This is an application made by way of Notice of Motion whereby Trencor Jetco Inc ("Jetco") seeks to set aside the Application by which the proceeding was commenced and the service of that Application made upon it in the United States of America. Jetco is the first respondent to that proceeding. The second respondent Mole Engineering Pty Ltd ("Mole"), an Australian company, is not concerned with the present motion.

2. The proceeding is brought by two applicants, Tycoon Pty Ltd ("Tycoon") and Kangarilla Pty Ltd ("Kangarilla"), both Australian companies. There is a business relationship between these two companies. They are involved in the construction of drains to relieve soil salinity in rural areas within Western Australia. Kangarilla has apparently been in existence for some years. Tycoon was incorporated only after the initial discussions regarding the transaction out of which this proceeding arises.

3. Jetco is based at Grand Prairie, Texas. Included in its business is the design, manufacture and supply of machines known as canal trenchers. The management of Kangarilla apparently believed that a canal trencher would provide them with a more efficient method of digging drainage canals. Accordingly, in April 1988 two representatives of Kangarilla, John Kimber and Neil Henning, visited Grand Prairie for discussions with representatives of Jetco. They were accompanied by David Braidwood, an employee of Mole. During that visit there were lengthy discussions as to the possibility of Kangarilla, or a company formed by it, acquiring a Jetco trencher. It is common ground that the machine was to be custom-built for the company and that Mr Kimber and Mr Henning outlined their requirements in some detail. But there is a dispute as to what those requirements were. According to Mr Kimber and Mr Henning the Jetco representatives made representation as to their company's ability to meet those requirements. These two men also state that they took the opportunity, during the course of their visit but in the absence of Mr Braidwood, to explore with Albert Gilbert of Jetco the possibility of by-passing Mole and thereby obtaining a cheaper machine. But Mr Gilbert replied that this would not be arranged as Jetco was committed to paying Mole a two per cent commission in relation to any sales Jetco made in Australia.

4. Mole subsequently forwarded to Kangarilla a document which purports to be a copy of a quotation issued to it by Jetco quoting a price of US$693,000. On an unidentified date prior to 4 January 1989 Tycoon, which had recently come into existence, placed an order with Mole for the supply of the machine and paid $100,000 deposit. According to a letter from Mr Braidwood to Mr Kimber dated 4 January 1989, Mole had placed an order with Jetco on 25 November 1988.

5. It had apparently been contemplated by all parties that the new machine would be trialled at Grand Prairie before delivery. Arrangements were made for Mr Kimber, Geoff Reynolds of one of the applicant companies, and Mr Braidwood to attend these trials. They were held late in May 1989. But, in the view of Mr Kimber, the trencher did not perform satisfactorily. He made a number of detailed criticisms to Mr Albert Gilbert. Mr Albert Gilbert suggested that Mr Kimber speak to Jerry Gilbert, the Jetco President, about the possibility of Jetco sending to Australia a Mr Nowels, a technician, who would make all final adjustments and stay with the machine until Tycoon was fully satisfied. This offer was apparently made by Mr Jerry Gilbert but, according to Mr Kimber, he did not immediately accept it. He said that the conversation terminated on the basis that Jetco would notify Tycoon, through Mole, when all the required modifications were made and that Tycoon would then decide whether to accept Jetco's offer to send Mr Nowels rather than have further trials in the presence of its representatives.

6. Mr Kimber says that, after his return to Australia but before he received notice that the machine was ready, he informed Mr Braidwood that Tycoon wished to test the trencher again before accepting delivery. However, the machine was shipped to Australia without prior notice to Tycoon.

7. After the trencher arrived in Australia there were discussions between Mr Kimber and Mr Smallwood of Mole about the matters of delivery and payment. Mr Smallwood insisted on payment before delivery. Mr Kimber wished to test the machine before paying the outstanding balance. Finally, the two men agreed that Tycoon would immediately pay the balance owing but only upon the basis of the offer made by Mr Jerry Gilbert in Grand Prairie. In fact Mr Nowels came to Australia. He spent some weeks with the machine but he was unable to get it to perform satisfactorily. He departed from Australia in December 1989. According to Mr Kimber and Mr Henning, the machine was subsequently made to operate more efficiently but it has never operated in accordance with the promises made to them in Grand Prairie, thereby causing the applicants substantial losses.

