GERLING AUSTRALIA INSURANCE COMPANY PTY LTD V LUDGATER HOLDINGS LTD CA CA546/2008

GERLING AUSTRALIA INSURANCE COMPANY PTY LTD V LUDGATER HOLDINGS LTD CA CA546/2008 11 September 2009IN THE COURT OF APPEAL OF NEW ZEALAND CA546/2008 [2009] NZCA 397BETWEEN GERLING AUSTRALIA INSURANCE COMPANY PTY LIMITED Appellant AND LUDGATER HOLDINGS LIMITED Respondent Hearing: 17 June 2009 Court: Ellen France, Potter and Keane JJ Counsel: C McLachlan QC, M S Cole and W J R Kiewik for Appellant I G Hunt for Respondent Judgment: 11 September 2009 at 2.30 pmJUDGMENT OF THE COURT A The appeal is allowed. B The proceeding in the High Court is dismissed. C The respondent must pay the appellant costs for a standard appeal on a band A basis plus usual disbursements. D The question of costs in the High Court is remitted to that Court to be reconsidered in light of this judgment. REASONS OF THE COURT(Given by Ellen France J)Table of ContentsPara NoIntroduction [1]The background [6]Relevant facts [7]The procedural background [13]The statutory scheme [17]The judgment of Chisholm J [19]The first question on the appeal [21]Jurisdiction in personam? [23]Submissions [24]Discussion [26]Relevance of presence [51]Subject-matter jurisdiction? [58]Conclusion [73]Costs [74] Introduction[1] The issue on this appeal is whether an Australian insurer (the appellant), which provides product liability insurance to an Australian insured, can be sued directly by a third party (the respondent) in New Zealand on the basis that one of the insured's products is in New Zealand and allegedly causes damage. [2] That issue raises questions about the effect of s 9 of the Law Reform Act 1936 ("the Act"). Section 9(1) provides that where an insurance policy indemnifies the insured against liability to pay damages on the occurrence of an event, on the happening of that event the amount of the insured's liability is a charge on all insurance money that may become payable in respect of that liability. The effect of s 9(4) is that every such charge is enforceable by an action against the insurer "in the same way" as if the action were an action to recover damages from the insured. [3] The appellant, Gerling Australia Insurance Company Pty Limited ("Gerling"), maintains that it cannot be sued by the respondent, Ludgater Holdings Limited ("Ludgater") in New Zealand. Rather, Gerling says Ludgater's proceedings must be brought in New South Wales, Australia. Associate Judge Christiansen found against Gerling on this point and that decision was upheld on review byChisholm J in a judgment now reported at [2008] 3 NZLR 685 (HC). Gerling successfully sought leave to appeal on three questions, each of which concerns different aspects of the central issue. The three questions are as follows: (a) Question 1: Does the High Court have jurisdiction to hear and determine Ludgater's application against Gerling under s 9 of the Act? (b) Question 2: Alternatively, does s 9 apply extra-territorially to Gerling, the insurance policy, and the proceeds of the policy, in this case? (c) Question 3: If the answer to either 1 or 2 is yes, should the Court have declined jurisdiction? [4] The answers depend on conflict of laws principles and on the nature and territorial scope of s 9. [5] After setting out the relevant background, we consider each question in turn.The background[6] We begin with the factual context.Relevant facts[7] Ludgater owns a commercial building in Auckland which was at all relevant times occupied by tenants. On 11 February 2006 the building was damaged by fire. [8] Ludgater alleges: (a) The fire was caused by a defective capacitor in one of the fluorescent lights in the building; and (b) The capacitor was manufactured in Australia by Atco Controls Pty Limited (In Liquidation) ("Atco").[9] Atco is an Australian company formerly in the business of manufacturing light components. Gerling insured Atco and the relevant policy of insurance ("the policy") was in force at the time of the fire. Gerling has an obligation to indemnify Atco in accordance with the terms of the policy to the extent that Atco may be found liable to Ludgater. [10] The policy was issued to Atco in Australia by Gerling, which has its principal place of business in Sydney. Atco had its principal place of business in Melbourne. The policy provides public and products liability cover for Atco worldwide, excluding the United States of America and Canada. There is no express choice of law clause in the policy, but it is common ground that the policy is governed by Australian law. [11] Gerling registered in New Zealand as an overseas company on 17 October 2001. Its only business in New Zealand was trade credit insurance, unrelated to this claim. Gerling ceased to carry on any business in New Zealand as from 4 April 