Australian Gourmet Pastes Pty Ltd (ABN 137 941 185) v IAG New Zealand Limited

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2016 0063

AUSTRALIAN GOURMET PASTES PTY LTD (ABN 137 941 185)	Applicant
v
IAG NEW ZEALAND LIMITED	Respondent

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JUDGES:	TATE, SANTAMARIA and BEACH JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	27 February 2017
DATE OF JUDGMENT:	23 June 2017
MEDIUM NEUTRAL CITATION:	[2017] VSCA 155
JUDGMENT APPEALED FROM:	[2016] VCC 455 (Judge Anderson)

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PRIVATE INTERNATIONAL LAW – Application for a permanent stay of proceeding under the Trans-Tasman Proceedings Act 2010 (Cth) – Exclusive choice of court agreement – Agreement not between the parties to the proceeding – Miscarriage of the discretion to determine that a New Zealand court is the more appropriate forum to determine the matters in issue – Application for leave to appeal granted – Appeal allowed – Re Douglas Webber Events Pty Ltd (2014) 291 FLR 173 considered – Trans-Tasman Proceedings Act 2010 ss 17, 19, 20.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr D McWilliams	Wotton & Kearney
For the Respondent	Mr J Ruskin QC with Ms C M Harris	Gilchrist Connell

TATE JA:

TABLE OF CONTENTS

Introduction and summary

Supply of deficient caps for jars of garlic paste

The TTP Act

The judge’s reasons

(1) Exclusive choice of court agreement nominating New Zealand courts

(2) Discretionary factors

(i) Finding that Endeavour is a New Zealand company principally operating in New Zealand

(ii)        The written concession
(iii)      Place of the subject matter of the proceeding
(iv)      Agreements between the parties about the court or place
(v)        The appropriate law

(3) Conclusion on the stay

Grounds of appeal and Notice of Contention

Section 20 — is there an exclusive choice of court agreement between the parties?

Section 19 — did the discretion miscarry?

How should the discretion be exercised afresh?

Conclusion on the application for leave to appeal

Conclusion on the appeal

Introduction and summary

The Trans-Tasman Proceedings Act 2010 (Cth) (‘the TTP Act’) identifies circumstances when an Australian court is bound to stay its proceedings in favour of a New Zealand court. It also confers a discretionary power on an Australian court to stay a proceeding on the ground that a New Zealand court is the more appropriate forum to determine the matters in issue. In this proceeding, a judge of the County Court determined to grant a stay because he considered himself bound to do so and, in any event, concluded that discretionary factors favoured a stay. This application for leave to appeal raises two questions: (1) whether the judge was correct in determining that, in the circumstances, he was bound to stay the Australian proceeding and leave a New Zealand court to determine the matters in issue; and (2) whether the grant of the stay involved a miscarriage of discretion.

The application for leave to appeal is brought by Australian Gourmet Pastes Pty Ltd (‘AGP’). AGP commenced a proceeding against Endeavour Packaging Pty Ltd (‘Endeavour’) and Endeavour’s insurer, IAG New Zealand Limited (‘IAG’). The proceeding involves a claim for damages for loss of stock, loss of profits, and product recall costs, on the basis that Endeavour’s products were, amongst other things, not fit for purpose. IAG sought a stay of the third party proceeding against it, in favour of a New Zealand court. A judge of the County Court granted the stay.[1]
[1]Australian Gourmet Pastes Pty Ltd v Endeavour Packaging Pty Ltd [2016] VCC 455 [9] (‘Reasons’).

For the reasons that follow, I would grant leave to appeal and allow the appeal.[2] In my view, the judge was wrong to conclude that he was bound to stay the proceeding and I consider that the exercise of his discretion miscarried. The discretion being re-opened, I would exercise it in the circumstances of the case by refusing a stay.
[2]For convenience, in what follows I refer to the matter as simply ‘the appeal’.

Supply of deficient caps for jars of garlic paste

AGP produces and sells garlic paste. It supplies garlic paste to Coles and Woolworths supermarkets. Both Coles and Woolworths impose specifications in their supply agreements with AGP in relation to the freshness, shelf-life and/or safety of products for consumption.

Between April 2011 and June 2012, AGP entered into 16 agreements with Endeavour whereby Endeavour agreed to supply caps for the jars AGP uses for garlic paste. AGP alleges that it entered into these agreements in reliance on representations made by officers of Endeavour that Endeavour could supply identical caps to the ones AGP had previously been using that were supplied by VIP Packaging, or were otherwise suitable for use, at a cheaper price.

AGP alleges that Coles notified it, in April 2012, of a problem experienced by its customers with respect to discolouration of the garlic paste. It also alleges that, in May 2012, it was notified by Woolworths that Endeavour’s caps were not sealed correctly and Woolworths had withdrawn the product from sale nationally. AGP voluntarily withdrew its garlic paste from Coles before Coles announced a similar product withdrawal.

On 14 August 2013 Endeavour went into voluntary administration, subject to a Deed of Company Arrangement (‘the deed’). In its original form, the deed excluded ‘product liability creditors’ from participating in the deed fund, thereby excluding AGP from participation.

The deed was varied in May 2015 by way of a Variation of a Deed of Company Arrangement (‘the varied deed’). The effect of the varied deed is to allow AGP to bring proceedings against Endeavour for breach of contract and breaches of consumer law (the Trade Practices Act 1974 (Cth) (‘TPA’) and the Australian Consumer Law (‘ACL’)) in AGP’s capacity as a product liability creditor and, if successful and to the extent Endeavour has an insurance policy, AGP is at liberty to lodge a claim under the insurance policy with the insurer. The varied deed states, relevantly:

8B. A Product Liability Creditor will not participate in the Deed Fund; however, a Product Liability Creditor is at liberty to assert such rights as it may have against the Company but in the event of a claim by a Product Liability Creditor, and to the extent that the Company has an insurance policy in place that may respond to that claim, the Product Liability Creditor is at liberty to lodge a claim under that policy with the insurer.
8C. In the event that a Product Liability Creditor is successful in its claim, the Company will ensure that the proceeds of the insurance claim are made available to the Product Liability Creditor. The introduction of a Product Liability Creditor in the Deed does not mean or imply that the Company admits liability in respect of any claim, successful or otherwise, by a Product Liability Creditor.

AGP commenced a proceeding against Endeavour on 30 June 2015, claiming losses of $363,764 as a result of a breach of contract between AGP and Endeavour and contraventions of consumer law, the losses including, as mentioned, loss of stock, loss of profit, combined recall costs and other costs.

Endeavour made a claim on its policy with IAG for indemnity in respect of the allegations made against it by AGP. The contract of insurance between Endeavour and IAG consists of a policy schedule with particulars as well as a policy document (known as IAG NZ policy wording BRD0210) (‘the policy’). It appears that the policy was placed by a New Zealand resident director of Endeavour through a New Zealand broker.

