Americhip Incorporated v Dean [2014] NZHC 450 (12 March 2014)

Last Updated: 9 April 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-004247 [2014] NZHC 450

BETWEEN AMERICHIP INCORPORATED Plaintiff

AND JASON CHARLES DEAN Defendant

Hearing: 9 December 2013; further memoranda submitted on 21, 29, 31

January, 3 February 2014

Appearances: D J Chisholm QC and C O van Leeuwarden for Plaintiff

DPH Jones QC for Defendant

Judgment: 12 March 2014

_{JUDGMENT OF ELLIS J}

Counsel/Solicitors:

D J Chisholm QC, Barrister, Auckland

C O van Leeuwarden, Barrister, Auckland

DPH Jones QC, Barrister, Auckland

AMERICHIP INCORPORATED v DEAN [2014] NZHC 450 [12 March 2014]

[1] The defendant, Mr Jason Dean, has applied under HCR 5.49(3) to dismiss this proceeding on the grounds that the Court lacks jurisdiction to hear it.

[2] The plaintiff, Americhip Incorporated (Americhip) is an American corporation that carries on business in a number of different countries.¹ Americhip’s CEO, Mr Clegg, described Americhip’s business as “designing, developing and selling a wide array of marketing and advertising materials and promotional products”. It is relevant that, for the most part, Americhip tends to outsource the manufacturing aspect of its business to other companies.

[3] Between 2003 and 2012 it says it employed Mr Dean as part of its operations in China.² Although he lived and worked in China during that period, Mr Dean was, and remains, a New Zealand citizen.

[4] Americhip alleges that, during the course of his employment, Mr Dean, with the assistance of Ms Zita Chan (his business associate and, more latterly, his partner) defrauded the company of approximately US$10 million.

[5] In about April 2013 Mr Dean, Ms Chan and their son Charlie returned to New Zealand. While there, they lived at a property at 15B Brighton Terrace, Mairangi Bay, which Mr Dean had purchased for approximately $2 million in cash. Americhip says that the property was purchased with Americhip’s misappropriated money.

[6] In August 2013, Americhip’s Chief Executive, Mr Clegg, visited New Zealand. The evidence is that during that visit (on 14 August) he and others visited Mr Dean’s home and confronted him and Ms Chan about the alleged fraud. They are said to have admitted embezzling Americhip’s funds and using it to buy the Brighton Terrace property. The evidence is that they promised to repay the money. But

_{instead, Mr Dean, Ms Chan and Charlie immediately fled the country.}

¹ The headquarters of Americhip Inc are in Los Angeles. The evidence in its present state discloses that Mr Dean was hired as a vice president of Americhip US, although for much of the time in issue he managed Americhip Trading (Shenzhen) Ltd which was what is known as a Chinese wholly-foreign owned enterprise. Americhip (Shenzhen) Ltd has now ceased operating.

² As I understand it, whether or not Mr Dean was in fact an employee is a matter that will be at issue in the event that jurisdiction is found to exist.

[7] On 18 September 2013, Americhip filed proceedings in this Court against Mr Dean.³ In the statement of claim as originally filed there was only one cause of action pleaded, in deceit. That cause of action necessarily relates to Mr Dean’s alleged fraudulent activities in China, and between China and the United States.

[8] By way of example only it is pleaded that between August 2005 and

September 2012 Mr Dean and Ms Chan (inter alia):

(a) established dummy companies with names similar to the names of entities to whom Americhip outsourced its manufacturing business;

(b) did not forward to Americhip bids they received from legitimate manufacturers but instead:

(i) delivered a substantially higher bid from two or three of these dummy companies; or

(ii) when instructed by Americhip to seek additional bids, provided inflated bids from other bona fide manufacturers so that Americhip would select the dummy company to undertake the work;

(c) established companies or false identities with bank accounts in Hong

Kong that were controlled by them;

(d) told Americhip that these were the bank accounts of (genuine) manufacturers with whom Americhip had contracts and that payment (in an inflated sum) should be made to those accounts;

(e) paid out of those accounts the actual amount charged by the manufacturers and kept the balance.

³ An application for summary judgment was filed at the same time as the statement of claim.

[9] Americhip says that by virtue of these and other deceits, it paid approximately $US10 million into the bank accounts controlled by Mr Dean and Ms Chan. It says that some of the money so derived was paid into a New Zealand bank account jointly held by Mr Dean and his father, Victor Charles Dean and that that money was used to purchase the Brighton Terrace house. It says that Mr Dean holds the proceeds of his fraud, and any substituted assets purchased with them (including the Brighton Terrace property) as a constructive trustee and/or a fiduciary (as Americhip’s employee and/or agent), and that he is obliged to account to Americhip in that regard.

[10] Americhip seeks:

(a) compensation of $10 million;

(b) a declaration that Mr Dean holds the Brighton Terrace property as constructive trustee for Americhip;

(c) An order vesting legal title in the Brighton Terrace property in

Americhip.

“Service”

[11] Mr Dean was last seen in New Zealand on 19 August and it seems the Brighton Terrace house has been vacant since then. The only evidence of any effort being made to locate him is that of Mr Hamish Williams who deposed that he had visited the Brighton Terrace property on 24 September and had a conversation with two men who were using the garage, and who told Mr Williams that they were not sure when Mr Dean would be back and were not sure if he was overseas. Nonetheless, Americhip proceeded on the (not unreasonable) assumption that he was

_{likely to have returned to China.}⁴

⁴ As I have noted, Ms Chan is Chinese and Mr Clegg’s evidence was that Mr Dean, himself, speaks Mandarin fluently. There is also evidence that during the meeting on 14 August 2013 Ms Chan said that she wanted to go back to China.

