FEDERAL COURT OF AUSTRALIA GRD Minproc Limited v Shanghai Flying Wheel Non-Ferrous Company (No 2) [2005] FCA 180 PRACTICE AND PROCEDURE – service out of the jurisdiction – criteria for service out – alleged contraventions of Trade Practices Act 1974 (Cth) – allegedly committed in Australia – respondent corporations in China – injunction claim based on estoppel – injunction claim based on Carriage of Goods by Sea Act 1991 (Cth) – requirements for service out of the jurisdiction in China – requirement for formal request by Australian courts Trade Practices Act 1974 (Cth) s 52 Carriage of Goods by Sea Act 1991 (Cth) s 11 Judiciary Act 1903 (Cth) s 39B(1A)(c) Federal Court Rules O 8 R 1, O 8 r 2 Paper Products Pty Ltd v Tomlinsons (Rochdale) Limited (No 2) (1993) 44 FCR 485 cited Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 cited The Swan Brewery Co Ltd v Atlee [1998] FCA 277 cited GRD MINPROC LIMITED v SHANGHAI FLYING WHEEL NON-FERROUS COMPANY and SHANGHAI FOREIGN TRADE CORPORATION W242 OF 2004 FRENCH J 4 MARCH 2005 (Publication of Reasons) PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W242 OF 2004 BETWEEN: GRD MINPROC LIMITED APPLICANT AND: SHANGHAI FLYING WHEEL NON-FERROUS COMPANY FIRST RESPONDENT SHANGHAI FOREIGN TRADE CORPORATION SECOND RESPONDENT JUDGE: FRENCH J DATE OF ORDER: 16 FEBRUARY 2005 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Pursuant to Division 3 Order 8 of the Federal Court Rules, the Applicant have leave to serve: (a) the Application dated 28 October 2004; (b) the Statement of Claim dated 28 October 2004; and (c) the reasons for this order to be published outside the Commonwealth upon: (a) the First Respondent at 2 Shenguang Road, Chunshen Village, Xinqiao Town, Songjiang District, Shanghai, 201612; and (b) the Second Respondent at No. 85 Lou Shan Guan Road, Changning District, Hongqiao Zone, 200336. 2. The applicant to file a revised request in form 14A to reflect the terms of Order 1. 3. The first respondent and second respondent file an appearance three weeks after the transmittal to the Court through the diplomatic channel by the government or court of the People's Republic of China that the documents referred to in paragraph 1 above have been personally served or served in accordance with the law of the People's Republic of China. 4. A directions hearing be held on 16 September 2005 at 9.30 am or such earlier date as the court may direct following the submission of appearances. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W242 OF 2004 BETWEEN: GRD MINPROC LIMITED APPLICANT AND: SHANGHAI FLYING WHEEL NON-FERROUS COMPANY FIRST RESPONDENT SHANGHAI FOREIGN TRADE CORPORATION SECOND RESPONDENT JUDGE: FRENCH J DATE: 4 MARCH 2005 (Publication of Reasons) PLACE: PERTH REASONS FOR JUDGMENT ON MOTION TO SERVE OUT OF THE JURISDICTION Introduction 1 GRD Minproc Limited (GRD) commenced proceedings in this Court on 28 October 2004 against Shanghai Flying Wheel Non-Ferrous Company (SFW) and Shanghai Foreign Trade Corporation (SFT), both of which are companies incorporated in the People's Republic of China. By a notice of motion filed, in an amended form, on 16 February 2005, GRD seeks the leave of this Court to serve the application and the statement of claim on the two companies. 2 Subject to some reservations as to the adequacy of the pleadings which are noted below, I am satisfied that leave to serve the Application, Statement of Claim (SC) and a copy of these reasons upon SFW and SFT in accordance with Div 3 of O 8 of the Federal Court Rules should be granted. Service of the supporting affidavits is not required at this stage. The Nature of the Proceedings 3 GRD brings proceedings in this Court against SFW and SFT, two companies incorporated in Shanghai in the People's Republic of China. GRD claims damages and declaratory and injunctive relief for misleading or deceptive conduct in contravention of the Trade Practices Act 1974 (Cth). It asserts, in support of the grant of injunctive relief, that the companies are estopped from pursuing a dispute they have with GRD through arbitration in Sweden. It also claims that they are barred from pursuing such arbitration by reason of the Carriage of Goods by Sea Act 1991 (Cth). The factual outline that follows is a summary of allegations set out in the statement of claim. It does not represent any finding of fact by the Court. 4 The application arises out of a dispute between GRD and the companiesabout the performance of a contract entered into in April 1995 to commission, supply and install a battery recycling plant in Shanghai to be used by SFW and paid for by SFT. 5 GRD alleges that all of its communications in relation to the contract were with Dianna Sun ostensibly acting on behalf of SFT and SFW (SC 7). As a matter of course the companies 'ostensibly agreed with' the proposals and courses of action proposed by Ms Sun to GRD (SC 8). 