2003 and was deregistered on 16 May 2006. [12] We turn then to the procedural history of the matter.The procedural background[13] On 2 July 2007 Ludgater applied to the High Court in Christchurch for leave to commence proceedings against Gerling under s 9 of the Act. Ludgater purported to serve the originating application in the proceedings without leave on Gerling at its offices in Sydney on 9 July 2007. [14] On 17 July 2007 Gerling gave notice pursuant to r 131(1) of the High Court Rules (now r 5.49) that it appeared under protest to jurisdiction. [15] On 23 August 2007 Ludgater applied ex parte for leave to proceed by way of originating application and for leave to serve Gerling out of the jurisdiction. Leave was granted by Associate Judge Christiansen on 27 August 2007.[16] On 3 October 2007 Gerling applied pursuant to r 131(3) of the High Court Rules for dismissal of the proceeding on the ground that the High Court had no jurisdiction to hear and determine the proceeding. The application was declined by Associate Judge Christiansen on 14 December 2007. Gerling applied for review of the judgment. As we have noted, Chisholm J upheld the decision of Associate Judge Christiansen.The statutory scheme[17] We need to set out the relevant parts of s 9 of the Act. For these purposes, the relevant provisions are subs (1), (2) and (4). Section 9(3) provides that a s 9 charge has priority over other charges on the insurance money and s 9(5) allows an action to be brought even if judgment has already been obtained against the insured for damages or compensation in respect of the same matter. Sections 9(6) and (7) are not relevant. Sections 9(1), (2) and (4) provide as follows:Amount of liability to be charge on insurance money payable against that liability –(1) If any person (hereinafter in this Part of this Act referred to as the insured) has, whether before or after the passing of this Act, entered into a contract of insurance by which he is indemnified against liability to pay any damages or compensation, the amount of his liability shall, on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance money that is or may become payable in respect of that liability. (2) If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured has died insolvent or is bankrupt or, in the case of a corporation, is being wound up, or if any subsequent bankruptcy or winding up of the insured is deemed to have commenced not later than the happening of that event, the provisions of the last preceding subsection shall apply notwithstanding the insolvency, bankruptcy, or winding up of the insured. (4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same Court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge,have the same rights and liabilities, and the Court shall have the same powers, as if the action were against the insured: Provided that, except where the provisions of subsection (2) of this section apply, no such action shall be commenced in any Court except with the leave of that Court.[18] The Act is silent as to its territorial application. It is therefore to be interpreted in light of the presumption that Parliament did not intend to legislate extraterritorially: Ex parte Blain. In re Sawers (1879) 12 Ch 522 at 528 (CA);Governor of Pitcairn v Sutton [1995] 1 NZLR 426 at 438 (CA) andHarris v Commerce Commission [2009] NZCA 84 at [20(b)].The judgment of Chisholm J[19] Finally, we summarise the judgment under appeal. Chisholm J concluded: (a) Rule 219(a) of the High Court Rules (now r 6.27(2)(a)) applied to permit service out of New Zealand without leave: at [20]. (b) Gerling had "a presence" in New Zealand "that brings it within the grasp of s 9 of the Law Reform Act and the jurisdiction of this Court": at [36]. (c) Had it been necessary to consider whether s 9 had extra-territorial effect Chisholm J would have found that it did: at [46]. (d) Ludgater had made out a good arguable case: at [54]-[55]. [20] On these grounds Chisholm J upheld the decision of Associate Judge Christiansen.The first question on the appeal[21] As Gerling submits, the first question on appeal, whether the High Court has jurisdiction to hear and determine the application, can be further broken down into the following specific issues:Question 1:(a) Whether the High Court has, or may properly assume, in personamjurisdiction over a foreign insurance company purportedly served abroad in respect of proceedings brought against it under s 9 of the Act. (b) Whether the High Court has subject-matter jurisdiction in an action founded upon s 9 in respect of: i) A contract of insurance governed by foreign law; and/or ii) A charge over a chose in action (being the insurance money) situate abroad, such that it may grant the relief provided by s 9; (c) Whether such a charge would be enforceable outside New Zealand.