8. This proceeding was commenced on 24 April 1991. Lee J subsequently gave leave to the applicants to serve the originating process, the Application, upon the first respondent in the United States. But this entitlement was subject to the right of that respondent to move to set aside the service as against it: see Order 9 rule 7 of the Federal Court Rules. The rationale of this rule is that a decision to grant leave must necessarily be made in the absence of the affected respondent; fairness therefore requires that the respondent have the opportunity to put before the Court any additional facts or arguments which might suggest that leave ought not to have been granted. Although an application under Order 9 rule 7 results in a review of the original decision to grant leave, it is a rehearing conducted on the basis of additional materials. The fact that, upon the rehearing, a judge concludes that the service ought to be set aside is no indication that the initial order was incorrectly made, having regard to the position which then appeared.

9. In determining whether service should be set aside, it is critical to consider whether the evidence demonstrates compliance with rules 1 and 2 of Order 8 of the Federal Court Rules. Rule 1 provides that, subject to rule 2, originating process may be served outside the Commonwealth of Australia in the following, amongst other cases:

"1 Subject to rule 2, originating process may be served outside the

Commonwealth in the following cases:

(a) where the proceeding is founded on a cause of action

arising in the Commonwealth;

(aa) where the proceeding is founded on a breach in the

Commonwealth 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 the Commonwealth;

(ab) where the proceeding:

(i) is for the enforcement, rescission, dissolution,

rectification or annulment of a contract; or

(ii) otherwise affects a contract; or

(iii) is for damages or other relief in respect of the

breach of a contract; and the contract:

(iv) is made in the Commonwealth; or

(v) is made on behalf of the person to be served by

or through an agent carrying on business or

residing in the Commonwealth; or

(vi) is governed by the law of the Commonwealth or of

a State or Territory;

(ac) where the proceeding is founded on a tort committed in

the Commonwealth;

(ad) where the proceeding is founded on, or is for the

recovery of, damage suffered wholly or partly in the

Commonwealth caused by a tortious act or omission,

wherever occurring;

...

(b) where the proceeding is founded on a breach of an Act,

where the breach is committed in the Commonwealth;

(c) where the proceeding is founded on a breach, wherever

occurring, of an Act, and is brought in respect of, or

for the recovery of, damage suffered wholly or partly in

the Commonwealth;

...

(g) where the proceeding is properly brought against a person

served or to be served in the Commonwealth and the person

to be served outside the Commonwealth is properly joined

as a party to the proceeding;

...

(n) where the proceeding, so far as concerns the person to be

served, falls partly within one of the foregoing

paragraphs and falls, as to the residue, within one or

more of the others of the foregoing paragraphs."

10. Rule 2(2) requires the Court to be satisfied, in granting leave to serve originating process outside Australia, that the Court has jurisdiction, that the proceeding is one to which rule 1 applies and that "the applicant has a prima facie case for the relief which he seeks": note para.(c).

11. Before turning to the claim made in the present case I make four observations about rules 1 and 2. First, most of the paragraphs in rule 1 use the words "the proceeding is founded on". This language is apposite to a case based on a single cause of action. It is awkward in its application to a case where the claim is based on more than one cause of action. However, it is clear from para.(n) that a proceeding is not taken out of rule 1 simply because it depends upon multiple causes of action. Paragraph (n) specifically refers to a proceeding which falls partly within one paragraph of the rule and partly within another; so there is no problem in such a case. Where the problem does arise, and this is the second point, is in a case where the proceeding is partly based on causes of action falling within one or more of the preceding paragraphs and partly on one or more causes of action falling outside those paragraphs. Counsel for the first respondent submits that, in such a case, service of so much of the Application as depends upon an unitemised cause of action must be set aside. Although the matter is not free from difficulty, I think that this submission is correct. The "proceeding" is, of course, the case itself; not any particular pleading or other document. No doubt it can be said that a case "is founded on" a particular cause of action notwithstanding that the pleader has elected also to rely upon an additional cause of action. But in such a situation it is really more correct to say that the case is partly founded upon the itemised cause of action and partly upon an unitemised cause of action. Such an approach would be consistent with para.(n). No doubt there is considerable advantage, if a particular respondent is to be brought before the Court on a cause of action which does fall within rule 1, in simultaneously dealing with any other causes of action which the same applicant may wish to litigate against that respondent. But that consideration of convenience has to be weighed against the possible embarrassment to international comity which might result from an Australian court exercising jurisdiction against a foreigner in respect of a cause of action which has no real connection with Australia.

