Kuwait Asia Bank E.C. v National Mutual Life Nominees Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 1990 |
| Date | 1990 |
| Year | 1990 |
| Court | Privy Council |
New Zealand - Practice Jurisdiction - Service of statement of claim without leave on defendant bank out of New Zealand - Bank objecting to jurisdiction of New Zealand court - Statement of claim disclosing no cause of action against bank - Whether proceeding against bank to be dismissed -
A foreign bank was beneficially interested in a New Zealand company, which carried on business as a money broker. The company had five directors, of whom A. and H. were employees of the bank and nominated by it to the board of directors. By a trust deed the plaintiff was appointed trustee for the depositors, and the company covenanted to furnish the plaintiff with monthly and quarterly certificates on behalf of the directors. After the company had gone into liquidation the plaintiff settled claims against it by unsecured depositors. The plaintiff brought an action against, inter alia, the bank seeking contribution towards the loss suffered in settling those claims, and pursuant to rule 219 of the Rules of the High Court, without leave of the court, served the statement of claim on the bank outside New Zealand. The causes of action alleged the bank were (1) that it was vicariously liable for acts and omissions by A. and H.; (2) that A. and H. were the bank's agents and so it was responsible for their acts and omissions as directors; (3) that, as a substantial shareholder in the holding company which controlled the company, the bank owed the plaintiff and depositors a duty of care to ensure that the company's business was not conducted negligently, recklessly or in a manner as to materially disadvantage their interests and was liable for breach of that duty; and (4) that A. and H. acted in accordance with the bank's directions or instructions and so the bank itself was a director within section 2(1) of the
On the bank's appeal to the Judicial Committee:—
Held, allowing the appeal, (1) that where a statement of claim had been served out of New Zealand without leave on a foreign defendant pursuant to rule 219 of the High Court Rules, and the defendant applied under rule 131 for the proceeding against that defendant to be dismissed on the ground that the court had no jurisdiction, the court should decline jurisdiction and dismiss the proceeding if the statement of claim disclosed no cause of action against the defendant (post, p. 322C–D).
(2) That, in the absence of fraud or bad faith, a shareholder or other person who controlled the appointment of a director, owed no duty to a company's creditors to ensure that the director discharged his duties with diligence and competence; that the directors appointed by the bank became the agents of the company and if they had committed any breach of the duty they owed to the plaintiff under the trust deed, they were acting in an individual capacity and as directors were bound to ignore the interests and wishes of their employer; that, accordingly, the bank, against which no impropriety was alleged, could not be liable for the acts of the two directors either as employer or as principal (post, pp. 318H–319A, 320A–B, C, D, E, E–F, 321C).
(3) That, although it was in the interests of the bank as a substantial shareholder in the company's parent, to give the directors it had appointed good advice and to see that they performed their duties to the company conscientiously and competently, the bank as a substantial shareholder had no duty to do so or to ensure that the quarterly statements supplied to the plaintiff under the terms of the trust deed were accurate; that before the bank could be treated as a director under section 2 of the
Semble. (i) Notwithstanding the right conferred by rule 219 of the High Court Rules to serve proceedings without leave out of New Zealand and the ostensibly narrow ground of objection embodied in rule 131, the court retains a discretion to set aside service on the same principles as governed the granting of leave under the former rule (rule 48 of the Code of Civil Procedure) and the setting aside of service before 1986, when the High Court Rules came into operation (post, p. 310E–F).
(ii) On an application under rule 131 of the High Court Rules the defendant can raise the objection that the plaintiff's choice of venue is forum non conveniens, but it is for the courts of New Zealand to follow their own preferred procedure in this respect (post, p. 315D–E).
Per curiam. A director does not by reason only of his position as director owe any duty to creditors or to trustees for creditors of the company, although a director may be agreement or representation assume a special duty to such creditors or trustees, and a shareholder does not by reason only of his position as shareholder owe any duty to anybody (post, pp. 315F–G, 317C–D).
The following cases are referred to in the judgment of their Lordships:
Brabo, The [
Cheah Theam Swee v. Equiticorp Finance Group Ltd. (unreported), 12 July 1989; Appeal No. 6 of 1989,
City Equitable Fire Insurance Co. Ltd., In re [
Cockburn v. Kinzie Industries Inc. (
Ewing (John) & Co. Ltd. v. Pullmax (Canada) Ltd. (
Ferguson v. Wilson (
Gartside v. Sheffield Young & Ellis [
Grandmaitre (Roger) Ltd. v. Canadian International Paper Co. (
Great Australian Gold Mining Co. v. Martin (
Hagen, The [
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [
Johnson v. Taylor Brothers & Co. Ltd. [
Kingsway Industries Ltd. v. John Holland Engineering Pty. Ltd. (unreported), 14 May 1986;
Kloeckner & Co. A.G. v. Gatoil Overseas Inc. [
Mackender v. Feldia A.G. [
McConnell Dowell Constructors Ltd. v. Lloyd's Syndicate 396 [
Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. [
Monro (George) Ltd. v. American Cyanamid and Chemical Corporation [
Petersen v. AB Bahco Ventilation (
Rainham Chemical Works Ltd. v. Belvedere Fish Guano Co. Ltd. [
Rayner (J.H.) (Mincing Lane) Ltd. v. Department of Trade and Industry [
Roger Grandmaitre Ltd. v. Canadian International Paper Co. (
Ryde Holdings Ltd. v. Sorenson [
Salomon v. Salomon & Co. Ltd. [
Scott v. Scott [
Shaw (John) & Sons (Salford) Ltd. v. Shaw [
Singh v. Howden Petroleum Ltd. (
Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [
Societe Generale de Paris v. Dreyfus Brothers (
Spilada Maritime Corporation v. Cansulex Ltd. [
Takaro Properties Ltd. v. Rowling [
Vitkovice Horni A Hutni Tezirstvo v. Korner [
Wendell v. Club Mediteranee New Zealand (unreported), 25 March 1987;
Wilson v. Lord Bury (
Wincham Shipbuilding, Boiler, and Salt Co., In re (
The following additional cases were cited in argument:
Attock Cement Co. Ltd. v. Romanian Bank of Foreign Trade [
Auckland Receivers Ltd. v. Diners Club (unreported), 5 August 1986;
Automatic Self-Cleansing Filter Syndicate Co. Ltd. v. Cuninghame [
Boulting v. Association of Cinematograph, Television and Allied Technicians [
Barrow v. C.S.R. Ltd. (unreported) 4 August 1988;
Bayley v. Edwards (
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