Huljich v McCaffrey
[2024] NZHC 361
•28 February 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1923
[2024] NZHC 361
BETWEEN CHRISTOPHER PETER HULJICH
Plaintiff
AND
PATRICK JOHN MCCAFFREY
Defendant
Hearing: 8 February 2024 Appearances:
D H McLellan KC and H P Short for Plaintiff
Judgment:
28 February 2024
JUDGMENT OF O’GORMAN J
This judgment was delivered by me on 28 February 2024 at 3 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Harmos Horton Lusk Limited, Auckland D H McLellan KC, Barrister, Auckland H P Short, Barrister, Auckland
HULJICH v MCCAFFREY [2024] NZHC 361 [28 February 2024]
Overview
[1] The plaintiff, Mr Huljich, has commenced proceedings against the defendant, Mr McCaffrey, originally seeking to recover certain assets, or alternatively compensation. The claim is that Mr McCaffrey obtained these assets by taking steps overseas as a recovery expert. Those recovery steps in turn relate to earlier and separate alleged fraudulent misappropriations by a Hong Kong broker, impacting many other investor victims from other countries.
[2] The defendant is a citizen of the United Kingdom, who is ordinarily resident in Dubai, United Arab Emirates. However, this proceeding was personally served on Mr McCaffrey in Nairobi, Kenya on 4 November 2022. The assets that are the subject of this proceeding are located overseas. Their precise location is unknown, but the most recent information indicates they are somewhere in England.
[3] Mr McCaffrey did not file any statement of defence, nor did he take any other step in this proceeding (such as protesting jurisdiction). This is an undefended application by way of formal proof pursuant to r 15.9 of the High Court Rules 2016.
[4]There are three causes of action pleaded in the statement of claim:
(a)Contractual claim: the first cause of action is a contractual claim seeking specific performance and damages in respect of an Assignment Agreement dated 26 September 2012.
(b)Conversion/Detinue: the second cause of action is for detinue or conversion.
(c)Constructive trust: the third cause of action alleges an institutional “common intention” constructive trust, based on expansion of the principles in Lankow v Rose.1
1 Lankow v Rose [1995] 1 NZLR 277 (CA).
[5] Overall, in respect of these three causes of action (and following an election of damages instead of specific performance),2 the plaintiff seeks judgment of:
(a)damages in the sum of NZD 12,892,040; and
(b)interest and costs.
Factual background
[6] On 2 August 1999, Mr Huljich advanced the sum of USD 1.5 million for the purposes of a long-term investment brokered by Mr Olliver, an investment broker acting for Ascent Ltd.
[7] In or about early 2000, the entirety of the investment fund was lost as a result of misappropriations by a Hong Kong-based investment broker (“Mr H”). The broker in Hong Kong fraudulently misappropriated investment funds, not only from the plaintiff and Mr Olliver, but also from a large number of other investor victims from many other countries. The total amount fraudulently misappropriated is thought to total some hundreds of millions in US dollars.
[8] Mr Huljich and Mr Olliver agreed to work together to try to recover the misappropriated assets, with Mr Olliver leading the recovery efforts on their behalf. As far as Mr Huljich and Mr Olliver know, other investor victims did not lodge claims with authorities or actively pursue their own remedies, given the embarrassment factor and the inherent legal and jurisdictional problems involved in international fraud offending.
