Vautin v BY Winddown, Inc

(REVISED FROM THE TRANSCRIPT) RARES J: 1 This is an application for leave to serve BY Winddown, Inc., the first respondent, in the United States of America pursuant to r 10.43 of the Federal Court Rules 2011 (Cth). Prior to 27 May 2015, that corporation was known as Bertram Yacht, Inc.

Background 2 Bertram manufactured yachts. On the material before me, Bertram had appointed the second respondent, Eagle Yachts Pty Limited as its exclusive dealer in Australia. 3 The proceedings arise out of the sale by Eagle Yachts to the applicant, William Vautin, of a 700 Bertram Enclosed Bridge motor yacht that Mr Vautin subsequently named Revive. The contract price was USD3 million in cash, plus USD75,000 for shipping costs, together with Mr Vautin delivering a trade-in Bertram 630 motor yacht worth a further AUD1.2 million amounting to a total consideration in the order of well over AUD4 million. Revive was delivered to Mr Vautin in early March 2012. 4 I am satisfied by the evidence of Mr Vautin's solicitor, Alasdair Doctor, in his affidavit of 18 April 2016, that Revive exhibited the defects pleaded in the statement of claim, being the defects identified in the report of Andrew Dovell dated 9 December 2015 to which Mr Doctor specifically refers in his affidavit. Those defects included a significant failure of the bond between both skins and the core of the superstructure panels of the vessel, as well as a number of other defects specified in paragraph 15 of the statement of claim. As a consequence, the evidence suggested that the topsides, deck and superstructure of the vessel had to be fully remediated in order for it to be deemed structurally sound or compliant with the relevant ISO standard. 5 Mr Vautin has claimed that Eagle Yachts is liable to him for failure to comply with the guarantee provided by s 54(1) of the Australian Consumer Law (ACL), which is Sch 2 to the Competition and Consumer Act 2010 (Cth). Mr Vautin alleged that this failure was a major failure pursuant to ss 259(3) and 260 of the ACL, because, first, a reasonable consumer, fully acquainted with the actual extent of the defects, would not have acquired the vessel, and, secondly, the vessel was neither of acceptable quality, because it was unsafe, and or was substantially unfit for the purpose for which goods of the same kind are commonly supplied and cannot easily, within a reasonable time, be remedied to make it fit for such a purpose. 6 Mr Vautin alleged that he has given notice to Eagle Yachts rejecting the vessel, and the grounds for that rejection, pursuant to s 259(3) of the ACL. He claimed, against Eagle Yachts as a supplier of the vessel, and sought that it collect the vessel from him at its expense, compensate him for both any reduction in its value below the price paid and his other damages arising from the failure to comply with the s 54(1) guarantee. He also claimed that Eagle Yachts was liable to him because at the time of her purchase, Revive was not reasonably fit to motor on the open ocean and that he had made known, expressly or by implication, that the purpose for which he was acquiring it was to do so. He claimed that Eagle Yachts represented to him that Revive was reasonably fit for that purpose. 7 Mr Vautin also claimed against Bertram on the basis that it was the manufacturer of the yacht. Clause 8.4 of the contract for sale between Mr Vautin and Eagle Yachts provided that Eagle Yachts would furnish Mr Vautin with all details of the manufacturer's warranties and do all such things as were reasonably necessary to enable Mr Vautin to receive the benefit of any manufacturer's warranties. In the owner's manual for Revive, Bertram gave a limited warranty to the first retail purchaser of the yacht that, subject to certain limitations, none of which appear presently to be relevant, Bertram would repair or replace defects in the yacht's hull and its fibreglass structural components for five years from the date of her actual delivery to Mr Vautin as first owner. 8 Mr Vautin argued that the ACL extended to the engaging in conduct outside Australia by a body corporate carrying on business within Australia pursuant to s 5(1)(g) of the Competition and Consumer Act. He argued that there was a prima facie case that Eagle Yachts was Bertram's exclusive dealer in Australia and that there was a course of business, represented by the builder's certification and first transfer of title, between Bertram and Eagle Yachts in respect of the yacht, dated 15 December 2011 that was annexed to Mr Doctor's affidavit. He contended that these facts gave rise to a prima face case that Bertram carried on business in Australia by selling the products that it manufactured to Eagle Yachts, as its exclusive dealer for the purposes of sale to persons in Australia.

