Thermasorb Pty Limited v Rockdale Beef Pty Limited and Ors

Thermasorb Pty Limited v Rockdale Beef Pty Limited and Ors - [2005] NSWSC 361 - NSWSC 2005 case summary — Zoe

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The District Court Proceedings 3 In District Court proceedings No. 4552 of 2003, commenced by way of Ordinary Statement of Claim filed in September 2003 ("the District Court proceedings"), Rockdale Beef sues Danaflex for breach of contract. Rockdale Beef operates an abattoir at Yanco in New South Wales and entered into a contract with Danaflex for the supply of Maraflex tubing and absorbent pads. The pads are used to absorb excess blood from large cuts of meat. Rockdale Beef alleges that the pads were defective and failed to comply with the condition of the contract pursuant to the Sale of Goods Act 1923 (NSW). The proceedings as between Rockdale Beef and Danaflex are confined to allegations of breach of contract. Rockdale Beef seeks damages in the order of $237,000.00. 4 Danaflex joined Thermasorb in the District Court proceedings by way of Cross Claim filed on 24 September 2004 and seeks damages for breach of contract, in negligence and for breaches of the Sale of Goods Act 1923 (NSW) and the Trade Practices Act 1974 (Cth). 5 On 23 December 2004, Thermasorb served a draft Cross Claim on Rockdale Beef and Danaflex. That draft Cross Claim named Itochu and Sumitomo Seika Singapore Pte Ltd ("Sumitomo") as Second and Third Cross-Defendants respectively. 6 On 18 January 2005, Sidis DCJ made an order in the District Court granting Thermasorb leave to file any Cross Claim within 28 days. 7 On 7 February 2005, a Cross Claim naming Itochu and Sumitomo as Second and Third Cross Defendants, was filed in the Sydney District Court. On 11 February 2005, the Second and Third Cross Claim was served by Thermasorb on Rockdale Beef and Danaflex. 8 It appears from the evidence before me, that absorbent pads for use in the meat export industry were manufactured by Thermasorb and supplied to Danaflex under contract. It appears that polymer within the absorbent pads was manufactured by Sumitomo and supplied to Itochu which, in turn, supplied the material to Thermasorb. 9 The Second and Third Cross Claim filed by Thermasorb in the District Court proceedings alleges breach of contract, breaches of ss.52 and 53(a) of the Trade Practices Act 1974 (Cth), negligence and negligent misstatement against Itochu. Thermasorb's claim against Sumitomo alleges deceit, negligent misstatement, breaches of ss.52 and 53(a) Trade Practices Act 1974 (Cth) and negligence. The claim against Sumitomo includes the assertion that Sumitomo represented to Thermasorb that it would supply spherical polymers but, instead, Sumitomo supplied polymers of irregular shape and that this is relevant to events which, in due course, affected Rockdale Beef. In the event that Thermasorb is found liable to Danaflex, Thermasorb claims contribution or indemnity from Itochu and Sumitomo under s.5 Law Reform (Miscellaneous Provisions) Act 1946. 10 Between 6 and 9 February 2005, the solicitors for Thermasorb undertook a number of historical company searches using the Australian Securities & Investments Commission ("ASIC") database to identify Sumitomo for the purpose of serving the Second and Third Cross Claim. These searches disclosed that Sumitomo is neither a registered company nor a registered foreign company, but is considered a foreign company according to ASIC records. Documents which are in evidence before me indicate that the head office of Sumitomo is at 20 Cecil Street, #20-08, The Exchange, Singapore. 11 On 21 February 2005, Thermasorb served the Second and Third Cross Claim on Itochu at its registered office in Sydney. 12 Thermasorb contends that it is not able to serve the Second and Third Cross Claim upon Sumitomo as there is no provision for service upon a foreign company under the District Court Act 1973, the District Court Rules, the Service and Execution of Process Act 1992 (Cth) or otherwise. There is no evidence before me that Thermasorb has communicated with Sumitomo with respect to the claim which it desires to bring in the District Court proceedings. This aspect gives rise to the application to transfer the District Court proceedings to this Court under s.145 District Court Act 1973. I shall return to this application later in this judgment.

