CASTAGNA v CONCERIA PELL MEC SPA SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY P, HANDLEY JA, WADDELL AJA 14-15 March, 15 March 1996 [1996] NSWCA 94 PRIVATE INTERNATIONAL LAW — service — jurisdiction — order granting leave to proceed — fundamental and substantial irregularities in notification of hearing date — proper service on a defendant resident out of jurisdiction essential under SCR Pt10 r2 — order granting leave to proceed not properly made — appeal upheld. PRACTICE — irregularity — nullity. Conceria Pell Mec SpA, an Italian company sued the appellant, a resident of California, and other defendants in the Commercial Division. The appellant did not enter an appearance or appear at the trial. The plaintiff relied upon an affidavit of service and notification of hearing date to prove service on the appellant. The affidavit of service stated that three documents were served at the appellant's office on 29 January 1992: an amended summons with an expired return date of 29 November 1991; an unsigned and unsealed notice to defendant served outside Australia; and a letter notifying the hearing date dated 28 February 1992 notifying a hearing date on 14 February 1992. These inconsistencies were not drawn to the attention of the trial judge. Dr Castagna appealed against the ex parte judgment on the ground inter alia that the order granting leave to proceed under SCR Pt10 r2 was wrongly made. HELD: Allowing the appeal: (1) There were fundamental and substantial irregularities in the service of process on the appellant though it was not a nullity. (2) Proper service on a defendant resident out of jurisdiction is essential under SCR Ptl0 12. (3) Had the irregularities been drawn to the attention of the trial judge, he would have been bound to refuse leave to proceed. ORDERS 1. Appeal allowed. 2. Order granting leave to appeal be set aside. 3. Judgment be set aside and proceedings be returned to the Commercial Division. 4. If properly qualified, the appellant is entitled to costs of proceedings in this Court and the respondent is entitled to a Certificate under the Suitors' Fund Act. Handley JA Dr Castagna has appealed from an ex parte judgment entered against him by Cole J on 25 August 1992 for 1,477,500.75 D Marks and 186,186.19 European currency units. Judgments for the same amounts were entered at the same time against two other personal defendants and judgments for different amounts were entered against three corporate defendants. The Court is not concerned in this appeal with the judgments against defendants other than Dr Castagna. The proceedings were originally brought in the Commercial Division in 1989 against seven companies. The three individual defendants, including Dr Castagna, were added by amendments to the summons by leave granted by Giles J during 1991, the amended summons, with a return date of 29 November 1991, being filed on 13 November of that year. 2 UNREPORTED JUDGMENTS Dr Castagna was then a resident of California and the summons correctly recorded his address as being 766 Palomar Avenue, Sunnyvale in that State. Unsuccessful attempts were made to effect personal service on him in California on 26, 27 and 29 November 1991 and such attempts were then abandoned until late January 1992. On 29 January, according to the affidavit of Mr Steven Tso, a local process server, the amended summons and a notice to absent defendant were left by way of service with the receptionist on duty at 766 Palomar Avenue, Sunnyvale. It is common ground that the amended summons as served showed a return date of 29 November 1991. According to the same affidavit of service, the process server also left a letter addressed to Dr Castagna notifying him that the proceedings would be heard on 14 February 1992. There are difficulties with this letter, to which I will return in due course. Dr Castagna did not enter an appearance and took no part in the proceedings in the Commercial Division. The trial commenced before Cole J on 17 August 1992. The plaintiff applied for and was granted leave to proceed against Dr Castagna under SCR Pt10 12. This required proof of service on the doctor and also proof that the case fell within one or more of the paragraphs of r1A which authorised service on absent defendants. The trial Judge was satisfied that the case fell within para(i) because proceedings had been properly brought against persons served in the State and Dr Castagna was properly joined as a party in the proceedings. This would indeed appear to be the case. The plaintiff relied on the affidavit of Steven Tso and what became exhibit G to prove service and the affidavit of a Mr Krantz to prove that such service complied with the law of California. Exhibit G was a service report declared by Steven Tso under penalty of perjury but not sworn before a notary or commissioner and not in the form of an affidavit. It referred to the attempts made to effect service in November 1991 and stated that Mr Tso had posted