Kosmos Capital Pty Ltd v Turiya Ventures LLC

Service under r 10.28 - agreement as to manner of service 6 Rule 10.28(1) of the FCR provides as follows: If a respondent in a proceeding has agreed that an originating application or other document in the proceeding may be served on the respondent, or on another person for the respondent, in a way or at a place mentioned in the agreement, the document may be served in accordance with the agreement. 7 Kosmos submits that a written agreement styled 'Tolling Agreement' satisfies the requirements of this rule. Alternatively, Kosmos submits that an email exchange between the third respondent, Mr Kung-Faust, and a director of Kosmos, Mr Sheridan Hammond, gave rise to the necessary agreement. 8 The Tolling Agreement was executed by the parties on 15 and 16 April 2018. It says that it is effective on 13 April 2018. It is stated to be between the respondents and Jetmax, not Kosmos. However the definition of each party encompasses a wide variety of other persons, including the assigns of the named parties. As will appear below, Kosmos claims to be an assignee of Jetmax's rights under the agreement. 9 The Tolling Agreement provides that California law governs its construction, interpretation and enforcement (cl 14). No evidence was provided to me as to the principles of Californian law that would govern the construction of the agreement or notices said to have been given under it, so I will apply the rule that, in the absence of such evidence, the principles of this forum apply: Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331 at 372 [125], 411 [249] and 416-417 [267]. 10 The recitals say that Jetmax claims to be prepared to file a lawsuit against the respondents 'relating to Jetmax's payment to $2,438,000 [sic]', which is defined as the 'Jetmax Claims'. The recitals state that the parties 'desire to engage in compromise discussions without Jetmax filing the lawsuit, while giving comfort to Jetmax that it loses no rights by doing so'. The parties are said to be entering into the agreement 'to standstill on filing lawsuits while preserving their respective legal positions, and to toll all time-related defenses, whether at law or equity…'. Clearly by 'tolling' time-related defences in this context, the parties meant to suspend the running of time for the purposes of limitation and similar defences. It is not necessary for present purposes to decide whether the Tolling Agreement was effective to achieve that aim. 11 In its operative part, the Tolling Agreement provides that 'the statute of limitations is tolled on any and all claims by or against either Party' (cl 1). Each party agrees that it will 'standstill and forbear, and will refrain from filing or initiating any lawsuit or claim against the other Party, in any court or tribunal throughout the world, through the Termination Date' (cl 2). The agreement provides that the running of all applicable periods of limitations and similar defences are extended and tolled until a date defined as the Termination Date (cl 3). 12 Then, materially for present purposes, the Tolling Agreement provides in cl 4: If either Party files suit, the other Party waives its right to service of process, and should the filing Party choose not to serve process it may effectuate notice by delivering a copy of the filed lawsuit to the other Party under the notices provision in Section 6 of this Agreement. Upon that notice, the Party receiving notice will have only the same amount of time to respond to the lawsuit, under the rules of the forum where the lawsuit was filed, as though they had been served process personally on that day. Promptly upon the filing Party's request, the other Party will cooperate in completing and returning any forms required to evidence service of process or waiver of service of process such as US Courts form AO 399 (01/09) Waiver of the Service of Summons, or the equivalent in Western Australia, Cayman Islands or any other jurisdiction. 13 Clause 5 provides for the Termination Date which, in the absence of extension or earlier termination is 14 May 2018. There is no evidence of extension or early termination before me. 14 Clause 6 then provides: Any and all notices required or permitted under this Agreement shall be·in writing and shall be personally delivered or mailed via certified mail, return receipt requested, electronic mail or via Federal Express or another comparable overnight delivery service for next business day delivery, to the respective Parties at the following addresses unless and until a different address has been designated by written notice to the other Party: · Notice to [the respondents] shall be hand delivered or sent to: [address in Phoenix, Arizona, with email address] Notice to Jetmax shall be hand delivered or sent to: [address in Los Angeles, California, with email address] 15 Clause 7 also needs to be considered. It provides: This Agreement shall not be admissible into evidence in any subsequent action involving [the respondents] or Jetmax for any purpose other than to prove the contents of the document itself and its impact on any statute of limitations or other defense based on time. 16 I accept Kosmos's submission that the effect of this clause is to preclude reliance on the agreement by either party as somehow going to the merits of any claim litigated between them, for example as an admission of liability. The provision does not go further than that, so as to prevent reliance on the Tolling Agreement in the present circumstances. Reading it that way would rob the clause and the agreement as a whole of any sensible effect. 