Americhip, Inc v Dean

[2015] NZHC 700

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-4247 [2015] NZHC 700

BETWEEN

AMERICHIP, INC

Plaintiff

AND

JASON CHARLES DEAN

Defendant

Hearing:	27 November 2014
Counsel:	L Theron for Plaintiff D P H Jones QC for Defendant
Judgment:	14 April 2015

JUDGMENT OF KATZ J

This judgment was delivered by me on 14 April 2015 at 4:45 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:               Meredith Connell, Wellington

Winston Wang & Associates, Auckland

Counsel:                 D P H Jones QC, Auckland

AMERICHIP, INC v DEAN  [2015] NZHC 700 [14 April 2015]

Introduction

[1]      Americhip,  Inc  (“Americhip”)  is  an  American  company  that  designs,

develops and manufactures advertising and marketing technologies internationally.

[2]      Americhip alleges that it employed the defendant, Jason Dean, as part of its operations  in  China  between  2003  and  2012.  It  claims  that  during  that period Mr Dean and his partner (now wife) Zita Chan systematically defrauded it of approximately US$10 million. They allegedly did this through a fairly elaborate scheme involving the submission of  false or inflated invoices for manufacturing work done for Americhip by various companies in China.

[3]      Americhip further claims that Mr Dean, who is a New Zealander, has used approximately NZ$2 million of the funds he embezzled to buy a house in Auckland (“Auckland property”).   Americhip’s  statement  of  claim  includes  four  causes  of action: deceit, breach of trust, knowing receipt (constructive trust) and “money had and received”.   Damages are sought, as well as a declaration that Mr Dean holds the Auckland property as a constructive trustee for Americhip.

[4]      Mr Dean applies to stay Americhip’s proceedings against him.  He says that New Zealand is not the appropriate forum for the claims to be heard and determined. Rather, Americhip  should  issue  proceedings  against  him  in  China,  which  is  an available and more appropriate forum to resolve the issues in dispute. I must accordingly determine whether these proceedings should be stayed, on forum non conveniens grounds, to enable some or all of the issues in dispute to be litigated in China.

Background

[5]      As a result of investigations it undertook into Mr Dean’s activities in China, Americhip concluded that he had systematically defrauded it of millions of dollars. As a result, Americhip’s Chief Executive Officer (Timothy Clegg), its private investigator (Ainsley van Leeuwarden) and other Americhip representatives flew to New Zealand and “confronted” Mr Dean and Ms Chan at the Auckland property, where they were then living.  Americhip’s evidence is that Mr Dean admitted at that

meeting (which took place on 14 August 2013) that he had engaged in fraudulent conduct.   He is said to have accepted that he would have to return the embezzled funds and transfer the Auckland property to Americhip.  Mr Dean, however, denies that he made any admissions at the meeting.

[6]      Following the meeting Mr Dean disappeared and Americhip was unable to trace him.   Nevertheless, on 16 September 2013, Americhip issued proceedings against Mr Dean in this Court.  It also applied for summary judgment and obtained an order for substituted service, allowing it to serve the proceedings on Mr Dean’s father at his home in Auckland.

[7]      The summary judgment application was supported by affidavits from  Mr Clegg and other Americhip executives.   Mr Dean’s former wife (Yvonne/Lee Li Fang) also provided an affidavit in support of Americhip’s claims.  She deposed that Mr Dean had admitted to her that he had embezzled funds from Americhip and had

asked her to lie for him in court if necessary.1

[8]      Mr Dean filed an appearance under protest to jurisdiction on 22 October

2013, followed by an application for dismissal of the proceedings for lack of jurisdiction.  He was successful at first instance, with the High Court allowing his protest to jurisdiction.2   The Court of Appeal, however, allowed Americhip’s appeal.

It found that the New Zealand courts did have jurisdiction in the matter.3   The Court

of Appeal noted that the constructive trust claim (at least) would have to be heard in New Zealand.   However, as the focus at that time was on jurisdiction, rather than whether the proceedings should be stayed on forum non conveniens grounds, the Court  of Appeal  left  open  the  question  of  whether  New  Zealand  was  also  the

appropriate forum to hear and determine Americhip’s other claims against Mr Dean:4

On balance, that question is best left to the High Court which will be guided by considerations of justice, fairness and common sense. Factors such as the expense and inconvenience of litigating the same factual issues in two different jurisdictions and the risk of conflicting results on the same facts will be directly relevant.  Alternatively a New Zealand Court may stay the

1      Mr Dean has since filed an affidavit from Yvonne/Lee Li Fang retracting this evidence.

2      Americhip Inc v Dean [2014] NZHC 450.

3      Americhip Inc v Dean [2014] NZCA 360, [2014] NZAR 1137.

4      Americhip v Dean, above n 3, at [22].

deceit claim until determination of the constructive trust claim, or on the basis that the underlying factual elements are heard in the appropriate jurisdiction.

