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233
Damages and Territorial Jurisdiction: Judicial Interpretation of Rule 219(a) and the Case for Reform
Giora Shapira*
Introduction
In an ever shrinking world, in which trade and commerce flow across national boundaries, it is no surprise that the number of cross-border disputes continues to rise. Civil litigation has itself become to some extent a commodity which prospective claimants shop for among potentially available national legal systems.1
The dramatic growth in trans-national litigation has brought jurisdictional issues into prominence. The question of litigation at home or abroad is often crucial. It is of concern not only to commercial traders but also to private citizens and consumers: tourists whose holidays abroad have been ruined; travellers who have suffered injury in a foreign country; individual purchasers of foreign goods; internet eBay traders and persons defamed on the web. Often, an action in New Zealand is the only chance for recovery; litigation abroad would be too costly and uncertain. Thus enforcement of trans-national obligations may crucially depend on a New Zealand court's jurisdiction to hear and determine the action.
Jurisdiction over foreign defendants2 is largely derived from R 219 of the High Court Rules (HCR).3 The provision states a number of legal categories in respect of which a plaintiff may serve proceedings out of New Zealand in certain circumstances. Due service under the Rule establishes jurisdiction of the New Zealand court over that defendant.
The jurisdictional paradigm comprises jurisdiction rules, forum non conveniens, anti-suit injunctions and exclusive jurisdiction clauses, and is yet to be fully explored. This article, however, has a narrow focus: it concentrates on judicial interpretation of R 219(a), which regulates service abroad in actions for damages. Because of its wide application and frequent use, it plays a major role in defining the territorial jurisdiction of the New Zealand courts.
Rule 219(a) allows service outside New Zealand without leave of the Court -
L.L.M (Lon) Mag.J (Jerusalem), of the Faculty of Law, University of Otago. My thanks to Simon Currie, for his research assistance and his comments. International Law Association, London Conference (2000) Committee on International Civil and Commercial Litigation.
"Foreign defendant" in this context means any person, (including a New Zealander) who is out of New Zealand at the commencement of the proceeding (and therefore cannot be served in New Zealand). Normally, a foreign defendant would be permanently residing abroad.
Under R 220 service abroad may be effected with leave of the court in situations not covered by R 219. See Cockburn v Kinzie Industries Inc [1988] NZHC 184; (1988) 1 PRNZ 243 (CA). Proper service with leave establishes the jurisdiction of the New Zealand court over the party so served.
234 Otago Law Review (2006) Vol 11 No 2
Where any act or omission for or in respect of which damages are claimed was done or occurred in New Zealand: ...
Though simple enough, the provision (and related issues, discussed below) has stirred a vigorous judicial debate. As we shall see, the gloss applied to R 219(a) by some courts has effectively changed its meaning. The resulting inconsistency and uncertainty is particularly disturbing because it affects "jurisdiction". Underlying the entire judicial process, jurisdiction rules should be clear and uniformly applied.
Before proceeding to analysis, two related matters need to be briefly revisited. The first is the power of a court to decline jurisdiction under the doctrine of forum non conveniens. The second is the requirement of a "good arguable case", as a pre-requisite to R 219 based jurisdiction.
Preliminary Issues
Forum non conveniens
The doctrine offorum non conveniens, allowing a court of competent jurisdiction to terminate or suspend a proceeding (issue "a stay") in certain circumstances, was adopted in New Zealand soon after its incorporation into English common law. In the leading case, Spiliada Maritime Corporation v Cansulex Ltd, the House of Lords stated the position as follows:4
The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, ie in which the case may be tried more suitably for the interests of all the parties and the ends of justice.
Soon afterwards the doctrine was uncritically adopted by the New Zealand Court of Appeal5 and is well established here.6
The point to bear in mind for the purpose of the following discussion is this: in principle, the existence of jurisdiction should not be confused with the exercise of jurisdiction. Existence of jurisdiction is established by mandatory, binary
[1986] UKHL 10; [1986] 3 All ER 843,854.
Club Mediterranee NZ v Wendell [1989] 1 NZLR 216.
