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[1] The internet was developed by the United States Defence Department in the early 1970s. It was then known as ARPANET (Advanced Research Projects Agency Network). It was designed to provide communications which would not be disrupted even in the event of a major emergency. Computers were interconnected so that each computer in the network was connected to each other computer. Electronic messages could be sent from A to B directly or via any other computer or computers in the network. If part of the network became unoperational, the message would arrive at its destination regardless via an alternative route. The second feature is that the messages are not sent as a single stream of data. Rather they are divided into discrete "packets" that are sent separately and reassembled by the recipient computer. Each packet may take a different route to the destination in order to avoid congestion. The internet is identical to the ARPANET in its operation with the major difference being that while the ARPANET consisted of approximately 40 computers, there are now literally millions of interconnected computers any of which can communicate freely with the others (Gringras 1997 3). The term "intranet" means an internal network which uses the same technology as the world wide web (see para 4) to show and link documents. It is not necessarily linked to the internet itself, but when it is it can allow in viruses and hackers (see para 148) from outside (Gringras 1997 383).

[2] The technology that makes the internet usable by other than specialists is the world wide web (www). This is a system of linking text, graphics, sound and video on computers spread across the globe. The basic technology of the web was created to assist physicists to keep track of all data generated by their experiments. At the heart of the technology is a programming language, hyper-text mark-up language (HTML), which allows a phrase or graphic in one document to be linked to another document anywhere on the global internet. Websites are being used to provide information about particular companies or their products; other websites are being used to sell goods directly over the internet in a form of electronic mail order (see generally, Gringras 1997 388).

[3] New Zealand InfoTech Weekly, 2 February 1998, 1, referring to a survey conducted by Price Waterhouse, Chartered Accountants. Of the 105 companies (out of 300 consulted) that responded, four said that more than $2 million would be spent on setting up an electronic commerce site and two others said that they would expect to spend between $1 million and $2 million.

[4] See the Law Commission reports The United Nations Convention on Contracts for the International Sale of Goods: New Zealand's Proposed Acceptance (nzlc r23 1992); Arbitration (nzlc r20 1991); and A New Zealand Guide to International Law and its Sources (nzlc r34 1996).

[5] Compare Sale of Goods Act 1908 which applies to domestic transactions with the Sale of Goods (United Nations Convention) Act 1994 which applies to certain international contracts.

[6] Matters to be discussed in this report will include the United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Credit Transfers; United Nations Convention on International Bills of Exchange and International Promissory Notes; and the possible adoption of the Brussels Lugano and San Sebastian Conventions (see also Australian Law Reform Commission, Legal Risk in International Transactions (Report 80, 1996) 221ff). Consideration will also be given to the proposed European Convention on Insolvency Proceedings and the United Nations Convention on the Carriage of Goods by Sea 1978 (Hamburg Rules); in the case of the latter the question will be whether the Hamburg Rules are more suited to electronic commerce than the amended Hague Rules currently enshrined in Schedule 5 of the Maritime Transport Act 1994; see in particular s 209.

[7] Although the notion of a general lex mercatoria has been disowned by the common law in recent times the suggestion is not without good authority. In Luke v Lyde (1759) 2 Burr 822; 97 ER 614, Lord Mansfield noted, in relation to a maritime case, that it "was desirous to have a case made of it, in order to settle the point more deliberately, solemnly and notoriously; as it was of so extensive a nature; and especially as the Maritime Law is not the law of a particular country, but the general law of nations: . . .". Lord Mansfield then referred to a quotation from Cicero, De Republica 3.22.33: "nor will it be one law at Rome and a different one at Athens, nor otherwise tomorrow than it is today: but one and the same law will bind all peoples and all ages". As Rt Hon Justice Sir Kenneth Keith observed in his 1997 paper, "The International Law Commission's Work the Shaping of International Law": "[Lord Mansfield] was not agreeing with Cicero that the law was unchanging but he was saying that we must concentrate on the essence of our time and understand present conditions and future needs. The dictates of common sense should be heard in the language of recorded experience" (see also the approach of the Privy Council in Re Piracy Jure Gentium [1934] AC 586, 588_589; and Higgins 1994). We also note Lord Mustill's 1988 paper, "The New Lex Mercatoria: The First Twenty-Five Years" which puts forward a list of 20 principles as constituting a modern lex mercatoria from 25 years of international arbitration (see also Redfern and Hunter 1991 117_121).

[8] Policy statements released in other jurisdictions include, for example, A Framework for Global Electronic Commerce (policy statement issued by President Clinton and Vice-President Gore by the White House, Washington DC, 1 July 1997); European Initiative in Electronic Commerce (a communication to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions, 15 April 1997); the American Law Institute and National Conference of Commissioners on Uniform State Laws, Revision of Uniform Commercial Code: Article 2 _ Sales (draft, November 1997); Uniform Law Conference, Canada, Consultation Paper on a Proposed Uniform Electronic Evidence Act (March 1997); Standards Australia, Strategies for the Implementation of Public Key Authentication Framework (PKAF) in Australia (1996); Electronic Commerce: Cutting Cybertape: Building Business (Corporate Law Economic Reform Program, Commonwealth of Australia, Report 5, 1997); and the report produced for the French Ministrie de l'economie des finances et de l'industrie, Electronic Commerce: A New Factor for Consumers, Companies, Citizens and Government (1998).

