The law applicable to torts (2)

 Maritime torts
o Union Shipping NZ v Morgan (2002) 54 NSWLR 690
 What were the facts and issues in this case?
 Facts:
 The plaintiff was an NZ resident employed by the
defendant (which was a company incorporated in NZ)
on a barge.
 The plaintiff suffered tortious injury while operating
machinery to unload coal from the barge onto land.
 The injury occurred during the course of employment
while the barge was anchored in a coastal harbour
within Australian territorial waters and flying the NZ
flag.
 The plaintiff brought an action in the NSWSC.
 The defendant argued that the applicable law was NZ
which would confine the plaintiff to NZ’s accident
compensation scheme (which would bar the claim if it
applied)
 Issue: What law applied to the claim – was it NSW law as the
law of the littoral state or NZ as the law of the flag state?
 Held: The applicable for a ship in territorial waters is the lex
littori, no matter what the flag state is. This is clear in cases
where the ship is anchored or still
 (at [107] – [109]) If an inquiry into the reasonableness
of expectations is relevant, the expectation that New
South Wales law would apply to the alleged tort would
not be unreasonable
 The Court left open what might happen if the ship was
just passing through territorial waters rather than being
anchored.
 [105] Cases that may arise when a vessel
passes intentionally, or even unexpectedly,
through territorial waters with which it has no
other connection can be dealt with when they
arise. It might or might not be the law, to be
declared by this court or the High Court, that the
law of the flag applies where a ship is in
territorial waters exercising, voluntarily or
involuntarily, a right of innocent passage: but
that need not be decided now. It is not
necessary to decide whether the law of the flag
would have applied if the plaintiff had not been
injured while the unloading of coal was taking
place, but just before that operation began, or
just before the vessel was moored, or just
before it reached the shore, or just before it
entered the inner or the outer harbour at Port
Kembla, or just after it entered the territorial
sea. Issues of that kind can be dealt with when
the factual context of a particular case makes it
necessary to do so.
 What law applied to the claim here? NSW law as the law of the littoral
state or NZ law as the law of the flag state?
  The court applied the law of NSW which is the law of the littoral
as the ship was anchored or still
 The vessel which the plaintiff was working on had
reached its destination and the ship had entered
Australian territorial waters when the ship was
unloading the coal and this was a continuous process
which would not be severed in any way,
 It is difficult to see how anything in the nature of an
onerous or disruptive burden would be created by
applying NSW law.
 Court also raised the argument of a hypothetical distinction
between external torts (littoral state) and internal torts (flag
state)
 Here the tort had an external characteristic, and was
not limited to the internal workings of the vessel.
 Why did the Court leave open the question of what law applies if the
ship was just passing through the territorial waters of the littoral state,
rather than being anchored there or on the way there (ie ‘innocent
passage’)?
 At [105], the court stated that issues like that can be dealt with
when the factual context arises or when it is necessary to do
so
 [105] "It might or might not be the law, to be declared
by this court or the High Court, that the law of the flag
applies where a ship is in territorial waters exercising,
voluntarily or involuntarily, a right of innocent passage:
but that need not be decided now."
 There are very varied factual scenarios (as outlined at [105])
which may arise so it would best to not set a rigid rule but to
decide on a case-by-case basis
 Note: One solution suggested by Nygh is for the law of the
country in whose territorial water the ship is in to apply to torts
having external consequences to the ship, and apply law of the
flag state carried by the ship to torts having purely internal
consequences within the ship
 
The law applicable to contracts (1)
 Identification of the applicable law – Party autonomy
o Vita Food Products v Unus Shipping Co [1939] AC 277 (PC)
 What were the facts and issues in this case?
 Facts:
 There was a Canadian act (Newfoundland Carriage of
Goods by Sea Act 1932) which in section 3 required
that every bill of lading (i.e., a contract) “shall contain
an express statement that it is to have effect subject to
the provisions … of this Act.”
 By these rules any clause or agreement relieving the
carrier from liability for negligence imposed by the rules
would be void.
 Goods were shipped from Newfoundland (Canada) to
New York under bills of lading which did not contain the
statement required by section 3.
 Instead it provided for exemption from liability for
damage due to the negligence of the shipowners'
 servants, and contained a clause that the contracts
“shall be governed by English law.”
 When delivering to NY, the ship hit an island in Nova
Scotia and all the food on the ship was damaged
 An action was brought in Nova Scotia against the
shipowner in respect of damage to the goods
 The shipowner then argued that English law applied as
per the contract.
 Issue: Which law applied to the contract?
 The choice-of-law clause aside, did the contract have any connection
with England?