Cockburn v Kinzie Industries Inc [1988] NZHC 184; (1988) 1 PRNZ 243; Oilseed Products (NZ) Ltd v H.E.
Burton Ltd [1987] NZHC 341; (1987) 1 PRNZ 313; McConnell Dowell Constructors Ltd v Lloyd's Syndicate
396 [1987] NZCA 144; [1988] 2 NZLR 257 (CA); Crane Accessories Ltd v Lim Swee Hee [1989] 1 NZLR
221; Longbeach Holding Ltd v Bhanabhai & Co Ltd [1994] 3 NZLR 28 (CA); Biddulph v
Wyeth Australia Pty Ltd [1994] 3 NZLR 49; Kang v Hyundai Electronics (1995) 8 PRNZ
628; Baxter v RMC Group plc [2003] 1 NZLR 304; University ofNewlands v Nationwide
News Pty Ltd (2004) 17 PRNZ 206.
The Spiliada received only a lukewarm welcome in Australia: Oceanic Sun Line
Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 79 ALR 9 (HCA). The High Court eventually
settled on a principle whereby a stay may be issued when the Australian court is
"clearly the non-appropriate forum": Voth v Manildra Flour Mills (1990) 171 CLR
538.
Damages and Territorial Jurisdiction 235
statutory rules. Exercise of jurisdiction is a matter for the court's discretion. In our context, jurisdictional debates are largely a matter of statutory interpretation. The discretion not to exercise jurisdiction is governed by a common law doctrine stated in Spiliada.
"Good arguable case"
By judicial decision, jurisdiction based on R 219 is established only if the plaintiff shows "a good arguable case" against the foreign defendant; namely, the court prejudges the strength of the plaintiff's case on the merits before "assuming" jurisdiction. Historically, the former R 48 of the Rules of Civil Procedure (replaced since 1986 by R 219, HCR), required leave of the court for all service abroad. Such leave was sought by the plaintiff in an interlocutory ex-parte application, supported by affidavit evidence. To grant leave the court had to be satisfied that the case came within the statutory grounds for service abroad contained in R 48. As well, the court had to be convinced that the case had sufficient merit. The rationale for the latter requirement was that, considering the costs and inconvenience of litigating abroad, a foreign defendant should not be compelled to litigate in the jurisdiction unless the case against him was sufficiently strong on the merits. The court's jurisdiction (established by the leave to serve) therefore depended, in part, on assessment of the strength of the case.
Currently, service under R 219 is as of right, requiring no leave of the court. Under R 131, HCR, a defendant who has been served abroad may enter an appearance and object to the jurisdiction of the New Zealand court. Rule 131 provides, in relevant part:
(3) A defendant who has filed an appearance under subclause (1) may apply to
the Court to dismiss the proceedings on the ground that the Court has no
jurisdiction to hear and determine it.
(4) On hearing an application under subclause (3), the Court, -
- (a) If it is satisfied that it has no jurisdiction to hear and determine the
proceeding, shall dismiss the proceeding; but,- (b) If it is satisfied that it has jurisdiction to hear and determine the proceeding,
shall dismiss the application and set aside the appearance.
Rule 131 is therefore the procedural vehicle for a foreign defendant who has been served abroad to appear before the New Zealand court and contest jurisdiction. On a plain reading the objection should be restricted to "jurisdiction", namely to R 219 grounds. But in Kuwait Asia Bank EC v National Mutual Life Nominees Ltd7 the Privy Council, apparently affirming the New Zealand Court of Appeal on this point, gave R 131 a significantly wider interpretation.
The bank was sued in respect of alleged negligence of two of its nominees who had served as directors on the board of a failed New Zealand company. The bank had no branches or business in New Zealand and was served abroad, primarily under R 219(a). The plaintiff alleged various counts of negligence,
7 [1990] 3 NZLR 513.
236 Otago Law Review (2006) Vol 11 No 2
vicarious liability and liability as a shadow director. The bank protested the jurisdiction under R 131. A main issue in the litigation was whether the Rule required "a good arguable case" against the bank as a pre-requisite to R 219-based jurisdiction.
