Fujitsu Australia Ltd v Dewar Electronics Pty Ltd & Adda Corporation [2001] VSC 222

Supreme Court of Victoria|2001-07-02|Before: Gillard J

ORDER 7 OF RULES OF COURT - Appeal from Master - third party notice - application to extend time to serve outside Australia - whether basis for service out of Australia - defective endorsement - dispense with compliance with Rules - abandonment of claims outside Rule 7.01.

This is an appeal from orders made by a Master of the Court on 5 June 2001 on a summons brought by the defendant and a summons brought by the third party to the proceeding, the effect of which was to set aside the third party notice.

The plaintiff, Fujitsu Australia Limited ("the plaintiff"), is a company which carries on the business, inter alia, of supplying electronic equipment to consumers.

The defendant, Dewar Electronics Pty Ltd ("the defendant"), is a company which was involved in the business of importing and supplying electronic equipment.

The third party, Adda Corporation ("the third party"), is a company carrying on the business in Taiwan of, inter alia, supplying electric fans to specification.

On 17 November 1999, the plaintiff issued a writ against the defendant claiming damages for breach of contract for the supply of electric fans which were sold by the defendant to the plaintiff for assembly in electronic equipment. The agreement to supply the goods was made in or about July 1997 and pursuant to it, between that date and December 1997, the plaintiff placed 13 purchase orders with the defendant for the supply of a total of 15,600 Hypro fans. The plaintiff claims damages alleging that the goods were not fit for the purpose and were not of merchantable quality. The plaintiff also claims damages for an alleged breach of s.52 of the Trade Practices Act 1974.

The defendant delivered a defence. It made a decision to join the third party to the proceeding to recover damages, or obtain an indemnity, in respect of any damages it was adjudged to pay the plaintiff.

On 12 April 2000, the defendant filed a third party notice against the third party. It did not contain any endorsement required by Rule 7.02(1) of the Rules and on 28 April 2000 the defendant filed a further third party notice which was headed "SERVICE OUT OF AUSTRALIA" and contained an endorsement.

The defendant's solicitors corresponded with the third party and its Taiwan lawyer during 2000, and requested the latter to accept service of the third party notice. Under the rules, the third party notice was required to be served within 60 days of filing - see Rule 11.07(1).

The Taiwan lawyer declined to accept service and accordingly, it was necessary to request the authorities to serve the document in Taiwan. In the course of discussions with the Taiwan lawyer, the defendants' solicitors forwarded a copy of the third party notice, which included a statement of claim. Once it was necessary to go through the authorities, the document had to be translated into Chinese, which was done, and the document was eventually served by the authorities on 27 March 2001. The service was effected pursuant to Part 2 of Order 7 of the Rules of Court.

The time for service had been extended twice by Master Bruce, the last time being on 1 December 2000, requiring service by 9 February 2001. It follows that the service was about 46 days late.

The solicitors for the third party filed a conditional appearance on its behalf on 7 May 2001.

On 22 May 2001, the third party's solicitors filed a summons seeking an order that the third party notice be set aside, alternatively, that service of the notice be set aside. On 4 June 2001, the defendant's solicitors filed a summons seeking an order that time for service of the third party be extended.

Both summonses came on for hearing before Master Evans on 5 June 2001. He dismissed the defendant's summons seeking the extension of time, and set aside the third party summons.

I was informed that the Master set the third party notice aside on the ground that the endorsement on the third party notice failed to comply with Rule 7.02(1) of the Rules. He followed a decision of Beach J of Peter Whinnen v Cussons (International) Ltd (unreported, delivered 24 February 1998) and held that he could not amend the endorsement. Accordingly, the failure to properly endorse the third party notice was fatal.

An appeal from a Master is a re-hearing de novo. The court considers the matter afresh without in any way being affected by the decision of the Master or his reasons - see Rule 77.05(7).

The rival contentions of the parties raised the following issues for consideration and determination:

(i) Whether the endorsement complied with the Rules of Court and if it did not, was the defect fatal to the validity of the third party proceeding?

(ii) Should time be extended within which to serve the third party notice?

(iii) Was the claim made by the defendant a claim within the meaning of Rule 7.01 of the Rules of Court which enabled the third party process to be served out of Australia without order of the court?

(iv) What is the effect of including in the third party claim, claims which are not covered by Rule 7.01(1)?

The Endorsement

It is a requirement that any originating process to be served out of Australia shall contain an endorsement setting out certain matters.

"(1) Originating process served on any defendant out of Australia in accordance with this order shall, at the time of service on the defendant, contain an endorsement stating the facts and the particular paragraph of Rule 7.01 relied upon in support of such service."

