Building Insurers' Guarantee Corporation v Merv Eddie & Ors

PARTIES : Building Insurers' Guarantee Corporation (Plaintiff) Merv Eddie (1st Defendant)

COUNSEL : Mr Lynch (Plaintiff) Mr Cleary (First Defendant)

1 HIS HONOUR: The Court has before it two Notices of Motion. The background to the motions is as follows. The plaintiff, which is a statutory corporation, claims entitlement to recover from the defendant sums of money paid by the plaintiff to building owners in respect of a building in Bankstown, in the construction of which building the defendants were involved. The claims include a claim based upon an alleged breach of contract by the defendants and upon a statutory cause of action, and exceed $300,000. The plaintiff, which is in a position akin to an insurer, also claims to be subrogated to right of indemnity given by the defendants to HIH Insurance Ltd. before it went into liquidation.

2 Proceedings were commenced in the District Court of New South Wales on 12 February 2007. In relation to the first defendant, Mr Merv Eddie, the plaintiff sought and obtained from the District Court an order for substituted service. The order was made by Garling DCJ on 13 August 2007, the address for substituted service being that of the professional premises of Mr Eddie's daughter. Mr Eddie, on becoming aware of the substituted service of the Statement of Claim, put on a motion in the District Court to have service set aside pursuant to Part 12 Rule 11(1) of the Uniform Civil Procedure Rules ("UCPR"). The plaintiff then applied to have the proceedings transferred to the Supreme Court, which application was granted by this Court on 6 December 2007. The plaintiff seeks orders in this Court by way of a Notice of Motion that service be confirmed pursuant to Part 10 Rule 14(3) or alternatively that an order for substituted service be made in accordance with Part 10 Rule 14(1) and (2) of the UCPR.

3 Mr Lynch of counsel appears for the plaintiff on its motion and in opposition to the motion of Mr Eddie. Mr Cleary of counsel appears for Mr Eddie on Mr Eddie's motion. That appearance is, in effect, a conditional appearance: see Part 12 Rule 11(3) and (4). Mr Cleary does not appear on the plaintiff's motion, but Mr Lynch agreed that Mr Clearly could make submissions as to why the relief sought by the plaintiff could not be granted on the plaintiff's motion.

4 In support of the plaintiff's motion, and to resist the defendant's motion, Mr Lynch relied on the affidavits of Mr Geary of 22 October 2007 and 8 November 2007 and Exhibit A (Exhibit LG1 to Mr Geary's first affidavit). He also tendered Exhibit B, a record from the Department of Immigration and Citizenship regarding Mr Eddie's departure from Australia and correspondence passing between his client and Mr Eddie which was not formally marked as an exhibit, but which I have now had marked as Exhibit C.

5 It is clear from the material tendered, that Mr Eddie left Australia in April 2006, after he had become aware of the plaintiff's claims against him but before proceedings were commenced. When he left he declared to Immigration officials that he was intending to travel to Syria to visit relatives and would be away from Australia for approximately 7 months (see Exhibit B). He gave his residence as New South Wales (see Exhibit B). He was, and presumably still is, a citizen of Australia (see Exhibit A, page 138).

6 It is accepted that, although the plaintiff did not know it at the time application was made for substituted service, Mr Eddie was not then within the jurisdiction. It is also accepted that he was not within the jurisdiction when the plaintiff commenced its proceedings in February 2007.

7 Mr Lynch accepted that as matters have transpired, Mr Eddie being overseas at all relevant times precludes the District Court from having any jurisdiction to make an order for substituted service - Part 11 of the UCPR applying only to the Supreme Court and not to the District Court. He accepted that Mr Eddie is entitled to have the order for service made by the District Court set aside.

8 Proceedings transferred to the Supreme Court are treated as having commenced from the date at which the proceedings commenced in the District Court: see s.143 of the Civil Procedure Act 2005.

