FEDERAL COURT OF AUSTRALIA

Beluga Shipping GmbH & Co v Headway Shipping Ltd (No 2)

[2008] FCA 1770

ADMIRALTY – procedure and evidence – ex parte application for service oforiginating process on person in foreign country outside Commonwealth jurisdiction – whether Court has jurisdiction under Order 8 rule 2 of Federal Court Rules or Admiralty Act 1988 (Cth), ss 4(3)(f) or 12 and 13 – whether proceedings were of kind mentioned in O 8 r 2 – whether there was prima facie case for relief claimed in proceedings – whether evidence established sufficient case for service outside jurisdiction – alleged breach of fiduciary duty – whether employee had authority to enter into contractual arrangements binding companies – alleged fraud and misrepresentation by employee – claim not fully pleaded or particularised on basis that investigations continuing

Held:  Application granted – proceedings mentioned in O 8 r 2, items 5, 6, and 18 applicable – material before Court raised sufficient inferences, which if translated into findings of fact, would support relief claimed – prima facie case for relief

Admiralty Act 1988 (Cth), ss 4(3)(f), 12, 13

Federal Court Rules, O 8, rr 2, 3

Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 37 cited

Commonwealth Bank of Australia v Peto (No 2) (2006) 152 FCR 362 cited

Gatoil International Ltd v Arkwright-Boston Manufacturers Mutual Insurance Company [1985] AC 255 cited

Heilbrunn v Lightwood plc (2007)164 FCR 1 cited

Ho v Akai Pty Ltd (in liq) (2006) 24 ACLC 1526; [2006] FCAFC 159 applied

News Ltd v Australian Rugby Football League (1996) 64 FCR 410 followed

Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 applied

Pontifical Society for the Propogation of Faith v Scales (1962) 107 CLR 9 cited

Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374 cited

The Antonis P Lemos [1985] AC 711 cited

The St Elefterio [1957] P 179 cited

Victoria v Sutton (1998) 195 CLR 291 cited

BELUGA SHIPPING GMBH & CO. KS "BELUGA FANTASTIC" v HEADWAY SHIPPING LIMITED, SUZLON ENERGY LTD, SUZLON ENERGY AUSTRALIA PTY LTD ACN 107 631 176 and HEADWAY CHARTERING (CANADA) LIMITED

NSD 1670 of 2008

RARES J

26 NOVEMBER 2008

SYDNEY

THE COURT ORDERS THAT:

1.                  Grant leave to file the pleading of second cross claimants against third second cross defendant.

2.                  Grant leave under Order 8 Rule 3(2) to the second cross claimants to serve the third second cross defendant, Sanjeev Bangad in India with the originating process being the second cross application.

3.                  Direct that the second cross claimants serve with the originating process the following documents:

3.1              the pleading of second cross applicants against third second cross defendant;

3.2              the affidavits of Gaurav Bansal sworn 28 October 2008 and 3 November 2008, the affidavit of Joseph Alan Hurley sworn 3 November 2008 and the affidavit of Amy Joanne Beaumont affirmed 6 November 2008;

3.3              the interpleader application;

3.4              cross claim;

3.5              defence to cross claim;

3.6              these orders.

4.                  Abridge time for service of the second cross application to 5.00 pm on 19 November 2008. 

5.                  Direct that the second cross application as against the third second cross defendant be returnable for directions on 26 November 2008 at 9.30 am.

6.                  Direct that as soon as practicable after service of a notice of appearance or conditional appearance upon the second cross claimants’ solicitors by the third second cross defendant, the solicitor for the second cross claimant provide the third second cross defendant with copies of the transcripts, orders, affidavits and interlocutory application exhibits in these proceedings.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

Application brought ex parte to serve outside the jurisdiction the third defendant to the second cross-claim

1                     On 13 November 2008, I made orders permitting service of the second cross-claimants’, (being Suzlon Energy Limited and its four associated companies) second cross- application on the third second cross-defendant, Sanjeev Bangad in India.  I was satisfied that leave should be granted under O 8 r 3(2) of the Federal Court Rules and that it was appropriate to do so on the conditions I set out.  The matter was of some urgency because the other parties to the proceedings have been working towards a final hearing commencing on 2 February 2009.  These are my reasons for those orders.

