Vector Limited v Sunverge Energy Incorporated

[2018] NZHC 1936

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2980

[2018] NZHC 1936

BETWEEN

VECTOR LIMITED

Plaintiff

AND

SUNVERGE ENERGY, INCORPORATED

Defendant

Hearing:	3 July 2018
Appearances:	N F Flanagan and T C Clark for the Plaintiff S S Cook and L C Sizer for the Defendant
Judgment:	31 July 2018
Reissued:	9 August 2018

(RE-ISSUED) RESERVED JUDGMENT OF ASSOCIATE JUDGE SMITH

This judgment was delivered by me on 31 July 2018 at 3.30pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors / Counsel: Meredith Connell, Auckland Buddle Findlay, Auckland

VECTOR LTD v SUNVERGE ENERGY, INCORPORATED [2018] NZHC 1936 [31 July 2018]

[1]                 On 31 July 2018 I gave a reserved judgment, on a protest by the defendant to the New Zealand jurisdiction. The reserved judgment was issued confidentially to counsel only at that time, to enable them to identify any confidential information that might be contained in the draft judgment that should be redacted, to ensure compliance with certain confidentiality orders that had been made on 22 June 2018 for the purpose of protection of commercially sensitive information. Counsel have since filed memoranda on that issue. I now re-issue the judgment on a "public" basis (with some passages redacted to ensure compliance with the 22 June 2018 confidentiality orders).

[2]                 The plaintiff (Vector) sues the defendant (Sunverge) for the supply of allegedly defective solar energy storage systems (Sunverge Units) manufactured in the United States and sold by Sunverge to Vector for installation at the homes of Vector's customers in New Zealand.

[3]                 Sunverge is an American company, registered in Delaware, but carrying on business in California. It says that the dispute should be heard and determined in California, and it has filed a protest to the New Zealand jurisdiction. Vector applies to set aside Sunverge's protest to the New Zealand jurisdiction.

Background

[4]                 In or about March 2013, the parties entered into an agreement (the Umbrella Agreement) setting out the relevant terms on which Sunverge would enter into contracts to sell Sunverge Units to Vector.

[5]                 Each contract entered into pursuant to the Umbrella Agreement would incorporate the General Conditions at Schedule 2 to the Umbrella Agreement, and the Particular Conditions at Schedule 1. The General Conditions would apply unless an alternate instruction was given in the Particular Conditions. To the extent that certain clauses and subclauses of the General Conditions and the Particular Conditions were not applicable to a certain contract job, those clauses would be deemed not to apply to that contract job.

[6]                 The Umbrella Agreement included warranties by Sunverge that the goods would remain fit for purpose for a period of 12 and one half years,1 and that the goods would be of merchantable quality and free from defects in design, material and workmanship.2

[7]                 The General Conditions in the Umbrella Agreement (ie the Schedule 2 provisions) provided that if Sunverge breached either of those warranties, Vector would be entitled to reject the non-complying goods and obtain from Sunverge, at Vector's option, a refund of the purchase price paid in respect of the non-complying goods, or replacement goods. Alternatively, Vector would be entitled to accept the non-complying goods and obtain compensation from Sunverge equivalent to the reduction in value of the non-complying goods below the purchase price.3

[8]                 The Particular Conditions in Schedule 1 added a further remedy for Vector in the event of breach of the warranties by Sunverge, directed to the situation where goods supplied by Sunverge had been installed in New Zealand by Vector or its agents. The following subclause (iv) was added to the remedies in cl 11(d) of the Second Schedule:

(iv)"in the case of Goods obtained from  [Sunverge] and installed by  Vector or its agents at any location(s) in New Zealand and not in violation of [Sunverge's] explicit warranties, modes of operation or installation instructions, at Vector's option, receive a refund of the purchase price paid for any faulty or defective Goods or payment on Vector's demand of the cost of repairing or replacing the Goods (including all costs actually incurred by Vector in repairing or replacing the Goods once installed);"

[9]                 Vector says that between September 2012 and 2014, Sunverge supplied it with 295 Sunverge Units. 212 of these Sunverge Units were installed outdoors at the homes of Vector's customers in the Auckland region, and a further two (spare) Sunverge Units were later used to replace two of those Sunverge Units that were found to be affected by rust.

1      Clause 11(a)(iii) of Schedule 2 to the Umbrella Agreement, as amended by Schedule 1 to the Umbrella Agreement.

2      Clause 11(a)(iv) of Schedule 2 to the Umbrella Agreement.

3      Clause 11(d)(i) and (ii) of Schedule 2 to the Umbrella Agreement.

[10]              Vector alleges that the Sunverge Units are defective, in that the cabinet enclosing the Sunverge battery, inverter and control system rusts when exposed to prolonged levels of moisture. It says that the rust is sufficiently severe that it can result in perforation of the cabinet, and that in turn can lead to water penetrating the cabinet. That is said to be incompatible with the operation of the electrical equipment inside, and can pose an electrical hazard.

[11]              Vector has sued Sunverge in this Court for refunds or damages for the allegedly faulty Sunverge Units, in the total sum of US$5,217,500.

Vector's amended statement of claim

[12]              In addition to cl 11 of Schedule 2 to the Umbrella Agreement, Vector relies on the following right to return goods at cl 8 of Schedule 2 to the Umbrella Agreement:

RETURN OF GOODS

If Vector cancels the Order or rejects any Goods in accordance with this Agreement, Vector may, at the risk and expense of [Sunverge], return the whole or any part of the Goods to [Sunverge] and, at Vector's discretion, require [Sunverge]:

(a)to … ; or

(b)refund in full any money paid to [Sunverge] for Goods that have been returned.

[13]              Vector pleads that as early as 21 September 2012 it advised Sunverge that the cabinet materials Sunverge proposed for the Sunverge Units would cause a major rust problem if installed outside. It says that it was reassured by Sunverge that the cabinets were designed to be installed outdoors. Vector then refers to certain communications between the parties in early 2013, in which stainless steel was considered as an alternative material for the construction of the cabinets. It says that it advised Sunverge that if a grade of stainless steel lower than 316 was used, it would need to be sufficiently coated to avoid rust.4

[14]              Vector says that on 30 November 2016, after investigating the extent of the rust issues over a period of some months, it wrote to Sunverge claiming a full refund on

4      In the event, stainless steel was not used. The cabinets were made of powder-coated mild steel.

each of the Sunverge Units that had been installed outdoors, under cl 11(d)(iv) of Schedule 2 to the Umbrella Agreement. It sought to return those Sunverge Units to Sunverge under cl 8 of Schedule 2.

[15]              Vector pleads that Sunverge replied on 13 December 2016, requesting further information about each Sunverge Units affected by rust and contending "that the rust issues are not caused by defects in the Sunverge Units themselves, but instead are caused by improper installation and/or poor maintenance". Sunverge has refused to accept liability for the claimed refunds.

[16]              Vector says that as a result of the claimed defects in the Sunverge Units, they were not and are not:

(a)fit for purpose (being installation outdoors); and/or

(b)of merchantable quality and free from defects in design, material and workmanship.

It says that Sunverge is therefore in breach of the warranties covering those situations in cl 11 of Schedule 2 to the Umbrella Agreement.

[17]              Vector claims a full refund of the purchase prices paid by it (US$5,189,500), together with US$28,000, being the cost of shipping the Sunverge Units back to Sunverge in California.

Sunverge's protest to the jurisdiction

[18]              In its protest, Sunverge says that the Sunverge Units were designed and manufactured in California according to standards, specifications and regulations governed by the law and industry standards of the United States of America. In particular, the steel cabinets which are in issue were sourced, designed, and constructed in the United States, in accordance with United States standards. It contends that the alleged acts and omissions and breaches on which Vector relies occurred wholly outside New Zealand.

[19]              Sunverge says that all of its witnesses on issues of fact are living in the United States of America, and the nature of Vector's allegations may require Sunverge to join third parties situated in America (by cross-claims governed by the laws of the United States). It contends that any judgment Vector might obtain would have to be enforced against it in the United States,  and  that  the  parties  expressly  agreed  that  the  New Zealand Courts would not have exclusive jurisdiction over claims made under the Umbrella Agreement.

[20]              Sunverge further contends that, if this Court assumes jurisdiction, Vector will obtain an unreasonable tactical advantage by putting Sunverge to the disproportionate cost and inconvenience of defending the claim in New Zealand. It says that defending the proceeding in New Zealand would place an added financial strain on it.

Vector's application to set aside the protest, and Sunverge's notice of opposition

[21]              In its application to set aside the protest, Vector says that New Zealand is the appropriate forum for the trial because:

(a)the parties expressly agreed to submit to the non-exclusive jurisdiction of the New Zealand Courts;

(b)New Zealand law governs the Umbrella Agreement;

(c)Vector is a New Zealand company;

(d)the subject of the dispute is products supplied wholly in New Zealand and for use in New Zealand;

(e)the breach of warranties by Sunverge occurred in New Zealand;

(f)a critical issue for determination will be the performance of the Sunverge Units, which can only be assessed in New Zealand and by witnesses in New Zealand. The key witnesses will be those experts giving evidence, having inspected the Sunverge Units;

(g)whether Sunverge may seek to join third  parties  situated  out  of  New Zealand is a matter for Sunverge;

(h)Vector will not obtain an unreasonable tactical advantage if the Court assumes jurisdiction;

(i)the exclusion of express or implied statutory warranties under the Umbrella Agreement is not relevant to the question of jurisdiction; and

(j)the financial position of Sunverge is not relevant to the question of jurisdiction.

[22]              In its notice of opposition, Sunverge repeated a number of contentions set out in its protest, including as to the design and manufacture of the Sunverge Units in the United States, and the possibility that Sunverge may wish to join third parties situated in the United States.