9 Part 10 Division 2 of the UCPR deals with the manner of service. Part 10 Rule 20 requires that originating process in the Supreme and District Courts must be personally served. Part 10 Rule 14 is in the following terms: "(1) If a document that is required or permitted to be served on a person in connection with any proceedings: a. cannot practicably be served on the person, or b. cannot practicably be served on the person in the manner provided by law, the court may, by order, direct that, instead of service, such steps be taken as are specified in the order for the purpose of bringing the document to the notice of the person concerned. (2) An order under this rule may direct that the document be taken to have been served on the person concerned on the happening of a specified event or on the expiry of a specified time. (3) If steps have been taken, otherwise than under an order under this rule, for the purpose of bringing the document to the notice of the person concerned, the court may, by order, direct that the document be taken to have been served on that person on a date specified in the order. (4) Service in accordance with this rule is taken to constitute personal service."

10 Mr Lynch relies on the following matters as giving rise to the plaintiff's entitlement to the relief sought: (1) Part 11 Rule 2 provides: "originating process may be served outside Australia in the circumstances referred to in Schedule 6" (2) Schedule 6 permits originating process to be served outside Australia inter alia in relation to: (a) if the proceedings are founded on a cause of action arising in New South Wales, (b) if the proceedings are founded on a breach in New South Wales of a contract (wherever made), whether or not the breach is preceded or accompanied by a breach (wherever occurring) that renders impossible the performance of any part of the contract which ought to be performed in New South Wales, (3) the proceedings are founded in part on a contract made in NSW and alleged breaches in NSW (4) therefore Part 11 Rule 14 is able to be relied on (5) it has been established that steps have been taken to bring the document to the notice of Mr Eddie (6) alternatively to (5), it has been established that the Statement of Claim cannot practicably be served on Mr Eddie.

11 Mr Cleary accepted that (1)(a) in Schedule 6 has been met, and that the plaintiff had no need to establish that (1)(b) was also satisfied. Mr Cleary agreed (as he was compelled to do) that it had been established that the steps taken by the plaintiff pursuant to the order of Garling DCJ had brought the originating process to the attention of his client so (5) is established. He did not accept that (6) had been established but in my view the absence of any address being provided by Mr Eddie in Syria or Europe makes actual personal service impracticable, see pp. 141, 142, 145 and 147 of Exhibit A. I have referred to Europe because in the statement of Mr Eddie annexed to the affidavit of Mr Geary, Mr Eddie makes reference to his decision to spend his retirement in Europe and not to return to Australia: see p.141.

12 The real dispute concerns step (4). The gravamen of Mr Cleary's argument was this: the common law does not permit substituted service on a defendant who was not resident in the jurisdiction at the time of initiation of the process, and the rules ought not be construed as altering the common law position. Thus he argued there can be no order for substituted service when a defendant has left NSW before proceedings have been commenced. He conceded that ASIC v Sweeney [2001] NSWSC 114, a decision of Austin J, was contrary to that position, but he submitted that it was wrongly decided, was contrary to Myerson v Martin [1979] 3 All ER 667 and that Laurie v Carroll (1958) 98 CLR 310 did not assist the plaintiff in that regard.

13 In Sweeney, ASIC alleged inter alia that Mr Sweeney had engaged in insider trading, false trading, and misleading and deceptive conduct. Civil relief was sought. The proceedings were commenced in July 1999, by which time Mr Sweeney had become resident overseas, probably in New Zealand. Although Mr Sweeney visited Australia in July, ASIC was not able to serve him whilst he was within the jurisdiction. On 24 November 1999 an order was made for substituted service based upon evidence of the attempts made to effect service from July until November. Mr Sweeney filed a Notice of Motion seeking a declaration that the Statement of Claim had not been duly served and that this Court had no jurisdiction. The question of whether the Court has jurisdiction to make the order for substituted service was considered by Austin J, and he held that it did. The rule which was under consideration was Part 9 Rule 10 of the Supreme Court Rules ("SCR"), which was in similar terms to the present Part 10 Rule 14 UCPR. Part 10 Rule 1A of the SCR was in similar terms to Schedule 6 of the UCPR.