copies of the summons and notice to absent defendant to Dr Castagna by prepaid first class mail on 30 January 1992. The trial Judge was satisfied that there had been service on Dr Castagna in California in accordance with the local law and on 17 August 1992 he granted the plaintiff leave to proceed. The plaintiff proved its case ex parte against Dr Castagna and on 25 August recovered the judgment previously referred to, formal orders being made on 31 August. On 22 September Dr Castagna appealed to this Court. There were twelve grounds of appeal, six directed to questions of service and jurisdiction and six directed to the merits of the judgment entered by the trial Judge. The notice of appeal challenged both the order granting leave to proceed and the final judgment. When the appeal came on for hearing, the Court intimated that it would hear argument in the first instance limited to the grounds which challenged the order granting leave to proceed. The difficulty in sustaining the order granting leave to proceed lies in the very terms of the affidavit of Steven Tso on which the plaintiff relied. This, so far as relevant, stated: "On the 29th day of January 1992 at 10.30 o'clock in the forenoon I duly served the co-defendant, Anthony Castagna, with a sealed copy of each of the following documents annexed to this affidavit and labelled A, B and C respectively, namely an amended summons, notice to defendant served outside Australia and letter addressed to the co-defendant stating the time and URJ CASTAGNA v CONCERIA PELL MEC SPA (Handley JA) 3 date for the Court hearing by delivering them to a female person over the age of 16 years and employed at the co-defendant's usual place of employment at 766 Palomar Avenue, Sunnyvale, California". Annexure A comprised the amended summons with its expired return date of 29 November 1991, which was indeed sealed with the seal of the Court. Annexure B was the notice to absent defendant which was not sealed with the seal of the Court or signed. Annexure C, described as letter addressed to the co-defendant stating the time and date of the Court hearing, bore the date 28 February 1992 and stated that the date for hearing was 14 February 1992 at 10.30 am. Annexure C therefore purports to be dated 28 February and to notify a hearing date on 14 February, but according to the affidavit was served on 29 January. The letter therefore contains a fundamental internal contradiction and there is a similar contradiction between it and the affidavit. The letter was neither signed or sealed. These inconsistencies were not drawn to the attention of the trial Judge and were not noticed by him. They were apparently also overlooked by the plaintiff's legal advisers. However, now that they have been drawn to the Court's attention, it is clear in my opinion that the service and the evidence of service were fundamentally irregular. Had these matters been drawn to the attention of Cole J or had his Honour noticed them, he would have been bound to refuse leave to proceed. Mr Brereton, however, submits that the defects were only irregularities, that s81 of the Supreme Court Act applied, and that it is now too late for Dr Castagna to take advantage of these irregularities because of the lapse of time between purported service on 29 January 1992 and the commencement of the trial later. He also submitted that SCR Pt10 12 was directed to proof of the matters arising under rl A, which authorised extraterritorial service, rather than the validity of the service as such. In my opinion the purported service of the amended summons with its expired return date was only irregular and not a nullity. In that respect I accept the submissions of Mr Brereton. However, the deficiencies were both substantial and fundamental, and did not depend upon what actually occurred when service was attempted. In cases of that kind, proof of defective service often raises disputed questions of fact which can only be determined after a hearing directed to that issue. In the present case one of the deficiencies was apparent on the face of the amended summons as served and proof of the attempted service could be expected to bring it under the notice of the plaintiff's legal advisers and the Court. The other deficiencies appeared on the face of the affidavit of service. Although I have concluded that the deficiencies in the service were only irregularities, this does not assist the respondent. The appellant challenges, as he is entitled to do in an appeal from the final judgment, the order granting leave to proceed, which he has submitted was wrongly made. Properly understood, no question of irregularity arises. The deficiencies in service on the appellant appeared on the face of the evidence relied upon by the plaintiff. On this basis the order granting leave to proceed was erroneous and this Court is bound to correct the error on appeal. The position may well have been different if the deficiencies in service raised disputed questions of fact which could only properly be resolved on an application to set aside service. 