[22] We begin with question 1(a).Jurisdiction in personam?[23] We agree with Chisholm J, although for different reasons, that the High Court has in personam jurisdiction in this case. Our view is that Ludgater's s 9 claim should be characterised as being in tort, reflecting the tortious nature of Ludgater's claim against Atco. A defendant in a tort claim can be served abroad under r 291(a) where the relevant act or omission for which damages are claimed was done or occurred in New Zealand, regardless of whose act is in question:Biddulph v Wyeth Australia Pty Ltd [1994] 3 NZLR 49 (HC). The conclusion that the claim should be characterised as one in tort means Gerling was lawfully served abroad under r 219(a).Submissions[24] Gerling's argument on this aspect is that the action based on s 9 is a contractual one. It follows, Gerling says, that r 219(a) does not apply because it applies only to actions in tort: Longbeach Holdings Ltd v Bhanabhai & Co Ltd[1994] 2 NZLR 28 at 34 (CA). Gerling makes the point that the s 9 claim is predicated on the existence of a contract: s 9(1). Further, Gerling emphasises that Ludgater is not without a remedy because there is an equivalent to s 9 in New South Wales. [25] Ludgater submits that, in enacting s 9, Parliament was not concerned with the identity of the insurer and did not intend there to be any distinction between an insurer resident in New Zealand and one resident abroad. Ludgater also emphasises that Gerling had a presence in New Zealand, sufficient to found jurisdiction.Discussion[26] The authorities on the characterisation of claims brought under direct recourse statutes like s 9 are divided. The two competing views are neatly encapsulated in the discussion on the point in Dicey, Morris and Collins on the Conflict of Laws (14ed 2006) and in Nygh and Davies Conflicts of Laws in Australia(7ed 2002). [27] Dicey states the law as at 2 January 2006. At that time, the editors of Diceyobserved at [35-043] that the views in Australia were split:According to a minority of the decisions the issue is to be treated as one in tort . The mainstream of authority, however, regards the question as contractual. Such English authority as there is would appear to support the latter view, . [Footnotes omitted].[28] The editors of Dicey express a clear preference for the contractual classification: at [35-043].[29] The authors of Nygh, by contrast, state at [22-24] that there are "strong reasons" for adopting the tortious analysis and so:[T]reating the direct action statute not as creating an independent cause of action against the insurer, but rather as giving the plaintiff a right to pursue the insurer on the cause of action that he or she would have against the insured.[30] Nygh notes there is authority for the contractual analysis but suggests the analogy with vicarious liability cases is apt and would support a tortious analysis. [31] In terms of the English authorities, Gerling relies on Through Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co Ltd [2005] 1 Lloyd's Rep 67 (CA). That case concerned damage to the cargo on board a ship while the ship was in transit. The Finnish shipper was insolvent, so the New India Assurance Company Limited ("New India"), which had insured the goods against loss or damage in transit, pursued the shipper's insurer under a Finnish direct recourse statute. The insurer claimed New India was bound by the arbitration clause and the "pay to be paid" clause of the insurance contract. The English Court of Appeal held New India's claim was in substance a right to enforce the contract, rather than an independent statute-based right. [32] Clarke LJ said at [58]:[T]he right is defined as a right "to claim compensation in accordance with the insurance contract direct from the insurer" in certain defined circumstances. The claim under the Act is not therefore in any sense independent of the contract of insurance but under or in accordance with it.[33] Similarly, in Youell v Kara Mara Shipping Co Ltd [2000] 2 Lloyd's Rep 102 (QB) Aikens J was dealing with a claim based on the Louisiana direct action statute. Aikens J concluded that the right conferred by the statute was contractual: at [58]. [34] Ryder v Hartford Insurance Co [1977] VR 257 (VSC), referred to by Dicey, supports the tortious analysis. Jenkinson J said of a statutorily-conferred right of action for a sum of money measured by reference to the unliquidated damages which would have been recovered at 260:I do not think classification of the statutory right as contractual or as quasi- contractual should be preferred to classification of it as a right of action in tort.