[23]              Sunverge then pleaded that any judgment Vector might obtain in New Zealand would have to be enforced against Sunverge in the United States, but it would not be enforceable there. That was said to be because courts in the United States are unlikely to enforce liquidated damages claims that amount to a penalty, and cl 11(d)(i) of the Umbrella Agreement is such a clause.

[24]              On the relative convenience and expense of proceeding in the High Court of New Zealand (as against the Federal Court in California) Sunverge says:

(a)the relative convenience and expense of the proceeding favours holding the proceeding in the United States of America:

(i)the location of documents and witnesses are primarily from the United States of America:

(1)documentation related to the design and manufacture of the [Sunverge Units] is located in the United States of America;

(2)all of [Sunverge's] factual witnesses are living in the United States of America, particularly California, and the bulk of [Sunverge's] evidence in relation to the alleged defects comes from these witnesses;

(3)expert evidence will be required from persons knowledgeable on United States of America Manufacturing Standards, particularly the NEMA 3R Standard, for the steel cabinets;

…

(ii)one of the key witnesses for Vector (an employee of Vector who was involved in the procurement stage) no longer resides in New Zealand;

(b)defending these proceedings will place an added financial strain on [Sunverge] if the Court assumes jurisdiction; and

(c)[Vector] will obtain an unreasonable tactical advantage by putting [Sunverge] to the disproportionate cost and inconvenience of defending this claim in New Zealand.

Protests to jurisdiction – legal principles

[25]Rule 6.29 of the High Court Rules materially provides:

6.29     Court’s discretion whether to assume jurisdiction

(1)If service of process has been effected out of New Zealand without leave, and the court’s jurisdiction is protested under rule 5.49, the court must dismiss the proceeding unless the party effecting service establishes—

(a)that there is—

(i)a good arguable case that the claim falls wholly within 1 or more of the paragraphs of rule 6.27; and

(ii)the court should assume jurisdiction by reason of the matters set out in rule 6.28(5)(b) to (d); or

…

[26]              It is not disputed that there is a good and arguable case that Vector's claim comes within one or more of the paragraphs of r 6.27. The question is whether the Court should assume jurisdiction by reason of the matters set out in r 6.28(5)(b) to (d).

[27]              Under r 6.28(5)(b), (c) and (d), the Court is required to enquire into whether there is a serious issue to be tried on the merits, whether New Zealand is "the appropriate forum for the trial", and "any other relevant circumstances that might support an assumption of jurisdiction".5

[28]              Sunverge does not suggest that there is no serious issue to be tried. The matters in issue are accordingly the appropriate forum, and whether other relevant circumstances support New Zealand as the jurisdiction in which Vector's claims should be heard.

[29]              The onus is on Vector to show that New Zealand is the appropriate forum. The guiding test is which of the competing forums has the most real and substantial connection with the dispute.6 The relevant factors include:7

(a)the law governing the relevant transactions;

(b)any choice of jurisdiction previously agreed by the parties;

(c)issues of convenience or expense; availability of witnesses;

(d)places where parties resided or carried on business;

(e)whether other related proceedings are pending elsewhere;

5      High Court Rules, Rule 6.28(5)(b), (c) and (d).

6      Spiliada Maritime Corp v Cansulex Limited [1987] AC 460 (HL) at 478; Wing Hung Printing Co Limited v Saito Offshore Pty Limited [2010] NZCA 502, [2011] 1 NZLR 754, at [45] and [46].

7      Wing Hung Printing Co Limited v Saito Offshore Pty Limited, above n 3, at [45] and [46].

(f)whether the New Zealand Court would provide the most effective relief or whether the foreign Court is in a better position to do so; and

(g)whether the overseas defendant will suffer an unfair disadvantage if a New Zealand Court assumes jurisdiction.

The issue

[30]              The issue between the parties is whether the proceeding should be tried in this Court, or whether the proceeding should be heard and determined in California.

The evidence

Vector

[31]              Mr Frederiksens, Vector's head of networks programme delivery, has been with Vector since 2012. He produced a copy of the Umbrella Agreement, and confirmed that approximately 295 Sunverge Units were purchased by Vector from Sunverge and installed in customers' homes in the Auckland region. He said that Vector has experienced systematic issues with the Sunverge Units. Those installed outside rust seriously, to the extent that the cabinets enclosing the battery and electronics perforate.

[32]              Mr Frederiksens said that Vector raised those issues with Sunverge and sought a refund of the purchase price for the Sunverge Units. No such refund has been provided.

[33]              Mr Frederiksens confirmed that Vector has no presence in the United States, and that the evidence it intends to call in the proceeding will come from witnesses based in New Zealand.

[34]              Mr Frederiksens produced copies of correspondence passing between the parties or their solicitors between 9 November 2016 and 16 May 2017.

[35]              Vector's formal notice demanding a full refund for the 211 units installed outdoors (dated 30 November 2016) described some of the cabinets as having become perforated due to the rust within just a few years. Vector contended that it was plain

the Sunverge Units would not survive the 12.5 year warranty period provided under the Umbrella Agreement.

[36]              Mr McNamara, Sunverge's Chief Administrative Officer and General Counsel, replied on 13 December 2016. Mr McNamara asked for full details of each Sunverge Unit that was claimed to be defective, including pictures of the unit, the unit's location, the date of installation and the name of the installer, and copies of any reports about the rust issues. He said that, from Sunverge's previous experience in dealing with Vector on the matter, "it is Sunverge's view that the rust issues are not caused by defects in the unit but are instead due to improper installation and/or poor maintenance (the protective paint was either chipped or scratched during installation or chips or scratches in the paint occurred subsequent to installation). Vector has not provided any information that suggests otherwise".

[37]              Vector rejected that position in a letter dated 3 March 2017, with which it provided Sunverge with details of the affected installations with "all information requested where available". Vector noted that rust was occurring in the same places in many instances, whether or not the particular location could be prone to installation damage. The sheer number of problems, and the uniformity between them, was said to be inconsistent with installation damage, and there was no evidence of installation damage to Sunverge Units that had been installed indoors.

[38]              Mr McNamara reviewed the reports Vector provided, and replied by email on 22 March 2017. He acknowledged there was evidence of rust on 45 of the Sunverge Units on which Vector had sent reports, but in many instances the rust appeared to be minor, "and in many cases, the result of faulty installation". He disagreed that Vector had any basis for a warranty claim. However he did indicate that Sunverge would assist with arranging a third party contractor to inspect the Units and arrange a remediation process that would remove rust from all affected areas. Mr McNamara invited Vector's cooperation in identifying a third party contractor to carry out that work.

[39]              The remediation proposal was promptly rejected by Vector. The rust problems were said to be "widespread and serious", and rust was present in places that could not

have been damaged during installation. Vector considered the units were inherently defective, and beyond repair.

[40]              Mr McNamara sent a detailed response on 17 April 2017. He noted that Vector had provided reports for 45 units only – there were 169 outside units for which no reports were provided, and the reports that were available appeared to be inconclusive. Mr McNamara then said:

(b)Although the reports provided by Vector record varying degrees of rust on the units, they contain no explanation as to its cause. As set out in Schedule A, at least half of the units inspected showed signs of installation defects:

a.20 reports had units missing their protective bolt, which would have allowed water to enter the unit and damage the interior doorframes. The very purpose of this type of bolt is to prevent unauthorized access to the unit and thus reduce the likelihood that it is tampered with and/or left open and exposed to the elements. Any water that enters through this hole would most likely settle on the inner door fold and eventually cause rust;

b.two reports show that the installer had used standard (as opposed to stainless) steel screws, which will rust;

c.five reports show that non-standard air vents were used; and

d.one report shows that additional holes drilled into the cabinet. Not only does this allow water to enter the unit, but also the shavings may cause contact surface rust if not immediately removed.

(c)Further, in almost all instances it was reported that the units were installed in locations which provided little to no protection from the elements (note that the reports state that units that were installed indoors show no signs of rust). Where the units are placed is as much of an installation issue as the matters set out above. The placement of the units was a matter for Vector at its sole discretion. Sunverge did not provide instructions as to where the units ought to be installed, nor did it provide a warranty that the units were impervious to constant dampness. In our view, you certainly could not sit the base of the unit in water and then expect to make a successful warranty claim for rust, which is not that far removed from what is happening in this case where units are sitting in damp conditions (as well as suffering from the installation issues described above). Therefore, without further investigation, Sunverge cannot be certain that these installation faults have not caused or contributed to the rust observed by Vector.

(d)The fact that rust has occurred in damp locations should have been fully anticipated by Vector. Sunverge's listed specifications for the enclosures were that they complied with the United States National

Electrical Manufacturers Association (NEMA) 3/3R requirements. Those requirements state the enclosures have been "designed … when completely and properly installed … to provide a degree of protection against falling dirt, rain, sleet, and snow; and that they will be undamaged by external formation of ice on the enclosure [emphasis added]". When Vector purchased the units it knew that the enclosures were designed to this standard given the above listed specifications and from its own experience with purchasing enclosures for its utility equipment as a core part of its procurement process. Vector was therefore on notice that the enclosures were never intended to be rustproof when placed in certain conditions. Overall, when reading the warranties in light of what both parties understood at the time, we do not accept that the rust issues give rise to a claim for a refund.

(e)Vector has failed to provide reports for the three units it allegedly decommissioned on account of rust issues. Please provide such reports.

(f)We note that all of the units included in Vector's reports have continued to operate without interruption and be fit for purpose, notwithstanding the rust.