12. The third point arises out of rule 2(2)(c). In terms, the paragraph does not require an applicant to demonstrate a prima facie case in respect of each of the causes of action upon which the proceeding is founded or any of them. Read literally, the rule merely requires that the applicant demonstrate a prima facie entitlement to the particular relief which he or she claims; that is to say, claims in the proceeding as a whole. On this reading, if an applicant claims damages, it is necessary only to show a prima facie entitlement to damages, not a prima facie case in respect of each cause of action. However, I have come to the conclusion that rule 2(2)(c) should be not read this way. I think that the intent of the paragraph is to enable an extraterritorial respondent to restrict the litigation against him or her to causes of action in connection with which the applicant can show a prima facie case. It would be burdensome, sometimes almost absurd, to allow the litigation of causes of action which the applicant could not show to have substance simply because the applicant joined with those claims some other, perhaps trifling, claim which did have merit. As I have pointed out, rule 1 is substantially drafted upon the assumption of only one cause of action in a proceeding. Particularly under those circumstances, I think that it is justifiable to read para.(c) distributively as referring to a prima facie case for the relief which the applicant seeks on each cause of action. But it is important to distinguish between a prima facie case on each cause of action and prima facie proof of each particularised allegation. The paragraph certainly does not require the latter.

13. Finally, in Merpro Montassa Ltd v Conoco Special Products Inc [1991] FCA 70; (1991) ATPR 41-096 at 52,541 Heerey J alluded to the approach which the Court should take in considering whether an applicant has demonstrated a prima facie case for the desired relief:

"It need only be added that the requirement of O.8 r.2(2)(c) has to be

met at the outset of the proceedings. It does not suggest the kind of

scrutiny that would occur in a submission of no case to answer following

the closure of an applicant's case at trial. As a matter of

practicality, one is here concerned with, in Sheppard J.'s words,

'evidence which discloses in a little detail what the facts are ...'

(See Stanley Kerr Holdings Pty Ltd v Gibor Textile Enterprises Ltd

(1978) 2 NSWLR 372 at 375.) It may be therefore that a court at this

stage might draw inferences more readily in favour of an applicant,

bearing in mind, amongst other things, that the applicant will not have

had the advantage of discovery, subpoena and other procedural aids to

the making out of a prima facie case at trial."

14. The Statement of Claim makes a number of allegations against the first respondent. Four different causes of action are pleaded: breach of s.52 of the Trade Practices Act 1974, breach of contract, negligence and breach of the Sale of Goods Act (W.A.). The last claim is now not pressed. The major contention between the parties arises out of the s.52 claim, which I will momentarily put aside. There is, I think, little doubt that, insofar as the proceeding is founded upon the contract and negligence claims, leave was properly granted to effect service outside Australia.

15. The gist of the contract claim is that it was agreed between the applicants and Jetco that, in consideration of Tycoon accepting delivery of the trencher and effecting payment before trials in Australia, Jetco would make Mr Nowels available to carry out all necessary adjustments and to stay with the machine until it was operating satisfactorily. It will be recalled that this proposition was first put to Mr Kimber by Mr Jerry Gilbert during their discussions at Grand Prairie. It was not then accepted and I think that counsel for the first respondent is correct in saying that the evidence does not establish a direct communication between the applicants and Jetco forming a contract to that effect. But it does establish communications between Mr Kimber and Mr Smallwood during which such an arrangement was agreed. And whatever may be Mole's general authority to bind Jetco, the inference is irresistible that Mole had Jetco's authority to make this arrangement. Mole had no control over Mr Nowel's movements. For him responsibly to make that promise, Mr Smallwood must have had authority from Jetco. It is noteworthy that, although he has sworn two affidavits in which he canvasses the facts in some detail, Mr Jerry Gilbert does not suggest that this arrangement was made without Jetco's authority. The contract claim clearly falls within paras. (aa) and (ab) of rule 1, the agreement between Mr Kimber and Mr Smallwood having been made in Australia.

16. The situation in regard to negligence is even clearer. It is common ground that the subject machine was custom-built for the applicants, by a manufacturer which held itself out as a world leader in the design and construction of trenchers. It is also common ground that, whatever the content of those instructions, the first respondent received detailed instructions as to the applicants' requirements. Under those circumstances, the first respondent clearly came under a duty of care towards the applicants even though, as a matter of contract law, the sale was to be made by Jetco to Mole. Jetco knew that Mole would resell to Kangarilla or its nominee and that the ultimate purchaser would be relying on Jetco's expertise in designing and constructing a machine meeting the disclosed requirements. According to the evidence of Mr Kimber and Mr Henning, which is contested but which must be taken into account for the purposes of this application, the stated requirements included numerous characteristics which, again according to their evidence, the delivered machine failed to meet. If their evidence is accepted, the negligence claim must succeed. The damage was sustained when the delivered machine failed to meet the stipulated requirements, that is within Australia. Accordingly, I think that it is correct to say that "the proceeding is founded on a tort committed in the Commonwealth", the tort of negligence being "committed" when it is completed by the suffering of damage. If that is correct, the claim falls within para. (ac) of rule 1. But it does not matter whether or not that is so. It plainly falls within para. (ad).

17. I pause at this point, in my consideration of rule 1, to remark that, on the evidence before me, there is clearly a prima facie case for damages for negligence. As I say, important elements of their evidence is disputed, but the evidence of Mr Kimber and Mr Henning regarding the notification of their requirements and the deficiencies in the machine is not inherently improbable. It constitutes a prima facie case entitling one or both of the applicants to damages. Whether that evidence will prevail at the trial remains to be seen. But it is clearly sufficient to discharge the burden imposed by rule 2(2)(c).

18. I think that the applicants have also established, on a prima facie basis, damage flowing from the breach of the alleged contract. It may prove difficult to disentangle the damage sustained as a result of Mr Nowels' failure to "stay with" the machine until it was operating satisfactorily from the damage which flowed from its apparently defective design and/or construction. But it is common ground that Mr Nowels was a competent mechanic, knowledgeable in the ways of trenchers and that some improvement in performance was eventually effected by others. It seems reasonable to infer that this result would have been achieved earlier if Mr Nowels had continued to work on the machine. And, as his services were being provided free of cost to the applicants, there would certainly have been a saving of expense.

19. As it seems to me, the fate of the s.52 claims depends upon the question whether Jetco is bound by the Trade Practices Act. If it is, the case would come within para.(c) of rule 1, the damage having been suffered in Australia. It would not matter that the oral misrepresentations of which the applicants complain were made in the United States. I interpolate that the applicants also complain of misrepresentations contained in a brochure apparently issued by Jetco but provided to them by Mole. If a court concluded that, in passing on this brochure, Mole was acting on behalf of Jetco, the case would fall within para.(b) as well. But there would still remain a question whether Jetco was bound by the Trade Practices Act.

20. That question turns on s.5(1) of the Act which reads:

"5.(1) Parts IV and V extend to the engaging in conduct outside

Australia by bodies corporate incorporated or carrying on

business within Australia or by Australian citizens or

persons ordinarily resident within Australia."

21. Jetco was not incorporated in Australia. But the applicants contend that, at material times, it carried on business in this country. They put the contention in two ways: first, that Jetco directly carried on business in Australia; alternatively, that it did so through Mole.

