The Owners - Strata Plan No 87231 v 3A Composites GmbH - [2019] FCA 811 - FCA 2019 case summary

Federal Court of Australia|2019-03-14|Before: Wigney J

Pursuant to rr 10.43(2) and 10.44(1) of the Federal Court Rules 2011 (Cth), the applicant be given leave to serve the amended originating application and statement of claim filed in this proceeding on the first respondent, the German corporation, with the business address at Kiefernweg 10, 49090, Osnabrück, Germany;
Service be in accordance with Art 5 of the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965, by request for service abroad in accordance with the Federal Court Form 25 and otherwise as provided for by rr 10.64 to 10.68 of the Federal Court Rules 2011 (Cth).
Costs be reserved.
The matter be listed for Case Management Hearing at 9.30am on 2 May 2019. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WIGNEY J: 1 The applicant in this matter, The Owners - Strata Plan Number 87231, has commenced representative proceedings pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) against two respondents. The first respondent, 3A Composites GmbH, is a corporation incorporated in Germany under German law. Its registered office is in Osnabrück, Germany. The second respondent, Halifax Vogel Group Pty Limited, is a company incorporated in Australia. 2 The applicant has applied for leave to serve its amended originating application and statement of claim on 3A Composites in Germany pursuant to rr 10.43 and 10.44 of the Federal Court Rules 2011 (Cth). It has also sought an order that service on 3A Composites be in accordance with Art 5 of the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matter done at the Hague on 15 November 1965 (Hague Convention), by request for service abroad in accordance with rr 10.64 to 10.68 of the Federal Court Rules. 3 For the brief reasons that follow, the applicant's application should be acceded to and it should be granted leave to serve 3A Composites in Germany in accordance with the Hague Convention.