[35] Couch on Insurance 3d (looseleaf ed), in dealing with the applicable statute of limitations, refers to a similar debate over the American direct action statutes noting, at [107:7]:The procedural classification of the direct action has caused some confusion. There is authority that the action of the claimant against the insurer is an action based upon contract, while by other authority it is based upon a tort. [Footnotes omitted].[36] Gerling submits that the position has now been clarified by the decision of the High Court of Australia in Sweedman v Transport Accident Commission (2006) 226 CLR 362. That case, Gerling argues, is authority for the proposition that the contractual analysis is correct. [37] The background to the litigation in Sweedman was an accident in New South Wales in which residents of Victoria were injured. The Victorians were entitled to, and received, compensation from the Transport Accident Commission in Victoria. The Commission then pursued the New South Wales tortfeasor under a provision of the Victorian Act that gave the Commission a right to be indemnified. [38] It was accepted in the High Court of Australia (at 401) that the right to be indemnified was distinct from the underlying claim in tort and that the choice of law rule in tort had no direct role to play. The cause of action was characterised as akin to indebitatus assumpsit: at 401. This classification meant that, for the purposes of choice of law, the applicable law was the law of the state with which the obligation to indemnify had the "closest connection". In the judgment of Gleeson CJ, Gummow, Kirby and Hayne JJ, the Court considered that the "better view" favoured the law of Victoria. That was because (at 402):The obligation to indemnify is sourced in s 104(1) of the Victorian Act, the obligation only arose after payment required by the Victorian Act had been made out of the Fund to [the] Victorian residents.[39] Hence, the source of the requirement that the Commission make the payments, and so the obligation of the tortfeasor to the Commission, was the Victorian Act. [40] We are not convinced Sweedman necessarily assists in the present case. First, there are differences between the right in Sweedman to be indemnified and the right under s 9 to pursue the insurer. The Commission had to pay compensation under the statute to the injured parties and then had a separate restitutionary claim against the original tortfeasor. The statute in Sweedman did not simply substitute one of the parties to the original action. Secondly, the underlying policy considerations are arguably different. The direct recourse statutes assist a plaintiff who would otherwise not have a remedy. [41] In the New Zealand context, the decision of this Court in FAI (NZ) General Insurance Co Ltd v Blundell and Brown Ltd [1994] 1 NZLR 11 also requires consideration. [42] There was no foreign element to the FAI case, a point emphasised by Gerling. The issue in FAI was whether the s 9 claim was time-barred under the Limitation Act 1950. The claim against the insured was in equity so there was no limitation period on that claim. But if the claim against the insurer were an independent action based on the statute, then the six-year Limitation Act period applied to that proceeding. [43] In concluding that the claim was not time-barred, Richardson J said at 17:In a broad sense the combined effect of the insurance cover, the statutory charge and the plaintiff's claim brings three relationships into play: the plaintiff's claim against the insured, the insured's right of indemnity against the insurer, and the plaintiff's claim against the insurer. The crucial question is to determine the character of the third claim for Limitation Act purposes. If it has the same character as the plaintiff's claim against the insured then in the present case it is to be regarded as a claim in equity and so not affected by the Limitation Act. In terms of the statutory language the parties have the same rights and liabilities. Both proceedings have the same stamp. In my view it must follow that the proceeding against the insurer has the same character as the proceeding against the insured. Given that stamp it is not to be treated as an independent action to recover a sum recoverable by virtue of an enactment for the purposes of s 9(4). That reflects the policy of the section that theplaintiff should be in no better or worse position if seeking to proceed against the insurer than if proceeding against the insured.