[41]              Mr McNamara suggested that the evidence poses more questions than answers. Nevertheless, he said Sunverge remained confident that the rust issues could be remedied,  and  it  was  ready  to  work  with  Vector   to  achieve  that  outcome.    Mr McNamara advised that Sunverge proposed to appoint an independent expert to inspect each of the Sunverge Units, and comment on the extent and cause of the rust and any remediation options available.

[42]              Mr Frederiksens replied on 16 May 2017. He rejected Sunverge's contentions relating to installation as the source of the rust problems. The rust caused by the use of standard (not stainless) screws in two cases was said to be insignificant in the context of the wider problems, and there was no indication that non-standard air vents had contributed to the rust issues, or that a hole drilled in one cabinet was responsible for the widespread rusting of a large number of them. Surface rust from shavings was not the issue – it was structural rust of the cabinets themselves.

[43]Mr Frederiksens went on to say:

Installation has occurred in accordance with Sunverge's own guidelines. None of the units are sitting in pools of water, as your letter implies. The units were installed in an ordinary way for residential properties in Auckland: the issue is that Sunverge appears to have not understood New Zealand conditions. Indeed, your reference to NEMA 3/3R standards rather illustrates that, and

why it seems that the warranty has been breached. Sunverge has apparently assumed that compliance with a US standard would mean that the cabinets were fit for purpose in New Zealand. That is plainly not the case. The risk of that falls squarely on Sunverge as seller of the equipment and provider of an express contractual warranty that the units would remain fit for purpose for twelve and a half years.

Sunverge

[44]              Mr Milani, chief executive of Sunverge, provided an affidavit in opposition. He confirmed that Sunverge is incorporated under the laws of Delaware, but its principal place  of  business  is  in  California.  It  has  had  no  connection  with  New Zealand, apart from the supply of the Sunverge Units which are the subject of this proceeding.

[45]              Mr Milani noted that under the Umbrella Agreement, Vector was appointed Sunverge's exclusive distributor of Sunverge products in New Zealand and Australia. The Umbrella Agreement was for an initial term of five years, which expired in May of this year. Neither party has sought to renew the Umbrella Agreement. There was  a variation to the Umbrella Agreement made in December 2015, which allowed Sunverge to sell products directly into Australia.8

[46]              Vector ordered products from Sunverge between September 2012 and July 2014, but after that date no further products were supplied by Sunverge.

[47]              Mr Milani said that the steel cabinets forming part of the Sunverge Units were manufactured in California, using materials sourced in the United States. They were constructed using powder-coated mild steel, to a United States standard, namely the NEMA 3R Standard.

[48]              Mr Milani said there is no doubt from the email communications that Vector understood at the time that mild steel cabinets would likely suffer from rust issues, 9

8      Mr Milani did not suggest that the amendment affects the issues now before the Court.

9      For example, as early as September 2012 Vector forwarded on to Sunverge an email Vector had obtained from a local sheet metal fabricator stating:

… Mild steel cabinets outside will show rust in 6-12 months,. Powder coating will not be adequate. They should be made in aluminium or stainless steel. If the cabinets are made from mild steel they will need to have an aluminium or stainless steel canopy over the top.

and that those issues would need to be addressed over time through regular maintenance.

[49]              Consideration was given to using certain grades of stainless steel, but ultimately Vector did not require a change to stainless steel, or request that the cabinets be constructed to any higher standard of rust resistance than that provided by the NEMA 3R Standard. 10

[50]              Mr Milani identified three California-based parties who were involved in the manufacture of the cabinets:

(a)Flory Industries, located in the San Joaquin Valley (manufacturer of metal parts from sheet steel);

(b)Maas Brothers Powder Coating, of Livermore, California, who carry out surface preparation and powder coating; and

(c)B & C Painting    Solutions,    of   Stockton,   California    (coating    of fabricated parts, prior to 2015).

[51]              Mr Milani said that it was in September 2014 that Vector first reported to Sunverge that some of the cabinets were developing rust. In 2015 and 2016 the parties worked on options to remediate the rust issues. However, on 30 November 2016, Vector served a notice on Sunverge demanding a full refund for the Sunverge Units, under the warranty provisions at cl 11  of Schedule 2 to  the Umbrella Agreement. Mr Milani said that Sunverge is unaware of the extent to which Vector has sought to mitigate the rust damage to the cabinets.

A covering email dated 21 September 2012 from Brett Tracy-Inglis of Vector warning of major rust problems if the cabinets are powder coated and installed outside, and enquiring whether it was too late to change to marine grade aluminium or stainless steel and powder coat them, was also passed on to Sunverge.

Mr Brock of Sunverge replied that he would take the matter back to his engineering team. He said that the cabinets are designed to be outdoors "so I will figure out the details here".

10 An "Issues-tracking" document, produced by Mr Milani recorded that the next group of Sunverge Units that would be sent would have improved coating "which all agree, may be sufficient. The consensus as of 26 Feb is to see how these go and evaluate it before making a major change to [the cabinets]."

[52]              Mr Milani  confirmed  that  Sunverge  has  no  assets  or  investments  in  New Zealand, and no ties to this country, and that all of Sunverge's documents and witnesses are based in the United States. He said that some of Sunverge's ex-employees who were integral in the procurement of the cabinets and the negotiations with Vector, would be hesitant to be involved in the proceeding as witnesses. Sunverge may also need to join third parties, including parties involved with the manufacture of the cabinets. All services provided by those parties occurred in the United States.

[53]              Mr Milani identified 11 witnesses that Sunverge would "likely need" to give evidence, in addition to himself. Some are said to have been involved in the negotiations for the Umbrella Agreement, and others are said to have been involved in direct discussions over the rust issue. One, Mr Sanders, was the founder and chief technical officer at Sunverge, and he was primarily responsible for the design of the equipment and selection of suppliers. Others are said to have been responsible for participating in or overseeing the design or manufacture of the cabinets.

[54]              In addition, Mr Milani envisaged that Sunverge would wish to call an expert witness on the NEMA 3R Standard.

[55]              Mr Milani said that a key area of enquiry for Sunverge to date has been what was verbally discussed between the parties during weekly telephone conferences during the procurement stage. That included discussion about the use of mild steel instead of stainless steel, and also necessary maintenance of the cabinets.

[56]              Mr Milani said that, until all relevant documents had been disclosed and reviewed, and the cabinets inspected by an expert, the factors contributing to the rust problem would remain unsolved. An obvious starting point will be the use of mild steel in the cabinet construction (in respect of which rusting was a potential outcome known to both parties). However, Mr Milani considered that there would also be issues of construction, coating and maintenance to assess. He said: "As such, we cannot discount the possibility that those third parties… who were involved with either constructing or coating the cabinets could be joined".

[57]              Finally, Mr Milani gave evidence that Sunverge is a "tech company", which is still primarily in the start-up phase. If Sunverge is subject to intensive litigation, that would place a significant strain on its financial position. That strain would be even greater if Sunverge were required to face the proceeding in New Zealand.

Sunverge evidence of the law in California

[58]              Mr Milani produced a copy of a memorandum from Sunverge's Californian counsel, Mr Dylan Savage, of Palo Alto, addressing the following three issues:

(a)the ability of United States Federal Courts to hear cases based on foreign law;

(b)the enforceability in California of foreign judgments; and

(c)United States-based witnesses giving evidence in foreign court proceedings.

[59]Mr Flanagan did not object to the production of the memorandum.

[60]The memorandum said:

…

U.S. federal courts, including those located within California, are often tasked with applying foreign law. See, e.g., De Fontbrune v. Wofsy, 838 F.3d 992, 997 (9^th Cir. 2016) (indicating courts are encouraged to "independently research and analyze foreign law – particularly as such issues will undoubtedly continue coming to the federal courts with increasing frequency as the global company economy expands and cross-border transactions increase") (internal citation and marks omitted); see also Cyberscan Tech., Inc. v. Sema Ltd., No. 06 Civ. 526 (GEL), 2006 U.S. Dist. LEXIS 90375, at

*38 (S.D.N.Y. Dec. 13, 2006) (noting the "task of decided foreign law" is a "chore federal courts must often perform"). The Federal Rules of Civil Procedure, which govern civil proceedings in U.S. district courts, specify that a party who intends to raise an issue of foreign law must simply give notice "by a pleading or other writing". Fed. R. Civ. P. 44.1. In determining foreign law, courts have broad latitude to "consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the [U.S.] Federal Rules of Evidence." Id.; see also, e.g., De Fontbrune, 838 F.3D at 1000 (Rule 44.1 establishes "broad boundaries" for courts to consider foreign legal materials, including at the pleadings stage).

In California, recognition of a monetary judgment rendered by a foreign tribunal is governed by the Uniform Foreign-Country Money Judgments Recognition Act ("UFCMJRA"), Cal. Code Civ. P § 1713 et seq. The UFCMJRA applies to foreign judgments that "[g]rant[] or den[y] recovery of a sum of money" and are "final, conclusive, and enforceable" under the law of the foreign country where rendered. Id. § 1715. A foreign judgment shall not be recognized if, among other things, it is "repugnant to the public policy of [California] or of the United States." Id § 1716. The party seeking recognition of the foreign judgment "has the burden of establishing that it is entitled to such recognition." Id § 1715(c). The UFCMJRA does not apply to judgments for non-monetary damages, such as specific performance. See id. § 1715(a)(1).

