CATCHWORDS PRACTICE AND PROCEDURE - application to serve outside the Commonwealth - whether breach of contract in the Commonwealth - whether prima facie case for relief - application refused. SEABOARD EXPRESS LIMITED and Anor v SANWA TRADING COMPANY LIMITED No. NG 869 of 1995 Coram:Whitlam J Place: Sydney Date: 28 December 1995 IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NG 869 of 1995 ) GENERAL DIVISION ) SEABOARD EXPRESS LIMITED First Applicant OCEANIA INTERNATIONAL LIMITED Second Applicant SANWA TRADING COMPANY LIMITED Respondent Coram:Whitlam J Place: Sydney Date: 28 December 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The motion for leave to serve outside the Commonwealth be refused. 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 ) NG 869 of 1995 ) GENERAL DIVISION ) SEABOARD EXPRESS LIMITED First Applicant OCEANIA INTERNATIONAL LIMITED Second Applicant SANWA TRADING COMPANY LIMITED Respondent Coram:Whitlam J Place: Sydney Date: 28 December 1995 REASONS FOR JUDGMENT The applicants commenced this proceeding by filing an application and a statement of claim on 17 November 1995. By notice of motion filed the same day they now seek leave to serve both documents in Japan. There are two applicants, Seaboard Express Limited ("Seaboard") and Oceania International Limited ("Oceania"), both of which are alleged to be incorporated in Vanuatu. The respondent Sanwa Trading Co., Ltd ("Sanwa") is incorporated in Japan. The proceeding is founded on causes of action in contract and under the Trade Practices Act 1974 ("the Act"). Sanwa is alleged to have repudiated two agreements, one with each of the applicants who purport to have accepted such repudiation and who accordingly sue for damages. The statutory cause of action is for damages under s 82 of the Act. The pleading of the contract counts is not very informative. Although the two agreements in respect of whose alleged repudiation the applicants sue for damages are both in writing and are sufficiently identified in paragraph 21 of the statement of claim, the substance and effect of those agreements are not stated. On the other hand, whilst it is not alleged that the relevant agreements are to be implied from facts and circumstances, such as the course of negotiations between the parties, the effect of their antecedent correspondence is detailed in paragraphs 7-20 of the statement of claim. Also the pleading does set out seemingly gratuitously in paragraph 22 what are alleged to be "oral terms and conditions" of the written agreement between Oceania and Sanwa. The evidence in support of a prima facie case is the affidavit of Christopher Crowley. He describes himself as a director of Seaboard and Oceania. Mr Cassidy annexes to his affidavit correspondence with Mr K. Nagasawa, the president of Sanwa. This correspondence commenced on 24 August 1994 (not 23 August 1994, as alleged in the statement of claim). Mr Cassidy wrote to Sanwa in Japan on a Seaboard letterhead from what was described as its "Australian office", being an address in Queensland with a fax number in the Brisbane telephone area. Mr Nagasawa's correspondence was sent to this fax number, mainly from Japan but also from Singapore and New Caledonia. It appears from this correspondence that Sanwa owned and operated a number of longline fishing vessels and that it wished to obtain Solomon Islands fishing licences, to establish a "fish base" in Honiara, and to transport fish by air from Honiara to Tokyo. Mr Cassidy offered on behalf of Seaboard to provide the air transport, and he also offered on behalf of "our management company Oceania International Ltd" to arrange the licences and to set up the base. According to Mr Cassidy, Oceania was incorporated on 31 August 1994. Mr Cassidy says that he went to Tokyo on 19 September 1994 and had several meetings with Mr Nagasawa. On 23 September 1994 they executed in Tokyo the agreements that are the subject of the present proceeding. The agreements are annexed to Mr Cassidy's affidavit. The agreement between Sanwa and Oceania is described as the "Agency Agreement". It provided that: "SANWA hereby agrees to appoint OCEANIA as SANWA'S Agents in Australia, Papua New Guinea and the Solomon Islands to: (i) Obtain any and all necessary fishing licences that may be required to permit SANWA to operate in the aforesaid territorial or international waters. (ii) Provide office space, manned by OCEANIA or its Agent's personnel in the aforesaid Countries. (iii) To liaise on SANWA'S behalf with the relevant Government Bodies. (iv) To ensure that on behalf of SANWA all Royalties and Fees, when due and payable by SANWA, are promptly paid to the relevant Government Bodies and to ensure that all necessary fishing Licenses are kept current and valid. (v) Organize and arrange for the facilitation of SANWA'S fishing boats and their catches, including the loading, unloading, chilling, freezing, packing, weighing, storing, and transhipment by air or sea of the catches and replenishing of its boats." The Agency Agreement also provided that: "Any controversy or claim