[9] Electronic Commerce: Building the Legal Framework 4. Another objective was to provide a vehicle for the harmonisation of laws governing electronic commerce across Australia: this issue does not arise in a unitary state such as New Zealand.

[10] For example, the changes to the method by which shares can be transferred under the upgraded FASTER system (Fully Automated Screen Trading and Electronic Registration): see Securities Transfer Act 1996 s 7.

[11] Submissions of the New Zealand Law Society's Commercial and Business Law Committee to the Securities Commission on proposed changes to the FASTER system, 23 October 1997.

[12] For example, current United States policy is that the internet should be a tariff free environment for the delivery of goods and services: A Framework for Global Electronic Commerce (a policy statement issued by President Clinton and Vice-President Gore by the White House, Washington DC, 1 July 1997); see also the Internet Tax Freedom Bill currently before Congress (available from the Congress library at

[13] Goode, in Cranston and Goode (eds) 1993, identifies nine distinct ways of developing commercial law internationally. Of these only four have the force of law. An example of international trading rules which are adopted contractually rather than via legislation is the International Chamber of Commerce's Incoterms, which cover the shipment of goods.

[14] As to the impact of small and medium-sized businesses on the New Zealand economy, see Cameron, Massey and Tweed "New Zealand Small Businesses _ A Review" (1997) Chartered Accountants Journal (October 1997) 4_5.

[15] UNCITRAL Model Law on Electronic Commerce, articles 1 and 2(a), defines "data messages" as "information generated, sent, received or stored by electronic, optical or similar means including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy". See appendix A and paras 24_28 on the Guide to Enactment. To similar effect see the proposed changes to the Uniform Commercial Code (US) designed to provide technologically neutral definitions for concepts such as "writing" (record) and "signatures" (authenticity); see para 95 and appendix B.

[16] Major trading partners are Australia, the United States, the European Community, Japan, the People's Republic of China, Republic of Korea (South Korea), Malaysia, Singapore, Chinese Taipei (Taiwan), and Thailand (New Zealand Official Yearbook 1997 565 (see also the discussion of conflicts of laws in chapter 6 and the comparative study in appendix D of this report).

[17] For example, the authors of Chitty on Contract give two basic definitions of contract: promises which the law will enforce, and agreements which give rise to obligations which the law will enforce (para 1-001). Atiyah, An Introduction to the Law of Contract, describes contracts in terms of private legal obligations concerning economic exchange (1_7). For a history of the law of contract, and the development of the doctrine of "consideration" see Holmes, The Common Law (1881) 247_288.

[18] Deutsche Schachtbau-und Tiefbohrgesellschaft v Ras Al Khaimah National Oil Co and Shell International Petroleum Co Ltd [1990] 1 AC 295, 312ff, in which the English Court of Appeal held that an award made under such a clause was enforceable and not contrary to public policy. Although an appeal to the House of Lords was allowed the House did not disturb the Court of Appeal on the public policy point.

[19] See Hafez 1998 s1_s15; the phrase is derived from s 38(1) of the Statute of the International Court of Justice.

[20] For example, s 2 of the Contracts Enforcement Act 1956. For a discussion of the historical context from which the Contracts Enforcement Act 1956 grew see Repeal of the Contracts Enforcement Act 1956 (nzlc pp30 1997).

[21] By the term "fundamental principles" we mean the essential elements of a cause of action in contract under New Zealand domestic law.

[22] For example in Databank Systems Ltd v Commissioner of Inland Revenue [1990] 3 NZLR 385 (PC) the Privy Council gave a detailed legal analysis of an Electronic Funds Transfer at Point of Sale (EFTPOS) transaction without querying whether it was possible to form a valid contract by means of electronic communication through an EFTPOS terminal (392). Similarly, in Corinthian Pharmaceutical Systems Inc v Lederle Laboratories 724 F Supp 605 (1989) a valid contract was formed electronically by telephoning orders directly into the supplier's computer (see also Boss and Winn 1997 1469).

[23] As early as 1972 a judgment of the 10th Circuit Court of Appeal in the United States held that

[h]olding a company responsible for the actions of its computer does not exhibit a distaste for modern business practices. . . . The fact that [business operations] are carried out by an unimaginative mechanical device can have no effect on the company's responsibility for . . . errors and oversights. (State Farm Mutual Auto Insurance Company v Bockhorst 453 F 2d 533, 536_537 (1972)).

[24] Generally, see Laws NZ, Contract para 151 and Laws NZ, Agency paras 37_39; see also Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 (HC, CA and PC), 272_275, 304 and 305.

[25] See, for example, article 13(5) of the Model Law and the commentary at para 90 of the Guide to Enactment; see also chapter 5 of this report.

[26] In this context, intention has a special meaning: the true intention of the offeror is what a third person would infer from the offeror's words or conduct. The actual or subjective intention of the offeror is irrelevant. While evidence will be admitted as to the surrounding circumstances in which a contract was entered into, evidence of what a person intended to enter into is inadmissible; the court will look at the circumstances to ascertain objectively the bargain struck: for example, Benjamin Developments Limited v Robt Jones (Pacific) Limited [1994] 3 NZLR 189 (CA) at 203.

[27] Gringas defines website as "a collection of colourful documents on the World Wide Web. They can be used as an electronic brochure or be more active performing tasks for their viewers, such as searching databases or taking orders. . ." (1997 387_388). Note too that whether the product could be purchased or delivered through the website might also be relevant.