This sub-rule applies to a third party proceeding - see Rule 11.04(2).

The amended third party notice contained an endorsement.

"TAKE NOTICE that the series of contracts referred to in the statement of claim endorsed on the third party notice were made in Victoria, Australia and it is intended to serve this third party notice out of Australia under the provisions of Order 7 of the Rules of Court." (Emphases added).

The document went on to state the rules relied upon by the defendant, namely, Rules 7.01(1)(f)(i), 7.01(1)(g), and 7.01(l).

The endorsement set out the words of each of the paragraphs relied upon.

It is noted that the endorsement does not set out in any detail the facts relied upon. There is a bald assertion that the series of contracts were made in Victoria. Further, no facts were given with respect to the assertion that the breach occurred in the State of Victoria or that the third party was a necessary or proper party to the proceeding.

In my opinion, the endorsement should have, in summary form, set out the facts which the defendant relied upon to establish the contracts were made in the State. The endorsement should also have contained the facts relied upon to attract the other two bases for service out of the jurisdiction.

The third party notice contained a detailed statement of claim. In paragraph four of the statement of claim, the assertion is made that the contracts were made in the State of Victoria between the defendant and third party. Also forming part of the third party documents was a copy of the writ and the defence. The third party was provided with substantial information which had been translated into Chinese, and had received an English version some ten months previously.

It is pertinent to observe that the two affidavits of the solicitor for the third party, relied upon in the application to set aside the third party, did not refer to any defect in the endorsement. The grounds put forward in the affidavit were first, that service was out of time and secondly, that the contracts between the defendant and third party were not made in the State of Victoria. Further, it was put that if the proceeding was to take place in Australia, the third party would be put to considerable expense and inconvenience.

One can safely infer from the evidence relied upon by the third party, that the third party's legal advisers were in no doubt as to the issues in the case and the basis upon which the defendant relied to serve the documents out of Australia without an order of the court.

Nevertheless, in my opinion, the endorsement was defective. It is a requirement, laid down by the Rules, that the endorsement should contain a statement of the facts relied upon in support of the service which attract the provisions of Rule 7.01. In my opinion, the statement of the facts should be contained in the endorsement, and the Rule is not complied with by reference to the statement of claim attached to the third party notice.

The purpose of the endorsement is to give the other party sufficient notice of the grounds upon which the claiming party is entitled to serve the process, and it must state the facts which bring the case within the particular part of the sub-rule. In this way, the other party is given an opportunity to determine whether to object that the service has not been effected based upon any claim within Rule 7.01(1).

In the case of Peter Whinnen v Cussons (International) Ltd, supra, it was conceded, by counsel for the plaintiff, that the endorsement did not comply with the provisions of Rule 7.02(1). Counsel for the plaintiff submitted that the deficiency could be corrected by appropriate amendments. Beach J held that it could not. After stating what the purpose of the rule was, His Honour then said at p.3 -

"To do that, the endorsement must identify not only the paragraph or paragraphs of Rule 7.01 the plaintiff relies upon, but it must also state the facts which bring the case within that rule. In this way a defendant is given an appropriate opportunity to determine whether to object that the court ought not to hear and determine the proceeding on the ground that the proceeding is not within Rule 7.01(1) before filing an appearance or conditional appearance in a proceeding. In my opinion, the defect cannot be cured by amendment made after the service of the writ. Indeed Rule 7.02 makes that clear. Originating process must be amended to contain the appropriate endorsement before service can be affected."

I respectfully agree with His Honour's observations. But in my opinion, that is not the end of the matter. The failure to comply with the paragraph of the sub-rule is an irregularity and it does not render the document a nullity. See Rule 2.01(1).

Where there has been a failure to comply with the Rules, the court may, and it is a matter of discretion, set aside the proceeding, set aside any step in the proceeding or any document, and exercise its powers to allow amendments "and to make orders dealing with the proceeding generally".

Rule 2.04 is concerned with dispensing with compliance with the Rules. It provides -

"The court may dispense with compliance with any of the requirements of these Rules, either before or after the occasion for compliance arises."

The court would only dispense with compliance if it was in the interests of justice. . That is, justice to both sides.

In the present case, it is clear that the defect in the endorsement did not mislead or deceive the lawyers acting for the third party. Indeed, as I have already stated, they did not take the point in the affidavit material in support of their summons. Further, it is clear from correspondence between the defendant's solicitor and the third party and its lawyers in Taiwan, that the issues involved in the case were discussed and, one would expect, appreciated by the lawyers in Taiwan. After service of the documents which were translated into Chinese, one would expect that the third party's lawyers in Taiwan had a very good understanding of the issues.

