IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-600 [2013] NZHC 1522

BETWEEN	ANZ BANK NEW ZEALAND LIMITED Plaintiff

AND	DONG HO CHUNG First Defendant

KYUNG OK SONG Second Defendant

Hearing:	20 June 2013

Counsel:	DR Kalderimis for plaintiff
No appearance for defendants

Judgment:	24 June 2013

INTERIM JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for substituted service]

This judgment was delivered by me on 24 June 2013 at 11:30am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:	Chapman Tripp, Wellington

ANZ BANK NEW ZEALAND LIMITED v CHUNG [2013] NZHC 1522 [24 June 2013]

The application

[1]       The plaintiff applies for an order for substituted service of a statement of claim, notice of proceeding, interlocutory application for summary judgment and affidavit in support on the first defendant.

[2]       Counsel for the plaintiff appeared at the first call of the summary judgment application on 20 June 2013 and sought leave, which I granted, to make additional oral submissions in support of an application for substituted service which had been filed on 19 June 2013 and in respect of the first defendant.

The grounds in support of the application

[3]       The application is made in reliance on r 6.8 of the High Court Rules.  Rule

6.8 provides:

6.8       Substituted service

If reasonable efforts have been made to serve a document by a  method permitted or required under these rules, and either the document has come to the knowledge of the person to be served or it cannot be promptly served, the court may—

(a)        direct—

(i)         that instead of service, specified steps be taken that are likely to  bring the  document  to the  notice  of the  person to  be served; and

(ii)       that the document be treated as served on the happening of a specified event, or on the expiry of a specified time:

(b)        when steps have been taken for the purpose of bringing, or which have a tendency to bring, the document to the notice of the person on whom it is required to be served, direct that the document be treated as served on that person on a specified date:

(c)        subject  to  any  conditions  that  the  court  thinks  just  to  impose, dispense with service of a document on a person and give to the party  by  whom  the  document  is  required  to  be  served  leave  to proceed as if the document had been served.

[4]       Mr Kalderimis recognised that in order to obtain an order for substituted service, the plaintiff must show:

(a)       That reasonable efforts have been made to serve the documents on the first defendant by personal service, or at an address; and

(b)	Either the document has come to the first defendant’s knowledge or it

cannot be promptly served;

(c)       How the method of substituted service would be likely to bring the document to the notice of the person to be served.1

Background

[5]	The plaintiff is a duly incorporated company having its registered office at

Level 10, 170-186 Featherstone Street, Wellington and carries on business as a bank. [6]	The plaintiff pleads that:
(a)       It entered into facility loan agreements with companies with which the defendants  were involved  to  the value of $112,968,088.    It  relies particularly on a facility agreement entered into in 2010;

(b)       A number of specific securities were provided by the borrowers under the facility agreement, including a guarantee given by the first and second defendants;

(c)	Default was made;

(d)	The plaintiff has sold the securities but there is a shortfall; and

(e)       Demand has been made to remedy the default, but that has not been complied with.

[7]	The affidavit in support of the application discloses that:

1	Re Franck ex parte Asteron Life Ltd (2009) 19 PRNZ 446 (HC) at 447.

(a)      The companies, whose borrowing the defendants guaranteed, are companies incorporated in New Zealand;

(b)       The first  and  second  defendants  are directors  and  shareholders of those companies;

(c)       The facility borrowing agreements were made to assist the companies and the defendants with their property portfolio, including financing the   purchase   of   multiple   office   buildings,   industrial   land   and residential properties in New Zealand;

(d)       The  facility  agreement  and  the  guarantee  were  executed  by  the defendants in New Zealand;

(e)       The facility agreement provides that payment is to be made in respect of the moneys borrowed by the defendant companies and themselves as guarantors in New Zealand; and

(f)	A breach of the facility agreement has occurred in New Zealand.

[8]       It is alleged that the plaintiff made demand for the sum due on 22 August

2010 and that demand expired unremedied on 30 August 2010.  It is further alleged that receivers were appointed and that the security properties were sold and that a shortfall, following completion of that exercise, is due and owing by the defendants to the plaintiff.