THE PROCEDURAL CONTEXT

2                     Suzlon Energy Limited and its four associated companies are the cross-claimants on the second cross-claim in these proceedings.  That cross-claim essentially involves allegations against Mr Bangad who was, at relevant times earlier this year, an officer of one or more of the Suzlon companies.  Mr Bangad’s address is in Pune, India.  The Suzlon companies sought leave to serve him in India pursuant to O 8 r 2.

3                     The Suzlon companies allege that Mr Bangad acted in breach of his fiduciary duty owed to one or more of them not to act in his own interests when he purported to assert that he had authority to enter into contractual arrangements binding the Suzlon companies to the central contractual documents in issue in these proceedings.  Those documents are:

·               two contracts of affreightment, the first, between Headway Shipping Ltd and Suzlon Energy Ltd dated 3 April 2008 and the second between Headway Shipping, Headway Chartering (Canada) Ltd (the Headway companies) and Suzlon Energy dated 17 June 2008;

·               a time charter for the MV Beluga Fantastic between the plaintiff, Beluga Shipping GmbH & Co KS “Beluga Fantastic” as owners, and Headway Shipping Ltd as charterers dated 19 August 2008;

·               an addendum attached to the time charter, incongruously dated 29 July 2008, in which Suzlon Infrastructure Ltd guaranteed Headway Shipping’s performance;

·               the bills of lading issued by the Master of the MV Beluga Fantastic for the carriage of wind turbine generating equipment from Mumbai to Port Kembla (“the cargo”);

·               other bills of lading for the carriage of other Suzlon companies’ cargoes.

4                     The Headway companies claim they are owed over USD 12,900,000 in unpaid freight for a number of cargoes carried to the United States of America and Australia under the impugned contracts of affreightment.  The Suzlon companies challenge the validity of those documents.

5                     The Suzlon companies also allege that Mr Bangad fraudulently obtained benefits without their knowledge by representing that he had authority to cause the Suzlon companies to enter into the documents impugned and that he failed to disclose that he was obtaining secret or undisclosed benefits as a result of his alleged association with the Headway companies.

Formal matters:  Order 8 rule 3(3)

6                     India is not a party to any convention, treaty or other treaty enforced between it and Australia in respect of the service of documents in civil proceedings.  The website of the Attorney-General’s Department notes that India permits private agents to serve Australian court process in that country and that, in general, such service through an agent will not be in breach of any Indian law or otherwise a breach of its sovereignty.  The Attorney-General’s website indicates that India will not assist, through diplomatic channels, in the service of Australian court process.

7                     I was satisfied by the affidavit of Amy Beaumont that the requirements of O 8 r 3(3) had been met.  I inferred that the proposed method of service was to be by private agent in accordance with the material contained on the Attorney-General’s website.

Jurisdiction of the Court:  Order 8 rule 3(2)(a)

8                     I was also satisfied that the Court had jurisdiction in these proceedings, as required by O 8 r 3(2)(a).  The proceedings were commenced by the ship owner of the MV Beluga Fantastic seeking to interplead by delivering the cargo at Port Kembla into the custody of the Sheriff.  This was a consequence of the dispute between the Headway companies and some of the Suzlon companies as to the circumstances in which that cargo ought to be discharged in light of the Headway companies’ claims for unpaid freight on this and earlier cargoes.

9                     The Suzlon companies argued that the Court’s jurisdiction was attracted under s 4(3)(f) of the Admiralty Act 1988 (Cth) by the existence of a general maritime claim arising out of an agreement that relates to the carriage of goods on a ship (namely the wind turbine generating equipment delivered to the Sheriff under the Court’s orders) or the use or hire of a ship (namely the MV Beluga Fantastic time charter or the contracts of affreightment).  They contend that if the claim against Mr Bangad is not directly within s 4(3)(f) it will fall within the Court’s associated jurisdiction within the meaning of ss 12 and 13 of the Act.

