NEWS

Zurich Insurance PLC v Koper [2022] NSWCA 128

This recent judgment of the NSW Court of Appeal provides a useful reminder of the jurisdiction of state courts and the availability to invoke federal legislation when serving potential defendants outside of jurisdiction.

Background

The First Respondent, Mr Koper, owned a unit in block of apartments in Auckland, New Zealand. Various defects were discovered in the apartment building and the owners corporation bought a claim against the builder, Brookfield Multiplex Constructions (NZ) Ltd (Brookfield NZ). Brookfield NZ was subsequently placed into liquidation and the owners corporation filed a summons in the NSW Supreme Court bringing a representative proceeding against Brookfield NZ as well as its insurers, Zurich Insurance PLC and Aspen Insurance UK, pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (the Claims Act).

The primary judgment and the appeal

The parties agreed that in order for the insurer to be joined to the proceeding via the Claims Act, the hypothetical underlying claim against Brookfield NZ was one that could properly be bought in NSW. This would have required Brookfield NZ to be able to be validly served. Mr Koper (and the Commonwealth Attorney-General, who intervened at the first instance) advanced the argument that he could have done so pursuant to the Trans-Tasman Proceedings Act 2010 (Cth) (the TTPA) (a federal law).

The primary judge found that ss 9 and 10 of the TTPA – sections that provide for service of initiating documents in New Zealand – authorised service against Brookfield NZ in New Zealand. In doing so, the primary judge rejected the insurers’ argument that ss 9 and 10 of the TTPA were a constitutionally invalid method of conferring jurisdiction on the NSW Supreme Court of a non-federal matter.

On appeal, the insurers contended that the Commonwealth Parliament may only invest state courts with federal jurisdiction on the terms provided by section 77(iii) of the Constitution. As a result, the TTPA should be read down to only apply to service of process within federal jurisdiction. The insurers contended with s 51(xxix) of the Constitution – which relevantly provides that the Commonwealth Parliament may make laws for the service throughout the Commonwealth – by submitting that as it stood outside of Chapter III, and therefore was essentially an exception to it.

The Court of Appeal dismissed the insurers’ appeal against the primary judgment. Bell CJ (with whom Ward P and Beech-Jones JA agreed) noted that the external affairs power of s 51(xxix) should be given a broad plenary construction and not be read down by reference to other heads of power and concluded that the external affairs power supports ss 9 and 10 of the TTPA (its subject matter concerns something which is external to Australia). Bell CJ cited the following passage from Flaherty v Girgis (1987) 162 CLR 574, which concerned the Service and Execution of Process Act 1992 (Cth) (legislation with a similar effect to the TTPA):

Whilst the determination of any question under the Service and Execution of Process Act regarding service involves the exercise of federal jurisdiction, jurisdiction over the subject-matter of the action, once service has validly been effected, derives from the same source whether or not the service is extraterritorial. It is only if the authority of the court to decide the matter, questions of service apart, is derived from federal law that it will be exercising federal jurisdiction in determining the matter. Section 51(xxiv) of the Constitution, under which the Service and Execution of Process Act is enacted, envisages an extension in the reach of the process of the courts of the States and does not speak in terms of the investiture of the State courts with a new substantive jurisdiction. It is in conformity with that legislative power that the provisions of the federal Act are framed as they are.

The Court also found that the insurers’ arguments conflated two varying concepts of jurisdiction, in particular, the concept of ‘federal jurisdiction’ as conferred by Chapter III of the Constitution and the concept of ‘personal jurisdiction’, being a coercive power of the Court following lawful service. It considered that this conflation of the two concepts carried a misapprehension through the insurers’ arguments; the Court in response detailed the significance of distinguishing between the two and quoted Justice Leeming’s phrasing of the distinction in his book Authority to Decide: The Law of Jurisdiction in Australia, that “[i]t is essential to distinguish a court’s authority to decide a particular class of dispute from its authority to bind a particular defendant”.

Takeaway

Pending any further appeal, it would appear that arguments concerning the unconstitutional nature of federal legislation providing avenues for extra-territorial service are unlikely to be accepted and technical arguments going against a broad view of the various heads of power of the Constitution should likely be avoided.

The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.

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