[28] Note also that where the Vienna Sales Convention applies, there is a presumption under article 14(2) that proposals addressed to unspecified people, such as by means of a website, are invitations to treat.

[29] This may be stated over simplistically: for example, there may be issues involving a "battle of the forms" where each party insists that a contract is to be governed by the terms and conditions of that particular party's standard form; likewise, cases such as Clarke v Dunraven; The Satanita [1897] AC 59 (HL) tend to fall outside the normal offer and acceptance model.

[30] Re Imperial Land Co of Marseilles (Harris' case) (1872) LR 7 Ch App 587, 594. See, generally, Brinkibon Limited v Stahag Stahl Und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 (HL) 41; also Myburgh 1993 326; Gardiner 1994 50; and Gringras 1997 24_25. Chitty on Contracts suggests the definition of "instantaneous" should depend on whether the sender knows at once of any failure in communication (para 2-031).

[31] An internet service provider is a company which allows its customers to gain access to or a presence on the internet and world wide web by making a local telephone call with a modem. Most provide email accounts (Gringras 1997 383).

[32] Sale of Goods (United Nations Convention) Act 1994, schedule, articles 15(1) and 18(2). Under article 9 of the schedule, usages and customs which are either prevalent in international trade, or established between the parties themselves, prevail over the presumptive rules provided that their usage or practice is valid under domestic law (see also Honnold 1989 para 122).

[33] The following states are parties to the Vienna Sales Convention: Argentina, Australia, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Chile, People's Republic of China, Cuba, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Georgia, Germany, Ghana, Greece, Guinea, Hungary, Iraq, Italy, Latvia, Lesotho, Lithuania, Luxembourg, Mexico, Mongolia, Netherlands, New Zealand, Norway, Poland, Republic of Moldova, Romania, Russian Federation, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Syrian Arab Republic, Uganda, Ukraine, United States of America, Uzbekistan, Venezuela, Yugoslavia, Zambia; status as at 2 September 1998 according to Treaty Section of the Office of Legal Affairs of the United Nations (treaty information may be accessed at the United Nations' internet site:

[34] In this regard observations made by Lord Goff of Chieveley in "The Future of the Common Law" are apposite. Lord Goff referred, in passing, to a suggestion made by Professor Jack Beatson at his Inaugural Lecture in Cambridge that the common law could end up "as the Louisiana or the Quebec of Europe": (1997) 46 Int and Comp LQ 745.

[35] Article 18(2) of the Vienna Sales Convention also provides that offers remain open for a reasonable time.

[36] Draft discussion paper, Revision of Uniform Commercial Code (25 July 1997_1 August 1997, Sacramento California); see In particular, see proposed amendments to s 2211 (attribution of electronic record message or performance), s 2212 (authentication, effect and proof; electronic agent authentication), s 2213 (electronic transactions and messages: timing of contract and effectiveness of message), and s 2214 (acknowledgement of electronic message). See also the helpful discussion on the proposed changes to the Uniform Commercial Code in Boss and Winn 1997 1474_1479.

[37] Note, however, that the courts have been prepared, where convinced that the context so requires, to extend the definition of the term "sign" or "signed" to avoid the need for a hand-written signature: for example, Goodman v J Eban Limited [1954] 1 QB 550 (CA) where the English Court of Appeal, by a majority (Sir Raymond Evershed MR and Romer LJ; Denning LJ dissenting) held that a rubber stamp containing a facsimile representation of a solicitor's signature was sufficient to comply with the requirement of s 65(2) of the Solicitors Act 1932 (UK) which (inter alia) required a Bill of Costs to be "signed by the solicitor" before an action could be brought by the solicitor to recover costs due to him or her. See, more generally, chapter 7.

[38] For example, the requirement of writing in s 2 of the Contracts Enforcement Act 1956 is based on the Statute of Frauds 1677 (UK). See Law Commission, Repeal of the Contracts Enforcement Act 1956 (nzlc pp30 1997).

[39] See footnote 33 as to states which have given effect to this convention.

[40] However, contracting states may make a reservation as to the latter provision, so that the Convention only applies when all parties to the contract have their respective place of business in a contracting state (see Nicoll 1993 306). The USA, China and Denmark had made such a reservation as at 9 June 1992.

[41] This is subject to qualification because article 92 of the Convention permits contracting states to opt out of either Part II or Part III of the Convention. As at 9 June 1992, only Denmark, Sweden, Norway and Finland had made such a reservation (see Law Commission, The United Nations Convention on Contracts for the International Sale of Goods: New Zealand's Proposed Acceptance, 82_84).

[42] By contrast, the United Nations Convention on the Carriage of Goods by Sea 1978 (Hamburg Rules) article 14(3) effectively provides that bills of lading may be issued electronically unless domestic law requires otherwise.

[43] Richardson does state that issuing a bill has been traditionally understood as requiring a signature, but that this is no longer the case.

[44] Bolero Project, Project Summary, 1997. The contractual nature of the rules underpinning the Bolero Project are summarised in a 1998 paper by Paul Mallon, "The Legal Implications of Electronic Commerce in International Trade _ The Electronic `Bill of Lading'". All legal issues affecting the evidential acceptance of electronic documentation and electronic equivalents to paper-based contractual documents are dealt with as a matter of contract with the problem of lack of privity between the shipper and intended recipient of the goods which a traditional paper-based bill of lading solves by acting as a document of title is addressed by novation of the contract of carriage between shipper of the goods and carrier. It is the contractual nature of the multi-party agreement accepted by all parties dealing within the project that gives it legal recognition.

