New South Wales Supreme Court CITATION : DHL V GOLD ENERGY [1999] NSWSC 1096 CURRENT JURISDICTION : Equity Division Commercial List FILE NUMBER(S) : 50068/99 HEARING DATE(S) : 29 October 1999, 5 November 1999 JUDGMENT DATE : 11 November 1999 DHL International (Aust) Pty Limited (Plaintiff) PARTIES : Gold Energy (Aust) Pty Limited (First Defendant) Grinnell Asia Pacific Pty Limited (Second Defendant) Harris Aircraft Inc (Third Defendant) JUDGMENT OF : Windeyer J at 1 COUNSEL : Mr G Lucarelli (Plaintiff) Mr K Smark (Third Defendant) Georgiou & Co (Plaintiff) SOLICITORS : Barnetts (First and Second Defendant) Schweizer & Co (Third Defendant) CATCHWORDS : PRACTICE AND PROCEDURE - application for leave to proceed against third defendant pursuant to Pt10 r2A - claim for breach of warranty of authority - need to show a good arguable case or serious issue for court to assume jurisdiction under Pt10 r1A(i)(i) - no denial of authority as third defendant clearly acted as agent for first defendant - leave not given to proceed ACTS CITED : Supreme Court Rules Pt8 r8 Pt 10, 1A(1)(a), (1)(b), (1)(c)(i), (ii), (iii), (1)(i), (1)(i)(i) r2 r6A CASES CITED : Hyde v Agars (1998) 45 NSWLR 485 DECISION : Notice of motion of plaintiff dismissed 1 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST WINDEYER J Thursday 11 November 1999 50068/99 DHL INTERNATIONAL (AUST) PTY LIMITED v GOLD ENERGY (AUST) PTY LIMITED & ORS JUDGMENT on application for leave to proceed 1 On 11 June 1999 Rolfe J ordered that Harris Aircraft Inc of Idaho in the United States of America (Harris Aircraft) be joined as third defendant pursuant to Pt8 r8 of the Supreme Court Rules, but without prejudice to the rights of Harris Aircraft pursuant to Pt10 r6A of the Supreme Court Rules. The plaintiff, by notice of motion filed on 20 August 1999, seeks leave to proceed against Harris Aircraft pursuant to Pt10 r2 of the rules. By notice of motion filed on 15 October, Harris Aircraft seek consent orders setting aside the service of the summons on it. Thus it is accepted the summons has been served. If leave to proceed is granted then the notice of motion of Harris Aircraft will be dismissed, but if leave to proceed is not granted then Harris Aircraft should succeed on its motion. That much is accepted. 2 The proceedings by the plaintiff against the first and second defendants are for recovery of unpaid international air freight service charges of $141,821.11 plus interest. Part of that amount is for a claim under a particular airways bill, which claim so far as I can see is not resisted. The substantial issue between the plaintiff and the first and second defendants is whether or not there was a contract to ship the goods by air rather than, as is claimed by the defendant, by sea. There is a subsidiary issue as to whether there was some limit on the charges which could be incurred through use of an account called a "96 Account" under the conditions of which account it was agreed that any person with knowledge of the 96 account number, which was issued by the plaintiff to the first defendant, was deemed authorised to contract on behalf of the account number holder. For the purpose of this decision it is the relationship between Harris Aircraft and the first defendant which is of importance. 3 It is not disputed that Harris Aircraft was an agent of the first defendant and had been given, by that defendant, its 96 account number. Nor is it disputed that by using this number Harris Aircraft as agent of the first defendant arranged for the plaintiff to carry a large cargo of goods to Australia. It may be that the cargo was so large that it was unlikely to have been expected it would be sent by air, but that is not the question to be decided on the present motion. The claim against the third defendant is for breach of warranty of authority, namely that if it be established the plaintiff was not authorised by Harris Aircraft, as agent for the first defendant, to carry the goods by air, then Harris Aircraft warranted that it was so authorised and is liable to the plaintiff accordingly. Unless the authority is challenged, and if it is, unless it is challenged on some arguable basis, leave to proceed should not be granted. 4 In its application for leave to proceed, the plaintiff relied on the following sub-rules of Pt10 rule 1A of the rules, namely (1)(a), (1)(b), (1)(c)(i), (ii), (iii), and (1)(i). I do not think it necessary to set out the argument on the sub-rules in full. Written submissions have been furnished which I will leave with the papers. Suffice it to say that breach of warranty or authority is a claim in contract. Any such contract was made in the United States between the representative of Harris Aircraft and the representative of the plaintiff's agent. No cause of action arose in New South Wales, any breach took place in the United States. Insofar as the subject matter of the proceeding is concerned, that refers to the proceedings between the plaintiff and the third defendant, and the warranty relied upon was neither made in this State, breached in this State nor was governed by the law of this State. This means that the only basis remaining for the court to assume jurisdiction is Pt10 r1A 1(i)(i). 