The applicant's claim 4 The action commenced by the applicant concerns the supply of products commonly referred to as Aluminium Composite Panels or ACPs. ACPs are generally supplied for use, amongst other things, as cladding in the construction of commercial and residential premises. They generally consist of three laminates: two aluminium cover sheets and a core which may comprise polyethylene (PE) or a combination of PE and other materials. 5 The applicant claims that 3A Composites relevantly manufactured two ACP products the trade names of which were Alucobond PE and Alucobond Plus. For convenience those products will be referred to collectively as Alucobond Cladding. Alucobond Cladding was, on the applicant's case, manufactured by 3A Composites in Germany and imported into Australia by or on behalf of Halifax. 6 Alucobond Cladding was supplied in Australia for uses which included use as cladding for residential premises. The applicant alleges that, at times relevant to its claim, 3A Composites and Halifax represented to consumers in Australia that Alucobond Cladding was suitable for use in residential construction and was compliant with relevant building codes and standards for use on or in residential buildings, including as part of an external wall, or as an attachment to an external wall. 7 The applicant is the owners corporation of a residential building known as Shore Dolls Point Apartments (Shore Aparments). Shore Apartments is a four-storey building containing 17 apartments and a basement level carpark. The applicant is also the registered proprietor of those parts of the Shore Apartments which comprise common property for the purposes of the relevant strata scheme legislation. Shore Apartments was constructed by or on behalf of another company or companies. 8 The applicant claims that Alucobond Cladding was fitted on the common property of Shore Apartments during the construction of that building. Shore Apartments was, on the applicant's case, a type or class of building which relevant building codes or standards required to be non-combustible or fitted-out in a way that would not create any undue risk of fire spread. 9 The essence of the applicant's case against 3A Composites and Halifax is that Alucobond Cladding was not safe and was not fit for the purpose for which goods of that kind were commonly supplied. The applicant alleges, in that regard, that Alucobond Cladding was combustible due to its PE core and, when used as or fitted to the external walls of the Shore Apartments, was not capable of satisfying applicable building codes in respect of fire resistance. The applicant claims that when fitted on a building such as the Shore Apartments, there was a material risk that Alucobond Cladding would cause or contribute to the rapid spread and severity of a fire. 10 The applicant claims that the facts just summarised give it two statutory based causes of action against 3A Composites. The first cause of action is for breach of what is referred to as the guarantee as to acceptable quality created by s 54 of the Australian Consumer Law (ACL), which is Sch 2 to the Competition and Consumer Act 2010 (Cth) (CCA). Sections 54(1) to (3) of the ACL provide as follows: 54 Guarantee as to acceptable quality (1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are of acceptable quality. (2) Goods are of acceptable quality if they are as: (a) fit for all the purposes for which goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and (c) free from defects; and (d) safe; and (e) durable; as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3). (3) The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods. 11 Section 271 of the ACL provides that if a guarantee under s 54 applies to the supply of goods to a consumer, and the guarantee is not complied with, an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer. The applicant claims that it is an affected person because it acquired or derived title to the Alucobond Cladding from the developer of the Shore Apartments. 12 It should also be noted, in this context, that s 54 of the ACL refers to the supply of goods to a consumer. The meaning of "consumer" is given in s 3 of the ACL and relevantly includes a person who acquires goods which "were of a kind ordinarily acquired for personal, domestic or household use or consumption". 13 It is the applicant's case that either it or the developer of the Shore Apartments was a consumer for the purposes of the ACL because Alucobond Cladding was a product of a kind ordinarily acquired for personal, domestic or household use. That is said to be the case because Alucobond Cladding was marketed and supplied as being fit for use in the construction of residential premises. 14 The second statutory cause of action pleaded by the applicant is for breach of the implied warranty of merchantable quality in s 74D of the Trade Practices Act 1974 (Cth). Section 74D of the Trade Practices Act provides as follows: 74D Actions in respect of goods of unmerchantable quality (1) Where: (a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (b) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer; (c) the goods are not of merchantable quality; and (d) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not of merchantable quality; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction. (2) Subsection (1) does not apply: (a) if the goods are not of merchantable quality by reason of: (i) an act or default of any person (not being the corporation or a servant or agent of the corporation); or (ii) a cause independent of human control; occurring after the goods have left the control of the corporation; (b) as regards defects specifically drawn to the consumer's attention before the making of the contract for the supply of the goods to the consumer; or (c) if the consumer examines the goods before that contract is made, as regards defects that the examination ought to reveal. (3) Goods of any kind are of merchantable quality within the meaning of this section if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to: (a) any description applied to the goods by the corporation; (b) the price received by the corporation for the goods (if relevant); and (c) all the other relevant circumstances. 15 The applicant's case is that the Alucobond Cladding it acquired upon its acquisition of the Shore Apartments was not fit for purpose and therefore not of merchantable quality for the purposes of s 74D of the Trade Practices Act. 16 The applicant claims that it suffered loss or damage by reason of 3A Composites' failure to comply with the guarantee as to acceptable quality and, in the alternative, as a result of its breach of the merchantable quality provision. In short terms, the applicant alleges that it has been required by a relevant authority or agency to remove and replace the Alucobond Cladding at a cost likely to exceed $300,000. 17 It should also be noted, in the context of both these statutory causes of action, that the applicant alleges that its claims against 3A Composites have a jurisdictional nexus with Australia either because conduct relevant to its claims occurred in Australia, or because 3A Composites carried on business in Australia. I will return to those issues in due course. 18 As indicated at the outset, this is a representative proceeding. The group members are, in simple terms, persons like the applicant who own or have owned or had a leasehold interest in a building fitted with Alucobond Cladding and have suffered loss or damage because the cladding was not fit for purpose.

Leave to serve outside Australia: rules 10.41 to 10.44 of the Federal court rules 19 In simple terms, before an applicant is granted leave to serve an originating application on a respondent outside Australia, the Court must be satisfied of four matters which are set out in r 10.43(4) of the Federal Court Rules. 20 First, the proceeding must be a proceeding which falls within one or more of the kinds of proceeding specified in r 10.42 of the Federal Court Rules. 21 Second, the Court must have jurisdiction in the proceeding. 22 Third, the applicant must have a prima facie case for all or any of the relief claimed in the proceeding. 23 Fourth, insofar as the Hague Convention is concerned, the application must be accompanied by an affidavit which states the name of the foreign country where the person is to be served, the proposed method of service and that the proposed method of service is permitted by the Hague Convention. 24 The applicant relies, in support of its application, on an affidavit sworn on 13 March 2019 by its solicitor, Mr Blagoj (Bill) Petrovski, which exhibits a sizeable number of documents relevant to its claims.