[12] Presumably because China is a big country and Mr Dean’s whereabouts there were unknown, Americhip did not take steps to attempt to serve him personally overseas. Rather, the company sought an order for substituted service on Mr Dean’s father in New Zealand. The grounds stated in the application were that:

2.1 Prior to the issue of these proceedings,

a. The defendant personally met with the plaintiff’s CEO, Mr

T Clegg at the defendant’s home in Auckland,

b. Mr Clegg asked the defendant to return the proceeds of his fraud on the plaintiff ... without the need for legal proceedings;

c. The defendant assured Mr Clegg that he would voluntarily return proceeds of his fraud to the plaintiff; but then

d. Without further notice to the plaintiff, the defendant fled the jurisdiction.

2.2 Victor Charles Dean is the defendant’s father and resides in Auckland. Service in the manner proposed in this application is likely to bring the documents to the attention of the defendant...

[13] An affidavit was filed setting out grounds for the plaintiff’s belief that service on Victor Dean would be likely to bring the proceedings to his son’s attention.

[14] Substituted service was ordered by Associate Judge Faire on 30 September

2013 and effected on Victor Dean accordingly.

The protest to jurisdiction and application to dismiss

[15] At the end of October 2013, Jason Dean filed an appearance under protest to jurisdiction. Shortly afterwards (and also before the filing of the amended claim) he filed an application under rule 5.49(3) to dismiss the proceeding on the grounds that the Court lacked jurisdiction to hear it.

[16] The arguments put forward in both the protest and the application to dismiss are the same. These were expressed as follows:

2.1 The Court has no jurisdiction to hear and determine the proceeding in that:

(a) The plaintiff is an American company.

(b) The relevant business operated in China.

(c) All alleged conduct that is the subject of the cause of action alleging deceit took place in China.

(d) All alleged representations the subject of the claim were made in or between China and the United States.

(e) All alleged “skimmed” payments that are the subject of the

claim were made between the United States and China.

(f) All alleged loss arising from the alleged conduct occurred in

China or the United States.

(g) No part of the cause of action in deceit relate to New

Zealand.

(h) The cause of action in deceit is inapt to determine factual and legal issues governed by the laws and customs of China and/or the United States.

(i) The constructive trust pleaded necessarily relies on the cause of action in deceit being proved first.

2.2 A New Zealand Court has no jurisdiction to hear a claim based on conduct which is alleged to have occurred in China and/or the United States, such conduct being subject to Chinese and/or American law.

2.3 Such further grounds as may be advanced in submissions.

Amendment of claim

[17] Shortly afterwards, on 4 November 2013, Americhip filed an amended claim which included three further causes of action, which are entitled:

(a) Breach of trust;

(b) Knowing receipt (constructive trust); and

(c) Money had and received.

[18] These causes of action are said to be based on events in New Zealand and, in particular, admissions and promises allegedly made by Mr Dean on 14 August 2013, before he “fled the jurisdiction”. For reasons that will later become apparent it is necessary to set out the new pleadings in a little more detail.

[19] The second (breach of trust) claim has two aspects. First, it alleges that as a result of the admissions made by Mr Dean on 14 August, he

... held the property on trust as bare or constructive trustee for the plaintiff or in the alternative the property is traceable to the ASB Bank Account which are some of the funds embezzled by the defendant and thus is property belonging to the plaintiff

[20] Secondly, it pleads that by not keeping his promises to repay the funds/transfer the property to Americhip, Mr Dean acted “in breach of his obligation to return the property” or, in alternative, “in breach of his obligation as bare or constructive trustee to so do”.

[21] The pleading of the third (knowing receipt) cause of action is that:

At all material times from the time of transferring funds he had embezzled from the plaintiff into the ASB Bank Account, the defendant held those funds on trust for the plaintiff.

The use of the funds in the ASB Bank Account by the defendant to purchase the property was in breach of trust that he hold those funds in the ASB Bank Account to the benefit of the plaintiff.

The purchase of the property by the defendant from the funds in the ASB

Bank Account are traceable as representing the plaintiff’s own money.

At all material times the defendant knew that the property was traceable to his breach of trust or in the alternative was the property of the plaintiff, along with funds in the ASB Bank Account and other assets purchased with the funds he had embezzled and he admitted the same on 14 August 2013 as particularised in paragraph 21 above.

[22] The pleading of the fourth (money had and received/restitution) claim is simply that:

By reason of the matters aforesaid on a date unknown the defendant wrongfully deprived the plaintiff of and converted the embezzled funds by depositing them into the ASB Bank Account and then by using some or all of the converted funds to purchase the property.

[23] The relief claimed in relation to each of the three new causes of action includes:

(a) A declaration that the defendant holds the Brighton Terrace property as constructive trustee for the plaintiff;⁵

(b) An order vesting legal title in the Brighton Terrace property in the plaintiff.

The hearing on 9 December 2013

[24] Notwithstanding the three further causes of action, the grounds on which the application to dismiss remained the same and the submissions made by Mr Jones QC were largely focused on the claim in deceit. In addition, however, Mr Jones relied on a recent decision of this Court, Exportrade Corp v Irie Blue New Zealand Ltd.⁶

There, Toogood J had said:

[72] The third defendant was served by substituted service inside New Zealand pursuant to an order made on 24 September 2009. Mr Fulton argued that the evidence indicates that the third defendant was resident out of New Zealand at the time the proceedings were issued, and that substituted service on him by delivery to addresses in New Zealand was a nullity. In Von Wyl v Engeler, the Court of Appeal noted that the foundation of the Court's jurisdiction in personam is service of the originating process. It accepted, in reliance on Dicey and Morris, that there was no jurisdiction to order substituted service within New Zealand on a defendant who was outside the jurisdiction when the proceeding was issued. There cannot be substituted service in New Zealand in circumstances where there could not have been personal service within New Zealand at the time the proceeding was commenced because the defendant was outside the jurisdiction.

