Bindaree Beef Pty Limited v Chinatex

Background to these proceedings

1. In June 2016, Bindaree commenced proceedings against Chinatex Australia in the Commercial List of this Court seeking damages for breach of a contract called a "Service Kill Agreement" (2016 proceedings). The contract involved Bindaree, which operated an abattoir at Inverell in New South Wales, processing cattle into consumable beef and beef products for Chinatex Australia. Chinatex Australia owned all of the shares in Unibale Pty Limited, which owned real property and water licenses in the Moree area. In July 2016, Bindaree informed Chinatex of the 2016 proceedings.
2. In April 2017, the 2016 proceedings were fixed for hearing in October 2017. On 21 April 2017, Bindaree served an expert report quantifying its damages in the amount of $23,972,000. On 24 April 2017, Chinatex Fortune Company Limited (Fortune) was incorporated in Hong Kong as a wholly owned subsidiary of Chinatex (HK) Holdings Limited, which itself is a subsidiary of Chinatex. On 30 September 2017, Chinatex Australia and Fortune entered into a contract for sale of shares, under which Fortune acquired all of the shares in Unibale from Chinatex Australia for $38,000,000.
3. In October 2017, the 2016 proceedings were heard by Hammerschlag J. On 14 November 2017, the contract for sale of shares was completed. On 24 November 2017, Hammerschlag J gave judgment in the 2016 proceedings, awarding damages to Bindaree: Bindaree Beef Pty Limited v Chinatex (Australia) Pty Limited [2017] NSWSC 1615. Final orders were entered in the amount of $32,758,986 less $374,249.36, representing the release of a security deposit.
4. On 29 November 2017, Bindaree's solicitor became aware of the sale of Chinatex Australia's shares in Unibale to Fortune. Bindaree's solicitor formed the view that the sale of shares was an attempt by Chinatex Australia to place assets owned by Unibale beyond the reach of Bindaree. On 1 December 2017, Bindaree obtained an ex parte freezing order and on 13 December 2017 commenced proceedings in the Commercial List against Chinatex Australia, Unibale and Fortune seeking relief under s 37A of the Conveyancing Act 1919 (NSW) in respect of the sale of shares (2017 proceedings). On 14 December 2017, the freezing order was extended to 2 February 2018, and extended to the 2017 proceedings as well.
5. On 2 February 2018, Bindaree sought to further extend and expand the freezing order whilst Chinatex Australia sought a stay of judgment in the 2016 proceedings pending an appeal. On 7 February 2018, Ball J expanded the freezing orders to Fortune and dismissed the application for a stay: Bindaree Beef Pty Limited v Chinatex (Australia) Pty Limited (No 2) [2018] NSWSC 57.
6. On 26 March 2018, Chinatex Australia entered into voluntary administration, which had the effect of staying the 2017 proceedings.
7. On 13 June 2018, Chinatex Australia's appeal against judgment in the 2016 proceedings was dismissed.