The Judicial Committee concluded its initial interpretation of R131 by saying:8
[T]he Court's duty is to decide whether it has or has not jurisdiction to proceed accordingly; the rule does not deal with any other issue.
The Judicial Committee noted a difference in approach by the courts below. Henry J at first instance held, emphatically, that the merits of the plaintiff's case were irrelevant to R 219.9 Having noted "the important change made by the High Court Rules" (ie service abroad as of right) he is cited by the Privy Council as saying10:
In my judgment there is no obligation on a plaintiff who invokes R 219 to satisfy the Court by affidavit evidence that factually there is a meritorious claim. On the contrary the merits are I think in such a case irrelevant to the issue of jurisdiction, and to embark on a consideration of the factual basis for the claim in the way envisaged is quite inappropriate and contrary to the intent of the rule. In each case coming within R 219 there is a strong territorial content to the proceeding, and as I apprehend it the philosophy of the new rule is to vest jurisdiction in the Court in such cases as a matter of course rather than a matter of discretion.
Henry J then concluded that the "good arguable case" issue is:11
[R]eally whether the proceedings should be struck out because no cause of action is disclosed, which is something not related directly to the issue of jurisdiction to hear and determine.
The Court of Appeal, however, disagreed.12 Cooke P speaking for the court, was adamant that the strength of the case on the merits in a R 131 application remained a jurisdictional issue. In key passages quoted by the Privy Council he said:13
Finally, the two-fold tests posed by the English Court of Appeal, a good arguable claim on the merits and a strong probability that the claim falls within the letter and spirit of the rule about service abroad, relate to questions that at least under [Rule 219(a)] ... merge into one in the present case. At least under that paragraph, on which the argument in this Court was mainly centred, whether the New Zealand Court has jurisdiction depends on the strength of the plaintiff's case against the bank on the merits.
8 Ibid., at 520 (emphasis added).
[1989]2NZLR43. Ibid., at 522. Ibid., at 523. [1989] 2 NZLR 50. Ibid., at 521-522. Emphasis added by the Privy Council.
Damages and Territorial Jurisdiction 237
The Judicial Committee added the following comment:14
(Their Lordships noted that the Court of Appeal there recognised as relevant a point which does not on the face of it go to jurisdiction, namely the strength of the plaintiff's case.)
Surprisingly, the Judicial Committee's conclusion seems inconsistent with its initial premise, namely that jurisdiction rules are mandatory and binary:15
Their Lordships agree with the approach which commended itself to the Court of Appeal and consider that, not withstanding the right conferred by R 219 to serve proceedings without leave out of New Zealand and the ostensibly narrow ground of objection embodied in R 131, the Court retains a discretion to set aside service on the same principles as governed the granting of leave under the former R 48 and the setting aside of service before 1986.
The judgment has been criticised as a... "[R]ambling and apparently obiter discussion [which] misunderstood the ruling of the Court of Appeal and went on to find a discretion to decline jurisdiction similar to that involved in granting leave under the previous R 48 of the Code of Civil Procedure."16
More likely the Privy Council did understand perfectly the Court of Appeal's jurisdictional ruling. It impliedly questioned it in a series of parenthetical asides but stopped short of rejecting it. This is for two reasons. In the first place, the plaintiff's statement of claim disclosed no cause of action against the bank. It was therefore unnecessary to decide which was the appropriate test. The plaintiff's action was untenable on any analysis and would be struck out. Secondly, generally speaking, the Privy Council has left it to the New Zealand courts to make their own rulings on matters of procedure. If Sir Robin Cooke believed that the strength of the plaintiff's case was relevant to jurisdiction, the Judicial Committee would not contradict it.17 This also explains why the tenor of the decision does not dovetail with the final conclusion.
Be that as it may, a Privy Council judgment in a New Zealand appeal is binding on all New Zealand courts. Arguably originally an obiter, the principle was subsequently followed by the Court of Appeal18 and has been applied routinely
Ibid., at 521. (Parentheses in the original).