...

[76] There is no evidence to rebut the third defendant's evidence that he was not in New Zealand at the time the proceedings were commenced and I accept it on balance. That means that the Court had no jurisdiction to order substituted service on him in New Zealand, even if his absence was only temporary. The “service” on the third defendant must therefore be regarded as a nullity. [Footnotes omitted]

_{[25] Mr Chisholm submitted that Exportrade was wrongly decided.}

5. No relief directed at any other property (such as any residual money that might be left in the joint ASB account) is sought in relation to any of the four causes of action.

⁶ Exportrade Corp v Irie Blue New Zealand Ltd [2012] NZHC 2870. Although the case was not

referred to in the application to dismiss, no real issue was taken with Mr Jones’ reliance on it.

Post-hearing events

[26] On 20 December 2013 I issued a minute in which I said:

[2] At the hearing before me, Mr Jones QC relied on the decision of Toogood J in Exportrade Corp v Irie Blue New Zealand Ltd as authority for the proposition that substituted service cannot be ordered where a defendant is overseas.

[3] Although that contention was not specifically referred to in the application to dismiss (or the protest to jurisdiction) I am prepared to proceed on the basis that it is covered by the catch-all “such further grounds as may be referred to in submissions”.

[4] That said, however, I have formed the view that Toogood J was, with respect, wrong on that issue. Put shortly, the Court of Appeal decision relied upon by him related to different and very specific circumstances, namely proceedings for the enforcement of a foreign judgment in New Zealand.

[5] In my view the correct position is, therefore, that substituted service may be ordered when a defendant is overseas provided that the requirements of rule 6.8 are met. The question then becomes whether they were in fact met in this case. And because Associate Judge Faire did not give reasons for ordering substituted service the answer to that question is not immediately obvious. The relevant requirements are that:

(a) reasonable efforts have been made to serve the proceeding by a method permitted or required under the rules, and either

(b) that proceeding

(i) has come to the knowledge of the person to be served or

(ii) cannot be promptly served.

[6] As far as (a) is concerned the Court would need to be satisfied that personal service could lawfully be effected on Mr Dean and (thus) that Americhip was entitled under rule 6.27 to serve him (personally) overseas.⁷

I heard submissions about the applicability (or not) of rule 6.27 and do not require further assistance on that front.

[7] What is more problematic is the requirement that the Court be satisfied that reasonable efforts had been made by Americhip to serve Mr Dean overseas. The affidavits before the Court do not seem to disclose any evidence of such efforts. And as I understand it, while there may be rare exceptions to the requirement that efforts be made to effect personal service they are limited to cases where, despite reasonable inquiries, no trace of the defendant’s whereabouts can be discovered. It is not clear to me whether that is what Americhip says is the case here and, if so, what those “reasonable inquiries” were.

7. The possibility of service under rule 6.28 is plainly not in play as no application under that rule was or has been made.

[27] Shortly after both counsel had filed memoranda responding to the issues raised in my minute, Mr Chisholm filed a further memorandum referring me to a decision of the Court of Appeal that had been released on the day immediately prior to the date on which my minute was issued, allowing the appeal against Toogood J’s decision in Exportrade.⁸ I set out what the Court said on the critical point, in full:

[13] We do not agree with Toogood J's decision that there was no jurisdiction for the High Court to make an order for substituted service on a defendant who is not present in New Zealand when the proceeding is commenced. There is no reason in principle why substituted service cannot be ordered in respect of an overseas defendant. A plaintiff may run a risk in doing so, especially in respect of enforcement of any judgment subsequently obtained, but that does not prevent a plaintiff from proceeding in this way. England's current Civil Procedure Rules 1998, like the New Zealand Rules, contain no specific provision for substituted service on defendants outside the jurisdiction. Substituted service has, however, been held to be available against a foreign defendant under CPR r 6.15, provided the case is otherwise one suitable for service outside the jurisdiction and there is good reason to allow it.

[14] It is well established, however, that leave to serve an originating document out of New Zealand, if leave is required under r 6.28, should still be obtained before seeking an order for substituted service. If leave is not required, the application for substituted service should, like a notice of proceeding served under r 6.27, typically specify the limb or limbs of r

6.27(2) which the plaintiff considers applicable, and the factual background which the plaintiff considers applies.

[15] Von Wyl v Engeler relied on by Toogood J, concerned the different issue of whether a New Zealand court could enforce an overseas judgment against a defendant who had not submitted to the jurisdiction of the overseas court. In Von Wyl the plaintiff was seeking to enforce against the defendant in New Zealand a judgment obtained in Switzerland when the defendant, who had already immigrated to New Zealand, was not served with the Swiss proceeding and was resident here when judgment was entered against him in Switzerland. The issue was whether in these circumstances the Swiss court had jurisdiction, as determined by the common law rules of conflicts of laws. This Court held that the Swiss judgment could not be enforced in New Zealand because, applying common law conflict of laws principles, the Swiss court had no jurisdiction over the defendant who was not in Switzerland and had not submitted to the jurisdiction of the Swiss court.

