FEDERAL COURT OF AUSTRALIA

Delco Australia Pty Ltd v Equipment Enterprises Incorporated trading as Kukla Trenchers [2000] FCA 821

Practice and Procedure  - service of originating process out of the jurisdiction – application by respondents to set aside service – whether the proceeding is one to which FCR O8, r 1 applies – claim based on misleading and deceptive conduct in Australia in contravention of the Trade Practices Act and breach of contract that occurred in the United States – whether the causes of action alleged must be wholly within one or more of the heads enumerated in r 1 – application to set aside service dismissed subject to striking out alleged of a cause of action not within r 1.

Trade Practices Act 1974 (Cth), ss 52, 75B, 82, 86(1)

Common Law Procedure Act 1852 (UK)

Judicature Act 1875 (UK)

Federal Court Rules, O 8, rr 1 & 2, O 9, rr 4, 6(2), 7(1)(b)

Supreme Court Rules (UK), O XI

Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 applied

Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 cited

Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 referred to

Trade Practices Commission v The Gillette Company (No 1) (1993) 45 FCR 366 referred to

Jackson v Spittall (1870) LR 5 CP 542 referred to

Distillers Co (Biochemicals) v Thompson [1971] AC 458 referred to

Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 applied

Laurie v Carroll (1958) 98 CLR 310 applied

Lenders v Anderson (1883) 12 QBD 50 referred to

Matthews v Kuwait Bechtel Corporation [1959] 2 QB 57 applied

Williams v The Society of Lloyd’s [1994] 1 VR 274 discussed

Deputy Commissioner of Taxation v Ahern [1986] 2 QdR 342 referred to

Metall und Rohstoff AG v Donaldson Lufkin and Jenrette Inc [1990] 1 QB 391 referred to

Tycoon Holdings Ltd v Tencor Jetco Inc (1992) 34 FCR 31 referred to

Dicey, Conflict of Laws, 6^th ed 1949 p 172

Dicey & Morris, Conflict of Laws, 13^th ed 2000 at para 11.003

Matter No. S72 of 1999

DELCO AUSTRALIA PTY LTD v EQUIPMENT ENTERPRISES INCOPORATED trading as KUKLA TRENCHERS & ORS

VON DOUSSA J

ADELAIDE

20 JUNE 2000

THE COURT ORDERS THAT:

1.       The claim for damages based on breach of contract be struck out of the application and statement of claim.

2.       The notice of motion seeking an order setting aside service of the proceeding on each of the respondents be dismissed.

3.       The respondents (applicants on the notice of motion) pay the costs of Delco Australia Pty Ltd of the notice motion.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     On 23 September 1999 on an ex parte application by the applicant Delco Australia Pty Ltd, leave was granted to serve these proceedings out of the Commonwealth of Australia and in the United States of America on each of the three respondents.  On 22 February 2000 the first respondent entered a conditional appearance under Federal Court Rule (FCR) O 9, r 4, and conditional appearances were subsequently entered on behalf of the second and third respondents on 30 March 2000.  The proceedings had been served on each of the respondents in the United States.  By notice of motion the respondents now apply under FCR O 9, r 7(1)(b) to have the service of the originating process on each of them set aside.

2                     The relevant provisions of the Rules of Court which govern service of proceedings outside the Commonwealth of Australia are found in FCR O 8, rr 1 and 2.  Relevantly those rules provide:

1.         Subject to rule 2… of this Order, originating process may be served outside the Commonwealth in the following cases –

(a) where the proceeding is founded on a cause of action arising in the Commonwealth;

…

(b) where the proceeding is founded on a breach of an Act, where the breach is committed in the Commonwealth;

…

(n) where the proceeding, so far as concerns the person to be served, falls partly within one of the foregoing paragraphs and falls, as to the residue, within one or more of the others of the foregoing paragraphs.

…

2.         (2)        Where the Court is satisfied of the following matters –

(a)       that the proceeding is a proceeding in which the Court has jurisdiction;

(b)       that the proceeding is a proceeding to which rule 1 applies; and

(c)        that the applicant has a prima facie case for the relief which he seeks,

the Court may, by order, grant leave to serve originating process outside the Commonwealth under this order.”

3                     The respondents contend that the applicant is unable to bring itself within these provisions of the rules. 

