[ . JUDGMENT No. 7S. 871. F.toenecreenei CATCHWORDS PRACTICE AND PROCEDURE - service out of jiurisdiction - Federal Court Rules 0.8 rl(a) and (a) - alleaedly defective bags for the carriage of meat sold by third party outside Commonwealth to respondent which sold them to applicant - whether proceeding founded cn a cause of action arising in the Commonwealth - whether third varty cutside Commonwealth can be "proverly ioined as a party toa the proceeding" (rl(q)) - exercise of discretion - whether prima facie tase for relief established - whether Trurt has jurisdiction. Federal Court Rules 0.5, 8. George Monro Ltd. v. American Cynamid & Chemical Corporation C1944] 1 K.B. 432 Cordova Land Co. Ltd. v. Victor Brothers Inc, (1966) 1 W.L.R. 783 McCheane v. Gyles (1902) 1 Ch. 287 Gilchrist v. Dean (1960) V.R. 266 Anqus & Coote Pty. Ltd. v. Qantas Airways Ltd. (1979) 2 N.S.W.L.R. 398 Bank of New South Wales v. Commonwealth Steel Co. Ltd. /1983) 1 N.S.W.L.R. 69 Entores v. Miles Far East Corporation (1955) 2 Q.B. 227 Lewis Construction Co. Ptv. Ltd. v. M,. Tichauer Societe Anonvme £1966] V.R. 341 Mendelson-Zeller Co. Inc. v. T. & C. Providores Pty. Ltd. £19813 LN.S.W.L.R. 366 Black Clawson International Ltd. v7, Paplerwerls Waldhof -Aschaffenburga A.G. (1981) ? Lloyds R. 446 Brinkibon Ltd. v. Stahaq Stahl "nd Stahlwarenhandelsqeselischaft m.b.H,. £19831 2 A.C. 34 ELDERS IXL LIMITED & ORS. v. LINDGREN PTY. LIMITED LINDGREN PTY. LIMITED v. GUNZE LIMITED No. G255 of 1987 CORAM: FOX J. 24 DECEMBER 1987 SYDNEY IN_THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION No. G255 of 1987 ~wy- ys Hew~ BETWEEN: ELDERS IXL OGIMUTED F.J. WALKER LIMITED THE ABERDEEN BEEF CO. LIMITED Applicants AND: LINDGREN PTY. LIMITED Respondent AND: LINDGREN PTY. LIMITED Cross Claimant AND: GUNZE LIMITED Cross Respondent MINUTE OF ORDER JUDGE: FOX J. DATE OF ORDER : 24 December 1987 WHERE MADE: Svdney. THE COURT ORDERS THAT: l. The application be dismissed. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN_THE FEDERAL COURT OF AUSTRALIA ) } NEW SOUTH WALES DISTRICT REGISTRY ) Wo. G255 of 1987 \ GENERAL DIVISION ) BETWEEN : ELDERS IXL LIMITED F.J. WALKER LIMITED THE ABERDEEN BEEF CO.PTY. LIMITED Applicants AND: LINDGREN PTY. LIMITED Respondent AND: LINDGREN PTY. LIMITED Cross Claimant AND: GUNZE LIMITED Cross Respondent TORAM: FOX J. DATE: 24 DECEMBER 1987 REASONS FOR JUDGMENT FOX J. The matter before me is an application, by way of notice of motion, made by the respondent to the principal application. in which 1h seeks leave oursuant to Order 8 rule 2 to serve a cross-claim in Japan on a non-party. The body sought to be made cross-respondent is Gunze Limited. which is said to be incorporated. and which apoarentiv 1s not located. by agent or otherwise, in Australia. Leave was qranted some time ago by Beaumont J. to filea cross-claim, out of time, and it was filed within the time limited. Tt has not been submitted, and would not seem to be the case, that his Honour decided any question now before me. The principal application was filed on 12 June last. Relvind in the alternative on a number of causes of action, one of which 18s under s.52 of the Trade Practices Act 1974, the three applicants respectively seek damages in relation to the supply of what are claimed to have been defective bags for the carriage of meat. The respondent to the principal application claims that the bags were sold fo it by Gunze Limited of Japan for a known purpose, and were not fit for that purpose and were not of merchantable qualitv, and, in particular, did not satisfy an agreed standard. The claim asserted in the supportina affidavit is that the intended cross-respondent indemnify the respondent against any liability for damages arising under the principal claim. No contract of indemnity is alleged, nor is reliance placed on any statutory provision aiving a right to an indemnity. It has been stated by senior counsel appearing for the present applicant that the term "indemnity" was used in a loose. or eolloquial sense, and it is not now claimed that the cause of action against the third partv is other than one related to a contract for the sale of goods. The applicants were served with the present natice of moti re) and have been represented before me. Thev didnot opgease the redex sought, but asked for a slight shortening of the time originally suggested by counsel for the respondent as the time for aprearance Ey Gunze Limited, and this