[9] In early October 2003, Mr Olliver engaged the services of TASK International Ltd (TASK) to assist in identifying and recovering the investment fund from Mr H. The defendant, Mr McCaffrey, worked for TASK at that time. Mr Olliver and TASK signed an “Engagement and Services Agreement” made on 8 October 2003. TASK was engaged in the capacity of an “independent consulting contractor” (cl 2). Under that same clause, Mr Olliver agreed that any “work product” generated by TASK
2 Chatfield v Jones [1990] 3 NZLR 285 (CA) at 290.
would remain the sole property of TASK and would only be provided to the client at the sole discretion of TASK. In addition, the contract provided an entitlement for TASK to be reimbursed for all expenses, supported by a USD 30,000 retainer (cls 3 and 4), and an irrevocable Finder’s Fee or Commission of 20 per cent on any and all sums collected (cl 6). Clause 10 provided that the agreement was governed by the laws of the State of Florida, United States of America which was agreed to be the “proper venue for any litigation involving this Agreement”, but that any controversy or claim arising out of or relating to the Agreement would be settled by binding arbitration. Clause 13 provided that the agreement could not be assigned without the written approval of all parties.
[10] As a result of the inquiries undertaken by TASK (via Mr McCaffrey), the plaintiff and Mr Olliver learnt that Mr H had purchased several valuable assets in the United Kingdom and Europe using the misappropriated funds. Among other things, these were reported to include rare watch, pen, and gold coin collections.
[11] After that, Mr Olliver says he was told by Mr McCaffrey that TASK was no longer prepared (or did not have the resources) to meet the upfront cost of recovering the assets. The defendant offered to continue the asset recovery role in his personal capacity, which Mr Olliver agreed to. There was no formal documentation of this change until September 2012, after Mr McCaffrey had recovered the assets that are the subject of this claim.
[12] Mr Olliver’s evidence is that by 25 September 2012, Mr McCaffrey had successfully identified and recovered several assets from Mr H, located in up to five locations around Europe. Mr Olliver says that Mr McCaffrey had taken ownership of the assets personally, “on behalf of Mr Huljich, me and the other investors that were looking to recover from Mr [H]”. Mr Olliver explains that taking ownership was used as a form of security, to ensure that appropriate arrangements were made for Mr McCaffrey’s remuneration and reimbursement of recovery and storage costs (claimed to be several hundred thousand pounds).
[13]Two contracts were entered into around that time.
(a)Recovery Agreement: On 25 September 2012, Mr Olliver and Mr Huljich entered into an “Agreement for the Recovery and Realisation of Assets” (Recovery Agreement). Part A set out the background of how assets “believed to be some of the assets purchased by the fraudster” had been recovered and were currently owned by the UK recovery agent, Mr McCaffrey. This agreement required Mr Olliver to enter into two contracts. The first was to be with Mr McCaffrey in the form annexed to the Recovery Agreement (the Assignment Agreement referred to below). The second was to be with Keith Cook to appoint him as selling agent of the assets. Clause D1 then provided for all proceeds of those sales to be accounted for in a Solicitor Trust Account at Bargate Murray (a London law firm). Clauses D2 and D3, along with schs A and B, provided for how the proceeds would be disbursed in three phases. Under the first, a
7.5 per cent commission on Mr Huljich’s investment funds recovered was to be paid to Auckland barrister Charles Sturt, and up to $100,000 paid to Mr Olliver to reimburse for past costs incurred. Then the second phase provided for 30 per cent of the net proceeds to be paid to Mr McCaffrey, and the 70 per cent balance applied against further recovery costs incurred and the capital invested by both Mr Huljich and Mr Olliver. Then the final third phase was for distribution of surplus recoveries (these were to be applied 57/70 or 81.4 per cent to Mr Huljich and the balance to Mr Olliver). If Mr Olliver breached the agreement, then Mr Huljich could increase his own share to 60/70 or
85.7 per cent. Clause E8 provided that the agreement is governed by the laws of New Zealand, and that the parties submit to the non-exclusive jurisdiction of the courts of New Zealand in relation to all disputes “arising out of or in connection with this agreement”.