IAG declined Endeavour’s claim for indemnity. IAG’s lawyers, Fortune Manning, sent a letter to Endeavour’s lawyers, Turks Legal, dated 5 November 2015, explaining the basis upon which it declined the claim:

AGP’s allegation is that Endeavour represented to it that it would supply caps and tamper proof seals that were equal to the quality of the previous supplier and had the same properties, but at a cheaper price. This AGP allege Endeavour breached by supplying defectively designed seals which were solely polyethylene ‘without any polar groups present to assist adhesion’ (under heat induction).
This core deficiency of design underpins all of the different causes of action pleaded against Endeavour, mainly contractual misrepresentation as to durable airtight sealing capability, misleading and deceptive conduct, breach of Trade Practices Act provisions, and a variety of Sales of Goods Act breaches such as lack of fitness for purpose, failure to correspond to description/sample etc - all predicated upon the alleged design deficiency referred to above.
...
In paragraph 56 of the proceedings, AGP claims, ‘That as a result of Endeavour’s seals failing to maintain an airtight seal’, (being the breaches of the contractual representations, the TPA provisions, the various provisions of the ACL (sale of) Goods Act Vic, it ‘suffered loss including the loss of stock (A$213k), loss of profit on recalled stock (A$55k), product recall costs (A$62k) and other costs (A$32k) to a total of A$363,764.’
Endeavour has a NZI Broadform Liability policy with BRD0210 wording (you have a copy). Whatever the allegations as to liability are, the policy will not respond to:
(a) Product Recall Costs
(i)Product recall costs cover applies to New Zealand only – see Automatic Extension of Liability Cover L,

(b) Damage In Connection with Insured’s Own Products
(i)Any claim for legal liability to pay for damage in connection with your products is excluded – in this case the caps and seals themselves. See Exclusion C. Resultant damage to ‘other property that is not a product’ is however preserved – in this case the uncapped bottles of garlic paste.
(ii)’Products’ are defined as being ‘goods that you, or any one on your behalf, sells, supplies, distributes, manufactures, constructs, erects or installs ...’. In this case, the caps and seals.
...

(d) Defect Design
(i)The major claim items of loss of stock, loss of profit and possibly a proportion of ‘other costs’ (whatever they may be), are prima facie covered under Insuring clause A Public and Product Liability. Such prima facie cover is however subject to any applicable exclusion – in this case Exclusion D, Defect Design.
(ii)Exclusion D provides ‘you are not insured for sums that you become legally liable to pay in connection with your development or formulation of any design or specification that is architectural, engineering scientific, chemical or medical in nature.’
(iii)In this case the underpinning allegation to all of the AGP causes of action is that the design of the seals was defective by the absence of ‘any polar group to assist adhesion of the seals’ – this in distinction to the original seals supplied by Endeavour’s competitor VIP ...
(iv)Specifically in paragraph 43 of the proceeding, particulars are provided namely:
...

‘Subsequent analysis of the defendant’s seals show that the defendant’s seals consisted of polyethylene only without any polar groups present to assist adhesion.’
(v)Accordingly Exclusion D excludes cover for any legal liability of Endeavour to pay in connection with its development or formulation of the engineering and/or chemical design of the caps and seals.
(vi)Thus to the extent that AGP’s allegations allege liability arising out of such circumstances, there is no cover for Endeavour for the consequences of such allegations.

For the reasons articulated above the claim doesn’t fall within the insuring clauses in the policy and the exclusions C, D and L apply. For these reasons Endeavour’s claim is declined.
NZI reserves the right to raise any other ground for declinature of the claim or avoidance of the policy that becomes apparent to it at any time in the future.[3]

[3]Italics as in original document.

The clauses under the policy that were expressly referred to in the letter declining the claim (Automatic Extension of Liability Cover L and Exclusions C, D, and L) include the following:

L PRODUCT WITHDRAWAL COSTS NEW ZEALAND ONLY
You are insured for your reasonable costs incurred, where it is necessary for you to withdraw or recall your products, provided that:
...
3.the costs are limited to the withdrawal or recall of products within New Zealand.
…

C DAMAGE TO PRODUCTS
You are not insured for sums that you become legally liable to pay for damage in connection with your products.
…

D DEFECTIVE DESIGN
You are not insured for sums that you become legally liable to pay in connection with your development or formulation of any design or specification that is architectural, engineering, scientific, chemical or medical in nature.
…

L LOSS OF USE
You are not insured for loss, legal liability, prosecution or expense of any type in connection with loss of use of tangible property that has not suffered physical loss or physical damage, where that loss is caused solely by:
...
2.the failure of products to meet a level of performance, quality, fitness or durability expressly represented by you.

The policy also includes amongst its General Conditions a clause governing disputes:

B. LAWS & ACTS THAT GOVERN THIS POLICY
...
2. Disputes about this policy
The law of New Zealand applies to disputes about this policy, and the New Zealand Courts have exclusive jurisdiction.

This clause was relied upon in the County Court as an exclusive choice of court agreement within the meaning of the TTP Act.

AGP sought leave to join IAG to the proceeding. On 8 December 2015 leave was granted to join IAG as the second defendant and the writ was amended to include a claim against IAG,[4] referred to as ‘NZI’, seeking, amongst other things, a declaration that IAG indemnify Endeavour, pursuant to the policy, for its liability to AGP. The alternative relief sought was an order that IAG pay to AGP any amount that is required to be paid by Endeavour to AGP to discharge its liability to AGP. It was specifically alleged that:

Wrongfully and in breach of the term of the NZI Policy set out ... above, NZI has denied that it is liable to and/or has refused to indemnify Endeavour for any liability to the Plaintiff [AGP] for its loss and damage.[5]

[4]Amended writ and statement of claim, December 2015, [61]-[74].

[5]Ibid [66]. The policy is referred to as ‘the NZI Policy’ in the amended writ.

On 24 December 2015 IAG sought a stay of the third party proceeding against it pursuant to the TTP Act.

A judge of the County Court ordered a stay of the third party proceeding on 22 April 2016.[6] I examine the judge’s reasons below after first considering the provisions of the TTP Act.
[6]The orders are more fully described at [48] below.

The TTP Act

The TTP Act came into force in October 2013. One of its purposes is to ‘streamline the process for resolving civil proceedings with a trans-Tasman element in order to reduce costs and improve efficiency’.[7]
[7]TTP Act s 3(a).

Part 3 of the TTP Act is dedicated to setting out the process for Australian courts to decline jurisdiction on the grounds that a New Zealand court is a more appropriate forum. Section 17 permits a defendant in a civil proceeding in an Australian court to apply to the court for an order staying the proceeding on the grounds that a New Zealand court is the more appropriate court to determine the matters in issue. Section 19 sets out the circumstances where a court may stay a proceeding on an application under s 17, while s 20 sets out the circumstances where a court must or must not stay a proceeding on an application under s 17.

An Australian court can exercise its discretion under s 19 to order a stay of proceedings on appropriate forum grounds where it is satisfied that a New Zealand court ‘has jurisdiction to determine the matters in issue between the parties to the proceeding’ and ‘is the more appropriate court to determine those matters’.[8]
[8]TTP Act ss 19(1)(a) and (b) respectively.

There are a range of factors which an Australian court must take into account under s 19(2), in determining whether a New Zealand court is the more appropriate court to determine the matters in issue, including:

(a) the places of residence of the parties or, if a party is not an individual, its principal place of business;
(b) the places of residence of the witnesses likely to be called in the proceeding;

(c) the place where the subject matter of the proceeding is situated;
(d) any agreement between the parties about the court or place in which those matters should be determined or the proceeding should be commenced (other than an exclusive choice of court agreement to which subsection 20(1) applies);

(e) the law that it would be most appropriate to apply in the proceeding;
(f) whether a related or similar proceeding has been commenced against the defendant or another person in a court in New Zealand;
(g) the financial circumstances of the parties, so far as the Australian court is aware of them;

(h) any matter that is prescribed by the regulations;
(i) any other matter that the Australian court considers relevant.