has been agreed to. The application was supported by an affidavit, the tender of two sets of copy documents and short oral evidence from a solicitor in the firm acting for the respondent. The Court can under Order 9 authorise service of a orcceedinag mtb of the jurisdiction. The starting point is 3,59 of the Federal Court of Australia Act 1976 and it is not suqgested that it does not support the rules now relevant. Order 8 rule 1 sets out a list of situations in which originating process can be served out of the turisdiction. The cross-claim can be considered as inthe same position as an originating process, (Order 5, r.11) 30 one can read "eross-claim" as "proceeding", where that term is used in the rules. Those relied on are Order 8 rule 1, paras. (a) and (q), which read as follows: "1. Subtect to rule 2. 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: (g) where the proceeding is properly brought against a person served or to be served in the Commonwealth and the person fo be served outside the Commonwealth 15 properly joined as a party to the proceeding." In relation to para.(a), it appears that the contract "was probably partly written and partly oral. - the whole of 1 15 A not before me. So far as the evidence goes, the cantract wa vrobably concluded in Japan. and its proper law is probably that of Japan. Documents before me indicate that some consianments, at least. were sent to Brisbane, C. & F., payment being effected through letters of credit. Freight was pre-paid. The toods were manufactured in Japan. Marine insurance was effected bv the buyer, the present applicant. Nn these facts it cannot be said that the cause of action arose in the Commonwealth. It has been held that it 15 not necessary that all ingredients of the "cause of action" be performed or take place in the jurisdiction. In tort, the cause of action is sometimes framed as having occurred in the iurisdiction although. in the case of qoods. they were 1mported. Such is the case when failure to warn in the jurisdiction is relied upon. The cause of action in tort is not complete until damage or injury occurs. but occurance of damage within the qurisdiction 1s seeminaly not sufficient in itself (Georde Monré Ltd. v. American Cyvnamid & Chemical Corporation £1944] 1 K.B. 432). The present proceedings are in contract. and the contract was not made or performed (or mis-performed) in the jursidiction tna (see Lew truction Co. Ptv. Ltd. v. M. Tichauer Societe Anonyme £19663 V.R. 341 at 346), at least it is not shown that either did occur in the jurisdiction and the indications are otherwise. What happened 1n the Commonwealth was that the qoods were re-sold, amd on the case of the respondent. in due course, found not to comply with the contract when the qeods reached their respective overseas destinations, Paragraph (a) 15 therefore not applicable. I would add that while the it91inder appears at this stage to be canvenient to the respondent, and perhaps to the applicant also, one can see that this mav not ALE prove to be the case. ThereZa number of potential problems which need not be traversed. It is of course possible that Gunze Limited may not appear. and. as counsel has said, enforceability in Tapan of anv default tudgment resulting may not be pessible. IT am also minded of the passave in the iudament of Winn J. in Cordova Land Co. Ltd. v. Victor Brothers Inc. '1966) 1 W.L.R. 783 at 796, set out itn Sassoon C.I.F. and F.9.B. Contracts 3rd Ed. at p.290:- "ThCe] Order. LT think. clearly gives a discretion to the court to decide whether it is right 1n the particular case to serve or to give notice of the writ even though the conditions of the Order are satisfied. I refer to the words 'service of a writ. or notice of a writ. out of the jurisdiction is permissible with the leave of the court in the following cases.' I think it is a discretion of the court which should be exercised with extreme caution and with full regard in every case tc the circumstances. Furthermore, it seems fo me that where the country of origin of goods isa foreian country, and where the handling of them prior to shipment has in every sense of the word been conducted in that foreign country, and where the contract of shipment itself is one «aoverned by the law of that foreign country, it would need a strong case, which I think is not this case, to satisfy the court that it would be right to take the action away from the American court and facilitate its conduct in this iturisdiction." If on some basis it would be thouqht that a case could be made under the rules, I would be disposed in this case to exercise my discretion against its exercise. I think that the best course would be for the principal proceedings to go ahead, and. if occasion should arise, for the respondent to sue in Tapan, or to proceed under one of the schemes of international arbitration now available. I shall however qo on to consider the application of the other paragraph relied on - para.