6 On 10 October 1999, SFT sent a facsimile to GRD alleging that it was in breach of the contract in various respects essentially relating to design defects and non-compliance with technical requirements (SC 9). GRD says it negotiated with SFT and SFW between 11 and 18 October 1999. Ms Sun represented the companies in those negotiations (SC 10). GRD says that in the course of negotiations Ms Sun represented to GRD that SFW and SFT agreed to settle the claim on the basis of mutual releases, termination of the contract and GRD waiving payment of a sum of $US200,000 then outstanding. Ms Sun's representations as to what the companies agreed to at that time are designated the 'Settlement Representations' (SC 11). 7 GRD says it sent SFT a Settlement Agreement reflecting its understanding of the negotiations and the Settlement Representations (SC 12). However on 8 November 1999, SFW sent a facsimile to GRD alleging breach of the contract and claiming compensation (SC 14). GRD alleges that Ms Sun, on behalf of the companies, told GRD that the claim for compensation emanating from SFW was not authorised and should be ignored. This representation is designated the 'SFW Claim Representation' (SC 15). The substituted statement of claim then sets out a history of facsimile communications from GRD to SFT seeking information about the progress of execution of the Settlement Agreement (SC 16). 8 Ms Sun, it is said, never told GRD that the companies did not agree with the terms of the Settlement Agreement or that they resiled from the effect of the negotiations, the Settlement Representations and the SFW Claim Representation. She is said thereby to have represented that the Settlement Agreement would be approved as a matter of course. These representations, by silence, are designated the 'Approval Representations'. 9 Between October 1999 and November 2000, SFT acted as if it had agreed to be bound by the Settlement Representations, the SFW Claim Representation and the Approval Representations (SC 19). It also acted as if it had agreed to, or would agree to, the terms of the Settlement Agreement (SC 19.2). Collectively these representations are designated the 'SFW Representations'. The conduct particularised and relied upon is expressed in terms of various omissions and silences. Further and alternatively, SFT acted over the same period as if it had agreed to be bound, or would agree to be bound, by the various representations and would agree to the terms of the Settlement Agreement. These representations are titled the 'SFT Representations' (SC 20). Again, the particulars relied upon are by way of silences and other omissions. 10 On 14 November 2002, a solicitor acting for the companies sent a letter of demand to GRD claiming damages for breach of the contract in the sum of $US8.5 million (SC 21). This was denied by GRD in a fax dated 17 December 2002 on the basis that the dispute had been settled (SC 22). On 31 January 2003, the companies requested arbitration in the Stockholm Chamber of Commerce (SC 23). 11 GRD alleges that the companies have engaged in misleading or deceptive conduct in the making of the various representations on their behalf by Ms Sun. There are some aspects of this part of the pleading which are less than satisfactory. When a representation is pleaded that is said to be misleading or deceptive it is generally necessary to plead a falsifying fact. The pleading filed on behalf of GRD seems to fall short of that requirement at times. 12 The Settlement Representations, attributed to the companies in par 9 of the statement of claim, were to the effect that they agreed to settle the claim on a certain basis. It was not part of the representations that Ms Sun had the authority to make them. Yet the falsifying plea in par 24 is that Ms Sun did not have authority to settle the claim on the basis proposed. 13 The SFW Claim Representation was a representation said to have been made by Ms Sun on behalf of the companiesthat the claim by SFW for compensation for breach of the contract sent on 8 November 1999 was sent without her knowledge, was not authorised to be sent on behalf of the companiesand should be ignored by GRD. This representation is said to be falsified by the companies' request that their claim be referred to arbitration. That conduct may be evidence of a falsifying fact. It is not of itself a fact which falsifies the alleged representations. They would be falsified by a plea that a claim for compensation was authorised to be sent by or on behalf of the companies. 