[45] Under article 6(5) the carrier may make out the waybill on the consignee's behalf.

[46] Sir Ivor Richardson, "What can Commercial Lawyers expect of a Legal System?" (8th Inter-Pacific Bar Association Conference, Auckland, 2 May 1998); see also his article "Law and Economics" (1998) 4 NZBLQ 64, 68_71. Compare with Lord Goff of Chieveley in Henderson v Merrett Syndicates Ltd (quoted above).

[47] Laws NZ, Tort, paras 1_3; see Todd et al 1997 chapter 25 for a general discussion of tortious remedies available in New Zealand.

[48] In this context reference can also be made to further development in New Zealand through the Consumer Guarantees Act 1993.

[49] See the judgment of the United States District Court in American Civil Liberties Union v Reno 929 F Supp 824 (1996); affirmed on appeal by the US Supreme Court in Reno v American Civil Liberties Union 117 SCt 2329 (1997).

[50] For a recent case dealing with defamation in the context of alleged republication of alleged defamatory material contained on a website see International Telephone Link Pty Ltd v IDG Communications Ltd (unreported, HC, Auckland, 20 February 1998, CP344/97).

[51] While there is no case directly in point, a duty not to allow a biological virus, such as foot and mouth disease, to be transmitted has been held to exist: Weller v Foot & Mouth Disease Research Institute [1965] 3 All ER 560.

[52] As a matter of New Zealand domestic law, it is likely that an action in tort will only arise in an international transaction if the alleged tortious act occurred in New Zealand, or the alleged tortious act was committed in a foreign country in which it would also be actionable: Red Sea Insurance Co Ltd v Bouygues SA [1994] 3 All ER 749 (PC) 761.

[53] Hacking has been defined as electronic or physical penetration of a computer system by an unauthorised user (Gringras 1997 212); in England and Wales a criminal offence is committed by a "hacker" under the Computer Misuse Act 1990 (see generally Gringras 211_227). A computer virus is a generic term for computer code which replicates, not only throughout the storage medium in which it incubates, but also across the network to which that computer is connected. Without anti-viral software a computer connected to the internet poses a threat to all other computers also connected and risks infection from those other computers. The ability to infect a home page with a virus and even a word processing document makes the internet capable of spreading malicious code widely and rapidly (Gringras 1997 228).

[54] The interest protected in the tort of trespass is possession. Although the plaintiff is not, in the current scenario, deprived of possession of the computer, the plaintiff is prevented from using that computer, either because the virus has caused it to stop operating, or because the plaintiff fears transmitting the virus to someone else.

[55] It is not necessary for me in this case to discuss the more difficult questions of whether or not an unintentional interference with goods is actionable without proof of damage, and indeed whether damage or asportation is necessary to constitute the tort. . . . (77)

This in turn draws on the earlier case of Everitt v Martin [1953] NZLR 298.

[56] In this case, the defendant damaged a buried electricity cable belonging to the plaintiff. However, this interference was not tortious because the cable had been buried on the defendant's land without the defendant's knowledge or consent, and did not appear on any plan. The interference was therefore neither intentional nor negligent. Note also that it is not tortious for a defendant to interfere with goods if he or she is entitled to exercise a self-help remedy, such as removing goods which have been unlawfully placed on his or her land (Laws NZ, Torts, para 291).

[57] The definition of confidential is broad and encompasses information as diverse as commercial trade secrets or client details, and personal secrets passed between spouses (see Laws NZ, Intellectual Property: Confidential Information, paras 22_43; and Meagher, Gummow and Lehane 1992 chapter 41).

[58] See Laws NZ, Intellectual Property: Confidential Information, para 17; Saltman Engineering Co Ltd v Campbell Engineering Co Ltd [1963] 3 All ER 413; AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515, 520; and the recent decision of the Court of Appeal in Maclean & Ors v Arklow Investments Ltd & Ors (unreported, 16 July 1998, CA95/97).

[59] Laws NZ, Intellectual Property: Confidential Information, paras 144_146. See also Aquaculture Corporation v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299. Note, however, that because the remedy is equitable, all remedies are discretionary.

[60] Laws NZ, Intellectual Property: Confidential Information, para 17; see also Attorney-General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 (HL), 256, 282.

[61] Questions arising from the accidental communication of confidential information to the wrong person or wrongful use of confidential information by a person who originally acquired that information lawfully are not considered as such issues are not peculiar to the field of electronic commerce.

[62] Nor would copying information constitute theft under current New Zealand law: Laws NZ, Intellectual Property: Confidential Information, para 182.

[63] See also the consultation paper of the Law Commission (England and Wales), Legislating the Criminal Code: Misuse of Trade Secrets, which discusses the case for criminal liability for certain misuses of confidential information.

[64] Note that the duty is not limited to the party who obtains the information; it can also extend to innocent third parties who subsequently obtain a copy: Ross Industries (New Zealand) Ltd v Talleys Fisheries.

