Hawaiki Submarine Cable LP v Tonga Cable Limited

[2019] NZHC 1595

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-002432

[2019] NZHC 1595

BETWEEN

HAWAIKI SUBMARINE CABLE LP

Plaintiff

AND

TONGA CABLE LIMITED

First Defendant

THE KINGDOM OF TONGA

Second Defendant

Hearing:

4 April 2019 (further evidence and submissions 20 May and 21

June 2019)

Appearances:

R Latton and K B Arthur for Plaintiff R E Harrison QC for Defendants

Judgment:

10 July 2019

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

HAWAIKI SUBMARINE CABLE LP v TONGA CABLE LTD & OR [2019] NZHC 1595 [10 July 2019]

Introduction

[1]    The plaintiff, Hawaiki Submarine Cable LP, is the owner and operator of a fibre optic submarine cable network (the Hawaiki cable network)  that  runs  between  New Zealand, Australia, Hawaii and the mainland USA. It provides international data bandwidth capacity to Hawaiki’s customers.

[2]    The plaintiff sues the defendants for failure to pay to it the sum of USD 1,400,000 payable under a binding heads of agreement (HOA). Under the HOA, the plaintiff was obliged to construct a cable spur to allow the Kingdom of Tonga to connect to the Hawaiki cable network. The Kingdom of Tonga, the second defendant, was guarantor and principal obligor for the first defendant’s due and punctual payment of the sum of USD 1,400,000.

[3]    The plaintiff seeks summary judgment against both defendants. It served the proceeding on the defendants without the leave of the Court, pursuant to r 6.27 of the High Court Rules 2016.

[4]    The plaintiff now seeks to set aside the defendants’ protest to jurisdiction under r 6.29. The Kingdom contends that the plaintiff required leave to serve the proceeding on it in Tonga and both defendants contend that New Zealand is forum non-conveniens under rr 6.28 and 6.29.

Relevant legal principles

[5]    Rule 6.27 sets out a list of circumstances where service may be effected out of New Zealand without the leave of the Court. Rule 6.27(2) provides that:

(2)An originating document may be served out of New Zealand without leave in the following cases:

(a)when a claim is made in tort and –

(i)any act or omission in respect of which damage was sustained was done or occurred in New Zealand; or

(ii)the damage was sustained in New Zealand;

(b)when a contract sought to be enforced or rescinded, dissolved, annulled, cancelled, otherwise affected or interpreted in any

proceeding, or for the breach of which damages or other relief is demanded in the proceeding –

(i)was made or entered into in New Zealand; or

(ii)was made by or through an agent trading or residing within New Zealand; or

(iii)was to be wholly or in part performed in New Zealand; or

(iv)was by its terms or by implication to be governed by New Zealand law.

[6]    If service of process has been effected out of New Zealand without leave and the Court’s jurisdiction is protested, r 6.29(1) applies. That rule sets out a two-stage enquiry.1

[7]    First, for each cause of action, there must be a good arguable case that the claim falls within at least one of the paras of r 6.27. A “good arguable case” does not require the plaintiff to establish a prima facie case. But there must be a sufficiently plausible foundation that the claim falls within one of the r 6.27(2) headings.2

[8]    Secondly, the Court must consider whether it should assume jurisdiction taking into account the matters set out in r 6.28(5)(b)–(d), namely whether:

(b)there is a serious issue to be tried on the merits; and

(c)New Zealand is the appropriate forum for the trial; and

(d)any other relevant circumstances support an assumption of jurisdiction.

Factual background

[9]    The first defendant, Tonga Cable Ltd (TCL), is a limited company incorporated in Tonga as a public enterprise. It is majority owned by the Kingdom of Tonga and manages telecommunication cables in Tonga.

1      Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754.

2      High Court Rules 2016, r 6.29(1)(a)(i).

[10]   In about mid-2016, the plaintiff entered into negotiations with TCL concerning the construction of the cable spur. Ministers of the Kingdom were involved in the negotiation of the binding HOA.

[11]   TCL wanted to have the option of connecting to the Hawaiki cable network in the future. This was only practical if TCL purchased a branching unit.

[12]The terms of the HOA of 4 October 2016 provided that:

(a)Hawaiki would, prior to 31 March 2019, procure the delivery and construction of a branching unit;

(b)Hawaiki would, prior to 31 March 2019, complete a marine survey covering the route of the cable spur from the branching unit to Tonga;

(c)TCL would pay USD 1,400,000 on the date of execution of the HOA;

(d)TCL would pay USD 1,400,000 on or before 30 June 2018 and the date on which the Hawaiki cable network and the branching unit was fully built, operational and ready for service;

(e)TCL would provide a guarantee from a surety acceptable to Hawaiki; and

(f)the HOA is legally binding.