4                     The nature of the applicant’s claim is summarised in commendably plain English in the application which reads:

“This is an Application for damages pursuant to Section 82 of the Trade Practices Act, 1974 (‘the Act’) in relation to alleged misleading or deceptive conduct contrary to Section 52 of the Act and for damages at common law for alleged negligent misstatements and breach of contract all of which arise out of the purchase by the Applicant from the First Respondent of a trenching machine.  This is also an Application against the Second and Third Respondents pursuant to Section 75B of the Act.  The legislative basis for the

Court’s jurisdiction to hear the Application and to grant the relief sought is to be found in Section 86 of the Act.

On the grounds stated in the accompanying Statement of Claim, the Applicant claims;

1.         Damages.

2.         Costs.

3.         Interest.”

5                     The accompanying statement of claim pleads in more detail the three causes of action identified in the application, namely a claim for damages under s 82 of the Trade Practices Act 1974 (Cth) (the TPA) in relation to a contravention of s 52 of the TPA, a claim for damages for negligent misstatement, and a claim for damages for breach of contract.

6                     The evidence presently before the court shows that Delco is a company incorporated and carrying on business in the State of South Australia as a pipeline construction contractor.  The first respondent is a corporation incorporated pursuant to the laws of the United States of America, with its principal place of business in Goodyear, Arizona.  The second respondent, Mr Gardner, is the national service manager of the first respondent, and the third respondent is the commercial manager of the first respondent.

7                     The circumstances alleged to give rise to the causes of action, as pleaded in the statement of claim, and as deposed to by the applicant’s general manager, Mr Allan Nuttall in support of the application for leave to serve out of the jurisdiction, are as follows.  Following telephone communications between Mr Seidler in the United States and Mr Nuttall in Adelaide, on 28 October 1997 by facsimile from the first respondent’s offices in Goodyear to the applicant’s offices in Adelaide the first respondent offered to sell to the applicant a second hand Capitol CTC 760 Wheel Trencher (the machine) for US$250,000.  The facsimile, signed by Mr Seidler, gave particulars of the machine and made the following representations about it:

“Hours: Approx. 584

  Undercarriage: D5, 80% good

  Excellent Condition.”

8                     On 23 November 1997 by a further facsimile the first respondent made representations pertaining to the quality of the machine following engine oil and hydraulic oil test results.  Again the facsimile was sent by the first respondent in the United States to the applicant in Adelaide.

9                     About 25 November 1997 the applicant alleges that in a telephone conversation between Mr Gardner in the United States and Mr Nuttall in Adelaide Mr Gardner made further representations regarding the quality of the machine including a representation that “the machine was in good condition”.

10                  On 26 November 1997 Mr Nuttall in Adelaide, in a telephone conversation with Mr Seidler for the first respondent in the United States, agreed that the applicant would purchase the machine.  The applicant’s agreement to do so was confirmed by facsimile from the applicant in Adelaide to the respondent in the United States.

11                  On 1 December 1997 the first respondent submitted an invoice to the applicant in respect of the machine which noted “upon receipt of funds machine immediately becomes Delco’s property”.  The applicant transmitted the purchase price in accordance with the invoice to the first respondent’s bank in the United States on 4 December 1997.  The first respondent subsequently arranged for the trans-shipment of the machine to the applicant in Australia.

12                  The applicant alleges that upon inspection on delivery in Australia, the machine was found to be in poor condition.  A report on the machine filed by the applicant in these proceedings from GAB Robins Australia Pty Ltd describes the condition of the machine and reports that a survey of it indicates wear of components indicative of use exceeding 12,000 and possibly as much as 16,000 hours.  The report recommends repair work estimated to cost about A$140,000.

13                  The applicant contends that the representations as to the quality of the machine contained in the original offer of 28 October 1997, and as conveyed in the subsequent communications from Mr Gardner and Mr Seidler, were misleading and deceptive in that they falsely represented the condition of the machine.  Further, it is alleged that the representations were made negligently, and in the further alternative that the representations amounted to express or implied conditions of the contract between the applicant and the first respondent which were broken because the machine was not in excellent condition, and had carried out well in excess of 584 hours of service.

Misleading and deceptive conduct claim

14                  Section 52(1) of the TPA relevantly provides:

“A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

15                  Section 82(1) provides:

“A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.”

16                  Section 52 falls within Part V of the Act.

17                  Section 75B deals with accessorial liability of persons involved in a contravention of the TPA by a corporation.  Section 75B(1) relevantly provides:

“A reference in this part to a person involved in a contravention of a provision of part …V…shall be read as a reference to a person who:

(a)       has aided, abetted, counselled or procured the contravention;

…

(c)       has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention…”.