[65] The fact situation in Franklin is directly analogous. The action concerned early fruiting nectarine hybrids which could only be raised by grafting a cutting (budstock) on to rootstock, which were bred by the plaintiff. The defendant stole cuttings from the plaintiff, grafted them, and made further cuttings from the resulting trees until he had an orchard. Although the possibility remained of bringing proceedings for conversion of the cuttings, the plaintiff preferred breach of confidence because the effective remedy in conversion would be a forced sale of the trees to the defendant. The plaintiff had no intention of letting others benefit from his work, a fact of which the defendant was well aware; rather, he wanted the defendant's trees destroyed. Although there was no prior relationship of confidence between the parties, the court allowed the plaintiff to succeed.

[66] See also Meagher, Gummow and Lehane 1992 para 4109; Laws NZ, Intellectual Property: Confidential Information, para 115, and the cases cited there. See also the dicta of Lord Goff of Chievelely in Attorney-General v Guardian Newspapers Ltd [1988] 3 All ER 545, 658_659; and Denning 1982 264_268.

[67] See also Fox LJ in Francome v Mirror Group Newspapers Ltd [1984] 1 WLR 892, 899_900, and the dicta of Swinfen Eady LJ in Ashburton v Pape [1913] 2 Ch 469, 475. Francome concerned information obtained by means of an illegal wire tap which the defendant, a newspaper, subsequently obtained and attempted to publish. The Court of Appeal ordered an interlocutory injunction prohibiting publication to preserve the position of the parties until trial, but did not consider that Malone compelled the court to deny the existence of a duty of confidence (Meagher, Gummow and Lehane 1992 para 4109).

[68] This approach to novel cases has been adopted by the Court of Appeal: see South Pacific Manufacturing Co Ltd v New Zealand Security Consultants Ltd [1992] 2 NZLR 282, 294; Connell v Odlum [1993] 2 NZLR 257, 265; and Fleming v Securities Commission [1995] 2 NZLR 514, 526_527. Although the courts in the United Kingdom have moved from the position adopted in Anns v London Borough of Merton, it has been confirmed that the law of negligence is one area in which the common law of New Zealand is diverging from that of England: Hamlin v Invercargill City Council [1996] 1 NZLR 513. Accordingly, the above statement remains an accurate statement of the law in New Zealand.

[69] See also Revlon Inc v Logisticon Inc (unreported, Superior Court of California, Santa Clara County No 705933, complaint filed 22 October 1990). Gripman also refers to United States v Morris 928 F 2d 504, 505_506 (Second Circuit, 1991) which involved damage caused by a virus ranging between $96 million to $186 million based upon labour costs to eradicate the virus and monitor recovery of the computer system (171); in that regard see also Lyman, Civil Remedies for the Victims of Computer Viruses 21 Sw ULRev 1169, 1172 (1992).

[70] This does not imply that a court must necessarily find that industry practice is sufficient to meet the legal standard of care where conformity with best practice guides does not constitute incontrovertible proof that the user has exercised a reasonable standard of care. Such evidence will be taken into account by a court in determining whether the allegation of negligence has been made out: Bolam v Friern Hospital Management Committee [1957] 1WLR 582; Laws NZ, Negligence, para 5.

[71] Gringras defines a "firewall" as:

hardware, but more usually software, designed to protect network systems from damage by outsiders, while maintaining connectivity. The firewall sits between a local network and the big, wide world (usually the internet). To protect the local network from evil-intentioned intruders, the firewall may admit only designated users, or allow only designated commands to be issued from outside. Balancing flexibility with security is, needless to say, a perennial headache in designing firewalls. (Gringras 1997 382).

Encryption is the mathematical process used to disguise text or data. It takes two forms: those forms are public key encryption and private key encryption (Gringras 381). For further discussion of public and private key encryption see chapter 7.

[72] Gripman provides a useful analysis, in technical terms, of the steps that can be taken to minimise security problems in this context (1997 182_195); that is followed by a specific case study (191_195).

[73] The acronym URL stands for uniform resource locator and refers to the standard for specifying an object on the internet, such as a world wide web page or a file on a file transfer protocol (FTP) for example. A URL for the world wide web will have the prefix "http://" denoting that the page uses hyper-text transfer protocol (see Gringras 1997, 387).

[74] The definitions of "processor" and "distributor" in s 2(1) of the Defamation Act 1992 are probably sufficiently broad to include computer network service providers (see Todd et al 1997 882).

[75] Compare with the UNCITRAL Model Law on Electronic Commerce article 8, and the Guide to Enactment paras 62_69.

[76] Section 5 of the Civil Evidence Act 1968 and the later Civil Evidence Act 1972; see also, the provisions of s 69 of the Police and Criminal Evidence Act 1984 as described by Lord Griffiths in R v Shepard [1993] AC 380 (HL).

[77] See generally Stone, who discusses electronic commerce issues in the context of the functions of an internal auditor (1997 27). For guidance on the effect of the microcomputer on the accounting system and related internal controls and audit procedures see International Auditing Practice Statement (October 1987), issued as a supplement to ISA 400 Risk Assessments and Internal Control.

[78] Presently, the law is contained in the Evidence Act 1908 and its various amendments. There are also substantive rules of evidence laid down by the common law. Under article 19 of the First Schedule to the Arbitration Act 1996 the Arbitral Tribunal may, subject to the provisions of that schedule, conduct the arbitration in such manner as it considers appropriate. In doing so it has power to determine the admissibility, relevance, materiality and weight of any evidence.