[16] When delivering the judgment of this Court in Von Wyl, Richardson

P said:

“ ... it seems there is no jurisdiction to order substituted service within the jurisdiction on a defendant who was outside the jurisdiction when the proceeding was issued.”

⁸ Exportrade Corp v Irie Blue New Zealand Ltd [2013] NZCA 675.

It is clear from the context that Richardson P was referring to the position in Switzerland and the general common law principle of territorial jurisdiction and not to the position under the New Zealand High Court Rules that applied at the time. Contrary to Toogood J's suggestion, Richardson P did not say that there was no jurisdiction to order substituted service within New Zealand on a defendant who was outside the jurisdiction when the proceeding was issued.

[17] The decision in Von Wyl is therefore not authority for the further proposition that New Zealand courts have no jurisdiction to order substituted service where the defendant is outside New Zealand. Nor was Von Wyl dealing with the question whether a proceeding could be served without leave under r 6.27. At the same time, of course, a judgment obtained in New Zealand against an overseas defendant in respect of whom substituted service had to be ordered may be unenforceable overseas under the conflict of laws principles applied by the overseas courts.

[18] The question of compliance with the particular sub-rules of r 6.27(2) was not discussed in any detail by Toogood J in relation to Mr Gribble. His discussion centred principally on the question of service on Mrs Gribble. Toogood J appears to have considered that r 6.27 was not available in any event based on his conclusion as to substituted service.

[19] We consider either r 6.27 or r 6.28 should be satisfied for an order for substituted service to be granted. We are confirmed in this view by the requirement in r 6.8 that, where substituted service is ordered, service must have been possible “by a method permitted or required under these rules”.

[20] Care must be taken that r 6.8 is not used as an alternative to rr 6.28 and 6.29. Accordingly, courts should be satisfied that reasonable efforts have been made to effect service. In the present case reasonable efforts had been made to serve Mr Gribble in Barbados. [Footnotes omitted]

[28] The first, and obvious point arising is that the Court of Appeal’s decision makes it clear beyond doubt that that aspect of Mr Dean’s protest to jurisdiction that relied on the High Court decision in Exportrade cannot succeed.

[29] The second point is that the comment made in [19] and [20] of the Court of Appeal’s judgment precisely reflects the concern that prompted me to issue my minute of 20 December 2013. More particularly, the application for substituted service in the present case did not refer at all to r 6.27, let alone the specific grounds in that rule for service overseas upon which Americhip relied. Moreover, in my view, the evidence filed in support of the application did not establish that reasonable attempts had been made to serve Mr Dean overseas.

[30] Be all that as it may, the Court of Appeal’s decision also makes it clear (at

[29]) that deficiencies in an application for substituted service do not render the

consequent order a nullity. The order remains valid until set aside, which in the present case would have required a formal review of Associate Judge Faire’s decision.⁹ And in terms of the Court’s power under r 1.5 to remedy such defects it seems to me to be relevant that, as the very existence of a protest makes clear, the order for substituted service was in fact effective at bringing the proceeding to Mr Dean’s attention.¹⁰ Moreover, for reasons to which I will shortly come, whether or not service overseas without leave would have been permitted under r 6.27 is a matter that will necessarily be considered in determining the protest. Any failure to consider that matter at an earlier stage is therefore effectively cured.

[31] But the Court of Appeal’s confirmation in Exportrade that an overseas defendant can be served by way of substituted service in New Zealand is not determinative of Mr Dean’s application to dismiss and protest to jurisdiction. In order to resolve that application it is necessary first to decide whether:

(a) substituted service on Mr Dean’s father in New Zealand constituted

service on Mr Dean overseas; or

(b) substituted service on Mr Dean’s father in New Zealand constituted

service on Mr Dean in New Zealand.

[32] This distinction is far from academic. That is because r 5.49(7) states:

To the extent that an application [to dismiss for want of jurisdiction] under this rule relates to service of process effected outside New Zealand under rule 6.27 or 6.28, it must be determined under rule 6.29.

[33] Rule 6.29 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 -

⁹ Mr Dean was faced, in that respect, by the obvious conundrum that, had he applied for such a

_{review, he would be submitting to the Court’s jurisdiction}

¹⁰ I accept, however, that bringing a proceeding to a person’s attention is not synonymous with service: see for example Discovery Geo Corporation v STP Energy Pte Ltd [2012] NZHC 3549, [2013] 2 NZLR 122 at [39].

(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

(b) that, had the party applied for leave under rule 6.28, - (i) leave would have been granted; and

(ii) it is in the interests of justice that the failure to apply for leave should be excused.

(2) If service of process has been effected out of New Zealand under rule 6.28, and the court's jurisdiction is protested under rule 5.49, and it is claimed that leave was wrongly granted under rule 6.28, the court must dismiss the proceeding unless the party effecting service establishes that in the light of the evidence now before the court leave was correctly granted.

(3) When service of process has been validly effected within New Zealand, but New Zealand is not the appropriate forum for trial of the action, the defendant may apply for a stay, or for a dismissal of the proceeding under rule 15.1.

[34] Accordingly, if the position is as in [31](a) above, then rule 6.29(1) applies and the onus is on Americhip to satisfy the Court that it should assume jurisdiction and (as part of that exercise) that the forum conveniens is New Zealand. But if the position is as in [31](b), then 6.29(3) governs the matter, and the application to dismiss falls to be determined under rule 15.1. In that case, the starting point would be that jurisdiction exists, and the onus would be on Mr Dean to satisfy the Court that New Zealand is not the appropriate forum.