[13]Clause 6 of the HOA provides that:

This Heads of Agreement will be governed by the laws of New Zealand and the parties agree that the New Zealand Courts have a non-exclusive jurisdiction.

[14]TCL paid USD 1,400,000 to the plaintiff’s bank account on 6 October 2016.

[15]   On 2 November 2016, the Kingdom, by the Tongan Ministry of Public Enterprises, executed a guarantee that included the following terms:

… in consideration of [Hawaiki] entering into the [HOA] with [TCL] … the Government of the Kingdom of Tonga (guarantor) unconditionally and irrevocably guarantees to [Hawaiki], as principal obligor, by way of a continuing obligation, the due and punctual payment by [TCL] of the balance of the price payable by [TCL] under the [HOA] …

[16]   The guarantee was approved by the Cabinet of the Government of the Kingdom of Tonga and signed under the seal of the Ministry of Public Enterprises for the Kingdom.

[17]   The marine survey was completed in July 2017. Following acceptance testing in New Zealand and the USA, the Hawaiki cable network and the branching unit were fully built, operational and in-service as from about 20 July 2018.

[18]   In July 2018, an invoice for USD 1,400,000 was sent to TCL. Despite demand, neither TCL nor the Kingdom have paid to the plaintiff the sum of USD 1,400,000.

Submissions

[19]   TCL concedes that r 6.27(2)(k) enabled service without leave, on the basis that TCL submitted to the jurisdiction of the Court by virtue of cl 6 of the HOA. In relation to TCL, the issue then becomes one of forum conveniens.3

[20]   TCL’s forum conveniens argument depends in large measure on the issue of whether the Kingdom can be sued in New Zealand. If I find that it can, then TCL accepts that it is likely that New Zealand is the appropriate forum.

[21]   The Kingdom on the other hand contends that there is no good arguable case that the plaintiff’s claim falls wholly within one or more of the paras of r 6.27 (Service without leave) and it follows therefore that it is necessary so as to address all of the matters in terms of r 6.29(1)(a) and (b).

[22]   For the purposes of this application, the Kingdom does not invoke the doctrine of sovereign immunity; it is accepted that sovereign immunity is not an issue I need to address.

3      See High Court Rules, r 6.29(1)(a)(ii) which refers to r 6.28(5)(b)–(d).

[23]   Both defendants concede, for the purposes of this application, that there are serious issues to be tried on the merits.

Issues

[24]Against that background, the critical issues I must determine are:

(a)Is there a good arguable case that Hawaiki’s claims fall within at least one of the paras of r 6.27?

(b)Should the Court assume jurisdiction, taking into account whether New Zealand is the appropriate forum and any other factors that support an assumption of jurisdiction?

Is there a good arguable case that Hawaiki’s claims fall within r 6.27?

Submissions

[25]Hawaiki contends that:

(a)The guarantee given by the Kingdom secures obligations owed by TCL to Hawaiki under the HOA and is accordingly governed, by implication, by New Zealand law, thereby satisfying r 6.27(2)(b)(iv). Hawaiki relies on the “doctrine of infection”, which I discuss below.

(b)The system of law with which the transaction has its closest and most real connection is New Zealand, and the Kingdom is a necessary and proper party to the claim, thereby satisfying r 6.27(2)(h)(i). That is so because:

(i)the HOA is governed by the laws of New Zealand and the non- exclusive jurisdiction of the New Zealand courts;

(ii)part of the laying of the Hawaiki cable network took place in New Zealand;

(iii)the acceptance testing of the branching unit and the Hawaiki cable network took place in New Zealand and the USA;

(iv)payment by TCL in the Kingdom was to  be  made  into  a New Zealand bank account; and

(v)the Kingdom guaranteed, as a principal obligor, the due and punctual payment by TCL of the balance of the price payable under the HOA.

[26]   In contending that Hawaiki has not established that it can rely on any of the paras of r 6.27, Dr Harrison, on behalf of the Kingdom, submitted that the guarantee contains no provision equivalent to that of cl 6 of the HOA. He submitted that this point of difference, and the fact that the Kingdom is an independent sovereign state, are of particular relevance to all of the issues in this case.

Proper law of contract

[27]Determining the proper law of a contract is a three-stage process:

(a)Express choice: if the parties make an express choice as to the proper law applicable to the contract, the Court will give effect to their choice, unless it would be contrary to public policy to do so.

(b)Implied choice: the parties may be found to have made a choice as to the applicable proper law, as a matter of implication. The process of inference as to the proper law under the “doctrine of infection” relied on by Hawaiki arises at this stage of the inquiry.