4 UNREPORTED JUDGMENTS Mr Brereton also submitted that proof of service on a defendant resident out of the jurisdiction was not an essential precondition to an order granting leave to proceed. This raises a question of the construction of SCR Ptl0O r2 which provides: "Where an originating process is served on the defendant outside Australia and the defendant does not enter an appearance within the time limited for appearance, the plaintiff shall not proceed against that defendant except with the leave of the Court". In my opinion the structure of Pt10 and in particular the relationship of r2 with rlA make proper service on an absent defendant an essential issue in any application for leave to proceed. While the Court is also necessarily concerned with the question whether the case falls within one or other of the subparagraphs of rlA, valid and effective service on the defendant is also a material consideration. In my opinion the evidence before Cole J on the application for leave to proceed demonstrated that Dr Castagna had not been properly served and accordingly the order granting leave to proceed was not properly made. I would therefore propose that the appeal be allowed, that the order granting leave to proceed be set aside, that the judgment be set aside and that the proceedings be returned to the Commercial Division to enable the plaintiff to take such further steps in the proceedings as it may be advised. The appellant is entitled to his costs of the proceedings in this Court and the respondent is entitled to a Certificate under the Suitors' Fund Act if properly qualified. MAHONEY P [J agree with the judgment given by Mr Justice Handley. As the matter is of some importance both to the parties and to others I shall add some observations of my own. As Mr Justice Handley has said, the issues as raised by the notice of appeal related to two matters: the order made under Pt10 r2 (the service issues) and the orders for payment made against Dr Castagna (the substantial issues). In relation to the appeal generally when it came on for hearing, Dr Castagna sought to pursue an application to adduce further evidence relating to various aspects of the appeal, evidence covering the two sets of issues to which I have referred. Notice of that application had previously been given and affidavits prepared. The Court has dealt with that application in the course of the hearing of the appeal. After a preliminary investigation of the matter, the Court indicated that the parties should first pursue the appeal so far as it related to the service issues. It should be recorded that Dr Castagna then adduced his further evidence as far as it related to the service issues and the Court ruled upon the application to adduce further evidence as far as it related to those issues. The Court indicated that the affidavits of Steven Tso and the two ladies who had made affidavits should be able to be relied upon notwithstanding that they were not present for cross-examination. A further affidavit of a Mr Murotta relating to legal matters was also tendered. It deals with the compliance or non-compliance with the provisions of the Californian civil code. In my opinion the Court should allow that affidavit to be used, although in the event I do not think that it adds anything of substance to the proceedings before the Court and I shall not refer to it further. The appeal in relation to the service issues then proceeded upon this basis. URJ CASTAGNA v CONCERIA PELL MEC SPA (MAHONEY P) 5 I agree with what has been said by Mr Justice Handley in relation to the effect upon the originating process of the fact that when the process came to be served the (as I shall describe it) return date in the process was out of date. It was served or purported to be served on 29 January 1992 and the date there specified as the return date was a date in November of the previous year. I agree with what Mr Justice Handley has said as to that matter being an irregularity both generally and within s81 of the Supreme Court Act. Iam of the opinion that for the reasons which his Honour has given the Court should allow the appeal as far as it relates to the service issue, upon the ground that the leave of the Court given under Pt10 r2 subr(1) was (in the sense to which I shall refer) wrongly given and that this Court should reverse the order that was made in that regard. I mean by this that, had the evidence which is now before the Court been brought to the trial Judge's notice, his Honour would I think inevitably have come to a different conclusion. It has been put in argument that his Honour, had he been made aware of the relevant deficiencies in the material as it was then before him, would not have made the orders in question. This has been put upon the basis that the letter of 28 February 1992 was a false letter. I have considered carefully