[35] Understandably, Mr Chisholm favoured the second ([31](b)) option. He submitted that service on Mr Dean had in fact occurred in New Zealand, so neither rr 5.49(7), 6.27, nor 6.28 had any application. He said that Mr Dean had “failed to plead any evidence” as to his whereabouts at the time the proceeding was commenced, and that his whereabouts were therefore unknown. He further submitted that r 5.49(6), rather than r 5.49(7) applied in this case.

[36] I do not agree. To take the last point first, r 5.49(6) relates to applications made by a plaintiff to set aside an appearance objecting to the jurisdiction. No such application has been made by Americhip here. As I have said, the issue is, rather,

whether the matter falls to be determined in accordance with r 5.49(7) (namely under r 6.29(1) and (2))¹¹ or under r 15.1 (by virtue of r 6.29(3)).

[37] As far as Mr Dean’s alleged evidentiary failure is concerned, Americhip’s own application for substituted service was expressly predicated on its belief that he had fled New Zealand. I do not consider that there was any obligation upon him to file evidence as to his whereabouts, in the present context.

[38] And in terms of Mr Chisholm’s first, and most substantive, point, the notion that Mr Dean has been served in New Zealand appears to me to be at odds with the Court of Appeal’s approach in Exportrade. In that case, the second defendant, Mr Gribble, was in Barbados but substituted service on him had been effected through lawyers in Auckland. After holding (in the passage I have set out above) that the order for substituted service was not a nullity, the Court then went on specifically to

consider the issue of “jurisdiction in respect of Mr Gribble”. The Court said:¹²

[21] It is common ground that the appellant did not apply for leave under r 6.28 prior to seeking an order for substituted service. As Toogood J noted in relation to Mrs Gribble, where there is a protest to jurisdiction following service without leave, a proceeding must be dismissed unless the plaintiff can show either:

(a) a “good arguable case” that a r 6.27(2) gateway was satisfied and that the Court should assume jurisdiction with regard to the criteria in r 6.28(5); or

(b) that the Court should excuse the plaintiff's failure to seek leave under r 6.28, having regard to r 6.28(5)(b)—(d).

[39] The requirements recorded at (a) and (b) replicate the terms of r 6.29(1) and (2) and thus the Court accepted that jurisdiction was to be determined in accordance with those provisions. Indeed, the judgment makes it clear that the Court then went on to apply those rules to Mr Gribble’s position and held that (subject only to its later

_{conclusions about the appropriate forum) the New Zealand Courts had jurisdiction.}

¹¹ Rule 5.49(7) states:

To the extent that an application under this rule relates to service of process effected outside

_{New Zealand under rule 6.27 or 6.28, it must be determined under rule 6.29.}

¹² Exportrade Corp v Irie Blue New Zealand Ltd, above n 8, at [21].

[40] In fairness to Mr Chisholm, however, I record that his submission derives support from the recently updated commentary to rr 5.49 and 6.29 in McGechan on Procedure which (respectively) says:¹³

A forum conveniens issue can arise both in a proceeding served within New Zealand as well as one served on a defendant overseas. A forum non conveniens issue raised in respect of a proceeding served locally is not an issue of jurisdiction and an appearance under HCR 5.49 ... is not the appropriate procedure. This also applies to local substituted service on an overseas defendant: Exportrade Corporation v Irie Blue New Zealand Limited [2013] NZCA 675 at [33]. An application to strike out or a stay should instead be made under r 2.50 District Courts Rules 2009 (HCR

6.29(3)). Under r 2.50 the onus will be on the defendant to establish forum non conveniens: Exportrade Corporation v Irie Blue New Zealand Limited at [42].

...

If a defendant has been validly served within New Zealand then r 6.29.3 provides that any objection on forum non conveniens grounds must be pursued by way of an application to strike out or stay under r 15.1...Valid service in New Zealand includes valid substituted service in New Zealand of an overseas defendant: Exportrade Corporation v Irie Blue New Zealand Ltd [2013] NZCA 675 at [13], [32], [33].

[41] Respectfully, however, I do not think that the learned authors of McGechan have correctly interpreted this aspect of the Court’s decision. Paragraph [33] of the Exportrade decision is in the following terms:¹⁴

There is no dispute that Toogood J was right to consider that in a case such as this when a defendant has been validly served in New Zealand, as was the case with Irie Blue (and, in the event he erred as to jurisdiction, the other defendants), but the defendant does not consider that New Zealand is the appropriate forum, the appropriate course is for the defendant to apply for a stay or dismissal under r 15.1 of the High Court Rules.

[42] Although not entirely clear, it seems to me that in this paragraph the Court was not considering the position of Mr Gribble but that of another defendant, Irie Blue, who (as is made clear in [3](a) of the judgment) had been validly served in NZ. As the Court’s earlier analysis shows, the issue of jurisdiction over Mr Gribble fell to

_{be determined under r 6.29(1) and (2), with the onus resting upon Exportrade.}¹⁵

¹³ Andrew Beck and others McGechan on Procedure (online ed. Brookers) at [5.49.10A] and

_[6.29.7].

¹⁴ _{Exportrade Corp v Irie Blue New Zealand Ltd, above n 8, at [33].}

¹⁵ See the very specific comments to this effect at [14] of the Court of Appeal’s judgment, quoted

above.

Although the Court was required to consider the appropriate forum question in the context of r 6.29(1) in relation to Mr Gribble (because r 6.28(5)(d) is required to be considered under that rule) it seems clear that the Court of Appeal preferred to address the forum issue in the context of its discussion in relation to Irie Blue. Accordingly, so as far as Mr Gribble was concerned the Court simply noted:¹⁶

[28] ... It was not submitted before us that if we concluded that New Zealand was the appropriate forum for the proceeding against Irie Blue that the appropriate forum for the appellant to sue Mr Gribble would nonetheless be Barbados.