5 It is not difficult to establish a good arguable case or a serious issue on the basis of that sub-rule. Insofar as it was somewhat faintly argued that sub-rule (i) was limited to cross-claims against third parties on the plain wording that is not correct. I have no doubt that if the authority of the agent is disputed on some genuine basis then the court has a discretion to take jurisdiction under sub-rule (i), and it would in most cases be appropriate to do so. See Hyde v Agars (1998) 45 NSWLR 485 at 505. 6 Paragraph 11 of the plaintiff's contentions claims that the first defendant knew or ought to have known that the account number was confidential, and that by disclosing it to any third person, that person could use the services of the plaintiff to ship goods anywhere in the world at the expense of the first defendant. That is admitted in the amended defence filed on 5 November 1999. Paragraph 12 of the contentions claims that at some time before 14 November 1997, the first defendant disclosed its 96 account number to an officer of the third defendant. Paragraph 7 of the amended defence does not admit this, but is as follows: 7. The first defendant does not admit paragraph C.12 of the Summons, but says that it disclosed the 96 account number to the third defendant so as to enable the third defendant to send the goods, which became the subject of AWB 7596027316, to the first defendant by air . This paragraph seems to be contradictory because while it does not admit the disclosure it goes on to admit the disclosure. What this really amounts to is an admission of disclosure of the 96 account number, but for a limited purpose of a particular consignment of goods, apparently because the defendant admits it was within the monetary limit which it said it authorised. 7 Paragraph 17 of the contentions claims that airfreight services were authorised by the first defendant or by its agent. It is accepted that the agent was Harris Aircraft. Paragraph 11 of the amended defence in 11(b) admits that the first defendant authorised Harris Aircraft to arrange for the transport of the goods the subject of the major order, "but denies that the third defendant arranged for or authorised the transport of the said goods by air;" and in 11(c) further says that it did not disclose its 96 account number to Harris Aircraft or anyone else for the purpose of transport of the goods the subject of AWB 9597946554 which covered the large shipment. That is not a denial of authority. 8 The only other relevant part of the pleading is paragraph 31 of the amended defence, which I will set out in full: 31. Further in relation to the claim of the plaintiff in respect of AWB 7597946554 dated 14 November 1997, the defendants say (without admission): (a) the plaintiff alleges at paragraph 37 of the summons that the third defendant warranted to the plaintiff that it had authority to use the first defendant's DHL 96 account number (which is denied by the first and second defendants); (b) the first and second defendants deny that: (i) the first defendant authorised the third defendant to use DHL 96 account number to transport by air the goods which became the subject of AWB 7597946554; (ii) the third defendant warranted to the plaintiff that it had authority to use the first defendant's DHL 96 account number to transport by air the goods which became the subject of AWB 7597946554; (iii) the third defendant requested the transport by air of the goods which became the subject of AWB 7597946554 ; (c) in the premises the first and second defendants have no liability to the plaintiff in relation to AWB 7597946554. In my view this paragraph does not deny the authority of Harris Aircraft, and in any event is perfectly clear that by admitting paragraph 11 of the contentions, the first defendant would not be in a position to deny the ostensible authority of Harris Aircraft to make whatever contract was made as a result of the disclosure of the 96 account number. It follows from this that there is either no denial of authority, or if there is, it is not an arguable point. The question at issue in the proceedings is whether or not there was a contract for the shipping of the goods by air. Whatever contract was made, was made insofar as Harris Aircraft was involved, as agent for a disclosed principal. If this is too strong a statement there is no good arguable case to the contrary. In those circumstances, as a matter of discretion, I should not give leave to proceed. It follows that the motion of the plaintiff should be dismissed and an order made as sought by Harris Aircraft on its motion. An order should be made for the costs of Harris Aircraft to be paid by the plaintiff, but as to some extent those costs have been incurred by the way the defence was originally pleaded, the plaintiff should be at liberty to make an application that the first defendant pay to it the costs ordered against it in favour of Harris Aircraft, but that should abide the final decision of this action. 9 The only reason this action was transferred to this Court from the District Court was to enable joinder of the third defendant. In light of my decision the matter should go back to the District Court and I will make an appropriate order. Last Modified: 11/16/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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