14 The Approval Representations are said to have been falsified by SFT's current statement that it has rejected the Settlement Agreement and was proceeding with the arbitration request. The conduct relied upon does not, in terms, falsify the Approval Representations. A promise or prediction which is broken or not fulfilled is not thereby misleading or deceptive. 15 GRD sets up an alternative plea in par 27 that the SFW Representations and the SFT Representations were false and misleading in that the companies had no intention of agreeing to the terms of the Settlement Agreement. It also relies upon s 51A of the Trade Practices Act in relation to the various pleaded representations on the basis that they were all representations as to future matters (SC 28). These pleas appear to be viable. 16 GRD says it relied upon the representations and acted as if the claim had been resolved in terms of the Settlement Agreement. On that basis it did not notify its insurers of the claim and did not pursue payment of the outstanding moneys due from the companies (SC 30). 17 An estoppel plea is set up on the basis that the companies were aware that GRD was conducting itself as if the Claim had been resolved and that it acted to its detriment in reliance upon that belief induced by the companies' conduct. 18 Finally it is put that the Contract involved the transhipment of goods from Australia to Shanghai by sea (SC 37) and that by reason of s 11 of the Carriage of Goods by Sea Act the proper forum to hear any dispute under the contract is Australia. Statutory Framework – Rules for Service out of Australia 19 Order 8 of the Federal Court Rules provides for service of originating process outside the Commonwealth. Order 8 r 1 provides that subject to rule 2 and Divisions 2 and 3 of the order, originating process may be served outside the Commonwealth in a number of cases including: '(a) where the proceeding is founded on a cause of action arising in the Commonwealth; ... (c) where the proceeding is founded on a breach, wherever occurring, of an Act, and is brought in respect of, or for the recovery of, damage suffered wholly or partly in the Commonwealth;' Order 8 rule 2 provides, inter alia: '(1) Service outside the Commonwealth of originating process is not valid under this Order unless – (a) the service is in accordance with the prior leave of the Court given under sub-rule (2); (b) the Court confirms the service under sub-rule (4); or (c) the person served waives objection by entering an appearance. (2) The Court may, by order, give leave to serve originating process outside the Commonwealth in accordance with Division 2 or 3 of this Order or, subject to subrule (2B), on such terms and conditions as it considers appropriate, if the Court is satisfied that: (a) the Court has jurisdiction in the proceeding; and (b) rule 1 applies to the proceeding; and (c) the party seeking leave has a prima facie case for the relief sought by the party in the proceeding.' Statutory Framework – Rules of Service in Non-convention Countries 20 Division 3 of Order 8 deals with service in non-convention countries. The People's Republic of China is a non-Convention country as there is no relevant convention for service applying to it. Order 8 rule 14(1) states that a party seeking service in a non-convention country must file a Form 14A request. That form is a formal request that the documents be served through diplomatic channels and contains an undertaking by the solicitor seeking service to meet all expenses incurred by the Commonwealth. 21 Sub-rule 14(2) provides that the Registrar must affix the Court's seal to the document to be served and it must be sent to the Secretary of the Attorney-General's Department together with a translated copy and a Form 14B request. That form is a formal request by the Federal Court that the Attorney-General's Department transmit the documents to be served to the government of the country in which service is required with a request that those documents be served. 22 Proof of service in the non-convention country is provided for in an official certificate or declaration by the government or court of that country if it states that the document was served personally or through the laws of that country – O 8 r 15. 