[9]       Evidence had also been given that the defendants left New Zealand on 2 April

2011 and were understood to be living in Seoul, Republic of Korea.   The second defendant has, in fact, been served with proceeding, service having been effected on
1 May 2013.  Evidence is that the first and second defendants are married.

[10]     The second defendant was served at her registered address.  The plaintiff has produced  a report that  confirms that the records of the Residential Registration Department of South Korea, Ministry of Public Administration and Safety show that the first defendant’s registered address is 501 Hyundai Hills Apt, 1025-2, Bangbae-

Dong, Seocho-gu, Seoul Republic of Korea.   The report also records that the registered address of the second defendant is at 1-607, Samick Apt, 869, Dogok- dong Kangnam-gu, Seoul, Republic of Korea.  The plaintiff has attempted service on the first defendant at both addresses, but without success.   The plaintiff’s senior manager has deposed that it is likely that the proceeding has already come to the first defendant’s attention by virtue of the fact that the first defendant is married to the second defendant and the fact that she was served on 1 May 2013.  That, however, is an over-simplification of the position.   A report annexed to the senior manager’s affidavit from a company instructed on the plaintiff’s behalf to locate the defendants in Korea, concludes with the following comment:

It was noticed that the couple had different registered addresses under their individual names.   It could not be determine whether they have separated, are living apart, or are living together but have registered addresses, possibly their own properties, under their own names.

[11]      The deponent adds that another means of service is by virtue of the first defendant’s email address which is  dh_chung@hotmail.com and that would be the best current means available to give notice of the proceeding to the first defendant. Unfortunately, there is no evidence as to the first defendant’s regular use of this email address and, more particularly, whether he has received communications from the plaintiff or someone acting on behalf of the plaintiff and has responded to those applications or requests through his email address.

Service out of New Zealand

[12]     The plaintiff relies on r 6.27 authorising service of these proceedings on the defendants  outside  New  Zealand  without  leave.    The  plaintiff ’s  notice  relies particularly on r 6.27(2)(b)(i), (2)(b)(iii), (2)(b)(iv) and (2)(c).  The relevant parts of r 6.27 that relate to this proceeding are as follows:

6.27     When allowed without leave

(1)        This rule applies to a document that initiates a civil proceeding, or is a  notice  issued  under  subpart   4  of  Part  4  (third,  fourth  and subsequent parties), which under these rules is required to be served but  cannot  be  served  in  New  Zealand  under  these  rules  (an originating document).

(2)	An originating document may be served out of New Zealand without leave in the following cases:

…

(b)        when  a  contract  sought  to  be  enforced  or  rescinded, dissolved, annulled, cancelled, otherwise affected or interpreted in any proceeding, or for the breach of which damages or other relief is demanded in the proceeding—

(i)	was made or entered into in New Zealand; or

(ii)	was made by or through an agent trading or residing within New Zealand; or

(iii)	was  to  be  wholly  or  in  part  performed  in  New
Zealand; or

(iv)	was by its terms or by implication to be governed by
New Zealand law:

(c)        when  there  has  been  a  breach  in  New  Zealand  of  any contract, wherever made:

[13]     A New Zealand court would therefore seem to have jurisdiction to deal with this dispute, although the matter might be the subject of a forum non conveniens argument in reliance on r 5.49.2

[14]     As I have already recorded, this contract was made in New Zealand, was to be performed wholly in New Zealand and, by its terms or by implication, is to be governed by New Zealand law and the breach of the agreement occurred in New Zealand.  In short, the requirements for service out of New Zealand without leave, pursuant to r 6.27, on the material currently before the court are met.

Can the court order substituted service on a defendant who was not present in
New Zealand when the proceeding was commenced?

[15]     Mr Kalderimis  correctly  drew  to  the  court’s  attention  the  judgment  of Toogood J in Exportrade Corporation v Irie Blue New Zealand Ltd.3    His Honour questioned  whether  the  court  had  jurisdiction  to  make  an  order  for  substituted service on a defendant who was not present in New Zealand when the proceeding
was commenced.

