New South Wales Supreme Court CITATION : Australian Securities & Investments Commission v Sweeney [2000] NSWSC 1249 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 3339/99 HEARING DATE(S) : 13/12/2000 JUDGMENT DATE : 13 December 2000 PARTIES : Australian Securities & Investments Commission (P) Charles Augustine Sweeney (D) JUDGMENT OF : Young J COUNSEL : M Pembroke SC, J W Stevenson and N Beaumont (P) I Barker QC, M Oakes SC and M Gorrick (D) SOLICITORS : Jan Redfern (P) Noel F Bracks & Co (D) CATCHWORDS : PRIVATE INTERNATIONAL LAW [26]- Service out of jurisdiction- Whether substituted service permissible inside jurisdiction PROCEDURE [750]- Declarations- What connection with jursidiction required. LEGISLATION CITED : Supreme Court Rules Part 9, r 10; Part 10 r (1)(a), r 4 Afro Continental Nigeria Ltd v Meridian Shipping Co SA, "The Vrontados" (1982) 2 Lloyds LR 241 Agar v Hyde (2000) 74 ALJR 1219 Altertext Inc v Advanced Data Communications Ltd [1985] 1 WLR 457 ANZ Grindlays Bank Pty Ltd v Fattar (1991) 4 WAR 296 Brisbane Oyster Fishery Co v Emerson (1877) Knox 80 Canada Trust Co v Stolzenberg ( No 2) [2000] 4 All ER 481 Denkman v Denkman 14 NYS (2d) 450 (1939) Fenbury Ltd (In liq) & ors v The Hong Kong and Shanghai Banking Corporation Ltd & Anor (Supreme Court of SA) - 22 March 1996 Ford v Shephard (1885) 40 WR 634 CASES CITED : Hospital for Sick Children v Walt Disney Productions Inc [1968] Ch 52 Laurie v Carroll (1958) 58 CLR 310 Meyerson v Martin [1979] 3 All ER 667 Mitchell v Carter [1997] 1 BCLC 673 Mondial Trading Pty Ltd v Interocean Marine Transport Inc (1985) 60 ALJR 270 National Commercial Bank v Wimborne (1978) 5 BPR 11958 Permanent Building & Investment Association v Hudson (1886) 7 QLJ 23 Porter v Freudenberg [1915] 1 KB 857 Ricegrowers Co-operative Ltd v ABC Containerline NV (1996) 138 ALR 480 Richard West and Partners v Dick [1969] 2 Ch 424 Rosenbaum v Rosenbaum [1926] VLR 280 DECISION : See para 41 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST YOUNG J WEDNESDAY 13 DECEMBER 2000 3339/99 - AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION v SWEENEY JUDGMENT 1 HIS HONOUR: Last Monday there was in the Corporations List a motion to set aside a subpoena issued at the behest of the defendant against the plaintiff, in aid of a motion which the defendant had filed pursuant to the Supreme Court Rules to set aside the statement of claim on the grounds that he was not amenable to the jurisdiction of the Court. 2 The material sought in the subpoena included a lot of material which the defendant says, had it been available to him, may have convinced the learned Deputy Registrar who made orders for substituted service or for confirming service not to make such orders. 3 The argument proceeded before me on Monday 11 December 2000. Mr Pembroke SC and Mr J W Stevenson appeared for the plaintiff and Mr Barker QC with Mr Oakes SC and Mr Gorrick appeared for the defendant. After the argument had gone some way it appeared to me that it was necessary to determine the question as to whether Pt 9 r 10 of the Supreme Court Rules, that is the order for substituted service, permits substituted service where the defendant is not personally present in Australia at the time when the proceedings are commenced or thereafter. Accordingly, with the consent of the parties, I set that question down as a preliminary point and that was argued and determined today. 4 Counsel appeared today as before, save that Mr Beaumont joined the team for the plaintiff and Mr Oakes SC was not able to be present for the defendant. 5 The problem that is thrown up in the instant case comes about, to a large extent, from the historical way in which our law grew up. 6 In Magna Carta in England, the King promised that he would deny no man his Court, meaning thereby that the feudal barons were to have jurisdiction to deal with matters in their Court as theory said they should determine them. That is, all feudal tenants of the feudal barons owed suit of court and were amenable to the Baron's Court. The King's Court only had jurisdiction where there was a breach of the King's peace, or where the circumstances were such as to show that there was a wrong committed towards the King, such as something that happened on the King's Highway. 7 By a series of legal fictions and with the onset of inflation during the middle ages, the King's Courts of Common Law more and more took over the jurisdiction of the feudal courts, despite the promise in Magna Carta. 8 However, even up until the 19th century the basic problem for a plaintiff in the King's Bench, Common Pleas or Exchequer Courts of England was to get the defendant to acknowledge the jurisdiction of the Court. All sorts of fictions were used to bring this about, particularly in the King's Bench, such as the Writs of Latitat and the Bill of Middlesex which pretended that the defendant was in the King's Bench prison and had escaped and now lurks and runs around (Latitat) in the county where he always lived. The defendant would then be arrested, brought before the Court and bailed by a man of straw, but the key point was that in this process he would appear and thus acknowledge the Court's jurisdiction. 