23 Under Practice Note 13 of the Federal Court Practice Notes a party seeking leave to serve originating process overseas should support the application with evidence of advice obtained from the Attorney-General's Department as to the most appropriate form of service in the country and as to the legality under the law of the country concerned of service in the manner proposed. Statutory Framework – Carriage of Goods by Sea Act 1991 (Cth) 24 Section 11 of the Carriage of Goods by Sea Act 1991 (Cth) provides, inter alia: '(1) All parties to: (a) a sea carriage document relating to the carriage of goods from any place in Australia to any place outside Australia; or (b) a non-negotiable document of a kind mentioned in subparagraph 10(1)(b)(iii), relating to such a carriage of goods; are taken to have intended to contract according to the laws in force at the place of shipment. (2) An agreement (whether made in Australia or elsewhere) has no effect so far as it purports to: (a) preclude or limit the effect of subsection (1) in respect of a bill of lading or a document mentioned in that subsection; or (b) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of a bill of lading or a document mentioned in subsection (1); or (c) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of: (i) a sea carriage document relating to the carriage of goods from any place outside Australia to any place in Australia; or (ii) a non-negotiable document of a kind mentioned in subparagraph 10(1)(b)(iii) relating to such carriage of goods. (3) An agreement, or a provision of an agreement, that provides for the resolution of a dispute by arbitration is not made ineffective by subsection (2) (despite the fact that it may preclude or limit the jurisdiction of a court) if, under the agreement or provision, the arbitration must be conducted in Australia.' Whether the Criteria for the Grant of Leave Are Made Out 25 The first requirement for the grant of leave set out in O 8 r 2(2) is that the Court is satisfied that it has jurisdiction in the proceeding. In this case, the proceeding is brought in part on the basis of contraventions of s 52 of the Trade Practices Act in respect of which the Court has jurisdiction pursuant to s 86 of that Act and s 39B(1A)(c) of the Judiciary Act 1903 (Cth). The estoppel plea would appear to invoke the accrued jurisdiction of the Court. Further, the Court's jurisdiction in matters arising under laws made by the Parliament is invoked in the reference to the Carriage of Goods by Sea Act. 26 The second requirement is that O 8 r 1 applies to the proceeding. GRD relies upon contraventions of s 52 of the Trade Practices Act which, it says, were committed in the Commonwealth as the implied representations were contained in facsimiles and telephone conversations received in Australia – Paper Products Pty Ltd v Tomlinsons (Rochdale) Limited (No 2) (1993) 44 FCR 485; Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 at [147] per Merkel J. I accept that on the face of this pleading, O 8 r 1 does apply. 27 The question that follows is whether there is a prima facie case for the causes of action which are alleged. GRD relies upon affidavit material, including affidavits sworn by Louis Mostert on 28 October 2004 and Matthew Knox sworn on 10 December 2004. Mr Mostert is an in-house counsel employed by GRD. Mr Knox is a solicitor employed by GRD's solicitors. Mr Knox's affidavit exhibits statements by officers of GRD lodged in the jurisdictional hearing of the Arbitral Tribunal constituted under the auspices of the Stockholm Chamber of Commerce. I take those statements into account. Without going through the detail of the affidavits and the statements to which I have referred, it is sufficient to say that I am satisfied that there is at least a prima facie case in respect of some of the causes of action pleaded under s 52. The estoppel plea appears to set up an estoppel based upon the failure of the companiesto correct GRD's erroneous belief, known to the companies, that the dispute over the Contract had been settled. Given the reliance and detriment claimed, it is arguable that, if the facts pleaded were made out, it could be regarded as unconscionable for the respondents to depart from the assumptions said to have been induced by the conduct and that this may support the grant of injunctive relief. This could perhaps be made clearer on the pleadings however. I am also satisfied that there is enough to arguably support a claim for injunctive relief based on the Carriage of Goods by Sea Act. Service of documents in China 28 GRD in its Amended Notice of Motion filed on 16 February 2005 seek orders in the following terms: '1. That pursuant to Division 3 Order 8 of the Federal Court Rules, the Applicant have leave to serve: (a) the Application dated 28 October 2004; (b) the Statement of Claim dated 28 October 2004; (c) the affidavit of Louise Mostert dated 28 October 2004 in