 At [290], the court stated that although the contract may not
have any connection to England as it was one relating to the
carriage on a Nova Scotian ship of goods from Newfoundland
to New York between residents in these countries, and
contains nothing to connect it in any way with English law, this
did not matter (on grounds of principles and facts)
 The proper law of the contract "is the law which the parties
intended to apply" – this intention is objectively ascertained,
and, if not expressed, will be presumed from the terms of the
contract and the relevant surrounding circumstances
 Since in this case, there was the express choice of law clause,
this trumped everything
 If it cannot be determined that there is an express or inferred
choice of law, then whether the contract has any connection
with England should be considered at that point
 Did English law or Newfoundland law apply to the contract?
 English law applied to the contract
 The provisions of the Canadian act were said to be
directionary and not mandatory, therefore failure to obey the
provisions of section 3 did not make the contract illegal –
express choice of law will override it
 The court noted that the proper law of the contract "is the law
which the parties intended to apply" – this was English Law –
this intention is objectively ascertained, and, if not expressed,
will be presumed from the terms of the contract and the
relevant surrounding circumstances
 What policy considerations may explain and/or justify the holding?
 Party autonomy and the ability to choose you own law and the
laws you are bound by
 Certainty as to which law the parties will be governed by, if it is
their own choice
 Do courts always give effect to express choice-of-law clauses? What
are some qualifications?
 There are some mandatory laws/rules which may override a
choice of law clause
 [290] Provided that the choice of law is bona fide and legal,
and provided there is no reason for avoiding the choice on the
ground of public policy, the courts will uphold the parties'
choice
 Questions on express choice of law
o In general, can the contractual parties choose a law that is unrelated to their
contract?
 As held in Vita, the parties may choose law that is unrelated to their
contract as this is consistent with the principle of party autonomy
  Though historically, it was suggested that the law expressly
chosen by the parties would not be upheld as the proper law of
the contract where the chosen law has no real or substantial
physical connection with the contract, its subject matter or the
parties
o Are there any qualifications on parties’ ability to choose a system of law to
govern their contract?
 There are four possible limits to the principle of party autonomy
(Mortsenson):
 (1) bad faith
 where the choice in law is not made freely and in good
faith
 (2) an unconnected law
 the courts are only likely to be looking for a reason not
to apply an unconnected law when the effect of
enforcing the choice would be a result offensive to the
legal or moral standards of the forum.
 In such a case, public policy provides a more
acceptable reason for refusing to apply the chosen law,
and will do so without complicating the principle of party
autonomy as an additional qualification of unconnected
laws would
 (3) overriding legislation
 The law expressly chosen by the parties will not be
applied as the law of the cause where legislation of the
forum overrides either the express choice of law or its
effect.
 (4) public policy
 The courts will refuse to apply the law expressly
chosen by the parties where the effect of applying it
would produce a result contrary to the public policy of
the forum
o Can parties choose non-state law to govern their contract?
 Mortensen – Currently Australian law does not allow the choice of a
non-state law
 Australia has not implemented the Hague Convention on
Choice of Court Agreements which would allow parties to
choice 'non-state law' as the applicable law
 The Hague Principles only apply to international cases,
to commercial contracts, and only deal with the
situation where the parties have expressly or tacitly
chosen the governing law.
 Amin Rasheed Corp v Kuwait Insurance [1984] AC 50 (HL)
o What where the facts and issues in this case?
 Facts:
 The plaintiffs were a shipping company based in Dubai, owned
a cargo vessel which was insured under an insurance policy
issued by the defendants, who were an insurance company
incorporated in Kuwait
 The form of policy closely followed the standard English
marine policy (specimen contained in the UK using English
terminology and written in English) called the Lloyd's contract
but gave Kuwait as the place of issue and provided for claims
in Kuwait.
 Kuwait itself had no indigenous marine insurance law
  The policy did not contain an express choice of law provision.
 The plaintiff's vessel was detained by Saudi Arabian authorities
for attempting to smuggle oil
 The plaintiff's sought to recover its losses arising from the
detention under the insurance policy
 Issue: What law was applied? Was there an inferred choice of law?
 Held:
 The use of an English standard form may be a powerful, even
a conclusive, indication that the parties intended to contract
with reference to English law
o What law was applied?
 English law was applied
 Although there was not express choice of law clause, there were
many factors that indicated the parties intended English law to apply
i.e., it was written in English, format/structure/construction of the
contract was in English, it was identical to an English contract and
used English currency
 The place where the contract was made was not very important here
as the actual contract itself was important
 The tipping point for the court was that there was no marine insurance
law that was part of Kuwaiti law, but there was in English law, and the
parties had copied an English precedent
o How did the court identify the appropriate law?