(a). In relation to this paragraph it 1s submitted that fhe third party Gunze Limited. would be, within the meaning of that paragraph "properly joined as a party to the proceedings". This is not I think a natural reading of the lanquage used. Proper qoinder to the proceeding would normally be understood as relating to a further or additional respondent. This conclusion 1s reinforced both by reference to the provisions dealing with evoss-claims, and by authority. Order 5 deals with "Cross Claims and Third Party Claims". Tt appears from the rules in Order 5 that a "third varty claim" is a "cross-claim" directed to a third partv. the last-mentioned being a person not already a party (see rule 1(2)). Rule 6(1) refers to a respondent to a cross-claim being made a party to the proceeding by the filing of a cross-claim. Rule 8(1) provides that a respondent may not cross-claim against a person not being a party without leave of the Court (leave was, as I have said, given by Beaumont J.). Sub-rules (1), (2) and (3) of rule 11 are as follows:- "L1.(01) Subject to this Order and to Order 11. a proceeding on a cross-claim shall follow as nearlv as may be the course of the proceeding on the originating process in respect of which the cross-claim is filed. (2) Subiect to this Order and to Order 11, and without Limiting the generality of sub-rule (1), these Rules apply toa cross-claim and the proceedina arising from it as thev apply to the originating process in respect of which the cross-claim 18 filed and the proceeding arising from it. (3: Sub-rules (1) and (2) apply as if - (a) the cross-claim were the originating process in respect of which the cross-claim is filed: (b) the cross-claimant were an applicant; and (ec) the respondent to the cross-claim were a respondent." These sub-rules suggest that for the purposes of the rules, a respondent to a cross-claim is not to be regarded as inined as a party to the principal proceedina. Sub-rule (A) provides for the entry of appearance (bv a cross-respondent who has not previously entered an appearance in the original proceeding), where the cross-claim is not served before the date appointed for a directions hearing in the original proceedina, to be made within 14 days. This time is again stated in Form 9 to the First Schedule, without, in each case, any qualification. This could lend credence to a view, seemingly not the better view, that it is not intended that cross-claims be served outside the jurisdiction. Time for appearance can of course be extended (Order 3 rule 3). Tnder a rule similar to para.(q), but which ceferred to "a mecessary or proper party". it was held by the Court of Appeal in Enaland that the reference was to a party defendant ('or cespondent) and not to a third party (McCheane v. Gyles (1902) 1 Ch. 287). See also discussion in Dicey and Morris. The Conflict of Laws 10 edn. pp.216.7. Wnder a Victorian rule similarly worded, this case was followed (Gilchrist v. Dean (1940) V.R. 766). In Angus & Coote Ptv. Ltd. v. Qantas Airwavs Ltd. (1979) 2 N.S.W.L.R. 398, when dealing with a rule in the same terms as the present, Sheppard J. was of the view that the difference in lanauage did not affect the proper construction of the rule, and he too applied McCheane v. Gvles. I respectfully agree with his view, and his explanation of the nature of third party proceedinas such as the present. In Bank of New South Wales -. Commonwealth Steel Co. Utd. (1983) 1 N.S.W.L.R. &9 Rogers JT, thought the examples qiven by Sheppard J. "would 'undulv restrict the beneficial operation" of the same provision. The expression of disaqreement went however to the scope of operation suagested bv Sheppard J. (not, as I would understand, intended bv him to be definitive) but involved in the respect here material a ceinforcement of his Honour's view. I am therefore of the opinion that para.