Zurich Insurance Company Ltd v Koper [2023] HCA 25

What the court decided

Mr Koper was the registered proprietor of a unit in the Victopia Apartments in Auckland, which were designed and built by Brookfield Multiplex Constructions (NZ) Ltd (BMX NZ), a New Zealand company that has never had assets or any presence in Australia [8]. The appellant insurers were BMX NZ's professional indemnity insurers [8]. Suing as representative of other unit owners, Mr Koper obtained judgment in the High Court of New Zealand against BMX NZ for defects in the design and construction of the building, in an amount of about NZ$53 million, and BMX NZ then went into liquidation with a substantial part of the judgment unpaid [9]. He then sought leave in the Supreme Court of New South Wales under the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (the Claims Act) to bring proceedings against the insurers [10].

The primary judge, Rein J, read section 4 of the Claims Act as requiring that the claim against the insured be one that was, or could have been, brought before a New South Wales court [12]. That reading was common ground, and the joint reasons said the appeal gave no occasion to examine whether it was correct [12]. Because the notional claims against BMX NZ were in tort, the question became whether BMX NZ could have been served with originating process of the Supreme Court in notional proceedings there [13].

The parties assumed that the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR) gave no authority to serve BMX NZ in New Zealand, so the primary judge framed the critical issue as whether such service would have been effective under sections 9 and 10 of the TTPA [14]. The insurers argued that those sections have no valid application to a State court's initiating document in a proceeding in State jurisdiction [15]. The primary judge rejected that argument and granted leave under section 5 of the Claims Act, and the Court of Appeal, on an appeal by leave from that interlocutory decision, upheld it [5], [17]. The insurers appealed to the High Court by special leave [5].

Subject to limited exceptions, section 9 permits an initiating document issued by an Australian court, which includes a State court, to be served in New Zealand without leave and without the court being satisfied of a connection between the proceeding and Australia [3], [4]. The document must be served in New Zealand in the way the issuing court's rules require or permit for service in the place of issue [4]. Under section 10, that service has the same effect as service in the place of issue [4]. The insurers did not contest the Court of Appeal's holding that sections 9 and 10 are laws with respect to external affairs under section 51(xxix) of the Constitution [19]. They argued instead for a new implied limitation: that the Commonwealth Parliament lacks power to "alter the scope and reach of State judicial power", except as expressly allowed by sections 51(xxiv), 77(ii) or 77(iii) [21].

Kiefel CJ, Gageler, Gleeson and Jagot JJ held that, because the implication rested on structure alone, it could be recognised only if shown to be "logically or practically necessary" to preserve the integrity of the constitutional structure [28]. The implication did not meet that requirement [29]. Agreeing with the Commonwealth Attorney-General, their Honours said it was wrong to begin with a general conception of the relationship between polities in a federation and to treat express provisions of the Constitution as exceptions to it, a method rejected in the Engineers' Case [30]. The insurers had not explained what rational purpose would be served by a Constitution that allowed the Commonwealth to legislate for service of State court process throughout Australia but not beyond it, and none was apparent [25].

The joint reasons held that the Constitution's references to federal and State jurisdiction are to subject-matter jurisdiction, and that a person's amenability to service of process defines neither of them [33], [34]. Subject to the Constitution, including the requirements of procedural fairness, the service of process in a proceeding in a State court is within the Commonwealth's legislative power under section 51(xxiv), whether the court is exercising federal or State jurisdiction [36]. That power, given to secure the enforcement of each State's process in every other State and Territory, is not an exception to a general rule; it shows that Commonwealth laws extending the reach of a State court's process in a proceeding in State jurisdiction are consistent with the constitutional structure, and its existence is enough to deny the implication [37].

The joint reasons concluded that sections 9 and 10 are within the external affairs power in section 51(xxix) and apply to a State court's initiating document in a civil proceeding in State jurisdiction just as they apply to one in federal jurisdiction [38]. The appeal was dismissed, with the insurers to pay Mr Koper's costs [39].

Gordon, Edelman and Steward JJ, writing separately, agreed that the appeal should be dismissed [40]. They disagreed with how the joint reasons applied Mason CJ's statement about structural implications in Australian Capital Television Pty Ltd v The Commonwealth: in their view necessity is not a threshold requirement, and there are not two types of implication subject to different rules [42], [43], [45]. They also rejected the idea of a single "constitutional conception of 'jurisdiction'", if that means the word has the same meaning wherever the Constitution uses it [46]. In their view the TTPA does not confer or engage federal jurisdiction, and sections 9 and 10 deal with the personal dimension of jurisdiction [49], [51].

They also considered that the materials relied on did not compel the notional proceeding premise on which the appeal was argued, noting that Rein J had first read the Claims Act as requiring a New South Wales connection before turning to an earlier Court of Appeal decision [52], [53], [54]. On what they described as the proper approach identified by Rein J, the New South Wales connection approach, they observed that paragraph (g) of Schedule 6 to the UCPR was satisfied for one insurer and paragraph (h) for the other, so that Mr Koper could proceed against the insurers [54], [56]. The joint reasons did not address this point.

Why it matters

The joint reasons hold that an initiating document issued by a State court, including a Victorian court, in a civil proceeding may be served in New Zealand under sections 9 and 10 of the TTPA whether the proceeding is in State or federal jurisdiction, and that the service has the same effect as service in the place of issue. Subject to limited exceptions, that service needs neither leave nor a connection between the proceeding and Australia, but the document must be served in the way the issuing court's rules require or permit in the place of issue. The decision does not settle how section 4 of the Claims Act applies to a claim against an insured outside New South Wales: the joint reasons took the parties' construction as given, and Gordon, Edelman and Steward JJ questioned whether the parties' premise was required.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.