FEDERAL COURT OF AUSTRALIA PRACTICE AND PROCEDURE - Application to set aside service of cross-claim outside Australia unsuccessful on basis of no prima facie right to relief claimed - whether such finding entitles respondents to order that the originating process be set aside on same basis. Federal Court Rules O 5 r 8, O8 r 2, O 9 r 7 Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1994) 58 FCR 365 Amust Computer Corporation Pty Ltd & Ors v Australia Entre Business Centres Pty Ltd (1987) 9 ATPR 40-829 Tycoon Holdings Ltd v Trencor Jetco Inc (1992) 34 FCR 31 SOUTHERN CROSS AIRLINES HOLDINGS LIMITED v ARTHUR ANDERSEN & CO (A FIRM), SIR LEO HIELSCHER, BRIAN HARVEY BADEN POWELL, LEONARD THOMAS GEORGE HEARD, DAME MARGARET GEORGINA CONSTANCE GUILFOYLE, LEIGH MASEL, DAVID SAMUEL COATS, JAMES GRAHAM AMBROSE TUCKER AND GEOFFREY ARTHUR COHEN BY ORIGINAL ACTION AND ARTHUR ANDERSEN & CO (A FIRM) v SIR LEO HIELSCHER, BRIAN HARVEY BADEN POWELL, LEONARD THOMAS GEORGE HEARD, DAME MARGARET GEORGINA CONSTANCE GUILFOYLE, LEIGH MASEL, DAVID SAMUEL COATS, JAMES GRAHAM AMBROSE TUCKER, WESTPAC BANKING CORPORATION, GLEDHILL BURRIDGE & CATHRO, THE APOGEE FINANCE GROUP INC, GPA GROUP PLC, TYROLEAN LIMITED AND IRISH AEROSPACE LIMITED BY CROSS-CLAIM No QG 170 of 1996 COOPER J BRISBANE 7 MAY 1998 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 170 of 1996 BETWEEN: SOUTHERN CROSS AIRLINES HOLDINGS LIMITED Applicant AND: ARTHUR ANDERSEN & CO (A FIRM) BETWEEN: First Respondent AND: SIR LEO HIELSCHER Second Respondent BRIAN HARVEY BADEN POWELL Third Respondent LEONARD THOMAS GEORGE HEARD Fourth Respondent DAME MARGARET GEORGINA CONSTANCE GUILFOYLE Fifth Respondent LEIGH MASEL Sixth Respondent DAVID SAMUEL COATS Seventh Respondent JAMES GRAHAM AMBROSE TUCKER Eight Respondent GEOFFREY ARTHUR COHEN Ninth Respondent BY ORIGINAL ACTION ARTHUR ANDERSEN & CO (A FIRM) CROSS-CLAIMANT SIR LEO HIELSCHER, BRIAN HARVEY BADEN POWELL, LEONARD THOMAS GEORGE HEARD, DAME MARGARET GEORGINA CONSTANCE GUILFOYLE, LEIGH MASEL, DAVID SAMUEL COATS, JAMES GRAHAM AMBROSE TUCKER FIRST - SEVENTH CROSS RespondentS WESTPAC BANKING CORPORATION EIGHTH CROSS-RESPONDENT GLEDHILL BURRIDGE & CATHRO NINTH CROSS-RESPONDENT THE APOGEE FINANCE GROUP INC TENTH CROSS-RESPONDENT GPA GROUP PLC ELEVENTH CROSS-RESPONDENT TYROLEAN LIMITED TWELFTH CROSS-RESPONDENT IRISH AEROSPACE LIMITED THIRTEENTH CROSS-RESPONDENT by cross-claim JUDGE: Cooper j DATE of order: 7 may 1998 where made: BRISBANE THE COURT ORDERS THAT: The application is dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 170 of 1996 BETWEEN: SOUTHERN CROSS AIRLINES HOLDINGS LIMITED Applicant AND: ARTHUR ANDERSEN & CO (A FIRM) BETWEEN: First Respondent AND: SIR LEO HIELSCHER Second Respondent BRIAN HARVEY BADEN POWELL Third Respondent LEONARD THOMAS GEORGE HEARD Fourth Respondent DAME MARGARET GEORGINA CONSTANCE GUILFOYLE Fifth Respondent LEIGH MASEL Sixth Respondent DAVID SAMUEL COATS Seventh Respondent JAMES GRAHAM AMBROSE TUCKER Eight Respondent GEOFFREY ARTHUR COHEN Ninth Respondent BY ORIGINAL ACTION ARTHUR ANDERSEN & CO (A FIRM) CROSS-CLAIMANT SIR LEO HIELSCHER, BRIAN HARVEY BADEN POWELL, LEONARD THOMAS GEORGE HEARD, DAME MARGARET GEORGINA CONSTANCE GUILFOYLE, LEIGH MASEL, DAVID SAMUEL COATS, JAMES GRAHAM AMBROSE TUCKER FIRST - SEVENTH CROSS RespondentS WESTPAC BANKING CORPORATION EIGHTH CROSS-RESPONDENT GLEDHILL BURRIDGE & CATHRO NINTH CROSS-RESPONDENT THE APOGEE FINANCE GROUP INC TENTH CROSS-RESPONDENT GPA GROUP PLC ELEVENTH CROSS-RESPONDENT TYROLEAN LIMITED TWELFTH CROSS-RESPONDENT IRISH AEROSPACE LIMITED THIRTEENTH CROSS-RESPONDENT by cross-claim JUDGE: Cooper j DATE: 7 may 1998 PLACE: BRISBANE REASONS FOR JUDGMENT On 27 March 1998, on the motion of the eleventh, twelfth and thirteenth cross-respondents, I ordered :- "1. Service of the cross-claim of Arthur Andersen & Co pursuant to leave granted by Drummond J on 6 June 1997 on each of the eleventh, twelfth and thirteenth cross-respondents be set aside. 2. Leave to serve the cross-claim outside Australia on the eleventh, twelfth and thirteenth cross-respondents granted by Drummond J on 6 June 1997 be discharged. 3. The eleventh, twelfth and thirteenth cross-respondents cease to be parties to the cross-claim. 