a close connection to the forum (see, eg, Duarte v Black & Decker Corp [2007] EWHC 2720 (QB), [2008] 1 All ER (Comm) 401 at [56]-[63]). In Almarzooqi, the spouses were – and still are – resident in New Zealand, which might make it more appropriate to apply the exception than in a case that has overwhelmingly foreign connections.
- The values that would ordinarily support the application of the foreign law should be evaluated in the context of the particular issue before the court. Where the issue is linked to general areas of public policy, the exception is a useful tool to modulate the effect of multilateral choice of law rules. The exception here operates as a more flexible alternative to lex fori rules or overriding mandatory rules. In this way, the public policy exception could play an important part in ensuring that mahr agreements need not be submitted to a general lex fori rule (see above). Where the spouses are divorced in New Zealand, the court would also be able to rely on s 182 of the Family Proceedings Act instead of the public policy exception (see above), assuming that s 182 has overriding mandatory force and is not merely self-limiting (see CLNZ at 4.4 and B.5.a.ii).
The overall question is whether the effects of upholding the mahr would be contrary to public policy in the circumstances of the particular case. There seem to be at least a couple of scenarios that might trigger the exception in this context:
- The exception could be relied upon where enforcement of the mahr would have the effect of undermining the purpose of the agreement and distort the function of the mahr. This might occur, for example, where enforcement of the mahr would expose the husband to double liability (under the mahr and, say, New Zealand rules of relationship property), in circumstances where the parties had entered into the mahr on the assumption that the wife would have no entitlement to share in the husband’s property.
- Depending on the facts of the case, the mahr might come close to a penalty for divorce (cf Mohamed v Mohmend [2012] NSWSC 852 at [53)). The fact that it is payable on divorce – directly disincentivising the husband from leaving the relationship – may not in itself be problematic. After all, relationship property laws and maintenance laws can have a very similar effect, discouraging a party from pursuing a separation because it would result in a significant reduction in wealth. But what if the relationship was a relationship of short duration, the divorce has had limited – or no – financial or social implications for the wife, and the wife had equal access to divorce (see Rutten at 4.2-4.3)? It is conceivable that the public policy exception could be triggered in such a case.
In Almarzooqi, the parties’ relationship was a relationship of short duration. The plaintiff obtained a fault-based divorce in the Dubai Court, and it is unclear whether she would have had a general right of divorce through the New Zealand court (this would have required that either she or the defendant was domiciled in New Zealand at the time: Family Proceedings Act, s 37(2)). What is more, divorce in accordance with Islamic law might have been the only culturally appropriate option for the parties. There has been no evidence so far of the financial or social implications of the divorce, but the fact that the plaintiff resides in New Zealand cannot be taken to mean that there were, or are, no such implications.
In the context of Ms Almarzooqi’s claim for enforcement of the UAE judgment, the High Court concluded that enforcement would not have been contrary to public policy because “New Zealand places a high value on cultural and religious autonomy” ([2020] NZHC 2441 at [62]). In my view, the Associate Judge was right to conclude that enforcement of a mahr would not in principle be contrary to public policy, but this does not mean that application of a foreign law giving effect to an obligation to pay a mahr may not be contrary public policy on the facts of the particular case.
III Conclusion
Courts face a challenging task when asked to enforce, or take account, of a promise to pay a mahr. Regardless of the particular approach that is adopted, it is crucial that courts are alive to the possible interrelationship between relationship property, maintenance and the obligation to pay the mahr, and that they make use of all available tools (including the principle of adaptation: CLNZ at 4.B.4(b)) to ensure the harmonious application of these different regimes. For example, an enforceable obligation to pay the mahr may be a factor in assessing the plaintiff’s entitlement to relationship property or maintenance, but courts should be very careful to conclude that the mahr amounts to a contracting out agreement. Fortunately, Almarzooqi v Salih does not seem to give rise to such concerns.
Claims for unjustified dismissal by “locally employed civilians” in the New Zealand court
New Zealand’s conflict of laws rules relating to employment matters are plagued by uncertainty. Is the Employment Relations Act 2000 (ERA) subject to ordinary choice of law rules? Do parts of the ERA have overriding mandatory effect? To what extent does the Employment Court/Employment Relations Authority have jurisdiction to apply foreign employment law? Although the Supreme Court had an opportunity to provide some clarity on these questions, its decision in Brown v New Zealand Basing Ltd [2017] NZSC 139, [2018] 1 NZLR 245 only seems to have contributed to the confusion. This was particularly evident in a recent case, Radford v Chief of New Zealand Defence Force [2020] NZEmpC 35, where the Employment Court had to determine whether the ERA was applicable to Ms Radford, a civilian working for the New Zealand Defence Force overseas, and whether the Employment Relations Authority (or the Employment Court) would have jurisdiction to determine the claim if it was governed by foreign law.