(c)Objective choice: if the contracting parties have not chosen the proper law of the contract (either expressly or by implication), the Court itself will determine the proper law by applying a test which involves

ascertaining the system of law with which the transaction has its closest and most real connection.4

Analysis: the “doctrine of infection”

[28]   I accept that the guarantee does not contain an express choice of the contractual proper law; plainly it does not. However, I reject the submission that the fact that the HOA, a contract to which the Kingdom is not a party, expressly does so is “completely irrelevant”. In my view, cl 6 of the HOA is directly relevant to the critical issue of whether the fact that the obligations of TCL under the HOA are guaranteed by means of the guarantee given by the Kingdom, supports a proper implication (as a matter of contractual interpretation) that the same choice has been made by the Kingdom as the guarantor.

[29]   The guarantee in this case is intimately and inextricably linked to the HOA. This is apparent from the express words used:

… in consideration of [Hawaiki] entering into [HOA] with [TCL] … the Government of the Kingdom of Tonga [Guarantor] unconditionally and irrevocably guarantees to [Hawaiki], as principal obligor, by way of a continuing obligation, the due and punctual payment by TCL of the balance of the Price payable by TCL under the HOA …

[30]   I accept the submission of counsel for Hawaiki that where a contract is governed by a given law, the courts will often infer that the parties to a guarantee of that contract intended the guarantee to be governed by the same law. This is especially so, as is the case here, when the guarantor and the party whose performance is guaranteed are connected. This is sometimes referred to as the “doctrine of infection”.

[31]   The term “doctrine of infection” was used by Staughton LJ in Wahda Bank v Arab Bank Plc, a case where the Court had to determine the applicable law (lex causae) in relation to a counter guarantee given in respect of contracts for supply of equipment and spares to Libya .5 Staughton LJ held:6

4      Bonython v Commonwealth of Australia [1951] AC 201 (HL) at 219–220; and Compagnie D’Armement Maritime SA v Compagnie Tunisienne de Navigation SA [1971] AC 572 (HL) at 603.

5      Wahda Bank v Arab Bank Plc [1996] 1 Lloyd’s Rep 470 (CA).

6      At 472.

We must turn to the familiar principles of the common law. Was there an express choice of the proper law of the contract, or an inferred choice or, if not, what was the system of law with which it had its closest and most real connection?

[32]He reasoned further as follows:7

The principle of law applicable to this case is, to my mind, what has been called on a previous occasion the doctrine of infection (Ilyssia Compania Naviera S.A. v. Bamaodah [1985] 1 Lloyd’s Rep. 107 at p. 112). That appears in a passage from Dicey & Morris, the Conflict of Laws, 11th ed. (1987). I take it from where it was cited, in Allock Cement Co. Ltd. v. Romanian Bank for Foreign Trade, [1989] 1 Lloyd’s Rep. 572 at p. 580, col 1; [1989] 1 W.L.R.

1147 at p. 1158:

The legal or commercial connection between one contract and another may enable a court to say that the parties must be held implicitly to have submitted both contracts to the same law.

[33]   The same approach was adopted in Broken Hill Pty Co Ltd v Xenakis, where the Court addressed the question of what law governed the guarantee in issue:8

It seems to me quite plain that in the context of a primary obligation, admittedly governed and being resolved according to English law, the most likely implication would be that the guarantee was to be governed by the same law [as that governing the primary obligation].

[34]   In Mitsubishi Corp v Alafouzos, which concerned jurisdiction of a guarantee of performance and obligations of the buyer under a ship building contract, Steyn J held that:9

The issue of jurisdiction resolves itself into a question whether the proper law of the guarantee is English law, or – to put it more accurately – whether the sellers have a good arguable case on that point. It will be recalled that the shipbuilding contract is expressly governed by English law but that the guarantee contains no expression of a choice of law. The search is therefore for the system of law with which the transaction has its closest and most real connection. It has often been pointed out that a link between a contract with an express choice of law clause and a contract without such a clause is a material factor tending to show that the latter is governed by the same proper law. … In relation to a guarantee this factor will often be of considerable importance. The link between the contracts is of fundamental importance. A guarantee is an accessory contract. The liability of the principal debtor triggers the liability of the guarantor and provides the measure of his liability. But the particular circumstances of each case are always important.

7      At 472.

8      Broken Hill Pty Co Ltd v Xenakis [1982] 2 Lloyd’s Rep 304 (QB) at 306.

9      Mitsubishi Corp v Alafouzos [1988] 1 Lloyd’s Rep 191 (QB) at 195–196 (citations omitted).

[35]   The Kingdom submits that the above authorities (which Hawaiki relies upon) are far from conclusive, turn essentially on the facts of the particular case and, most importantly, do not involve an independent sovereign state as the alleged contracting party. However, I reject that submission. There are important principles of general application in these authorities and the fact that the Kingdom is an independent sovereign state is, in the context here, irrelevant. That is particularly so given that the Kingdom is acting very much as a commercial player rather than in its capacity as an independent sovereign state.10

[36]   I find that in the circumstances here the guarantee ought to be “infected” with the governing law of the HOA. I thus conclude, in terms of r 6.27(2)(b)(iv), that, by implication, the guarantee is to be governed by New Zealand law. The guarantee is obviously very closely linked to the HOA, being the contract that it guarantees. The guarantee is, as Hawaiki submits, an accessory contract.