10                  As Allsop J pointed out in Heilbrunn v Lightwood plc (2007) 164 FCR 1 at 6-9 ([30]-[40]) s 4(3)(f) is to be given a wide and liberal construction in accordance with a similar view expressed by the House of Lords in The Antonis P Lemos [1985] AC 711 and  Gatoil International Ltd v Arkwright-Boston Manufacturers Mutual Insurance Company [1985] AC 255.  The Australian Law Reform Commission had referred to their Lordships’ decisions in its Civil Admiralty Jurisdiction, Report No 33 (1986) (the ALRC report).  Earlier, Foster J observed in Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374 at 380-382 showed the words of s 4(3)(f) are also similar to Article 1(1)(d) of the International Convention for the Unification of Certain Rules Relating to the Arrest of Seagoing Ships 1952.  In The St Elefterio [1957] P 179 at 183, Willmer J held that the English analogue to s 4(3)(f) encompassed a claim whether in contract or tort “arising out of any agreement relating to the carriage of goods in a ship” (emphasis added).  In that case, he held that it gave the Court jurisdiction where a person allegedly made a fraudulent ante-dating of bills of lading.

11                  At the heart of the conduct alleged against Mr Bangad, is his activity relating to the carriage of the wind turbine generating equipment of the Suzlon parties from India to various ports, including the shipment delivered to the sheriff.  The Suzlon companies relied on evidence that Mr Bangad had executed letters of indemnity as general manager of Headway Shipping in April 2008, while he was working as an employee of one of the Suzlon companies.  The letters of indemnity related to cargoes carried under the contract of affreightment between Headway Shipping and one of the Suzlon companies.  He ceased to be employed by the Suzlon companies on discovery of his alleged fraud in late September 2008. They also relied on the evidence from Mr den Hartog’s emails.  The Suzlon companies argue that this material gives rise to the inference that some explanation will be needed to establish any innocent association of Mr Sridhar in the execution of the contracts of affreightment and the Suzlon companies’ dealings with the Headway companies, and also to establish how Mr Bangad was able to sign in his capacity as an officer of Headway Shipping, while contemporaneously employed by the Suzlon companies.

A Maritime Claim?

12                  I was satisfied that the Suzlon companies had asserted a maritime claim within the meaning of s 4(3)(f) of the Admiralty Act.  That claim arose out of the existence of each of the contracts of affreightment, the time charter, the guarantee and the bills of lading for the MV Beluga Fantastic to carry the cargo to Port Kembla, and also out of the Suzlon companies’ challenge to those transactions based on the allegations that they made against the Headway companies and Mr Bangad.  The words “arising out of” and “relates to” in s 4(3)(f) are of wide import.  They should not be read down:  see Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 420-421 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.  The claims made against Mr Bangad had the legal character of maritime claims within s 4(3)(f):  Shin Kobe Maru 181 CLR at 426.

13                  The Suzlon companies also relied on their claims against Mr Bangad being within the associated jurisdiction of the Court conferred by s 12 of the Admiralty Act as matters of Admiralty and maritime jurisdiction.  That jurisdiction is “… concerned with the resolution of controversies relating to marine commerce and navigation”:  Shin Kobe Maru 181 CLR at 424.  Contractual or business arrangements of a party to proceedings with third parties are capable of attracting the Court’s Admiralty and maritime jurisdiction:  Shin Kobe Maru 181 CLR at 425.  I was of the opinion that, on the present materials, the claims which the Suzlon companies seek to bring against Mr Bangad were substantive rather than appearing to be remotely or tenuously related to matters of Admiralty or maritime jurisdiction pleaded by and against them:  cf:  The “Bass Reefer” 37 FCR at 381 per Foster J.  I was satisfied that those claims raised a real controversy relating to marine commerce and navigation in which Mr Bangad occupied a central role.

Are the proceedings proposed to be served of a kind mentioned in Order 8 rule 2?

14                  Under O 8 r 3(2)(b), the Suzlon companies had to satisfy the Court that the proceedings were of a kind mentioned in O 8 r 2 and that there was a prima facie case for the relief claimed in the proceedings: O 8 r 3(2)(c).