Under California law, an award of liquidated damages pursuant to a contractual provision may be considered an unenforceable penalty. In particular, a liquidated damages clause will "generally be considered unreasonable, and hence unenforceable … if it bears no reasonable relationship to the range of actual damages that the parties could have anticipated would flow from a breach." Press Rentals, Inc. v. Genesis Fluid Solutions Ltd., No. 5:11-CV-02579-EJD, 2014 U.S. Dist. LEXIS 564, at *33

(N.D. Cal. Jan. 3, 2014) (quoting Ridgley v. Topa Thrift & Loan Assn., 17 Cal. 4^th 970, 977 (1998)); see also Cal. Code Civ. P. § 1671. We have not assessed whether California courts would consider the application of (or award pursuant to) a liquidated damages provision to be against public policy in the regard discussed above.

To obtain federal court assistance in securing the testimony of a witness residing in the U.S. for use in a foreign proceeding, an application may be made to the federal court for the district where the witness "resides or is found." 28 U.S.C. § 1782. While a court has authority to grant discovery under Section 1782 so long as the statutory provisions are met – namely, that

(1) the discovery is sought from a person residing in the court's district, (2) the discovery is for use in a proceeding before a foreign tribunal, and (3) the applicant is a foreign tribunal or an interested person – the court is "not required to grant a [Section 1782] discovery application simply because it has the authority to do so." Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264 (2004). Rather, the ultimate decision is within the discretion of the district court, and considers factors such as whether the request would be "unduly intrusive or burdensome." Id. At 265. Moreover, "any person invoking the power of a federal court must demonstrate standing to do so," including by showing "he has suffered a concrete and particularized injury that is fairly traceable to the challenged conduct, and is likely to be redressed by a favourable judicial decision." Hollingsworth v. Perry, 570 U.S. 693, 704 (2013). Discovery may also be taken by voluntary means.

Reply evidence for Vector

[61]              An affidavit was provided by Dr Jonathan Smith, a metallurgical engineer with 35 years' experience in the engineering and materials sector. Dr Smith has inspected many of the cabinets on the Sunverge Units. He said that, when installed outside, the

cabinets can seriously rust, to the point of perforation, and that rusting of that sort is incompatible with their function.

[62]              Dr Smith confirmed that he has read the United States NEMA 3R Standard. He said that the requirements of the NEMA 3R Standard are much like any other technical specifications that he routinely encounters. In his view any qualified expert in New Zealand (including himself) would be able to consider whether the cabinets complied with these standards.

[63]              Mr Frederiksens also provided a reply affidavit. In it, he addressed Mr Milani's evidence that Vector was aware, and agreed, that mild steel cabinets (as used in the Sunverge Units) would likely suffer from rust issues that would need to be addressed over time through regular maintenance. He noted that Mr Milani's views on those issues could not have come from his own personal knowledge, as he only joined Sunverge in December 2017.

[64]              Mr Frederiksens said that Vector did not accept the limitations of mild steel, and did not accept that the cabinets might rust in the way that they have rusted (or indeed that they would rust at all). Nor did Vector accept that the rust in the cabinets could be dealt with by way of regular maintenance.

[65]              Mr Frederiksens annexed copies of some of the correspondence between the parties in which the rust issue was discussed. He summarised this correspondence by saying that Vector persistently raised the issues with Sunverge as and when they were identified. The rust problems were relatively minor at first, but got more and more serious as time went on. Sunverge acknowledged that there was a problem, and there was no suggestion that the fault was anything other than Sunverge's.

[66]              Mr Frederiksens identified nine likely witnesses for Vector, all of whom had day-to-day involvement with the Sunverge Units. With one exception (Mr Cross, who lives  in   Brisbane)   these   witnesses   all   live   in   New Zealand.   In   addition, Mr Frederiksens anticipated that two witnesses from Astech Electrical Ltd, who were responsible for installing the Sunverge Units at customers' homes, and who have

periodically returned to inspect the units, would be called for Vector. Vector's other witness is expected to be Dr Jonathan Smith.

The parties' submissions

Vector

[67]Mr Flanagan first refers to cl 16.6 in the Umbrella Agreement:

Governing Law and Jurisdiction: This Agreement is governed by the laws of New Zealand and the Parties submit to the non-exclusive jurisdiction of the New Zealand courts in respect of all matters relating to this Agreement.

[68]              He submits that Vector's claim is under the Umbrella Agreement, and that, other things being equal, it is preferable for the law of a given jurisdiction to be applied by the Courts of that jurisdiction.11 He submits that due deference should be paid to the parties' choice of law as reflected in the terms of the Umbrella Agreement, and that the choice of law will be a particularly significant factor where the claim involves the interpretation of an agreement, as it does in the present case (particularly on the issue of penalty raised by Sunverge in its notice of opposition).

[69]              New Zealand is also the most appropriate forum having regard to the balance of cost and convenience. Vector is resident in New Zealand, and New Zealand is its principal place of business. By contrast, Sunverge supplies its products and services in a range of countries. In the course of its business it has chosen to enter a commercial contract with a party based in New Zealand, which was wholly to be performed in New Zealand (performance of the contract involved the  supply  of  products  in  New Zealand).

[70]              There are no procedural advantages of having a trial in the United States, and there are some disadvantages. The process is likely to be burdensome and time-consuming for Vector. By contrast, Sunverge has New Zealand counsel and can be assumed to have had New Zealand counsel at least from the time it contemplated entering into the Umbrella Agreement in 2013.

11     Referring to Bomac Laboratories Limited v Life Medicals (MSDN BHD) HC Auckland CIV-2010-404-004654, 5 August 2011, at [13].

[71]              A central issue at trial will be whether the cabinets were fit for purpose.     Mr Flanagan emphasised that there will be issues at trial over the extent of the rusting, and in particular whether it is cosmetic only (as contended by Sunverge), and whether the Sunverge Units have in fact proved fit for purpose. Sunverge has also raised issues over whether the rusting is the result of faulty installation of the Sunverge Units in New Zealand. The most important evidence on these issues will necessarily come from witnesses who have seen the cabinets in New Zealand, and it will be easier to require those witnesses to give evidence in a New Zealand Court. Vector has only one witness overseas, and he is in Australia, where he will be subject to a subpoena issued by this Court.12 There is no evidence of a similar provision for overseas witnesses to be subpoenaed to appear in a Californian Court.

[72]              On Sunverge's claimed need to join third parties based in the United States, Mr Flanagan submits that that is a matter between Sunverge and the manufacturers, and Vector should not have to be concerned with it. He further notes that Sunverge has not provided any evidence of the basis on which third party claims might be brought. Sunverge will not in any event lose any substantive rights if the trial takes place in New Zealand: it can raise any question of indemnity and contribution at the stage of any enforcement proceedings that are taken in California.

[73]              The fact that any judgment against Sunverge in New Zealand will need to be enforced in the United States should be given limited weight.13

[74]In Mr Flanagan's submission, Sunverge's financial position is not relevant.

[75]              Overall, Mr Flanagan  submits  that  the  interests  of  justice  favour  the  New Zealand jurisdiction. The claim is about products supplied in New Zealand, that allegedly failed under New Zealand conditions. New Zealand has the most real and substantial connection with the proceeding.

12     Evidence Act 2006, s 154.

13     Referring to Kiwi Air Limited v UTS Geophysics Pty Limited [2013] NZHC 3236 at [47].

Sunverge

[76]              Mr Cook acknowledges that it has not been confirmed that the third party manufacturers will be joined, but he submits it would be premature to decide to join them while the factors contributing to the rusting of the Sunverge Units remain unresolved. If the third parties are joined, any claims against them would be governed by Californian law.14

[77]              Evidence from the Californian manufacturers will be important whether or not they are joined as parties. That is because, on Vector's own case, the alleged breaches occurred during manufacture. There will be issues over whether the Sunverge Units, as manufactured, were "defective", as Vector pleads. (For example, there will be an issue over whether the coatings applied to the mild steel used in the cabinet manufacture was sufficient to protect the cabinets from rust). If that is right, the critical issue at trial will not be how the Sunverge Units performed in New Zealand, but how they were manufactured, and whether appropriate materials were used. The evidence on those issues will be in California. Representatives of manufacturers are unlikely to give evidence willingly, given Vector's allegations that the units were inherently defective.

[78]              While the United States Federal Court may grant a request from a foreign tribunal for assistance, compliance is discretionary, and the Federal Court will consider whether the request would be "unduly intrusive or burdensome".15 Sunverge would be likely to face significant difficulties and expense if it were required to compel United States witnesses to give evidence in a New Zealand Court proceeding.

[79]              Further, Mr Cook notes that many of Sunverge's witnesses are no longer associated with Sunverge. Those witnesses cannot be compelled to assist Sunverge because of employment obligations. By contrast, Vector will be able to compel any of its New Zealand witnesses to provide evidence in the United States.16

14     Private International Law (Choice of Law in Tort) Act 2017, s 8(1).

15     Intel Corp v Advanced Micro Devices Inc 542 US 241 (2004) at 265.

16     Referring to s 185 of the Evidence Act 2006.

[80]              Mr Cook submits that Vector was already aware of a potential rusting issue before it ordered the Sunverge Units. In those circumstances, the warranty provisions in cl 11 of Schedule 2 may not apply (because of the provision in the Umbrella Agreement, referred to in footnote 1 of this judgment, under which certain clauses and subclauses in Schedule 2 might not apply to particular contract jobs). The issue over the rust damage is more complex than Vector has portrayed it to be. If indeed the design or manufacture of the Sunverge Units turns out to be a substantial issue, all of the evidence on that would be in California.

[81]              Mr Cook submits that Vector would not be automatically able to enforce a New Zealand judgment in California. It would need to initiate recognition proceedings in California. If this proceeding continued in New Zealand and Vector obtained a judgment, Sunverge would have no option but to contest enforceability. Duplication of proceedings arising in that way is an important factor in determining the appropriate forum.17 He submits that enforcement considerations favour California.

[82]              Furthermore, Vector's claim is not a simple claim for a refund under a contract. Many of the Sunverge Units are not rusting, and the end-users have had the benefit of using them for up to five years. In those circumstances, Sunverge has a legitimate argument that any entitlement to refunds under the Umbrella Agreement would be an unlawful penalty under Californian law. If that were the view taken by a Californian Court asked to enforce a New Zealand judgment for the claimed refunds, the Californian Court would likely refuse to enforce the judgment because the unlawful penalty element of it would make the judgment contrary to public policy in California.

[83]              Mr Cook submits that Vector is wrong to assert that New Zealand is the appropriate forum because Sunverge "can raise any question of indemnity and contribution at [the enforcement stage]". There may be procedural constraints that prevent Sunverge from doing so (particularly, limitation issues). And even if Sunverge could  pursue  issues  of  indemnity  or  contribution  at  the  enforcement  stage,  it is

17     B R Films Partnership G-38 v Spin Interactive Limited HC Auckland CIV-2005-404-002295,  25 July 2005 at [37]-[43].

desirable for all relevant parties to the proceeding to be subject to one jurisdiction.18 That is efficient, fair, and minimises the risk of inconsistent judgments.

[84]              Mr Cook submits that comprehensively dealing with all issues, between all parties, should be an important consideration in assessing which forum is the more appropriate.19 In the Citi-March case, Colman J said:

There is, however, one matter which is, in my judgment, highly relevant to the exercise of discretion on this application and that is the fact that if, as may well be the case, the second third and fourth defendants cannot be compelled to participate in an action against all the defendants in Singapore, there will arise a highly unsatisfactory procedural situation in which the action against the first defendants must be pursued in Singapore, whereas the English action against the second, third and fourth defendants must be continued here, for there is no reason to believe that those defendants will be persuaded to submit voluntarily to Singapore jurisdiction. In that event, the plaintiffs would be left in the position where they could not advance their alternative claims against the four defendants all in the same forum. Not only would this be inconvenient; but it would be potentially unjust, for it would preclude the plaintiffs from having the benefit of getting the evidence of all four defendants before the same court. Where, as here, the underlying issue is which, if any, of the several defendants was responsible for the loss and the evidence as to how the goods were cared for is exclusively in the possession of the defendants, a plaintiff who is precluded from joining all of the defendants in the same proceedings is placed in what is potentially an extremely detrimental position, for he may be prevented from deploying the strength of the evidence of one or more of the defendants to make good his claim against another defendant.

[85]              Finally, Mr Cook submits that the relative cost and convenience factors favour California as the appropriate forum. While Vector is a well-resourced, experienced litigant, who can afford overseas Court proceedings, Sunverge is still in the "start up" phase and may face financial difficulty to run the proceeding in New Zealand. However, Sunverge would be able to defend the proceeding more cost effectively in California.

18     Referring to Citi-March Limited v Neptune Orient Lines Limited [1996] 1 WLR 1367 (QB) at 1375.

19     McConnell Dowell Constructors Limited v Lloyd's Syndicate 396 [1988] 2 NZLR 257 at 275 to 276, and Citi-March Limited v Neptune Orient Lines Limited, above n 14, at 553.

Vector's submissions in reply

[86]              Mr Flanagan acknowledged that Vector's amended statement of claim does plead the warranty in the Umbrella Agreement 20 that:

(b)the Sunverge Units supplied by it are … free from defects in design, material and workmanship.

[87]              And at paragraph 28 of the amended statement of claim, Vector alleges that the Sunverge Units were not and are not:

(a)fit for purpose (being installation outdoors); and/or

(b)… free from defects and design, material and workmanship;

and, accordingly, the Sunverge Units supplied to Vector for use outdoors are faulty and defective and in breach of the warranties given by Sunverge … contained in clause 11 of Schedule 2 to the Umbrella Agreement.

[88]              However, Vector's essential claim is that the Sunverge Units were not fit for purpose in New Zealand. Breach of the warranties only arose when the Sunverge Units were installed in New Zealand. Vector does not allege that the cabinets on the Sunverge Units were made "sloppily", or that the Sunverge Units would not have been fit for use in California. They may have worked well in California, but Auckland conditions are different. (Mr Flanagan said the reference in his written submissions to "inherent defects" in the Sunverge Units was only intended to refer to defects "in local conditions in Auckland New Zealand" (when installed outdoors)). Vector's claim is not a tort claim, so it is not required to identify any negligence in the manufacture of the Sunverge Units. The issue is whether they are fit for purpose, namely to use outdoors in Auckland, New Zealand.

[89]              While all the Sunverge Units are sufficiently rust-damaged that Vector is entitled under the Umbrella Agreement to return them and obtain a refund, there has been a "range of performance" of the Sunverge Unit. In situ assessment of a large range of cabinets is likely to be required, and expert witnesses conducting those assessments may need to return for further inspections. The Court may also wish to view the Sunverge Units on site in New Zealand.

20     Clause 11(a)(iv), Schedule 2.

[90]              There is nothing in the point that the Federal Court in the United States has a discretion as to whether it will compel a United States witness to provide evidence in support of a foreign Court proceeding. The same discretion exists in the New Zealand legislation.

[91]              Mr Flanagan submitted that, once a clearly more appropriate forum overseas has been identified, the rule is that the plaintiff has to take that forum as it finds it, as long as substantial justice can be done in that forum. The same applies to a defendant. In this case, Sunverge must take New Zealand (the natural forum) "as it finds it". Any disadvantage to Sunverge in the litigation proceeding in New Zealand would have to be unfair, and there is  nothing unfair  in compelling  a supplier  of goods  to the  New Zealand market to face justice in New Zealand when those goods fail.21

Discussion and conclusions

[92]              In considering which forum is the more appropriate  (the  High  Court  of New Zealand or the Federal Court of the Unites States), the Court will be guided by existing authority, including the matters canvassed by the House of Lords in Spiliada Maritime Corporation v Cansulex Limited (The Spiliada).22 The ultimate question will be which is the forum with which the proceeding has the most real and substantial connection. Relevant factors will include the 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.23

[93]              Other relevant considerations may include whether there are relevant proceedings pending in some other jurisdiction, whether the New Zealand Court will be able to provide the most effective relief, or whether a foreign court is in a better position to do so, and whether an overseas defendant will suffer an unfair disadvantage if the proceeding continues in New Zealand. Any choice of jurisdiction previously agreed by the parties may be an important (although not decisive) factor.24

21     Referring to Haines v Herd [2015] NZHC 3365.

22     Spiliada Maritime Corporation v Cansulex Limited [1987] AC 460; [1986] 3 All ER 843 (HL).

23     Wing Hung Printing Co Limited v Saito Offshore Pty Limited [2011] 1 NZLR 754; [2010] NZCA 502, at [45].

24 At [46].

[94]              The onus of proving that New Zealand is the more appropriate forum falls on Vector.25

[95]              In this case, Vector's one cause of action is based in breach of contract, and the numerous individual contracts for the supply of the Sunverge Units were all governed by the Umbrella Agreement. The fact that the parties chose New Zealand law to govern their contracts, and agreed to submit to the non-exclusive jurisdiction of the New Zealand Courts in respect of all matters relating to the Umbrella Agreement, are powerful considerations in Vector's favour on the appropriate forum issue.26

[96]              So too is the fact that the Sunverge Units were delivered by Sunverge to  New Zealand, and were to be used by New Zealand residential consumers. In that respect, the case is similar to Bomac Laboratories Limited v Life Medicals (MSDN BHD), a decision of Associate Judge Abbott.27 Bomac was a manufacturer of farm products in New Zealand, including medical solutions which it marketed in plastic bags. The defendant (Life Medicals), was a Malaysia-based supplier of PVC bags and tubes, and Bomac alleged that Life Medicals supplied defective bags to it. It sued Life Medicals in this Court at Auckland, alleging breach of the Sale of Goods Act 1908. Life Medicals applied for a stay of the proceeding, contending that Malaysia was the more convenient and appropriate forum.

[97]              The Associate Judge considered many of the factors often used in comparing the convenience of competing forums, were neutral.  For  example,  the  laws  of New Zealand and Malaysia were not considered sufficiently different that they would or might result in an unfair disadvantage to one side or the other, and His Honour did not consider that cost and convenience generally was a factor in favour of one forum or the other. A significant factor which persuaded His Honour that New Zealand was the most appropriate forum was Bomac's need to call evidence from a number of New Zealand-based farmers and veterinarians to establish the extent of its losses.

25 At [44].

26 For example, in TTAH Limited v Koninklijke Ten Cate NV [2016] NZHC 237 in the context of an agreement which involved companies located all over the world, and conducting business on an international stage, it was considered significant that the parties chose New Zealand law to govern the agreement, and there was a non-exclusive jurisdiction clause similar to that in the present case. Edwards J regarded those factors as weighing in favour of New Zealand as the natural forum.

27     Bomac Laboratories Limited v Life Medicals (MSDN BHD) HC AKL CIV-2010-404-004654.

While it would be easy enough to subpoena those witnesses to give evidence in   New Zealand, that was considered to be a far more difficult exercise if the trial were held in Malaysia.

[98]              His Honour was also clearly influenced in coming to his decision by the fact that Life Medicals had elected to supply for the New Zealand market. The Associate Judge said:28

… What is significant, in my view, is that Life Medicals elected to enter into this contract with Bomac, knowing that its  product  would  be  used  in  New Zealand, and that the consequences of any faulty manufacture would be experienced in New Zealand. This is a very real connection. In my view, it tips the scales in favour of New Zealand as the appropriate forum, in large part because, whilst issues as to contractual terms and compliance with those terms can be addressed comparatively fairly in either jurisdiction, it will place Bomac under a substantial disadvantage if evidence of breach and particularly the consequences of breach have to be given in a trial in Malaysia.