18                  Section 4 of the TPA contains a number of relevant definitions.  A “corporation” includes a “foreign corporation”.  The respondent is a corporation within the meaning of s 52.  “Trade and commerce” means trade or commerce within Australia or between Australia and places outside Australia.  The concept therefore includes trade or commerce between a party in Adelaide and a corporation in the United States.

19                  Under O 8, r 2(2)(a) the court must be satisfied that the proceeding is a proceeding in which the court has jurisdiction.  The Court has jurisdiction in respect of a claim for damages under s 82 of the TPA by virtue of s 86(1) of the TPA.  That subsection confers jurisdiction on the Federal Court in any matter arising under the TPA in respect of which a civil proceeding has been instituted under Part VI.  Section 82 falls within that part.  The other claims alleged in the application fall within the accrued jurisdiction of the Court, being claims that arise essentially out of the one controversy as disclosed in the application and the statement of claim.

20                  The Court must also be satisfied that the proceeding is one to which r 1 applies and that the applicant has a prima facie case for the relief sought: r 2(2)(b) and (c).

21                  In Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549 a Full Court of this Court approved the following passage from the judgment of Heerey J in Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 at 390:

“…the requirement of O 8, r 2(2)(c) has to be met at the outset of the proceedings.  It does not suggest the kind of scrutiny that would occur in a submission of no case to answer following the closure of an applicant’s case at trial … It may be therefore that a court at this stage might draw inferences more readily in favour of an applicant, bearing in mind, amongst other things, that the applicant will not have had the advantage of discovery, subpoena and other procedural aids to the making out of a prima facie case at trial.”

22                  In the present case, the affidavit evidence advanced by the applicant sufficiently makes out a prima facie case that the first respondent was engaged in trade and commerce so as to attract the application of s 52 of the TPA.

23                  On the hearing of the notice of motion the Court received an affidavit from Mr Seidler.  No objection was raised by the applicant as to the late filing or form in which that document was received by the Court.  Whilst on matters of detail Mr Seidler takes issue with, or seeks to qualify, facts deposed to by Mr Nuttall, his affidavit confirms the applicant’s acquisition of the machine either from or through the first respondent, and also confirms the roles of Mr Gardner and Mr Seidler in the business of the first respondent.  At this stage in the proceedings, the Court is not concerned to resolve disagreements as to matters of detail.  The Court must be satisfied that on the material before the Court, inferences are open, which if translated into findings of fact, would support the relief claimed.  (See Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 at 110 and Trade Practices Commission v The Gillette Company (No 1) (1993) 45 FCR 366 at 371).  Mr Seidler’s affidavit does not dispute that the written representations alleged by the applicant were made in the facsimile offer of 28 October 1997, nor does the information deposed to by Mr Seidler give reason to doubt that the facsimile constituted an offer to sell the machine for US$250,000.  In my opinion the information before the Court gives rise to an inference that the respondents made representations regarding the quality of the machine as alleged by the applicant, which were misleading or deceptive, or likely to mislead or deceive as the representations were wrong.

24                  On the respondents’ behalf it was argued that service of the proceedings should nevertheless be set aside as the cause of action alleged under the TPA did not fall within
O 8, r 1.  It was argued that it is s 82 of the TPA which gives rise to the cause of action in damages, not s 52, and that an essential ingredient of a cause of action under s 82 is the suffering of loss or damage by the applicant.  Counsel contended that the damage claimed was suffered by the applicant when the contract of sale and purchase was made.  That contract, it was argued, was made in the United States, and accordingly the damage occurred there.  Thus, it was argued, the proceeding was not “founded on a cause of action arising in the Commonwealth” within the meaning of O 8, r 1(a).

25                  Counsel for the applicant conceded, for the purposes of argument, that the contract for the sale and purchase of the machine was made in the United States.  Counsel also conceded that on Mr Nuttall’s affidavit, acceptance of the first respondent’s offer occurred when the first respondent heard by telephone the applicant’s acceptance, an event which occurred in the United States, or alternatively when the facsimile confirmation of acceptance was received by the respondent in the United States.  Further, counsel for the applicant accepted that the applicant suffered loss or damage as a result of the contract, and at the time that the contract was made.  However, counsel contended that these concessions did not lead to the conclusion that a cause of action under the TPA did not arise in Australia.  Counsel for the applicant relied on the Full Court decision in Sydbank, and the authorities referred to by the Full Court at 546-547, namely Jackson v Spittall (1870) LR 5 CP 542, Distillers Co (Biochemicals) v Thompson [1971] AC 458 at 467 and Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 567.