15                  During the course of argument on this application, I suggested that it would be appropriate for the Suzlon companies to identify the substantive claims to be pleaded against Mr Bangad in a document to be served on him.  Shortly afterwards, on 12 November 2008, the Suzlon companies produced a document entitled “Pleading of Second Cross Applicants against Third Second Cross Defendant” (being Mr Bangad).  They did this on the basis that their investigation into the circumstances of the alleged fraudulent activity was still continuing and that it would be better to defer a complete formal pleading of the allegations against the Headway companies and Mr Bangad until those investigations had been finalised.

16                  In pleading their claim against Mr Bangad, the Suzlon companies asserted that Mr Bangad held a position of employment in charge of freight and chartering for Suzlon Energy Limited.  The pleading also alleged that, between February and October 2008, Mr Bangad made representations to one or more of the Suzlon companies to the effect that:

·                    the transactions he was causing the Suzlon companies to enter, including the time charters, addendum, guarantees and contracts of affreightment (“the impugned documents”) were genuine transactions;

·                    those transactions were not ones from which he was not obtaining any secret or undisclosed benefit;

·                    he was honestly carrying out his duties of employment on behalf of the Suzlon companies in making the arrangements for the shipping of the cargoes;

·                    the transactions were at arms length;

·                    the transactions were commercially beneficial and properly negotiated in the Suzlon companies’ interests.

17                  The representations were allegedly made to three individuals within the Suzlon companies, and/or to their boards of directors, by Mr Bangad providing them with the relevant transaction document(s).  And, the Suzlon companies relied on the inference which would ordinarily be drawn by an employer in their position that when a senior and trusted employee advised his employer to enter into those arrangements, they were proper ones for the company to make.  It was alleged that each of the representations was false to Mr Bangad’s knowledge.  The particulars of his knowledge included:  that he knew that he had no authority to execute the documents;  that he had not disclosed any benefits he would obtain under them;  that he had signed guarantees as general manager of Headway Shipping;  that he had concealed the nature of the impugned documents and transactions to which they gave effect, and when asked to explain them, he had not only failed to do so, but had fled from his employment.  The particulars also relied on what were alleged to be uncommercial terms of the transactions.  These were based on the Suzlon companies having given guarantees, the uncommercial rates of freight and the lack of proper negotiation for the terms of the impugned transactions.

18                  The pleading then alleged that the Suzlon companies had been induced to pay some of the invoices rendered by the Headway companies, permitted cargo to be loaded and shipped on the vessels, did not examine whether the transactions entered into by Mr Bangad, in their name or on their behalf, exceeded his authorities, and did not investigate their propriety or the potential of Mr Bangad obtaining secret benefits and commissions.  The Suzlon companies alleged that they had suffered loss or damage, including payments that they had already made, together with the payments of USD 7 million into Court and USD 6.5 million to Headway Shipping in Australia pursuant to the orders made by the Court on 4 November 2008 to secure the release of the cargo in the custody of the Sheriff here.  They also relied on the detention of the cargo in Australia and the incurring of demurrage here, the payment of discharge costs here as well as the Marshall’s costs and expenses and the freight, hire and outgoings made by them to Mr Bangad or to entities he controls, owns or in which he has a beneficial interest.

19                  The Suzlon companies also claimed that Mr Bangad breached his fiduciary duties of loyalty and of not to act in his own interests in the course of his employment.

20                  The Suzlon companies’ claims were not fully pleaded and particularised.  However, there was a considerable amount of evidence before me relating to the overall dispute.  The Suzlon companies relied on the affidavit evidence read on 4 November 2008, together with the oral evidence I took on that occasion from an agent of theirs, Gaurav Bansal, and some additional emails tendered on the hearing of this application.  The Suzlon companies claimed that this evidence provided a sufficient basis for me to be satisfied of the matters in O 8 r 3(2)(b) and (c).  This evidence together with the prior pleadings provided a sufficient background for the claims now pleaded against Mr Bangad to be understood.

