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When Is A Revenue Claim Not A Revenue Claim? - A Footnote

Paul Matthews

This is a footnote to the article ‘When is a Revenue Claim not a Revenue Claim?’ which appeared in the February 1999 number of this Review, at page 56.  In that article,[1] I discussed the question whether the Jersey Royal Court would in principle enforce a statutory cause of action created by a UK Act of Parliament.  I referred in particular to the Jersey decision of Guernsey States Insurance v Ernest Farley & Son Limited.[2]  Since the article was published, I have come across a line of Australian cases which may also be helpful in this connection.  The purpose of this note is to draw attention to those cases.

Australia is a particularly useful source for materials relating to the conflict of laws between different common law jurisdictions, because the several states of the commonwealth of Australia are all common law jurisdictions, and mobility and communications within Australia mean that it is common these days for cases brought in any one state to involve significant foreign contacts. The cases that I came across relate in the main to insurance and workmen’s compensation statutes.  Typically, in the latter class of case, a statute enacted by the legislature of one of the states confers a right to ‘no fault’ compensation on the worker against his employer.  But then the statute goes on, in some cases at least, to confer a right of indemnity against the person causing the accident, at least in circumstances where that person would have been liable in negligence.  In other cases, the right may be less extensive, but the principle is the same.  Accordingly, it sometimes happens that an accident is caused by a person from another state, and the employer, having paid the compensation due to the worker, has to take action, under his home statute, against the person who caused the accident in the foreign state.

A good example is Borg Warner (Australia) v Zupan.[3]    In that case the plaintiff’s employee was on his way to work in New South Wales, when he was injured in an accident in Victoria.  The circumstances were such that compensation was payable to the employee by the plaintiff under the New South Wales Workers Compensation Act 1926.  Under Section 64 of that Act it is provided:

‘Where the injury for which compensation is payable under this Act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof... (b) if the worker has recovered compensation under this act, the person by whom the compensation was paid shall be entitled to be indemnified by the person so liable to pay damages as aforesaid...’

The plaintiff having paid the compensation to the worker, began proceedings in the courts of Victoria under the terms of Section 64 of the New South Wales Act.   The defendant argued that Section 64 could not be used as a cause of action in Victoria.  The full court of the Supreme Court of Victoria (equivalent to the Court of Appeal in Jersey or in England) disagreed.  The court relied on the principles stated by Cardozo J in Louks v Standard Oil Co of New York:[4]

‘If aid is to be withheld here, it must be because the cause of action in its nature offends our sense of justice or menaces the public welfare... Our own scheme of legislation may be different.  We may even have no legislation on the subject.  That is not enough to show that public policy forbids us to enforce the foreign rights.  A right of action is property.  If a foreign statute gives the right, the mere fact that we do not give a like right is no reason for refusing to help the plaintiff in getting what belongs to him... Similarity of legislation has indeed this importance - its presence shows beyond question that the foreign statute does not offend the local policy... the courts are not free to refuse to enforce a foreign right at the pleasure of the judges to suit the individual notion of expediency or fairness.  They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep rooted tradition of the common weal’.

Unlike the Guernsey States Insurance case, this was not a case where the existing cause of action was transferred by operation of the statute to the plaintiff.  This was the case where the victim of the accident had a cause of action, but the statute created an entirely separate and independent cause of action, contingent on the fact of payment of compensation to the employee under the terms of the statute.  Readers will notice that this is precisely the situation in relation to the statutory indemnity given in paragraph 6 of schedule 5 to the Taxation of Chargeable Gains Act 1992.

An earlier, but slightly different case was Hodge v Club Motor Insurance Agency Proprietary Limited.[5]  In that case the plaintiff was a passenger in a motor vehicle who was injured in an accident in South Australia.   The driver was killed in the accident.  The car was registered in Queensland and the driver’s insurance was issued by Queensland insurers under Queensland law.  The insurers were not resident or carrying on business in South Australia, and nor were they approved insurers pursuant to South Australian law.