(b)Assignment Agreement: On 26 September 2012, Mr Olliver and Mr McCaffrey entered into an “Agreement for the Assignment and Sale of Assets” (Assignment Agreement). The signature of both parties was
witnessed by Mr Sturt. The document states that the Assignor (Mr McCaffrey) is the owner of certain assets (being any and all assets recovered from the fraudster, including artwork and a world class watch and pen collection), and that such assets are unencumbered and “currently in the possession, custody or control of the Assignor”. Under cl 1 of that agreement, the Assignor agrees to assign to the Assignee (Mr Olliver) all rights of ownership over the assets “to sell or otherwise dispose of for full value”. Clause 5 provides for the transfer to take place progressively, to be completed within a period of 26 weeks (i.e., by 26 March 2013). In consideration the Assignee agreed to pay GBP 25,000, plus storage costs of up to GBP 3,000. Clause 7 provided that the Assignor would receive 30 per cent of the net proceeds of sale. Clause 8 provided that the agreement is governed by the laws of New Zealand, and that the parties submit to the non-exclusive jurisdiction of the courts of New Zealand in relation to all disputes “arising out of or in connection with this agreement”.
[14] Despite his obligations in the Assignment Agreement, Mr McCaffrey did not transfer the assets to Mr Olliver — not by the deadline of 26 March 2013, nor subsequently.
[15] During the six-year period from March 2013 to 2019, Mr Olliver was in regular contact with Mr McCaffrey and travelled to the United Kingdom on multiple occasions. During one trip in around January 2019, Mr Olliver visited a storage facility with Mr McCaffrey in England. He was shown several of the assets listed in a schedule and several vehicles and car parts that had not yet been listed or valued. Among the assets inspected were several packs of gold coins, a collection of Rolex and other rare watches, a collection of rare pens, and approximately 50 or more paintings wrapped in bubble wrap.
[16] On 25 August 2021, Mr McCaffrey sent a text with an attached inventory of the assets that were to be transferred (the Assets). The total value of the Assets as listed in that schedule is GBP 8,894,000.
[17] On 8 September 2021, Mr McCaffrey sent a photo via text message of that same schedule with an endorsement and his signature, confirming that he had endorsed the attached inventory of assets, that they were securely stored, and that he would confirm their whereabouts. The schedule is the most recent evidence of the value of the Assets. The plaintiff has also filed evidence from a valuer, Mr Tongue, who was able to assess the value of the assets listed in the first four line items, being various gold coins. His expert view was that the values were higher than in the schedule. The other assets cannot be independently valued without access to them.
[18] During October 2021, Mr Olliver was told that one of the people storing the Assets had died. These roadblocks were not ultimately resolved, and the current location of the Assets is unknown.
[19] On 29 November 2021, Mr Olliver and Mr Huljich entered into an agreement under which Mr Olliver agreed to assign all of his rights under the Assignment Agreement to Mr Huljich. The consideration was NZD 1, and an acknowledgment that Mr Huljich had a genuine commercial interest in the assignment because the 2012 Recovery Agreement was for his benefit. Clause 5.4 provides that the governing law is the laws of New Zealand and the parties submitted to the exclusive jurisdiction of the courts of New Zealand in respect of any dispute or proceeding arising out of the deed. A schedule to the agreement provided for the form of a notice of assignment was to be given to Mr McCaffrey. No such notice was given, until service of the present proceeding. Given that this proceeding constitutes notice, and that Mr Olliver has filed an affidavit in support, I consider it unnecessary for Mr Olliver to be a named as a party in the proceeding because of his status as assignor.3
Formal proof hearings
[20] Under r 15.9(4) of the High Court Rules, the plaintiff must, before or at the formal proof hearing, file affidavit evidence establishing, to a judge’s satisfaction, each cause of action relied on and, if damages are sought, providing sufficient information to enable the judge to calculate and fix the damages.
3 Property Law Act 2007, ss 50 and 51; and Roger Fenton The Laws of New Zealand — Choses in Action (online ed, LexisNexis) at [31].