 Lord Diplock
 The first step in the determination of the jurisdiction point is to
examine the policy in order to see whether the parties have, by
its express terms or by necessary implication from the
language used, evinced a common intention as to the system
of law by reference to which their mutual rights and obligations
under it are to be ascertained
 Lord Wilberforce
 The significant factors remain: (1) the use of this form of
policy expressed in the English language and requiring
interpretation according to English rules and practice; (2) the
nationality of the parties, the defendants being incorporated
and carrying on business in Kuwait and the plaintiffs being
Liberian and resident in Dubai (i.e. neither in England nor in
Kuwait); (3) the use of English sterling as the money of
account; (4) the issue of the policy in Kuwait—this I regard as
of little weight; (5) provision in claims to be paid in Kuwait.
This, too, is of minor consequence in view of the practice,
established at the time of contracting, of settling claims in
London. I think also, for myself, that it is not without importance
that the policy contains no choice of law clause. With a policy
in a form so essentially English, the absence of such a factor
leaves the form and language, as a pointer towards English
law, without what one would consider as its natural
counterweight.
 Questions on the nature of choice of law clauses
o Does a choice-of-law clause choosing the law of X include a promise not to
litigate in a forum which will not apply the law of X?
 Unless very clear language is used, the choice of law clause is not
promissory, but merely declaratory of the intent of the parties (Nygh)
 It is just an intention of the parties that they want their contract
to be governed or read in a certain way
  i.e. not saying I promise to do this, but declaring that
the law will be governed by a certain legal system / i.e.
declaring that the promise we’re about to make is
governed by a specific legal system.
 The court properly may infer that the parties intended
their contract to be governed by reference to a
particular system of law'
 This is different to an exclusive jurisdiction clause, as an exclusive one
is a promise
 i.e., "I will not sue anywhere else"
o Why does it matter?
 By regarding choice of law clauses as promissory there are two
consequences outlined by Nygh:
 (1) commencement of proceedings in a jurisdiction which
would not apply the parties’ chosen law would not amount to a
breach of contract giving rise to an action for damages
 Nor would it, in itself, furnish a basis for the grant of an
anti-suit injunction to restrain a breach of a contractual
right, namely a promise that disputes would be
governed by the law chosen by the parties and,
impliedly, not by the law of any other country.
 (2) if a choice-of-law clause is not promissory, it cannot be
characterised as a separable agreement distinct from the main
contract (unlike jurisdiction and arbitration agreements) and
consequently, the principle of separability is inapplicable to
choice-of-law clauses in Australia
 Bonython v Commonwealth of Australia (1950) 81 CLR 486 (PC)
o What were the facts and issues in this case?
 Facts:
 The QLD government issued a series of debentures in 1895
 The terms of the debentures stated that the holders were
entitled to payment to 1000 pounds sterlings in 1945
 At the time, Australia used the English pound as their form of
currency
 In 1932, the Commonwealth government took over the debt of
the QLD Government
 In 1945 when the debentures were due to be paid, the
currency had to be paid in the Australian pound (which was
must less valuable than the English pound)
 Holders of the debentures argued that they were entitled to be
paid the equivalent of 1000 English pounds
 Issue: To determine what currency the debt was to be measured by,
the court needed to determine what the proper law of the contract was
 The question then is what upon the true construction of the
debenture of 1895 according to its proper law is intended by
the use of the words therein "pounds sterling". This is to be
determined as at the date of its issue.
 If governed by English law → meant English currency
 If governed by AU law → meant to be AU currency
 Held:
 It was impossible to infer from the mere use of the word
“sterling” in conjunction with the word “pound” in a document of
1895 that the currency of England rather than that of QLD was
intended.
  Must interpret intention as at date of issue (i.e., when QLD and
UK both had same currency)
 The substance of the obligation, created by debentures was
the same whatever the place of payment and should have
been determined by the proper law of the contract. On the
assumption that no express reference was made to the proper
law of the contract that question became a matter of
implication to be derived from all the circumstances of the
transaction.
 Applying that test, there was overwhelming evidence that it
was the law of QLD to which the parties looked for the
determination of their rights. Accordingly, that law governed
the contract and determined the meaning of the word “pound”.
o What was the objective proper law of the contracts? What effect did that have
on the outcome of the case?
 The objective proper law of the contract was QLD law
 The proper law of the contract was ‘the system of law ... with which
the transaction has its closest and most real connection’ (Viscount
Simonds)
 The debentures were issued by the QLD colony under the
authority of a QLD Act
 The loans were secured on the public revenue of the QLD
colony
 These circumstances must be of great, if not decisive, weight
in determining what is the proper law of the contract.
 i.e., the Authority for the contract was a QLD Act and therefore
it was expected that QLD law would have the closest
connection to it
 Therefore the money was to be paid with the currency of QLD
o Do you agree with the Court’s holding?
 Yes, there was no express choice of law clause, nor an inferred
choice, so the court's had to determine what law had the closest and
most real connection to the contract
 This seems to be something made on a case by case basis, and in
this case since the debentures were given force under a QLD Act,
QLD law should govern
 Note: Caution: Judgment ‘mixed’ steps 2, 3 (so do many other
judgments) For step-3 purposes, the following are clear:
 Describing the objective proper law as the law with which the
contract has the ‘closest and most real connection’
 That a contract is enabled by legislation is a relevant
consideration
 That a party is a public authority is a relevant consideration
 Oceanic Sun Line Special Shipping Co v Fay (1988) 165 CLR 197
o What were the facts and issues in this case (recall)?
 Facts:
 Fay, a resident of QLD, was a passenger on a Greek ship
during a cruise. He received serious injuries on board the ship,
which was sailing in Greek waters at the time
 Sun Line was the cruise company incorporated in Greece.
 Travel arrangements were made by a Sydney travel agent who
gave Fay an invoice and exchange order.
 Before paying Fay was shown a brochure which said the
transportation of passengers was governed by terms and
 conditions printed on the ticket which could be inspected at a
Sun Line office.
 Fay didn't read this part of the brochure and the travel agent
did not have any tickets he could inspect.
 Fay was to present that exchange order upon arrival at the
ship in Greece in exchange for the tickets. The tickets
contained an exclusive jurisdiction clause, specifying the
jurisdiction as Greek.
 Issue: What was the law governing the contract, Greek or NSW law?
o Was Greek law or NSW law likely the objective proper law, according to
Wilson and Toohey JJ? How did they reach that decision?
 The objective proper law of the contract was Greek Law
 Wilson and Toohey JJ
 There was no express identification of the proper law as the
contract was provisionally found to be constituted by nothing
more than the payment of the fare and the issuing of an
exchange order, the printed conditions on the passage ticket
not being incorporated in the contract
 The decisive consideration is that the contract was to be wholly
performed in or near Greece
 Also in support of Greek law as the proper law of the
contract is that passengers for the cruise provided were
drawn from the US as well as Australia and no doubt
from other countries.
 It would be extraordinary if the obligations of the cruise
ship towards its passengers were to be governed by a
variety of different laws, depending on where the fare
was paid and the contract concluded
 ACCC v Valve (No 3) [2016] FCA 196
o What were the facts and issues in this case?
 Facts:
 Valve was an online video game company which was based in
the US
 The platform required players to agree to their subscriber's
agreement
 ACCC launched proceedings against Valve alleging they had
made misrepresentations regarding Australian customer's
consumer rights and that they had breached provisions of the
ACL
 Issue: Ignoring the express choice of law clauses, what was the
objective proper law of the contract?
o Disregarding the exclusive jurisdiction and choice-of-law clauses and the
deeming clause what was the objective proper law, and why?
 The objective proper law was Washington law
 The online gaming company was located in Washington and had
consumers not only in Australia, but all around the world
 Thus if there is an agreement signed by all players, it was best
to have one governing law
 The place of performance was all around the world and the place of
contracting was Washington, being place of receipt of the electronic
acceptance
 Conceptual questions
o Suppose a contract does not have an express choice-of-law clause. Do you
think there is any difference between its objective proper law and any implied
choice of law?
 I thinks so, the implied choice of law looks to the intention of the
parties from the contract, while objective proper law looks to the
surrounding circumstances and whether there is a connection to that
law.
 Although there may be some overlap, objective proper law test is
broader as it looks to the circumstance beyond the contract like places
of residence and place of contracting, while implied choice of law
looks more at the language of the parties in the contract, use of a
particular currency (Amin Rasheed)
 There are some cases e.g., international cases where parties may be
from all over and so intention itself may not be sufficient
o How should courts resolve the problem of renvoi in contract cases?
 Renvoi occurs where the laws of one place apply, and they direct a
person to apply the law of another country (e.g., law of the country
where person is domiciled)
 The doctrine of renvoi does not apply in the field of contract (traditional
view)
 However, McLure JA in O’Driscoll (WA) suggested the
applicability of renvoi to contracts, but Proactive Building
(NSWSC) stated that it does not apply to contracts
 Courts to apply the traditional approach of no renvoi in contracts,
when the parties expressly select a choice of law (this would also
mean respecting party autonomy)