17 It follows that on its ordinary natural meaning, cl 4 of the Tolling Agreement is capable of being an agreement as to service for the purposes of r 10.28 of the FCR. However there are two obstacles to Kosmos relying on it in that way here. One is that Kosmos is not a party to the agreement. The other is that the documents that Kosmos claims to have served have not been served at the address for notice to the respondents that is set out in cl 6 of the agreement. 18 In relation to the first of these difficulties, Kosmos claims to be entitled to rely on the Tolling Agreement by reason of a deed of assignment between Jetmax and Kosmos which is undated but was executed on or about 16 November 2018. By the deed, Jetmax assigns to Kosmos all of Jetmax's right, title and interest in any and all debts that Jetmax is 'entitled to receive' from the respondents and each of them, and any and all choses in action that Jetmax has against the respondents and each of them (cl 1.1 definition of 'Chose in Action', cl 2, Schedule 1). A notice of this assignment signed on behalf of both Jetmax and Kosmos was served on the second respondent on 21 December 2018 and notices of the assignment were posted to each of the other respondents on 5 February 2019. 19 Assignable contractual rights are choses in action, are a species of personal proprietary right and can be transferred to a third party at law or in equity in accordance with the formal rules governing the transfer of such rights: Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40; (2006) 149 FCR 395 at 404 [32]. On the assumption that the law of Western Australia applies to the claimed assignment, there is a prima facie case available to Kosmos that Jetmax's rights under cl 4 of the Tolling Agreement have been effectually assigned to Kosmos, including, arguably, by force of s 20(1) of the Property Law Act 1969 (WA). For the purposes of these reasons I will assume, without deciding, that this assignment has occurred. 20 Even so, the question remains of whether there must be an agreement between the respondent and the applicant in order for r 10.28(1) to have effect. Here, the respondents have entered into no agreement with the applicant, Kosmos. Even if Jetmax's choses in action have been assigned to Kosmos, that does not make Kosmos a party to the Tolling Agreement. 21 Be that as it may, there is no express requirement in r 10.28(1) that the necessary agreement must be between the respondent and the applicant - all that is required is that the respondent 'has agreed' that service may be effected in a certain way. It is arguable that a facultative provision such as r 10.28(1) does not require that the agreement of the respondent must have been entered into with the applicant. I will therefore also assume, without deciding, that for the purposes of the rule the respondents have agreed by the Tolling Agreement that an originating application or other document, in proceedings that include the present action, may be served on them, or on another person for them, in a way or at a place mentioned in the agreement. 22 I do not need to reach any conclusion as to the correctness of those assumptions because in my view, the second obstacle identified above presents a more serious problem for Kosmos in the present application. It is clear that the waiver of service of process in cl 4 of the Tolling Agreement is only effective if a copy of each of the documents commencing the proceeding is delivered in accordance with the notices provision of cl 6. I did not understand Kosmos to be contending otherwise. The difficulty is that cl 6, in terms, requires notice to the respondents to be hand delivered or sent to what appears to be a law firm in Phoenix, Arizona. There is no suggestion in the evidence that notice has been given in that way. If it were, it may be that the leave of the Court to serve the documents outside Australia would be required, for example under FCR r 10.43. 23 Instead, Kosmos relies on an email exchange between Mr Hammond and Mr Kung-Faust as designation of a different address for service of notices on the respondent, effective for the purposes of cl 6. 