arising out of, or relating to any part of this Agreement, or breach thereof, and which is not settled between the parties themselves, shall be settled in accordance with the Statutes and Law of Australia in the State of Queensland." The agreement between Sanwa and Seaboard is described as the "Aircraft Charter Agreement". Under this agreement Seaboard was to provide an aircraft for use by Sanwa in the carriage of airfreight from Honiara to Tokyo and return once a week. The aircraft was to be a Boeing 707 with a payload of 25 tonnes. Sanwa undertook to pay for 48 charter flights per year at a cost of US$61,600 for each round trip. Sanwa also had the option of utilizing a second weekly flight at a slightly lower cost. The Aircraft Charter Agreement provided for payment to be made within 10 days of the departure of each flight to Seaboard's account at Banque d'Hawaii (Vanuatu) Ltd in Port Vila, Vanuatu. Clause 6(ii) of the Aircraft Charter Agreement provided: "(ii) SANWA shall, within twenty one (21) days of signing this agreement, provide Seaboard with an irrevocable letter of credit suitable to Seaboard, in the amount of USD $250,000. Such letter of credit shall act as security deposit for SANWA's performance under this agreement and shall only be drawn against in the event SANWA defaults in any of its obligations hereunder." Clause 14 of the Aircraft Charter Agreement provided: "This agreement shall be construed in accordance with the laws of the Republic of Vanuatu and any proceedings against Seaboard shall be brought in Vanuatu." I should mention too that the address of Oceania and Seaboard is shown in the respective agreements as their registered office in Port Vila. Mr Cassidy deposes to the terms of a conversation with Mr Nagasawa in Tokyo during discussions leading up to the execution of two agreements. In this discussion Mr Nagasawa is said to have agreed to pay Oceania "US $50,000 per vessel per year in relation to providing licences" and an amount equivalent to 15% of the rent payable for the fish base and of the capital value of the plant and equipment purchased for the base. This conversation forms the basis of the "oral terms and conditions" alleged in paragraph 22 of the statement of claim. The statement of claim alleges that Sanwa repudiated each agreement on 24 November 1994. Mr Cassidy annexes to his affidavit correspondence covering the period from the execution of the agreements until December 1994. Mr Cassidy says that he sent an Oceania employee to Honiara for the purpose of assisting a Sanwa employee in negotiating a lease and setting up a fish base there. It is not necessary to describe the effect of this further correspondence. It is sufficient to observe that it does not suggest that any licences were procured, leases arranged or capital items purchased so that any entitlement to payment of sums pursuant to the alleged "oral terms and conditions" could have arisen in favour of Oceania. Nor does the correspondence suggest that Seaboard was ever in a position to provide the agreed air charters. Aircraft leasing arrangements (with African Aircraft Corp of Miami, Florida at the end of September 1994, and with Jetlease Inc of Houston, Texas in October 1994) were not implemented. Attempts to charter an aircraft from the Guam agents of Buffalo Airways also appear to have foundered on account of operational problems in Honiara and of landing rights difficulties in Tokyo. Certainly it may be accepted that Sanwa, which had originally indicated that it would require the air charter in November 1994, had by December 1994 felt obliged to make alternative arrangements to transport fish from Honiara to Tokyo. I should perhaps mention too that Sanwa did furnish a letter of credit to Banque d'Hawaii in Port Vila, but that Seaboard said it was not suitable. The fate of the present motion does not entirely depend, so far as the contracts counts are concerned, upon my view of the inferences open on this material as to whether a prima facie case can be made out. After all, the fact of the agreements being concluded appears plain enough. But how can these counts be pressed within O 8 r 1 of the Federal Court Rules? The applicants' principal submission is that they fall within par (aa) of that rule as being "founded on a breach in the Commonwealth", because Sanwa's faxes repudiating the relevant agreements were received at the "Australian office". This submission cannot be accepted for reasons explained by Sheppard J in Stanley Kerr Holdings Pty Ltd v Gibor Textile Enterprises Ltd [1978] 2 NSWLR 372 at 377-8. The authorities establish that the place where the repudiatory act or conduct occurs is the place from which the faxes were sent. In this case that is Japan. There was accordingly no breach of contract within Australia. However, as a fallback position, Oceania also seeks to rely on subpar (ab)(vi) of the rule since the Agency Agreement is "governed by the law of the Commonwealth or of a State". The relevant provision in that agreement may, it is true, stipulate such a choice of law. But here it is