26                  Those authorities establish that “cause of action” within the meaning of
FCR O 8, r 1(a) does not refer to all the elements of the cause of action.  Rather it refers to the act on the part of the defendant which gave the plaintiff his cause for complaint.  In Distillers Lord Pearson, delivering the opinion of the Board at 468 said:

“It is not the right approach to say that, because there was no complete tort until the damage occurred, therefore the cause of action arose wherever the damage happened to occur.  The right approach is, when the tort is complete, to look back over the series of events constituting it and ask the question, where in substance did this cause of action arise?

Theory no. (iii) is that the cause of action arose within the jurisdiction if the act on the part of the defendant, which gives the plaintiff his cause of complaint has occurred within the jurisdiction.  That is the rule laid down in Jackson v Spittall (1870) LR 5 CP 542, which is an authoritative case, and the rule is inherently reasonable, as the defendant is called upon to answer for his wrong in the courts of the country where he did the wrong.”

27                  On the facts asserted by the applicant the acts on the part of the respondents which give the applicant its cause of complaint are the misleading or deceptive representations about the quality of the machine.  Those representations were received by the applicant in South Australia, and the applicant’s cause of complaint therefore occurred in South Australia.  In my opinion the applicant’s submissions are correct.  The Sydbank decision, which is binding on a single judge of this Court, is decisive of the issue in favour of the applicant.  In that case misleading or deceptive representations were made by the agent of a Danish corporation in Denmark to the applicant in Australia by telephone.  The Court held that the applicant’s claim for damages under s 82 of the TPA was founded on the misleading and deceptive representations made in Australia where they were heard, and accordingly that FCR O 8, r 1(a) was satisfied.

28                  Insofar as the proceeding alleges causes of action against the second and third respondents based upon accessorial liability, those causes of action depend upon the same misleading or deceptive conduct that is alleged against the first respondent.  For the same reason the claims against them under s 82 of the TPA come within r 1(a).

29                  There is however another answer to the respondents’ contention.  In my opinion the causes of action against each of them alleged under the TPA plainly fall within O 8, r 1(b).  Whilst the entitlement to damages alleged by the applicant arises under s 82 of the Act, in conjunction with s 75B in the cases of the second and third respondents, it is not those sections which proscribe conduct.  The relevant proscription is contained in s 52.  It is a contravention of that section which gives rise to an entitlement to damages under s 82.  The language of s 82 is clear in that respect.  The applicant’s proceeding, insofar as it alleges causes of action under the TPA, is plainly “founded on a breach of an Act, where the breach is committed in the Commonwealth”.

Negligent misstatement

30                  In my opinion the proceeding, insofar as it alleges negligence misstatement, is also founded on a cause of action arising in the Commonwealth within the meaning of O 8, r 1(a).  The authorities referred to above apply equally to this cause of action.  Whilst it was the happening of damage which would complete a cause of action in negligence, it does not follow for the purposes of O 8, r 1(a) that the cause of action arose when and where the damage occurred.  Again, it is necessary to inquire what act or acts on behalf of the respondents gave the applicant his cause of complaint.  In this case, the acts were the misleading or deceptive representations received by the applicant in Australia.  In my opinion the information before the court establishes a prima facie case that misrepresentations about the quality of the machine were made by the respondents, and that they were negligent in making those representations because they did not take reasonable steps to verify their accuracy.  Mr Seidler deposes that he recommended that the applicant send an officer to North America to inspect the machine before agreeing to purchase it, but he knew that this was not to happen. The strong inference from the facts before the Court is that Mr Seidler must have realised that the applicant intended to rely on the representations as to quality made by the respondents.  The respondents in these circumstances would owe a duty to the applicant to take reasonable care that the representations were not wrong.

Breach of contract

31                  As already noted, counsel for the applicant conceded that the evidential material advanced by the applicant showed a contract made in the United States.  Without argument on the point, counsel also conceded that the claim for damages against the first respondent for breach of contract was not a cause of action within O8, r 1.  This concession gives rise to a further question, namely whether the Court should now excise that part of the claim from the proceeding served out of the jurisdiction. 