21                  It is not necessary to set out extensively the material on which the Suzlon companies relied.  As noted above, they impugn the time charter dated 19 August 2008 for the MV Beluga Fantastic’s voyage to Port Kembla.  The time charter is in the 1946 New York Produce Exchange form.  The addendum purported to be given by Suzlon Infrastructure on 29 July 2008 (i.e. about three weeks before the time charter was actually made).  It guaranteed to the owner performance of the terms of the time charter dated 19 August 2008 by Headway Shipping.  The master of the MV Beluga Fantastic issued charterers bills of lading naming Suzlon Energy Limited, an Indian company, as consignor and Suzlon Energy Australia Pty Limited as the notifying party.

22                  When the MV Beluga Fantastic arrived at Port Kembla there was a dispute between Headway and the Suzlon companies as to the amount of freight due under that time charter and a number of other time charters between Headway companies and Suzlon companies for the delivery of wind turbine generating equipment shipped from India to both the United States of America and Australia.  Since no-one would produce bills of lading to the Master authorising discharge of this cargo, and since the vessel was due elsewhere, the owners interpleaded so that the cargo could be discharged.

23                  Mr Bangad was appointed as the general manager of logistics of Suzlon Energy Limited in India in October 2005.  While working for the Suzlon companies, he executed a number of letters of indemnity in late April 2008 on behalf of Headway Shipping addressed to the owner of the MV S Fighter.  In those letters of indemnity, Mr Bangad described himself as general manager of Headway Shipping in his handwriting under his signature on behalf of Headway Shipping.

24                  Earlier in April 2008, it appears that Suzlon Energy entered into the first contract of affreightment with Headway Shipping for carriage of wind turbine generating equipment by sea to the United States, Europe, South America and Australia.  Mr Bangad and his superior, Mr Sridhar, both appear to have signed the contract of affreightment on behalf of Suzlon Energy.  The Suzlon companies say that Mr Sridhar now is under investigation in respect of his role in these dealings.  On 17 June 2008 an amended or further contract of affreightment was entered into between the same two parties and Headway Chartering.  Mr Bangad alone appears to have signed the latter document for Suzlon Energy.  It contains different terms in certain respects to the earlier one.

25                  I infer that the equipment shipped under the contracts of affreightment was even more valuable than the total freight now in dispute which exceeds USD 12,900,000.

26                  In essence, the Suzlon companies allege that Mr Bangad caused them to enter into contracts with the Headway companies for the shipment of Suzlon goods from India to other parts of the world.  The Suzlon companies allege that the arrangements had no proper commercial basis and were, in effect, a fraud on them.  This is because first, they allege that Mr Bangad had an undisclosed association with the Headway companies or stood, through his association with those companies, to reap an undisclosed benefit by causing the Suzlon companies to enter into arrangements with the Headway companies.  Secondly, the Suzlon companies allege that they received no benefit from the guarantee of the time charter which Suzlon Infrastructure purportedly gave of Headway Shipping’s performance.  Suzlon Infrastructure, in effect, was guaranteeing Headway Shipping’s performance to the ship owner for no apparent commercial purpose.  This would permit the Headway companies, or one of them, both to fulfil their obligations to, and earn a reward from, the Suzlon companies where the Suzlon companies were bearing the ultimate commercial risk for the charter of the vessel and the Headway companies’ profits in shipping their own cargo.

27                  The Suzlon companies also relied on an email from Mr Bangad dated 13 October 2008, after he ceased to be their employee, which stated that he was now associated with the Headway companies.  He also said, in the email, that Mr Sridhar “is professionally a banker and is indirectly associated with the company” (meaning Headway Shipping).  On the evidence before me, Mr Sridhar was still an employee of the Suzlon companies at the time of this email, so that his “indirect” association with Headway Shipping asserted by Mr Bangad may be of importance.