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The Cross-Vesting Application 13 Thermasorb applies for the removal of the District Court proceedings to this Court under s.8 Jurisdiction of Courts (Cross-Vesting) Act 1987 ("the Cross-Vesting Act") so that the proceedings may then be cross-vested to Queensland pursuant to s.5(2) of that Act. It is clear that the District Court has no power itself to make an order under the Cross-Vesting Act: s.8(1) Cross-Vesting Act; James Hardie & Coy Pty Ltd v Barry (2000) 50 NSWLR 357 at 372 (paragraph 65). The application to cross-vest the District Court proceedings to Queensland is opposed by Rockdale Beef, Danaflex and Itochu. 14 In 2003, Australian Meat Holdings Pty Limited ("AMH") commenced proceedings S8560 of 2003 against Danaflex in the Supreme Court of Queensland ("the Queensland proceedings"). AMH seeks damages against Danaflex for breach of contract, breach of the Trade Practices Act 1974 (Cth) and in negligence arising out of the supply of absorbent pads. AMH alleges a breach of the Sale of Goods Act 1896 (Qld) in support of its claim for breach of contract against Danaflex. 15 Danaflex joined Thermasorb in the Queensland proceedings by way of Third Party Notice filed on 18 February 2004. The claim by Danaflex against Thermasorb in the Queensland proceedings is for damages for negligence, breach of contract and breaches of the Sale of Goods Act 1896 (Qld) and the Trade Practices Act 1974 (Cth). 16 Itochu and Sumitomo are not parties to the Queensland proceedings. It has been asserted, for Thermasorb, that application will be made to join Itochu and Sumitomo as parties to the Queensland proceedings in due course. 17 Removal from the District Court to this Court under s.8 Cross-Vesting Act is a mechanism to enable consideration to be given to the real point of the application, which is to transfer Rockdale Beef's District Court proceedings to the Supreme Court of Queensland. The principal factor relied upon by Thermasorb in this application is the existence of the Queensland proceedings and suggested similarities between those proceedings and the District Court proceedings. 18 All parties approached the hearing before me upon the basis that consideration of the cross-vesting application involves application of an "interests of justice" test. Submissions were made concerning the "interests of justice" test by reference to Bankinvest AG v Seabrook (1988) 14 NSWLR 711 and James Hardie and Coy Pty Ltd v Barry, above. After I reserved my decision, counsel for Thermasorb drew my attention to the decision of the High Court of Australia in BHP Billiton Ltd v Schultz (2004) 79 ALJR 348; [2004] HCA 61 ("Schultz"). 19 In Schultz, above, Gleeson CJ, McHugh and Heydon JJ said at paragraph 14: "In the context of the Cross-Vesting Act, one is not concerned with the problem of a court, with a prima facie duty to exercise a jurisdiction that has been regularly invoked, asking whether it is justified in refusing to perform that duty. Rather, the court is required by statute to ensure that cases are heard in the forum dictated by the interests of justice. An application for transfer under s 5 of the Cross-Vesting Act is brought upon the hypothesis that the jurisdiction of the court to which the application is made has been regularly invoked. If it appears to that court that it is in the interests of justice that the proceedings be determined by another designated court, then the first court 'shall transfer' the proceedings to that other court. There is a statutory requirement to exercise the power of transfer whenever it appears that it is in the interests of justice that it should be exercised. It is not necessary that it should appear that the first court is a 'clearly inappropriate' forum. It is both necessary and sufficient that, in the interests of justice, the second court is more appropriate." 20 The principles in Schultz have been applied in Ewins v BHP Billiton Ltd [2005] VSC 4 (Gillard J) and BHP Billiton Ltd v Utting [2005] NSWSC 260 (Simpson J). In Utting, above, Simpson J said, at paragraphs 4-5:

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5 Notwithstanding the primacy of the natural forum, that is not the only consideration in determining where the interests of justice lie. The natural forum may, in an appropriate case, be displaced by other factors." 21 In Schultz, above, Gleeson CJ, McHugh and Heydon JJ said at paragraph 15: "The interests of justice are not the same as the interests of one party, and there may be interests wider than those of either party to be considered. Even so, the interests of the respective parties, which might in some respect be common (as, for example, cost and efficiency), and in other respects, conflicting, will arise for consideration. The justice referred to in s 5 is not disembodied, or divorced from practical reality." 22 In Ewins, Gillard J observed at paragraph 26 that courts have adopted the approach of determining what is the natural forum, being the appropriate court, based upon connecting factors to that forum and that the decision in Schultz supports that approach. In Schultz, above, Gleeson CJ, McHugh and Heydon JJ said at paragraphs 18-19: 18. … Reference is sometimes made to one forum or another being the 'natural forum'. Such a description is usually based upon a consideration of 'connecting factors', described by Lord Goff in Spiliada [1987] AC 460 at 478 as including matters of convenience and expense, such as availability of witnesses, the places where the parties respectively reside or carry on business, and the law governing the relevant transaction. Lord Templeman described such factors as 'legion', and said that it was difficult to find clear guidance as to how they are to be weighed in a particular case: Spiliada [1987] AC 460 at 465. … 19 In many cases, there will be such a preponderance of connecting factors with one forum that it can readily be identified as the most appropriate, or natural, forum. In other cases, there might be significant connecting factors with each of two different forums. Some of the factors might cancel each other out. If the action is between two individuals, and the plaintiff resides in one law area and the defendant in another, there may be no reason to treat the residence of either party as determinative, although, as already noted, it will ordinarily be the residence of the defendant that is important to establish jurisdiction. Weighing considerations of cost, expense, and convenience, even when they conflict, is a familiar aspect of the kind of case management involved in many cross-vesting applications." 23 I apply the principles in Schultz, guided by the approach of Simpson J in Utting and Gillard J in Ewins, in considering the present application. In doing so, I keep in mind that those cases involved claims for personal injury and that the present case involves claims for breach of contract, negligence and associated statutory claims arising from the supply of goods. Factors which are relevant to the present application include the following:

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Application Under s.145 District Court Act 1973 30 Section 145(1) District Court Act 1973 is in the following terms: "(1) Proceedings may, upon the application of a party, be removed into the Supreme Court by order of the Supreme Court upon such terms as to payment of costs, giving security for the amount claimed or costs, or otherwise, as the Supreme Court thinks fit." 31 Section 145 is remedial and confers a discretionary power on the Supreme Court: KBRV Resort Operations Pty Limited v Chilcott (2001) 51 NSWLR 516 at 526 (paragraph 32). The onus rests on the party seeking the order: Parry v WGE Engineering [2003] NSWSC 337 at paragraph 3. The discretionary power in s.145 is to be exercised having regard to the relevant circumstances of the particular case before the Court and so that justice is best served between the parties: Parry, above at paragraph 3; White v Viewden Pty Ltd [2005] NSWSC 196 at paragraph 8. 32 The claim before the District Court is for damages in the order of $237,000.00. It has been argued faintly that transfer of the proceedings from the District Court to the Supreme Court ought to occur because of the complexity of the issues in the proceedings. Proceedings of this type, even where complex issues are involved, are heard in the District Court of New South Wales from time to time. An order for transfer under s.145 upon this basis is not warranted. 33 It is clear that the District Court is seized with jurisdiction to deal with the claim brought by Rockdale Beef against Danaflex and the Cross Claims brought by Danaflex against Thermasorb and by Thermasorb against Itochu. However, Thermasorb contends that it is not able to serve Sumitomo, a foreign company, with the Second and Third Cross Claim so as to engage the jurisdiction of the District Court with respect to that aspect of the proceedings. 34 In these circumstances, Thermasorb submits that the only available solution to allow justice to be done is to transfer the proceedings in their entirety to the Supreme Court. Thermasorb submits that such a step will allow access to the provisions in Part 10 r 1A Supreme Court Rules concerning service of process outside Australia. 35 Rockdale Beef neither consents to nor opposes transfer under s.145(1) on this basis, although a submission has been made that the application is premature. I shall return to this issue. Danaflex submits that it is a matter for the Court. Itochu supports the application for transfer to the Supreme Court upon this basis. The attitude of other parties to a s.145(1) transfer application is clearly not determinative of the application. It remains a matter for this Court to make its own discretionary determination in the circumstances of the case. 36 Rockdale Beef submits that the application is premature - that there is no evidence that Thermasorb has brought the existence of the Cross Claim to the attention of Sumitomo. In these circumstances, Rockdale Beef submits that the Court is not in a position to determine whether Sumitomo would submit voluntarily to the jurisdiction of the District Court in the matter. 37 No party before me submits that s.51 District Court Act 1973 contains an answer to the present question. That provision relates solely to consent to extended jurisdiction of the District Court where that jurisdiction is otherwise confined by a monetary limit. I do not consider that s.51 is presently relevant. 38 The District Court is a statutory court of record: s.8(2) District Court Act 1973. The civil jurisdiction of the Court is provided for in s.9(1) of that Act: "9(1) The Court shall have a civil jurisdiction, consisting of - (a) its jurisdiction conferred by Part 3; and