Ibid., at 524-525. In the end the Privy Council adopting the normal striking out
test, decided that the statement of claim did not disclose any cause of action against
the bank and should be struck out. On this point it reversed both the Court of
Appeal and Henry J.
A. Beck, "Rule 219, The 'Good Arguable Case' Requirement" [2002] NZLJ 187. For
further criticism see P. Mayburgh and E. Schoeman, "Jurisdiction in Trans-national
Cases" [2004] NZLJ 403.
In the same vein, Their Lordships thought that arguments of forum non conveniens
may be raised on a R 131 application (although the Rule is silent on that matter)
but left it to the courts of New Zealand to follow their own preferred procedures
in this respect: Kuwait Asia Bank at 529 lines 7-11.
Stone v Newman [2002] NZCA 48; (2002) 16 PRNZ 77.
238 Otago Law Review (2006) Vol 11 No 2
in a line of High Court decisions.19 In at least two of them it has proved decisive.20
The point of revisiting Kuwait Asia Bank at this stage is that the views expressed there are material to the policy debate and may be germane to law reform. Also worth noting is the fact that the Court of Appeal has singled out R 219(a) as requiring proof of "a good arguable case." R 219(a) therefore, specifically requires the plaintiff to show "a good arguable case" before jurisdiction is established.21
Judicial Interpretation of Rule 219(a)
The early cases
The three early cases in which the predecessor to R 219(a) was applied involved product liability. The New Zealand plaintiffs sought to sue the respective overseas manufacturers for negligence abroad causing damages in New Zealand.
In Adastra Aviation Ltd v Airparts (N.Z.) Ltd22 the plaintiff's injuries were allegedly caused by a defective aircraft manufactured abroad. The plaintiff sought leave to serve the defendant under R 48(a) of the Code of Civil Procedure (then in force). The Rule enabled leave to be given "where any act for which damages are claimed was done in New Zealand".
Hardie Boys J pointed out the difference between R 48(a) and the then English equivalent which permitted service out of the jurisdiction by leave "whenever an action is founded on a tort committed within the jurisdiction." Noticing the differences with R 48(a) he concluded:23
The result is a wider scope than is permitted in England. Delivery in New Zealand of a defective machine, resulting in damage to a plaintiff in New Zealand may well qualify as an "act done in New Zealand" as, indeed, may the suffering of damage in itself, on the footing that it is that suffering of damage which is the foundation of tortious liability.
This short paragraph, unconvincing on its face (the provision clearly localised the act causing the damages - not the ensuing legal liability) and accompanied by little analysis except for historical background, turned out to be seminal.
The action in Pratt v Rural Aviation Ltd 24 followed a fatal air accident. The pilot's widow claimed negligence by the United States manufacturer of the aircraft. Speight J had no evidence before him to establish delivery in New Zealand by the manufacturer; but following Adastra accepted that such delivery would be sufficient to satisfy R 48(a).
19 For the most detailed discussion of the "good arguable case" requirement see
Bomac Laboratories Ltd v F Hoffman - La Roche Ltd (2002) 7 NZBLC 103,627,103,633-103,635; Baxter v RMC Group plc [2003] 1 NZLR 304,310-313.
22 [1964] NZLR
393.
23 Ibid., at
395.
24 [1969] NZLR 46.
Damages and Territorial Jurisdiction 239
In My v Toyota Motor Co Ltd25 the plaintiff was injured in New Zealand when a Toyota car he was driving overturned due to mechanical defect. He alleged manufacturer's negligence. The car was manufactured in Japan and delivered to its New Zealand buyer through the manufacturer's distribution channels. The plaintiff obtained leave to serve the well known car manufacturer in Japan. The defendant protested the jurisdiction, arguing that it had not "done in New Zealand" any act for which damages are claimed" as required by R 48(a).
