BETWEEN : GLENDALOUGH HOLDINGS PTY LTD (ACN 009 178 072)

JARDINE LLOYD THOMPSON PTY LTD formerly known as JARDINE INSURANCE BROKERS PTY LTD (ACN 009 098 964)

Courts - Practice and procedure - Long­arm jurisdiction - Whether serious issue - Turns on own facts

First Third Party : Mr R L Le Miere QC & Dr S E Ivey

Brunsden v Humphrey [1883] 11 QBD 712

Commonwealth Bank of Australia v White [1999] VSC 262; [1999] 2 VR 681

Darrell Lea Chocolate Shops Pty Ltd v Spanish-Polish Shipping Co Inc (1990) 25 NSWLR 568; 103 FLR 90

David Syme & Co Ltd v Grey [1992] FCA 479; (1992) 115 ALR 247

Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480

George Monro Limited v American Cyanamid and Chemical Corporation [1944] 1 KB 432

Gilchrist v Dean [1960] VicRp 42; [1960] VR 266; (1958) 2 FLR 175

Laminex Aust Pty Ltd v Co Manufacturing Co (1998) ATPR 41­610

Regie National de Usines Renault SA v Zhang [2002] HCA 10; (2002) 76 ALJR 551

Tricon Industries Pty Ltd v Abel Lemon & Company Pty Ltd [1988] 2 Qd R 464

Tycoon Holdings Ltd v Trencor Jet Co Inc [1992] FCA 25; (1992) 34 FCR 31

Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538

Williams v The Society of Lloyds [1994] VicRp 19; [1994] 1 VR 274

1 On 28 June 2002, Master Sanderson granted leave to the defendants to issue a third party notice on Vetrotex Espana SA ("Vetrotex"). The second and third defendants are directors of the first defendant and for convenience, I will refer to all of them as "Summit". On 29 August 2002, Master Sanderson allowed the third notice to be amended in relation to the proper name of the first third party: Saint-Gobain Vetrotex Espana SA. He also gave leave to effect service on Saint-Gobain RF Pty Ltd ("RF") purportedly as the agent of Vetrotex. The amended third party notice was delivered to RF in Melbourne on or about 26 September 2002.

2 By amended notice of motion dated 20 January 2003, Vetrotex seeks orders discharging the orders made by Master Sanderson on 28 June 2002 and 29 August 2002 as it affects Vetrotex; alternatively setting aside service on its alleged agent RF and alternatively staying the proceedings on the basis of forum non conveniens.

3 The plaintiff makes baths and spa baths out of fibreglass. The first defendant distributes fibreglass products in Western Australia including "gun rovings" which are continuous fibreglass rovings. Between 1996 and 1998, Vetrotex sold Summit a number of consignments of gun rovings which it had manufactured. The plaintiff claims that it bought gun rovings from Summit and on 7 January 2000 issued a writ against Summit alleging loss and damage arising from some 18 consignments of gun rovings purchased from Summit. The plaintiff claims the gun rovings are defective. Although at one point Vetrotex was joined as a defendant to the action, the plaintiff does not now proceed against Vetrotex, a point of significance.

4 It is necessary to set out the third party notice:

"... The First, Second and Third Defendants claim against The First Third Party to be indemnified against the Plaintiff's claim and further claims damages and the costs of the action on the following grounds:

1 The First Third Party was the manufacturer and supplier of the rovings to the First Defendant that the Plaintiff claims has caused spa bathS (sic) it supplied to its customers to blister and need replacement.

2 The rovings were supplied to the Plaintiff by The First Defendant in the same condition that they were supplied by The First Third Party to the First Defendant. The Plaintiff alleges that the rovings were contaminated, had excessive moisture content, were not fit for the purpose of manufacturing spa baths and were not of merchantable quality.

3 The First Defendant queried with The Second Third Party the moisture content of the rovings it received from The First Third Party in December 1996, and when further batches of rovings were received in January and March 1997. In late December 1996 or January 1997 The Second Third Party, in its capacity as the agent of the First Third Party, advised The First, Second and Third Defendants that it had consulted the First Third Party, and that the rovings were suitable to sell to the customers of The First Defendant.