[37]   The Kingdom’s liability to Hawaiki is triggered by the liability of TCL under the HOA. TCL and the Kingdom are closely connected parties. TCL is majority owned by the Kingdom, and Ministers of the Kingdom were involved in the negotiations leading to the HOA eventually entered into.11

Conclusion

[38]   By implication, the proper law of both the HOA and the guarantee is the law of New Zealand. By its express terms, the governing law of the HOA is New Zealand law. There are no public policy reasons for concluding that the governing law of the guarantee is not New Zealand law.

[39]   I find therefore that the proceedings were validly served outside of New Zealand pursuant to r 6.27. There is a sufficiently plausible foundation that the plaintiff’s claim falls within r 6.27(2)(b)(iv).

[40]   Having reached that conclusion, it is not necessary for me to determine whether the plaintiff can rely upon r 6.27(2)(h)(i), namely that the Kingdom is a necessary or

10     Reef Shipping Co Ltd v The Ship “Fua Kavenga” [1987] 1 NZLR 550 (HC).

11     Mitsubishi Corp v Alafouzos, above n 9.

proper party to the proceedings brought against TCL. The plaintiff only needs to rely on one of the grounds in r 6.27.

[41]   I now turn to consider whether the Court should assume jurisdiction taking into account the matters set out in r 6.28(5)(b)–(d). That includes the critical issue of whether New Zealand is the appropriate forum for the trial.

Is New Zealand the appropriate forum for the trial?

Real and substantial connection

[42]   In considering whether another forum is more appropriate, the court looks for the forum with which the proceeding has the most real and substantial connection.12 Relevant factors include issues of convenience or expense, availability of witnesses, the law governing the relevant transaction and the places where the parties resided or carried on business.

[43]   Other relevant factors include whether other related proceedings are pending elsewhere; whether the New Zealand court will provide the most effective relief or whether a foreign court is in a better position to do so; whether the overseas defendants will suffer an unfair disadvantage if a New Zealand court assumes jurisdiction; and any choice of jurisdiction previously agreed by the parties.13

[44]   The statement of claim pleads that the Kingdom is a “sovereign nation sued pursuant to the Tongan Crown Proceedings Act 2016”. The Kingdom contends that, in both suing it in a New Zealand court (that is, outside of Tonga) and in enforcing any New Zealand judgment against it in Tonga, Hawaiki faces formidable legal obstacles under both the Tongan Crown Proceedings Act and the Tongan Reciprocal Enforcement of Judgments Act. These obstacles are said to support the contention that it is Tonga, and not New Zealand, that is the appropriate forum.

[45]   In response to the Kingdom’s notice of opposition, Hawaiki filed an affidavit from Mr William Edwards, a Tongan legal practitioner, addressing aspects of Tongan

12     Wing Hung Printing Co Ltd, above n 1, at [44]–[46].

13 At [46].

law and practice. Mr Edwards, in his affidavit, contends that New Zealand judgments can be enforced in Tonga pursuant to the provisions of the Tongan Reciprocal Enforcement of Judgments Act.

[46]   Following the hearing, I issued a minute14 requesting the parties to file further evidence and/or submissions on the questions of: whether the Tongan Crown (the Kingdom) is bound by the Tongan Reciprocal Enforcement of Judgments Act; whether any relevant order in council has been made applying that Act to judgments of New Zealand courts; and whether New Zealand court judgments are enforceable in Tonga pursuant to the common law of Tonga. Mr Edwards filed a further affidavit sworn 20 May 2019 which addressed all three of those issues.

[47]   In addressing the question of whether a Tongan court would provide the most effective relief, I first turn to consider the relevant Tongan statutory provisions at issue.

Tongan statutes

[48]Section 5 of the Tongan Crown Proceedings Act reads:

Suits against the Kingdom

(1)A person making any claim against the Kingdom of Tonga whether in contract or tort, or for any other civil remedy, may in respect of the claim bring a suit against the Kingdom of Tonga in that name and style in the appropriate Court.15

(2)Subject to this Act, all suits which are taken on behalf of or brought against the Kingdom under this Act shall be instituted and proceeded with in accordance with Rules of Court of the appropriate Court.16

[49]Section 8 of that Act reads:

No execution against the Kingdom

No execution or attachment, or process in the nature thereof, shall be issued against the property or revenues of the Kingdom of Tonga in any suit; but when any judgment is given against the Kingdom of Tonga, the Registrar of the Supreme Court shall give to the party in whose favour a judgment is given a certificate in the form in the Schedule to this Act.