[44] Hardie Boys J also considered that the claim was not time-barred, observing at 19:Nonetheless, a claim against the insurer is not a claim against the insured. But because the section gives the claim against the insurer the same character and identity as a claim against the insured, the time limit for bringing the former must be the same, and must have the same starting point, as the time limit for bringing the latter. The claim against the insurer is not one "to recover any sum recoverable by virtue of any enactment" so as to attract the six-year limit [45] Robertson J at 24 quoted Kirby J's dissent in Grimson v Aviation and General (Underwriting) Agents Pty Ltd (1991) 25 NSWLR 422 (NSWCA), where Kirby J had said that the purpose of the phrase "the same rights and liabilities as if the action were against the insured" was "to achieve the statutory assimilation of the action against the insurer to the action which would have existed against the insured" at the relevant time. Robertson J concluded at 25:The respondent's claim against [the insured] is in equity and no limitation period applies. The relationship between [the insured] and his insurers is in contract. The trigger point in respect of a potential liability for [the insurer] is the emergence of a claim against [the insured] during the period of insurance. It would make the insurance cover of no utility if one were to interpret the provisions so that a claim notified in respect of an incident more than six years earlier (but itself not statute-barred) could not create a liability. I am not attracted by an interpretation which indicates that the remedial benefit contained in s 9 of the Law Reform Act is to have no potential for application.[46] Gerling does not suggest FAI was wrongly decided. Rather, as we have foreshadowed, Gerling argues that the correct classification of the nature of s 9 for the purpose of conflict of law rules is not determined by the way in which the provision is approached in cases with no foreign element. [47] We acknowledge that, as La Forest J observed in Tolofson v Jensen (1994) 120 DLR (4th ) 289 at 302 (SCC), in considering legal issues which have an impact in more than one legal jurisdiction, the issue is not really one of "interest balancing" but rather, involves a "structural problem". La Forest J continued at 303-304:On the international plane, the relevant underlying reality is the territorial limits of law under the international legal order. To prevent overreaching, , courts have developed rules governing and restricting the exercise of jurisdiction over extra-territorial and transnational transactions.[48] However, given there is no settled position in terms of the overseas authorities on the characterisation of claims under direct action statutes, we consider the best course is to apply FAI. There is some logic to that approach in the present case. First, Nygh's analogy with the position for vicarious liability has some attraction. Secondly, as the Law Commission for England and Wales explains at [3.51] of its report Private International Law: Choice of Law in Tort and Delict(Law Com No 193 1990), the direct action is not "in any real sense" contractual, since the claimant is not suing a party with whom he or she is in privity of contract. The Commission continued:[T]he action against the wrongdoer's insurer may be more akin to a claim in tort than contract, since what would normally be the claimant's primary remedy would be a tortious action against the wrongdoer. If the claimant's action against the actual wrongdoer would be tortious, an action against the insurer may be better seen as an extension of this tortious action. Although the direct action cannot exist in the absence of the contract of insurance, neither would the direct action exist in the absence of any wrongdoing[49] The Commission also addressed the consequences of this approach for the insurer noting at [3.51] that:[T]o apply a law other than the law of the insurance contract would expose the insurer to a liability greater than he contemplated, nevertheless, depending on where the insurer carries on his activities, his expectations might reasonably be expected to include not only the potential liability of the insured under the law of that jurisdiction to which cover extends, but also any potential direct liability.[50] The Commission did not recommend any legislative change. It considered the matter was of little practical importance and could be left to the courts to decide.Relevance of presence[51] We should also briefly indicate why we do not consider the test of "presence" in New Zealand, relied on by Chisholm J and Ludgater, to be helpful here (cf Lewins "Australian Insurance Law Cases 2008" [2009] J.B.L. Issue 6 543 at 560 – 561). In essence, we adopt Gerling's submissions on this point. [52] Gerling is incorporated and has its principal place of business in Australia, where it was served with these proceedings. It is therefore to be treated as a foreign defendant for present purposes. The concept of a foreign defendant having a "presence" sufficient to found jurisdiction is said