The claimant was employed to work for the New Zealand Defence Force in Washington DC. After eight years, the Chief of Defence Force terminated her employment without providing reasons, which he believed to be consistent with the law in Washington. The claimant returned to New Zealand and brought proceedings for, amongst other things, unjustified dismissal under the ERA. The Chief of Defence Force protested jurisdiction, arguing that the parties had agreed on Washington law being applicable, that the Court/Authority did not have jurisdiction to determine the claims pursuant to foreign law, and that in any case Washington was the appropriate forum. In this post, I will focus on the first two issues.
Applicable law
The Defence Act 1990 expressly provides that the Employment Relations Act applies to “Civil Staff” working for the New Zealand Defence Force (s 69). However, the claimant was not employed as a member of “Civil Staff” but as a “locally employed civilian” under s 90A of the Act. According to the Employment Court, there was nothing in the Act preserving the application of the ERA to locally employed civilians, even though the Chief of Defence can freely choose whether to employ a person overseas as Civil Staff or a locally employed civilian (at [88], [93], [94]).
The claimant further argued that, despite the Court’s interpretation of s 90A, it was still open to the Court to conclude that the ERA had overriding mandatory effect. The claimant relied on the Supreme Court’s decision in Basing to support this argument (even though the Court did not use the concept of “overriding mandatory rules” to conclude that the ERA applied in that case, holding instead that the question was purely a question of statutory interpretation: at [76], see Hook & Wass The Conflict of Laws in New Zealand (LexisNexis, 2020) at 4.114ff). The Employment Court seemed to have some sympathy for this argument. Yet it did not consider whether the ERA did, in fact, have overriding mandatory force, concluding instead that its application to the claimant would not be excluded if the law applicable to the agreement was New Zealand law (at [103]-[104]). The reason for this approach is unclear.
Applying traditional choice of law rules, the Employment Court held that the parties’ agreement was governed by the law of Washington, but that the parties had intended to incorporate the ERA into their employment relationship by signing the NZDF Civil Staff Code of Conduct 2006, which referred to the ERA (at [122]). Whether this incorporation of the ERA was effective was a matter for the proper law of the contract, the law of Washington (at [126]). Under Washington law, proceedings were only available to a claimant if the reason for the dismissal was a prohibited ground of discrimination or, potentially, if there was a breach of contract (at [126]).
This analysis demonstrates the difficulty of navigating between the Supreme Court’s approach – based on statutory interpretation – and traditional choice of law rules. Although it may be possible to reconcile the two approaches (see The Conflict of Laws in New Zealand at 4.124-4.126), further appellate guidance would clearly be beneficial. In particular, the Supreme Court left open the question whether a personal grievance claim based on the right not to be unjustifiably dismissed could still be characterised as contractual, which would lead to the application of ordinary choice of law rules rather than principles of statutory interpretation (at [57] per William Young and Glazebrook JJ, at [86] per Elias CJ, O’Regan and Ellen France JJ):
“… the more contractual a particular right may appear to be, the easier it may be to construe the right as applying only where the proper law of the employment agreement is that of New Zealand. This is a consideration which may be of some moment where the personal grievance right invoked is the right not to be unjustifiably dismissed.”
This was precisely the issue confronting the claimant in this case.
Subject-matter jurisdiction
In light of its conclusion that foreign law was applicable, the Employment Court had to consider whether the Court/Authority had jurisdiction to determine cases pursuant to foreign law, or whether their subject-matter jurisdiction was limited to cases governed by New Zealand law.
In Brown, William Young and Glazebrook JJ had drawn a distinction between contractual and statutory claims for this purpose. They pointed out that the Employment Court had jurisdiction over a range of claims, including claims for breach of contract, and they considered that there was “no reason why such claims should not be determined by reference to foreign law if such law is the proper law of the contract” (at [47], see Royds v FAI (NZ) General Insurance Co Ltd [1999] 1 ERNZ 820). They did not specifically consider the position of the Authority (as opposed to the Employment Court). Moreover, they did not form a view on whether the Employment Court “would have jurisdiction to give effect to statutory rights arising under a foreign statute which correspond generally to our personal grievance rights” (at [49]).
The main form of relief available to Ms Radford under Washington law appeared to be a breach of contract claim so to that extent – based on William Young and Glazebrook JJ’s reasoning – it was clear that the Employment Court would have jurisdiction to determine the claim. The Employment Court further decided that there was no principled reason why the Authority should be treated any differently, concluding that “Parliament intended the Court and the Authority to be able to entertain cases which involve the application of foreign law” (at [138]). It found support for this conclusion in the breadth of the Authority’s personal jurisdiction over foreign defendants (at [150], [151]).
The Employment Court did not distinguish between jurisdiction over contractual and statutory claims (at [129]-[131]), as William Young and Glazebrook JJ had done. On the facts, the distinction may not have been material, but it seems to be rather fraught in any case. Which types of claims would be characterised as contractual, and which as statutory? What would be the basis for the distinction in principle? The distinction reflects the Supreme Court’s bifurcated approach to choice of law more generally – treating the cross-border scope of statutory employment rights as a question of interpretation that falls entirely outside of the conflict of laws, while retaining conflict of laws reasoning for “contractual” employment matters. A better approach would be to recognise that all employment claims are “sui generis” (cf Brown at [77]) and in need of an integrated conflict of laws/statutory interpretation analysis (see The Conflict of Laws in New Zealand at 4.124-4.126, 6.79-6.85).
As to the more general question whether the Employment Court and/or Authority have subject-matter jurisdiction to determine employment matters governed by foreign law, it is worth noting that the broad powers for service out of the jurisdiction may not necessarily be indicative of a power to apply foreign law, as the Employment Court in Radford concluded. On the contrary, because the rules for service out are accompanied by a relatively restrictive discretion to decline jurisdiction, there is an argument that they are more consistent with an already limited subject-matter jurisdiction (that is because, if the Court’s/the Authority’s subject-matter jurisdiction is already largely confined to claims governed by New Zealand law, New Zealand is necessarily more likely to be the appropriate forum): see The Conflict of Laws in New Zealand at 2.312. One may also wonder about the practicalities of applying foreign employment law in a New Zealand court, when such rights often go hand in hand with procedures and infrastructure that could not be recreated here. These considerations are far from determinative, but they suggest that the question may not be as straightforward as the Employment Court might have thought.
CBL Insurance and section 9 claims against foreign insurers
By Jack Wass (Stout Street Chambers)
CBL Insurance collapsed in 2018 after intervention by the Serious Fraud Office, the Reserve Bank and the Financial Markets Authority owing very substantial sums. Class actions have since been launched against the company and directors.
An important source of recovery may be public offering and directors’ and officers’ liability policies held by CBL that respond to the plaintiffs’ losses. Under section 9 of the Law Reform Act 1936, the victim of a tort can assert a charge over the proceeds of policies held by the tortfeasor, so that the funds are used to satisfy the plaintiffs’ claims instead of being applied to the company’s general pool of creditors. The latter outcome is seen as unfair in circumstances where the funds are only available because of the plaintiffs’ claim.
In Ludgater v Gerling [2010] NZSC 49, [2010] 3 NZLR 713, the Supreme Court found that in a case with international dimensions, whether section 9 was available depended on whether the debt (representing the proceeds under the policy) was situated in New Zealand. In Bridgecorp Ltd (in rec and liq) v Certain Lloyd’s Underwriters [2014] NZCA 571, [2015] 2 NZLR 285, the Court of Appeal held that a debt could only ever be situated in a place where the insurance company was incorporated or had a physical place of business.
The latest decision in the CBL saga – an application to strike out the representative plaintiffs’ reliance on section 9 (Livingstone v CBL Corporation Ltd [2021] NZHC 753) – is yet another case illustrating the unjust results from that approach: policies that are held in the name of a New Zealand company in liquidation in New Zealand, and in one case are subject to a New Zealand choice of law clause, cannot support a statutory charge because the insurer is based in the United Kingdom. The result is that even where the insurer sought out business in New Zealand section 9 does not apply, as long as the insurer did not have a place of business in New Zealand (the plaintiffs do argue that the insurers were present through an agent in New Zealand).
I have previously argued that the Court of Appeal’s approach derives from a false turn taken by English law in the mid-20th century and is wrong in principle: Jack Wass “The Situs of Insurance Debts” (2014) 20 NZBLQ 221. Indeed more recent English cases have held that a debt can be situate in a country where the debtor is not resident: Hardy Exploration & Production (India) Inc v Government of India [2018] EWHC 1916 (Comm), [2019] QB 544; SAS Institute Inc v World Programming Ltd [2020] EWCA Civ 599 (an exception to the residence rule where suit can or must be brought in another jurisdiction, for example under an exclusive jurisdiction clause).
In the latest CBL decision, the plaintiffs’ claim narrowly survived a strike-out application and it is hard to resist the impression that Lang J went out of his way to keep the proceedings alive despite the apparently clear effect of Bridgecorp. While section 9 deserves comprehensive legislative reform, in the meantime it is open to the appellate courts to correct the wrong direction taken in Bridgecorp and restore the law to a more just position that recognises that a debt may be situate where payment is to be made.
Webb v Webb
In the relatively recent Cook Islands case of Webb v Webb, the Privy Council ([2020] UKPC 22) considered the relevance of a New Zealand tax debt to matrimonial property proceedings in the Cook Islands. The proceedings were brought under the New Zealand Matrimonial Property Act 1976 as incorporated into Cook Islands law. The two main issues in this regard were (a) whether a personal tax debt owed by Mr Webb to the New Zealand Inland Revenue had to be enforceable in the Cook Islands in order to be deductible from the value of Mr Webb’s matrimonial property located in that country and (b) whether the debt was enforceable against the matrimonial property in the Cook Islands or whether it was barred by the “foreign tax principle”. We provide a critical analysis of the the Board’s reasoning on these issues here. The case may be of particular relevance to New Zealand law. In relation to the first issue, the Board considered whether the meaning of “debt” in s 20(5) of the Act is confined to debts that are enforceable against the matrimonial property in question. This question could still arise in New Zealand under s 20D of the Property (Relationships) Act 1976. In relation to the second issue, the case raises general questions about the relevance of the foreign tax principle in the context of cross-border insolvency.