Deed of Company Arrangement

1. On 2 July 2018, the creditors of Chinatex Australia resolved to execute a Deed of Company Arrangement. The deed was prepared by MinterEllison solicitors. The opening provisions of the Deed of Company Arrangement was entitled "Details" and contained the following information in respect of Chinatex and Chudai: Name Chinatex Corporation Short form name Proponent Notice details C/- MinterEllison Governor Macquarie Tower, 1 Farrer Place, Sydney NSW 2000 Email:michael.hughes@minterellison.com; william.nolan@minterellison.com Attention: Michael Hughes and William Nolan Name Chudai (HK) Development Co Ltd. Short form name Contributor Notice details C/- MinterEllison Governor Macquarie Tower, 1 Farrer Place, Sydney NSW 2000 Email:michael.hughes@minterellison.com; william.nolan@minterellison.com Attention: Michael Hughes and William Nolan
2. A Deed of Company Arrangement can be proposed by any interested party, such as a director, shareholder or creditor, who is referred to as the proponent. A contributor is a party contributing a sum of money to the fund established under the Deed of Company Arrangement, which is used to pay admitted claims.
3. It is worth pausing to reflect on the nature of Deed of Company Arrangement or "DOCA" as it is fondly referred to by practitioners. Part 5.3A of the Corporations Act 2001 (Cth) was enacted by the Corporate Law Reform Act 1992 (Cth) and sought to address "concerns that Australia's current corporate insolvency laws are inflexible": Explanatory Memorandum at [448]. Part 5.3A provides a statutory regime by which an insolvent company and its creditors may, rather than appoint a liquidator, agree how the company's business, property and affairs will be administered in order to maximise the prospect that the company, or as much of its business as possible, will continue and, if this is not possible, provide a better return for creditors and members than an immediate winding up of the company: s 435A; Brash Holdings Ltd (administrator appointed) v Katile Pty Ltd [1996] 1 VR 24 at 29. Part 5.3A also confers power on the Courts to make orders in respect of DOCAs, including on the application of creditors to terminate a DOCA (s 445D), declare the deed or part of it to be void (s 445G) and bring the administration of a company to an end (s 447A).
4. On 12 July 2018, Bindaree's solicitors wrote to the administrators' solicitors advising that they had been instructed to commence proceedings seeking to set aside the Deed of Company Arrangement under ss 445D and 447A of the Corporations Act and s 75-41 of the Insolvency Practice Schedule (Corporations). Bindaree anticipated filing and serving its Originating Process and affidavit within seven days. On 13 July 2018, Bindaree's solicitors forwarded this letter to MinterEllison and sought confirmation that the firm acted for Chinatex with respect to the Deed of Company Arrangement and held instructions to accept service of the Originating Process and supporting affidavit. On 16 July 2018, MinterEllison replied: We do not have instructions to accept service of your client's proposed Originating Process and supporting affidavit material. It is not clear from either correspondence whether your client proposed to join Chinatex to the proposed action to set aside the DOCA. We otherwise reserve our client's rights. The only client to whom MinterEllison could have been referring was Chinatex.
5. On 20 July 2018, the Deed of Company Arrangement was executed by Chinatex and Chudai. Under the Deed of Company Arrangement, Bindaree will receive $5.8 million less $364,500 less any payments made to Bindaree in satisfaction of any costs order in the appeal proceedings. Beyond that, Bindaree's claims will be extinguished.
6. On 24 July 2018, Bindaree's solicitors wrote to MinterEllison asking to be informed whether MinterEllison acted for the Chinatex and Chudai and had instructions to accept service of the Originating Process. … this letter seeks to place the Deed Administrators on notice for the purposes of clause 12.2(f)(i) of the DOCA that Bindaree intends to make an application to the Court to terminate, void or invalidate the Deed pursuant to ss 445D, 445G, 447A of the Corporations Act 2001 or Division 90 Sub-Division B of the Insolvency Practice Schedule (Corporations). The defendants to that action will obviously be the parties to the DOCA and we anticipate that such an action will be filed and served this week or early next week. The last paragraph was clearly in answer to MinterEllison's query as to whether Chinatex was proposed to be a defendant to the proceedings. On 25 July 2018, MinterEllison replied that they did not have instructions to accept service.

These proceedings

1. On 27 July 2018, Bindaree's solicitors emailed an Originating Process and affidavit in support to Mr Nolan and Mr Hughes of MinterEllison and personally served the documents at MinterEllison's offices. The email noted: We acknowledge receipt of your emails regarding service dated Monday 16 July 2018 and Wednesday 25 July 2018 and draw your attention in this regard to the Notice Details on page 5 of Deed of Company Arrangement dated 20 July 2018 and clause 23.1 of that document and the provisions of Reg.1 and Reg10.14 of the UCPR. Our client reserves it rights with respect to service of the attached documents. MinterEllison did not reply.
2. By the Originating Process, Bindaree seeks to void, invalidate or terminate the Deed of Company Arrangement under ss 445D, 445G and/or 447A of the Corporations Act 2001 and ss 75-41 and 90-15 of the Insolvency Practice Schedule (Corporations).
3. On 10 August 2018, Bindaree's solicitor emailed MinterEllison noting that the matter was listed for directions and enquired whether MinterEllison held instructions to accept service on behalf of Chinatex and Chudai. MinterEllison replied that they did not. On 6 September 2018, Bindaree's solicitors emailed MinterEllison the interlocutory process which is now before the Court together with the affidavit in support.
4. Chudai has since been served in accordance with the law of the Hong Kong Special Administrative Region and is thus served: Uniform Civil Procedure Rules (2005), r 11.8AC. Section 827 of the Companies Ordinance (Cap 622) (Hong Kong) allows a document to be served on a company in the Hong Kong Special Administrative Region by leaving it at the Company's registered office. On 13 September 2018, the Originating Process and affidavit in support was served personally at the registered office of Chudai in Hong Kong. Notwithstanding that Chudai has been validly served in accordance with the laws of Hong Kong, Bindaree seeks an order that Chudai had already been served by agreement.

Jurisdiction

1. Substituted service is not a means of overcoming any territorial limits on the jurisdiction of the Court: Laurie v Carroll (1958) 98 CLR 310 at 332. Rule 11.4(1) of the Uniform Civil Procedure Rules 2005 provides that Originating Process may be served outside Australia without leave in circumstances referred in Schedule 6 of the rules. Bindaree submits that the following cases listed in Schedule 6 apply here: (h) when any person outside of Australia is: (i) a necessary or proper party to a proceeding properly brought against another person served or to be served (whether within Australia or outside Australia) under any other provision of these rule, or … (j) when the claim arises under an Australia enactment and: (i) any act or omission to which the claim relates was done or occurred in Australia, or … (iii) the enactment applies expressly or by implication to an act or omission that was done or occurred outside Australia in the circumstances alleged, or (iv) the enactment expressly or by implication confers jurisdiction on the court over persons outside Australia (in which case any requirements of the enactment relating to service must be complied with). … (p) when the claim concerns the construction, effect or enforcement of an Australian enactment.
2. I agree that, having regard to these cases, Bindaree is entitled to serve the Originating Process on Chinatex and Chudai without leave.

Service in the People's Republic of China

1. The People's Republic of China is a signatory to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965 (the Hague Service Convention). The Chinese Central Authority for the purposes of the Hague Service Convention is the International Legal Corporation Centre of the Ministry of Justice of China. The centre has published material to assist those wishing to avail themselves of the Hague Service Convention to serve legal process in China. The publications include a guide to filling out the necessary forms and, helpfully, a document entitled "The Most Frequently Asked Questions and Answers" which explains: How long does it take to finish a service in China? Usually, it takes four to six months to finish one service. But this period could be shorter or longer depending on the location of the recipients. Is there any way to speed up the process of service in China? No. The process of service is to be conducted by the Local Court according to the Chinese Civil Procedure Law.
2. There is no equivalent legislation in the People's Republic of China to the legislation in Hong Kong that allows for the service of an Australian Originating Process other than under the Hague Service Convention. Nor has the Commonwealth Attorney General's department made other arrangements which would enable service under Pt 11 Div 2 of the Uniform Civil Procedure Rules.
3. It is, of course, open to Bindaree to serve Chinatex under the Hague Service Convention. It will take some four to six months to effect service in this manner. This is far from ideal in a commercial dispute.

Service by agreement

1. Part 10 r 10.6 of the Uniform Civil Procedure Rules 2005 provides: (1) In any proceedings, any document (including originating process) may be served by one party on another (whether in New South Wales or elsewhere) in accordance with any agreement, acknowledgment or undertaking by which the party to be served is bound. … (2) Service in accordance with subrule (1) is taken for all purposes (including for the purposes of any rule requiring personal service) to constitute sufficient service.
2. The rule merely provides that service in accordance with an agreement, acknowledgment or undertaking is taken to constitute sufficient service, thereby formally recognising the position at common law: Zepinic v Chateau Constructions (Aust) Ltd [2014] NSWCA 27 at [8].
3. Bindaree relies on Clause 23.1 of the Deed of Company Arrangement, which provides: 23.1 Services of Notices A notice, demand, consent, approval or communication under this Deed (Notice) must be: (a) in writing, in English and signed by a person duly authorised by the sender; and (b) hand delivered or sent by prepaid post, facsimile or email to the recipient's address for Notices specified in the Details, as varied by any Notice given by the recipient to the sender.
4. Caution must be taken when considering such clauses to ensure that it can properly be said, as a matter of construction, that service of judicial process was to fall within the scope of the agreement. As Ritchie's Uniform Civil Procedure NSW helpfully explains at [10.6.5]: Parties may agree on a special mode of service in place of that provided by the rules: British Controlled Oilfields Ltd v Stagg (1921) 127 LT 209; Reversionary Interest Society Ltd v Locking [1928] WN 227; Mondial Trading Pty Ltd v Interocean Marine Transport Inc (1985) 65 ALR 155; BC8501059 … But the court must be satisfied that the agreement relied on did relate to the service of documents concerning judicial proceedings. Consequently, neither an agreed address for service in a standard form of contract of sale of land (Gaggain v LemarI (2000) 10 BPR 18,381; (2002) NSW ConvR 56-002; [2000] NSWSC 856; BC20005015), nor the commercial use of a business address with telephone and fax numbers (Molins plc v GD SpA [2000] I WLR 1741 (service by fax), can be relied on as an agreement for the purpose of the present rule. However, a summons to remove a caveat may be served at the address for service of notices shown on the caveat: Re Drinkwater (1929) 46 WN (NSW) 202; and see Real Property Act 1900 s 75N.
5. More recently, in Kapos v Jury [2011] NSWSC 1090, a contract for sale of land provided that a document "under or relating to this contract" was served on a party if it was served on the party's solicitor, even if the party had died. A Summons filed by the vendor seeking a declaration that the contract was validly terminated and that the deposit had been forfeited was held by Brereton J to be a document relating to the contract: at [6]. Service of the summons was held to be service by agreement notwithstanding that it was doubtful that the solicitor still acted for the purchaser.
6. In Mobis Parts Australia Pty Ltd v XL Insurance Co SE [2016] NSWSC 1170, the plaintiff sought to prove service on a Liechtenstein insurer, UNIQA Versicherungs AG (UNIQA), by agreement said to be found in two insurance policies. His Honour Ball J found that there was no service by agreement. The clause relied upon in one of the policies provided that the lead insurer was authorised to receive "notifications and declarations of intent" by the policy-holder on behalf of all participating insurers. His Honour held that "notifications and declarations of intent" referred to notifications by the insured of claims and the value of the items insured. At [29]: There is a clear distinction between a notification under the policy and service of court proceedings in relation to a dispute respecting the policy; and a reference to the former cannot easily be interpreted as including the latter.
7. The clause relied upon in the second policy provided that a Co-Insured had a discretion to settle or compromise any claim under the policy and could commence, continue, defend or withdraw from actions, suits or proceedings and generally do all things relating to such claims that is deemed necessary or expedition. His Honour considered at [32]: Cl 2.4 cannot be interpreted as conferring a right on [a co-insurer] to accept service of proceedings on behalf of UNIQA. The clause does not confer that authority in express terms. It does confer on [the co-insurer] the right to conduct the defence of proceedings. But that right assumes that both insurers are properly a party to the proceedings, which depends on whether the Court has jurisdiction and is willing to exercise that jurisdiction over both parties. It also assumes that the interest of the two insurers is the same. However, as I have explained, the interests of the two insurers are not the same insofar as the exercise of jurisdiction is concerned. That being so, the Court should not give to cl.2.4 a construction that it does not obviously bear and which would have the result of permitting [a co-insurer] to determine UNIQA's attitude to the question of jurisdiction despite the fact that its interests are different from those of UNIQA in relation to that question.
8. Similar to the case at hand, In the matter of Cummins Equipment Hire Pty Ltd [2015] NSWSC 2085, a creditor served a statutory demand which provided an address for the creditor for service of any application or affidavit. An Originating Process to set aside the statutory demand was sent to that address. His Honour Brereton J considered at [14]: I would readily find that specifying an address for service in a s.459E statutory demand amounts to an agreement, acknowledgment or undertaking by which the creditor is bound.
9. The Deed of Company Arrangement records that Chinatex proposed the deed and Chudai contributed USD$1,041,361 to the administrators. By proposing the Deed of Company Arrangement and providing funds to the administrators, Chinatex and its subsidiary Chudai together sought to avail themselves of the statutory regime under Part 5.3A in respect of another subsidiary of Chinatex, Chinatex Australia. Part of that regime included the ability of the Courts to hear and determine applications by creditors to terminate a DOCA (s 445D); declare the deed or part of it to be void (s 445G); and, bring the administration of a company to an end (s 447A). So much was acknowledged in the Deed of Company Arrangement. In cl 12.2(f)(i), the Deed administrators agreed not to distribute the Deed Fund unless and until, inter alia: They are satisfied, acting reasonably, that no application to a Court to terminate, void or invalidate the Deed pursuant to ss 445D, 445G, 447A of the Corporations Act … will be made.
10. Likewise, the Deed administrators' remuneration and costs were specified to include any remuneration and costs arising in connection within the application to a Court to terminate, void, or validate the Deed pursuant to ss 445D, 445G or 447A of the Corporations Act: cl 20.3(A).
11. As such, I consider that clause 23.1 does apprehend the service of judicial process in respect of the Deed of Company Arrangement. In circumstances where parties are utilising a statutory regime under the Corporations Act 2001, it is clear enough that they may expect to receive notices from other parties exercising their rights under the same statutory regime.
12. Service of Originating Process by which a creditor seeks to void, invalidate or terminate the Deed of Company Arrangement seems to me to fall within the definition of "Notice" under clause 23.1, being "a notice, demand … or communication under this Deed".
13. As to whether it was as "demand", the meaning of that word "in the understanding of the common law is of so large an extent as no other one word in the law is": Hancock v Field (1607) Cro. Jac. 170. In its ordinary meaning, "demand" includes court documents originating legal proceedings. In the Oxford English Dictionary: 3. Law. The action or fact of demanding or claiming in legal form; a legal claim; esp. a claim made by legal process to real property.
14. In the Macquarie Dictionary: [verb] 4. Law to lay formal legal claim to; [noun] 10. a requisition; a legal claim
15. In the Encyclopaedic Australian Legal Dictionary: 1. The assertion of a legal right, requiring a person to do something, refrain from doing something, or give something
16. In Black's Law Dictionary: n. (13c) 1. The assertion of a legal or procedural right.
17. As such, I think an Originating Process is a "demand" as that term is used in the Deed of Company Arrangement.
18. Was the demand "under this Deed"? This phrase was considered by the Court of Appeal in Rinehart v Welker (2012) 95 NSWLR 221; [2012] NSWCA 95 in the context of a clause in a settlement deed requiring the parties to mediate and arbitrate disputes "under this deed". While all members of the Court were broadly in agreement, each had a slightly different emphasis as to the meaning of the phrase. The Chief Justice considered it referred to disputes "governed, controlled or bound by; in accordance with" the deed: at [125]. Her Honour McColl JA concluded that the parties intended to refer disputes that arose regarding the rights and obligations created by the deed itself and which depended upon the deed for their enforcement: at [207]. His Honour Young JA considered it referred to a dispute which "owes its existence" to the deed or depends on the deed for its enforcement or has its source in the deed: at [223].
19. It seems to me that an application by a creditor to the Court to set aside a DOCA is a demand "under this Deed" as the demand arises from rights and obligations created by the Deed of Company Arrangement itself and "owes its existence" to the deed or has its source in the deed. It is the very existence of the Deed of Company Arrangement which has prompted Bindaree's application to the Court to terminate it. I think it is a sensible construction of Clause 23.1 that the proponent and contributor apprehended that such applications could be served on their solicitor.
20. As such, the Originating Process has been served in accordance with an "agreement, acknowledgment or undertaking by which the party to be served is bound" within the meaning of r 10.6 of the Uniform Civil Procedure Rules 2005. I note the rule only requires that the party to be served is bound. I do not think this requires Bindaree to have signed the Deed of Company Arrangement in order for this rule to apply. As Bindaree submitted, and I agree, it did not matter that it was not a party to the Deed of Company Arrangement as a DOCA is binding on all creditors of the company: s 444D(1). Nor do I think that the rule requires a bilateral agreement between the party serving process and the recipient of the process. As much is clear from the reference in rule 10.6 to "acknowledgement and undertaking" which are by their nature unilateral obligations.
21. As I have accepted that Bindaree is entitled to a declaration that Chinatex and Chudai have been validly served by agreement, it is not necessary for me to consider Bindaree's alternative application for an order under r 10.14(3) of the Uniform Civil Procedure Rules.