Further, the third party has suffered no prejudice by the defect in the endorsement. It has not precluded it from making an application raising the points that service was out of time and secondly, that no paragraphs of Rule 7.01 applied.

In those circumstances, it is my opinion that justice would be best served by dispensing with the requirement of compliance with Rule 7.02(1) of the Rules. To do otherwise would result in the plaintiff's claim being further delayed, but more importantly and more relevantly, the defendant would be put to considerable further expense to no real benefit to the parties. Counsel for the third party disavowed any prejudice being suffered if the court dispensed with compliance.

Accordingly, I will make an order that compliance with Rule 7.02(1) of the Rules be dispensed with pursuant to Rule 2.04.

The third party's counsel did refer to a New South Wales authority which was to the effect that a reasonable explanation should be given for the failure to comply with the Rules. Whilst the court expects an explanation of why there was a failure, it is not fatal to fail to provide one. The reason here was obvious. The failure to comply was due to the fact that the defendant's lawyers did not advert to the full requirements of the Rule. In the end, justice is the determining factor, and I rule that justice dictates the order I propose.

Rule 11.07(1) requires service of a third party notice within 60 days after filing. Time was extended. In the end, service was effected some 46 days after the time expired.

However, under Rule 11.07(3), the court may from time to time extend the period for service. Importantly, paragraph 4 provides -

"(4) An order may be made under paragraph (3) before or after expiry of the period for service."

Counsel for the third party disavowed any prejudice caused to the third party if the time for service was extended.

Again, it is a question of justice to the parties. One must approach this question pragmatically, seek to do justice between the parties and to avoid unnecessary costs. If time is not extended, then it will be necessary for the defendant to go through the whole procedure again, which would be a massive waste of time and money. In an absence of any prejudice, justice dictates that time should be extended. Accordingly, I would be prepared to make an order that the time be extended to a date seven days after the third party notice was actually served in Taiwan.

The defendant relies upon three sub-paragraphs of Rule 7.01(1).

"(1) Originating process may be served out of Australia without order of the Court where -

(f) the proceeding is one brought to enforce, rescind, dissolve, rectify, annul or otherwise affect a contract, or to recover damages or other relief in respect of the breach of a contract, and the contract -

The burden is on the plaintiff. In Williams v The Society of Lloyd's [1994] VicRp 19; (1994) 1 VR 274, McDonald J at 291 said -

"On these applications it is for the plaintiff to persuade the court that in respect of each cause of action on which he relies against the first four defendants there is a strong arguable case that service out of the jurisdiction of that claim is justifiable under one or other of the sub-rules of Rule 7.01 as is relied on."

His Honour went on to state that if the plaintiff established at least one claim was within Rule 7.01 but failed in respect of another claim, it was open to the plaintiff to elect not to proceed with that claim.

The evidence in relation to the question of where the contract was made is found in affidavits sworn by the solicitors acting for the defendant and the third party. Some documents have been tendered in evidence. However, the evidence is hearsay and although admissible on an interlocutory proceeding, it suffers from the fact that it is not direct evidence from the employees of the defendant and third party.

The defendant's case is put simply. An order was placed by the defendant forwarding a purchase order to the third party in Taiwan, and the third party in Taiwan responded by sending a facsimile accepting the order. The contract was concluded and binding when the facsimile was received by the defendant in this State. Mr Donald of counsel who appeared for the defendant relied upon the House of Lords decision of Brinkibon Ltd v Stahag Stal etc (1983) 2 AC 34.

The House of Lords held, in that case, that where there was an instantaneous communication between the offeror and the offeree, the formation of the contract between the parties was governed by the general rule that the contract was concluded where and when acceptance of the offer was received by the offeror. That case supports the submission of the defendant that the contract was made in Victoria. The documents which were exhibited by the solicitor acting for the third party supported that contention.

It was argued by counsel for the third party that, on a proper consideration of the documents, the acceptance, that was sent by facsimile by the third party to the defendant and received in Victoria, was a counter-offer which had to be considered, signed and accepted by the defendant by sending a copy back to the third party in Taiwan.

In an effort to make good this argument, counsel referred the court to a series of documents commencing with one dated 13 June 1997. This is a purchase order form of the defendant which was faxed to the third party in Taiwan. It was noted under the heading "Special Instructions:", the following -

The document which came back from Taiwan is a document marked "PROFORMA INVOICE". It is noted against the statement "Shipment:" the following -

"BY AIR FREIGHT COLLECTED, THROUGH U-FREIGHT, ON/ABOUT JUN 30."