[21] The plaintiff is only required to prove a cause of action so far as the burden of proof lies on the plaintiff. The plaintiff is not required to engage with any matters of affirmative defences, set-off or counterclaim.4
Jurisdiction and conflict of laws
[22] The two essential prerequisites to the High Court exercising jurisdiction in a civil proceeding are:5
(a)personal jurisdiction; and
(b)subject matter jurisdiction.
[23] The former concerns who can be brought before the Court, which depends on valid service of the proceedings on the defendant in accordance with the High Court Rules.6 The latter concerns the extent to which the Court can claim to regulate the conduct of those persons.7
[24] The fact that a court has personal jurisdiction over a defendant does not mean that it also has subject-matter jurisdiction to hear the claim.8 Unlike in the context of personal jurisdiction, parties are unable to submit or contract out of the ordinary rules of subject-matter jurisdiction.9
[25]For subject-matter jurisdiction, there are two questions that arise:10
(a)does the court have subject-matter jurisdiction over the kind of issue that is before it; and
4 Ferreira v Stockinger [2015] NZHC 2916 at [36].
5 Ludgater Holdings Ltd v Gerling Australia Insurance Co Pty Ltd [2010] NZSC 49, [2010] 3 NZLR 713 at [21] and [21], n 31; Brown and New Zealand Basing Ltd [2017] NZSC 139, [2018] 1 NZLR 245 at [9]; and Maria Hook and Jack Wass (eds) The Conflict of Laws in New Zealand (online ed, LexisNexis) at [2.329].
6 Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [52].
7 Ludgater Holdings Ltd v Gerling Australia Insurance Co Pty Ltd, above n 5, at [21] and n 3.
8 The Conflict of Laws in New Zealand, above n 5, at [2.329].
9 At [2.335].
10 At [2.341].
(b)if so, what is the scope of the jurisdiction?
[26] These questions are answered by way of characterisation, in the same way that a court uses characterisation to identify the law applicable to an issue.11 This starts with the basic steps of characterising it, then identifying and applying the relevant choice of law rule.12 For example:13
(a)the general choice of law rule for contracts applies to the existence, validity, performance, and interpretation of contracts;
(b)the lex situs rule applies, amongst other things, to the validity of the assignment or sale of movable property;14 and
(c)torts are governed by the general rules in ss 8–11 of the Private International Law (Choice of Law in Tort) Act 2017.
[27] It is the issue in question, rather than the overall pleaded cause of action, that requires characterisation.15
[28] Each cause of action must satisfy the requirements for service out of the jurisdiction.16 In particular, there must be a head of jurisdiction under r 6.27 or r 6.28 of the High Court Rules that covers the cause of action, as well a serious issue to be tried on the merits. If only some of the causes of action satisfy the requirements for service out of the jurisdiction, the court may order the claimant to file an amended statement of claim that includes only those causes of action over which the court has assumed jurisdiction.17
[29] Where the defendant was served outside of New Zealand under r 6.27 and has failed to appear, judgment by default must not be sealed without the leave of the court. Rule 15.11 ensures that, even in cases where the defendant does not object to
11 At [2.341].
12 At [4.2] and [4.3].
13 At [4.19].
14 At [7.103].
15 At [4.27].
16 At [2.369].
17 At [2.381], referencing Vervoot v Forrest [2013] NZHC 590 at [48].
jurisdiction, the court’s long-arm jurisdiction is limited to claims with a sufficiently close connection to New Zealand. There are three conditions that must be satisfied before a court may grant leave:18
(a)the plaintiff must have been entitled to effect service under r 6.27;
(b)the court must be satisfied that “there is no reason to believe that the service was effected, or may have been effected” contrary to the law of the foreign country;
(c)service must have been effected in sufficient time to enable the defendant to appear.