Section 19(2) also provides that the court must not take into account the fact that the proceeding was commenced in Australia.

Section 20 applies where there is an exclusive choice of court agreement between parties to a proceeding. Pursuant to s 20(1)(a), an Australian court must stay the proceeding if the parties have an exclusive choice of court agreement that designates a New Zealand court as the court to determine the matters in issue. Conversely, an Australian court must not stay the proceeding if the parties have designated an Australian court as the court to determine the matters in issue.[9]
[9]TTP Act s 20(1)(b).

Section 20(3) relevantly defines the meaning of an ‘exclusive choice of court agreement’:

Exclusive choice of court agreement, in relation to matters in issue between parties to a proceeding, means a written agreement between those parties that:
(a)designates the courts, or a specified court or courts, of a specified country, to the exclusion of any other courts, as the court or courts to determine disputes between those parties that are or include those matters’. [10]

[10]An exclusive choice of court agreement must also not be an agreement ‘the parties to which are or include an individual acting primarily for personal, family, or household purposes’ and ‘is not a contract of employment’: TTP Act ss 20(3)(b) and (c).

The mandatory nature of s 20 does not apply to an exclusive choice of court agreement if the Australian court is satisfied that:

(a) it is null and void under New Zealand law (including the rules of private international law); or

(b) a party to it lacked the capacity to conclude it under Australian law; or
(c) giving effect to it would lead to a manifest injustice or would be manifestly contrary to Australian public policy; or
(d) for exceptional reasons beyond the control of the parties to it, it cannot reasonably be performed; or
(e) the court designated by it as the court to determine the matters in issue between the parties to the proceeding has decided not to determine those matters.[11]

[11]TTP Act s 20(2).

The TTP Act was modelled on the Service and Execution of Process Act 1992 (Cth) (‘SEPA’).[12] In particular, s 19 of the TTP Act largely reflects s 20 of SEPA which provides for a stay of proceedings (in courts other than the Supreme Court of a State) where a court of another State is the more appropriate court to determine matters in issue.
[12]See Commonwealth, Parliamentary Debates, House of Representatives, 25 November 2009, 12769 (Robert McClelland, Attorney-General).

The judge’s reasons

In the County Court, Endeavour did not file an appearance and indicated that it would not file a defence.[13] This left the third party proceeding by AGP against IAG for the declaration, mentioned above,[14] that IAG indemnify Endeavour for its liability to AGP under the policy or a declaration that IAG pay to AGP any amount that Endeavour was required to pay to discharge its liability to AGP.
[13]Reasons [9].
[14]See [15] above.

On the application for a stay made by IAG pursuant to s 17 of the TTP Act, the judge considered whether he was obliged to stay the proceeding under s 20 or whether, in any event, he ought, as a matter of discretion stay the proceeding on appropriate forum grounds under s 19.

He stated that, for the purposes of the application, the ‘proceeding’ was the action between AGP and IAG.[15] He noted that AGP could enter judgment against Endeavour at any time although it had not done so. He considered that the remaining matters in issue were the questions of AGP’s standing to seek relief against IAG and, if it did have standing, whether it should recover damages from IAG under the policy. He said:

In the proceeding, Endeavour has not filed an appearance and its solicitor has apparently indicated that it would not be defending the proceeding. At present, the only relief [AGP] is likely to pursue against Endeavour is its claim for damages. In these circumstances, [AGP] could at any time enter judgment against Endeavour in default of appearance with damages to be assessed. ...
This would leave, as the only outstanding dispute in the proceeding, the claims by [AGP] against IAG. The two issues for determination in relation to those claims are:
a. whether [AGP] has the standing to bring an action seeking the relief it does against IAG, either in its own name, or in Endeavour’s name;
b. if [AGP] does have standing, whether [AGP], through Endeavour, should recover damages from IAG in respect of Endeavour’s liability to [AGP], under the terms of the insurance policy.[16]

[15]He noted that ‘it may also be necessary to consider the action (or “proceeding”) between [AGP] and Endeavour’: Reasons [13].

[16]Reasons [9]–[10].

It was not submitted that a New Zealand court failed to have jurisdiction to determine the matters in issue.[17]

(1) Exclusive choice of court agreement nominating New Zealand courts

[17]Ibid [14].

The judge held that there was an exclusive choice of court agreement that obliged him to stay the proceeding, pursuant to s 20 of the TTP Act. He held that General Condition B2 of the policy is an exclusive choice of court agreement within the meaning of s 20(3) of the TTP Act that applied to the matters in issue. This is set out above[18] but for convenience I set it out again:

2. Disputes about this policy
The law of New Zealand applies to disputes about this policy, and the New Zealand Courts have exclusive jurisdiction.

[18]See [13] above.

AGP made several submissions before the judge as to why General Condition B2 of the policy could not be relied on as an exclusive choice of court agreement, namely:

a.the exclusive choice clause is not part of an agreement between [AGP] and IAG;
b.the ‘matters in issue’ or the ‘disputes’ between [AGP] and IAG are not confined to ‘disputes about this policy’, to which the exclusive choice clause is restricted;
c.the exclusive choice clause would not be enforced by an Australian court, as the clause was contrary to section 8 of the Insurance Contracts Act 1984 (Cth). Therefore, section 20(2)(c) of that Act applied, as ‘giving effect to [the exclusive choice clause] would lead to a manifest injustice or would be manifestly contrary to Australian public policy’.[19]

[19]Reasons [17] (emphasis as in original).

Only the first two of these reasons were persisted with by AGP on the appeal.

The judge rejected the first submission on the ground that, while the parties to the insurance policy were Endeavour and IAG, AGP ‘can only bring a proceeding against IAG because it has been granted the right pursuant to the deed of variation to stand in the position of Endeavour’.[20] He said:

I consider, therefore, that the relevant ‘parties’ to take account of when considering the ‘written agreement’ under section 20(1) are the parties to the insurance policy between Endeavour and IAG, which [AGP] wishes to enforce in the place of Endeavour and pursuant to rights of subrogation or the assignment of rights.[21]

[20]Ibid [18].

[21]Ibid (emphasis as in original).

The judge rejected the second submission on the ground that the principal issue between AGP and IAG was the issue of indemnification under the policy, although the issue of AGP’s standing to sue would also be relevant. He said:

I consider ... that the principal issue for determination in the proceeding between [AGP] and IAG is whether [AGP]^[[22]] is entitled to be indemnified pursuant to the insurance policy. Section 20(3)(a) provides that if the contract between the parties designates that the disputes between the parties ‘that are or include’ the ‘matters in issue between’ the parties, are to be determined by specific courts to the exclusion of others, that the provision in the agreement is an ‘exclusive choice of court agreement’.[23]

[22]The judge described the principal issue as whether ‘IAG’ is entitled to be indemnified pursuant to the policy but this must be a simple mistake as IAG is the insurer. AGP claims he must have meant either Endeavour or AGP.

[23]Reasons [20] (emphasis as in original). The judge rejected the third submission. AGP had submitted that because the proper law of the contract would be Victorian law, the exclusive choice agreement is void pursuant to s 52 of the Insurance Contracts Act 1984 because it would have the effect of ‘excluding, restricting or modifying, to the prejudice’ of Endeavour. IAG submitted that the clause neither had that effect nor was the proper law of the contract Victorian law. Rather, the clause reinforced the position that New Zealand law was the proper law to apply and it would be inappropriate to override the intention of the TTP Act via application of the Insurance Contracts Act. The judge accepted that the exclusive choice of court agreement was unaffected by the Insurance Contracts Act. Reasons [21]–[25]. As mentioned, this issue does not arise on the appeal.