14     Minute of 6 May 2019.

15     Amended by Act 24 of 1978.

16     Inserted by Act 21 of 1986.

[50]Section 9 of that Act reads:

Performance by the Kingdom

On receipt of the certificate of a judgment against the Kingdom of Tonga, the Minister of Finance shall satisfy the judgment out of the moneys legally available.

[51]Section 3 of the Tongan Reciprocal Enforcement of Judgments Act reads:

Application of this Part17

(1)If the Cabinet is satisfied that, in the event of the benefits conferred by this Part of this Act being extended to judgments given in the superior court of any country, substantial reciprocity of treatment will be assured as respects the enforcement within that country of judgments given in the Supreme Court of Tonga, it may by Order direct –

(a)that this Part of this Act shall extend to that country; and

(b)that such courts as are specified in the Order shall, for the purposes of this Part of this Act, be deemed superior courts of that country.

(2)Any judgments of a superior court of a country to which this Part of this Act extends, other than a judgment of such court given on appeal from the court which is not a superior court, shall be judgments to which this Part of this Act applies, if –

(a)it is final and conclusive as between the parties thereto;

(b)there is payable thereunder a sum of money, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty; and

(c)it is given after the coming into operation of the Order directing that this Part of this Act shall extend to that country.

(3)For the purposes of this section a judgment shall be deemed to be final and conclusive notwithstanding that an appeal may be pending against it, or that it may still be subject to appeal, in the courts of the country of the original court.

(4)The Cabinet may by a subsequent Order vary or revoke any Order previously made under this section.

[52]   Section 4 of the Tongan Reciprocal Enforcement of Judgments Act provides in relevant part:

17     Amended by Act 42 of 2010.

Application for, and effect of, registration of foreign judgment

(1)A person, being a judgment creditor under a judgment to which this Part of this Act applies, may apply to the Supreme Court at any time within 6 years after the date of the judgment, or, where there have been proceedings by way of appeal against the judgment, after the date of the last judgment given in those proceedings, to have the judgment registered in the Supreme Court, and on any such application the said Court shall, subject to proof of the prescribed matters and to the other provisions of this Act, order the judgment to be registered:

Provided that the judgment shall not be registered if at the date of the application –

(a)it has been wholly satisfied; or

(b)it could not be enforced by execution in the country of the original court.

(2)Subject to the provisions of this Act with respect to the setting aside or registration –

(a)a registered judgment shall, for the purposes of execution, be of the same force and effect;

(b)proceedings may be taken on a registered judgment;

(c)the sum for which a judgment is registered shall carry the same interest; and

(d)the Supreme Court shall have the same control over the execution of a registered judgment, as if the judgment had been a judgment originally given in the Supreme Court and entered on the date of registration:

Provided that execution shall not issue on the judgment so long as, under this Part of this Act and the rules of court made thereunder, it is competent for any party to make an application to have the registration of the judgment set aside, or, where such an application is made, until after the application has been finally determined.

The Kingdom’s opposition

[53]The Kingdom submitted that:

(a)The recognition and enforcement of judgments against the Kingdom and under the laws of the Kingdom of Tonga are governed solely and exhaustively by the Tongan Crown Proceedings Act.

(b)It is plain on the face of the Tongan Crown Proceedings Act that it only governs proceedings brought in the “appropriate court” of the Kingdom (s 5).

(c)Section 8 of the Tongan Crown Proceedings Act provides that no execution or attachment, or process in the nature thereof, shall be issued against the property or revenues of the Kingdom of Tonga in any suits. Instead, “when any judgment is given against the Kingdom, the Registrar of the Supreme Court shall give to the party in whose favour a judgment is given a certificate in the form in the Schedule” to the Act. The form of certificate refers to the successful plaintiff against the Kingdom having obtained “a judgment of the Supreme Court (or of a magistrate) as the case may be …”.

(d)On the face of the Reciprocal Enforcement of Judgments Act, that Act does not provide that it binds the Crown.

(e)The contention of Mr Edwards that, in applying s 11 of the Tongan Interpretation Act, the Crown is bound by the Reciprocal Enforcement of Judgments Act, by necessary implication, is wrong.

(f)For the foreign judgment to be recognised and ultimately enforced at common law, the foreign court must have had jurisdiction over the defendant in common law terms. Qualifying factors include presence in the jurisdiction at the time of initiation and service of proceedings, or submission to the jurisdiction.

The Court’s approach to foreign law

[54]   In interpreting these Tongan statutory provisions, the starting point is to determine what law applies. Should the Court, as Mr Harrison contends, apply New Zealand law, namely s 27 of the Interpretation Act 1999 (which provides that no enactment binds the Crown unless it expressly says so)?

[55]   A New Zealand Judge is not assumed to know anything about the content of foreign law or even when it should displace New Zealand laws which would otherwise be applied.18

[56]   Foreign law must be pleaded and proved by the parties. The following principles apply:

(a)Foreign law is a question of fact that must be established.