28                  There is also evidence, in the form of emails, from Japp den Hartog, an officer of the Beluga companies, that Mr Bangad and his superior, Mr Sridhar, approached Mr den Hartog in August 2008 and induced him to agree to become a director of Headway Shipping.  Mr den Hartog has subsequently sent a number of emails asserting that he was the victim of misrepresentation in signing a consent to act as a director and did not appreciate that he was not assisting the Suzlon companies, as he thought, but was furthering the interests of those associated with the Headway companies.  In emails with Mr Bangard of 2 and 3 November 2008, Mr den Hartog asserted that, in May 2008, Mr Bangad represented to Beluga that Headway Shipping was, in effect, a Suzlon subsidiary which had been created to take care of Suzlon’s in-house international transport needs.

29                  Mr den Hartog asserted that:

“The only reason for us [Beluga] to support Headway was because it was guaranteed by Suzlon.” 

He claimed that, on 1 September 2008, Mr Bangad had asked him to sign – but not date – a document making him a director of Headway Shipping.  Mr den Hartog asserted that, subsequently, Mr Bangad inserted a date of October 2007, about six months before Headway Shipping was incorporated, as the date of his consent to act as one of its directors.  Mr den Hartog claimed in the email that he had been the subject of a misrepresentation and fraud through Mr Bangad’s conduct in this regard.  He wrote that when he confronted Mr Bangad with this:

“… we had various telephonic exchanges during one of which you started crying out [loud] begging for forgiveness that you messed things up and you did not realise your action would damage people and their business.” 

30                  Mr den Hartog asserted that, even after his dismissal by Suzlon, Mr Bangad did not disclose the fact of his dismissal which he, again, regarded as being misleading.  Mr Bangad responded to Mr den Hartog in an email dated 2 November saying only:

“Noted your message and have passed to [H]eadway to reply on relevant parts of the mail.

While I not to comment on the rest at this moment and would reply in due course.” (sic)

31                  On 12 November 2008, the Suzlon companies also tendered a series of emails and what purported to be a company search made in India of Genus Shipping Service Private Limited.  The emails involved Mr Bangad and were addressed to him at his Suzlon email address.  They indicated that substantial sums of money were to be paid to Genus Shipping by third parties who were proposing to enter into contracts for shipment of goods with a Suzlon company.  The Suzlon companies argued that this was prima facie evidence of other fraudulent activity engaged in by Mr Bangad for his own benefit and to the detriment of them.  However, those materials provided no relevant evidence against Mr Bangad of any of his alleged activities in relation to the Headway companies.  At best they were potentially admissible as propensity evidence.  I had no regard to them for the purposes of forming my view that an order under O 8 r 2 should be made for service of the Suzlon parties’ cross-claim on Mr Bangad in India.

Requirements of Order 8 rule 2

32                  The Suzlon companies argued that the evidence before me (from the part-heard, but now resolved, motion which I dealt with on 4 November 2008, together with the additional emails provided with written submissions after the further hearing of this application on 12 November 2008) established a sufficient case for service outside the jurisdiction to satisfy the requirements of O 8 r 3(2)(b) and (c).  These requirements were summarised by Finn and Weinberg JJ and myself in Ho v Akai Pty Ltd (in liq) (2006) 24 ACLC 1526; [2006] FCAFC 159 at [10] in the following terms:

As has been observed on many occasions, the prima facie case requirement has to be met at the outset, usually on an ex parte basis, and without the advantage of discovery and other procedural aids to the making out of a case:  see e.g. Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 at 390.  It “should not call for a substantial inquiry”:  WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 at 476;  see also Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549.  For present purposes it is sufficient to say that a prima facie case for relief is made out if, on the material before the court, inferences are open which, if translated into findings of fact, would support the relief claimed:  Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 at 110.  Or, to put the matter more prosaically as Lee J did in Century Insurance (in provisional liquidation) v New Zealand Guardian Trust [1996] FCA 376:

“What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court’s processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified.”

33                  The Full Court noted that, because of the construction given in Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 by of the majority of the Court to what is now O 8 r 3(2)(c), a finding that there was a prima facie case on one aspect of the claim against Mr Bangad has the consequence that he may be proceeded against on other bases as well.  That is because it is only necessary that a prima facie case be established for any one of the causes of action relied on for the relief sought:  Bray 130 FCR at [47]-[55] per Carr J, [176]-[191] per Branson J:  Ho (2006) 24 ACLC 1526 at [45]-[46].