9 Because appearance was so important to jurisdiction at Common Law, the courts paid particular attention to whether the defendant was subject to their jurisdiction. When the courts were amalgamated under the Judicature Act, the question of jurisdiction focused on territorial issues rather than internal issues. The courts in the colonies had particular problems with jurisdiction in this sense, see Brisbane Oyster Fishery Co v Emerson (1877) Knox 80. In Permanent Building & Investment Association v Hudson (1886) 7 QLJ 23, Griffiths CJ said: "Writs in New South Wales run as far as the border of New South Wales and no further. Beyond that they are mere pieces of paper - mere notices." 10 Thus at Common Law the rule this century has been as expressed by the High Court in Laurie v Carroll (1958) 98 CLR 310 at 322 that: "The writ does not run beyond the limits of the State." 11 In actions in personam, unless the defendant can be personally served in the State, or unless the defendant is in the State and can be served by substituted service, the Court has no jurisdiction. 12 However, Common Law jurisdiction was not the only jurisdiction that the Supreme Court possessed. Equity had a jurisdiction which was not so controlled by Magna Carta. One reason is it did not exist when Magna Carta was originally promulgated. However the basic premiss of equity was that it acted in personam, thus it required that there be a person within the jurisdiction over whose person the Court could exercise jurisdiction: see Spence on the Equitable Jurisdiction of the Court of Chancery, Volume 1 at pages 426 and following. 13 However, the apparent limitation of courts only acting in personam was in fact used by Chancery lawyers to expand their jurisdiction so that they could deal with people present within the jurisdiction no matter where the property or the subject matter was situated. Indeed, in more recent days the Court has exercised jurisdiction where the defendant is not within the jurisdiction but where the defendant has property within the jurisdiction which can be subject to the Court's order, and that has even been extended so that the defendant is presumed to have property within the jurisdiction unless evidence shows otherwise: see Hospital for Sick Children v Walt Disney Productions Inc [1968] Ch 52. 14 The Equity Court these days also has jurisdiction in cases where a local company in liquidation is involved. The Court has jurisdiction over claims both by and against a liquidator even where the subject of the dispute and the opposing party is outside the jurisdiction. This has become apparent in the BCCI cases: see Mitchell v Carter [1997] 1 BCLC 673. 15 The Court also has no problems about exercising jurisdiction over specific performance of contracts involving foreign land, so long as parties are "domiciled" within the jurisdiction: see Richard West and Partners v Dick [1969] 2 Ch 424, 430 and 431 (Megarry J) which decision the Court of Appeal affirmed at page 436 of the same volume. It is interesting that both in the first instance and in the Court of Appeal the word "domiciled" was used rather than "resident". Probably this is because of international conventions binding England: see Canada Trust Co v Stolzenberg (No 2) [2000] 4 All ER 481. 16 The acme of this line of territory was probably ANZ Grindlays Bank Pty Ltd v Fattar (1991) 4 WAR 296. In that case the plaintiff had a branch office in Dubai in the United Arab Emirates. It was there that the first defendant, a Jordanian citizen, was employed as the plaintiff's manager and he and his wife fled to Jordan with some $US32,000,000 of the plaintiff's money. It appeared that $57,000 of the money found its way into the Westpac Bank in Perth. The plaintiff then commenced proceedings in the Supreme Court of Western Australia at the suit of a United Kingdom corporation against a Jordanian resident in respect of a cause of action that had nothing to do with Western Australia, for the sole purpose of freezing the funds part of which were in a Western Australian Bank. Although the Court was sympathetic to the problem, it considered that the foreign defendant was prima facie not subject to the jurisdiction of the Western Australian Court and that until the defendant became subject to the jurisdiction it would not be proper to issue any injunction. The English courts have probably gone a little further than this; see for instance Altertext Inc v Advanced Data Communications Limited [1985] 1 WLR 457, where Anton Pillar orders were made against foreign defendants in relation to property held outside the jurisdiction. 