14 Austin J considered Laurie v Carroll and concluded: "[40] In my opinion, therefore, Laurie v Carroll is authority for the proposition that substituted service of an originating process for an in personam claim can be ordered where the defendant is outside the jurisdiction, if direct personal service could have been effected under the rules of court. It follows that I do not accept the defendant's submission that according to Laurie v Carroll, Part 9 rule 10 does not ever apply to permit substituted service outside Australia. In the end, I accept the plaintiff's submission that substituted service is permissible as long as the case can be brought within one of the categories set out in Part 10 rule 1A. However, I reach this conclusion by a process of reasoning that I must explain. [41] The principle of Laurie v Carroll requires an examination to be undertaken as to whether, in the circumstances, personal service could have been effected abroad. It is a principle driven by the proposition that the plaintiff should not be permitted to use substituted service as a means of sidestepping the obstacles to personal service abroad.".

15 In Laurie v Carroll, the plaintiff Carroll had issued a writ in Victoria and obtained an order for substituted service on Laurie by service on Laurie's Melbourne solicitor. Laurie was English, and had visited Melbourne briefly in connection with the theatrical event which he had organised which involved a famous British ballet dancer touring in Australia. Carroll's claim was that he and Laurie had agreed (whilst he had visited London) on a sharing of profits of the event.

16 The High Court (Dixon CJ, Williams and Webb JJ) set aside the order of the Supreme Court for substituted service, holding that substituted service was not available against Laurie who was not "connected with the state by birth, domicile or residence, if these things matter, or in any other way, and he was not, within the state when the writ (one for service within the jurisdiction) was issued nor at any time afterwards" (p.317).

Carroll had argued that Laurie had been within Victoria for two or three days in connection with a transaction connected with the tour, and had left the state in anticipation of the issue of the writ and to avoid service. The High Court was of the view that substituted service could not be used as a means of conferring jurisdiction where none existed.

17 Carroll had not established that the cause of action was one which fell within any of the paragraphs of Rule 1 Order 11 nor within any of the paragraphs of s.11 of the Service and Execution of Process Act 1901-1957. The Court said (pp.322-323): "For, except for these extensions of the principle of the common law, it remains true that a writ issued out of the Supreme Court of Victoria does not run outside that State. And in actions in personam this must determine the jurisdiction of the Court over the defendant".

At p.327 of the judgment: "The proposition that where a writ may not be served on a party personally it cannot be effected indirectly by substituted service was affirmed again in Wilding v Bean"

and at pp.327-328: "There has been no intention to depart from the settled principle that there cannot be an order for substituted service upon a defendant upon whom personal service could not be validly effected".

18 At p.328 of Laurie reference is made to "the need to resort to rules governing the extraterritorial exercise of jurisdiction by service (or notice) out of the jurisdiction".

19 The focus of Laurie was not on what is permitted when jurisdiction is present by virtue of the equivalent of Schedule 6 or the Service and Execution of Process Act, but whether resort can be had to the provisions for substituted service when personal service is not available by virtue of the absence of the defendant from the jurisdiction and absence of any relevant extension of jurisdiction.

20 In my view, nothing said by the Court in Laurie undermines the proposition that an order for substituted service can be made if the Court otherwise has jurisdiction so that service could be effected overseas. I agree, with respect, with Austin J's view that an order under the earlier rule equivalent to Part 10 Rule 4(1) and (4) UCPR could be made, provided the defendant could, by reason of provisions such as Part 11 of the UCPR, be served overseas. Mr Eddie could be served overseas because, as conceded by Mr Cleary, Schedule 6(1)(a) at least applies, and hence Part 11 Rule 2 applies.