(g) does not apply. IT reach this conclusion without considering the further question, arising under that paraqraph, as to whether the proceedings are "properly brought". The result is that the application must fail. As the matter was fully argued, I shall endeavour briefly to express my views on the operation of Order 8 rule 2. to which rule 1 is made subject. That rule is as follows: "2.41) Service outside the Commonwealth of oriainating process is not valid under this Order unless - (a) the service is in accordance with the prior leave of the Court qiven under sub-rule (2); (pb) the Court confirms the service under sub-rule (4); or 'c) the person served waives objection by entering an appearance. (2) Where the Court is satisfied of the following matters - (a) that the proceeding is a proceeding in which the Court has iurisdiction;: (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 oriqginating process outside the Commonwealth under this Order." For the reasons already stated, rule 2(b) is not satisfied. The question whether a prima facie case has been established (rule 2(c.) would need further consideration, particularly because the full contract 1s not before me, and because I have nothing before me as to Japanese law, assuming 1t to be the proper law. It was put that I should assume, at least for present purposes. that it is the same as the law of Australia, or, as it would have to be put, the law of an Australian State or States (not specified). Tf the matter were in due course contested, and Japanese law proved. it mav appear that there never was a prima facie case. The problem starts with incomplete knowledge of the contract (there may indeed have been more than one) but my present view is that the requirement that there be a prima facie case requires proof qoing towards the establishment of the matters relied on, and people in Japan are not to be made liable or threatened with liability on the basis of the law of an Australian state or states, when they have. expressly or by operation of law. made Japanese law applicable. The question seems to be without authority, although the English Court of Appeal in Entores v. Miles Far East Corporation (1955) 2 Q.B. 327, without discussion, applied English law to decide that a contract was made in London. and net in Holland or ene of the United States of America. This would seem to me a different question: there plainlv has to be a starting point and fhat could only be determined by Enalish law. 'See alsa Mendelson-Zeller Co. Inc. v. T. & C. Providores Pty. Ltd. (19811 10. 1 N.S.W.L.R. 366. Black Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G. (1981) 2 Llovds R. 446, Brinkibon Ltd. v. Stahag Stahl Und Stahlwarenhardelsqesellschaft m.b.H. £1983] 2 A.C. 34), The question of the existence of jurisdiction ('rule 2(a)) ais highly doubtful. The cross-claim is an action for damages for a breach or breaches of a contract for the sale of goods. I accept that "jurisdiction" does not refer to the common law rules respecting jurisdiction in an international situation, but this Court does not have jurisdiction, unless it be accrued jurisdiction, to entertain such a claim. Although I do not have finallv to decide the matter, it at present seems to me that the eross-claim cannot be said to be part of the same controversv as fhe claim made under s.52 bv the applicants, nor, 3c far as appears, is there a sufficiently common. sub-stratum of fact. What will be common. no doubt. will be the condition of the baas, and. probably, their suitabililtv for the purpose for which thev were required by the applicants. although the relevant times for testing these matters will be different. The contracts however. are separate. The consequences of the fact that the cross-claim is addressed to a non-partv, and that the non-partv is ina different country would also be relevant in considering whether the Court could have accrued jurisdiction. In mv opinion the application fails and should be dismissed. Ll. Counsel for the Applicants: Solicitors for the Applicant: Counsel for the Respondent /Cross Claimant: Solicitors for the Respondent/Cross Claimant: Dates of hearina: Date judgment delivered: I certify that this and the ten (10) precedina pages are a true copv of the Reasons for Judqment herein of his Honour Mr. Justice Fox. C Associate: WO) A Date: 24 December 1387 Mr M. Paslev, Mr L.G. Foster Baker & McKenzie Mr. D.M.J. Bennett QC with Mr D.E.7. Ryan Malcolm Johns & Company Svdnev;: 9 December 1987 Sydney; 24 December 1987