4. Arthur Andersen & Co pay the eleventh, twelfth and thirteenth cross-respondents' costs of and incidental to the notice of motion, including reserved costs, if any, and of the joinder, to be taxed if not agreed." The cross-claimant, Arthur Andersen & Co, sought that I vacate the third of the above orders. Accordingly I directed that written submissions be filed and served by the parties in respect of the application to vacate the order. This application has been determined on the basis of those written submissions. The grounds advanced by the cross-claimant for the removal of the eleventh, twelfth and thirteenth cross-respondents as parties to the cross-claim not being ordered were :- (a) the order of Spender J of 14 March 1997 giving leave to Arthur Andersen & Co to bring the cross-claim had not been challenged by the eleventh, twelfth and thirteenth cross-respondents; (b) the proceedings before me on the notice of motion were concerned with whether Arthur Andersen & Co had, for the purpose of O 8 r 2(2) of the Federal Court Rules, made out a prima facie case against the eleventh, twelfth and thirteenth cross-respondents and not, whether no reasonable cause of action could be made out; (c) Arthur Andersen & Co are obtaining further information in relation to the affairs of Southern Cross Airlines Holdings Limited which may enable a further application to be made under O 8 r 2 of the Federal Court Rules; (d) it is possible that the eleventh, twelfth and thirteenth cross-respondents, or some of them, might commence business in Australia enabling service of proceedings against them without recourse to O 8 r 2 of the Federal Court Rules; (e) if the joinder is set aside, it may be the case that Arthur Andersen & Co would not succeed in a future application to join the eleventh, twelfth and thirteenth cross-respondents because a relevant limitation period may have expired. Order 9 r 7 of the Federal Court Rules provides :- "7(1) The Court may, on application made by a respondent to any originating process on notice of motion filed within the time fixed by sub-rule (2), by order - (a) set aside the originating process; (b) set aside the service of the originating process on the respondent; (c) declare that the originating process has not been duly served on the respondent; (d) discharge any order giving leave to serve the originating process outside Australia or confirming service of the originating process outside Australia. 7(2) Notice of a motion under sub-rule (1) may be filed by a respondent before he enters an appearance or within fourteen days after the date of entry of a conditional appearance by him." By their notice of motion the eleventh, twelfth and thirteenth cross-respondents sought the following relief :- "1. That the Cross-Claim filed on 14 March 1997 by the Respondent, Arthur Andersen & Co (a firm): (a) be set aside; or (b) that the purported service of the Cross-Claim on the Eleventh, Twelfth and Thirteenth Cross-Respondents be set aside; or (c) that the order of Mr Justice Drummond made 6 June 1997 granting leave to serve the Cross-Claim out of Australia on the Eleveth, [sic] Twelfth and Thirteenth Cross-Respondents be discharged; 2. Such other order as the Court may consider appropriate; and 3. Costs." Order 9 of the Federal Court Rules is concerned with appearance in the court by respondents to proceedings filed in the court. Entry of an unconditional appearance is provided for in O 9 r 3. Entry of a conditional appearance is provided for under O 9 r 6. Unless a respondent applies under O 9 r 7 within fourteen days of filing the conditional appearance, that appearance takes effect as an unconditional appearance. The purpose of O 9 r 7 is to enable a respondent to an originating process filed in and issued by the court, without submitting to the jurisdiction of the court, to challenge the court's power to grant coercive relief against the respondent at the suit of the applicant. The respondent may seek to set aside the originating process itself or attack the service of, or right to serve, the originating process: see the discussion in Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1994) 58 FCR 365 at 370 - 371. Where a prima facie case is not made out, the originating process itself may be set aside under O 9 r 7(1)(a): see for example Amust Computer Corporation Pty Ltd & Ors v Australia Entre Business Centres Pty Ltd (1987) 9 ATPR 40-829 at 48,949; Tycoon Holdings Ltd v Trencor Jetco Inc (1992) 34 FCR 31 at 40. The order of Spender J granting leave to cross-claim against the eleventh, twelfth and thirteenth cross-respondents was made pursuant to O 5 r 8 of the Federal Court Rules and was made ex parte so far as those cross-respondents were concerned. The grant of leave merely authorises the initiating of court proceedings which could, in ordinary circumstances, have been filed without leave against the cross-respondents alone in the existing proceedings: Grundy v Lewis (1995) 62 FCR 567 at 571 - 572. The object of O 5 r 8 is that common issues of fact or law may be determined in a way which binds all parties and avoids a multiplicity of actions. However, leave under O 5 r 8 does not authorise service outside the jurisdiction without leave or confirmation under O 8 r 2 of the Federal Court Rules; nor does it deprive the respondent of the rights given under O 9 r 7 to seek the relief available under that order. In the