Proceedings of a type specified in r 10.42 of the Federal Court Rules 25 As for the first requirement, it is readily apparent from the originating application, the pleading and Mr Petrovski's affidavit, that the proceeding is of a kind specified in r 10.42 of the Federal Court Rules. The present proceeding is a proceeding which falls within one or more of the following categories or descriptions: a proceeding based on a cause of action arising in Australia (item 1); a proceeding based on a contravention of an Act that is committed in Australia (item 12); a proceeding based on a contravention of an Act (wherever occurring) seeking relief in relation to damage suffered wholly or partly in Australia (item 13); a proceeding seeking any relief or remedy under an Act (item 15); or a proceeding in which the person to be served is a corporation that carries on business in Australia (item 18). I will return to the question of carrying on business in Australia in due course.

Whether the Court has jurisdiction 26 The Court plainly has jurisdiction in respect of the applicant's pleaded statutory causes of action under the ACL and the Trade Practices Act. I will return later in these reasons to deal with the question whether there is a relevant jurisdictional nexus with Australia.

Whether a prima facie case exists 27 In determining whether a prima facie case exists for the purposes of r 10.43(4)(c) of the Federal Court Rules, the Court need not exercise the kind of scrutiny that would occur in, for example, a no case to answer application at the conclusion of an applicant's case at trial. Rather, it is sufficient that there is placed before the Court material from which "inferences are open which, if translated into findings of fact, would support the relief claimed": Perdaman Chemicals & Fertilisers v Griffin Coal Mining Co Pty Ltd [2011] FCA 1425 at [14]. In short terms, a prima facie case may exist where it is shown that there is a controversy the resolution of which that warrants the use of the Court's processes and that justifies the involvement of the foreign respondent: see Santa Trade Concerns Pty Limited v Robinson [2016] FCA 1510 at [9]; Suzlon Energy v Bangad (No 3) [2012] FCA 123 at [35]. 28 The material that the applicant has relied on in support of this application establishes that it has a prime facie case for the relief sought by it for the purposes of r 10.43 of the Federal Court Rules. It is, in the circumstances, and having regard to the nature of this application, neither necessary nor desirable to provide detailed reasons for arriving at this finding. It suffices to say that the material relied on is capable of supporting inferences to the following effect that: 3A Composite's supply of Alucobond Cladding was subject to the guarantee of acceptable quality and the warranty as to merchantable quality in s 54 of the ACL and s 74D of the Trade Practices Act respectively; that Alucobond Cladding is a good of a kind ordinarily acquired for personal, domestic or household use or consumption and that the applicant (or the developer of the Shore Apartments) therefore fell within the definition of "consumer" for the purposes of s 3 of the ACL; that Alucobond Cladding was not fit for purpose or was not safe and 3A Composites therefore did not comply with the guarantee of acceptable quality and breached the warranty as to merchantable quality; and that the applicant was, and is, an affected person and suffered loss or damage by reason of 3A Composites' non-compliance with the guarantee of acceptable quality and its breach of the warranty as to merchantable quality. 29 The material relied on by the applicant in support of its application is also sufficient to establish that it has a prima facie case, for the purposes of r 10.43 of the Federal Court Rules, that some of the relevant conduct by 3A Composites occurred in Australia or, alternatively, that 3A Composites carried on business in Australia. It will, in due course, be necessary for the applicant to demonstrate either or both of those matters for the purposes of demonstrating a jurisdictional nexus in Australia for the purposes of s 5(1)(g) of the CCA. 30 In relation to the issue of whether 3A Composites engaged in any relevant conduct in Australia, it suffices to say that it is open to infer from the material relied on by the applicant that 3A Composites engaged in relevant conduct in Australia because the guarantee and warranty it supplied in relation to the Alucobond Cladding was to be performed in Australia and, if not complied with, any rectification would need to be carried out in Australia given that the product was used on buildings in Australia: see generally Vautin v BY Winddown Incorporated (formerly Bertram Yachts) (No 4) [2018] FCA 426 at 212-225. 31 In relation to carrying on business in Australia, it should be emphasised that the expression "carrying on business in Australia" is not defined but should, in the present context, be broadly interpreted: Bray v Hoffman-La Roche (2002) 118 FCR 1 at [59]-[64]. In general terms, a corporation does not need to have a place of business in Australia for it to relevantly carry on business in Australia. Rather, it need only engage in activities in Australia which have a repetitive and permanent character: Valve Corporation v Australian Competition and Consumer Commission (2017) 258 FCR 190 at [143]-[145] per Dowsett, McKerracher and Moshinsky JJ; Luckins (Receiver & Manager of Australian Trailways Pty Ltd) v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 at 178 per Gibbs J; Meyer Heine Pty Ltd v The China Navigation Company Ltd (1966) 115 CLR 10. 32 It is again unnecessary and undesirable to provide detailed reasons supporting the finding that there is a prima facie case, for the purposes of r 10.43 of the Federal Court Rules, that 3A Composites relevantly carried on business in Australia. It suffices to say that the material relied on by the applicant is capable of establishing the following facts: marketing material used in Australia in relation to Alucobond Cladding named 3A Composites as the manufacturer; the marketing material referred to compliance with Australian Standards; 3A Composites protected its intellectual property by registering the Alucobond trademark in its name in Australia; 3A Composites was described as Halifax's long-term partner and, indeed, traded under a name at various times which included the word Alucobond; and 3A Composites had allocated persons to provide advice and assistance to, or in respect of, the Australian market. Those facts, or a combination of some of them, are in turn capable of supporting the inference that 3A Composites carried on business in Australia, particularly by reason of its close relationship with Halifax as its Australian distributor of Alucobond Cladding. 33 It should be emphasised that the findings that have been made in relation to the applicant's prima facie case should not be taken to be findings of fact which will be determinative of the ultimate issues in the proceeding. It should also be noted, in this context, that it will be open to 3A Composites to apply to the Court for an order setting aside service, or discharging the order granting leave to serve the originating application overseas, pursuant to r 13.01 of the Federal Court Rules. The existence of a prima facie case, and the findings that have been made in that regard, may be revisited in any such application in light of any evidence adduced or submissions advanced on behalf of 3A Composites.