4 The First, Second and Third Defendants claim against The First Third Party will be based on the breach of the terms of the various sales of rovings made by The First Third Party to the First Defendant during the period July 1996 to August 1998, and in particular concerning the merchantable quality and fitness for purpose of the rovings.

5 Further, The First, Second and Third Defendants claim The First Third Party is in breach of its duty of care owed to both the Plaintiff and The First, Second and Third Defendants, and the terms of the Australian Trade Practices Act.

6. If the Plaintiffs contention that the condition of the rovings has caused it to suffer loss or damage is accepted by the Court then The First Third Party is liable to indemnify and/or pay damages to The First, Second and Third Defendants in an amount equal to any amount which The First, Second and Third Defendants may be found liable to the Plaintiff, plus costs.

7 The First Defendant further claims damages to be assessed in regard to the breach of the said sale agreements in regard to any claims which may be made against the First defendant in regard to its supply of rovings to any of its customers, but which have not yet been made upon the First Defendant."

This last plea seems to go well beyond any third party claim.

5 The application for issue of the third party notice was supported by a number of affidavits including one from the defendants' then solicitor, Mr Kevin Banks-Smith, sworn 18 June 2002.

6 At [24] he deposes to the grounds for the application for service out of the jurisdiction by reference to specific paragraphs: Rules of the Supreme Court O 10.

7 I insert the appropriate order in italics and set out par 24 of the affidavit:

Order 10

"Service of a writ or notice of a writ out of the jurisdiction is permissible with the leave of the court whenever -

...

1(1)(e) the action is one brought to enforce, rescind, dissolve, annul, or otherwise affect a contract, or to recover damages or obtain other relief in respect of the breach of a contract, being in either case a contract -

(i) made within the jurisdiction; or

(ii) made by or through an agent trading or residing within the jurisdiction on behalf of a principal trading or residing out of the jurisdiction; or

(iii) which by its terms or implications is governed by the law of Western Australia; "

"(1) Order 10 Rule (1)(1)(e) in regard to the breaches of the contracts of sale of the rovings which were made by or through RF Services Pty Ltd as agent for Vetrotex Espana SA when RF Services Pty Ltd was trading within the State of Western Australia on behalf of Vetrotex Espana SA in regard to the sales of the rovings to the First Defendant;"

"1(1)(f) the action is brought in respect of a breach committed within the jurisdiction of a contract wherever made and irrespective of the fact, if such be the case, that the breach was preceded or accompanied by a breach committed out of the jurisdiction that rendered impossible the performance of so much of the contract as ought to have been performed within the jurisdiction;"

"(2) Order 10 Rule (1)(1)(f) in regard to the fact that the breach of the said purchase agreements by Vetrotex Espana SA was committed by delivery of defective rovings in Western Australia;"

"1(1)(h) any person out of the jurisdiction is a necessary or proper party to an action properly brought against some other person duly served within the jurisdiction;"

"(3) Order 10 Rule (1)(1)(h) in that Vetrotex Espana SA is a necessary or proper party to this action against the First, Second and Third Defendants; and"

"1(1)(k) the action is founded on a tort committed within the jurisdiction;"

"(4) Order 10 Rule (1)(1)(k) in that the action is founded on a tort committed within this jurisdiction. Vetrotex Espana SA's obligations in tort arose in Western Australia as the nature of the tort was misrepresentation made to The First Defendant by its Australian agent RF Services Pty Ltd, and also by its continued failure to warn the First, Second and Third Defendants of known defects with the rovings it sold to the First Defendants."

8 Vetrotex argues that Summit is limited to the grounds set out in the affidavits in support of the original application: Koranna Nominees Pty Ltd v Roberts, unreported; FCt SCt of WA; Library No 4289; 15 October 1981. The only Judge who referred expressly to the matter was the Chief Justice, and his comments were obiter dicta. He said:

"In my opinion on an application by a defendant served with a writ out of the jurisdiction pursuant to O.10 R.1 to set the service aside ... the plaintiff is required to sustain the service on the ground or grounds relied upon by him in the affidavit upon which the order was made and he cannot at that stage sustain the service upon some other ground."

