E LAW - MURDOCH UNIVERSITY ELECTRONIC JOURNAL OF LAW ISSN 1321-8347 Volume 8 Number 3 (September 2001) Copyright E Law and author File: kampmark83.txt ftp://law.murdoch.edu.au/pub/elaw-issues/v8n3/kampmark83.txt http://www.murdoch.edu.au/elaw/issues/v8n3/kampmark83.html ________________________________________________________________________ Macquarie Bank v Berg: A Private International Law Critique Binoy Kampmark University of Queensland Faculty of Law Contents * Introduction * The Injunction Aspect o The nature of an injunction o Specific injunctions o The anti-suit injunction o The 'non-global' nature of the Internet o Limiting the scope of the injunction * The Jurisdiction Aspect o Connections and links to New South Wales o Suing the ISP * Enforcement o Enforcing the award in the United States * Conclusion * Bibliography o Articles o Textbooks o Cases o Rules of Court * Notes Introduction 1. The decision of Macquarie Bank Ltd. v Berg,[1] laid down by the Supreme Court of New South Wales in 1999 generated interest from a cyber-law perspective. But technically Macquarie Bank propounds a dubious judicial precedent. The plaintiffs, Macquarie Bank Ltd, sought to restrain the publication of defamatory material on the net through a website operated by the defendant Berg. Berg, a former employee of Macquarie Bank, was evidenced to be in the United States at the time the defamatory imputations were published. In rejecting the application for interim relief and refusing the injunction, Simpson J reasoned that an injunction in such a multi-state case exceeded the proper powers of the New South Wales court. Such an injunction would restrain Berg from publishing anywhere in the world via the Internet. It would also prejudice the rights of Berg to publish the material in other jurisdictions. Finally, even if the previous matters were not a bar to the grant, the injunction would be unenforceable as long as defendant was outside the New South Wales forum. 2. Viewed from a purely cyber-law perspective Macquarie Bank offers a detached non-regulatory approach to the World Wide Web. It accepts the web as plural and borderless whilst characterising present legal remedies as chauvinist and territorially constrained. Injunctions cannot be granted to compel the cessation of conduct on a person resident in a foreign territory at the time of the court hearing. It implies territorial assertions; it presumes that the law of New South Wales could not be the law of the world. The decision also permits the maker of defamatory imputations to evade court processes through the means of publication - here the Internet. 3. It is submitted that this approach is flawed. Simpson J, it is proposed, could have used private international law in deciding the case. By this it is meant that the court might have granted the interim relief to Macquarie Bank through an analysis of private international law principles relevant to the grant of injunctions. There was no discussion as to which forum might have been most inappropriate to determine the case. There was no analysis of the respective connections each party had to either New South Wales or the place of Berg's residence in the United States. Nor was there a discussion of the expansive scope offered by injunctions granted under the lex fori, here the law of N.S.W. The decision also overlooked the possibility that an interim award made in N.S.W. might have been enforceable in an American court against Berg. By omitting the features offered by a private international law critique, the judgment reveals a misunderstanding of the scope of injunctions and their reach under present law. The Injunction Aspect The nature of an injunction 4. Simpson J claimed that granting an injunction here would 'superimpose the law of NSW' globally.[2] This reasoning is inconsistent with the nature of an injunction. An injunction is a remedy emanating from equitable jurisdiction: clearly the injunction can be granted in some instances to enforce rights even if the subject matter of the application is external to the territory. The interim remedy is ancillary to the main determination of the parties' rights: it binds the conscience of the party, not the locus of the delictual person or the locus of other laws.[3] The decision is misconceived for stating that the extra-territorial nature of a defendant's conduct disentitles the grant of an injunction to restrain him. Furthermore, the grant of the injunction was to enforce a right that arose in New South Wales: the remedy was in personam; the right was in rem. Specific injunctions 5. Macquarie Bank suffers from careless reasoning: the injunction is flexible but Simpson J's reasoning regards the injunction as inflexibly stuck to jurisdictional weights. As the Court here had jurisdiction by virtue of breach and service over the defendant, it logically had jurisdiction 'to grant interim measures to preserve the position pending adjudication on merits.'[4] There was a jurisdictional basis over Berg - his delict, occurring in N.S.W., activated the grounds for a foreign service of the writ. Provisional relief could have been granted.[5] Furthermore, given Berg's close connection with N.S.W. they were in Lord Diplock's words 'merits in ... extending jurisdiction of the [court] over foreign defendants.'[6] 6. In the Mareva injunction,[7] the English Court of Appeal fashioned a remedy preventing a defendant from dealing with its assets other than in its ordinary course of business for payment of proper expenses. It extends to preventing the defendant from dealing with assets irrespective of their location.[8] In fact, the locus of the assets is no bar to the grant of the injunction: 'in appropriate cases, though those may well be rare, there is nothing to preclude out courts from granting Mareva type injunctions against defendants which extend to their assets outside the jurisdiction.'[9] No idea of unenforceability over external conduct in dealing with such assets arose in these cases as a substantive bar. The defendant's return[10] to the forum was not a precondition to enforcement. 7. The injunctive remedy is one in personam[11] and not in rem, enabling a court 'to control [the defendant's] activities abroad.'[12] It lies in the inherent power of the court. Even if the injunction in Macquarie Bank might have ran counter to principles of international comity as between courts,[13] it alone was no bar to such extraterritorial relief.[14] The financial specificity of the Mareva injunction might render it sui generis and distinguishable here - Macquarie Bank dealt with a remedy protecting reputation rather than preserving assets. But the Mareva injunction remains clothed in the language of a court's power to protect rights and ensure its processes are not abused by a defendant's desire to weaken court orders. Whether it asserts a global power over the defendant was beside the point. The anti-suit injunction 8. A second type of injunction - the anti-suit injunction, also usurps the jurisdiction of a foreign court by paralysing a defendant from commencing proceedings in that court. It breaches international comity and is rarely granted - but in exceptional cases the court will exercise its discretion in favour of the party seeking it. The High Court[15] evinced no doubt about that premise: if an anti-suit injunction which paralyses a party from pursuing claims in a foreign court is recognised, then it seems unremarkable that a defendant be governed by an injunction which forces him to refrain from publishing defamatory matter even though it happens in a foreign jurisdiction. The defendant residing abroad 'is no bar to the exercise of power to restrain.'[16] The 'non-global' nature of the Internet 9. Even arguments for a wider reading of injunctions is rejected, the refusal to grant the injunction on the basis that its effect would have had a 'global' impact on Berg was erroneous. In Macquarie Bank's ignorance, the Internet has filtering faculties of its own that arise out of netiquette (social conventions adopted by computer users) and software limitations. This tends to limit accessibility and localise the use of various sites. Governments can block material, service providers can limit access, net user groups can require passwords and subscriptions.[17] Some netizens can even exclude members through blockage of access. The injunction would not have been 'global' at all, because the Internet medium is only deceptively global. Limiting the scope of the injunction 10. Whilst the court judge confused the global reach of the Internet with the universality of the injunction, there is reason to suppose that the injunction could have been limited in any case. Macquarie Bank would have only been interested in limiting access to N.S.W, or perhaps Australian users of Berg's site, as the injunction was designed to protect Macquarie's reputation in that forum. Beyond the boundaries of Australia, Macquarie's reputation was inconsequential to the publication of Berg's imputations. Hence the injunction would not have resulted in a global restriction on Berg because Macquarie's reputation was not itself global. The Jurisdiction Aspect 11. The facts disclose that Berg was beyond the territorial boundaries of the state - the issue of the writ is ineffective without a complete service of it.[18] Service perfects the court's jurisdiction over the defendant, and this was done through the solicitors for Berg and accepted by the judge. 12. Even if the service of the writ was effective, the publication of the defamatory material in New South Wales enabled the court to exercise jurisdiction over it. There were no problems for Macquarie Bank to establish this, as publication occurs at the place where the material is read.[19] Australian case law analogises the Internet bulletin board, and news forum as a universal poster of defamatory content.[20] The Supreme Court Rules would have been used to justify the injunction on a claim that arose in N.S.W.[21] Berg then had to rebut the plaintiff's prima facie entitlement to the choice of forum by a stay for forum non conveniens - showing harassment or oppression from Macquarie's proceeding in a clearly inappropriate forum.[22] But even if the onus was on Macquarie to show that N.S.W was not a clearly inappropriate forum, that feature only being so if the rules required prior leave to serve outside NSW,[23] Macquarie's representatives could have discharged it by showing the respective parties' connections to the forum. Connections and links to New South Wales 13. It is true that Voth[24] forum non conveniens did not entertain interlocutory proceedings whilst Macquarie Bank did. But the factual circumstances in Macquarie Bank presented some issues that would have found Voth useful. Simpson J considered that a factor to consider for the grant of the order was whether 'another court is a more appropriate forum.'[25] This was incorrect: the test is the clear inappropriateness of the forum court. It would be illogical to have one test for interlocutory proceedings and another one for final proceedings. In any case, many applications to decide which forum to sue in are ex parte. 14. Simpson J was adamant that an interlocutory judgment does not pre-empt rights and one seeking to restrain a party from publishing matter would 'unduly override the rights of publisher and pre-empt the resolution of legitimate issues'[26] Yet she pre-empted Macquarie Bank's reputation and choice of forum. Simpson J did not consider the travesty that arose from refusal. Her Honour's decision impliedly classed N.S.W as an inappropriate forum because a defendant did not file his notice of intention to defend. It is clear that defendant's failure to do so cannot prejudice the plaintiff. If he was correctly served, the onus on Macquarie seeking to prove so having been discharged, the onus shifted to Berg to show that the forum was inappropriate as being vexatious and oppressive.[27] 15. Simpson J misallocated the onus, contradicting the position of the House of Lords in Spiliada and the High Court in Voth that refusing a plaintiff's choice of forum is a most 'weighty decision'. Simpson J however might have relied on distinguishing forum non conveniens stays and injunctions altogether. The injunction 'in effect determines the matter for the foreign court'; a stay involves the domestic determining whether it should assume jurisdiction at all.[28] However, the distinction is more formal than substantial: the court still applies the Voth test to decide where to litigate. Admittedly this analysis has only been applied to anti-suit injunctions,[29] not the type of injunction Macquarie Bank contemplated. 16. Had the Spiliada/Voth categories applied, as they do to multi-jurisdictional defamation cases,[30] the less inappropriate forum would hardly have been the American state the defendant resided in. His conduct eventuated in the United States, but the breach and damage arose in New South Wales. Witnesses necessary to identify the plaintiff as the entity defamed were in Australia.[31] His prior contacts were with New South Wales; the animus arose against the plaintiff whilst in the employ of Macquarie in New South Wales. He was a past employee of Macquarie working in that forum. He was an Australian citizen. Contacts with the forum such as finance, business connections and were relevant here, as in Berezovsky. Nor could it be said that New South Wales was the most inappropriate forum. The same applicable factors of Spiliada show that virtually every ingredient of proceedings placed the foreign court in an inappropriate domain, making New South Wales the less inappropriate forum. Refusing the injunction in effect classed the forum as inappropriate. 17. A plaintiff after all selects the forum with an important substantial connection and an important business reputation to protect.[32] The only factor pointing in the defendant's favour was his terminal used to post the matter - but that could have been done anywhere at all under a different logical address. The injunction, Macquarie should have submitted, would have thus being in aid of enforcing N.S.W. rights rather than affecting 'global' rights. They should then have pursued the matter directly to a determination of liability. The damage was done - it had now to be remedied. Suing the ISP 18. The injunction could have been granted against the internet service provider hosting the news forum.