24 On 1 March 2019, Mr Hammond emailed Mr Kung-Faust, forwarding an email from Mr Hurley and saying 'See the serving papers'. The subject matter of the email appears to have been 'Service of Claim on Zane Kung-Faust'. The email from Mr Hurley referred to attempts made to serve 'the documents' on Mr Kung-Faust at a property in Bomaderry, New South Wales, and suggested that Mr Hammond 'forward a copy of the attached documents to Zane directly by email, to bring the Court documents to his attention, whilst we continue to effect formal service' (emphasis in original). 25 Mr Kung-Faust replied to Mr Hammond's email on the same day saying, 'There are no attachments. Could you please resend. The address is also correct as mentioned. Cc'd is our Australian counsel Mike Hales. His details for reference below…'. Mr Hales's contact details were then given. He is a partner at Minter Ellison in Perth. He was copied in as a recipient of the email, as were the fourth respondent Mr Iyengar and two solicitors for Kosmos (and another person whose role and position are not revealed by the evidence). 26 Then, within two minutes of Mr Kung-Faust's email, Mr Hammond emailed the originating application, statement of claim and genuine steps statement in these proceedings to Mr Kung-Faust. He did so by forwarding Mr Hurley's original email with the attachments. The only recipients of the forwarding email apart from Mr Kung-Faust were two solicitors for Kosmos. 27 On the same day Kosmos's solicitors forwarded Mr Kung-Faust's email to Mr Hales, asking whether he had instructions to accept service on behalf of the respondents. On 5 March 2019 Mr Nicholas Brown, a solicitor for Kosmos, spoke to Mr Hales and asked him whether he had instructions to accept service. Mr Brown emailed the originating application, statement of claim and genuine steps statement to Mr Hales on the same day and asked for confirmation as to whether Mr Hales had instructions to accept service on behalf of the respondents. 28 Mr Hales replied by letter dated 11 March 2019 confirming that Minter Ellison acted for all four respondents, but indicating that the firm did not have instructions to accept service on behalf of any of the respondents. The letter also raised an issue concerning the content of the statement of claim. 29 Kosmos now relies on Mr Kung-Faust's email to Mr Hammond of 1 March 2019 as designation for the purposes of cl 6 of the Tolling Agreement of a different address for the provision of notices pursuant to the agreement. 30 In construing any unilateral contractual notice, the law favours a commercially sensible construction, and words will be interpreted in the way in which a reasonable commercial person would construe them, having regard to what Lord Steyn, in Mannai Investment Co. Ltd v Eagle Star Life Assurance Co. Ltd [1997] AC 749 at 768, called 'the contextual scene'. This standard is hostile to technical interpretations and undue emphasis on niceties of language: Mannai at 771 (Lord Steyn). However such notices, operating as they do unilaterally to alter the rights of the parties, must comply strictly with the terms of the agreement: Mannai at 773 (Lord Hoffmann). 31 Stating the principle in this way in the present case begs the question as to whether Mr Kung-Faust's email of 1 March 2019 was a unilateral contractual notice, that is, a notice given for the purposes of the Tolling Agreement, at all. However I see no reason why that question should be approached any differently. That is, it is to be answered objectively by reference to what a reasonable commercial person with knowledge of the terms of the Tolling Agreement and any relevant objective context would conclude is the purpose and effect of the email. 32 Applying that standard here, in my view Mr Kung-Faust's email does not designate any address for the purposes of the notice provisions of the Tolling Agreement. The reasons for that view can be stated simply. The email does not say that it is given under or for the purposes of the Tolling Agreement. It does not say that it is designating any address for notices under the Tolling Agreement. It does not refer to the Tolling Agreement at all. 33 Construed objectively in context, Mr Kung-Faust's email is, at most, asking that when the attachments that were missing from Mr Hammond's email are sent to Mr Kung-Faust, Mr Hales be copied in. Even that is only implied. There is no need to construe that as somehow referring to the Tolling Agreement in order for Mr Kung-Faust's request to be given full and sensible effect. I do not see in it any further statement, express or implied, that henceforth notices to the respondents under the Tolling Agreement are to be sent to Mr Hales. 34 One must avoid an unduly technical approach the interpretation of the email. Also, allowance may be made for the fact that a reasonable commercial person would not expect a communication changing an address for notices under an agreement to be construed as strictly as a communication with more ostensibly drastic consequences, such as termination of the agreement. Nevertheless, in the absence of any reference to the Tolling Agreement at all, Mr Kung-Faust's email cannot be read as having any unilateral effect for the purposes of that agreement. 