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(b) at the time of service of the document commencing the action. (3) For the purposes of this section, a defendant is duly served with a document commencing an action if the defendant is served with the document by or under this Act or in accordance with the Service and Execution of Process Act 1992 of the Commonwealth. (4) In this section, 'defendant' includes, if there are two or more defendants, any one of those defendants." 43 Part 8 District Court Rules relates to service. Thermasorb points to the absence of express provisions in the District Court Rules relating to service outside Australia of the type found in Part 10 Rule 1A Supreme Court Rules. Thermasorb contends that the express reference in s.47 District Court Act 1973 to service in accordance with that Act or the Service and Execution of Process Act 1992 (Cth) confirms the inability of service of process outside Australia to be effective to engage the civil jurisdiction of the District Court. 44 Reliance is placed by Thermasorb upon the decision of the Court of Criminal Appeal in Ex parte Iskra; Ex parte Mercantile Transport Company Pty Limited (1963) SR(NSW) 538 in support of the proposition that the jurisdiction of a State court over persons who are outside the territorial limits of the State is dependent upon the existence of statutory authorities for the service of its process outside those limits. Ex parte Iskra related to criminal proceedings for a summary offence before a Court of Petty Sessions, and then on appeal to Quarter Sessions. Nevertheless, the Court of Criminal Appeal referred at pages 540-546, 553-557 to cases in the context of civil proceedings which laid down the same principle. 45 In Agar v Hyde (2000) 201 CLR 552 at 570-571, Gaudron, McHugh, Gummow and Hayne JJ observed that rules of court or local statutes providing for service outside the jurisdiction are now commonplace. The Court was there considering the provisions in Part 10 rule 1A Supreme Court Rules (NSW). Their Honours observed at 575 (paragraph 56): "If service was authorised by the Rules, and has been properly effected, the Court's authority to determine the issues that are raised by the proceeding has been regularly invoked." 46 In the absence of a statutory provision extending to service of District Court process outside Australia, it seems clear that Sumitomo cannot be compelled to submit to the jurisdiction of the District Court and participate in proceedings before that Court. 47 Rockdale Beef contends that Part 8 rule 15 District Court Rules (which appears hereunder) is relevant: "Service under contract