The judge then set out his findings in support of the conclusion that he was obliged to stay the proceeding, pursuant to s 20(1)(a) of the TTP Act, by reason that there was an exclusive choice of court agreement that nominated New Zealand courts as courts with exclusive jurisdiction to determine the matters in issue:

a. Endeavour’s right to bring a claim against IAG under the insurance policy has been subrogated to [AGP];

b. the ‘parties’ to the written agreement are Endeavour and IAG;
c. the ‘written agreement’ referred to in section 20(3) of the Trans-Tasman Act is the insurance policy;

d. the insurance policy contains an ‘exclusive choice of court agreement’;
e. the exclusive choice clause ‘designates a New Zealand court as the court to determine the matters in issue’;
f. the exclusive choice clause is not affected by the Insurance Contracts Act 1984;

g. I must therefore, by order, stay the present proceeding.[24]

(2) Discretionary factors

[24]Reasons [27] (emphasis as in original).

In the alternative, the judge considered whether, if there was no exclusive choice of court agreement, it would nevertheless be appropriate to stay the proceeding under s 19 of the TTP Act. He separately dealt with each of the factors required to be taken into account under s 19(2).[25]

(i)Finding that Endeavour is a New Zealand company principally operating in New Zealand

[25]See [21] above.

The judge made the observation, conceded on the appeal to be erroneous, that both parties to the policy, Endeavour and IAG, are New Zealand companies. Endeavour is in fact an Australian company, being incorporated pursuant to the Corporations Act 1991 (Cth). The judge also described Endeavour as ‘principally operat[ing] in New Zealand although it supplies its packaging products to other countries, including Australia’.[26] This was a further error. The renewal declaration completed by Endeavour with IAG states that the gross turnover for products supplied to Australia is $7 million and New Zealand $1 million. Moreover, 100 per cent of Endeavour’s products are manufactured outside New Zealand. IAG is incorporated in New Zealand but, as the judge acknowledged, its policies may cover an insured’s worldwide liability.[27]

(ii)The written concession

[26]Reasons [29]. He did not mention the principal place of business of AGP.

[27]Reasons [29].

With respect to the places of residence of the witnesses likely to be called in the proceeding, the judge accepted a concession made by IAG in a written statement that if AGP obtained a default judgment against Endeavour in the County Court, IAG would not contradict the truth of certain allegations upon which the default judgment was entered if a proceeding was brought in a New Zealand court (‘the written concession’). The judge took the view that this would significantly reduce the number of witnesses who would be called in the proceeding and that the remaining witnesses would likely be residents of Victoria or New South Wales. The written concession is as follows:

Australian Gourmet Pastes v Endeavour Packaging Pty Ltd and IAG New Zealand Limited
County Court proceeding No CI-15 03161
The Second Defendant IAG New Zealand Limited accepts that judgment entered in the proceeding by the Plaintiff [AGP] against the First Defendant [Endeavour] in default of appearance, with damages to be assessed separately, would be entered upon an acceptance of the truth of the matters alleged by the Plaintiff against the First Defendant in the Amended Statement of Claim dated December 2015, and that in any proceeding brought by the Plaintiff against the Second Defendant in an appropriate New Zealand Court, the Second Defendant would not contend otherwise,
PROVIDED THAT
The Second Defendant does not concede that it would be bound by the assessment of damages, and does not for that reason accept that if the judgment is entered in default of appearance it is bound to accept as true the matters in the particulars to paragraph 60 of the Amended Statement of Claim.
The Second Defendant does not concede the truth of any of the allegations in the claim by the Plaintiff against the Second Defendant in the Amended Statement of Claim, specifically paragraphs 2A, 61 to 74 inclusive, and the associated claims for relief against the Second Defendant.

As is apparent, there were exceptions to the concessions made by IAG. The written concession expressly allowed for IAG to contest the truth of the allegations in [2A], [60], [61] to [74] (inclusive) of the amended statement of claim and the associated claims for relief against it, even if AGP entered default judgment against Endeavour. These allegations are relevantly as follows:

2A. The Second Defendant [IAG] is and was at all material times:
a. a company duly incorporated pursuant to the laws of New Zealand and capable of being sued;

b. carrying on business as an insurer.

…
60.As a result of ... Endeavour’s breaches of the Endeavour agreements [the agreements by which Endeavour supplied caps to AGP] and/or the TPA and/or the ACL, and the Coles Notification and the Woolworths Notification as set out above the Plaintiff [AGP] has suffered loss and damage.

Particulars
The Plaintiff refers to and repeats paragraphs 36 to 39 herein [relating to the product withdrawal].
Further, as a consequence of the failure of Endeavour’s seals the Plaintiff has incurred loss and damage ... including loss of stock, loss of profit on the recalled stock, cost of the voluntary withdrawal from Coles and compensation to Woolworths for its costs of its own withdrawal stock from 885 stores nationally.
As at 3 November 2014 the Plaintiff’s losses in relation to the above are as follows:
(a)   Loss of stock:  $213,026
(b)   Loss of profit:  $55,449
(c)   Combined recall costs:         $62,832
(d)   Other costs:  $32,457
Total:  $363,764
Full particulars of loss will be provided prior to the trial of this proceeding.
61.By a contract of insurance [the policy], [IAG] agreed to indemnify Endeavour for public and product liability in respect of all sums that it became legally liable to pay arising from damage that happens during the period of insurance anywhere in the world, except for North America, in connection with Endeavour’s business.
...

62. The following terms are defined in [the policy]:
a. ‘Business’ means Endeavour’s business as a glass bottle supplier;

b. ‘Damage’ means:
i.unexpected or unintended physical loss or physical damage to any tangible property, including its subsequent loss of use,
ii.unexpected or unintended loss of use of any tangible property that has not suffered physical loss or physical damage.

c. ’Period of Insurance’ means 30 June 2011 to 30 June 2012; and
d.’Products’ means any goods that Endeavour, or anyone on its behalf, sells, supplies, distributes, manufactures, constructs, erects or installs, including any item that is used to contain those goods.

63.The matters in paragraphs 34 to 38 [agreements to supply caps, representations, supply, Coles and Woolworths’ Notifications, testing and inspection of caps]:
a.occurred within Victoria during the Period of Insurance in [the policy];
b.constituted damage that happens in connection with Endeavour’s business as defined in [the policy].

64. By reason of the matters set out in paragraphs 15 to 60 [representations, agreements to supply caps, supply, further representations, Coles and Woolworths’ Notifications, testing and inspection of caps, product withdrawal, loss and damage caused], Endeavour had a liability to pay damages to the Plaintiff for its loss and damage as set out in paragraph 60.
65.By reason of the matters set out in paragraphs 61 to 64 above, [the policy] covered Endeavour’s liability to pay damages to the Plaintiff for its loss and damage resulting from the Event.
66.Wrongfully and in breach of the term of [the policy] set out in paragraph 62 above, [IAG] has denied that it is liable to and/or has refused to indemnify Endeavour for any liability to the Plaintiff for its loss and damage (Denial).
...

67.In the circumstances, the Plaintiff is entitled to a declaration that [IAG] indemnify Endeavour for its liability to the Plaintiff for its loss and damage.
68.On or about 14 August 2013:
a.Endeavour was placed under External Administration; and
b.Bradd William Morelli (Morelli) and Andrew John Spring (Spring) were appointed as Administrators of Endeavour.