34                  The Suzlon companies relied on their cross-claim as being proceedings of the kind within a number of the items listed in O 8 r 2, namely as being proceedings:

·               based on or seeking the recovery of damage suffered wholly or partly in Australia caused by a tortious act or omission wherever occurring (namely, the damage caused by having to pay USD 13,500,000 pursuant to the Court’s orders of 4 November 2008 to secure release of the cargo carried by the MV Beluga Fantastic to Port Kembla and initially delivered into the custody of the Sheriff and then, subsequently pursuant to orders made by myself on 4 and 5 November 2008, delivered to Suzlon Energy Australia) (item 5);

·               seeking the setting aside of contracts, being the contracts of affreightment, which affected property in Australia (namely, the above cargo) (item 6);

·               properly brought against a person who was served in Australia (the Headway parties, who consented to service on them) where Mr Bangad has been properly joined (item 18).

35                  The Suzlon companies also faintly pressed assertions that their proceedings were based on a tort committed on Australia (item 4), sought the execution of a trust governed by a law of the Commonwealth, a State or a Territory (item 7) and, last, were proceedings in which the person to be served had submitted to the jurisdiction of the Court (item 17).

36                  None of these last three bases has any substance and I rejected them. There is no evidence that any tort or other conduct of Mr Bangad occurred in Australia.  There is no evidence of any trust governed by any Australian law.  To the extent that Mr Bangad is alleged to have entered into arrangements in breach of any of his fiduciary or other obligations, any relevant trust would arise pursuant to the law of India or the other place in which he caused the Suzlon companies to act.  There is no evidence that any relevant activity occurred in Australia.  Last, there is no evidence that Mr Bangad has submitted to the jurisdiction of the Court.  This leaves for consideration, the first three matters.

Order 8 rule 2, Item 18

37                  The Suzlon companies placed principal reliance on this item.  They contended that Mr Bangad may be served in India because first, the Headway companies have been served and accepted the Court’s jurisdiction and, secondly, Mr Bangad is a proper or necessary party to the proceedings, having regard to the nature of the allegations against him.

38                  I am satisfied that the allegations of fraud against Mr Bangad in the Suzlon companies’ cross-claim, as well as the centrality of his role in the events on which the Suzlon companies rely to seek relief from the Headway companies’ claims, make Mr Bangad a proper and necessary party to the proceedings:  see News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 523G-524F per Lockhart, von Doussa and Sackville JJ;  see too Victoria v Sutton (1998) 195 CLR 291 at 316-317, [77]-[78] per McHugh J;  Commonwealth Bank of Australia v Peto (No 2) (2006) 152 FCR 362 at 370-372 [27], [30]-[33] per myself.

Order 8 rule 2, Item 5

39                  Order 8 r 2 item 5 permits service of a proceeding based on or seeking the recovery of damage suffered wholly or partly in Australia caused by a tortious act or omission, wherever occurring.  The allegations of deceit by Mr Bangad practised on one or more of the Suzlon companies causing their entry into one or more of the impugned transactions articulated a cause of action based on a tortious act within the meaning of item 5.  The relevant acts and omissions involved in the alleged tort of deceit occurred, on the evidence before me, principally in India, although there may have been communications that occurred in other places including, potentially, Canada (where some emails in evidence suggest that the Headway companies have an association).

40                  However, because the Suzlon companies paid USD 13.5 million in Australia pursuant to the orders made on 4 November 2008, they have a prima facie case that they suffered damage here (by paying some or all of that amount), in order to secure the release of their cargo.  Moreover, they had to pay the Marshall’s costs and expenses of holding the cargo at Port Kembla after Emmett J made orders on 24 October 2008 for it to be discharged into the Sheriff’s custody.  Those costs would not have been incurred, if the cargo had been delivered in the ordinary course.

41                  I was satisfied that the allegations in the Suzlon companies’ cross-claim against Mr Bangad fell within item 5.  That proceeding is based on or seeks the recovery of damage suffered partly in Australia, being costs and expenses paid to secure the release of the cargo caused by a tortious act or omission of Mr Bangad, namely his alleged deceit of one or more of the Suzlon companies.