[33] They would have had a presence in New South Wales; they could have been personally served, completing the sovereign's mandate over them. If for instance, the news forum was accessed through Yahoo, then it would follow that Yahoo Australia could have been prevented from permitting defamatory material on 'macquarieontrialcom' from being shown.[34] The lawyers might well have sued the wrong defendant, since defamation involves chain liability. Thus, the ISP could be found to be a publisher in Australia. Enforcement problems would have been overcome. Enforcement 19. Simpson J conceded that enforcement[35] was a factor in exercising her discretion not to grant it. It is submitted that it miscarried. Any United States court, Macquarie's lawyers should have noted, would firstly have considered whether the Australian findings and award of jurisdiction would have been enforced in the state the defendant was located. State law would apply to recognition,[36] not federal law since foreign judgments do not have the full faith and credit protection.[37] The law of "the Bahamas, Tazhakistan (sic), and Mongolia"[38] was irrelevant - Macquarie's reputation would have mattered only in the fora of the US and NSW. If a London Times readership in those countries had been able to access a restrained article published in paper, it would hardly matter whether those courts would be interested - the contempt would issue from England and other relevant connecting states. Enforcing the award in the United States 20. Simpson J refused to consider the chance that an interim award made in the N.S.W. forum could have been enforceable in a U.S. Court. There are two main difficulties that Macquarie Bank might have encountered in making the argument that a N.S.W. injunction would have been duly recognised in the United States. 21. Firstly, United States courts might be reluctant to enforce a foreign defamation order that lacked the fettering qualities of the Free Speech Amendment so logically, it would find an overseas interim decision pursuant to a defamation judgment suspect. But this point becomes less effective if the American court notes the relevant jurisdiction where the defamation was occurring. The plaintiff's banking operations were not extensively American focusing mainly in Australia, and chiefly in New South Wales. Thus, Macquarie was not "damaged" in the United States in the sense it was in New South Wales. The First Amendment could not apply. 22. Secondly, against this, the American judge would have had to refer to the doctrine of comity, which might favour the Australian determination within its territorial limits provided it did 'not prejudice the power or rights of another state or its subjects.'[39] Both nations are under no obligation to apply each other's specified law. But since N.S.W provided a court of full and competent jurisdiction, with regular proceedings and citation of the defendant, with laws aimed at an impartial administration of justice, without fraud and without prejudice 'the merits of the case [would not] ... be tried afresh' on the mere assertion that it was erroneous in law or in fact.[40] 23. Whether this requirement is met may depend on the reciprocity limb of recognition. N.S.W must recognise the equivalent state injunction from other U.S. states where the defendant was located when he committed the offence.[41] But this requirement is not binding on all states within the U.S.[42] 24. Notwithstanding the difficulties of the First Amendment and the argument of comity, it is more than likely that a U.S. court, glancing at all the connecting factors of the case, would be content to accept the N.S.W. injunction The connecting factors of the defendant to any relevant American jurisdiction were confined to residence and preparatory conduct - all other factors from the loci delicti to witnesses and convenience pointed to N.S.W. Conclusion 25. The Macquarie Bank Case sets a dubious example. It confused the injunctive remedy as far more limited under private international than it is. It ignored the present state of law on the scope of court's injunctive powers to prevent an abuse of its processes. The decision also misunderstood the functions of the Internet in reading it as an unqualified 'global' domain. The onus of determining forum was also misapplied - it was Berg who had to show that the forum selected by Macquarie's lawyers was inappropriate. Macquarie Bank's lawyers might have been best served by either suing immediately for an award of damages or the ISP that hosted the news forum. But in reality they had a case to show that Macquarie's reputation interest lay in N.S.W. The laws of the world did not matter, because enforcement would only have been relevant to Britain or the U.S. Finally the decision failed to take into account prospects for enforcing the