69. On or about 8 October 2013:
a.Endeavour was made subject to a Deed of Company Arrangement (Deed); and
b.Morelli and Spring were appointed as joint and several Deed Administrators of Endeavour (Deed Administrators).

70.On or about 21 April 2015 at a meeting of the creditors of Endeavour a motion was carried to vary the Deed to:
a.create a special class of creditor, being a person who contends it has a claim against Endeavour arising from its supply of goods which the person alleges are defective (Product Liability Creditor);
b.confirm that a Product Liability Creditor does not participate in the Deed Fund;
c.give a Product Liability Creditor the right to make a direct claim with Endeavour’s insurer under a relevant policy (Claim); and
d.make the proceeds of the Claim available to a Product Liability Creditor if the Public Liability Creditor is successful in its Claim.

71.A Deed of Variation was executed by Endeavour and the Deed Administrators on 11 May 2015.
72.The Plaintiff is a Product Liability Creditor under the Deed having notified the Deed Administrators of its intention to be a Product Liability Creditor on 1 May 2015 (Notification).
...

73.[IAG] is the insurer of Endeavour for the purposes of a Claim by the Plaintiff pursuant to [the policy].
74.Further to paragraphs 68 to 73 above, the Plaintiff is entitled to an order that:
a.pursuant to the terms of the Varied Deed, Endeavour pay any amount received by it from [IAG] to the Plaintiff;
b.alternatively to subparagraph (a), [IAG] pay to the Plaintiff any amount that it is required to be paid in order to discharge Endeavour’s liability to the Plaintiff.

…
AND THE PLAINTIFF CLAIMS AS AGAINST THE SECOND DEFENDANT [IAG]:
E.   A declaration that the Second Defendant indemnify the First Defendant for its liability to the Plaintiff (including any interest and costs payable);
F.   Alternatively to paragraph AA above, and if necessary, a further order that the Second Defendant pay to the Plaintiff any amount that is required to be paid by the First Defendant to the Plaintiff to discharge its liability to the Plaintiff;
G.     Costs.
H.    Such further or other relief as this Honourable Court deems appropriate.

There were submissions made on the appeal with respect to the relevance of the allegations in these paragraphs and the extent to which their determination would require findings to be made on the basis of Endeavour’s liability to AGP.

(iii)Place of the subject matter of the proceeding

The judge also considered the place of the subject matter of the proceeding. He held that ‘the construction of a policy of insurance made in New Zealand between New Zealand companies’ was situated in New Zealand and that the circumstances giving rise to the claim under the policy was situated in Australia.[28]

(iv)Agreements between the parties about the court or place

[28]Ibid [38]-[39].

The judge held that, in the event that the exclusive choice of court agreement in the contract did not require a stay of proceedings under s 20 of the TTP Act, it ‘nevertheless reflects the agreement by Endeavour and IAG that “disputes about this policy” were to be determined exclusively by New Zealand courts and by the application of New Zealand law’.[29]

(v)The appropriate law

[29]Ibid [40].

The judge held that New Zealand law would be the appropriate law to apply to determine the dispute with respect to the construction of the policy because of the exclusive choice of court agreement. He considered that New Zealand law would apply on the issue of standing although ‘this may also involve the application of Australian law if there were an issue surrounding [AGP’s] rights under the deed of variation’.[30] He also remarked that it was unlikely ‘that there would be any significant difference between Australian and New Zealand law in relation to these matters’.[31] It was not in contest on the appeal that Australian and New Zealand law would be substantially similar on these issues.[32]
[30]Ibid [41].
[31]Ibid.
[32]See [86] below.

He considered that the factors in s 19(2) referring to related proceedings, the financial circumstances of the parties, and matters prescribed by regulation, were not applicable in the circumstances of the case.

The judge accepted that, upon entry of a default judgment against Endeavour, the issue of quantum of damages will be determined by evidence at a hearing in Victoria. He acknowledged ‘the possibility of courts in Victoria and New Zealand reaching different and inconsistent decisions on matters of quantum. It is possible also that the question of quantum may include issues of causation.’[33] The possibility of inconsistency on quantum arises because the written concession does not extend to accepting in a New Zealand court the truth of the allegations of AGP’s loss and damage or the quantum arrived at in a Victorian court.[34] However, he considered this possibility to be remote on the basis that Endeavour would most likely not take part in the assessment of damages in Victoria.
[33]Ibid [46].
[34]See [40] above ([60] of the amended statement of claim).

The judge concluded that as a matter of discretion under s 19 ‘a New Zealand court is the more appropriate court to determine the matters in issue between [AGP] and IAG’.[35] He reached this conclusion by relying on the following:

a.the non-participation by Endeavour in the present proceeding, and the likelihood that it will not take part in the assessment of damages, reduces the possibility of courts in Victoria and New Zealand reaching different conclusions on contested matters arising from the same circumstances;
b.[AGP] cannot be placed in a better position than Endeavour would have been, where [AGP] is pursuing a claim of Endeavour’s against its insurer pursuant to rights of subrogration or an assignment of rights;
c. Endeavour and IAG had agreed to their disputes under the policy being determined by New Zealand courts and according to New Zealand law.[36]

(3) Conclusion on the stay

[35]Ibid [47].

[36]Ibid [47].

Having concluded that both s 19 and s 20 of the TTP Act applied in the circumstances of the case, the judge ordered that the third party proceeding between AGP and IAG be stayed. He ordered that the proceeding:

contained in paragraphs 61 to 74 of the amended statement of claim ... is stayed on the grounds that, pursuant to section 17(1) of the Trans-Tasman Proceedings Act 2010 ..., a New Zealand court is the more appropriate court to determine the matters in issue.[37]
[37]Ibid [48].

Grounds of appeal and Notice of Contention

AGP relies on three proposed grounds of appeal to challenge the judge’s conclusion that he was bound to stay the proceeding pursuant to s 20 of the TTP Act:[38]
[38]The grounds have been modified to reflect matters already defined.

Ground 1: The judge erred by finding that AGP acquired its rights against IAG pursuant to rights of subrogation or an assignment of rights and therefore, by operation of the doctrine of privity, there is an exclusive choice of jurisdiction clause which ignites the operation of s 20 of the TTP Act.

Ground 2: The judge erred in concluding that the ‘principal issue’ for determination between AGP and IAG is whether Endeavour/AGP is entitled to be indemnified pursuant to the policy. Such a conclusion is erroneous because the relevant clause in the insurance contract applied only to ‘disputes about this policy’ and did not contemplate what the principal issue was.

Ground 3: The judge erred in concluding that he was obliged to stay the proceeding pursuant to s 20 of the TTP Act in circumstances where:

a. there was no exclusive choice of jurisdiction provision in any agreement between AGP and IAG;

b. the exclusive choice of jurisdiction clause had no operation because there are matters between AGP and IAG which were outside the operation of the policy.