[9]      Following the Court of Appeal decision, Mr Dean filed a notice of opposition to the summary judgment application, together with supporting evidence.  He also filed an application for a stay of the proceedings on forum non conveniens grounds. Because  Mr  Dean’s  evidence  gave  rise  to  disputed  factual  issues,  Americhip withdrew its application for summary judgment.

[10]     Mr Dean has not yet filed a statement of defence.  From the evidence he has filed in opposition to the summary judgment application, however, it is clear that his position is that he was not an employee of Americhip during the relevant period. Rather, he claims, he was a consultant or middleman.    He does not deny taking a “margin” on orders he sourced for Americhip but says that, as a consultant, he was entitled to do so.   Further, he says that he did so with Americhip’s (Mr Clegg’s) knowledge and consent.  That allegation is strenuously disputed by Americhip, who say that the information Mr Dean sent from China was deliberately false or misleading and that, as a result, it had no knowledge that he was taking a margin on product sales.

[11]     Mr Dean’s alternative position appears to be that he was entitled to take a margin on orders regardless of whether Americhip knew or consented to his doing so.   His expert evidence is that the taking of secret commissions or margins by “intermediary agents” (as opposed to employees) is permissible under Chinese law.

[12]     It will accordingly not be in dispute at trial that Mr Dean took margins on orders.  Rather, the key issue will be whether he was legally entitled to do so.

Legal principles

[13]     The court  has  power under its  inherent  jurisdiction  to  grant  a stay of  a proceeding where New Zealand is not the forum conveniens.   Rule 6.29(3) also provides that when service of process has been validly effected within New Zealand, but New Zealand is not the appropriate forum for trial of the action, the defendant may apply for a stay, or for a dismissal of the proceeding under r 15.1.

[14]     A stay will only be granted on forum conveniens grounds where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action.  In other words, there is an available and competent forum in which the case may be tried more suitably for the interests  of  all  the  parties  and  the  ends  of  justice.5  The  following  additional

principles apply:6

(a)      The applicant has the onus of persuading the court to exercise its discretion.   This   requires   the   applicant   to   show   not   just   that New Zealand is not the natural or appropriate forum, but also that there is another available forum which is clearly and distinctly more appropriate.

(b)The natural or appropriate forum is that with which the action has the most real and substantial connection.  In assessing this, the court will have regard to connecting factors such as relative convenience and expense (particularly in relation to witnesses), the governing law, and the places where the parties reside and carry on business.

(c)      The court will ordinarily refuse a stay if it concludes that there is no other available forum that is clearly more appropriate for the trial.

(d)The court will ordinarily grant a stay if it concludes that there is another forum which prima facie is clearly more appropriate for the trial, although it still has a discretion not to grant the stay in the interests   of   justice. The   court   can   take   into   account   all   the

circumstances of the case.

5      Spiliada Maritime Corp v Canulex Ltd [1987] 1 AC 460 at 476 (HL); approved in Schumacher v

Summergrove Estates [2014] NZCA 412, [2014] 3 NZLR 599 at [28].

6      Schumacher v Summergrove Estates, above n 5, at [29]; Oilseed Products (NZ) Ltd v HE Burton

Ltd (1987) 1 PRNZ 313 at 316-317 (HC).

[15]     The  courts  have  also  identified  the  following  factors  as  relevant  to determining the appropriate forum:7

(a)       the foreign court must be able to grant the relief sought;

(b)      the relative cost and convenience of proceeding in each jurisdiction; (c)       the location and availability of documents and witnesses;

(d)the governing law and in particular whether the law governing the dispute to be resolved is New Zealand law (although this carries less weight where the relevant laws are similar in each jurisdiction);

(e)       the strength of the plaintiff’s case;

(f)       where any judgment will be enforced;

(g)whether the application or stay is brought to gain a tactical advantage and not because trial in the other forum is genuinely desired;

(h)whether   there   are   any   procedural   advantages   in   one   of   the jurisdictions.

[16]     No one factor is determinative.  The court will take all relevant factors into account in the exercise of its discretion.  Further, even if the various factors I have identified indicate that prima facie an overseas forum is more appropriate, the courts have recognised that there may be special circumstances by reason of which justice

requires that the trial should nevertheless take place in New Zealand.8

7      Schumacher v Summergrove Estates, above n 5, at [30]. These factors are listed in Bomac

Laboratories Ltd v Life Medicals (MSDN BHD) Auckland HC CIV-2010-404-004654, 5 August

2011 at [13] (upheld on review: Bomac Laboratories Ltd v Life Medicals (MSDN BHD) [2012] NZHC 363).

8      Exportrade Corporation v Irie Blue NZ Ltd [2013] NZCA 675, [2014] NZAR 495 at [53]-[56].

[17]     Of the various factors I have identified, the following are the most relevant in this case:

(a)       the strength of Americhip’s case;

(b)the  relative  cost  and  convenience  of  proceedings  in  China  and New Zealand  (including  whether  any  Chinese  judgment  would  be likely to give rise to an issue estoppel in subsequent New Zealand proceedings and the location of witnesses and documents);

(c)       the applicable governing law;

(d)      whether China is an available forum for the resolution of this dispute; (e)     any procedural advantages or disadvantages of the two jurisdictions;

and

(f)       where any judgment will need to be enforced. [18]     I will consider each issue in turn.