17 I have gone into some detail about the equity jurisdiction because the assumption has been made in argument that the rule that applies at common law is a rule which governs all litigation in the Court. I do not consider that that is necessarily so. I will not go much further along this line because I am really just dealing with a separate question and the general problems that beset this case have been set down for hearing for February 2001. However, apart from general equity matters, the Court's jurisdiction exists with respect to probate, protective proceedings and family law questions, none of which necessarily pick up the common law rules: see for instance, Nygh, Conflict of Laws in Australia, 5th edition (Butterworths, Sydney, 1991) page 35. 18 The present proceedings are not the run of the mill proceedings in this Court. The statement of claim and the amended statement of claim seek, apart from costs, a declaration that the defendant has contravened s 1002G(2) and ss 998(1) and 995(2) of the Corporations Law, injunctions restraining the defendant from continuing to contravene such sections and an order preventing the defendant managing a corporation for such period as the court thinks appropriate. 19 None of the matters involve a common law cause of action in contract or tort, or indeed any equitable cause of action. The proceedings involve a statutory cause of action which it might be thought the Court has jurisdiction to deal with under ss 1323-1324 of the Corporations Law. What rules apply to the jurisdiction over absent defendants is not at all clear. In the old days, in matters of felony the Crown would just have the defendant declared an outlaw if he did not appear because he fled to a foreign country, his property could be sequestrated and he could be shot on sight. Although these days things are not done with such a buccaneering spirit, it may be that the Court may have jurisdiction to continue the proceedings even if the defendant was never served. I make no concluded finding on this. I note however that the plaintiff appears to have chosen deliberately not to proceed criminally, but merely to issue civil proceedings for a declaration almost six years after the event. 20 There is also a very interesting point as to whether there is jurisdiction to make a declaration where the defendant is not resident within the jurisdiction. The point, as far as I know, has never been decided but it would seem that the Court's power to make a declaration in the sense of having jurisdiction to do so would exist so long as there was some sufficient nexus with New South Wales. The width of the jurisdiction is shown by Denkman v Denkman 14 NYS (2d) 450 (1939). In that case, the plaintiff was a resident of Illinois and the defendant was a resident of New Jersey. The plaintiff (husband) sought a declaration in New York that he was still married to the defendant because the divorces obtained in Nevada were invalid. The New York Court held it had jurisdiction but declined to exercise that jurisdiction in its discretion. 21 It may well be - and I use that phrase because the matter was not argued - the Court may have jurisdiction in a declaratory suit no matter where the defendant is resident at the time when the proceedings were commenced, but in its discretion it may not consider it appropriate to make any declaration. It may also be that where an order is sought to prevent a person from managing a corporation that the Court can make such order without the defendant being served, at least on the basis that the defendant, when he returns to Australia, can apply to set the order aside. Again, because that was not argued before me, I will not make any final finding. 22 I mention all this because I am not at all sure, having done considerable work after hearing the submissions of counsel, as to whether the answer to the question I posed is really of great utility. 23 However, I will deal with the particular point that was argued before me in deference to the reasoning of counsel and because it is of some utility to consider the points raised. However the answer to the question must be "sometimes" because there are situations not within the traditional common law principles where certainly there may be substituted service and there are other situations within the common law principles where such cannot take place. 24 The facts which can be assumed for the present case are that the proceedings were commenced on 27 July 1999 by the filing of a statement of claim. At least the day before the proceedings were instituted and at all material times since, the defendant has not resided in Australia, nor has he been physically present within Australia. Where he was domiciled at the time of instituting the proceedings had not been explored. 