to have come from the cases ofClark v Oceanic Contractors Inc [1983] 2 AC 130 (HL) and Agassi v Robinson[2006] 1 WLR 1380 (HL). [53] However, both of those cases dealt with the assessment of United Kingdom tax liability so the context was very different. In both cases, the House of Lords had to interpret the specific terms of the taxing legislation. [54] The question in Clark was whether a company that had branches in the United Kingdom but was non-resident for tax purposes was required to deduct PAYE from the wages of workers employed in the United Kingdom sector of the North Sea. The House of Lords thought that as the company, although non-resident, was liable for corporation tax in the United Kingdom, this gave it sufficient "tax presence" that the obligation to deduct PAYE applied. [55] In Agassi, a particular tax statute specifically applied to non-resident sportsmen and entertainers who earned money in connection with United Kingdom appearances. The question was whether the fact that money was paid to Mr Agassi by a foreign corporation was relevant to Mr Agassi's United Kingdom tax obligations. [56] In both cases, the critical factor was whether the defendants had come into the jurisdiction and done acts which put them within the scope of the legislation. The relevant tax legislation provided for foreigners who entered the United Kingdomand did acts there. Mr Agassi, for example, had played tennis at Wimbledon and earned money over the relevant period. [57] The situation in those cases is different from that here where the statute is silent as to its territorial application.Subject-matter jurisdiction?[58] We turn then to question 1(b) which relates to whether the High Court has subject-matter jurisdiction. [59] The fact that Gerling has been properly served is not a complete answer to the appeal. That is because there are still limitations on jurisdiction including those that affect the subject matter of the issue: Cheshire North and FawcettPrivate International Law (14ed 2008) at 477. Hoffmann J (as he then was) made the same point in Mackinnon v Donaldson, Lufkin and Jenrette Securities Corporation [1986] 1 Ch 482. Hoffmann J noted at 493 that it did not follow from the fact that a person was within the jurisdiction and so able to be served that there was no territorial limit to the issues, "upon which the court may properly apply its own rules or the things which it can order such a person to do". [60] Here, where the law of the policy is Australia, it is still necessary to ask whether the New Zealand court has subject-matter jurisdiction. The issue arises in this case because it is not simply a matter of bringing Gerling before the New Zealand court. Rather, the effect of s 9 is to create a charge over the proceeds of the Australian insurance policy. We need to consider whether the chose in action constituted by the charge on the proceeds of the policy is situated in New South Wales (where Gerling has its head office) or in New Zealand. If it is situated in New South Wales then a New Zealand court should not trespass on the jurisdiction of a foreign state: Société Eram Shipping Co Ltd v Cie Internationale de Navigation[2004] 1 AC 260 (HL). [61] In Société Eram, the House of Lords was considering the following factual scenario. The Hong Kong and Shanghai Banking Corporation ("the third party")was incorporated in Hong Kong and carried on a banking business there and elsewhere. It had a branch in London. Société Eram was a Romanian shipping company and was the judgment creditor. The judgment debtors were Société Oceanlink Ltd and a Mr Yoon Sei Wha who were, respectively, a company and an individual both resident in Hong Kong. The judgment creditor claimed demurrage against the judgment debtors. The debt was not satisfied and a judgment was registered in the High Court in England. One of the judgment debtors held an account in Hong Kong with the third party. The debt due from the third party to the judgment debtors on the account was situated in Hong Kong and governed by the law of that country. [62] The judgment creditor could have obtained a third party debt or garnishee order in Hong Kong against the third party in respect of the debt due from the third party to the judgment creditors. Instead, the judgment creditor applied to the High Court in England for an interim third party debt order (then called a garnishee order nisi) in respect of the debt owed by the third party to the judgment debtors in Hong Kong. [63] Referring to Mackinnon, Lord Bingham concluded that whether or not the matter was treated as one of jurisdiction or discretion, an order could not be made relating to a chose in action situate abroad. Lord Hoffmann said at [54]:My Lords, so far I have been considering the matter, as almost all the authorities have done, as one of fairness and equity between the parties. But there is another dimension. The execution of a judgment is an exercise of sovereign authority. It is a seizure by the state of an asset of the judgment debtor to satisfy the creditor's claim. And it is a general principle of international law that one sovereign state should not trespass upon the authority of another, by attempting to seize assets situated within the jurisdiction of a foreign state or compelling its citizens to do acts within its boundaries.