9 The authority which Burt CJ cites in support was Collins v NB Mercantile Insurance [1894] 3 Ch 228 at 234, 235 per Kekewich J is, with all respect, hardly any precedential value. Nevertheless, I consider the statement of Burt CJ is correct and I apply it. In any event it has been followed by the Full Court in ICI Australia Operations Pty Ltd v Kidde-Graviner Ltd [1999] WASCA 65.

10 What is invoked is the extraordinary, or long-arm, jurisdiction of the Court and the circumspection required before the exercise of this jurisdiction demands that a party who applies ex parte and succeeds in obtaining an order for service on a foreign person, or entity, should be held strictly to the grounds upon which that order was obtained.

11 I accept Summit must establish a good arguable case that the proposed third party notice falls within O 10 r 1(1): Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 439. The third party notice, in summary, claims:

• breach of duty of care to the plaintiff and Summit;

• breach of the Trade Practices Act. [As to this latter matter, Summit concedes that O 10 r 1(1) does not permit service of a writ making a claim under the Trade Practices Ac 1975.]

12 Summit concedes breaches of the contracts occurred outside Western Australia.

13 In the course of submissions, counsel conceded also that the only evidence of trading of RF in Western Australia in 1995 and 1996 was provided by an undated letter, apparently received in about 2001. A post office address in Western Australia is given. It is unnecessary to quote the letter. Suffice to say that it provides no evidence that RF traded or resided in Western Australia in 1996.

The contracts were not made within Western Australia

14 Vetrotex relies on an affidavit sworn by Sharon Elaine Ivey, a solicitor employed by its Western Australian solicitors. She deposes by way of information and belief as to the manner in which orders were processed. Without setting out the detail, I find, for the purposes of this application, that the last act of the contract indicating Vetrotex's acceptance of Summit's offer occurred crossing the ship's rail in Valencia, Spain when Vetrotex delivered the goods for shipment CIF.

15 Vetrotex then posted the shipping documents to Summit's bank. An argument was raised that the postal acceptance rule does not apply because there was no evidence that the acceptance documents were sent by pre-paid properly addressed letter. I think nothing turns on that. The documents arrived.

16 It was conceded that delivery of the rovings occurred outside Western Australia. So did the making of the contract. There is no evidence to invoke the Court's long-arm jurisdiction in respect of the contract.

Is the contract governed by the law of Western Australia?

17 Order 10 r 1(1)(e)(iii) is not specifically identified in the grounds seeking an order to issue the third party notice. The contracts are the orders placed by Summit and acceptance of them by Vetrotex on delivery: they do not specify a governing law. The question is whether the closest and most real connection with the contract is Spain or Western Australia. Delivery occurred in Spain. Payment was made by Summit in Chambrey, France in the specified currency -United States dollars. I am not satisfied that the defendants have established an arguable case that the proper law of the contract is that of Western Australia. The fact that the terms of the contract were CIF, delivery was in Spain, and payment was outside Western Australia, all combine to suggest strongly that the appropriate law is that of Spain.

The claims in tort Defective rovings

18 I accept that it is arguable the rovings had an excessive moisture content when inspected by Summit and also that this was a defect. I also accept that it is arguable this defect was made known to Vetrotex by RF during the course of 1996. The evidence so far put before me does not establish the cause of the moisture: that is, whether moisture occurred in the gun rovings prior to, or subsequent to, delivery. In one fax from RF Services to Vetrotex Japan, dated 5 December 1996, the author said:

"... It would appear moisture is collecting during travel ex-Spain, whilst using the existing packaging system. ..."

19 Nor does the evidence before the Master or before me establish that the rovings caused loss and damage. It is true that the plaintiff's claim is just that. The position of a defendant seeking to join a third party is a difficult one. It may not wish to concede that any loss and damage was caused at all while asserting that if loss and damage was in fact caused it is entitled to an indemnity. The provisions of O 19 "Third Party and Similar Proceedings" are designed to accommodate this difficulty.