[43] And as far as Irie Blue was concerned, the operation of rr 6.29(3) and 15.1 meant that forum was the only question, and it is this which the Court discusses between [33] and [52]. The Court concluded that Barbados, not New Zealand was the appropriate forum. For the reasons given at [28] that conclusion also applied to

Mr Gribble.¹⁷

[44] Accordingly, it is my view that the application to dismiss in the present case is governed by the requirements r 6.29(1). As noted by the Court of Appeal in Exportrade, that rule requires the party effecting service (i.e. Americhip) to establish that:

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

(b) the court should assume jurisdiction by reason of the matters set out in rule 6.28(5)(b) to (d), namely that:

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

_{(ii) New Zealand is the appropriate forum for the trial; and}

¹⁶ _{Exportrade Corp v Irie Blue New Zealand Ltd, above n 8, at [28].}

¹⁷ The further complicating factor in the Exportrade case is that notwithstanding the Court’s conclusion that New Zealand was not the most appropriate forum, it held that Exportrade had established that there were other special circumstances that warranted the assumption of jurisdiction here. The applications for stay by Mr Gribble (under r 5.49(7) and by Irie Blue (under r 15.1) were therefore dismissed.

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

[45] I address each aspect in turn.

Is there a good arguable case that the claim falls within 6.27?

[46] In Exportrade the Court of Appeal said that:¹⁸

[23] The standard of a “good arguable case” of compliance with r 6.27(2) is a distinct test, separate from any question of the substantive merits of a claim. In the case of some categories in r 6.27(2) a conclusion at the first stage of the inquiry may substantially answer the question of the merits of the claim.

[47] In this case, Mr Chisholm contended that Americhip was entitled to serve the claim out of New Zealand without leave pursuant to r 6.27 because there is a good arguable case that:

(a) the subject matter of the proceeding is land or other property situated in New Zealand, or any act, deed, will, instrument, or thing affecting such land or property: r 6.27(2)(e); and/or

(b) relief is sought against a person who is domiciled or ordinarily resident in New Zealand: r 6.27(2)(g); and/or

(c) a claim is being made for the remedy of constructive trust and Mr Dean’s alleged liability arises out of acts committed within the jurisdiction: r 6.27(2)(l).

Rule 6.27(2)(e)

[48] Although the precise ambit of r 6.27(e) is (in my view) not altogether clear, Mr Chisholm referred me to Islamic Republic of Pakistan v Zardari where the

_{English High Court confirmed that the equivalent English rule}¹⁹ _{was not confined to}

¹⁸ _{Exportrade Corp v Irie Blue New Zealand Ltd, above n 8, at [23].}

19. Civil Procedure Rules, r 6.20(10), which applies when “the whole subject matter of a claim relates to property located within the jurisdiction”

claims concerning the ownership or possession of property, but also applied to claims against property in the United Kingdom which was (allegedly) the subject of a constructive trust arising from (allegedly) corrupt acts by the defendants in Pakistan.²⁰ Collins J said:²¹

By CPR 6.20(10) the court may assume jurisdiction if the whole subject- matter of the claim relates to property situated in England. In Re Banco Nacional de Cuba [2001] 1 WLR 2039, at 2055, Lightman J held that the rule is not confined to claims relating to the ownership or possession of property, but extends to any claim for relief, whether for damages or otherwise, so long as it is related to property located within the jurisdiction; but since the jurisdiction was discretionary the court would consider whether the character and closeness of the relationship was such that the jurisdiction against foreigners abroad should properly be exercised. In Sahar v Tsitsekkos [2004] EWHC 2659 (Ch) at [41]- [42] Mann J held that in considering the application of the rule it was necessary to examine how the case was put, and what in substance it involved.

...

The subject matter of the claim is the property. It is true that the basis of the claim rests on alleged corruption, but that does not affect the existence of jurisdiction under CPR 6.20(10). The intention of that head of jurisdiction is to confer a discretionary jurisdiction on the English court to hear disputes relating to property in England. Nor is there any basis for the suggestion on behalf of Mr Zardari that the rule was not intended to relate to disputes over funds of money representing property in England. It is argued that if the rule applied to easily movable property a claimant could establish jurisdiction over a foreigner by, for example, paying a disputed fund into an English bank account. But in such a case the discretion of the court would prevent an exorbitant jurisdiction being exercised.

[49] Accordingly I consider that Americhip has a good arguable case that service overseas was permitted as of right by r 6.27(e), by virtue of the location of the Brighton Terrace property (which Americhip seeks to have transferred to it) in New

_Zealand.

²⁰ Islamic Republic of Pakistan v Zardari [2006] EWHC 2411 (Comm). In that case Pakistan had claimed a constructive trust over properties located in Britain that had allegedly been bought with the proceeds of bribes and secret commissions taken in Pakistan.

²¹ At [157] and [158].

Rule 6.27(2)(g)

[50] As far as r 6.27(2)(g) is concerned, I am greatly assisted by the fact that the Court of Appeal in Exportrade regarded the arguability of the case in relation to Mr Gribble’s domicile as straightforward. The Court said:²²

[25] The r 6.27(2)(g) gateway seems most clearly satisfied. As Mr Thwaite submitted, the Domicile Act 1976 provides that a person's domicile of origin (birth) is retained until a new domicile is acquired by proof of presence in another county and intention to live in that country indefinitely:²³ Mr Gribble is New Zealand-born and has not submitted evidence that he intends to live permanently in another country.