The Hague Convention 34 The affidavit of Mr Petrovski, relevantly, establishes that Germany is a party to the Hague Convention and that the proposed method of service, which includes translating the relevant documents into the German language, is permitted by the Hague Convention.

Conclusion 35 The applicant has made out each of the conditions or requirements in the Federal Court Rules for the grant of leave to serve 3A Composites in Germany in accordance with the Hague Convention. It is accordingly appropriate to make the orders sought by the applicant in that regard. I will accordingly make the following orders in relation to the interlocutory application: (1) Pursuant to rr 10.43(2) and 10.44(1) of the Federal Court Rules 2011 (Cth), the applicant be given leave to serve the amended originating application and statement of claim filed in this proceeding on the first respondent, the German corporation, with the business address at Kiefernweg 10, 49090, Osnabrück, Germany. (2) Service be in accordance with Art 5 of the Convention on the Service of Broader Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965, by request for service abroad in accordance with the Federal Court form 25 and otherwise as provided for by rr 10.64 to 10.68 of the Federal Court Rules 2011 (Cth). (3) Costs be reserved. (4) The matter be listed for Case Management Hearing at 9.30am on 2 May 2019. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.

Competition and Consumer Law Act 2010(Cth)ss 3, 5

Trade Practices Act 1974(Cth)s 74D

Federal Court Rules 2011(Cth)rr 10.41, 10.42, 10.43, 10.44, 10.64, 10.65, 10.66, 10.67, 10.68, 13.01

The Owners - Strata Plan No 87231 v 3A Composites GmbH

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