AGP relies on one ground of appeal to challenge the judge’s exercise of discretion:

Ground 4: The judge failed to exercise his discretion judicially pursuant to s 19 of the TTP Act in that:

a. he approached that consideration on an erroneous principle of law — namely, that AGP acquired its rights pursuant to assignment or subrogation from Endeavour;

b. he was mistaken as to the facts and in particular:

(1) that Endeavour was incorporated in New Zealand;

(2) that the principal issue between AGP and IAG was whether Endeavour/AGP was entitled to be indemnified;

(3) that the policy of insurance was made between two New Zealand companies, that the concession by IAG about Endeavour’s liability to AGP would reduce the evidence required to establish Endeavour’s liability to AGP and the response of the insurance policy to that liability;

(4) that New Zealand law would be the most likely law to apply in determining the standing of AGP on behalf of or in the name of Endeavour under the New Zealand policy;

(5) in determining that AGP cannot be placed in a better position than Endeavour as against IAG the judge has operated on an erroneous principle in exercising his discretion under s 19 of the TTP Act.

IAG relies upon a Notice of Contention which identifies two grounds upon which the judgment should be affirmed on a different and alternative basis than that which was erroneously decided:

Ground 1: That the policy included an ‘exclusive choice of court agreement’ within the meaning of s 20 of the TTP Act which was applicable to the matters in dispute on the basis that the relief sought by AGP is founded in the policy (even though AGP does not rely on rights of subrogation or assignment as understood by the judge).

Ground 2: That the discretion to stay the proceeding pursuant to s 19 of the TTP Act was correctly exercised to grant a stay, taking into account that Endeavour, the insured under the policy, was a company incorporated in Australia and not New Zealand.

It is apparent that there is much overlap between the grounds of appeal, and between those grounds and the Notice of Contention. It is convenient to deal with the issues as they were argued on the appeal.

Section 20 — is there an exclusive choice of court agreement between the parties?

It is common ground on the appeal that AGP does not purport to rely upon the assignment of rights from Endeavour under the contract of insurance, nor upon a relationship of subrogation. The acceptance of this by IAG is apparent in the terms of ground 1 of the Notice of Contention. To this extent, it was common ground that the judge had misconstrued AGP’s position.

AGP submits that, given IAG’s acceptance that there was here no assignment and no relationship of subrogation, it follows that AGP is not a party to the exclusive choice of court agreement in General Condition B2 of the policy. Accordingly, s 20 of the TTP Act has no operation here.

IAG submits that the judge was correct in his application of s 20 of the TTP Act. It submits that although AGP’s claim is not based on an assignment of rights, nor on a relationship of subrogation, nor on a claim that is strictly a derivative claim under Part 2F.1A of the Corporations Act, it is nevertheless another form of ‘derivative’ claim in that it is based upon the policy between Endeavour and IAG. AGP’s claim being based upon the policy, AGP cannot be in a better position than Endeavour would be vis-à-vis IAG; and indeed this renders AGP tantamount to a ‘party’ to the written agreement, within the meaning of s 20(3).

It is important, however, to give close attention to the statutory language.[39] The text of s 20(3) refers to ‘parties’ on three occasions.[40] The first is that the definition of an exclusive choice of court agreement is relative to matters in issue between ‘parties to a proceeding’. The second is that the written agreement must be between ‘those parties’; that is, the parties to the proceeding. For s 20(3) to apply it is thus necessary for the written agreement to be between the entities who are the parties to the proceeding. The third reference to ‘parties’ in the definition is that the written agreement designates a court of a specified country to the exclusion of any other court to determine disputes between ‘those parties’. This further reinforces the requirement that the parties to the proceeding must also be the parties to the written agreement and the parties whose dispute is to be determined exclusively by a particular court.
[39]Thiess v Collector of Customs (2014) 250 CLR 664, 671 [22].
[40]See [24] above.

Here the relevant proceeding (as the judge found)[41] is the third party proceeding between AGP and IAG. There is no written agreement between AGP and IAG. More particularly, there is no written agreement between AGP and IAG that designates a court of a country to the exclusion of any other courts to determine the dispute between them, namely, whether IAG ought indemnify Endeavour pursuant to the policy for Endeavour’s liability to AGP, or whether IAG ought pay to AGP any amount that is required to be paid by Endeavour to AGP to discharge its liability to AGP. It follows that no exclusive choice of court agreement exists between AGP and IAG. As AGP and IAG are the parties to the proceeding, there is no exclusive choice of court agreement between the parties to the proceeding. In my view, s 20(3) has no operation in the circumstances of this case.
[41]See [29] above.

This approach is supported by that taken by Brereton J in Re Douglas Webber Events Pty Ltd.[42] He held that the ‘parties’ to the proceeding referred to in s 20(3) must be those entities who are the ‘parties’ in a contractual sense to the written agreement.
[42](2014) 291 FLR 173 (‘Douglas Webber’).

The proceeding involved an application for leave by Gareth Webber (‘Webber’) (the plaintiff), a director of Douglas Webber Events Pty Ltd (‘DWE AS’), to bring proceedings in the name of DWE AS (the third defendant) against Craig Douglas (‘Douglas’) (the first defendant) for alleged breaches of his duties as a director under the Corporations Act. DWE AS, which specialised in organising ice hockey events in Australia, was incorporated in 2012 with Douglas and Webber as directors. Both Douglas and Webber are New Zealanders. DWE AS also had one non-executive Australian director.[43] Douglas and Webber each held 450 of the 900 shares in DWE AS.
[43]He was named as the second defendant to the proceeding.

DWE AS (as General Partner) and Webber and Douglas entered into a Limited Partnership Agreement establishing a limited partnership called International Ice Hockey Australia LP (‘IIHA LP’). When difficulties emerged, Douglas agreed to manage the Australian operations as an independent contractor (while retaining his equity) with Webber having no active role. As a result, three agreements were executed. The first agreement was a Shareholders Agreement between Douglas Webber Events Ltd (‘DWE NZ’), a company that specialised in organising ice hockey events in New Zealand, and its shareholders. The shareholders were the trustees of the Douglas Family Trust, Douglas, the trustees of the Webber Family Trust, and Webber. The second agreement was a Management Agreement between the limited partnership IIHA LP and DWE AS, whereby IIHA LP consented to DWE AS engaging Douglas Projects International Ltd (‘DPI’) as an independent contractor. The third agreement was an Independent Contractor Agreement between IIHA LP and DWE NZ as principals and DPI as contractor. Each of the three agreements contained a clause nominating New Zealand courts as courts with exclusive jurisdiction.

Before filing an appearance, Douglas made an application pursuant to s 17 of the TTP Act for an order staying the proceeding in the Supreme Court of New South Wales on the ground that the High Court of New Zealand was the most appropriate court to determine the matters in issue. He relied on s 20 and, in the alternative, s 19.

The exclusive choice of court agreement in the Shareholders Agreement was drafted so that the parties irrevocably submitted to the exclusive jurisdiction of New Zealand courts ‘with respect to any legal action, suit or proceeding or any other matter arising out of or in connection with this agreement’.[44] Brereton J acknowledged that Webber and Douglas ‘are both parties to the Shareholders Agreement’.[45] However, he rejected the proposition that there was an exclusive choice of court agreement within the meaning of s 20(3) because ‘these proceedings do not arise out of the Shareholders Agreement. Nor are they proceedings in connection with the Shareholders Agreement’[46] because that agreement ‘makes no provision in respect of the Australian business’.[47]
[44]Ibid 178 [17].
[45]Ibid 178 [18].
[46]Ibid 178 [19].
[47]Ibid.

As mentioned, both Webber and Douglas were parties to the proceeding.[48] With respect to the Management Agreement, Brereton J observed that neither Webber nor Douglas was personally a party to that agreement and therefore the exclusive choice of court clause had no application to the dispute between them. He said:

The parties to the Management Agreement are IIHA LP and DWE AS. Neither Mr Webber nor Mr Douglas personally is a party. The Management Agreement is therefore not an agreement between the parties to the proceeding, and cannot be an ‘Exclusive choice of court agreement’ within s 20(3).[49]

[48]As plaintiff and first defendant respectively.