25 The simple proposition of the team of counsel for the defendant was based on Laurie v Carroll (supra). They say that because the defendant has not been physically present in Australia at the time of the commencement of the action, or indeed since, there is simply no jurisdiction. They point to the statement in Porter v Freudenberg [1915] 1 KB 857 at 887: "The general rule is that an order for substituted service of writ of summons within the jurisdiction cannot be made in any case in which, at the time of the issue of the writ, there could not be at law a good personal service of the writ because the defendant is not within the jurisdiction." 26 That proposition was accepted as a general proposition by the team of counsel for the plaintiff. However, they put that there is an exception, and that is if the writ is authorised for service outside the jurisdiction, then it is possible to get an order for substituted service within the jurisdiction. That proposition is supported by a series of decisions such as Ford v Shephard (1885) 40 WR 634; Porter v Freudenberg at 888; Rosenbaum v Rosenbaum [1926] VLR 280 and Mondial Trading Pty Limited v Interocean Marine Transport Inc (1985) 60 ALJR 270 at 278. Mr Barker QC boldly submitted that Rosenbaum was wrong. However, the fact that it was accepted by Dawson J in the lastmentioned case without qualification and it is in accordance with previous decisions in England, seems to indicate to me that I should not spend too much time on that submission, apart from noting it. 27 A problem is that the present originating process has nothing in it to indicate that it is in the nature of a writ to be served outside the jurisdiction. In particular it does not include Form 13A which is what is to be attached to originating process that is to be served outside the jurisdiction giving information to the defendant as to what he or she should do about the writ. 28 In earlier days the distinction was much clearer. Most court rules provided that where there was service outside the jurisdiction the writ was not served, but a notice in lieu of the writ was served and it was only after the court had given authorisation that the process could be served. For instance, the current rule 10.2 of the Western Australian Supreme Court Rules indicates that it is notice of the writ that is to be sent out. The reason why a notice of the writ instead of the writ is to be sent out was because, as Lord Denning made it clear in Afro Continental Nigeria Ltd v Meridian Shipping Co SA, "The Vrontados" (1982) 2 Lloyds LR 241 at 245, service outside the jurisdiction is really an appeal to a foreign country with whom Australia has appropriate relations to permit service in that country. Accordingly, the Australian Government is not rude enough to send to a person living in a foreign country under the protection of a foreign sovereign a command at least without the goodwill of that sovereign. Although these words reflect the position twenty years ago rather than today, Lord Denning said: "As I have always understood it, service of a writ out of the jurisdiction is an exercise of sovereignty within the country in which service is effected. It can only be done with the consent of that country. That is why our rules provide for service..." Indeed the same concept of not trespassing on another sovereign's jurisdiction is expounded at length by Martin CJ in the Brisbane Oyster case (supra) at pp 85-7. 29 Accordingly, there was always up until recently a special procedure for service outside the jurisdiction which usually involves some less than royal comment to the defendant and the permission of the country concerned for service on someone within its territory. 30 The Supreme Court Rules were recast between 1988 and 1993 to remove much of the distinction. The reform was straightforward with respect to service within Australia, but perhaps the procedure for service outside Australia is now a little fuzzy. Division 2 of Pt 10 still permits the service of a document outside Australia in a convention country pursuant to a convention, or in such other country as the Attorney General may direct. The document is sent to the Prothonotary and the Prothonotary then transmits it to the appropriate authority in the other country. The plaintiff itself does not, unless it is in accordance with the rules of the place where the service is to be effected, effect the service. 31 Further, Pt 10 r 4 of the Supreme Court Rules provides: "Subject to this part, and subject to any convention, the rules apply to service outside the State under this part as they apply for service inside the State". 32 The rule in that exact form has been included in the Supreme Court Rules from the beginning. It appears in the fourth schedule to Act No 52 of 1970, which was the initial rule which was part of an Act of Parliament. However, at that stage the rule provided that service outside New South Wales was not valid unless the Court had either given prior leave or subsequent leave. 