[30]In this proceeding, the plaintiff relies on r 6.27(2)(a)–(d), (f) and (k):
(a)Rule 6.27(a) applies when a claim is made in tort and damage and any act or omission in respect of which damage was sustained was done or occurred in New Zealand, or the damage was sustained in New Zealand. In this case, the plaintiff says that the Assets subject to the Assignment Agreement, being personal moveable property owned by the plaintiff were tortiously converted and/or unlawfully detained by the defendant. Although the tortious conduct occurred substantively in the United Kingdom, the plaintiff suffered loss or damage in New Zealand.
The plaintiff says that is sufficient to bring his tort claim within the rule.19
(b)Rule 6.27(b)(iv) applies when a contract sought to be enforced or otherwise affected or interpreted in any proceeding, or for the breach of which damages or other relief is demanded in the proceeding, was by its terms or by implication to be governed by New Zealand law. In this case, cl 8 of the Assignment Agreement expressly provides that the agreement is to be governed by, and constructed in accordance with, the laws of New Zealand.
18 At [2.377].
19 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR6.27.08(4)].
(c)Rule 6.27(c) applies when there has been a breach in New Zealand of any contract, wherever made. The plaintiff says this applies because the Assignment Agreement was to be partly performed in New Zealand (such as the payments to be made to the defendant), and there has been a breach.
(d)Rule 6.27(d)(i) applies when the claim is for a permanent injunction to compel or restrain the performance of any act in New Zealand. The relief sought in this claim includes orders for specific performance and/or orders compelling the defendant to transfer the assets subject to the Assignment Agreement to the plaintiff in New Zealand.
(e)Rule 6.27(f) applies when the proceeding relates to the carrying out or discharge of the trusts of any written instruments of which the person to be served is a trustee and which ought to be carried out or discharged according to the laws of New Zealand. The plaintiff asserts that this applies, because the defendant held the Assets on trust for the plaintiff pending the transfer of those assets to Mr Olliver, and the Assignment Agreement was itself governed by the laws of New Zealand.
(f)Rule 6.27(k) applies when the person to be served has submitted to the jurisdiction of the court. In this case, cl 8 of the Assignment Agreement records that “the parties submit to the exclusive jurisdiction of the courts of New Zealand in relation to all disputes arising out or in connection with this agreement”.
[31] I accept that the requirements of rr 6.27(b)(iv) and 6.27(k) apply to the contractual cause of action seeking damages, being a claim based on the Assignment Agreement governed by New Zealand law, with a clause submitting to the jurisdiction of the New Zealand courts. On these grounds, I give leave under r 15.11 for the plaintiff to seal judgment by default for the contractual cause of action, in circumstances where the defendant has not appeared.
[32] I am not convinced that the plaintiff’s other grounds under r 6.27 are robust. However, given that I am granting judgment under the contractual cause of action and not those in tort or constructive trust, I need not determine those issues. I am sceptical about whether damage arising from the defendant’s alleged tortious conduct was sustained in New Zealand, because the assets are wholly located overseas and the transfer and sale process (including payment into the solicitor’s trust account), was to be completed entirely offshore. For similar reasons, I am doubtful that any contractual breaches by the defendant occurred in New Zealand, or that the orders originally sought for specific performance/injunction (delivery up of assets) relate to acts in New Zealand.
[33] In terms of subject matter jurisdiction, I consider that property in the Assets should be determined by the lex situs (i.e., the validity of the assignment or sale of movable property, and any conflicting third party claims such as storage liens or competing transfers). It is now well-established that the validity or effect of an assignment of tangible movables is governed by the lex situs at the time of the assignment.20 Related to that, s 55 of the Limitation Act 2010 removes previous doubt about the substance/procedure dichotomy, and provides that whenever the substantive law of a foreign country is to be applied to a civil proceeding before a New Zealand court, then the limitation law of that foreign country is part of the substantive law of that country and must be applied accordingly. Given that more than 10 years have elapsed since Mr McCaffrey first breached his obligations under the Recovery Agreement and the Assignment Agreement, I expect that limitation and third-party claim issues could arise wherever the Assets are now located. For those reasons, I would not have purported to grant any order requiring delivery up of assets located overseas. At the hearing, the plaintiff made his election and restricted the relief sought to damages, for which I accept that the court can grant relief in personam.21
20 The Conflict of Laws in New Zealand, above n 5, at [7.103]; and H v S [2015] NZHC 310 at [75] and [99].
21 Lord Collins and Jonathan Morris (eds) Dicey, Morris and Collins: the Conflict of Laws (17th ed, Thomson Reuters, 2022) at [11-002].