22. In aid of the first submission, counsel refer to a number of documents which are in evidence. The earliest of them is an advertisement which was published in an Australian magazine called "Resources" in 1986. The advertisement occupied a full page. It is headed "Trenchers for all reasons and all seasons". It includes three photographs of trenchers in action with captions supplying some technical detail. At the bottom is the name "Trencor Jetco" with that company's Texas address and telephone number. No Australian agent or contact person is identified. Secondly, there are copies of letters, or extracts of letters, between Mole and Jetco relating to a visit to Australia by Mr Jerry Gilbert in late 1989 or early 1990. It is apparent from these letters that Mr Gilbert was expected to visit both South Australia and Western Australia, in conjunction with Mole representatives, for the purpose of supporting that company's sales efforts. Furthermore, Jetco was to send one or more of their engineering staff to deal with operational problems on one or more already delivered machines. Finally, there is a diary note, written by a Mole employee, concerning various meetings which he attended in company with Mr Jerry Gilbert, and sometimes Mr Smallwood, in connection with possible trencher sales. It is clear from the diary note that Mr Gilbert was ready to give his time to assist Mole's sales efforts.

23. Notwithstanding this evidence, I do not think that the material presently before the Court establishes that, at relevant times, Jetco was directly carrying on business in Australia. The magazine advertisement was no doubt designed to stimulate Australian interest, but it invited readers to contact Jetco in America; in other words, to do business with the company in that country. The personal visits to Australia by Mr Jerry Gilbert and some Jetco technical staff are a more substantial matter. But those visits fall short of carrying on business in this country. As the High Court of Australia pointed out in Thiel v Commissioner of Taxation [1990] HCA 37; (1990) 171 CLR 338, continuity is fundamental to the notion of carrying on business. See especially per Dawson J at 347-348 and per McHugh J at 359. It is no doubt correct to say that the visits made to Australia by Mr Jerry Gilbert and the other Jetco representatives were made in the course of Jetco's business. But there is no evidence of repetitive visits and no continuity. Jetco never established an office or other business premises in Australia. It never had employees permanently stationed here.

24. In the course of argument reference was made to Vogel v R and A. Kohnstamm Ltd (1973) 1 QB 133. That was an unsuccessful application to register in the United Kingdom a judgment recovered in Israel against the respondent company. The application turned on the question whether the company had at relevant times carried on business in Israel. In the course of discussing that matter Ashworth J, at 143 quoted from the judgment of Buckley L.J. in Okura and Co Ltd v Forsbacka Jernverks Akttebolag (1914) 1 KB 715 at 718-719. Buckley C.J. said:

"In one sense, of course, the corporation cannot be 'here'. The

question really is whether this corporation can be said to be 'here' by

a person who represents it in a sense relevant to the question which we

have to decide. The point to be considered is, do the facts show that

this corporation is carrying on its business in this country? In

determining that question, three matters have to be considered. First,

the acts relied on as showing that the corporation is carrying on

business in this country must have continued for a sufficiently

substantial period of time. That is the case here. Next, it is

essential that these acts should have been done at some fixed place of

business. If the acts relied on in this case amount to a carrying on of

a business, there is no doubt that those acts were done at a fixed place

of business. The third essential, and one which it is always more

difficult to satisfy, is that the corporation must be 'here' by a person

who carries on business for the corporation in this country. It is not

enough to show that the corporation has an agent here; he must be an

agent who does the corporation's business for the corporation in this

country."

25. Some may think that it goes too far to insist that the acts relied on be performed at a fixed place of business. It would seem correct to say that an itinerant hawker carries on business in a country notwithstanding that he trades only from a moveable vehicle. I do not see why it should be different if the hawker, in these days of corporatisation, should choose corporate status. But, significantly, Buckley L.J. emphasised the need for continuity over a substantial period of time. That is lacking in this case, so far as Jetco's direct activities are concerned.