35 There is also a question as to whether the alleged designation was ineffective because it was, itself, not sent to the address set out in the notice provisions in cl 6 of the Tolling Agreement. However there is no need to consider that issue, given my view as to the insufficiency of the content of the communication. 36 A further difficulty with Kosmos's reliance on Mr Kung-Faust's 1 March 2019 email is that there is little evidence that he had either the intention or the authority to designate a different address on behalf of the other three respondents. As to intention, the reference to 'our Australian counsel' is ambiguous. There is no indication of to whom Mr Kung-Faust was referring by using the collective pronoun. The word 'our' is equally capable of being a loose reference to Mr Kung-Faust alone, and the subject heading of the email ('Service of Claim on Zane Kung-Faust') supports that construction. 37 As to authority, while Mr Kung-Faust copied in Mr Iyengar, it is not clear from the evidence whether he added Mr Iyengar as an addressee or whether Mr Iyengar was already copied in to Mr Hammond's first email. In any event, given the ambiguity of Mr Kung-Faust's email, nothing can be inferred from Mr Iyengar's subsequent silence. 38 It is true that ten days after the email, Minter Ellison confirmed that they acted on behalf of all four respondents. But at the same time they said that they had no instructions to accept service, so the inferences that may be drawn from their letter of 11 March 2019 are limited. Kosmos also points to the fact that Mr Kung-Faust and Mr Iyengar executed the Tolling Agreement as 'Managing Partners and Directors' of the corporate respondents, but that does not establish that any one of them had authority by himself to bind the companies, let alone to bind each other. 39 Notice of the originating application, statement of claim and genuine steps statement have not been provided at any address designated under or for the purposes of cl 6 of the Tolling Agreement, so those documents have not been served in accordance with the Tolling Agreement for the purposes of r 10.28 of the FCR. 40 Kosmos submitted in the alternative that Mr Kung-Faust's email of 1 March 2019 was an offer to accept service of the documents on behalf of the respondents by email to him and to Minter Ellison. That offer, it is submitted, was accepted by Mr Hammond's subsequent email to Mr Kung-Faust attaching the documents, and by Mr Brown's email of 5 March 2019 to Minter Ellison, giving rise to the necessary agreement. 41 It is not clear from the words of r 10.28 whether the reference to agreement requires a legally binding agreement, supported by consideration, or refers to a non-binding consensus of some sort. In Howard v National Bank of New Zealand Ltd [2002] FCA 1257; (2002) 121 FCR 366 at 378 [36], Drummond J found in relation to the predecessor provision, namely O 7 r 14 of the Federal Court Rules 1979 (Cth), that in so far as it required a binding agreement, the requirement was satisfied in that case by a statement from the respondents' lawyers that they had instructions to accept service, and the applicants' lawyers acting on that statement by serving the documents on the respondents' lawyers. 42 Here, however, the submission founders, once again, on the content of Mr Kung-Faust's email. In Howard at 371 [10], Drummond J noted that the purpose of service of originating process on a respondent is to enliven the Court's jurisdiction to entertain the action against that respondent, and held that this was also the effect of O 7 r 14, the predecessor to r 10.28. It is one thing to ask (implicitly) that documents be emailed to a person. It is quite another to say that emailing the person will be effective service for the purposes of invoking the jurisdiction of the court. In my view, Mr Kung-Faust's email can only be fairly read as doing the first of these things. That is especially so given the context provided by Mr Hurley's email which, as I have said, suggested that the documents be brought to Mr Kung-Faust's attention while Kosmos's solicitors continued to effect formal service. 43 In addition, for reasons I have given, the evidence is insufficient to establish that Mr Kung-Faust was authorised to agree to the manner in which service could be effected on the other respondents. 44 I will not make an order stating that under r 10.28 of the FCR, service has been effected. I doubt the utility and appropriateness of making such an order anyway, as it is akin to a declaration in circumstances where other parties affected have not been heard. But since the requirements of the rule have not been met, I do not need to take that any further.