(b)The content of foreign law must be established by evidence. This may be the evidence of expert witnesses or, where permitted by s 144 of the Evidence Act 2006, documentary evidence, or a combination of both.

(c)The judge must assess and weigh the sources, including the underlying authorities in which the experts rely. The objective is to determine how the dispute would be decided if it were heard in the courts of that country.

(d)Ordinarily, the court will only consider foreign law where the parties have chosen to plead it and thus put it in issue. The party who seeks to rely on foreign law bears the burden of establishing it.

(e)Where the parties have chosen not to plead, or have failed to prove the content of, the foreign law, the court will apply New Zealand law.19

Analysis: enforceability against the Kingdom

[57]   I accept the Kingdom’s submission that the affidavits of Mr Edwards do not extend to the question of the extra-territorial effect of the Tongan Crown Proceedings Act and that in neither of his affidavits does he expressly mention s 8 of that Act. It may also be the case that some of the criticisms the Kingdom makes of Mr Edwards’

18     Jack Wass “Where the parties have failed to plead foreign law, can the Court determine foreign law for itself?” (11 July 2018) Conflict of Laws in New Zealand also Neilson v Overseas Project Corp of Victoria Ltd [2005] HCA 54, (2005) 223 CLR 331.

evidence, including his interpretation of s 11 of the Tongan Interpretation Act, have merit. However, those contentions are ultimately of no real relevance.

[58]   I also accept, for the purposes of this application, Mr Harrison’s submission that the legal position as regards recognition and enforcement of judgments against the Kingdom is, within and under the laws of Tonga, governed solely and exhaustively by s 8 of the Tongan Crown Proceedings Act. In Mr Harrison’s words, that Act “occupies the field”. Again, however, ultimately those submissions do not assist the Kingdom in its opposition to the current application. For the reasons set out below, I conclude that the provisions of the Tongan Crown Proceedings Act and its mechanism for the enforcement of judgments against the Crown, do not support the view that either it is only a Tongan court which can provide an effective remedy to the plaintiff or that a Tongan court will provide the more effective remedy. I find that in this case the mechanism for the enforcement of Tongan Supreme Court judgments against the Kingdom in Tonga pursuant to the Tongan Crown Proceedings Act applies equally to the enforcement of a judgment of the New Zealand High Court against the Kingdom in Tonga.

[59]   In his second affidavit, Mr Edwards has expressed the view that the courts of Tonga have generally held the Kingdom to account when it enters into commercial arrangements and have not allowed it to escape paying damages simply because it is a sovereign state. In support of that opinion, Mr Edwards has referred to, and attached to his affidavit, a recent judgment of the Tongan Supreme Court namely Pacific Games Council v Kingdom of Tonga.20 In that case, the plaintiffs are suing the Kingdom seeking damages for breach of a written agreement of 19 October 2012 (the host contract) pursuant to which the government of Tonga agreed to support, facilitate and fund the hosting of the Pacific Games in Tonga in 2019. The Kingdom sought to strike out the proceedings on the basis that the fiscal and/or financial provisions of the host contract were never of themselves legally binding on the Kingdom. It was argued that for any legal obligation or fiscal authority to be imposed or conferred on the Kingdom, independent (that is statutory) authorisation by way of a lawful appropriation of funds was required. The Kingdom accepted that the government generally has the power to

20     Pacific Games Council v Kingdom of Tonga [2018] TOSC 71.

enter into contracts without statutory authority but not in the case of contracts that involve undertaking financial liabilities or require the expenditure of public funds. In such cases restrictions are placed on its power, so it was argued, by the provisions of the constitution and the Tongan Public Finance Management Act.

[60]   The Tongan Supreme Court dismissed the Kingdom’s strike-out application. In the course of his analysis, Paulsen CJ referred to English authority in support of the view that the Crown cannot escape liability to pay damages under a contract it considers disadvantageous simply by saying that it never promised to act otherwise than in the public good.21 His Honour also referred to Canadian Supreme Court authority, namely Wells v Newfoundland, where it was held that the Crown has an undisputed right to legislatively avoid a contract but it will not escape its liability to pay the other contracting party damages unless it legislates to expropriate that party’s right.22 In his judgment, Paulsen CJ quotes directly from the Wells v Newfoundland judgment as follows:23

In a nation governed by the rule of law, we assume that the government will honour its obligations unless it explicitly exercises its power not to. In the absence of a clear express intent to abrogate rights and obligations – rights of the highest importance to the individual – those rights remain in force. To argue the opposite is to say that the government is bound only by its whim, not its word. In Canada this is unacceptable, and does not accord with the nation’s understanding of the relationship between the state and its citizens.