33 The team of counsel for the plaintiff argued that the rule means that Pt 9 r 10, which is the ordinary rule for substituted service, applies in exactly the same way where there is service outside the State. Accordingly, so long as the plaintiff says it could serve outside Australia because the matter falls within one of the paragraphs of Pt 10 r (1)(a), it can obtain an order for substituted service if it can convince a Registrar that it is impractical to serve outside Australia but that there is a method of service within Australia which may bring the process to the notice of the defendant. 34 The defendant's team of counsel argue that Pt 10 r 4 does not have such a wide effect. They point to the fact that it has been a rule that has been included within the Supreme Court Rules for a long period of time, that the system was quite different, and it would be quite surprising to know that a rule which formerly had limited operation virtually repealed the general rule set out in Freudenberg. In this case the decision of Debelle J in Fenbury Ltd (In liquidation) & Ors v The Hong Kong and Shanghai Banking Corporation Ltd and Anor (Supreme Court of SA) 22 March 1996, unreported, BC 9600771 is in sympathy. 35 Further, the contrary argument is when one changes the whole of the framework of a part of the rules and leaves the rule intact, one must be taken to have meant the intact rule to have such extended operation as was necessary to make the new scheme work. 36 The defendant's team of counsel points to the way in which the problem was tackled in Victoria. They say that it is quite plain in Victorian Rule I 6.10(3) that the Court may make an order for substituted service notwithstanding that the person to be served is out of Victoria, or was out of Victoria when the proceedings were commenced. That makes it quite plain. However the New South Wales rule, which was never originally intended to address this question, as with any general rule, should not be held to have such a radical result as repealing the fundamental Freudenberg rule which was upheld in Laurie v Carroll. 37 On this particular point it seems to me that although the strength of the respective arguments are close to a line ball, what the plaintiff's team of counsel is saying is correct. The rule as part of the new scheme is to be given a fairly wide operation and the intention of the part in its present form is to allow wide provision for substituted service, even if a writ is to be served outside Australia. I am using the word "writ" in this judgment as shorthand for "initiating process". 38 However, a rule cannot completely take up Pt 9 r 10 in the same way as local service. As Lord Denning pointed out in "The Vrontados", before one can get substituted service one has to apply the law of the place where the writ is to be served and ask, in the light of that law of the place where it is to be served, is it impracticable for any reason to serve the document? The part of the rule talking about serving the document in the manner required by or under any Act or by the rules cannot apply because it is then incompatible with service outside the country. 39 Accordingly, Pt 10 r 4 does have operation in relation to what has been called the "extended jurisdiction" where a writ can issue to be served outside the jurisdiction. However, substituted service can only be ordered if the Court determines that, bearing in mind the requirements for service outside Australia in the relevant place, personal service is impracticable. 40 I have probably been too detailed in the reasons that I have given because it seems to me that I was probably wrong to have asked the question in the form I did. However as the parties by themselves and their counsel have put considerable work into the matter, the discussion should not be lost and what I have said may be useful in another stage of the litigation. I will just note, in case it be helpful later on, that I have also considered the general principles concerning in personam litigation dealt with in New South Wales in National Commercial Bank v Wimborne (1978) 5 BPR 11958 at 11982, the decision of the English Court of Appeal in Meyerson v Martin [1979] 3 All ER 667, decisions of the Federal Court such as Ricegrowers Co-operative Limited v ABC Containerline NV (1996) 138 ALR 480 at 482-3 and the High Court's recent discussion of some of the problems in Agar v Hyde (2000) 74 ALJR 1219. 41 Accordingly, I answer the question "sometimes". Costs to be costs in the cause. 42 The matter is adjourned to 10am on Thursday 14 December 2000. ************** Last Modified: 02/02/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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