The South Australian proceedings were served out of the jurisdiction, on the insurers in Queensland.  This was done pursuant to specific Australian legislation intended to facilitate the service of process out of one state and into another.  The plaintiff had no direct claim against the defendant insurers in contract or in tort.  She sued on a provision contained in the Queensland insurance statute law which provided that:

‘4A.  Where accidental bodily injury... to any person has been caused by, through, or in connection with a motor vehicle insured under this Act but the insured person against whom it is sought to establish liability is dead or cannot be served with process, any person who could have obtained a judgment in respect of such accidental bodily injury so caused against such insured person if he were alive or had been served with process may recover by action against the insurer... the amount of the judgment which he could have so recovered against such insured person.’

The Queensland defendants applied to the South Australian court to set aside the writ and service, on the ground that the  South Australian court had no jurisdiction, the defendants being resident and carrying on business in Queensland, and having no other connection with South Australia.

The Full Court of the Supreme Court of South Australia (again, equivalent to the Court of Appeal in Jersey or in England) held that the defendants’ application failed.  The plaintiff had a cause of action against the defendants, not in contract or in tort, but under Section 4A of the Queensland statute.  If the defendants had been found in South Australia, the South Australian courts would have entertained the action in respect of that cause of action.  Because the defendants were not in South Australia but in Queensland, the South Australian process could be served out of South Australia and on the defendants in Queensland pursuant to the commonwealth legislation in that behalf.  Bray CJ said:

‘What, then, is the nature of this liability?  It is not a liability in tort... The liability is, of course, a liability created by statute, but jurisprudentially, I think,... it should be classified as quasi-contractual.  The insurer under the Queensland law... is liable to pay to the plaintiff the amount of the judgment she could have obtained against [the driver]... as if it had expressly agreed so to do.

Why should not a South Australian court entertain an action for the enforcement of such a quasi contractual obligation validly incurred under the law of Queensland, provided it has jurisdiction over the person of the defendant?...

I think that it is immaterial that the law of South Australia in the limited municipal sense does not create any obligation on the defendant in this case.  The Queensland law does, and that is sufficient according to the rules of private international law enforced in this state, provided that the law of Queensland is the proper law applicable to the obligation and that there is no reason of public policy to the contrary.’

It is, however interesting, that in this case the court went on to consider whether the Queensland defendants had any sufficient connection with South Australia which would justify the application of Queensland law to this situation.   Bray CJ said this:

‘It might, although it was not, have been argued that [Queensland was not the proper law applicable to the obligation], because the plaintiff had no connection with Queensland and the accident happened out of Queensland and hence there is nothing under our rules of private international law to attract the law of Queensland to the situation.  I think there is.  Under Regulation 38 of the South Australian Motor Vehicles Regulations, [the driver] was permitted to drive his car in South Australia if it was insured and registered in compliance with the law of Queensland.  The terms of the policy contemplate that the car might be driven by him in South Australia and the defendant undertook to be responsible for damages for bodily injuries caused in South Australia by his negligence. The permission to drive in South Australia can be regarded as conditional on the acceptance of the obligation imposed under the Queensland insurance policy by the Queensland law with regard to South Australian accidents and the defendant, by the contract of insurance, impliedly undertook so to accept them.’

I can find no trace of any similar discussion or argument in the later case of Borg Warner.  It is not quite clear whether this discussion is simply part of the process of selecting the proper law of the obligation, or whether it represents an additional hurdle over and above the selection of the proper law of the obligation.  In the context of paragraph 6 of schedule 5 to the Taxation of Chargeable Gains Act 1992, the connection between English law and Jersey resident trustees would be obvious if the trust were an English law trust.   But even if the trust were a Jersey law trust, the Jersey trustees would still have accepted assets from an English settlor in the creation of the trust, and it is this transaction (albeit creating a Jersey law trust), to which the trustees were willing parties, that has ultimately given rise to the settlor’s liability (under UK law) and the right of indemnity (also under UK law).

The Australian cases to which I have referred (and there are others) do not, of course, deal with enforcement of revenue liabilities.  They add nothing to the discussion, in the original article,[6] on the question whether the Jersey court should refuse to enforce the statutory right of indemnity on the basis that it amounts to an indirect enforcement of a foreign revenue law.  But what they do demonstrate is, as suggested in the original article, that there can be no objection in principle to the enforcement of a foreign statutory right merely because the local law does not impose it nor have any comparable rule.

  Paul Matthews is a solicitor of the Supreme Court of England and Wales and a consultant with the firm of Withers, 12, Gough Square, London, EC4A 3DE.