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The word "party" is defined in Part 8 rule 1 District Court Rules to mean "the person to be served with a document" . 48 In Howard v Bank of New Zealand Limited (2002) 121 FCR 366, Drummond J considered Order 7 rule 14 Federal Court Rules which provides: "Where a respondent in any proceeding has, before or after the commencement of the proceeding, agreed that originating process or any other document in the proceeding may be served on the respondent or on some other person on behalf of the respondent in a manner or at a place (whether in or outside the Commonwealth) specified in the agreement, service in accordance with the agreement shall be sufficient service on the respondent." 49 Drummond J held that service upon the respondent's solicitors (in New Zealand), in accordance with an agreement, was valid service despite the service being effected upon an overseas corporation. His Honour said at paragraph 19: "The entry of an appearance by a respondent outside the jurisdiction has long been regarded as such an act of voluntary submission to the jurisdiction of the local court in the action in which the appearance is entered. But submission by a foreign respondent to the jurisdiction of the local court can take many other forms. It has long been the law that a respondent outside the jurisdiction can so act to give the local court jurisdiction over it which it would not otherwise have by waiving objection to jurisdiction, eg, by taking a step in the proceeding inconsistent with maintaining that objection - see Rein v Stein (1892) 66 LT 469 - even if it has not entered an appearance - see Boyle v Sacker (1888) 39 Ch D 249. By such an act of voluntary submission, the foreign respondent does all that is regarded as necessary to authorise the local court to exercise its jurisdiction in the particular matter over that respondent. In such cases, insistence on the applicant nevertheless applying to the Court for leave to serve outside the Commonwealth (when service has not in fact been effected) or for confirmation of service effected without prior leave can serve no purpose other than to pointlessly inflate the costs of the proceedings." 50 Drummond J continued in paragraph 19: "A party to a contract who is outside the Commonwealth will be regarded as having submitted to the jurisdiction of this Court by agreeing that it is to have jurisdiction over that party with respect to disputes arising under the contract; but if the parties have failed to specify in the contract a method by which the foreign respondent party can be served with process, leave to serve out of the jurisdiction will still be necessary to complete this Court's authority over that respondent." 51 His Honour continued at paragraph 20: "Even if service under O 7 r 14 on a respondent outside the Commonwealth involves a voluntary submission by that respondent to this Court's jurisdiction, the Court's jurisdiction over the respondent is completely enlivened immediately service under the rule is effected. There is therefore no need for the applicant to seek leave under O 8, the whole purpose of which is to enliven that jurisdiction, because it has already been fully invoked."

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Order 8 Federal Court Rules makes express provision, like Part 10 rule 1A Supreme Court Rules , for service of process outside Australia. 52 After referring to passages in Agar v Hyde, above, Drummond J said at paragraph 23: "This statement reinforces, in my opinion, the correctness of construing O 7 r 14 as meaning what its clear words say. If a respondent in or outside the Commonwealth agrees in a formal or informal ad hoc way that the originating process in a particular case may be served on it at a place in or outside the Commonwealth, service in accordance with that agreement will be effective to give this Court jurisdiction in the action over that respondent. Where service in such a case is outside the Commonwealth, it will be unnecessary to invoke O 8. In accordance with the principle in Agar v Hyde , O 7 r 14 should be read as providing for a consensual procedure for serving not only respondents in the Commonwealth, but also respondents outside the Commonwealth, which will be effective to entitle the Court to exercise over both local and foreign residents such jurisdiction as it may have in actions in personam." 53 It should be observed that Part 9 rule 9 Supreme Court Rules is in similar terms to Part 8 rule 15 District Court Rules except that the phrase "in a manner or at a place (whether in or outside the State) specified in the agreement" appears in the Supreme Court Rules. Likewise, it will have been noted that the phrase in Order 7 rule 14 Federal Court Rules is "in a manner or at a place (whether in or outside the Commonwealth) specified in the agreement". Part 8 rule 15 District Court Rules does not contain words of extension as contained in brackets in the Rules of these other Courts. 54 I do not consider that the absence of these words in Part 8 rule 15 District Court Rules means that a foreign party may not submit voluntarily to the civil jurisdiction of the District Court. It has been held (in a different context to the present) that, by reason of a party's voluntary submission to the jurisdiction of the District Court, that Court has jurisdiction to hear and determine a claim for damages which otherwise was outside that Court's jurisdiction: Vertzyas v Singapore Airlines Ltd (2000) 50 NSWLR 1 at 18ff (paragraph 83ff). This appears consistent with general statements of principle that a party may submit voluntarily to the jurisdiction of a court and thereby authorise the court to exercise its jurisdiction over him: Howard v Bank of New Zealand Limited, above, at paragraph 14; Laurie v Carroll (1957-1958) 98 CLR 310 at 334; Dicey and Morris, The Conflict of Laws, 13th ed, paragraph 11-107; Nygh, Conflict of Laws in Australia, 7th ed, paragraph [4.80]. 55 The position which I have reached, at this point, may be summarised as follows:

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