necessary, in my opinion, to look more closely at the pleading. The breach of contract alleged is the failure to appoint Oceania as its agent in the Solomon Islands by appointing someone else (see paragraph 27 of the statement of claim), but the damages said to flow from such breach are alleged in the particulars to paragraph 32 of the statement of claim to be the failure to pay amounts which could, on any view, only be due under the "oral terms and conditions" alleged in paragraph 22 of the statement of claim. Although these terms and conditions are said to be part of the Agency Agreement, that cannot be so where that agreement is in writing. Any anterior agreement is wholly oral. It has no express choice of law provision. If a governing law must be discovered, it would plainly be the law of the Solomon Islands where the licences were to be procured and the fish base established. In addition, as I have already mentioned there is no material upon which a prima facie case could be made out that a breach of the obligation to make such payments has occurred. Applications such as the present motion are not, of course, to be approached on fine points of pleading: Trade Practices Commission v The Gillete Company (No 1) (1993) 45 FCR 366 at 381. I am mindful that a breach of contract, such as the Agency Agreement, gives rise to a cause of action even though it is not shown to have caused loss or damage. However, quite apart from any necessity for Oceania to disentangle its contract claim from that of Seaboard, leave should not be granted under O 8 r 2(2) to serve in Japan originating process of this Court based on such a claim. Any connexion with Australia is entirely artificial. This brings me to the claims under the Act. These are very confusingly pleaded in paragraphs 29, 30 and 31 of the statement of claim. They appear to have been added as an afterthought. In any event, in terms, paragraph 30 alleges that Sanwa engaged in misleading and deceptive conduct in contravention of s 52 of the Act. In the case of each agreement it is alleged that Sanwa represented that it would enter into such a contract and that it would "act honourably with regard to that contract". The misrepresentation is said to be that Sanwa "failed to advise Seaboard [or Oceania, as the case may be] that there was the possibility that the promises contained in those representations would be unfulfilled". In paragraph 29 of the statement of claim, the same representation is alleged to have involved making an implied representation that Sanwa "had the intention at the time of making those representations to Seaboard [or Oceania, as the case may be] to make good the provisions contained in those representations and that it had the means to do so". This is said to be a misleading representation by virtue of s 51A of the Act. It may be accepted that misrepresentations contained in correspondence sent by fax are made in the place where they are received and acted upon: Sedgwick Ltd v Bain Clarkson Ltd (1994) 56 FCR 578 at 584-586. Such claims will fall within par (b) of O 8 r 1. I consider that the pleading is in large part embarrassing. Furthermore, whatever may be the pleading requirements of s 51A of the Act, it is plainly an evidentiary provision and it cannot be abused for the purposes of extending the reach of Australian courts. I accept that at a trial it may be utilized once there is evidence of a positive unqualified representation as to future conduct. The applicants rely upon Rousselis v Aizeema (Australia) Pty Ltd (1994) ATPR (Digest) ¶ 46-116 for the proposition that a representation will be misleading where the representor lacked the means to cause the event to occur. But the applicants cannot merely make such an allegation in their pleading. They must adduce material from which a prima facie case can be discerned. There is simply no material upon which inferences are open that Sanwa lacked the means to fulfil its obligations under the two agreements. On the contrary, whilst it is not strictly relevant, it may be observed that Sanwa may well have had good reason to doubt Seaboard's capacity to perform its obligations under the Aircraft Charter Agreement. It follows that I am not satisfied of the matters referred to in pars (b) and (c) of O 8 r 2(2). Even had I been so satisfied and the discretion under that rule enlivened, I should not have regarded the proceeding as a proper one for service outside the Commonwealth. As Dawson J recently said in Gardner v Wallace (1995) 132 ALR 323 at 327, the discretion is to be exercised with caution. Here two Vanuatu companies seek to invoke the jurisdiction of an Australian court in respect of contracts, which were made in Japan and were to be performed in the Solomon Islands, Japan and Vanuatu. The motion is refused. I certify that this and the preceding eight pages are a true copy of the reasons for judgment herein of the Hon. Justice A.P. Whitlam Associate: Date: 28 December 1995 Mr T.L. Lee of the Terence Lockyer Lee and Associates, solicitors appeared for the applicants. Date of hearing: 23 November 1995