20 However, what is now under consideration is O 10 "Service Out of the Jurisdiction".

21 The title to O 10 is misleading in some respects because the order is principally about jurisdiction, particularly the invocation of what has been described as the extraordinary or long-arm jurisdiction of the Court.

22 There must be facts put before the Court which enable a judicial officer who deals with an application to come to a conclusion as to whether there is some substance in the claim: Stanley Kerr Holdings Pty Ltd v Gibor Textile Enterprises Pty Ltd (1978) 2 NSWLR 372 per Sheppard J at 375.

23 Before Master Sanderson, Summit relied on affidavits from Mr Banks-Smith, Mr Spencer, Mr Phillips and Mr Cilli. None of those affidavits refer to loss or damage actually suffered.

24 The evidence at its highest establishes that the moisture content may make the gun rovings hard to use and difficult to sell. When an applicant is seeking to invoke the long arm jurisdiction of the Court, it must put forward sufficient facts to raise a serious issue to be tried, the difficulties that may pose for third party applications notwithstanding.

25 On this basis the grounds alleging a claim in tort must fail. I will, however, also deal with the specific claims identified as failure to warn and misrepresentation.

26 Ground 4 pleads a continued failure to warn of known defects. I consider the facts and the pleading fall entirely within ICI Australia Operations Pty Ltd v Kidde-Graviner Ltd. Even assuming that a duty to warn of defects arose, the obligation to warn was at the time of delivery in Valencia harbour.

27 The misrepresentation alleged is when Mr Beston, the third third party and director of RF, said words to the effect that there was no problem with Summit selling the P292S despite the moisture tests.

28 As a result of this conversation it is asserted that Summit reinstated the on-hold purchase orders for further gun rovings.

29 Leaving aside the question of agency, and assuming for the moment that RF was the agent of Vetrotex, there remain fundamental difficulties. The third party notice sets out as a narrative par 3 - the representation. It does not assert, however, any misrepresentation or deceit caused any loss. The only claim in tort is for breach of a duty of care.

30 The representation may have been relevant for a claim under the Trade Practices Act but that has fallen away. Although Mr Banks-Smith's affidavit does refer to the representation as grounding a tort, the proposed pleading does not make the claim. In discretion, therefore, I would set aside the third party notice in respect of this claim.

31 In the way I have approached this application, it is unnecessary for me to make any provisional finding about agency. This remains a contentious issue, especially for the second and third third parties, and can only be properly determined at trial.

Is Vetrotex a necessary and proper party to be joined?

32 It is conceded that Vetrotex was not a necessary or proper party for the purposes of O 10 r 1(1)(h) when orders were made. On the authority of Koranna Nominees Pty Ltd v Roberts, that would probably be sufficient to dispose of this aspect of the claim. However, it has other problems. In Australian Insurance Brokers Ltd v Hudig Langeveldt Pty Ltd (No 2) (1991) 7 WAR 343, Owen J held at 346:

"... O 10 r 1(1)(h) only applies if the third party proceedings involve more than one third party at least one of whom is within the jurisdiction and has been properly served."

33 As Vetrotex points out, it is the only party to the action. RF and Mr Beston are not parties to that action. They are parties to actions instituted by separate third party notices. Vetrotex is no longer pursued by the plaintiff.

34 As I have reached the conclusion that none of the grounds upon which leave to serve out of the jurisdiction can be sustained, it is unnecessary to further consider the interesting question whether, had I concluded that one or more grounds could be sustained, I could sever the ineffective grounds or whether the notice stood or fell in its entirety.

35 It is also unnecessary to determine whether Western Australia is, or is not, a clearly inappropriate forum, although I add, strictly by way of an obiter dictum, that the evidence led by Vetrotex has not persuaded me that Western Australia is a clearly inappropriate forum. I discharge the orders made by Master Sanderson on 28 June 2002 and 29 August 2002 granting leave for the first, second and third defendants to effect service of a third party notice on Saint-Gobain Vetrotex Espana SA.