32                  The relief claimed in the proceeding is for monetary amounts.  The proceeding is one in personam, and in such a case the jurisdiction of the Court depends on lawful service of the process upon the respondents.  At common law the originating process of a State court does not run beyond the territorial limits of that State: Laurie v Carroll (1958) 98 CLR 310 at 322, Lenders v Anderson (1883) 12 QBD 50 at 56.  That limitation was extended first in England by the Common Law Procedure Act 1852 (UK), and subsequently the Judicature Act 1875 (UK) and the Supreme Court Rules (UK), O XI.  Rules of court in Australian jurisdictions, based on the English legislation, define the circumstances where the court will assume jurisdiction when process is served in a foreign country.  The position is summarised in the following passage from Dicey, Conflict of Laws, 6^th ed 1949 p 172 cited with approval by the High Court of Australia in Laurie v Carroll at 324:

“The service of the writ, or something equivalent thereto, is absolutely essential as the foundation of the court’s jurisdiction.  Where a writ cannot legally be served upon a defendant the court can exercise no jurisdiction over him.  In an action in personam the converse of this statement holds good, and wherever a defendant can be legally served with a writ, there the court, on service being effected has jurisdiction to entertain an action against him.  Hence in an action in personam, the rules as to the legal service of a writ define the limits of the court’s jurisdiction.”

That statement of principle is retained in Dicey and Morris, Conflict of Laws, 13^th ed 2000 at para 11.003.

33                  The limits of this Court’s jurisdiction is defined by O 8 and confined to proceedings to which r 1 applies.

34                  Under similar rules of court in England relating to service out of the jurisdiction it has been held that the various provisions in the rule corresponding to O 8, r 1 must be read independently of each other with the consequence that if a cause of action falls partly but not completely under one head and partly under another, service out of the jurisdiction is not permitted: Matthews v Kuwait Bechtel Corporation [1959] 2 QB 57 at 62.  Under the Victorian Supreme Court Rules it was held in Williams v The Society of Lloyd’s [1994] 1 VR 274 at 291-292 that the court has to be satisfied that each cause of action alleged in the proceedings falls under one or other of the heads for service out of the jurisdiction.  The decisions in Deputy Commissioner of Taxation v Ahern [1986] 2 QdR 342 and Metall und Rohstoff AG v Donaldson Lufkin and Jenrette Inc [1990] 1 QB 391 concerning the Supreme Court Rules in Queensland and England respectively are to similar effect.

35                  In this Court r 1(n) makes express provision for a proceeding where a proceeding does not fall squarely within one of the heads enumerated in the earlier paragraphs.  In my opinion r 1(n) makes it clear that an originating process to be served out of the Commonwealth must be confined to causes of action that fall wholly within one or several of the heads in r 1.  An originating process that includes a claim that does not fall within one or more of the heads is not an originating process that meets the description of r 1, in that it is not one “in” any of the cases described in the rule.  It is not a “proceeding to which rule 1 applies” so as to meet the requirement of r 2(2)(c)(b).  A similar conclusion was expressed by Wilcox J in Tycoon Holdings Ltd v Tencor Jetco Inc (1992) 34 FCR 31 at 35.

36                  In light of the concession that the claim for damages for breach of contract is not a claim within r 1, it will be necessary to strike out that claim.  Once that is done, the proceeding will be one to which r 1 applies.

37                  The assumption of jurisdiction over a person outside the jurisdiction in cases which come within O 8 is discretionary.  A factor to be considered is whether the local court is clearly an inappropriate forum having regard to matters of cost and convenience to all the parties to the action.  The question of whether the local court is a clearly inappropriate forum requires attention to be directed to the inappropriateness of the local court and not to the appropriateness or comparative inappropriateness of the suggested foreign forum: Voth v Manildra Flour Mills Pty Ltd & Anor.  In the present case it has not been argued that this Court is a clearly inappropriate forum, and I am satisfied that it is not.  The applicant carries on business here.  Mr Nuttall is here.  The machine is now here, as are the witnesses who inspected it after its arrival in Australia.  And the applicant’s cause of complaint occurred here.

38                  In my opinion, subject to striking out that part of the proceeding which claims damages for breach of contract, the respondents’ notice of motion seeking to set aside service of the proceeding on each of them should be dismissed.  An order to this effect will result in the respondents’ conditional appearances becoming for all purposes unconditional: FCR O9, r 6(2).

Associate:

Dated: