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Where the parties have failed to plead foreign law, when can the court apply New Zealand law in default?

By Jack Wass (Stout Street Chambers)

This is the second of two posts about the pleading and proof of foreign law.

In general, parties can choose whether or not to plead foreign law; where it suits them to do so, they can choose not to plead foreign law and rely on New Zealand law in default. In my previous post, I explained that where the parties had chosen not to rely on foreign law, the court should not conduct its own enquiry into the content of that law; it must apply New Zealand law if it applies any law.

However, in recent years there has been a growing acceptance that there are circumstances in which the parties and the court cannot simply fall back on New Zealand law.

The cases fall into three categories:

(a) Where, on proper analysis, one party’s claim positively relies on the content of foreign law, and they have failed to prove it;

(b) Where the case so obviously raises a question of foreign law that it is necessary as a matter of case management that the parties plead to it; and

(c) Where New Zealand law is inherently local and it would be too strained or artificial to extend it to the foreign facts in issue.

The first category can be broken down further into three situations:

(a) Where the parties have proved the content of foreign law on some issues but not others, the courts can sometimes apply the law of the forum to ‘plug the gaps’. But in other cases the English courts have refused to do this, so that parties omit to plead the law applicable to all issues at their peril (Global Multimedia International Ltd v Ara Media Services [2006] EWHC 3107 (Ch); Tamil Nadu Electricity Board v St CMS Electricity Co Ltd [2008] 2 Lloyd’s Rep 484; cf Balmoral Group Ltd v Borealis UK Ltd [2006] 2 CLC 220 and Law Debenture Trust Corp plc v Elektrim SA [2009] EWHC 1801 (Ch)).

(b) In other cases, a party may have proved the primary rule (for example, by adducing a copy of the statute) but failed to prove the rules of interpretation necessary to resolve an ambiguity in its construction. Again, in some cases the courts will apply New Zealand rules of interpretation in default (Koops v Den Blanken (1999) 18 FRNZ 343 (CA)) but in other cases the court will be left in such uncertainty that further evidence is required (Cheon v Attorney-General HC Auckland CIV-2007-404-7669 at [49]).

(c) Third, the primary rules may empower the decision-maker to exercise a discretion. Where there is no evidence of the principles that would apply to the exercise of the discretion, the court is left in a difficult position. The notorious example is the High Court of Australia’s decision in Neilson v Overseas Projects Corp of Victoria Ltd (2005) 223 CLR 331, where the majority found that the statute had to be interpreted as if it were a domestic statute, while the dissenters found that the failure to prove the principles that would govern the exercise of the discretion meant that the primary rule could not be applied at all.

In the second category of case, the judge may decide that the case so clearly raises a question of foreign law that it would not be fair or consistent with the overriding principles of civil procedure to allow the parties to fall back on the law of the forum (Belhaj v Straw [2014] EWCA Civ 1394, [2015] 2 WLR 1105); this is an exception to the usual rule.

The third category is where the New Zealand law in question is inherently local or creates a special institution, so that it cannot be extended to the foreign facts. Where a general body of rules is concerned (such as tort, or contract, or restitution), it will usually be possible to treat the case as if it were a domestic case and apply New Zealand law accordingly. But where the law in question is purely local, that might not be appropriate. As the Federal Court of Canada put it, the cases demonstrate:

… reluctance of the judges to dispose of litigation involving foreign people and foreign law on the basis of provisions of our legislation peculiar to local situations or linked to local conditions or establishing regulatory requirements. Such reluctance recognizes a distinction between substantive provisions of a general character and others of a localized or regulatory character… (The Ship Mercury Bell v Amosin (1986) 27 DLR (4th) 641 (FCC)).

Particular problems arise with statutory regimes. In Shaker v Al-Bedrawi [2003] Ch 350 (EWCA), the plaintiff’s claim depended on the status of a distribution. That in turn depended on technical company rules about the maintenance of reserves and the extent to which distributions could be made out of profits. The English Companies Act could not be applied literally, since it only extended to English companies, and it was not possible to ‘adapt’ the law to apply in the circumstances. It followed that because the claimant had failed to prove the content of Pennsylvanian law, the English companies legislation could not apply (although English common law rules of company law could, to the extent that they had survived the passing of the Act).

To similar effect, in Damberg v Damberg (2001) 52 NSWLR 492 the New South Wales Court of Appeal refused to presume that German tax law was the same as Australian law, with the consequence that the claim simply failed.

The ambit of this limitation remains uncertain, and the criteria for assessing whether a particular rule is ‘inherently local’ or creates a ‘special institution’ are yet to be settled. In the meantime, the safest course is to ensure that all of the necessary rules are proved. If there is any doubt about what law will apply at trial, and evidence cannot be briefed to account for that contingency, then a preliminary determination on choice of law may be necessary.

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