Deemed service on the third respondent 45 Rule 10.23 of the FCR provides that: A party may apply to the Court, without notice, for an order that a document is taken to have been served on a person on a date mentioned in the order if: (a) it is not practicable to serve a document on the person in a way required by these Rules; and (b) the party provides evidence that the document has been brought to the attention of the person to be served. 46 'Without notice' is defined in the Dictionary at Sch 1 to the FCR to mean 'without serving or advising another party or other person of an application to be made to the Court'. 47 The order sought under this rule is supported by evidence in Mr Hurley's affidavits. On 25 February 2019 a process server tried to effect personal service on Mr Kung-Faust at an address in Manly, New South Wales. Documents filed with the Australian Securities and Investments Commission show that as Mr Kung-Faust's address. But when the process server went to the property there appeared to be no one there, and the process server learned from a neighbour that the occupants had recently moved out. 48 There is a title search indicating that Mr Kung-Faust was the registered proprietor of a property in Bomaderry, New South Wales. Two attempts were made to serve him there on the morning of 28 February 2019. On each occasion there was no answer to knocks on the door, and the blinds were closed. The property was on the market at the time, and from a subsequent title search it appears it has since been sold. 49 The agent of the process server has also made three attempts to telephone Mr Kung-Faust on his mobile telephone number. Each time there was no answer and the call diverted to message bank, where a message was left. 50 In the context of r 10.23(a), the word 'practicable' has a wide meaning which will depend on the circumstances of the particular proceeding: Australian Securities and Investments Commission v China Environment Group Ltd [2013] FCA 286 at [11]-[15]. Rule 10.23 does not require the applicant to prove the impossibility of service of documents upon a party in accordance with the rules, or that further attempts to effect service in accordance with the rules would be futile or not sensible or feasible: Speedo Holdings B.V. v Evans [2011] FCA 1089 at [12]. The question is not whether reasonable effort has been shown by the applicant over a particular period, but whether at the date on which the application regarding service is made, the applicant, using reasonable effort, is unable to serve the respondent personally: Foxe v Brown [1984] HCA 69 at [16]; (1984) 58 ALR 542 at 547 as applied in O'Neil v Acott (1988) 59 NTR 1 at 2. Evidence of attempts to serve, attempts to speak by telephone and lack of knowledge of whereabouts will be relevant to the question of practicability: see eg Ross v Cotter [2015] FCA 310 at [2]. 51 In the present case, I infer from the several unsuccessful attempts to serve and contact Mr Kung-Faust which I have summarised above, as well as from his apparent unwillingness to instruct Minter Ellison to accept service on his behalf (evidenced by Minter Ellison's letter of 11 March 2019), that it is not practicable to serve him. 52 The email correspondence I have summarised above establishes that the criterion in r 10.23(b), evidence that the document has been brought to the attention of the person to be served, has been satisfied. 53 I will therefore order that pursuant to r 10.23 of the FCR, the originating application, statement of claim and genuine steps statement are taken to have been served on the third respondent. The rule requires me to fix a date on which the documents are taken to have been served. I will fix 1 March 2019, as that was when the documents were brought to Mr Kung-Faust's attention. Kosmos must provide a copy of the orders and these reasons to Mr Kung-Faust by emailing him, as well as emailing them to Mr Hales. I will extend the time under r 16.32 of the FCR within which Mr Kung-Faust is required to serve a defence to within 28 days after provision of the orders and reasons in accordance with that direction. I will reserve the question of costs so that Mr Kung-Faust will have an opportunity to make submissions on that question. I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jackson.

SCHEDULE OF PARTIES WAD 96 of 2019 Respondents Fourth Respondent: RAVI IYENGAR