[99]              I think similar considerations apply in this case. While Mr Cook endeavoured to persuade me that the issues at trial will or may be substantially concerned with negligent or faulty manufacture of the Sunverge Units in California, it seems to me that the more important evidence is likely to be in New Zealand. The Sunverge Units are installed in homes in New Zealand, and any consideration of whether they were or were not fit for purpose will presumably need to start with an examination of the Sunverge Units themselves. That is likely to be a task for expert metallurgists or engineers,29 and to the extent it has not already been done, it will need to be done in Auckland.

[100]          There are over 200 Sunverge Units installed (outside) in properties in the Auckland region, and it appears from the correspondence between the parties that Sunverge's defence will be partly based on alleged faults in the installation of those Sunverge Units, and/or poor maintenance of them.30 The evidence of how the

28 At [43].

29     Mr Milani himself said in his evidence:

Until the cabinets have been inspected by an expert and all relevant documents have been disclosed and reviewed in the litigation process, the contributing factors in respect of the cabinet rust remain unresolved.

30 As early as November 2014 Sunverge had expressed the view that some paint damage was caused during installation of the Sunverge Units on site in New Zealand. For example, in an email dated 19 November 2014, Ms Emily Hedges of Sunverge wrote:

Sunverge Units were installed and whether or not they have been properly maintained will presumably come from New Zealand–based witnesses, not witnesses in the United States.

[101]          Mr Milani also raises Vector's involvement in the procurement stage, before the supply contracts were made, and in particular its knowledge of the fact that powder-coated mild steel would be used in the cabinet construction. The broad contention is that Vector knew there could be rust issues with mild steel, but it elected to go ahead anyway.

[102]          It appears to me that evidence of communications made during the procurement stage is likely to be either in writing or to have been recorded in writing, and the records  of  such  communications  will  be  produced  just  as  easily  in  New Zealand as in California. I have nothing before me to suggest that particular issues of credibility might arise over what was communicated by whom and when, but if such issues do arise it seems to me they can again be dealt with easily enough in New Zealand (if necessary by hearing any American witness by video-link from the United States). I think the relative ease of production of documentation or oral evidence relating to this pre-contract or "procurement" stage is a neutral factor as between the competing jurisdictions.

[103]          Of  course  the  evidence  is  yet  to  be  heard,  but  it  seems  likely  from   Mr McNamara's letter of 17 April 2017 that evidence will be directed to a number of individual Sunverge Units, and I think it is likely to be more convenient in that situation if the trial takes place in the city where the units are located. That will facilitate any return inspections which might be required during the trial, and allow for the possibility of the Court inspecting the Sunverge Units in situ if it should consider a view to be appropriate.

[104]          I acknowledge that in the correspondence between the parties Vector did raise issues concerning the quality of the steel, or the surface preparation before painting.

… if the rust is due to damage to the paint caused during installation or while on-site, then labour to treat cabinet is responsibility of Vector/Astech [the company engaged by Vector to do the installation work]. For example rust [to Sunverge Unit] V001419 appears to be due to knicks during install – see attached.

For example, on 25 September 2014 Mr Muscroft-Taylor of Vector sent a message to Sunverge raising a question as to whether Sunverge had used marine grade steel on the cabinets. Mr Muscroft-Taylor observed that that could be an issue in regions with high   humidity/moisture   such   as   Auckland.    And   on   10 November   2014   Mr Muscroft-Taylor referred to a photograph he had sent through to Sunverge, which was said to show poor surface preparation of the cabinet prior to painting.

[105]          Also, Sunverge appears to have acknowledged an issue over the paint coating thickness on the steel cabinets, and/or the consistency of its application.31

[106]          So it seems likely that Sunverge will want to raise some issues over the quality of the manufacturing or painting work done for it in California (in particular over the surface preparation and the application of the paint to the steel cabinets). But to the extent such issues may be relevant and admissible as between Vector and Sunverge, it appears they will be the subject of evidence given by experts who have inspected the rusting steel cabinets in New Zealand. Ms Hedges' email of 8 November 2014 makes it clear that equipment is available to test the paint coating thickness and consistency, and presumably the expert witnesses will do that (if necessary) on the Sunverge Units installed in Auckland. Similarly, it appears from the correspondence that any inadequate surface preparation of the steel cabinets before painting is something the expert witnesses should be able to detect from a visual inspection of the Sunverge Units on site in Auckland. Neither party should have difficulty arranging for its expert witnesses to give evidence in a New Zealand proceeding.

[107]          As between Vector and Sunverge, the critical issue seems likely to be whether the Sunverge Units delivered to New Zealand were or were not fit for the purpose made known by Vector to Sunverge, and it is difficult on the evidence before me to see how evidence directed to the process of manufacture of the cabinets is likely to

31     For example, in an email dated 18 November 2014 Ms Hedges set out a proposed basis for dealing with the rust issues, which included:

·If rust is due to improper surface preparation or painting, then labour to treat cabinet is responsibility of Sunverge. Example is Sunverge Unit V001354 – see attached.

And in an email dated 8 November 2014 she had told Vector that Sunverge had "implemented improvements to further prevent rust issues. Additional more expensive equipment has been procured that provides more robust testing of the paint coating thickness and consistency in application. Testing with the new equipment has been incorporated into our process".

assist on that issue. Certainly Sunverge has not explained how such evidence might assist. It appears to be common ground that the cabinets were made from mild steel (powder-coated), and thereafter the Sunverge Units are likely to tell their own story, properly interpreted by expert witnesses on each side. Beyond that, the principal matters in issue between Vector and Sunverge are likely to be limited to what specifications for the Sunverge Units may have been agreed between Vector and Sunverge  (if  any),  whether  the  Sunverge  Units  were  correctly  installed  in   New Zealand, whether they have been properly maintained since installation, and whether there are any other reasons the warranties in the Umbrella Agreement might not be applicable. Taking those issues together, I think they are likely to be more conveniently heard in this Court than in the Court in California.

[108]          The next factor to consider is the evidence of Mr Milani for Sunverge that Sunverge would be put at a serious disadvantage if it were obliged to conduct a defence of the proceeding in New Zealand, rather than in its "home jurisdiction" in California. Mr Milani said that Sunverge is still in the "start-up" phase.

[109]          There are a number of difficulties with this argument. First, I have no evidence before me of the likely cost Sunverge would incur if the case were heard in California. Mr Milani referred to the considerable expense in bringing over its required witnesses and producing evidence in a foreign country, and he considered that the expense of litigation in the United States, whilst no doubt "still considerable", would be less than if Sunverge was required to face proceedings in New Zealand. But I have been given no details of any of that. What would the attorneys' fees be if the case were heard in California, and how would that compare with the costs of New Zealand counsel if the case were heard in Auckland? If attorneys' fees in California would likely be higher than New Zealand lawyers' fees, would the difference cancel out any extra costs Sunverge would incur running the case in New Zealand?

[110]          Mr Cook referred to the decision of the UK Court of Appeal in Carvalho v Hull Blyth (Angola) Limited,32 but I do not think that case assists his argument. In that case, there appears to have been an argument from the (Angola based) defendants that under

32     Carvalho v Hull Blyth (Angola) Limited [1979] 3 All ER 280.

Angolan law they would be able to invoke "economic hardship" as a substantive defence to the claims made against them. But that is quite different from an argument that a party's difficulty in meeting the costs of running the proceeding in the foreign jurisdiction should count in its favour on the issue of forum conveniens.

[111]          Quite apart from those considerations, I am not attracted to what Associate Judge Abbott referred to in Bomac as the "David v Goliath" argument. If it were valid, every overseas defendant sued in a New Zealand court could point to any impecuniosity as a factor in favour of moving the litigation from New Zealand to its home jurisdiction. I bear in mind too that the parties entered into the Umbrella Agreement with the knowledge that, in the event that defective products were supplied by Sunverge, Vector would (subject to any forum conveniens issues) be entitled to commence a proceeding in New Zealand.

[112]          In all of those circumstances, I do not regard Sunverge's financial position as a significant factor in deciding which is the more appropriate forum.

[113]          Some of the other considerations raised by Mr Cook are neutral, and do not "move the needle" in either direction. First, the fact that Sunverge is based in California, and has no presence in or connection with New Zealand, does not advance matters. Nor does Vector have any presence in, or connection with, California. As with most of these "appropriate forum" cases, there will be inconvenience for one side or the other, whatever the Court decides.

[114]          I accept the evidence provided by the memorandum of Mr Savage, Sunverge's attorney, that United States District Courts can and frequently do apply the law of overseas jurisdictions. But that is equally true of the High Court of New Zealand. And, all other things being equal, the principle that matters involving the application of a particular country's law are generally better decided by the courts of that country 33 favours the New Zealand jurisdiction. In this case, Vector's claim is a contract claim, governed by New Zealand law.

33     Bomac Laboratories Limited v Life Medicals (MSDN BHD), above n 11, at [13].

[115]          It is true that any third party claims Sunverge might issue in this Court against the manufacturers or suppliers of the steel cabinets (or against its painting or other subcontractors) are likely to be governed by American law.    But in my view a    New Zealand Judge, assisted by expert evidence on the relevant United States law, should have no difficulty applying that law if such third party claims fell to be decided in New Zealand. Any modest advantage there might be in an American Court deciding matters of American law (arising as between Sunverge and any manufacturers or suppliers from whom it might wish to seek contribution or indemnity) cannot be decisive when weighed against the other factors that favour New Zealand as the appropriate jurisdiction.