Wild CJ found that although the car was not sold in New Zealand by the manufacturer, it was delivered by it in New Zealand. He then addressed the argument that Adastra was wrong in holding that delivery of a defective machine was "an act done in New Zealand" in terms of R 48(a) because the rule required that the act must be one for which "damages are claimed". His Honour's conclusion:26
[Counsel] said that the act for which damages are claimed here is the alleged negligent manufacture of the car. I do not think it is so. If the alleged negligent manufacture stood alone it would not matter to anyone in New Zealand and this claim would not have been brought. It is the alleged negligent manufacture of the car coupled with its delivery to New Zealand on behalf of the defendant that is
pleaded The act done in New Zealand for which damages are claimed is the
delivery for use by such a person as the plaintiff of a car which, through the alleged negligence of the defendant, was defective.
With respect, the logic here is doubtful. Damages are claimed in respect of acts creating legal liability. Delivery by itself, being the only "act" done in New Zealand, is a neutral fact. The damages do not result from, and are not claimed in respect of, the delivery. They are claimed in respect of wrongdoing completed overseas. Of course without delivery in New Zealand there would be no damages here - but this is not the point. Nevertheless, the Adastra proposition has taken root. It received a further boost in the Court of Appeal decision discussed below.
Longbeach
The main contribution of the Court of Appeal to the R 219(a) debate is in Longbeach Holdings Ltd v Bhanabhai & Co Ltd27. By a contract allegedly made in New Zealand, L, a New Zealand company, contracted with B, a Fijian company, for sale of garments to be delivered to L's agent in Fiji. The garments were destined for New Zealand and subsequently shipped there by the agent. L sued in New Zealand for damages for breach of contract relating to the quality of the garments. It claimed five acts or omissions breaching the contract, all occurring in New Zealand: delivery of the garments, cancellation of contracts, inability to effect sales, sales of defective garments and the physical receipt and inspection of defective garments.
[1977] 2 NZLR113. Ibid., at 116-117. [1993] NZCA 655; [1994] 2 NZLR 28.
240 Otago Law Review (2006) Vol 11 No 2
L served B in Fiji and the latter protested jurisdiction under R 131. Service was upheld by Master Hansen under R 219(b)(i) (which allows service abroad in actions for breach of a contract made in New Zealand) and the Court of Appeal upheld his ruling. Although this disposed of the case, the Court of Appeal also assessed the plaintiff's alternative submission under R 219(a). It concluded that R 219(a) was apparently confined to damages suffered as a result of a tort. Even if extended to contractual damages, a distinction had to be made between "acts and omissions" in respect of which ensuing damages in New Zealand may be claimed, and those events that establish the damages the plaintiff is entitled to as a result of the breach. Since delivery took place in Fiji no acts or omissions founding jurisdiction to award damages suffered in New Zealand had happened in New Zealand.
Remarkably, though, while the Court of Appeal applied the correct analysis to R 219(a) (the factual cause of the damage, rather than the ensuing loss, must have occurred in New Zealand) it has restricted this analysis to contractual damages. On tort damages, the court upheld Adastra, stating that under R 219(a) "it was sufficient... that the damage was sustained rather than the tortious act occurred within the jurisdiction".28
This proposition has thus received the imprimatur of the Court of Appeal -albeit in obiter. The stage was set for the next development - whereby tort damages sustained in New Zealand were all that mattered - irrespective of whether their cause or reason was located in New Zealand and whether there was delivery by the defendant in New Zealand.
Recent cases
Biddulph v Wyeth Australia Pty Ltd29
The plaintiff claimed to have become unwillingly pregnant due to the defective packaging of a contraceptive product manufactured by the defendant in Australia and purchased in New Zealand from a third party. The defendant applied for an order dismissing or staying the proceeding on the ground that it had been wrongly served outside New Zealand. Rule 219(a), the defendant argued, required an act or omission committed in New Zealand. In this case, the alleged act, (defective packaging) had occurred in Australia. This argument was rejected, Eichelbaum CJ upholding service under R 219(a) on three separate grounds:
(1) Rule 219 required only the happening in New Zealand of an act for or in
respect of which damages were claimed. The identity of the actor was
not stipulated and should not be confined to the defendant. The act of
the plaintiff was thus sufficient to found jurisdiction.