It is noted in the main part of the invoice that the prices are "FOB HK". It was submitted that in the light of that information, one could infer that the defendant expected the goods to be air freighted to Victoria whereas it was said that the goods were to be supplied FOB in Hong Kong, and it followed that that was a counter-offer. There is no doubt that there was a notation on the invoice which requested the defendant to sign the back of the document for confirmation. This appears to have been done. In later purchase orders sent by the defendant under the heading "Special Instructions:" the following words appear -

It was submitted, on behalf of the third party, that I should infer from the later documentation that the proforma invoice sent by the third party constituted a counter-offer.

I would not be prepared to draw that inference from the documents. No direct evidence was given. The court would be speculating as to that matter. It does appear, in my opinion, on the evidence, that the offer was accepted by the forwarding of a facsimile to the defendant at Croydon in this State. The freight was, pursuant to the contract, via Hong Kong.

I am satisfied that the plaintiff has established, for the purposes of service out pursuant to Rule 7.01(1), that the contracts were made in the State of Victoria.

In addition to sub-paragraph (f)(i) of Rule 7.01(1), the defendant also relied upon sub-paragraph (g).

"(g) the proceeding is brought in respect of a breach committed within Victoria of a contract wherever made, even though that breach was preceded or accompanied by a breach out of Victoria that rendered impossible the performance of that part of the contract which ought to have been performed within Victoria;"

The evidence established that the goods were delivered FOB in Hong Kong and in my opinion, the breach occurred when the goods were delivered in a defective state. In other words, the breach occurred outside Victoria.

Sub-paragraph (g) does not assist the defendant.

It also relied upon sub-paragraph (l) on the basis that the third party was a necessary or proper party to the proceeding.

"(l) The proceeding is properly brought against a person duly served within or out of Victoria and another person out of Australia is a necessary or proper party to the proceeding;"

The question arises whether the third party is a proper party to the proceeding. For the purposes of this sub-paragraph, it is my opinion that "the proceeding" is the actual proceeding brought by the plaintiff against the defendant. The question is whether the third party is the proper party to that proceeding. It is well established that the third party proceeding is a separate and discrete proceeding from the main proceeding. In my opinion, the sub-paragraph only applies to the joinder of a defendant, and does not apply to a defendant joining a third party. That is not to say that it could not apply to joining an additional third party to the third party proceeding.

Counsel did not refer me to any authority which has held that the sub-paragraph applies to a situation where a defendant was seeking to join a third party as a necessary party to the main proceeding.

Accordingly, in my view, the sub-paragraph does not assist the defendant.

Where a party seeks to rely upon Rule 7.01 to serve the process out of Australia, it must be established that the claim falls within Rule 7.01(1), and the party seeking to serve the documents out of Australia cannot include or add any claim which is not within the Rules. If the party does in fact include such a claim, then it does not form the basis of the service out. The general rule, in those circumstances, is that the party must abandon the claims.

The defendant in fact claims relief on the ground that there has been a breach of s.52 of the Trade Practices Act 1974, and also claims contribution under the Wrongs Act.

Mr Donald, on behalf of the defendant, informed the court that the defendant elected not to proceed in respect of those claims. It will be necessary to amend the claim.

It follows that, in my opinion, the defendant was entitled to serve the process out of Australia on the third party located in Taiwan on the ground that the contracts made for the supply of goods were made in this State and accordingly, attracted the provisions of Rule 7.01(1)(f)(i) of the Rules of Court.

The endorsement was defective but, for reasons already stated, I am prepared to dispense with compliance with the Rules. Further, I am prepared to extend time to enable the service to be effective.

Subject to any submissions from counsel, I propose to make the following orders -

(1) That the appeal from the orders made by Master Evans dated 5 June 2001 be allowed.

(2) That the orders made by Master Evans be set aside.

(3) That upon the defendant's summons filed 22 May 2001, the time for service of the third party notice on the third party be extended to 28 March 2001.

(4) That the failure by the defendant to comply with the provisions of Rule 7.02(1) of the Rules of Court in respect of the endorsement on the third party notice be dispensed with pursuant to Rule 2.04.

(5) That the summons filed by the third party be dismissed.

(6) That the statement of claim attached to the third party notice be amended by deleting paragraphs 10, 11, 12, 13, 14, 18 and 19, together with paragraphs B and C of the relief clause.

(7) That the defendant file and serve an amended third party statement of claim on or before 27 June 2001 by serving the said document on McKean & Park, solicitors.

(8) That the third party file and serve its defence by 4.30 p.m. on 27 July 2001.

I will hear the parties on the question of costs of the summons before the Master and the appeal.

I certify that this and the 12 preceding pages are a true copy of the reasons for Judgment of Gillard J of the Supreme Court of Victoria delivered on 2 July 2001.

At a glance

Court

Decision date

Before

Source

Judgment (85 paragraphs)

Parties

Cases Cited (1)