[116]          Mr Savage referred to the ability of the United States District Court to require a resident within the area of the District Court to give evidence required in a foreign court proceeding.34 He noted that the court is "not required to grant a [section 1782] discovery application simply because it has the authority to do so".35 The ultimate decision is within the discretion of the District Court, and the Court will consider factors such as whether the request would be unduly intrusive or burdensome.

[117]          That seems to me to be little different from the jurisdiction of a New Zealand court to compel a New Zealand-resident witness to attend and provide evidence for use in a court proceeding in a foreign country.36 In any event, it is difficult to see why a District Court in the appropriate locality in California would not be prepared to compel a California-based witness to attend to give evidence on the application of a California company (Sunverge), for use in a foreign court proceeding where that company was being sued for a very substantial sum. Specifically, and without more evidence, it is difficult to see how a District Court Judge might regard compelling a California-based witness to attend the District Court in California to give evidence for Sunverge in such circumstances as "unduly intrusive or burdensome". There is insufficient evidence for me to regard this as a significant risk for Sunverge (or, for that matter, for Vector if it wished to compel a United States-based witness to give evidence for it) if the proceeding continues in New Zealand.

34     28 U.S.C. § 1782.

35     Citing Intel Corp v Advanced Micro Devices Inc 542 US 241, 264 (2004).

36     Evidence Act, 2006, s 185.

[118]          Mr Savage also referred in his memorandum to the issue of recognition of any New Zealand judgment Vector might obtain, in California. (It was common ground that Sunverge has no assets in New Zealand, and that Vector will need to enforce any judgment it might obtain in California.)

[119]          Mr Savage referred in his memorandum to the Code of Civil Procedure of California, Part 3, Title 11: Money Judgments of Other Jurisdictions. Chapter 2. Chapter 2 provides that a court of this state shall recognize a foreign-country judgment to which this chapter applies. There follows a list of some circumstances where a foreign judgment will not be registered, and Mr Cook referred to two of these circumstances:

…

(C) The judgment or the cause of action or claim for relief on which the judgment is based is repugnant to the public policy of this State or of the United States.

…

(E)In the case of jurisdiction based only on personal service, the foreign court was a seriously inconvenient forum for the trial of the action.

[120]          I have come to the view that New Zealand is the most appropriate and convenient forum for the hearing of Vector's breach of warranty claims, and the same considerations that have led me to that conclusion make it highly unlikely, in my view, that a Californian Court would regard New Zealand as having been a "seriously inconvenient forum" for the trial of the action.

[121]          Mr Cook placed greater reliance on the argument that there is a real prospect that a court in the State of California would regard the claim for relief on which the judgment is based as repugnant to the public policy of California or of the United States.

[122]          Vector is not seeking an order for specific performance, or other relief in respect of which Chapter 2 does not provide for recognition. The issue raised by Sunverge is whether Vector's claims for a refund under the warranty provisions of the Umbrella Agreement amount to an unenforceable penalty. In his memorandum,

Mr Savage notes that under Californian law an award of liquidated damages pursuant to a contractual provision may be considered an unenforceable penalty. That is likely to be the case where the liquidated damages clause is considered unreasonable, and hence unenforceable. It will be unreasonable and unenforceable if it bears no reasonable relationship to the range of actual damages that the parties could have anticipated would flow from a breach.37 Mr Savage said that he had not assessed whether California courts would consider the application of (or an award pursuant to) a liquidated damages provision to be against public policy on the "unreasonable" ground referred to in his memorandum.

[123]          As for the law in New Zealand on when a liquidated damages clause will be struck down as an unlawful penalty, in Wilaci Pty Ltd v Torchlight Fund No 1 LP 38 the Court of Appeal recently referred to the tests applied in both the High Court of Australia39 and the UK Supreme Court.40 The latter court looked to the broad question of whether the impugned clause was extravagant or unconscionable, a fundamental question being whether the obligation was out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation to perform the contract.41 Although Wilaci involved the application of New South Wales law rather than New Zealand law, I think it is clear enough from the judgment that the Court of Appeal no longer regards the "genuine pre-estimate of loss" test associated with (in particular) the speech of Lord Dunedin in Dunlop Pneumatic Tyre Co Limited v New Garage & Motor Co Limited 42 as appropriate.43 The Court of Appeal in Wilaci rejected any rigid application of a genuine pre-estimate of loss test, noting that Cavendish  reinstated the  pre-Dunlop  focus on whether  the substituted obligation is

37     Citing Press Rentals Inc v Genesis Fluid Solutions Limited, No. 5:  11-CV-02579 – EGD, 2014

U.S. Dist. LEXIS 564, at 33, and the decision of the Supreme Court of California in Ridgely v Topa Thrift and Loan Association 17 Cal. 4th 970, 977 (1998).

38     Wilaci Pty Ltd v Torchlight Fund No 1 LP [2017] NZCA 152.

39     Paciacco v Australia and New Zealand Banking Group Ltd [2016] HCA 28, (2016) 333 ALR 569.

40     Cavendish Square Holding BV v Makdessi [2015] UKSC 67, [2016] AC 1172.

41     The test proposed by Lords Neuberger and Sumption (with whom Lords Cornwath and Clark agreed) in Cavendish was:

Whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.

42     Dunlop Pneumatic Tyre Co Limited v New Garage & Motor Co Limited [1915] AC 79 (H.L.)

43 See, for example, para [79] of the judgment in Wilaci, where Kós J referred to "the deficiencies in Dunlop" having been "exposed in length in the United Kingdom Supreme Court decision in Cavendish".

unconscionable or extravagant. Consistent with authorities in the modern doctrine of unconscionability, relevant considerations will include whether both parties are commercially astute, have relatively similar bargaining power and are advised.44

[124]          I think the "unconscionable or extravagant, and out of all proportion to any legitimate interest of the innocent party" is the test to be applied when a defendant contends that a contract provision  represents  an  unenforceable  penalty  under  New Zealand law.

[125]          Thus it does appear there is or may be some difference between New Zealand law and California law on what constitutes an unlawful penalty (the law of California, as advised by Mr Savage, appears to apply the equivalent of the old Dunlop 45 test, which turned on whether, at the time the contract was made, the clause could be seen as a genuine pre-estimate of the loss in the event of breach).

[126]          The argument for Sunverge is that Vector is seeking to reject and obtain a full refund, notwithstanding that the Sunverge Units will have been in use in New Zealand for four to five years. It says that a full refund in such circumstances, together with the costs of returning the Sunverge Units to the United States (which Vector also claims in its amended statement of claim) would bear no reasonable relationship to the actual damage the parties could have anticipated would flow from a breach of warranty. It says the warranty therefore provides for an unreasonable recovery, which would be a penalty under United States Federal law and/or the law of California. It might or might not – Mr Savage did not express a view – be repugnant to justice under relevant American state and/or federal law.

[127]          Although Mr Savage did not express a view on that question, he did refer to relevant United States authorities. The principal authority referred to by Mr Savage on when a foreign-country judgment will be enforced under California's Uniform Recognition Act, was De Fontbrune v Wofsy.46 In that case, the Court of Appeals for the Ninth Circuit noted that, under the Uniform Recognition Act, a foreign judgment

44     Wilaci, above n 38, at [82].

45     Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd, above n 42.

46     De Fontbrune v Wofsy 838F.3d 992, 997 (9th Cir. 2016).

that constitutes "a fine or other penalty" will not be enforced. The Court of Appeals referred to the decision of the United States Supreme Court in Huntington v Attrill, in which the Court explained that determining whether a foreign law is "a penal law, in the international sense, so that it cannot be enforced in the Courts of another State, depends upon… whether its purpose is to punish an offence against the public justice of the State, or to afford a private remedy to a person injured by the wrongful act".47 The Ninth Circuit in De Fontbrune noted that the Huntington enquiry entails consideration of whether the harm the foreign judgment seeks to redress is private or public. Private harms "are an infringement or privation of the private or civil rights belonging to individuals, considered as individuals"; whereas public harms "are a breach and violation of public rights and duties, which affect the whole community, considered as a community".48

[128]          In undertaking the Huntington enquiry, California Courts use a balancing test to determine whether the essential character and effect of a foreign award is penal. The test 49 looks to a number of factors ("the Java Oil factors"), including:

(a)whether the purpose of the foreign award is to compensate an individual or to "provide an example", or punish "an offence against the public";

(b)whether the award is payable to an individual or to the State or one of its organs;

(c)whether the judgment arose in the context of a civil action or through the enforcement of penal laws; and

(d)whether the award was a mandatory fine, sanction, or multiplier.

[129]No one of the Java Oil factors is determinative.

[130]          In De Fontbrune, the Ninth Circuit was concerned with Mr De Fontbrune's application to register in California State Court an award of €2 million entered by an

47     Huntington v Attrill 146 U.S. 657, 13 S.Ct. 224, 36 L.Ed. 1123 (1892).

48     Referring to Huntington v Attrill, above n 44 at 668 to 669.

49     Articulated in Java Oil Limited v Sullivan 168 Cal. App. 4th 1178, 86 Cal. Rptr.3d 177, 183 (2008).

enforcement Judge in the Tribunal de Grande Instance de Paris. Some 10 years earlier, the   Paris   Court   of   Appeal   had   found   Wofsy   guilty   of   infringement   of Mr De Fontbrune's copyright in a collection of photographs of works of Picasso, and it prohibited Wofsy from using the photographs in any manner under penalty ("astreinte") of 10,000 francs by proven infraction. Wofsy was also ordered to pay Mr De Fontbrune 800,000 francs in pecuniary damages in redress of his injury resulting from the infringement of copyright. The 2012 enforcement judgment followed breaches of the prohibition orders made by the Paris Court of Appeal back in 2001.