(2) It was not necessary for products manufactured overseas to have been
delivered in New Zealand by, or on behalf of the manufacturer. Rule
219(a) is satisfied if the product was sold in New Zealand with the
Ibid., at 34, lines 5-10. In the result, the Court of Appeal upheld the jurisdiction of the New Zealand court and also held that New Zealand was the appropriate forum (reversing the trial judge on this point). [1994]3NZLR49.
Damages and Territorial Jurisdiction 241
defendant's consent or if it was reasonably foreseeable by the defendant that the goods would be sold in New Zealand.
(3) Jurisdiction under R 219(a) is established if any part of the plaintiff's cause of action arose in New Zealand. This includes, in claims in tort, the suffering of damage. The tortious act itself need not have occurred within the jurisdiction.
None of the three propositions holds water. Indeed, the first proposition borders on the absurd. The "act or omission" in R 219(a) are those damages which "are claimed for". As the claim is from the defendant, obviously they should be the defendant's acts. As well, since the immediate cause of damage is always some act or omission of the plaintiff, the reasoning in (1) is tantamount to making the suffering of damage in New Zealand the sole requirement. If this indeed were the legislative intent, the provision would have simply said so. The second proposition is inconsistent with the rationale of Adastra, Pratt and My where the respective courts clearly looked for a delivery by the defendant. And as for the third proposition, to say that the "act" of suffering damages is the act for which damages are claimed is a senseless tautology.
All the same, Biddulph30 is the current leading authority.31 Being the high watermark in the "liberalisation" of R 219(a), it has relegated the requirement of an "act or omission" occurring in New Zealand for which damages are claimed to insignificance. Instead it has made damage suffered in New Zealand the only test. As noted by a later court:32
I am satisfied that Bomac's case falls squarely within R 219(a). Clearly it has suffered loss in New Zealand. It is sufficient that the damage, as opposed to the tortious act, causing it, occurred within our jurisdiction (Biddulph, (supra) at pp
55-56).
Baxter v RMC Group plc33
In 1988 the plaintiff purchased a group of companies from RMC Group plc. Two years later the principal trading company in the group went into liquidation. The plaintiff alleged that the defendants had caused money to be siphoned out of the group and pleaded three causes of action in tort (deceit, unlawful means conspiracy and conspiracy to injure) and a fourth based on a constructive trust. The failure of the group resulted in considerable loss to the plaintiff, the Bank of New Zealand foreclosing on the properties he had posted as security for the purchase money. The plaintiff served proceedings on the defendant outside New Zealand without leave. The defendant filed notices of appearances under protest to jurisdiction and the plaintiff applied to set these notices aside.
On the application of R 219(a), the court found that the acts or omissions which formed the basis of the plaintiff's allegation occurred exclusively in the United
32 Bomac Laboratories Ltd v
Hoffman-La Roche Ltd (2002) 7 NZBLC 103,627, para
44.
33 [2003] 1NZLR 304.
242 Otago Law Review (2006) Vol 11 No 2
Kingdom. Nevertheless, following (with express reservation34) Biddulph, O'Regan J held that R 219(a) was satisfied. Under the provision it was sufficient to establish jurisdiction if the damage sustained as a result of the tortious act or omission occurred in New Zealand. Here the plaintiff had established "a good arguable case" that the loss he had suffered (the enforcement action against his New Zealand assets) occurred within the jurisdiction. (After further analysis, however, the judge concluded the plaintiff had failed to establish a good arguable case on the merits. His application to set aside the notices of protest to the jurisdiction was accordingly dismissed, and the action was dismissed.)
Baxter merely follows Biddulph on compliance with R 219(a). It is notable for two reasons. Unlike the product liability cases discussed above, Baxter involved an economic tort. It is therefore an interesting example of the application of R 219(a) to cases raising cross-boundary issues of deceit, conspiracy and breach of trust. As well, Baxter demonstrates the reach of the Kuwait Bank requirement -despite the complexity of the issues and compliance with R 219(a), the judge effectively struck out the action for failure to establish a strong enough case in the preliminary proceeding.