the possibilities in relation to that letter. The circumstances of it have been referred to Mr Justice Handley and I need not repeat them. If the affidavit of Mr Tso which was before his Honour, that is the affidavit sworn on 26 March 1992, had been the only relevant evidence on this particular issue and had the circumstances of the letter been drawn to his Honour's attention, I agree with Mr Justice Handley that it is likely to the extent at least of being probable that his Honour would not have made the order. The date 28 February 1992 was either an error or the letter was not in fact served by Mr Tso in the manner he described in his affidavit. The Court invited counsel to offer such explanation as could be offered as to how this situation arose. Mr Brereton, in the course of his case, called as a witness Mr Capagreco, the solicitor whose name appears on the affidavit of service of Mr Tso to which I have referred. Mr Capagreco said, and I summarise his evidence, as far as it is relevant for this purpose, that he had not noticed that the letter was of the date which it bears and therefore had the significance to which Mr Justice Handley referred. Accordingly he did not refer the matter to the Court's attention or, as I assume, to the attention of counsel dealing with the matter accept Mr Capagreco's evidence in that regard. But it follows from that that there is no explanation of how the letter came to be used in the way that it was used. The relevant persons from the Mercantile Agency from whom the letter purports to have come were not called to give evidence in relation to the matter or to explain how the situation arose. Bearing in mind the degree of satisfaction which is here involved, it is my opinion, probable to the appropriate degree, that the letter was attached to the affidavit following notification of the suggestion of service by Mr Tso and that it was attached to it with a consciousness that in fact the letter was not (as it could not have been) served at the time, namely 29 January 1992 when Mr Tso undertook the service of the documents as he claimed. In these circumstances, had these matters been drawn to the Judge's attention, I do not think that he would have made the order that he did. But the matter does not rest there. The affidavit of 26 March 1992 was, for the reasons Mr Justice Handley has given, a document which, when properly scrutinised, called for an explanation on the face of it. 6 UNREPORTED JUDGMENTS That explanation was ultimately given by a further affidavit of Mr Tso. Because the original affidavit called for an explanation it was necessary that some further information be available from Mr Tso. It is unfortunate that he was not available to give evidence orally or to be cross-examined. But an endeavour has been made to explain why he is not here and that explanation is in my opinion sufficient for present purposes, sufficient to warrant leave being given to use the affidavit. It appears from the further evidence which is now before the Court that there were further discrepancies in the evidence which, had they been brought to his Honour's attention, must have influenced him against the making of an order under Pt10 r2. It was said in the original evidence placed before the Judge that an attempt had been made by Mr Tso to serve the relevant documents on 29 November 1991. The note which was accepted in evidence in relation to that date contains the remark "not in" as presumably the explanation of why the documents were not served. But it appears now from the evidence which is before the Court that on that particular day the office in question was closed. It appears, as I would infer, that no person was there on the particular day and that therefore a significant attempt at service could not have been made on that day. Certainly an attempt could not have been made in the manner which is suggested by the document under the heading "attempts" which is in evidence before the Court and which apparently was before the trial Judge. There is in addition the discrepancy in relation to the date to which I have referred. The evidence as it is now before the Court indicates in my opinion that there really was no attempt by Mr Tso to comply with the Californian code as far as it required an explanation of the nature of the documents or their contents. Mr Tso has indicated that in fact all he said was that the documents were 'legal documents". There is nothing I think before the Court, nor I think was there evidence before his Honour which would warrant the conclusion that that aspect of the Rules was satisfied. In addition, I am satisfied that the requirements of the Californian law in relation to the posting of the document were not satisfied. In the document before his Honour there appeared a note suggesting that the documents had been served "by mailing a copy to the person served addressed as shown in item 2(c) by first class mail postage prepaid". It now appears from Mr