support of this motion; (d) the supplementary affidavit of Louis Mostert dated 10 December 2004 in support of this motion; (e) the affidavit of Matthew William Knox dated 10 December 2004 in support of this motion; (f) the supplementary affidavit of Matthew William Knox dated 13 December 2004 in support of this motion; (g) the supplementary affidavit of Matthew William Knox dated 27 January 2005 in support of this motion; and (h) any orders made by and any reasons for decision of the Court on hearing this motion, outside the Commonwealth upon: (a) the First Respondent at 2 Shenguang Road, Chunshen Village, Xinqiao Town, Songjiang District, Shanghai, 201612; and (b) the Second Respondent at No 85 Lou Shan Guan Road, Changning District, Hongqiao Zone, 200336. 2. The First Respondent and Second Respondent file an appearance 3 weeks after the transmittal to the Court through the diplomatic channel by the government or court of the People's Republic of China that the documents referred to in paragraph 1 above have been personally served or served in accordance with the law of the People's Republic of China. …' 29 There is evidence exhibited to the affidavit of Mr Mostert dated 28 October 2004 from the Attorney-General's website relating to the service of process in China. The procedures contained therein contain the following advice: 'Service of Process Abroad – China There is no Convention in force between Australia and China relating to the service of documents. China is a party to the Hague Convention on the Service Abroad of Judicial and Extra Judicial Documents in Civil and Commercial Matters 1965, however, Australia has not acceded to that Convention because some Australian Courts have not made the necessary Rules of Court. According to the law of the People's Republic of China, no foreign organisation or individual may themselves serve documents issued by foreign courts within the territory of the Republic. Where a party in Australia wishes to serve a party in China with documents issued by an Australian court in civil proceedings, a formal request by the Australian court should be sent through the diplomatic channel seeking the assistance of Chinese authorities in serving the documents as a matter of comity. The request for service should be sent by the Australian court to the Attorney-General's Department in Canberra (for service of process issued by Commonwealth courts) or to the relevant State or Territory law Department (for service of process issued by State or Territory courts). The request for service should: . be addressed to the "Appropriate Court of China"; . set out the name of the requesting court; . set out the names and descriptions of the parties; . set out the name, sex, age, nationality and address of the person to be served; . set out the nature and quantity of documents to be served; . state that Australian government will reciprocate in assisting with the service of documents from Chinese judicial authorities; . state that the party in Australia seeking service of the documents will reimburse Chinese judicial authorities for the costs incurred in serving the documents; . be sealed by the requesting court; . be accompanied by translations in full character Chinese of the request for service and the documents to be served; the translations should bear the signature of the translator attesting to the authenticity of the translation.' 30 The affidavit of Mr Knox sworn on 15 February 2005 exhibiting an email from a Legal Officer of the Civil Justice Division of the Attorney-General's Department and concerning service of Australian court process in China accords with and makes reference to the above information. Conclusion 31 The criteria for leave to serve outside the jurisdiction having been made out, I am satisfied that leave to serve the application, the statement of claim and a copy of these reasons should be granted in accordance with Div 3 of O 8. I should note however, the conclusions I have reached as to the granting of leave under O 8 are in one sense provisional. They have nothing to say about the strength of the case, nor about the sufficiency of the pleading were it to be the subject of a strike out motion. I do not require that the supporting affidavits should be served at this stage. They can be served once an address for service is established. I certify that the preceding thirty one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. Associate: Dated: 3 March 2005 Counsel for the Applicant: Mr SR Adams and Mr M Knox Solicitor for the Applicant: Corrs Chambers Westgarth Date of Hearing and Orders: 16 February 2005 Date of Publication of Reasons: 4 March 2005