Comparison With Other Jurisdictions
The comparison with overseas equivalents of R 219 (a) serves in two ways: it helps interpret R 219(a) and it demonstrates the trend of national systems in defining their trans-national jurisdiction in actions for torts.
The New South Wales provision allows proceedings to be served outside the State where: "the proceedings are for the recovery of damage, suffered wholly or partly in the State, caused by a tortious act or omission wherever occurring".35
Under the Victorian provision proceedings may be served out of Australia without order of the court where:
(-) the proceeding is founded on a tort committed within Victoria;
(-) the proceeding is brought in respect of damage suffered wholly or partly in
Victoria and caused by tortious act or omission wherever occurring.36
The English provision allows service out of the jurisdiction with permission of the court in respect of tort actions in the following terms:
Claims in tort
(8) A claim is made in tort where -
(a) damage was sustained within the jurisdiction; or
- (b) the damage sustained resulted from an act committed within the
jurisdiction.37
34 Ibid., at 316, lines 27-30.
37 Civil Procedure Rules R 6.20 (8)(a) and (b) (UK).
Damages and Territorial Jurisdiction 243
By comparison, the New Zealand provision, as recalled, allows service outside New Zealand where "any act or omission for or in respect of damages are claimed was done or occurred in New Zealand".
The contrast is obvious. Clearly, when the legislature wants "damages sustained within the jurisdiction", simpliciter, to found jurisdiction, it expressly says so. The respective overseas provisions distinguish damage sustained within the jurisdiction and an act causing damage committed within the jurisdiction. They rightly treat them as separate grounds. The New Zealand provision speaks only of the second ground. Under it, plainly, at least part of the tortious act ("for or in respect of which damages are claimed") causing the damages, must have happened in New Zealand. Rule 219(a) makes no mention of the place of the ensuing damage. Yet, by creative judicial interpretation, damages suffered in New Zealand are a sufficient ground for R 219(a) based jurisdiction. This might well be in line with other nations' modern legislation on territorial jurisdiction in tort actions, but it is contrary to the plain meaning of the provision. As a matter of statutory interpretation it is nothing short of judicial legislation.
Policy Considerations
The expansive interpretation of R 219(a) gives a larger category of New Zealand tort victims the opportunity to sue foreign parties at home (subject to forum non conveniens consideration). By the same token, on a reciprocal basis, other states' provisions making the mere suffering of damages within the jurisdiction a sufficient ground for service abroad would expose New Zealand exporters to product liability actions anywhere in the world. This must affect their public liability insurance premiums.38
Generally speaking wide jurisdiction rules with weak territorial links - such as the "damages sustained" rule,39 may encourage forum shopping and fuel jurisdictional battles. The doctrine of forum non conveniens should act as a
244 Otago Law Review (2006) Vol 11 No 2
gate keeper, ensuring that cases are heard in their natural forum. But the preliminary stage itself - the litigation on where to litigate - often consumes valuable court time and litigants' resources.
Paradoxically, on jurisdiction in trans-national actions for tort damages, New Zealand courts have moved in the footsteps of modern foreign legislation. The outcome, although arguably justified on policy grounds, is nevertheless based on shaky foundations. Obviously the present state of the law justifies a call for reform.
Evaluation
The law on R 219(a) can be summarised as follows:
Longbeach Holdings Ltd v Bhanabahai & Co Ltd [1993] NZCA 404; [1994] 2 NZLR 143.
University ofNewlands v Nationwide News Pty Ltd (2004) 17 PRNZ 206; and see Dow
Jones & Company Inc v Gutnick [2002] 194 ALR 433.
Diamond v Bank of London and Montreal [1979] 1 All ER 561.
(1992) 6 PRNZ 162.
Damages and Territorial Jurisdiction 245
• If service abroad under R 219 is challenged by the defendant on a R 131 application, the plaintiff's "good arguable case " is a prerequisite to the court's "assuming" jurisdiction.
This hardly makes for clear law. The main difficulties are discussed below.