[64] Lord Hoffmann concluded at [59] that there were "strong reasons of principle" for not making a third party debt order in respect of a foreign debt. [65] Finally, Lord Millett at [81] noted that the issue in the case had been seen as turning on the distinction between "jurisdiction" and "discretion":[W]hereas in truth it turns on the distinction between the court's duty to disclaim or decline jurisdiction as a matter of principle and its power to do so as a matter of discretion.[66] In this case, we consider Gerling is right that the situs or place of the chose in action is Australia and, applying the principles from Société Eram, it follows that the New Zealand Court should not trespass on Australia's authority by making orders in relation to it. [67] The test for determining the situs of a chose in action was discussed in Kwok Chi Leung v Commissioner of Estate Duty [1988] 1 WLR 1035 (PC). The Privy Council at 1040 cited Dicey and Morris on the Conflict of Laws (11ed 1987) for the rule that choses in action generally are situate in the country where they are properly recoverable or can be enforced. The Privy Council suggested that the place where a debt could be enforced could only be the place where the debtor resides and can be sued: at 1041. [68] The Privy Council at 1041-1042 considered it to be "clearly established" that, where the debtor has two or more residences:[T]he locality of the chose in action falls to be determined by reference to the place – assuming it to be also a place where the company is resident – where, under the contract creating the chose in action, the primary obligation is expressed to be performed.[69] In Cambridge Credit Corp Ltd v Lissenden (1987) 8 NSWLR 411 (NSWSC), the Court applied a slightly different test. The insurance policy in question was payable in New South Wales. However, none of the debtor insurers were proved to have a residence in that state. Clarke J held that the chose in action was situate in New South Wales regardless. Dicey considers Lissenden but concludes that a contractual stipulation that a debt be paid in a jurisdiction where the debtor does not have a residence does not affect the general rule that the situs of the debt is the country of the debtor's residence: (14ed 2006) at [22-029]. [70] On either the approach in Kwok Chi Leung or that in Lissenden the chose in action cannot be located in New Zealand. Gerling does not have a residence here and the debt is not payable here.[71] Ludgater says that the position is affected by the fact that under the policy Gerling may satisfy its liability by making a payment on behalf of its insured. However, that does not change the place of payment of the proceeds, which will remain in New South Wales. Similarly, it is not relevant to the question of where the proceeds of the policy are payable that a New Zealand judgment on Atco's liability to Ludgater is payable here. [72] Ludgater emphasises the consequences of Gerling's argument on the ability of a third party dealing with an apparently insured defendant to obtain a remedy. Ludgater says that in the case of an insurer resident in a country with no direct recourse provision equivalent to s 9, there would be no ability on the part of the third party to pursue such a claim. That is not an issue which arises in the present case. But, in any event, the focus of the issue before the Court is a narrower one, namely, whether or not the foreign insurer can be required to defend legal proceedings in relation to a foreign chose in action in New Zealand in its own name.Conclusion[73] The absence of subject-matter jurisdiction means Gerling's appeal must be allowed. It is not necessary for us to deal with the other questions for which leave was granted and we do not do so. The effect of our conclusion is that the proceeding in the High Court is dismissed.Costs[74] There is no reason why costs should not follow the event. The respondent must pay the appellant costs for a standard appeal on a band A basis plus usual disbursements. The question of costs in the High Court is remitted to that Court to be reconsidered in light of this judgment.Solicitors: Simpson Grierson, Auckland for Appellant Young Hunter, Christchurch for Respondent