Contractual cause of action
[34] As the Assignment Agreement was executed after 1 January 2011, the Limitation Act applies.22 Section 11 of the Limitation Act requires claimants to bring a money claim within six years of the date of the act or omission giving rise to the claim. That period would ordinarily have expired in this case on 25 March 2019 (six years from the deadline for transferring the assets under cl 5 of the Assignment Agreement).
[35] However, the plaintiff relies on continuing breaches of contract by representing that the assets would be transferred but continuously failing to do so.23 For example, on 7 September 2021, the defendant endorsed the Schedule of Assets and affixed his signature, stating:
I can confirm that I have endorsed the attached inventory of assets. The assets are securely stored and in due course I will confirm the whereabouts of the assets. Also I will instruct the landlord/agent to work with you [Mr Olliver] on removal of the agree[d] assets.
[36] In addition, the plaintiff submits that the affirmative defences provided in the Limitation Act are not operative in a formal proof hearing. The defences must be pleaded and do not operate automatically.24
[37] For both of these reasons, I accept that limitation issues do not prevent the plaintiff from seeking judgment on the contractual cause of action.
[38] During the hearing, I asked counsel to address me on issues of enforceability/legality of the Recovery Agreement and the Assignment Agreement, if the Assets may have been acquired using funds misappropriated from the Hong Kong investments (called “improperly or illegally obtained client assets” in the 8 October 2003 agreement). Other victims of the misappropriations by Mr H may have potential legal avenues to pursue the proceeds of crime, such as tracing, knowing
22 Limitation Act 2010, s 2.
23 Hugh Beale (ed) Chitty on Contracts (35th ed, Thomson Reuters, London, 2023) at [32-35].
24 Davys Burton v Thom [2007] NZCA 215, [2008] 1 NZLR 193 at [79].
assistance and receipt25 claims. The damages sought in this proceeding reflect the value of the Assets, which far exceeds the value of the plaintiff’s lost investment pursued in the recovery steps.
[39] First, the plaintiff points out that much of the difference is explained by increases in value over a lengthy time period. The plaintiff invested USD 1,500,000 with First Suisse Trust Co Ltd in August 1999. The Assets recovered 12 years later were warranted as at September 2012 to be worth at least GBP 4,000,000. By August 2021 (another 9 years later), those Assets had increased in value to GBP 8,984,000. Based on the conversion rate provided at the hearing of 2.05, this converted to NZD 18,417,200.
[40] Secondly, the plaintiff observed that claims in knowing receipt and dishonest assistance have not been pleaded in this proceeding, and it is unclear to what extent the Court can, on a formal proof hearing, consider principles relating to unpleaded claims, when it is not permitted to consider counterclaims, set-off or affirmative defences. In any event, the plaintiff’s position is that such unpleaded claims do not operate to undermine the validity or legality of the contract, and there was no dishonesty on the part of the plaintiff or Mr Olliver.
[41] I accept that these issues have not been pleaded and I have insufficient facts to consider any issues that might arise involving non-parties. This judgment solely determines the personal contractual commitments as between the plaintiff and defendant. I also accept that, assessing the relative position between these parties, there are obvious reasons why the defendant would not rely on ex turpi causa non oritur action (that no action could be brought on an illegal contract). Furthermore, granting a damages judgment does not constitute receipt, particularly since there are no known assets in New Zealand against which to enforce. So, I am satisfied that these issues are not ultimately for me to assess or determine for this contractual damages claim.