The strength of Americhip’s case

[19]     The court is entitled to give some weight to the relative strengths of the cases of the parties.9   It is therefore necessary to consider the strength of Americhip’s case and Mr Dean’s foreshadowed defences a little more closely.

[20]     Obviously, I have not had the benefit of hearing from the relevant witnesses. Nor has their evidence been tested through cross-examination. Based on the affidavit evidence alone, however, Americhip appears to have a fairly strong case. Mr Dean provides little or no documentary evidence to back up a number of the assertions he

makes in his affidavits.

9      Oilseed Products (NZ) Ltd, above n 6, at 320.

[21]     Mr Dean’s suggestion that Americhip knew that he was taking a margin on orders rests uneasily with much of the other evidence, including that Americhip hired a private investigator to investigate his activities and that its Chief Executive Officer, private investigator and other executives flew out to New Zealand in August 2013 to confront him at the Auckland property.

[22]     Further, the evidence indicates that Mr Dean and Ms Chan set up payment channels  that  were  highly  unusual  and  far  from  transparent.  On  Americhip’s evidence, Mr Dean and Ms Chan appear to have used a range of company names and beneficiary bank  accounts  with  names  often  very similar to  those  of  the actual manufacturers who had quoted for the relevant work, although they were in fact unrelated entities.   Such conduct (if established) is likely to require considerably more explanation than Mr Dean has provided to date, if Mr Dean is to avoid an inference being drawn that his aim was to disguise his and Ms Chan’s involvement in the various transactions.

[23]     Mr Dean’s alternative position appears to be that even if Americhip did not know or agree that he could take margins on orders, he was legally entitled to take such margins.  Such an argument is likely to face serious obstacles unless Mr Dean can prove that an employee or intermediary agent is legally entitled to take such margins, in the absence of any contractual arrangement expressly permitting such conduct.  Such an argument is likely to be a difficult one to pursue if California or New Zealand law governs the parties’ relationship (discussed further at [55] to [68] below).

The relative cost and convenience of proceedings in China and New Zealand

[24]     I now turn to consider the relative cost and convenience of proceedings in China and New Zealand.  In this context it is highly relevant that, as the Court of Appeal observed, part of the claim (the constructive trust claim) can only be heard and determined in New Zealand. 10   The comparison is accordingly not between the

entirety of the proceedings being heard in China or the entirety of the proceedings

10     Americhip v Dean, above n 3, at [20].

being heard in New Zealand.  Rather, what must be compared is the relative cost and efficiency of:

(a)      the deceit, breach of trust, and “money had and received” causes of action being heard and determined in China, followed by a trial in New Zealand of the constructive trust claim; or

(b)      all four causes of action being heard and determined in New Zealand.

[25]     In short, the issue is whether one trial (in New Zealand) would be more efficient than two trials (one in China, followed by one in New Zealand).  Expressed in that way, the answer would appear to be fairly obvious.  A trial in one jurisdiction will normally be more efficient than sequential litigation in two jurisdictions.

[26]     Mr Jones, however, submitted that such a view is simplistic.  He submitted that the deceit cause of action lies at the heart of this case.  The findings made in that cause of action will, in effect, determine the outcome of the other three causes of action, which are “parasitic” on it. As a result, if the deceit cause of action is proved in China, then it should be relatively straightforward to determine the constructive trust claim in New Zealand. All Americhip would need to prove is that the Auckland property was purchased with the funds which the Chinese court found had been embezzled. This should be a fairly narrow inquiry.

[27]     This submission only carries weight if determination of the deceit claim in China would be likely to give rise to either cause of action estoppel or issue estoppel in New Zealand.  If it does not, it will be necessary for the underlying factual issues surrounding the fraud allegations to be re-litigated in this jurisdiction, as those facts also underpin the constructive trust claim.

[28]     China has a civil legal system.  There is no common law cause of action in deceit.   Rather,   China appears to have a codified tort statute that, presumably, includes a broadly equivalent statutory cause of action to the common law tort of deceit.  Unfortunately, however, the relevant statutory provisions were not identified by either expert witness or otherwise put into evidence.  That makes it impossible to

determine how similar or different the comparable statutory tort is to the common law tort of deceit.  In any event, given the significant differences between the legal systems, the prospect of cause of action estoppel arising appear to be negligible.

[29]     Accordingly, if Americhip succeeds on a comparable statutory cause of action in China, it would need to successfully raise a plea of issue estoppel (rather than cause of action estoppel) to avoid having to re-litigate its factual allegations as to Mr Dean’s allegedly fraudulent conduct in subsequent New Zealand proceedings.

Would a Chinese judgment be likely to give rise to an issue estoppel in subsequent

New Zealand proceedings?