[131]          The issue facing the Ninth Circuit in De Fontbrune was whether the "astreinte" was an award of damages in favour of Mr De Fontbrune, or whether it was penal in nature, and unenforceable under California's Uniform Recognition Act. The Court held that the question was whether the "astreinte", in essential character and effect, was a punishment of an offence against the public, or a grant of a civil right to a private person. The Court considered each of the Java Oil factors, concluding that the purpose of the astreinte was not to punish "an offence against the public" or make an example of Wofsy, but to safeguard Mr De Fontbrune's copyright. Nor was the purpose of the astreinte to criminally punish copyright violations under the French Intellectual Property Code. Other Java Oil factors weighed in favour of the conclusion that the astreinte was not essentially penal in nature – for example, the astreinte was payable directly to Mr De Fontbrune, rather than to the Court or to the French State. It represented a private remedy to Mr De Fontbrune, a person injured by the relevant wrongful act.

[132]          Applying De Fontbrune and the Java Oil factors to this case, the claim for the refunds appears to be broadly concerned with compensating Vector, as opposed to punishing some "offence against the public", or providing an example to others. The amount of any judgment will be payable to Vector, and not to the New Zealand Government or one of its organs, and the issue arises in the context of a civil action and not the enforcement of any penal law. There is no "multiplier" involved, and presumably no question of enforcement in California will arise at all unless and until the New Zealand Court has decided that Sunverge's obligation to refund the purchase price (on return of the Sunverge Units) was not extravagant or unconscionable, or out

of all proportion to Vector's legitimate interest in the enforcement of Sunverge's primary obligations under the Umbrella Agreement and the contracts made pursuant to it.

[133]          Of course it will be for the California Courts to decide whether any judgment Vector might obtain in New Zealand is enforceable in California under the Uniform Recognition Act, but I think it can at least be said that Vector's position seems to be at least as strong as that of Mr De Fontbrune. On the evidence before me, there does not appear to be any substantial, or significant, risk that any judgment Vector might obtain in New Zealand would be unenforceable in California.

[134]          Furthermore, as Associate Judge Abbott noted in Bomac,  it  will  be  the New Zealand-based party (in this case, Vector) who will be carrying the principal risk that a New Zealand judgment might prove to be unenforceable in the foreign jurisdiction. In those circumstances, His Honour considered the point about Bomac's ability to enforce the judgment overseas to be of lesser significance in the weighing of the considerations.50

[135]          The point raised for Sunverge that has given me the greatest cause for pause, is the argument that it will or may need to issue third party claims against its suppliers and/or subcontractors in California. Such claims are likely to be subject to the law of California, and those parties are unlikely to willingly submit to the New Zealand jurisdiction.

[136]          I accept the broad proposition derived from cases such as Citi-March that it is desirable, where there are a number of parties (including third parties), to have all causes of action (including third party claims for contribution or indemnity) heard in the same court proceeding. That way, a party may use evidence given by another party against other parties, and the risk of inconsistent decisions of different courts on the same issues is eliminated. That risk can be an important consideration in the "weighing" exercise the Court is required to undertake on an appropriate forum argument, especially where a decision in favour of one jurisdiction will or may deprive

50     Bomac Laboratories Limited v Life Medicals (MSDN BHD), above n 11, at [35].

a party of a defence or argument that would be available to it in the other jurisdiction.51 But I do not think any risk of juridical disadvantage to Sunverge of that sort has been sufficiently made out on the evidence in this case.

[137]          First, problems with the Sunverge Units have been known for four to five years, and one would have expected that, if Sunverge believed it had valid third party claims, it would have made them by now (if not by commencing a claim in California, then at least by correspondence addressed to the appropriate subcontractors or suppliers, advising them of Vector's claims in New Zealand and that Sunverge would be looking to them for contribution or indemnity to the extent that Vector's claims might succeed). There is some reference in the correspondence going back as far as 2014 to the possibility that there was defective surface preparation of the steel, and/or lack of sufficient thickness or inconsistency in the application of the paint. But Sunverge has only put its position on potential third party claims on the basis that further investigation is necessary before third party claims can be decided upon; it did not say what further investigation is required, or why it has apparently not yet been undertaken in the five years or so that have passed since 2013. Indeed, the most Mr Milani apparently felt able to say (having referred to the need for examination of the Sunverge Units by an expert, the need for discovery of all relevant documents, and various possible contributing factors to the rust problems) was:

As such we cannot discount the possibility that those third parties … who were involved with either constructing or coating the cabinets could be joined.

[138]          I think third party contribution claims that are no more than a "possibility that cannot be discounted" cannot have the same force in any forum conveniens consideration as, say, contribution claims that have already been commenced in the overseas jurisdiction, or that have been clearly articulated to the point where the  New Zealand court can be reasonably satisfied that the defendant has some arguable basis to bring the contribution claims and intends to do so. The evidence in this case falls well short of either of those situations.

51 See for example McConnell Dowell Constructors Limited v Lloyds Syndicate, 396 [1988] 2 NZLR 357 (CA) at 276, referring to Société Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 3 All ER 510 (PC).

[139]          Secondly, I did not understand Mr Cook to submit that Sunverge could not now issue a proceeding in California against any relevant supplier or contractor, to protect its position in the event it should be found liable to Vector in this proceeding. If it did that, the main issue would appear to be whether there would be a risk of conflicting judgments between the courts in the two jurisdictions. (The other possible issue would be whether it would be oppressive to Sunverge to effectively require it to participate in two separate proceedings, the first defending Vector's claims in this proceeding and the second pursuing contribution claims in California. But I think that would be a lesser concern if the nature of the proceedings in the two jurisdictions were essentially different, with Vector having no interest in the issues in the American proceeding.)

[140]          On the second of those possible issues, Vector's claims against Sunverge for breach of the fitness for purpose/and merchantable quality warranties are not concerned with the reasons how or why the Sunverge products turned out not to be fit for purpose or not of merchantable quality (if either of those claims is proved), and any issues that might arise between Sunverge and its suppliers or subcontractors would appear to be different from those arising as between Vector and Sunverge. As between Sunverge and each of its suppliers or subcontractors, the likely issues would appear to be:

(a)What specifications/contractual provisions were agreed between Sunverge and its supplier/subcontractor?

(b)Did the supplier's/subcontractor's product or work conform to those specifications or contractual provisions?

(c)Did the supplier/subcontractor carry out its work/supply its product in breach of its contract with Sunverge, and/or negligently?

[141]          On the basis that Vector's claim is a contractual warranty claim, concerned only with issues of the fitness for purpose and/or merchantable quality of the Sunverge Units supplied for outdoor use in New Zealand, there would appear to be no need for the trial Court in New Zealand to make findings on the first two of those issues, and thus little risk of it making findings on them that would be inconsistent with findings

made in any separate proceedings Sunverge might take against its suppliers or subcontractors in California.

[142]          As for the third of the issues, the risk of conflicting decisions seems to me to be low. The New Zealand Court dealing with Vector's claim against Sunverge will not be concerned with whether any breach of warranty by Sunverge was caused or contributed to by some negligence or breach of duty by one of Sunverge's subcontractors or suppliers, and I think the likelihood is that the Sunverge Units, as delivered in New Zealand, will largely "speak for themselves" (with appropriate interpretation from the expert witnesses) on the breach of warranty issues. I take into account too Mr Flanagan's advice at the hearing that Vector is not contending that the Sunverge Units might not be fit for purpose in California. The argument is that they were not fit for purpose when installed, outside, in Auckland, New Zealand.

[143]          While there may be some practical disadvantages to Sunverge if it is not able to bring third party claims in the same proceeding as Vector's claims against it, I think any such disadvantages are outweighed by the disadvantages Vector would suffer if it were required to litigate what is, in all other respects, a New Zealand-centred dispute, in California. For example, the issues of whether the Sunverge Units were properly installed and maintained in New Zealand seem to me to be issues that are clearly better suited to determination in this Court than in a Californian court. In the balancing exercise I am required to undertake, I am of the view that any disadvantage to Sunverge in having to sue third party suppliers or subcontractors in California is outweighed by the other considerations, all of which are either neutral or favour the New Zealand jurisdiction.

[144]          Certainly the onus of proof is on Vector to show that New Zealand is the more appropriate forum, but as Associate Judge Bell noted in Haines v Herd, a plaintiff is not required to show that New Zealand is clearly or distinctly more appropriate. "Close calls are permitted."52 Associate Judge Bell also noted in Haines v Herd that the fact that the parties agreed to submit to the jurisdiction of a particular country's courts is relevant to the forum non conveniens question.

52     Haines v Herd [2015] NZHC 3365 at [76].

[145]          Weighing all the considerations, I am satisfied that Vector has shown that the High Court of New Zealand is the appropriate forum to hear its breach of warranty claims under the Umbrella Agreement. Neither party raised any "other relevant circumstances" under r 6.28(5)(d) that might have suggested any contrary conclusion.

Result

[146]          Vector has made out its case for an order setting aside Sunverge's protest, on the basis that Vector's claims in the proceeding are restricted to claims for breach of the contractual warranties at cl 11(a)(iii) of Schedule 2 to the Umbrella Agreement (as amended by Schedule 1 to the Umbrella Agreement) and cl 11(a)(iv) of Schedule 2 to the Umbrella Agreement. On that basis I make an order setting aside the protest to jurisdiction filed by Sunverge. Vector is entitled to costs on the application, which I fix on a 2B basis, with disbursements to be fixed by the registrar.

[147]          Sunverge is to file and serve its statement of defence to Vector's amended statement of claim within 30 working days of the date of delivery of this judgment. The registrar is to allocate a case management conference for the first practicable date after 15 October 2018.

Associate Judge Smith