21 Mr Cleary submitted that Myerson is authority against that conclusion. Myerson however is a case in which the events the subject of the claim all occurred in Jersey not within the jurisdiction of the English Court in which the writ was issued. No attempt was made to obtain an order for service outside the jurisdiction. Lord Denning commented: "It is doubtful whether he [the plaintiff] would ever have got leave to serve out because all these transactions took place in Jersey" (p.669)

22 Eveleigh LJ who agreed in the dismissal of the appeal and saw the question as one for the discretion of the Court said he accepted "that no substituted service is permissible in a case where personal service has never been possible" (p.672). He did not see the authorities as requiring him to hold "that there can never be substituted service where the defendant is out of the jurisdiction at the time of the issue of the writ, no matter who the defendant is or where he lives" (p.672). Waller LJ agreed with Lord Denning but added that he accepted that the Court had a discretion but it should not involve a conflict with Order 11 Rule 1 (i.e. the equivalent of Schedule 6). I do not regard Myerson as supporting Mr Cleary's arguments.

23 I have been referred to Sheahan v Joye 57 FCR 389 in which Branson J held that the issuing of a Federal Court Summons was an act of jurisdiction and that as the defendant was present in Australia at that time an order for substituted service could thereafter be validly made even though by then the respondent had left the jurisdiction. Her Honour noted of Laurie v Carroll that she did not find it an easy judgment (p.398F) but she did not see it as casting doubt on the rule that substituted service can be ordered when a defendant has left the jurisdiction with knowledge of the issue of the writ, and she referred with implicit approval to Myerson v Martin. Her Honour expressly noted that she did not need to consider the alternative argument that leave could be granted to serve the Summons on the respondent pursuant to Order 8 Rule 2 of the Federal Court Rules (similar to Schedule 6 of the UCPR).

24 Not only am I not persuaded that Sweeney was wrongly decided, in my view it was correctly decided, and the same approach should be applied to Part 10 Rule 14 of the UCPR. There is then, in my view, no impediment to an order for substituted service being made. This approach accords with that taken by Swinfen Eady J in his Western Suburb and Notting Hill Permanent Benefit Building Society v Rucklidge [1905] 2 Ch 472 and the law is correctly summarised in Ritchie's Uniform Civil Procedure (Lexis Nexis Butterworths) at 10.14.15.

25 Mr Eddie is aware of the proceedings and I think that there is a basis for making an order under Part 10 Rule 14(3) and (4).

26 I would add that there is no reason of policy in this case that would encourage a restrictive view of the ambit of Part 10 Rule 14. A party who is not amenable to the jurisdiction of the Court ought not be compelled to defend a case here by resort to a side door that undercuts the need for jurisdiction but once it is clear that there is jurisdiction over a party, as is the case here, there can be no concerns of that kind. S.56(2) of the Civil Procedure Act provides that the Court must, in interpreting the Act and rules, seek to give effect to the overriding purpose of the Act set out in s.56(1), namely the facilitation of the just, quick and cheap resolution of the real issues in the proceedings. The interests of justice demand that a person who lived and worked in New South Wales and who faces claims as a consequence of that work in respect of which the Court has jurisdiction and who, although not practicably able to be personally served, either has been provided with a copy of the initiating process (as in this case) or would to the Court's satisfaction be informed of the proceedings by service at an address, or who has taken steps to avoid service, ought not be able to preclude a plaintiff from proceeding with his case because he has not been personally served.

27 It follows that the orders made by the District Court on 13 August 2007 must be set aside, but that a direction should be made that service at 31 Haldon Street Lakemba on 17 August 2007 of a sealed copy of the Statement of Claim in proceedings 485 of 2007 in the District Court (now 5121/07 in the Supreme Court of New South Wales) pursuant to an order made by DCJ Garling on 13 August 2007 is to be taken to have been service of that document on Mr Eddie on that date.

28 Mr Eddie succeeded on his motion and the plaintiff succeeded on its motion. Until the proceedings were transferred to the Supreme Court, Mr Eddie was not amenable to this Court's jurisdiction. Some cost was incurred by Mr Eddie in filing his motion but little or no time was spent on the hearing of it because the plaintiff conceded that the orders would have to be set aside. I am presently inclined to the view that the appropriate order is that Mr Eddie pay the plaintiff's costs as and from the 6 December 2007 but I will hear the parties on that issue.

18/03/2008 - Typographical error - Paragraph(s) 1 03/04/2008 - There have been no substantive changes to the judgment, all amendments relate to formatting. - Paragraph(s) 1

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