[79] A standard direction in place in many High Court Registries in New Zealand is in the following terms:

[S]ubject to admissibility objections by either side, plaintiff is to incorporate all documents into one bundle in chronological order, consecutively page numbered throughout with main bundle as the exhibit (to be used by the witness), one copy for Judge and [ ] copies for defence. The bundle is to commence with index indicating date and nature of each document, by whom produced and page number. Full costs of preparation to be treated as disbursement in the proceedings. The parties agree that, unless expressly stated otherwise on the bundle or at trial leave is given on adequate grounds to argue the contrary, each document in the bundle (i) was signed by any purported signatory shown on its face; (ii) was sent by any purported author to, and was received by, any purported addressee shown on its face; (iii) was produced from the custody of the party indicated in the index; (iv) is accurately described and dated in the index; and (v) is admissible evidence in the proceeding.

[80] The definition set out in High Court Rule 3(1) is replicated in the Fisheries Act 1996 s 2; Fair Trading Act 1986 s 2; Evidence Act 1908 s 48G; Serious Fraud Office Act 1990 s 2; Commerce Act 1986 s 2; Commissions of Inquiry Act 1908 s 1A; Corporations (Investigation and Management) Act 1989 s 2; Reserve Bank of New Zealand Act 1989 s 2; and Takeovers Act 1993 s 2. Many other statutes adopt the definition of document contained in the Official Information Act 1982 which differs from the High Court Rules definition in that the words "whether signed or initialled or otherwise authenticated by its maker or not" are excluded. Statutes adopting the Official Information Act definition of "document" are the Privacy Act 1993 s 2; Local Government Official Information and Meetings Act 1987 s 2; Financial Transactions Reporting Act 1996 s 2; and Proceeds of Crime Act 1991 s 2. Examples of statutes which contain materially different definitions of the term document are the Crimes Act 1961 s 263; Births Deaths and Marriages Registration Act 1995 s 2; Evidence Amendment Act 1952 s 3; Friendly Societies and Credit Unions Act 1982 s 2; Goods and Services Tax Act 1985 s 2; Law Practitioners Act 1982 s 80; Securities Act 1978 s 2 ; and Local Government Act 1974 s 248.

[81] The definition of "documents" contained in the Customs and Excise Act 1996 s 2 arose out of a report entitled Review of the Customs Acts _ A Discussion Paper on Border Protection Legislation (HM Customs August 1989). Compare with the UNCITRAL Model Law on Electronic Commerce article 2(a) which defines the term "data message" as information "generated, sent, received or stored" by electronic (and certain other) means (see also the Guide to Enactment, paras 30_32).

[82] For example, Longcroft-Neal v Police [1986] 1 NZLR 394 (CA) (videotape held to be a document for the purposes of s 2 of the now repealed Indecent Publications Act 1963); Snow v Hawthorn [1969] NZLR 776, 777 (tape recording held to be a document); and NZI Insurance NZ Ltd v Hinton, Hill and Powles [1996] 1 NZLR 203, 209 (admission of documents copied from a computer on to compact discs).

[83] Myers v Elman [1940] AC 282; Rockwell Machine Tool Co Limited v EP Barrus (Concessionaires) Limited [1968] 1 WLR 693; see also Stevens 1982 401.

[84] Holt v Auckland City Council [1980] 2 NZLR 124 (CA) and Ministry of Transport v Hughes [1991] 3 NZLR 325.

[85] Ministry of Agriculture and Fisheries v Thomas [1994] DCR 486, 505 citing from Holt v Auckland City Council [1980] 2 NZLR 124 (CA) 128. See also, the Western Australian case of Zappia v Webb [1974] WAR 15, 17 to which Judge RL Kerr also referred in Thomas.

[86] Gringras gives some support to this view when referring to "programmed intention" in the context of the question whether a party who has pre-programmed a computer to enter into a contract in any given circumstance can have had the necessary intention to form a binding contract (1997 29; see also Nicoll 1998 48_49; Myburgh 1993 327; and paras 57_64 of this report).

[87] See generally the Federal Rules of Evidence (USA) s 803(6); Transport Indemnity Co v Seib 132 NW 2d 871 (1965), 874_875; and State of New Mexico for the Use of Electric Supply Co Inc v Kitchens Construction Inc 750 P 2d 114 (NM 1988) 114, 117.

[88] See chapters 3 (contract) and 7 (electronic signatures); see also, on this topic, the provisions of articles 6 (writing) and 7 (signature) of the UNCITRAL Model Law on Electronic Commerce and the Guide to Enactment, paras 47_52 (writing) and 53_61 (signature).

[89] When discussing conflict of laws issues, commentators frequently refer to conflicts between or among "countries" rather than "states" as used here. The term "state" is used in this paper to refer to countries and to states in federated countries such as the United States of America or Australia when their distinctive laws are material.

[90] For a definition of "comity" see Hilton v Guyot 59 US 113, 162_164 (1895).

[91] In international transactions, it will also be necessary to consider the law relating to the contract of carriage by sea, air, or (except in the case of island states) road or rail.

[92] Note that the term "gateway" is defined as a "device that connects two different computer systems or networks, particularly those using different technical standards or communications protocols (Gringras 1997 382).

[93] Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 and Metall und Rohstoff AC v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391. See also Libman v The Queen [1985] 2 SCR 178; Canada (Human Rights Commission) v Canadian Liberty Net 157 DLR (4th) (1998) 385.