25 The knowledge requirement (if any) for a receipt-based or unjust enrichment claim has been much debated, both in New Zealand and overseas. See Byers v Saudi National Bank [2023] UKSC 51; [2024] 2 WLR 237 at [29], [30] and [33]–[35].
[42] The object of contractual damages is to restore the injured party to the position he or she would have been in were it not for the breach. This generally involves an expectation measure, being the difference between the value contracted for and the value obtained.26 The Assignment Agreement provided for Mr McCaffrey to retain 30 per cent of the net proceeds of sale of the Assets. Correspondingly, the plaintiff’s contractual expectation was to receive 70 per cent of the value of the Assets.
[43] The evidence on which the plaintiff relies to substantiate the existence and value of the Assets comes from the defendant. As such, it is hearsay because the defendant is not giving evidence as a witness. The plaintiff contends that the evidence is admissible under ss 17 and 18 of the Evidence Act 2006 on the grounds that the defendant is unavailable as a witness and there is a reasonable assurance of reliability given that the statements from Mr McCaffrey were against his interests.27 I admit that evidence on that basis, for formal proof purposes.
[44] The value of the Assets on the date of hearing was converted by the plaintiff to a sum of NZD 18,417,200 (based on a 2.05 conversion rate on the date of hearing). This results in a damages sum of NZD 12,892,040 (using the expectation measure of 70 per cent of the value).
Conversion/Detinue
[45] During the hearing, I confirmed that the plaintiff is not asserting any tracing remedy, nor any other type of entitlement based on the misappropriations by Mr H. Mr Huljich is also not asserting any agency relationship for the recovery steps taken by the defendant. Rather, the plaintiff acknowledges and relies on the contractual terms in the Assignment Agreement recording that the defendant was the “owner” of the Assets, which were both unencumbered and “currently in the possession, custody or control of the Assignor”. The plaintiff’s alleged entitlement to the Assets for the purposes of the conversion/detinue claim derives solely from the contractual obligations to transfer the Assets as set out in the Assignment Agreement.
26 Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR 726 at [27] per Elias CJ.
27 Andru Isac (ed) Cross on Evidence (online ed, LexisNexis) at [EVA18.2].
[46] In those circumstances, I do not regard this as providing a proper foundation for a concurrent cause of action in tort pursuable in this jurisdiction if the contractual cause of action is unavailable. In practical terms, the duty asserted in tort is necessarily covered by the duties asserted in contract.28
[47] Where there is a contractual commercial relationship, the contractual terms should ordinarily control the relationship between the parties, unless for some special reason it is fair and just that there be obligations in tort.29 This reflects the fundamental difference in how the obligations arise:30
There are in essence two branches to what might compendiously be called the law of obligations. The first branch is where obligations are voluntarily or consensually assumed. The second branch is where they are imposed by law. Speaking both broadly and generally the first branch represents the field of contract and the second branch the field of tort and equity. An obligation is imposed by law in tort because the obligation is seen as being just and reasonable and, one might add, sound in principle. The same rationale might well be given for obligations imposed in equity. If a plaintiff is trying to cast an obligation on to a defendant in contract he must be able to show that the defendant has assumed that obligation either expressly or by clear and necessary implication. In tort or in equity an obligation is imposed essentially because the law sees it as both just, reasonable and sound in principle that such obligation be imposed.
My point is that when the parties have already assumed by contract voluntary obligations it will seldom in my view be just, reasonable or sound in principle for the law to impose additional obligations in tort. Where the asserted duty, ex hypothesi, does not exist in contract because it has not been voluntarily assumed either expressly or by implication, the law should not strive to impose the equivalent duty in tort.
[48] Section 8 of the Private International Law (Choice of Law in Tort) Act provides that the applicable law is “the law of the country in which the events constituting the tort in question occur”. Section 9(1) provides that the general rule is displaced if the court determines that it is “substantially more appropriate” for the law of another country to be the applicable law. Section 11(2)(c) provides that the Act does not preclude “recognition or development of a choice of law rule giving effect to an agreement as to the applicable law”.