[Footnote in original]

[51] In my view this comment is equally applicable to Mr Dean. There is therefore a good arguable case that service on him overseas was permitted by 6.27(g).

Rule 6.27(l)

[52] The position as regards r 6.27(2)(l) is more difficult. While it is plain that in the present case “a claim is being made for the remedy of constructive trust”, I am doubtful that it can arguably be said that Mr Dean’s alleged liability arises out of acts committed within the jurisdiction.²⁴ But because of the conclusions I have reached in relation to r 6.27(2)(e) and (g) it is not necessary for me to address the matter definitively, further. I merely record that a similar doubt was expressed in relation to similar facts and a similar rule by the learned Judge in Zardari.²⁵

[53] On the basis that Americhip had a good arguable case for service without leave in terms of r 6.27(2)(e) and (g) (and that 6.29(1)(a) is therefore satisfied) I turn now to consider the requirements of 6.29(1)(b). The first of these is whether

_{Americhip’s claim raises a serious issue to be tried on the merits.}

²² _{Exportrade Corp v Irie Blue New Zealand Ltd, above n 8, at [25].}

²³ _{Domicile Act 1976, ss 9 and 12}

²⁴ _{This issue is discussed further at [56] and [57] below.}

²⁵ Islamic Republic of Pakistan v Zardari, above n 16. By r 6.20(14) of the Civil Procedure Rules, the court may assume jurisdiction if the claim is made against the defendant as constructive trustee where the defendant's alleged liability arises out of acts committed within England. In Zardari the argument that some relevant acts (albeit acts not committed by Mr Zardari personally) had occurred within the jurisdiction was somewhat stronger than it is here. The issue is discussed by Collins J between [160] – [170].

Rule 6.28(5)(b): is there a serious issue to be tried on the merits?

[54] I have set out the key parts of the statement of claim above.

[55] An assessment of the merits of the claim is necessarily made in the absence of pleading or evidence from Mr Dean. On the basis of the material before me, however, the first cause of action in deceit is plainly arguable (at least as a matter of New Zealand law) and, indeed, Mr Jones did not attempt to argue otherwise.

[56] But the remaining three causes of action are somewhat more problematic. In particular, it is difficult to see how any of them adds anything of substance to the first. All three are predicated on Mr Dean having embezzled Americhip’s funds in China and the consequent construction of a trust over those funds. They then allege some further breach of trust or other equitable wrong by Mr Dean involving:

(a) his use of the embezzled (trust) funds in New Zealand to purchase the

Brighton Terrace property;

(b) his promising to return the funds but failing to do so.²⁶

[57] Accordingly, the reality is that if the facts that are pleaded in the first cause of action cannot be proved, then the subsequent causes of action will also, inevitably, fail. If the first cause of action succeeds, then there is no need for the second to fourth. The point is further underscored by the fact that the only relief sought in the newer claims (tracing the misappropriated funds to the Brighton Terrace property) is, and has always been, claimed in relation to the original, first cause of action. I am therefore unable to see that the new claims have any independent merit; they appear to have been added to the pleading simply as a means of locating some part of the

_{factual matrix of the claim in New Zealand.}

²⁶ The pleading of Mr Dean’s alleged admissions in New Zealand (that he had stolen Americhip’s money and used it to purchase the Brighton Terrace property) appears to me to add little of consequence to any of the causes of action themselves. The admissions are, rather, evidentiary matters. Even in a formal proof setting it is, in my view, doubtful that Mr Clegg’s evidence of those admissions would, without more, suffice.

[58] For the purposes of any assessment of the existence of a serious question to be tried, however, my conclusions about the merits of the deceit cause of action suffice. But the issues I have identified in relation to the remaining causes of action will become relevant in the context of the discussion about forum, which follows.

Rule 6.28(5)(c): would New Zealand be the appropriate forum for the trial?

[59] As the decision in Exportrade confirms, the leading authority on forum non conveniens continues to be Spiliada Maritime Corp v Cansulex Ltd.²⁷ There is, however, a signal difference between that case and this. That is because, by virtue of the operation of r 6.29(1), the burden lies not on Mr Dean to show that some other forum is more “convenient” but rather, it is the plaintiff, Americhip, who must satisfy me that New Zealand is the appropriate forum for its claim.

[60] The starting point is that Mr Chisholm did not seek to argue that these proceedings could not be brought or progressed in either China or the United States, (where Americhip is based). I therefore proceed on the assumption that they could be.

[61] If more than one forum is available then there is a range of factors which can be relevant to determining appropriateness, including:

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

(c) The existence of litigation in another jurisdiction, and the state of those proceedings;

(d) Whether all relevant parties are subject to New Zealand jurisdiction;

(e) Whether the law governing aspects of the dispute is New Zealand law or foreign law;

(f) The strength of the plaintiff’s case;

(g) Where any judgment will need to be enforced;

(h) Whether the defendant’s challenge to the plaintiff’s chosen forum is

made to gain a tactical advantage;

(i) Any procedural advantages that may exist as between the respective jurisdictions.

Discussion

[62] My conclusion above that there is a good arguable case that Mr Dean could be served without leave under r 6.27 means that it is equally arguable that all relevant parties (namely Mr Dean and Americhip) could properly be held subject to the jurisdiction of the New Zealand Courts.²⁸ I also record at the outset that, so far as I am aware, there is no parallel litigation in China or in the United States.