interim award in an American court. Critiqued under private international law, the decision remains conceptually poor, enabling publishers of defamatory material to escape and impede the court processes of the forum court through the medium they use. Bibliography Articles Kohl, Uta, "Defamation on the Internet - A Duty Free Zone After All? Macquarie Bank Ltd v Berg" (2000) 22 UNSWLJ 119. Lorenzen, Ernest, "Huber's De Conflictu Legum," (1919) 13 Ill.L.Rev. 375. Textbooks Nygh, P. E., Conflict of Laws in Australia, 6th ed (Sydney: Butterworths, 1995). Cases Babanaft International Co. S.A. v Bassatne [1988] W.L.R. 232. Banque Libanaise Pour Le Commerce v Khreich, 915 F 2d 1000 (5th Cir. 1990). Bata v Bata [1948] WN 366. Berezovsky v Michaels & Anor [2000] May 11, (HL, Eng.) Castanho v Brown & Root (UK) Ltd [1981] AC 557. Godfrey v Demon Internet Ltd [1999] 4 All ER 342 (QB). International Credit & Investment Co. (Overseas) Ltd v Adham [1998] BCC 134. Kawasaki Steel Corp v Owners and Others Interested in the ship "Daeyang Honey" (1993) 120 ALR 109. Laurie v Carroll (1958) 98 CLR 310. Macquarie Bank Inc v Berg [1999] NSWSC 526. Mareva Compana Naviera S.A. v International Bulk Carriers S.A. (1975) 2 Lloyd's Rep. 509. United States v Nippon Paper Industries Co., Inc, 109 F.3d 1 (1st Cir. 1997). Harford Fire Ins. Co. v. California, 509 U.S. 764 (1993). Helicopter Utilities v Australian National Airlines Commission (1963) 80 WN)(NSW) 48. Somportex Ltd v The Philadelphia Chewing Gum Corp., 318 F Supp 161, 167-169 (ED PA 1970). Rindos v Hardwick (No. 1994, March 31, 1994, WA Sup Crt). Tonga Air Services Ltd v Wayne Fowler, 1992 Wash. Lexis 78) (SC Washington State, Appeal No. 58057-0, March 26, 1992). Venezuelan Meat Export Co. v United States, 12 F Supp. 379 (DC Md. 1935). Rules of Court Supreme Court Rules 1970 (NSW) Notes [1] [1999] NSWSC 526 (herein Macquarie Bank). [2] Macquarie Bank, at para. 14. [3] Dagi v BHP Co Ltd (No 2) [1997] 1 VR 428. [4] Lawrence Collins (ed), Dicey and Morris on The Conflict of Laws, 13th Edition, Vol. I (London: Sweet & Maxwell, 2000), at 189. [5] Siskina (Owners of Cargo Lately Laden on Board) v Distos Compania Naviera S.A. [1979] A.C. 210. [6] Ibid., at 259-60. [7] Mareva Compana Naviera S.A. v International Bulk Carriers S.A. (1975) 2 Lloyd's Rep. 509. [8] International Credit & Investment Co. (Overseas) Ltd v Adham [1998] BCC 134. [9] Babanaft International Co. S.A. v Bassatne [1988] W.L.R. 232, 242. [italics added] [10] Macquarie Bank, at para 10. [11] Derby & Co Ltd v Weldon (No. 6) [1990] 1 WLR 1139, 1149 (CA). [12] Lawrence Collins (ed), Dicey and Morris on The Conflict of Laws, 13th Edition, Vol. I, at 186. [13] See The Siskina v Distos Compania Naviera S.A., supra, n.6. [14] Lawrence Collins (ed), Dicey and Morris on The Conflict of Laws, 13th Edition, Vol. I, at 307-8. [15] CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345. [16] P. E. Nygh, Conflict of Laws in Australia, 6th ed (Sydney: Butterworths, 1995), at 112; Castanho v Brown & Root (UK) Ltd [1981] AC 557. [17] Uta Kohl, "Defamation on the Internet - A Duty Free Zone After All? Macquarie Bank Ltd v Berg" (2000) 22 UNSWLJ 119. [18] Laurie v Carroll (1958) 98 CLR 310, 328. [19] Bata v Bata [1948] WN 366. [20] Rindos v Hardwick (No. 1994, March 31, 1994, WA Sup Crt). [21] Supreme Court Rules 1970 (NSW), Pt 10, r. 1A(1)(a), (d). [22] Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 559. [23] Ibid., at 564. [24] Ibid. [25] Citing Helicopter Utilities v Australian National Airlines Commission (1963) 80 WN)(NSW) 48, 51. [26] Macquarie Bank, para. 16. [27] Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460, 476-8. [28] Kawasaki Steel Corp v Owners and Others Interested in the ship "Daeyang Honey" (1993) 120 ALR 109, 116, citing Worker's Compensation Board v Amchem Products [1993] 1 SCR 893. [29] CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345, 397. [30] Berezovsky v Michaels & Anor [2000] UK HL 25 May 11, (HL, Eng.) [31] Oceanic Sun Line Special Shipping Co. Inc v Fay (1988) 165 CLR 197, 245 per Deane J. [32] Berezovsky v Michaels & Anor [1999] EMLR 278, 290 per Hirst LJ. (CA Eng) [33] Godfrey v Demon Internet Ltd [1999] 4 All ER 342 (QB). [34] Ibid. [35] Macquarie Bank, at para. 9. [36] Banque Libanaise Pour Le Commerce v Khreich, 915 F 2d 1000 (5th Cir. 1990). [37] Tonga Air Services Ltd v Wayne Fowler, 1992 Wash. Lexis 78) (SC Washington State, Appeal No. 58057-0, March 26, 1992). [38] Macquarie Bank, at para. 14. [39] Ernest Lorenzen, "Huber's De Conflictu Legum," (1919) 13 Ill.L.Rev. 375; Hilton v Guyot, 159 U.S. 113 (1895). [40] Hilton v Guyot, 159 U.S. 113, 202. (1895). [41] Venezuelan Meat Export Co. v United States, 12 F Supp. 379 (DC Md. 1935). [42] Somportex Ltd v The Philadelphia Chewing Gum Corp., 318 F Supp 161, 167-169 (ED PA 1970).