28 Simms Jones Ltd v Protochem Trading NZ Ltd [1993] 3 NZLR 369 (HC) at 374.
29 At 376, referencing South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282 (CA) at 318 and 319.
30 Sinclair Horder O'Malley & Co v National Insurance Company of New Zealand Ltd [1992] 2 NZLR 706 at 719, quoted with approval in Simms Jones Ltd v Protochem Trading NZ Ltd, above n 28, at 375.
[49] Overall, I do not consider that there are proper grounds for the imposition of any separate or additional liability in tort, particularly given my various concerns including about subject-matter jurisdiction for assets located and converted overseas (in which case the lex situs would more appropriately govern), and whether there are grounds for service of that cause of action overseas under r 6.27.
Constructive trust claim
[50] As discussed in Almond v Read, constructive trusts can be divided between institutional constructive trusts and remedial constructive trusts:31
An institutional constructive trust is one which arises by operation of the principles of equity and whose existence the Court simply recognises in a declaratory way. A remedial constructive trust is one which is imposed by the Court as a remedy in circumstances where, before the order of the Court, no trust of any kind existed.
[51] Rule 6.27(2)(l) provides for service out of the jurisdiction “when a claim is made for restitution or for the remedy of constructive trust and the defendant’s alleged liability arises out of acts committed within the jurisdiction”. The question is whether “a substantial part of the acts [that gave rise to the alleged liability], viewed as a whole” took place within the jurisdiction.32
[52] As discussed in Americhip Inc v Dean, a court has jurisdiction for claims concerning the ownership or possession of property within jurisdiction, including claims against property within jurisdiction which are (allegedly) the subject of a constructive trust arising from (allegedly) corrupt acts by the defendants overseas.33 The same is not necessarily true for property and misconduct entirely overseas.
31 Almond v Read [2019] NZCA 26 at [172]–[173], quoting Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 171–172.
32 The Conflict of Laws in New Zealand, above n 5, at [2.213] referring to NABB Brothers International Ltd v Lloyds Bank International (Guernsey) Ltd [2005] EWHC 405 (Ch),[2005] ILPr 506 at [83].
33 Americhip Inc v Dean [2014] NZHC 450 at [48], referring to Islamic Republic of Pakistan v Zardari [2006] EWHC 2411 (Comm) (Pakistan had claimed a constructive trust over properties located in Britain that had allegedly been bought with the proceeds of bribes and secret commissions taken in Pakistan).
[53] As observed in Schumacher v Summergrove Estates Ltd,34 controversy still surrounds the true character of constructive trusts as proprietary or restitutionary, substantive or procedural. The orthodox view of constructive trusts in private international law is that what must be classified is not the trust but the obligation or interest or event that will lead a court to declare or impose it.
[54] The significance of the constructive trust cause of action was diminished once the plaintiff elected to seek damages rather than orders for the delivery up of the Assets. In any event, similar to the tort cause of action, I do not consider that there are proper grounds for the imposition of any separate or additional liability under an institutional constructive trust. Rather, the personal entitlements as between the plaintiff and defendant arising from the intentions recorded in the contractual arrangements are properly governed by the contract cause of action.
Result
[55] I give leave under r 15.11 of the High Court Rules for the plaintiff to seal judgment by default for the contractual cause of action, in circumstances where the defendant has not appeared.
[56]For the contractual cause of action, I award:
(a)damages of NZD 12,892,040;
(b)interest from the date of this judgment until the date of payment under the Interest on Money Claims Act 2016; and
(c)costs on a 2B basis.
O’Gorman J
34 Schumacher v Summergrove Estates Ltd [2014] NZCA 623, [2014] 3 NZLR 599 at [37].
0
10
1