[94] Other tribunals possess statutory jurisdiction; some others may be created in the exercise of the prerogative. All may give decisions affecting legal rights which may give rise to issues of conflict of laws.

[95] Examples of New Zealand statutes of likely extra-territorial application in commercial transactions are the Fair Trading Act 1986, the Commerce Act 1986, and the Civil Aviation Act 1990.

[96] An anti-suit injunction can be sought to restrain proceedings in another jurisdiction where comity requires the forum granting the jurisdiction to have a sufficient interest in, or connection with, the matter in question to justify the indirect interference with the foreign court which such an injunction entails. For an Australian decision on the court's approach to application for an anti-suit injunction see CSR Limited v Cigna Insurance Australia Limited & Ors [1997] 189 CLR 345. See also Laker Airways Ltd v British Airways [1985] 1 AC 58 (HL); Midland Bank Plc v Laker Airways Ltd [1986] QB 689 (CA); Airbus Industrie GIE v Patel and Ors [1998] 2 WLR 686; and Amchem Products Inc v British Columbia (Workers' Compensation Board) (1993) 102 DLR (4th) 96. The case of Laker Airways v Sabena, Belgian World Airlines 731 F 2d 909 (1984) provides an example of an American court, by issuing an anti anti-suit injunction, preserving its ability to determine a dispute involving foreign defendants whose actions outside the American jurisdiction (anti-competitive pricing) may have nonetheless been in breach of American anti-trust laws.

[97] This added requirement is not evident from a reading of rule 219; the courts have grafted on to the rules an ability to determine, as part of the question of jurisdiction, whether jurisdiction should be exercised in the particular case having regard to factors which would otherwise be considered in relation to forum conveniens: Kuwait Asia Bank EC v National Mutual Life Nominees Limited [1990] 3 NZLR 513 (PC) 528_529. See also Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460 (HL).

[98] Club Mediterrannée NZ v Wendell [1989] 1 NZLR 216 (CA); this follows the English approach enunciated in, for example, Spiliada Maritime Corp v Cansulex Ltd. See also the cases listed in footnote 96.

[99] The very act of applying for a stay of proceedings made by a defendant who has not previously or at the same time filed an appearance objecting to jurisdiction may in some states constitute a submission to the jurisdiction of the state court: Henry v Geopresco International Ltd [1976] 1 QB 726; Williams & Glyn's Bank plc v Astro Dinamico Compania Naviera SA [1984] 1 WLR 438; and Laurie v Caroll (1958) 98 CLR 310, 334_336. This principle was reversed in England by the Civil Jurisdiction and Judgments Act 1982 s 33.

[100] It is necessary to distinguish between the provision of goods and the provision of services as difficulties may exist in determining whether a dispute falls to be resolved under the Vienna Sales Convention, due to the difficulty in proving whether a seller of goods over the internet is located in a state which is a signatory to the Convention (see para 255).

[101] See generally Dicey and Morris 1993 230_238; see also the Evidence Act 1908 ss 37_40; and Mount Cook (Northland) Ltd v Swedish Motors Ltd [1986] 1 NZLR 720, 726.

[102] Phillips v Eyre (1870) LR 6 QB 1; see generally Harris 1998 33; Boys v Chaplin [1971] AC 356; and Red Sea Insurance Co Ltd v Bouygues SA [1995] 1 AC 190 (PC).

[103] Dicey and Morris 1993 455_456. For example, Schibsby v Westenholz (1870) LR 6 QB 155, 159 and Adams v Cape Industries Plc [1990]1 Ch 433, 456_458, 657 (Scott J) and 513_514 (CA).

[104] "Conflict of Laws _ the International Element in Commerce and Litigation" (NZLS seminar) 36; see generally, Dicey and Morris, rule 36.

[105] Government of India v Taylor [1955] AC 491 and Peter Buchanan Limited v McVey [1955] AC 516; compare, however, the position on insolvency where a revenue claim may be one of a number of debts in a bankruptcy: Ayres v Evans (1981) 39 ALR 129; see also the Insolvency Act 1967 s 135. The question of indirect enforcement of revenue or penal claims in the context of insolvency will be addressed in the Commission's work on cross border insolvency and whether New Zealand should adopt the UNCITRAL Model Law on Cross Border Insolvency. A report on this topic is is due to be published in late 1998.

[106] A list of the jurisdictions recognised by Order in Council made under the Reciprocal Enforcement of Judgements Act 1934 is set out in Laws NZ, Conflict of Laws: Jurisdiction and Foreign Judgments para 43; see also para 79 on the 1908 Act.

[107] We note that it is not possible to adopt the Brussels Convention because that convention is restricted to the European Community.

[108] Utah Code Ann S 46-3-103(10). For a detailed analysis of the Utah Act, see paras 3.2.6_3.2.19 of Electronic Commerce: Building the Legal Framework.

[109] This Act was passed as Article 3 of the Information and Communication Services Act (Informations-und Kommunikationsdienste-Gesetz) August 1 1997 (Federal Republic of Germany), and includes subordinate legislation in the form of the Digital Signature Ordinance (the Signatureverordnung, decreed under s 16 of the Digital Signature Act and entered into force on 1 November 1997). The original text of the Information and Communication Services Act s 2(1) reads:

Eine digitale Signatur im Sinne dieses Gesetzes ist ein mit einem privaten Signaturschlüssel erzeugtes Siegel zu digitalen Daten, das mit Hilfe eines zugehörigen öffentlichen Schlüssels, der mit einem Signaturschlüssel-Zertifikat einer Zertifizierungsstelle oder der Behörde nach § 3 versehen ist, den Inhaber des Signaturschlüssels und die Unverfälschtheit der Daten erkennen läßt. (translation provided by The Federal Ministry of Education, Science, Research and Technology)

[110] However, s 3 of the Ordinance, which sets out the application procedure for digital signatures, does provide that an applicant may use a digital signature instead of personally signing his or her application. As digital signatures in Germany are issued for a finite period of up to 5 years under s 7 of the Ordinance, s 3 really applies to applications for renewal of an existing certificate.