The Biddulph proposition whereby "damages suffered" in New Zealand are the relevant "act" required by the provision.
This is currently the accepted position. However this interpretation is patently wrong, being contrary to the plain language of the provision and ignoring key words and conjunctions. Rule 219(a) clearly requires that at least part of the tortious act, for which damages are claimed from the defendant, to have been committed by the defendant, in New Zealand.
Ironically, perhaps, wrong judicial interpretation of R 219(a) has moved New Zealand law in the right direction. "Damages sustained in the jurisdiction caused by a tortious act wherever committed" is now the standard position adopted by overseas jurisdictions. Whether New Zealand should adopt a similar position is a matter for Parliament, not for the courts. In the current state of the law, a High Court judge may still depart from Biddulph by giving the provision its plain meaning. And it is possible to speculate that the Supreme Court, when addressing the issue, would feel obliged to apply the golden rule giving unambiguous legislation its plain meaning, especially when presented with the wording of comparable overseas legislation.
The "good arguable case" requirement
The strength of the case on the merits as a pre-requisite to R 219-based jurisdiction, is onerous for both New Zealand plaintiffs and the courts. The plaintiff who starts proceedings as of right by complying with R 219 is entitled to have his/her case heard. Rule 131 applications to dismiss the action for lack of jurisdiction should indeed be restricted to jurisdictional (as distinct from substantive) issues: namely, compliance with R 219 and forum conveniens. Parties should not be expected to debate the strength of the case on the merits in the preliminary stage (as long as the statement of claim displays a cause of action -to the standard required by R 477). In this respect, Henry J's analysis of R131, in the Kuwait Asia Bank litigation, is preferable, it is submitted, to that of the higher courts. The concern about subjecting a foreign defendant to local litigation when the case against him seems unsound, was first judicially expressed some hundred and twenty years ago. This authority is still cited today.44
Obviously, current travel, communication and technology make trans-national litigation today considerably less onerous than a century ago. Admittedly, litigation abroad is still a formidable task for many defendants. Here, the relatively recent doctrine of forum non conveniens - only twenty years old but in full bloom - plays a central role. Applying a wide range of considerations, it seeks a proper balance between the plaintiff's right to invoke the court's
44 Societe Generale de Paris v Dreyfus Bros [1887] UKLawRpCh 235; (1888) 37 Ch D 215, cited at length by the
Privy Council in Kuwait Asia Bank EC v National Mutual Life Nominee Ltd [1990] 3 NZLR 513, 524.
246 Otago Law Review (2006) Vol 11 No 2
jurisdiction and the protection of the foreign defendant against an unfair choice of forum. As for the courts, having to prejudge complex issues on scant evidence and before discovery, does not make their job any easier. There is also the risk of an inflated litigation on the right to litigate.
Conclusions
A court which acts without jurisdiction is usurping power. This is anathema to the judicial system. Rules establishing jurisdiction should be mandatory, clear and easy to apply. The law on R 219(a) hardly fits this description. The provision itself is simple, but the law surrounding it is problematic.
Rule 219(a) is ripe for reform, ideally within a major overhaul of the entire R 219 - although that is a matter outside the scope of this article. As regard policy, manufacturers whose products sell on global markets should be accountable for harm caused by their products, wherever caused. Hence local courts should, in principle, have jurisdiction to deal with such claims. The policy that underlies the Australian and English provisions mentioned above should guide us too.
In line with modern international trends in establishing local jurisdiction in trans-national tort actions the New Zealand revised provision should be expressly restricted to actions in tort; and specifically, apply to :
For the reasons cited above, the "good arguable case" requirement should be abolished. Parties to R 131 applications should only be concerned with jurisdiction. They should not be forced to debate the strength of the case on the merits in a preliminary proceeding. Admittedly, the same facts establishing jurisdiction may also have a bearing on the substantive issues - for example, was a contract concluded and if so where? Was a tort committed? Which law applies? However, the bottom line of jurisdiction ought to remain. Moreover, that should have nothing to do with the strength of the case on the merits provided, there is, on the face of it, a case.
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