[61]   It seems clear and obvious that these fundamental principles, expressed by the Supreme Court of Canada and endorsed by the Supreme Court of Tonga, apply equally throughout New Zealand, Tonga, Canada and much of the Commonwealth. In applying these principles, no real issue arises as to whether Tongan law or New Zealand law is to apply; the principles are the same. Furthermore, those principles fall to be applied whatever the status of Mr Edwards’ evidence.

[62]   I have, of course, already concluded, contrary to the submission advanced by Mr Harrison, that in this case the Kingdom has effectively submitted to the jurisdiction

21     Commissioners of Crown Lands v Page [1960] 2 QB 274 (CA) as cited in Pacific Games Council v Kingdom of Tonga, above n 20, at [49].

22     Wells v Newfoundland [1999] 3 SCR 199 as cited in Pacific Games Council v Kingdom of Tonga, above n 20, at [50].

23     Wells v Newfoundland, above n 22, at 216 and 218 as cited in Pacific Games Council v Kingdom of Tonga, above n 20, at [51] (emphasis added).

of the New Zealand courts, albeit on a non-exclusive basis. The Kingdom submitted to the New Zealand jurisdiction when it entered into the guarantee that is an accessory to the HOA and the doctrine of infection applies. Having reached that conclusion, I find that it would be highly unlikely that a Tongan court would conclude that the Kingdom, having submitted to the jurisdiction of the New Zealand courts, could then turn around (in what would be seen as an act of bad faith) and contend that the New Zealand judgment could not be enforced against it in Tonga because the only way to sue the Kingdom under the Tongan Crown Proceedings Act is to bring proceedings in a Tongan court. Such a finding would directly contradict the important points of principle I have referred to above and set out by Paulsen CJ and the Supreme Court of Canada.

[63]   As I understand it, Mr Harrison did not challenge the proposition that if, having submitted to the New Zealand jurisdiction (which is contested), the Kingdom could not then turn around and claim that under the Tongan Crown Proceedings Act the Kingdom can only be sued in Tonga, rendering any New Zealand judgment unenforceable. The Kingdom’s position very much depends, as I see it, on its claim that it has not in the first instance submitted to the New Zealand jurisdiction. For reasons outlined above, I have already ruled against it on that critical issue.

[64]   In these circumstances, I find that ss 5 and 8 of the Tongan Crown Proceedings Act do not preclude the enforcement of a New Zealand High Court judgment against the Kingdom in Tonga. Such a judgment would be enforceable on the same basis as a judgment of the Tongan Supreme Court. I conclude that “an appropriate court” in s 5 would include a New Zealand High Court judgment. And as regards s 8, that section only restricts execution against the property or revenues of the Kingdom. Section 8 is not a bar but rather a mechanism for enforcement. There is clear support for that conclusion in the recent decision of the Tongan Supreme Court in Australia and New Zealand Banking Group Ltd v Lasike.24 There, Paulsen CJ observed that the Tongan Crown Proceedings Act does not release the Kingdom from the obligation to pay judgments (however unexpected and unwelcome they may be) but provides in ss 8 and 9, a mechanism for payment. Indeed, s 9 expressly provides that upon receipt of the

24     Australia and New Zealand Banking Group Ltd v Lasike [2017] TOSC 6 at [29].

certificate of a judgment against the Kingdom under s 8, the Minister of Finance shall

(mandatory) satisfy the judgment out of the monies legally available.

[65]   I thus conclude that the Tongan Crown Proceedings Act does not support the contention that Tonga is the appropriate forum.

Tongan Reciprocal Enforcement of Judgments Act

[66]   It is not strictly necessary for me to determine the issue of enforcement under the Tongan Reciprocal Enforcement of Judgments Act. However, for completeness, I will make some brief comments.

[67]   In his second affidavit, Mr Edwards accepts that the Kingdom is not expressly bound by the Tongan Reciprocal Enforcement of Judgments Act. He continues: first, Tonga does not have an equivalent to s 27 of New Zealand’s Interpretation Act 1999, which states the Crown is only bound by statute where the statute expressly provides as such; secondly, the Kingdom is bound by the Reciprocal Enforcement of Judgments Act by necessary implication. Mr Harrison submitted that this is incorrect. I agree with Mr Harrison.

[68]Section 11 of the Tongan Interpretation Act provides that:

No Act shall be deemed to effect in any manner whatsoever the right of the Crown unless it is therein expressly stated or unless it appears by necessary implication that the Crown is bound thereby.

[69]   Whilst the words used are different to those in s 27 of the New Zealand Act, in my view the effect of those words is virtually the same. The Crown is not bound by statute unless expressly stated or necessarily implied as such.