[63] No evidence was adduced, and no information was made available, about:

(a) the relative cost and convenience of proceeding in China, the United

States or New Zealand;

(b) the law, or the conduct of litigation, in China or the United States;

(c) any procedural advantages or disadvantages that may exist were the matter to proceed in China or the United States.

[64] I am not prepared to make assumptions about any of those matters; they are, at best, neutral considerations.

[65] I have also been given only minimal information about the location and availability of documents and witnesses. But the affidavit of Mr Clegg for Americhip makes it very clear that the facts underpinning the claims (the alleged

skimming fraud) all took place in China (or between China and the United States) and involved other people who were, and are, resident in those countries. It can, in my view, be reasonably supposed that the great majority of relevant documents and witnesses will be located overseas.

[66] The best that can be said for Americhip is that, if the claim is permitted to continue in New Zealand, and Mr Dean chooses not to defend it, the evidence about his admissions (in New Zealand) might limit the scope of the evidence from China and the United States that is required. It seems unlikely, however, that the evidence of his admissions would obviate the need to call further evidence from those countries altogether; there is much in the way of detail that is also likely to require proof. And, of course, if Mr Dean were to elect to defend the claim and to deny the “admissions” then it seems inescapable that considerable overseas evidence would be required.

[67] In the discussion about the substantive merits of the claim above I concluded that the apparent strength of the claim in deceit sufficed for the purposes of the r 6.28(5)(b) (serious question) hurdle. By and of itself, the strength of that claim must tend to favour Americhip in terms of forum. That said, however, the deceit cause of action is also problematic in the forum context. That is because the starting point is that the all the facts that are alleged to comprise that claim occurred overseas; in China and, to a much lesser extent, the United States. It follows that it

is Chinese law that will in all likelihood need to be applied to determine that claim.²⁹

As I have said, no information was provided to the Court about this, but it seems improbable that the common law tort of deceit exists in China.³⁰ Nor do I have information about any equivalent to the law of equity and constructive trusts in Chinese law. Accordingly, any merit the deceit claim might have if New Zealand law were to be applied to the alleged facts is, in my view, outweighed by the fact that

_{the cause of action is indisputably located in China.}

²⁹ A New Zealand Court has jurisdiction to hear an action in respect of a wrong committed outside New Zealand provided that the defendant can be properly served with the proceedings. But New Zealand law will be applied to determine the matter only if no evidence of Chinese law is adduced.

³⁰ It may well play a part in the law of the United States, which I accept is an alternative forum, but again, no information was provided about that.

[68] By contrast, I accept that the second to fourth causes of action are pleaded in a way that purports to engage New Zealand law. But as I have already indicated above, I consider that those causes of action are parasitic on, and largely superfluous to, the first (Chinese) cause of action. I therefore consider that although the relevant facts occurred in New Zealand, and although New Zealand law might well apply, these are matters that can be given very little weight in terms of determining the appropriate forum.

[69] In terms of the place where any judgment will need to be enforced, the focus of Mr Chisholm’s submissions was, understandably, on tracing the proceeds of Mr Dean’s fraud to the Brighton Terrace property. I accept that enforcement of any judgment in that respect is necessarily a New Zealand matter. He did not, however, address the point that if judgment were to be entered for Americhip for the full US$10 million sought on the first cause of action, then approximately 80 per cent of the judgment will, presumably, have to be enforced overseas. There is no claim that Mr Dean has further money remaining in bank accounts here and, indeed, Mr Clegg’s evidence was that he has used the remainder of the embezzled funds to buy a number of properties in Hong Kong and elsewhere.

[70] Mr Chisholm also submitted that, in the event that Americhip was required to bring proceedings in China, and Mr Dean took no steps to defend them, any default judgment given in that country may not be able to be registered and enforced in New Zealand. I am prepared to accept that that may be so; Mr Jones did not argue to the contrary. But as I have noted in the preceding paragraph, that portion of the allegedly embezzled funds that is said to be traceable to New Zealand is relatively small (no more than twenty percent). So this is, at best, a relatively minor consideration.

Rule 6.28(5)(d): are there other relevant circumstances supporting an assumption of jurisdiction?

[71] No further matters were raised by Mr Chisholm in this respect.

Conclusion

[72] On the basis of the analysis above, Americhip has failed to satisfy me that there are sufficient grounds for this Court properly to assume jurisdiction in this case. Although, in terms of the requirements of r 6.29, I have found that there is a good arguable case that the claim falls within two of the paragraphs of rule 6.27(2), and that the deceit cause of action raises a serious question to be tried on the merits (at least in terms of New Zealand law), I do not consider that New Zealand is the appropriate forum. In particular:

(a) the facts comprising the critical, deceit, cause of action all occurred either in China or the United States;

(b) in the (likely) event that Americhip is required to prove those facts, none of the relevant documents or witnesses are in New Zealand;

(c) Mr Dean would be entitled to call evidence of the equivalent Chinese (or possibly United States) law and the Court would most likely need to apply that law to the first cause of action;

(d) Although the remaining three causes of action appear on their face to engage with the New Zealand jurisdiction, in reality they add nothing to the first cause of action and (indeed) are dependent upon Americhip establishing the facts which comprise it;

(e) While the constructive trust claimed over the Brighton Terrace property favours New Zealand as the appropriate forum it is outweighed by the other matters I have listed above. Moreover the funds that are said to be traceable to that property comprise only about twenty per cent of the total amount claimed against Mr Dean.

[73] Mr Dean’s application to dismiss the proceedings is granted accordingly. He

_{is entitled to costs on a 2B basis in the usual way.}

Rebecca Ellis J