[49]Ibid 178-9 [22].

Similarly, he denied the operation of s 20(3) in the context of the Independent Contractor Agreement because neither Webber nor Douglas was personally a party to that agreement. He said:

The parties to the Independent Contractor Agreement are IIHA LP and DWE NZ as principals, and DPI as contractor. Neither Mr Webber nor Mr Douglas personally is a party. The Independent Contractor Agreement is therefore not an agreement between the parties to the proceeding, and cannot be an ‘Exclusive choice of court agreement’ within s 20(3).
...
Accordingly, no ‘Exclusive choice of court agreement’ between the parties to these proceedings designates a New Zealand court, to the exclusion of any other court, as the court to determine disputes between them that are or include the matters in issue in these proceedings. Section 20(1)(a) is not engaged.[50]

[50]Ibid 179 [25], [28].

It is clear that in rejecting the application of s 20 to the proceeding Brereton J applied a standard contractual analysis to the question of who are the ‘parties’ to the written agreement referred to in s 20(3), informed by the doctrine of privity of contract. It is only those who are personally parties to the written agreement containing an exclusive choice of court clause who can rely on that clause in a proceeding between them, for the purposes of the TTP Act. In my view, for s 20(3) to apply, the parties to the proceeding must personally be parties to the written agreement in the strict contractual sense in accordance with the doctrine of privity of contract and not, as IAG would have it, someone claiming through the agreement, or making a claim in some derivative sense.

As noted above, s 20(2)(b) provides that paragraph (1)(a) of s 20 does not apply to an exclusive choice of court agreement if the Australian court is satisfied that ‘a party to it lacked the capacity to conclude it under Australian law’.[51] The reference to the capacity of a party to enter into a binding legal relationship also suggests that s 20 is to be read as informed by notions of privity of contract.
[51]See [25] above.

Here, as mentioned, AGP is not personally a party to the contract of insurance. It follows that General Condition B2 of the policy has no application to it within the meaning of s 20(3). There is no exclusive choice of court agreement between AGP and IAG, the parties to the proceeding. Section 20(3) is not engaged. In my view, the judge was in error to conclude that he was bound by s 20(1)(a) to stay the proceeding.[52]
[52]It follows that I accept grounds 1 and 3(a) of the grounds of appeal. Given this conclusion, it is unnecessary to consider AGP’s further submission that to establish that there is an exclusive choice of court agreement within the meaning of s 20(3), the agreement must extend to all the matters in dispute and it does not do so here.

Section 19 — did the discretion miscarry?

AGP submits that the discretion exercised by the judge miscarried because of: (1) the factual error made by the judge as to the place of incorporation of Endeavour and its principal place of business; (2) the judge’s misconception of the basis upon which AGP made its claim; and (3) the judge’s misconception of what was the principal issue in dispute between IAG and AGP.

As mentioned, the factual error is conceded.[53] It was common ground that the judge mistook the facts.[54] AGP submits that the error is material and therefore the discretion is re-opened. The judge’s mistaken assumption gave the dispute a New Zealand connection that was unwarranted and that, in effect, predisposed the judge to consider that a New Zealand court would be the more appropriate court. The starting point of the judge’s analysis was significant. I agree that this mistake erroneously led the judge into querying, at least implicitly, why it is that a New Zealand insurer should have to defend litigation in a foreign jurisdiction with respect to an independent bargain it reached with another New Zealand company. The foundation for this approach was in error. The accurate factual foundation was that the New Zealand insurer undertook to accept risk in a foreign jurisdiction with respect to a foreign insured (Endeavour), albeit under a policy between it and Endeavour containing an exclusive jurisdiction clause. This provides quite a different starting point for the exercise of the discretion under s 19.
[53]See [38] above.
[54]House v The King (1936) 55 CLR 499, 505.

It is also conceded that the judge was wrong to analyse the claim made by AGP as one based on rights of assignment or an assertion of a relationship of subrogation.[55] It is therefore common ground that the judge ‘act[ed] upon a wrong principle’,[56] although, as discussed, IAG submits that this is of no significance given AGP’s reliance on the policy.
[55]See [53] above.
[56]House v The King (1936) 55 CLR 499, 505.

Furthermore, AGP submits that the judge wrongly understood the written concession[57] as significantly narrowing the issues in dispute. He considered that the effect of the written concession was to render it unnecessary for the factual basis of the liability of Endeavour to AGP to be explored. He considered that the ambit of the dispute would be the construction of the policy and the question of indemnification. This was mistaken. The judge thus proceeded on a misconception as to the scope of the proceeding and the basis upon which AGP seeks its declaratory relief against IAG.
[57]See [39] above.

IAG submits that the written concession should be read as acknowledging that once default judgment is entered, the facts against Endeavour are admitted, that is, the representations made, the number of jars involved, the deficiency of the seal, and so on. However, it was accepted that, insofar as those matters may be relevant to the quantum of loss and damage (for example, the volume of jars) the written concession does not preclude IAG from contesting that matter, although a contest may be unlikely. The fundamental submission by IAG is that, if default judgment is entered, the written concession has the effect that what remains in contest are matters of interpretation of the policy.

AGP submits that the written concession does not in substance narrow the issues in dispute because it does not distance itself from all the specific grounds upon which IAG initially declined to accept liability. The exceptions identified in the written concession mean that IAG is free to contest all the allegations made specifically against IAG including the allegation in [66] of the amended statement of claim that IAG has wrongfully refused to indemnify Endeavour.[58] AGP submits that this reintroduces all of the factual issues identified in the letter declining liability, including the ‘core deficiency of design’ of the caps,[59] which stands at the centre of the liability of Endeavour to AGP. I agree. It is not until the basis of Endeavour’s liability to AGP is tested and determined that a court would be in a position to decide whether the policy responded to the circumstances, and whether one or more of the exclusions relied upon applied. The liability of Endeavour to AGP will thus remain as a live and significant issue in the proceeding. Indeed, that liability and the allegedly wrongful refusal of IAG to indemnify in light of that liability are the principal issues in the proceeding.
[58]See [40] above.
[59]See [11] above.

Resolving those underlying disputes, including factual disputes, will depend upon the evidence of witnesses, primarily drawn from Victoria, including expert witnesses on the alleged defects in design. AGP estimates that it will likely call five witnesses from Victoria, one from New South Wales and only one witness from New Zealand. All of the activities upon which AGP’s claims against Endeavour are based, the spoiling of AGP’s product due to the inadequacies of Endeavour’s caps, are located in Australia (specifically Victoria and New South Wales).

In my view, given the wide-ranging exceptions in the written concession, in particular the allegations made in [66], it would be imprudent, and wrong, to conclude that factual issues do not remain, in respect of which evidence must be given, in relation to events that took place in Australia.[60]
[60]It follows that I accept ground 4 of the grounds of appeal.

AGP also submits that the written concession does not distance IAG from the comment made in the letter declining liability that IAG reserves the right to raise any other ground for declining the claim that becomes apparent to it at any time in the future. The rights which IAG has reserved for itself to dispute its liability to Endeavour under the policy under any other ground provides an additional reason for concluding that one cannot rule out the possibility of a contest of other factual issues relating to Endeavour’s conduct. For example, IAG’s letter declining liability does not rely upon Exclusion F which relevantly provides:

F. ERRONEOUS ADVICE
You are not insured for sums that you become legally liable to pay in connection with any error or omission in:
... advice given by you ....

This exclusion might become relevant to the proceeding because IAG may seek to rely upon it with respect to the representations of suitability allegedly made by Endeavour; it may be that IAG will seek to characterise the representations alleged in the amended statement of claim as ‘advice’ given by Endeavour to AGP about the caps. Neither the letter declining liability nor the written concession preclude this position being adopted by IAG and its resolution may depend upon evidence about the exact words spoken, the context of the statement, the knowledge the speaker had about AGP’s processes, and so on.

I consider that AGP is correct in its submission that the judge made three errors in the exercise of his discretion and that these errors, albeit made in the context of practice and procedure, were sufficiently material to conclude that the discretion miscarried.

How should the discretion be exercised afresh?

I have accepted that the discretion under s 19 miscarried. Given that, the question arises: how is the discretion to be exercised afresh?

AGP submits that the connection to New Zealand (that IAG is incorporated in New Zealand and the policy was procured by a New Zealand resident director of Endeavour through a New Zealand broker) is ‘the smallest part’ of the proceeding which may, in the end, require no evidence from New Zealand. The factual subject matter of the proceeding, AGP argues, rests firmly in the seat of Victoria.

The circumstances in Douglas Webber are instructive. Having concluded that s 20 of the TTP Act was not engaged, Brereton J turned to the question of whether, in his discretion, he should stay the Australian proceedings, pursuant to s 19 of the TTP Act. He identified the matters in issue as the claims for relief by way of: (1) as mentioned, an application for leave under the Corporations Act to bring proceedings for breach of directors’ duties; (2) a compulsory purchase order for alleged oppression under the Corporations Act; and (3) damages for breach of the Limited Partnership Agreement. He said:

The New Zealand courts would plainly have jurisdiction in respect of the claim under the Limited Partnership Agreement; and were that the only matter in issue the ... choice of jurisdiction clause in the Limited Partnership Agreement would weigh significantly in favour of a conclusion that the courts of New Zealand were more appropriate ... However, that claims forms only a small part of the plaintiff’s case; indeed, the plaintiff’s counsel was hard-pressed to indicate how the evidence supported any such claim at all. In substance the plaintiff’s claim is one in respect of members’ rights and directors’ duties in connection with DWE AS, an Australian company, under the Corporations Act ....[61]

[61]Douglas Webber (2014) 291 FLR 173, 180-1 [32].

He ultimately refused to stay the Australian proceeding because the principal relief Webber sought would not be available in New Zealand. This was so because it was relief within the meaning of the Corporations Act, and the New Zealand court did not have jurisdiction to grant that relief because it could only be granted by a ‘Court’ as defined within the Corporations Act, the definition not extending to a New Zealand court.

As mentioned, I accept that here the principal claims relate to the liability of Endeavour to AGP (and the wrongful refusal of IAG to indemnify in light of that liability) and the factual basis of that lies in Australia, with respect to: (1) the principal place of business of AGP and of Endeavour[62] (and taking into account the fact that IAG’s policies may cover an insured’s worldwide liability); (2) the places of residence of the witnesses likely to be called in the proceeding;[63] and (3) the ‘place’ where the subject matter of the proceeding is situated.[64] Matters relating to the policy (including how it came about)[65] would be unlikely to be in contest.
[62]Section 19(2)(a). See [38] above.
[63]Section 19(2)(b).
[64]Section 19(2)(c).
[65]See [10] above.

There are powerful factors supporting the refusal of a stay.

I have already concluded that General Condition B2 is not engaged under s 20(3) because it is not a written agreement between the parties to the proceeding. I consider that it is also irrelevant to the exercise of the discretion[66] for the same reason. However, if I am wrong and it is relevant, because it indicates what agreement on jurisdiction had been reached between the insured (Endeavour) and the insurer (IAG), albeit that AGP is not a party to that agreement, it is only one factor in support of the grant of a stay to be balanced against countervailing factors.
[66]Section 19(2)(d).

With respect to the appropriate law to be applied, questions concerning the varied deed and the liberty extended to a product liability creditor to make a claim under the policy[67] are regulated by the Corporations Act. While the proper law of the contract of insurance is New Zealand law, AGP and IAG both accept that there is unlikely to be any significant difference between Australian and New Zealand law.[68]
[67]See [8] above.
[68]Section 19(2)(e). See [44] above. As the judge noted, the factors in paragraphs (f), (g), and (h) of s 19(2) are inapplicable here. See [45] above.

With respect to the issue of potential inconsistency between the findings of a court in New Zealand and the County Court in Victoria, which the judge adverted to,[69] this risk is clearly reduced if the proceeding is also heard by the County Court. This would particularly obviate the concern that the issue of the quantum of loss and damage that AGP suffered (which would require determination by the County Court even if default judgment is obtained and which is also identified as an express exception in the written concession), and any related issue of causation, might be decided differently in a New Zealand court from the County Court.[70]
[69]The judge considered this under the category of ‘any other matter that the Australian court considers relevant’ in s 19(2)(i). See [46] above.
[70]See [46] above.

In my view, and without taking into account the fact that the proceeding was commenced in Australia, the factors supporting the refusal of a stay manifestly outweigh any factors in favour of the grant. [71]
[71]AGP also submitted, albeit faintly on the appeal, that the test to be applied, at least in genuinely indeterminate cases, in deciding whether a New Zealand court is ‘the more appropriate court’ within the meaning of s 19 required IAG to demonstrate that a New Zealand court is ‘clearly and distinctly more appropriate’ than the forum chosen by AGP, as applied in Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460, 477 (‘Spiliada’). In the absence of clear language indicating as such, there is nothing to suggest that the statutory test of ‘the more appropriate forum’ has imported the articulation of the test as set out in Spiliada. It is unnecessary to determine this issue. AGP argues that the discretionary factors clearly favour Australia and we are not in an indeterminate situation. However, it might be observed that to suggest that the test under s 19 requires the New Zealand court to be ‘clearly or distinctly more appropriate’ would appear to elevate the test beyond a plain reading of the statute and beyond the application even of the test at common law (see Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, 247-8; Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 558-61). See also Re Featherston Resources Ltd (2014) 288 FLR 265; Nevill v Nevill (2016) 307 FLR 23, 27 [17]; Explanatory Memorandum, Trans-Tasman Proceedings Bill 2009 (Cth) 2.

Conclusion on the application for leave to appeal

I would grant leave to appeal as the prospects of success are real.[72]
[72]Supreme Court Act 1986 s 14C; Kennedy v Shire of Campaspe [2015] VSCA 47 [12].

Conclusion on the appeal

I reject the Notice of Contention.

I would allow the appeal, set aside the orders of the judge dated 22 April 2016 and, in their place, dismiss IAG’s summons dated 24 December 2015.

SANTAMARIA JA:

I agree with Tate JA.

BEACH JA:

I agree with Tate JA.

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Citations

Australian Gourmet Pastes Pty Ltd (ABN 137 941 185) v IAG New Zealand Limited [2017] VSCA 155

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Australian Gourmet Pastes Pty Ltd v Endeavour Packaging Pty Ltd [2016] VCC 455

Residual Assco Group Ltd v Spalvins [2000] HCA 33

Thiess v Collector of Customs [2014] HCA 12

[2017] VSCA 155

23 June 2017