26. I turn to the applicants' alternative submission: that it carried on business through Mole. In Vogel at 143 Ashworth J suggested that the critical question, where it was contended that a company carried on business by an agent, was whether the person in question is "doing his business or doing the absent corporation's business? Conversely, are they doing business through him or by him?" Those questions present difficulty because the activities of the putative agent will normally serve the interests both of the agent and the company. I think that one needs to look at the whole of the evidence and determine whether the relevant activities are those of the agent, even though the company benefits, or whether they are truly those of the company, though effected by a different legal person. The question will usually be one of degree, the answer depending upon the nature of the agent's activities and the degree of domination of those activities by the company. Where the agent's only activities are related to the products or services of the company, this may indicate that the company is carrying on business by the agent. If it should happen that the agent is owned or otherwise legally controlled by the company, that conclusion may be strengthened. This was the situation in Amalgamated Wireless (Australasia) Ltd v McDonnell Douglas Corporation (1987) 77 ALR 537, a case where I concluded that an American company was carrying a business in Australia by its Australian subsidiary.

27. In the present case the evidence establishes that Mole is Jetco's "distributor". That word is not a term of art. It merely indicates a role in distributing the products of another, leaving open the manner in which that role is performed. The relationship has existed for some time. An advertisement in "The Earthmover and Civil Contractor" of February 1987 lists Jetco, the stated address being "Mole Engineering Pty Ltd" at premises in Sydney. Since the making of the agreements relevant to the present proceedings, Jetco and Mole have executed a formal distributorship agreement. In that agreement they state that their relationship is not one of principal and agent, but I leave that out of account as it post-dated the present problem. There is no question that Mole acted as Jetco's agent for some purposes. For example, it solicited customers and was involved in having Jetco satisfy them as to that company's ability to produce trenchers to meet their needs. It negotiated delivery details and was involved in servicing delivered machines. The evidence suggests that Mole was recompensed by receipt of a commission on sales made by Jetco to Australian customers. Although, in this case at least, the transaction took the form of a sale by Jetco to Mole and a further sale by Mole to Tycoon, it was not intended that Mole would re-sell at a profit. And despite the double transaction, Jetco has acknowledged that Tycoon is entitled to the benefit, if it be a benefit, of the manufacturer's guarantee issued in respect of the machine. Indeed, Mr Gilbert has argued that Tycoon is limited to the rights provided in the guarantee.

28. I do not think that the question whether Jetco carries on business in Australia by Mole is to be answered by saying that Mole is, for some purposes, the agent of Jetco. Many persons perform acts on behalf of others in the course of running their own business. It is necessary to look at Mole's business as a whole. The evidence is scanty, but there is nothing to suggest that Mole is controlled in the conduct of its business by Jetco, other than by its distributorship agreement. There is no evidence that either company has a proprietary interest in the other. Moreover, it seems that Mole's business is not limited to the sale and servicing of Jetco products. It does not even appear that this is a major component of its total activities. Upon the evidence presently available, even applying the Merpro approach, it seems to me that the true position is that Mole conducts its own business, one aspect of which is that of acting as Jetco's agent. To apply Ashworth J's words, Jetco does business "through" Mole. It does not do business "by" Mole. I conclude that Jetco's relationship with Mole does not mean that it carries on business in Australia. In my opinion Jetco is not caught by the Trade Practices Act; the s.52 claim must fail. It follows that, to this extent, the applicants have not established a prima facie case.

29. Having regard to the form of Order 9 rule 7 the appropriate order is to set aside the Application and the service of the Application upon the first respondent except to the extent that the Application is founded upon claims of breach of contract and negligence. The practical manner of dealing with the matter would be for the applicants to further amend their Statement of Claim so as to limit their claim to these two courses of action. I grant leave to make that amendment.

30. So far as costs are concerned, each party has had some success. The first respondent has succeeded in ridding itself of the s.52 claim. But it has fallen well short of its objective of being quit of the entire proceeding. I think that the balance of success lies with the applicants and that they should have one-half of the costs of the motion.

1. I set aside the Application and the service of the

Application upon the first respondent insofar as the

Application is founded upon any claim other than

breach of contract or negligence.

2. I grant leave to the applicants to further amend the

Statement of Claim in order to so limit their claim,

such amendment to be at the cost of the applicants.

3. I order the first respondent to pay to the applicants

one-half of the costs of this motion.