[111] The Guide to Enactment states that

any attempt to develop rules on standards and procedures to be used as substitutes for specific instances of "signatures" might create the risk of tying the legal framework provided by the Model Law to a given state of technical development. (para 55)

[112] The United States has now proposed a draft convention based on the Model Law and Uniform Rules; see UNCITRAL Working Paper 77; A/CN 9/WG.IV/WP.77. 25 May 1998.

[113] "Public entities" is defined in s 811.2 of the Code as including

the State, the Regents of the University of California, a county, city, district, public authority, public agency, and any other political subdivision or public corporation in the State.

[114] Signature dynamics is a method of literally transforming a manual signature into an electronic form by means of a stylus or electronic pen. The signature is unique, and therefore secure, because the information recorded includes the shape of the signature, the speed of the stylus and the pressure exerted.

[115] Credit card transactions because of cost per transaction to the vendor and possibly customer resistance to transmission of details for fear of fraud; invoicing because of the need for a prior contractual relationship between the parties whereby the vendor gives credit to the purchaser, thereby attracting statutory compliance costs (eg, Credit Contracts Act 1981) and risk of default, and also losing the opportunity of sales to casual browsers.

[116] Sneddon includes the Mark Twain Bank (USA), Deutsche Bank (Germany), and the St George Bank (Australia) among those banks offering digital currency units (known as ecash) through DigiCash, a company incorporated in the USA, the Netherlands and Australia (1998 4). DigiCash is a private company run from Amsterdam (Gringras 1997 375).

[117] See also the analysis in Quin (1996 224) which uses the definition of money propounded by Mann in The Legal Aspect of Money (5th ed). There is no definition of the term "legal tender" in New Zealand statutes. As a matter of common law, however, it generally refers to "the jingle money": ex p Danks re Farley (1852) 2 DeGm & G 936 as applied in Leeward Holdings Limited v Douglas [1982] 2 NZLR 532.

[118] This was in fact the case in re Charge Card Services Ltd, [1989] Ch 497 where the third party issuer (of physical cards rather than EM) was insolvent.

[119] Although the courts may declare privately issued currency to be negotiable in certain circumstances: Miller v Race (1758) 1 Burr 452; 97 ER 398 (a decision of Lord Mansfield) discussed in Quin 1996 225. In that case, the private issuer of a bank note refused to redeem it, claiming it to have been stolen by a highwayman and hence subject to the nemo dat principle. The court decided, however, the note was negotiable and could therefore be redeemed by the bearer without considerations of the bearer's title arising.

[120] However, it has been suggested that in allocating domain names on a first-come-first-served basis, without checking that an applicant has a legal right to use a name, the domain name registry may be liable for passing off if, by registering a trade mark as a domain name to someone other than the owner, it is facilitating tortious conduct by the applicant (Hilsgen, "Battle over Internet names" NZ Infotech Weekly, No 345, 18 May 1998).

[121] This decision has now been upheld by the Court of Appeal: The Times 24 July 1998.

[122] Provided that is, the Icelandic site was not used to conduct business in New Zealand, in which case the owner of the site may become subject to New Zealand law by operation of, for example, s 3 of the Fair Trading Act 1986.

[123] As occurred in the defamation case of Stratton Oakmont, Inc v Prodigy Services Co 1995 WL 323710 (NY Sup Ct. May 24 1995). Harrison and Frankel cite the case of Playboy Enterprises, Inc v Frena 839 F Supp. 1552 (MD Fla 1993) as an example of a bulletin board operator being found liable for publication of material in breach of copyright (1996 62) (see also Gringras 1997 155, and Betts 1998 21_23).

[124] Note that Betts also argues that use of a trade mark as a hyperlink would not be an infringement of that trade mark since the person using that trade mark as a link is not using it to describe his or her own goods or services. However, there may be a different result if the trade mark is registered in a jurisdiction with a restriction on "dilution" of the trade mark, such as the USA (11).

[125] Betts comments that implied licences cannot be unlimited in their scope. However, see Stangret, "The legalities of linking on the World Wide Web" (1997) 6(2) Communications Law, 202, 204.

[126] Securities commenced trading over the improved FASTER system on 18 May 1998.

[127] See the paper by Eric Roose, "Taxation and internet issues", 15, and the commentary on it by Simcock (4), both delivered to the Inter-Pacific Bar Association in May 1998. These tests have their origins in the OECD Model Tax Convention, which New Zealand (in common with most other industrialised countries, according to Roose) has adopted for its DTAs.

[128] Typically, the purchaser of computer software does not actually purchase the software itself, but instead purchases a licence to use the software. The licence is usually contained in the packaging, and the purchaser is notified that breaking the shrink-wrap seal on the packaging constitutes acceptance of the terms of the licence (see Gringras 1997 33).

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