Costs

1. Bindaree seeks an order for the costs of this application, which was heard on an ex parte basis. Bindaree's counsel, Mr Marskell, demonstrated the candour which the Court is entitled to expect on such applications, raising for consideration potential arguments and authorities which might indicate that the orders which he sought should not be made. However, I have concluded that Bindaree is entitled to the orders which is seeks and, ordinarily, it is also entitled to its costs of the application.
2. Bindaree's solicitor repeatedly sought confirmation from MinterEllison that the firm had instructions to accept service. Those instructions were not forthcoming in circumstances where Chinatex and Chudai were in the process of executing, and did execute, the Deed of Company Arrangement containing Clause 23.1. As a result, Bindaree was put to the cost of seeking orders that service had been validly effected in accordance with the requirements of the deed. I do not mean by this to make any criticism of MinterEllison.
3. As Chinatex and Chudai did not appear, I will make the ordinary costs order but grant them liberty to make submissions that a different costs order is appropriate.

Orders

1. The Court ORDERS: 1. Service of these proceedings on the third and fourth defendants was effected by email sent by the solicitor for the plaintiff to MinterEllison on 27 July 2018 at 4:35 pm and constitutes sufficient service of the Originating Process filed 27 July 2018 within the meaning of r 10.6(2) of the Uniform Civil Procedure Rules 2005 (NSW). 2. The third defendant and fourth defendant to pay the plaintiff's costs of, and incidental to, this Interlocutory Process. 3. Direct the plaintiff to serve a copy of this judgment and orders on the third defendant and the fourth defendant. 4. Grant liberty to the third defendant and the fourth defendant to file and serve any submissions to vary Order 2 within 21 days of being served with this judgment and orders. 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 October 2018