[70]   I accept that statutes can bind the Crown by necessary implication, but it is important to note the stringency involved in finding that an implication is necessary. The concept is discussed in Burrows and Carters Statute Law in New Zealand:25

25 Ross Carter Burrows and Carter Statute Law in New Zealand (5th ed, LexisNexis, Wellington, 2015) at 323; and see also Laws of New Zealand: Interpretation at [89] where it is stated that the scope and operation of s 27 of the Interpretation Act 1999 is uncertain but it seems that despite its apparently broad effect, a large number of statutes that do not contain an express provision binding the Crown are held to do so by necessary implication.

A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context. It distinguishes between what I would have been sensible or reasonable for Parliament to have included or what Parliament would if it had thought about it, probably have included and what it is clear that the express language of the statute shows that the statute must have included. A necessary implication is a matter of express language and logic not interpretation.

[71]   Mr Harrison submitted that if the Kingdom is bound by the Tongan Reciprocal Enforcement of Judgments Act by necessary implication, then this would effectively put foreign judgments on a superior footing, as regards enforcement, to a judgment of the Tongan Court against the Kingdom, which must be enforced pursuant to the Tongan Crown Proceedings Act. In effect, it would allow foreign courts to bind the Kingdom more easily in the Tongan court. As a matter of policy and common-sense, that cannot be the case.

[72]   I agree with Mr Harrison’s submission that it is the Tongan Crown Proceedings Act that is at the heart of this case, not the Reciprocal Enforcement of Judgments Act.

Enforceability at common law

[73]   In relation to the enforceability of a New Zealand judgment in Tonga pursuant to Tongan common law, I find that the plaintiff has failed to establish that the operation of the Tongan Crown Proceedings Act does not exclude enforcement at common law. For reasons set out above, the recognition and enforcement of judgments against the Kingdom in Tonga is governed exclusively by the Tongan Crown Proceedings Act.26

Other factors relevant to the issue of determining appropriate forum

[74]   Having concluded that a Tongan court would be in no better position than a New Zealand court to provide effective relief to the plaintiff, I now turn to address the

26 I note, however, that Mr Harrison at [24] of his supplementary submissions (dated 21 June 2019) accepted that for a foreign judgment to be recognised and ultimately enforced at Tongan common law, the foreign court must have had jurisdiction over the defendant in common law terms. Qualifying factors are said to include submission to the jurisdiction. In this case, I have of course concluded that the Kingdom has submitted to the New Zealand jurisdiction and on the basis of Mr Harrison’s submission it could be argued (but this is not clear) that he has accepted that a New Zealand judgment might be enforceable against the Kingdom in accordance with the Tongan common law.

question of whether there are any other factors relevant to the assessment of whether New Zealand is the appropriate forum.

[75]   I accept the argument for the plaintiffs that the governing law of the contracts at issue (that is, New Zealand law) is a strong factor supporting New Zealand as the appropriate forum for the litigation. I also find that the overseas defendants, which include the Kingdom, will not suffer an unfair disadvantage if the New Zealand court assumes jurisdiction. All parties have instructed New Zealand-based counsel.

[76]   As to convenience and expense, the plaintiffs responsibly accept that these factors are probably neutral factors.

[77]   While the amount at issue is, as the plaintiffs submit, not a trifling claim, I accept the submission for the Kingdom that this has no real bearing on the question of the appropriate forum.

[78]   I also find that New Zealand is the forum which has a real and substantial connection with the proceedings. Again, however, I do not see that as a decisive factor because, as Mr Harrison points out, there is merit to the argument that there was also a meaningful connection with Tonga.

Conclusion

[79]   In considering all of the factors relevant to the determination of what is the appropriate forum, I find that the choice of law expressed by the parties (New Zealand law) and my findings that enforceability of a New Zealand judgment in Tonga would not present any real difficulties, lead me to the conclusion that New Zealand is the appropriate forum for the trial. While there can be no suggestion that the courts of Tonga are unable to determine an apparently straightforward claim under an alleged guarantee, the parties choice (which, by implication, is New Zealand law) should be respected in applying New Zealand law as the proper law of contract.

[80]I thus conclude that New Zealand is the appropriate forum.

[81]   Having determined that service was legitimately effected outside New Zealand without leave pursuant to r 6.27(2)(b)(iv) and my conclusion that this Court is the appropriate forum (r 6.28(5)(c)(d)), I find that the application by the plaintiffs to set aside the protest to jurisdiction in respect of both defendants should be granted.

Result

[82]   The interlocutory application by the plaintiffs dated 8 February 2019 to set aside the defendants’ appearance under protest as to jurisdiction is granted and the protest is set aside pursuant to r 5.49 of the High Court Rules 2016.

[83]   As to the question of costs, my preliminary view is that the plaintiffs, having succeeded, should be awarded costs and on a 2B basis. If the parties cannot agree on costs, then memoranda are to be filed within 14 days.

[84]   The summary judgment proceedings are to be listed again in the Summary Judgment List on 23 July 2019.

Associate Judge P J Andrew