present case, the existence of the order of Spender J of 14 March 1997, and the fact that the eleventh, twelfth and thirteenth cross-respondents have taken no steps to set aside that order before seeking relief under O 9 r 7, were not impediments to the eleventh, twelfth and thirteenth cross-respondents seeking the relief prayed for in their notice of motion. The proceedings initiated in the notice of motion sought, amongst other things, that the originating process, the cross-claim, be set aside. It also sought that service of the originating process be set aside. It is irrelevant that the basis of the relief sought under either head of O 9 r 7(1)(a) and r 7(1)(b) was that Arthur Andersen & Co did not have a prima facie case against the eleventh, twelfth and thirteenth cross-respondents for the relief claimed. The decision of Jenkinson J in Amust Computer Corporation Pty Ltd v Australia Entre Business Centres Pty Ltd, is an example of O 9 r 7(1)(a) being applied to strike out an originating process where no prima facie case for the relief claimed was made out notwithstanding the earlier grant of leave under O 8 r 2 to serve outside the jurisdiction. So too, is the decision in Tycoon Holdings an example of the use of O 9 r 7(1)(a) in like circumstances. In Tycoon Holdings, Wilcox J said, as to the requirement under O 8 r 2(2)(c) for a prima facie case (at 35) :- "... Read literally, the rule merely requires that the applicant demonstrate a prima facie entitlement to the particular relief which he or she claims; that is to say, claims in the proceedings as a whole. On this reading, if an applicant claims damages, it is necessary only to show a prima facie entitlement to damages, not a prima facie case in respect of each cause of action. However, I have come to the conclusion that r 2(2)(c) should not be read this way. I think that the intent of the paragraph is to enable an extraterritorial respondent to restrict the litigation against him or her to causes of action in connection with which the applicant can show a prima facie case. It would be burdensome, sometimes almost absurd, to allow the litigation of causes of action which the applicant could not show to have substance simply because the applicant joined with those claims some other, perhaps trifling, claim which did have merit." His Honour applied this reasoning to his decision to set aside the originating process in respect of causes of action other than those where the applicant had made out a prima facie case. Where no prima facie case for relief exists, the discretion under O 9 r 7(1) is sufficiently broad to enable an order being made setting aside the originating proceedings or an order having that effect. I was satisfied that the present case was a proper one for the making of such an order. The order which I made, that the eleventh, twelfth and thirteenth cross-respondents cease to be parties to the cross-claim, was intended to have the effect that the proceedings initiated against them by cross-claim be set aside, but that the cross-claims initiated against the other cross-respondents be unaffected. In my view, once the service of the cross-claim was set aside and the leave to serve outside the jurisdiction was discharged, the eleventh, twelfth and thirteenth cross-respondents ought not be left nominally joined in the proceedings where no prima facie case for relief could be made out by Arthur Andersen & Co against them. In those circumstances the originating process itself should be set aside. The fact that Arthur Andersen & Co is continuing to receive information, and the possibility that a relevant limitation period may have expired, do not of themselves justify the continued joinder of the eleventh, twelfth and thirteenth cross-respondents in respect of pleaded causes of action where Arthur Andersen & Co cannot make out, as a matter of law and/or fact, a prima facie entitlement to the relief claimed in respect of those causes of action. If Arthur Andersen & Co seek at a later time on the basis of new information to cross-claim against the present eleventh, twelfth and thirteenth cross-respondents, that application and any question of a time bar can be addressed on that material according to the merits disclosed on that application. Likewise, the proceedings should not be kept on foot on the speculative basis that the eleventh, twelfth and thirteenth cross-respondents may establish a presence within the jurisdiction. I am not persuaded that the third of the above orders should be vacated. Accordingly, the application is dismissed. I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper Associate: Dated: 7 May 1998 Solicitors for the First Respondent: Minter Ellison Solicitors for the Eleventh, Twelfth and Thirteenth Cross-Respondents: Deacons Graham & James Date of Judgment: 7 May 1998