Tso's subsequent affidavit that he did not do that and he could not say that it was done. At the best he would rely upon what he thinks was probably done by someone else. The statement in the affidavit of 26 March 1992 referring to service by post is therefore quite misleading. It follows that in that regard the evidence before the Judge was misleading and had he known the situation I do not think that he would have made the order that he did. Ihave detailed these matters because there has been a deal of discussion as to the nature of the procedures and it may be that those in other jurisdictions may require to understand some of the matters at least upon the basis of which this Court will uphold the appeal. Mr Brereton, faced with these difficulties, then submitted that the appeal should not be upheld because, and I state the matter in oversimplified form, there had been an election by the appellant not to take advantage of these particular matters. This argument by Mr Brereton was put in a number of different ways and I do not purport to state the detail of them in full. URJ CASTAGNA v CONCERIA PELL MEC SPA (Mahoney P) 7 On one basis of argument it was submitted that, because of the provisions of Pt11 r8, there was in a sense an obligation upon the appellant to move to set aside an order in relation to the proceedings or to move for a declaration inter alia that the service had not been properly effected. It was submitted that because that had not been done that the Court should not grant relief or relief of the present kind in this case. I do not think that the making of an application under Pt11 is the only way in which service, or the grant of leave to proceed, can be challenged. The fact that such an application has not been made may be relevant in deciding whether, on an original application or on appeal, leave to proceed should be granted. But the Court retains the power to decide, in each case, what justice requires. The argument was put also upon the basis of the provisions of s81 of the Supreme Court Act and in particular by reference to the thrust of s81 (3) of that Act. It was put generally that because, as it was said, Dr Castagna knew of the documents left for him, knew that the documents included a statement of claim and understood the effect of them that, and because he stood by and allowed the matter to proceed, he is debarred from taking advantage of these matters upon an appeal of the present kind. Ido not think that in the circumstances those arguments should be upheld. This is a case in which the plaintiff has sought to serve documents in a State of the United States of America. What is the law in that part of the world in relation to the enforcement of a judgment obtained here has not been the subject of argument in the present case; it may or may not be able to be enforced as such. But it is in my opinion proper that, when service is to be effected of an originating process of the present kind, claiming relief such as that which is here in question, the requirements of the New South Wales law in relation to service should be adhered to, if not with the utmost particularity, at least with such a degree of particularity as will ensure that the substance of the rules and the law have been complied with. It is for this Court, as the final Court of Appeal accessible as of course within this State, to indicate the approach to be adopted to requirements of this kind. In the present case I do not think that such compliance occurred. I do not think that there has been in the circumstances such a standing by that on any basis Dr Castagna is not in a position to take advantage of this matter upon appeal. For the reasons Mr Justice Handley has given, I think it will follow from the Court upholding the appeal on the service issues that the appeal must be upheld generally and that the orders that his Honour has proposed should be made. Counsel have not formally been heard upon that aspect of the matter. If they desire to put something of substance in relation to it, they may of course do so, but subject to that I would agree with the orders which his Honour has proposed. Waddell AJA Yes I agree with the President and with Mr Justice Handley and there is nothing I can usefully add. Mahoney P I think the orders proposed follow from our upholding of the appeal in relation to, as I have described them, the service issues. If that is so, I think the orders that have been proposed are the appropriate orders. 1. Appeal allowed. 2. Order granting leave to appeal be set aside. 3. Judgment be set aside and proceedings be returned to the Commercial Division. 8 UNREPORTED JUDGMENTS 4. If properly qualified, the appellant is entitled to costs of proceedings in this Court and the respondent is entitled to a Certificate under the Suitors' Fund Act. 5 The appellant appeared in person. Counsel for the respondent: P Brereton and MK Meek Solicitors for the respondent: Joseph G Capogreco and Associates