2	Auckland Receivers Ltd v Diners Club [1986] 2 NZLR 674 (HC), Kuwait Asia Bank EC v
National Mutual Life Nominees Ltd [1990] 3 NZLR 513 (PC).
3	Exportrade Corporation v Irie Blue New Zealand Ltd [2012] NZHC 2870.

[16]     In considering the position in this case, I start from the position that this particular  proceeding  is  a  proceeding  which  comes  within  the  subclauses  of r 6.27(2), which I have already discussed.  It is not a proceeding that requires leave pursuant to r 6.28.

[17]     The issue is discussed in McGechan on Procedure as follows:4

In Exportrade Corp v Irie Blue New Zealand Ltd [2012] NZHC 2870, Toogood J held at [72]-[76] – relying on the Court of Appeal’s decision in Von Wyl v Engeler [1998] 3 NZLR 416 (CA) at 421 – that there was no jurisdiction for the High Court to make an order for substituted service on a defendant who was not present in New Zealand when the proceeding was commenced and an order made in those circumstances was a nullity.

With respect, this decision is questionable. In Von Wyl v Engeler, the Court of Appeal was addressing the different question of whether a New Zealand court could enforce an overseas judgment against the defendant, not whether a  New  Zealand  court  could  order  substituted  service  on  an  overseas defendant. An overseas judgment cannot be enforced in New Zealand where (among other things) the defendant has not submitted to the jurisdiction of the overseas court. In that case, the Court of Appeal held that the defendant had not submitted to the jurisdiction of the overseas court – as determined by New Zealand conflict of laws principles – because the overseas court had assumed jurisdiction only on the basis of substituted service. The decision in Von Wyl is not authority for the further proposition that New Zealand courts have  no  jurisdiction  to  order  substituted  service  where  the  defendant  is outside of New Zealand (although, of course, any 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 overseas courts).

[18]     I adopt the above analysis.  It was also the preferred position adopted by the presenters in the New Zealand Law Society/CLE seminar, Private International Law (August 2012) 1095

[19]     Exportrade Corporation v Irie Blue New Zealand Ltd is distinguishable on another ground, in any event, in that it was not dealing with a proceeding which qualifies for service without leave pursuant to r 6.27.  The comments therefore made in [72] of His Honour’s judgment are obiter.

[20]     Accordingly, I conclude that there is no jurisdictional bar to the making of an order for substituted service of a defendant who was outside the jurisdiction of the

4	McGechan on Procedure, High Court Rules 6.8.05.
5	David Goddard QC, Professor Campbell McLauchlin QC.

court when the proceeding is issued and where the proceeding is one which can be issued  without  leave and  in  terms  of r 6.27(2)(b).   This  conclusion  accordingly answers the matter of principle which Mr Kalderimis was concerned to draw to my attention.

Is there a sufficient basis for ordering substituted service?

[21]     In [3] and [4] I referred to r 6.8 and what must be proven before an order for substituted service is justified.  I have two particular concerns.  First, the evidence does not lead me to the position where I could responsibly find that there is a basis for treating the service on the second defendant as a sufficient basis for notification of this proceeding to the first defendant.  The passages that I have referred to in [10] and the annexure to the plaintiff’s senior manager’s affidavit put on inquiry whether there is any proper basis for concluding that the first defendant has notice of this proceeding.

[22]     The second problem with the application in the material that is currently before me is that I have no current evidence that suggests the email address as a possible alternative means of substituted service is in use by the first defendant.  In Re Franck ex parte Asteron Life Ltd, Clifford J had the comfort of knowing that communications with the party sought to be served had been replied to in respect of
communications made to the email address.6    That led the court to the conclusion

that it was very likely that the party sought to be served checks the email address regularly and therefore would receive notice of the proceedings.

[23]     I have set out my concerns in this interim judgment and invite the plaintiff to advance further evidence on both possible grounds for substituted service, if it exists, or, if some new line of inquiry can be followed, evidence of that.  Leave is granted to the plaintiff to file further evidence by way of affidavit and by memorandum which
addresses the particular concerns I have raised in this judgment.

6	Re Franck, above n 1.

[24]	I rule accordingly.

JA Faire
Associate Judge