Order 8 rule 2, Item 6

42                  In addition, the Suzlon companies argued that these proceedings seek the setting aside of a contract, obligation or liability affecting property in Australia and so fell within item 6.  They argued that the cargo delivered at Port Kembla was property affected in Australia and that each impugned document was a contract which they sought be set aside. 

43                  I was satisfied that the allegations made in the proceedings in respect of each of the impugned documents satisfied the requirements of item 6 and that they affected the cargo which is property in Australia.

Prima facie case:  Order 8 rule 3(2)(c)

44                  I was satisfied that on the material before me, inferences were open which, if translated into findings of fact, would support the relief claimed on each of the bases in the claims falling within items 5, 6 and 18 described above:  Ho (2006) 24 ACLC 1526 at [10].

45                  On the material before me, the inference was available that Mr Bangad was unable to explain to his employer, or to Mr den Hartog, the commercial justification for the impugned documents and the relationship they evidenced between the Suzlon and Headway companies.  If Mr den Hartog gave evidence to the effect of the material in his emails, an inference could be drawn that he, on behalf of Beluga, had been misled into entering into the transactions for the carriage of goods to Port Kembla on the basis that he understood that the Headway companies were associated with, rather than independent and at arms length from, the Suzlon companies.  That inference would be supported, in the absence of explanation, by the fact that Suzlon Infrastructure guaranteed Headway Shipping’s performance of the time charter, apparently before it was even made.  If the transactions were at arms length, an explanation would be needed, which is not presently before me, as to why Suzlon Infrastructure would guarantee a time charter entered into by Headway Shipping with Beluga for the time charter of the Beluga Fantastic.  There was no evidence of any reward or benefit passing to Suzlon Infrastructure or any other Suzlon company for this guarantee.  The inference was also open that the Headway companies would earn a profit from performing the time charter and carrying the Suzlon companies’ goods.

46                  It was difficult to see, in the absence of an explanation, the commercial rationale for the related company of the shipper and consignee (both Suzlon companies) guaranteeing the owners under a time charter of the vessel for its performance by the party (Headway Shipping) contracting with the shipper for the carriage of its goods to Australia.

47                  Of course, one story is good until another is told:  Pontifical Society for the Propogation of Faith v Scales (1962) 107 CLR 9 at 20 per Dixon CJ.  There may well be explanations for this state of affairs.  But, I was satisfied, prima facie, that it was appropriate to permit service on Mr Bangad in India.  This was because of the present absence of any explanation of the apparently uncommercial nature of the guarantee of the time charter and Mr Bangad’s apparent involvement with the Headway companies when the impugned documents and the transactions, which they evidenced, were made.  The prima facie case asserted by the Suzlon companies was further strengthened by the material indicating Mr Bangad’s inability to explain to his employer his purposes for his entering into the impugned transactions and his inability, when confronted by Mr den Hartog, to explain why he had told Mr den Hartog that the Suzlon and Headway companies were associated, rather than at arms length, and why Mr den Hartog’s letter accepting appointment as a director of Headway Shipping had been backdated.

48                  Of course, much of the material currently in evidence had been presented in circumstances of urgency and would not necessarily be admissible in its current form at a final hearing.  However, I was satisfied that there was sufficient in the material before me to warrant drawing an inference that they were sufficient to support the exercise of the Court’s power to permit service out of the jurisdiction on Mr Bangad.

49                  I was fortified in this view because the Headway had accepted that, whatever the strengths and weaknesses of the allegations made by the Suzlon companies, they raised a tribal issue which ought be determined at a five day hearing early next year.  That is not to suggest that the Headway companies have not vigorously denied the allegations, as they have.  Rather, it revealed the underlying litigious reality that the Suzlon companies had raised a case to be answered against the Headway companies, which have appeared, raising their involvement in the serious claims against Mr Bangad that would, if their case were accepted, translate into findings of fact that would support the grant of the relief they claim.

Associate:                                                         Dated:  26 November 2008