[30]     Issue estoppel prevents a party in subsequent proceedings from seeking to re- litigate an issue that has already been decided between the same parties in earlier proceedings.

[31]     The Chinese judgment would first need to be recognised by the New Zealand courts in order for it to have any effect.11   This applies equally whether recognition is sought for enforcement purposes (the most common situation) or where, as here, recognition is sought for preclusion purposes (in order to raise issues of res judicata). As there is no statute allowing for reciprocal enforcement of Chinese judgments, any recognition would need to be in accordance with common law conflict of laws

principles.

[32]     The leading case on issue estoppel is Carl Zeiss (No 2).12    In that case the House of Lords found that the following requirements were necessary in order to establish an issue estoppel:13

(a)        the judgment of the foreign court must  be:

(i)       of a court of competent jurisdiction,

11     Peter  Barnett,  Res  Judicata,  Estoppel  and  Foreign  Judgments  (Oxford  University  Press, New York, 2001) at 25.

12     Carl Zeiss Stiftung v Rayner and Keeler Ltd (No 2) [1967] 1 AC 853 (HL).

13     At 933.

(ii)      final and conclusive; (iii)          on the merits.

(b)the parties to the English (or in this case, New Zealand) litigation must be the same parties as in the foreign litigation;

(c)       the issues raised must be identical and must have been necessary for the decision of the foreign court and not merely collateral.

[33]     The requirements set out in (a) are essentially the “recognition” requirements, that would apply equally to an application to enforce a foreign judgment.  In addition (b) and (c) must be satisfied in order for an issue estoppel to arise.  I will consider each requirement in turn.

[34]     The jurisdiction requirement will generally be satisfied if the defendant was present within or submitted to the jurisdiction of the foreign court.  Assuming that Mr Dean voluntarily submits to the Chinese jurisdiction, as he has said he will, the jurisdiction requirement will be met.

[35]     A judgment will be final and conclusive if the subject matter cannot be reopened in the original jurisdiction. The finality requirement would need to be assessed with reference to Chinese law, rather than New Zealand law.   Expert evidence would be required in that respect.

[36]     In  relation  to  whether  a  decision  is  “on  the  merits”,  Lord  Brandon  of

Oakbrook observed in The Sennar (No.2) that:14

Looking at the matter negatively a decision on procedure alone is not a decision on the merits.  Looking at the matter positively a decision on the merits  is  a  decision  which  establishes  certain  facts  as  proved  or  not  in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned.

14     The Sennar (No.2) [1985] 1 WLR 490 at 499 (HL).

[37]     An issue will have been rendered on the merits if it is apparent to the New Zealand court that the foreign decision establishes the facts, applies the law and thus adjudicates that issue to a conclusion.

[38]     When questions of issue estoppel arise solely within a domestic context it is not usually difficult for a court to determine whether the earlier decision was “final and conclusive” and “on the merits”.  As Lord Reid observed in Carl Zeiss (No 2), however, these requirements need “a good deal more thought” when considering whether an issue estoppel arises based on a foreign judgment.15     It is simply not possible to say at this stage whether any judgment obtained by Americhip in China would be likely to meet such requirements.

[39]     The requirement that the issues be identical requires that precisely the same issue is raised for determination in any subsequent proceedings in New Zealand as was determined by the Chinese judgment. This could well require the New Zealand court to not only examine the Chinese judgment itself but possibly also the pleadings and evidence before the Chinese court, in order to ascertain whether precisely the same issue was determined.  It is far from clear that the requirement that the issues be identical would be met in this case.  In particular, although a number of aspects of Chinese court procedure have been put in evidence, the statutory provisions that would found the substantive cause of action have not been.   It is not therefore possible to  identify the  relevant  elements  of  the analogous  Chinese  cause(s)  of action.    Whether  those  causes  of  action  are  likely  to  require  determination  of identical factual and legal issues to those raised by the New Zealand proceedings is accordingly unknown.

[40]     Similarly, prior to receipt of the Chinese judgment, and in the absence of any evidence as to the elements of the comparable cause(s) of action in China, it is not possible to form any view as to what issues addressed by the Chinese court may be “necessary and fundamental” to that Court’s decision.  Even if an identical issue is traversed,  an  issue  estoppel  will  not  arise  if  the  relevant  issue  is  subsidiary or

collateral to the final determination. As Lord Reid observed in Carl Zeiss:16

15     Above n 12, at 917.

16     Above n 12, at 918.

[W]e are not familiar with modes of procedure in many foreign countries, and it may not be easy to be sure that a particular issue has been decided or that  its  decision  was  a  basis  of  the  foreign  judgment  and  not  merely collateral or obiter.

[41]     In addition to the requirements I have outlined, any plea of issue estoppel would also be defeated if one of the recognised defences to recognition of a foreign judgment applied.   This could include, for example, an argument that the foreign judgment was procured by fraud, or that the foreign judgment was procured in breach of natural or substantial justice.  Procedural differences between the Chinese and New Zealand jurisdictions may well be relevant in this context.   I note, for example,  the  evidence  of Americhip’s  legal  expert,  Hu  Xiaohong,  that  pre-trial discovery is not required (and cannot be compelled) in Chinese legal proceedings.

[42]     Given the unfamiliarity of local courts with foreign law and procedure it is perhaps not surprising that Commonwealth courts have repeatedly noted the need for the courts to exercise special caution before recognising an issue estoppel (or any other form of res judicata) based on a foreign judgment in any particular case.17  This distinguishes foreign res judicata from local res judicata, where there is no need for such “special caution”.

[43]     Finally, I note that the  “special circumstances exception” was extended to the issue estoppel plea by the House of Lords in Arnold v National Westminster Bank:18

[whilst] there are significant arguments in favour of the proposition that issue estoppel constitutes a complete bar to relitigating a point once it has been decided…I am now of the opinion that the court can, and in exceptional circumstances should, relax that rule.

[44]     Lord Keith of Kinkel observed similarly that:19

One of the purposes of estoppels being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result.

17     See, for example, Carl Zeiss (No 2), above n 12, at 918, 938 and 967; The Sennar (No 2), above n 14; Desert Sun Loan Corp v Hill [1996] 2 All ER 847 at 858 - 859 (CA).

18     Arnold v National Westminster Bank [1991] 2 AC 93 at 112 (HL), per Lord Lowry. The exception had previously been recognised in abuse of process cases that applied the principle in Henderson v Henderson (1843) 3 Hare 100.

19     Above n 18, at 109.

[45]     Accordingly, even if an issue estoppel was found to arise based on the foreign judgment, it would be open to Mr Dean to seek to argue that there were “special circumstances” justifying relaxation of the rule in this case.

[46]     For all of the reasons I have outlined, if Americhip were to succeed against Mr Dean in legal proceedings in China, it may face significant obstacles in successfully establishing  an issue estoppel  arising out  of that judgment in New Zealand.  Given Mr Dean’s approach to this litigation to date, Americhip’s concern that Mr Dean would pursue every objection available to him (as he is entitled to do) are likely well founded.

[47]     The reality is that, if these proceedings are stayed, Americhip faces the very real prospect of having to litigate the key facts underpinning the deceit cause of action twice: once in China and once in New Zealand.

Location of witnesses and documents

[48]     Both parties have indicated that they will likely wish to call some evidence from Chinese based witnesses.  Mr Dean may wish to call evidence from suppliers. Americhip may wish to call evidence from some witnesses who were aware of and may even have  participated in the alleged frauds.  This factor does not, however, favour  a  stay  of  the  New  Zealand  proceedings.    In  the  absence  of  an  issue estoppel arising, the question is essentially whether the Chinese based witnesses should be called upon to give evidence twice (in China and New Zealand) or once (in New Zealand only).

[49]     I further note that while the evidence of any Chinese based witnesses  may provide important context and background, it is unlikely to be critical to the key issues in dispute.  Those issues are relatively confined and are centred on the nature and terms of the contractual relationship between Americhip and Mr Dean.  The key evidence on those issues is likely to be that of Americhip executives and Mr Dean, who are all English-speaking. The evidence of manufacturers and employees of exactly what occurred, or their awareness of it, may cast light on the mechanics of what happened. It is unlikely, however, to be critical to any objective determination of the scope of the contractual arrangements between Americhip and Mr Dean.

[50]     The key defence witnesses are likely to be Mr Dean and his wife Ms Chan. They will presumably wish to give evidence in person.   There appears to be no reason, however, why most or all of the other Chinese based witnesses could not give evidence by audio visual link, given that their evidence is likely to be brief and, to some extent, peripheral.  I note in this context that the affidavits those witnesses have  filed  in  opposition  to  the  summary  judgment  application  are  very  brief (1-2 pages).

[51]     The key documents regarding the nature and scope of the parties’ contractual relationship are likely to be documents either created by the parties, or exchanged by them.  All or most of this evidence is likely to be in English and in the possession of the parties.  Establishing the amount of money that Mr Dean has received through the  mechanism  of  adding  “margins”  to  quotes  will  depend  largely on  financial records, almost exclusively relating to payments from California to Hong Kong bank accounts.  There may need to be some translation of these documents, but there is no reason to believe that could not readily be undertaken in New Zealand.

[52]     Witnesses  cannot  be  compelled  to  give  evidence  in  China.    A  similar difficulty will arise in New Zealand in relation to the Chinese based witnesses.  The issue of compellability of witnesses (or lack thereof) is therefore a neutral factor as between China and New Zealand.

Conclusion as to the relative cost and convenience of proceedings in China and

New Zealand

[53]     For  the  reasons  I  have  outlined,  if  Americhip  were  to  succeed  against Mr Dean in China it would likely face significant hurdles in relying on the Chinese judgment as giving rise to an issue estoppel in these proceedings.  As a result, the issue for this Court is the relative cost and convenience of sequential litigation in China and New Zealand, or the entire proceedings being heard and determined in New Zealand.

[54]     Litigating in two jurisdictions is likely to be significantly less cost effective and efficient than litigating in one.  It is also likely to lead to lengthy delays in any final resolution of the matters in dispute.  In Oilseed v HE Burton the Court observed

that the court should lean against a multiplicity of actions where claims could more conveniently be heard together, with real costs savings.  This would also avoid the risk of conflicting factual or legal findings in each jurisdiction.20

What is the governing law?

[55]     It is generally preferable for the law of a jurisdiction to be applied by the courts of that jurisdiction, although this factor carries less weight where the relevant laws are similar in each jurisdiction.21

[56]     There was no dispute that New Zealand law, as the lex situs, governs the question of whether a constructive trust arises in relation to the Auckland property.22

The issue of which law governs the deceit claim was, however, considerably more contentious.   Mr Jones submitted that the Court would need to look at evidence of Chinese law and custom to decide whether what Mr Dean did in China was permissible in terms of Chinese law.   He submitted that what Mr Dean did may not be  actionable  in  China,  but  may  be  actionable  in  the  Unites  States  or in New Zealand.  Ms  Theron,  on  the  other  hand,  submitted  that  Californian (or New Zealand) law was the governing law of the deceit claim.

The law governing the parties’ contractual relationship

[57]     The  deceit  allegations  arise  in  the  context  of  the  broader  contractual relationship between the parties.   The success or failure of the deceit cause of action will therefore likely turn, to a significant degree, on the court’s findings regarding the nature and terms of the parties’ underlying contractual relationship.

[58]     At common law, the law which governs a contract (“the proper law”) is the system  of  law  which  the  parties  intended  to  govern  the  contract. Where  their intention is not expressed and cannot be inferred from the circumstances, it will be

the  system  of  law  with  which  the  transaction  has  its  closest  and  most  real

20     These factors were taken into account in Oilseed v HE Burton, above n 6, at 319, and identified

as “directly relevant” by the Court of Appeal in Americhip v Dean, above n 3, at [22].

21     Bomac Laboratories Ltd v Life Medical, above n 7, at [13]; Baxter v RMC Group PLC [2003]

1 NZLR 304 at [247].

22     Shumacher v Summergrove Estates Ltd, above n 5, at [30] and [37]-[39]; Baxter v RMC Group, above n 21, at [61].

connection.23     This must be determined with reference to the time at which the contract is alleged to have been made.24

[59]     It was common ground that Mr Dean was living in Taiwan (not China) at the time the relevant contract was entered into.  The evidence of Hu Xiahong was that Taiwan has a different legal system to China.

[60]     Mr Clegg’s evidence is that Mr Dean travelled to California and the contract was entered into there.   Mr Dean says that in October 2002 he accepted an email proposal from Mr Clegg offering him the opportunity to do consultancy work for Clegg Industries.  Subsequently, in July 2003, he met with Mr Clegg in China and Mr Clegg offered him the opportunity to do consultancy work for another of “his companies”, Americhip.    They  had  some  discussions  as  to  how  this  would  be structured which, Mr Dean says, became the basis of his business relationship with Americhip until 2005.  Subsequently, in 2004/2005 he was involved with Mr Clegg and Mr Clegg’s brother in the establishment of the company Mr Clegg refers to as “Americhip Shenzen”, although Mr Dean denies that he was an employee of that company.

[61]     If Mr Clegg’s evidence were accepted, then the contract between Mr Dean and Americhip was entered into in California.   On Mr Dean’s evidence it is not entirely clear where the contract was entered into.  The main possibilities appear to be Taiwan, California or China.  The places where Mr Dean was ordinarily expected to work were Taiwan and China.   The residence or centre of operations of the employer was  California, while the residence or domicile of the employee was Taiwan.  I note, however, that the cases suggest that the place of the centre of the

employer’s operations is an especially important factor when the employee is at a

23     Lawrence Collins (ed) Dicey and Morris on the conflict of laws (11th ed, Stevens, London, 1987) at 1190 - 1191. The 11th edition is referred to because the common law rules in this context have been superseded in the UK by the Rome Convention and Rome I Regulation. See Lawrence Collins (ed) Dicey, Morris and Collins on the conflict of laws (15th ed, Sweet and Maxwell; Thomson Reuters, London, 2012) at [32-003] and Laws of New Zealand Conflict of Laws: Choice of Law at [118].

24     Lawrence Collins (ed) Dicey and Morris on the conflict of laws (11th ed); Laws of New Zealand

Conflict of Laws: Choice of Law at [121].

senior level.25   Taking all these factors into account, in my view the governing law of the contract is more likely Californian law than Chinese law.

Law governing deceit

[62]     The tort of deceit is committed at the place where reliance on the fraudulent misrepresentation occurs.26    I accept Americhip’s submission that, in this case, the place of the wrong (the lex loci delicti) is California.   The conduct at issue was directed towards Americhip in California, was acted on by Americhip in California and was intended to be acted on by Americhip in California.  Loss was suffered by Americhip in California.

[63]     It is not clear which of two approaches to choice of law in tort applies in New Zealand.27  The   traditional   approach   has   been   to   apply   the   “double actionability” rule, whereby the plaintiff had to establish actionability both under domestic law as the law of the forum (the lex fori), and under the law of the place where the tort was committed (the lex loci delicti).  The court would then apply the law of the forum to determine the claim, with certain exceptions.  Recent statutory

reforms in England, and case law in Australia and Canada have, however, abandoned the “double actionability” rule in favour of a simple lex loci delicti rule (the law of the place of the wrong).

[64]     Nothing turns on the correct approach in this case, however.   Whichever approach to choice of law is adopted, the applicable law in relation to the deceit claim does not appear to be Chinese law.   If the proceedings take place in New Zealand then, unless the party wishing to rely on foreign law pleads and proves that

law, the Court will apply New Zealand law.28     Americhip’s position is that the

Californian law of deceit is so similar to New Zealand law that its claim can be tried by applying New Zealand law, without the need for evidence on Californian law.

25     Dicey and Morris on the conflict of laws, above n 23, at 1298.

26     Baxter v RMC Group, above n 21, at [53] - [54], citing Diamond v Bank of London and Montreal [1979] 1 QB 333; [1979] 1 All ER 561 (CA). See also Waterhouse v Contractors Bonding [2012] NZHC 566 at [46].

27     Waterhouse v Contractors Bonding, above n 26, at [38].

28     Laws of New Zealand Conflict of Laws: Choice of Law at [271].

[65]     I also accept that there is force in Americhip’s argument that a New Zealand court will be more readily able to deal with a case involving a common law deceit cause of action than a Chinese court.  That is because China has a codified civil legal system  and  does  not  recognise  common  law torts  (although  its  legislation  does apparently provide for various statutory torts).

Governing law according to Chinese choice of law rules

[66]     I have  applied  the New  Zealand  choice of law rules  to  determining  the relevant governing law.  I note for completeness, however, that there is no evidence before me that suggests that Chinese law would apply to any of the claims in this proceeding if Chinese choice of law rules were applied.

[67]     The affidavit that Mr Dean has provided from Xinping Lai, a senior partner in the firm of Guangdon Guangshen Law Office, provides little assistance on the issue of the correct governing law.29    Xinping Lai was asked to advise based on certain factual assumptions that, in effect, required him to assume that Mr Dean’s disputed evidence is true and correct.  This resulted in him failing to squarely engage with several of the key issues, including the governing law.   For example, Xinping Lai

was asked to assume that Mr Dean was not an employee of Americhip or Americhip Shenzhen and was operating as an independent intermediary agent between Americhip  and  third  party  enterprises  and  that  “as  such,  he  acted  as  an  agent charging reasonable profits between Americhip Inc. and the other third party enterprises who supplied products to Americhip Inc”.

[68]     Given that assumption, it was not necessary for Xinping Lai to address the issue of how a Chinese court would determine whether Mr Dean was an employee or an intermediary agent and what law it would apply in doing so.     Xinping Lai accordingly does not explain the Chinese choice of law rules that apply to either contracts or the tort of deceit.   He does say, however, that in China foreign law would apply to the relationship between a foreigner and a company sending that

foreigner to work in a branch company in China.  On such an approach, Californian

29     I note that Xinping Lai does not refer to the Code of Conduct for Expert Witnesses.  Nothing turns on that, however, as his evidence fails to fully engage with the key issues in any event.

law would presumably apply if Mr Dean was an employee, but arguably not if he was a consultant.

The availability of the Chinese Court

[69]     The onus rests on Mr Dean to establish that an alternative forum (China) is both appropriate and available.

[70] Hu Xiaohong’s evidence is that the Chinese court’s jurisdiction is dependent on either the domicile of one party or the place where the tort occurs. For the reasons I have outlined at [62] above, any tort of deceit was committed in California, as the place where reliance on any fraudulent misrepresentation occurred. Mr Dean deposes, however, that he is currently domiciled in China and that he will submit to the jurisdiction of the Chinese courts. Americhip expresses some scepticism regarding that, on the basis that he “fled” from New Zealand after being confronted in this country and has gone to considerable lengths to prevent these proceedings being progressed. I will assume for present purposes, however, that the Chinese court will have the necessary jurisdiction, based on Mr Dean’s domicile.

[71]     Whether the Chinese court would be willing to exercise that jurisdiction is, however, a different matter.  Hu Xiaohong’s evidence is that this would depend on the Chinese court being satisfied that it is the forum conveniens for the litigation. Accordingly, even if these proceedings were stayed, there would be a possibility that the Chinese court could decline to accept jurisdiction on the basis that there was a more appropriate forum (for example, California).

Procedural advantages and disadvantages of the two jurisdictions

[72]     There do not appear to be any significant procedural advantages to this matter being litigated in China as opposed to New Zealand.  There is, however, one clear disadvantage.   Discovery is not available in Chinese legal proceedings.   I accept Americhip’s submission that discovery, particularly of bank and other financial records, is likely to be a key part of the proceeding if it is conducted in New Zealand. Discovery is arguably particularly important in cases involving allegations of fraud and deceit.

Where is any judgment most likely to be enforced?

[73]     A further  factor  relevant  to  the forum  conveniens  analysis  is  where any judgment is most likely to be enforced.

[74]     Americhip has not been able to identify any assets in China that could be pursued to satisfy a Chinese judgment.  The only asset of any value identified to date is the Auckland property.   Accordingly any judgment will need to be enforced in New Zealand.  Whether it will also need to be enforced in any other jurisdictions is currently uncertain, and is likely to depend on whether assets are located in any further jurisdictions.

Summary and conclusion

[75]     The burden is on Mr Dean to establish that some other available forum, having  competent  jurisdiction,  is  clearly  and  distinctly  more  appropriate  than New Zealand for the hearing and determination of Americhip’s claims against him. He has nominated China.

[76]     As  the  Court  of  Appeal  has  previously  observed,  part  of  the  claim

(the constructive trust claim) can only be heard and determined in New Zealand. 30

The comparison is accordingly not between the entirety of the proceedings being heard in China or the entirety of the proceedings being heard in New Zealand.  The key issue is whether Americhip’s deceit claim should be first heard and determined in China, prior to the constructive trust claim being heard in New Zealand.  I have not been persuaded that such a course is appropriate, for the following key reasons:

(a)      Neither party is from China.  Mr Dean was resident in New Zealand when confronted by Americhip with its allegations of fraud, shortly before this proceeding was filed.

(b)Based on the affidavit evidence before the court (which has not yet been  tested)  Americhip  appears  to  have  a  fairly  strong  case.

30     Americhip v Dean, above n 3, at [20].

Resolution of the merits of its claim should not be further delayed or hindered by procedural hurdles.

(c)      Proceedings  in  one jurisdiction  only (New  Zealand)  will  be more efficient and convenient, particularly given that there can be no confidence that any issue estoppel would arise based on a Chinese judgment, if the deceit claim were heard and determined in China first.

(d)It  appears  that  the  applicable  governing  law  is  most  probably Californian law, rather than Chinese law.  Americhip’s position is that the Californian law of deceit is so similar to New Zealand law that its claim can be tried by applying New Zealand law, without the need for evidence on Californian law. Even if it were necessary to apply Californian law in relation to the deceit cause of action, however, a New Zealand court will likely be better placed to do so, as China has a civil legal system as opposed to a common law system.

(e)       The principal witnesses on the critical legal and factual issues, namely

Americhip executives and Mr Dean, are English-speaking.

(f)      There appears to be no reason why most or all of the Chinese based witnesses (other than Mr Dean and Ms Chan) could not give evidence by audio visual link, given that their evidence is likely to be fairly brief and, to some extent, peripheral.   Further, it will be more convenient for those witnesses to only have to give evidence once (in New Zealand) rather than twice (in New Zealand and China).

(g)In  terms  of  documents,  the  critical  documents  are  likely  to  be documents either created by the parties, or exchanged by them. All or most of this evidence is likely to be in English and in the possession of the parties.

(h)There do not appear to be any significant procedural advantages of this  matter  being  litigated  in  China  as  opposed  to  New  Zealand. There is, however, one clear disadvantage. Discovery is not available

in   Chinese   legal   proceedings.   Discovery   is   often   particularly important in cases involving allegations of fraud.

(i)The only available asset against which a judgment could be enforced is located in New Zealand. No assets in China have been identified.

(j)There is a risk that a Chinese court may refuse to hear the claim on the grounds of forum non conveniens.

(k)Americhip’s proceeding has been underway in New Zealand since September 2013. Both parties have engaged New Zealand counsel who are familiar with the legal and factual issues arising.31 Significant affidavit   evidence  has   already  been   filed  in   the  New Zealand proceedings, which will likely form the basis for the evidence at trial.

[77]     Taking all of these factors into account, considerations of justice, fairness and common sense all support the entire claim being heard in New Zealand, rather than Americhip (and Mr Dean) being put to the expense and inconvenience of sequential proceedings in China and New Zealand. Litigating in two jurisdictions is likely to be significantly less cost effective and efficient than litigating in one.  It is also likely to lead to lengthy delays in the final resolution of the matters in dispute.

Result

[78]     The stay application is dismissed.

[79]     In the event that costs issues cannot be resolved between the parties any costs memorandum on behalf of Americhip is to be filed by 4 May 2015.   Any memorandum in response from Mr Dean is to be filed by 18 May 2015.  A decision

on costs will then be made on the papers.

Katz J

31     Spiliada Maritime Corp, above n 5, at 486 (HL), per Lord Goff (the “Cambridgeshire” factor).