Consideration 9 I accept that argument for the purposes of this application. In Hope v Bathurst City Council (1980) 144 CLR 1 at 8-9, Mason J, with whom Gibbs, Stephen, Murphy and Aickin JJ agreed, held that the popular meaning of the expression "carrying on business" implied a repetition of acts and activities that possessed something of a permanent character engaged in for the purpose of profit on a continuous and repetitive basis. The course of trade between a manufacturer and its exclusive dealer within the jurisdiction, who was expected to purchase from the manufacturer and then on-sell to persons within the area of exclusive dealership, in my opinion, prima facie is an activity that would appear to amount to the carrying on of business within Australia within the meaning of s 5(1)(g) of the Competition and Consumer Act. 10 Mr Vautin appears to be a person who acquired Revive as a consumer. That is because luxury motor yachts, such as Revive, are goods of a kind ordinarily acquired for personal, domestic or household use or consumption within the meaning of s 3(1)(b) of the ACL, as is alleged in the statement of claim. That gave rise to the presumption in s 3(10) that Mr Vautin, unless the contrary be established, should be presumed to be a consumer in relation to Revive. 11 Having regard to the nature of the defects alleged in the statement of claim, as appear to have been analysed by Mr Dovell in his report, I am satisfied that there is a prima facie case that at the time Revive was supplied to Mr Vautin it was not of an acceptable quality within the meaning of s 54 of the ACL because, on the evidence before me, she was not fit for the purposes for which goods of that kind are commonly acquired, nor was she free from defects, or safe or durable. In those circumstances, there would have been a contravention of the guarantee in s 54(1) of the ACL that provided that goods be of an acceptable quality if a person supplied them in trade or commerce to a consumer and the supply did not occur by way of public auction. 12 Although Bertram did not directly supply Revive to Mr Vautin, Mr Vautin had a right of action against it pursuant to s 271(1) of the ACL if there were a failure to comply with a guarantee under s 54 that applied to a supply of goods to a consumer. That is because s 271(1) created a direct right of a person affected in relation to the goods to bring an action to recover damages against their manufacturer. 13 I am satisfied that there is a prima facie case on the material before me that Mr Vautin is entitled to proceed against Bertram pursuant to s 271 of the ACL. 14 Moreover, I am also satisfied that Mr Vautin has established a prima facie case that justifies the grant of leave to serve the originating application outside Australia under r 10.43, namely, that the Court has jurisdiction, the proceeding is of a kind mentioned in r 10.42, he has a prima facie case for all or any of the relief claimed, and, the proposed method of service is permitted in accordance with r 10.43(2), relevantly under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965 (the Hague Convention). 15 I am satisfied by Mr Doctor's evidence that the United States is a party to the Hague Convention and that the originating application and associated documents can be served in that country pursuant to it. 16 The requirement in r 10.43(4)(c) that Mr Vautin have a prima facie case for any or all of the relief he claims has been explained in a number of authorities. It suffices for me to set out the explanation that I gave in Lehman Brothers Australia Limited (in liq) v Lehman Brothers Special Financing Inc [2015] FCA 779 at [32]-[34] as follows: 32 Rule 10.43(4)(c) requires that [the applicant] have a prima facie case for all or any of the relief that it claims in the proceedings. That rule is in identical terms to O 8 r 3(2)(c) of the Federal Court Rules 1979 (Cth). In Ho v Akai Pty Limited (In Liquidation) (2006) 24 ACLC 1526 at [10] Finn, Weinberg JJ and myself explained the principles under O 8 r 3(2)(c) for ascertaining whether a party had established such a prima facie case in the following terms: As has been observed on many occasions, the prima facie case requirement has to be met at the outset, usually on an ex parte basis, and without the advantage of discovery and other procedural aids to the making out of a case: see e.g. Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 at 390. It "should not call for a substantial inquiry": WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 at 476; see also Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549. For present purposes it is sufficient to say that a prima facie case for relief is made out if, on the material before the court, inferences are open which, if translated into findings of fact, would support the relief claimed: Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 at 110. Or, to put the matter more prosaically as Lee J did in Century Insurance (in provisional liquidation) v New Zealand Guardian Trust [1996] FCA 376: "What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court's processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified." 33 And, as I said in Beluga Shipping GmbH & Co KS "Beluga Fantastic" v Headway Shipping Ltd (No 2) (2008) 251 ALR 620 at 628 [33]: … a finding that there was a prima facie case on one aspect of the claim against [the party to be served] has the consequence that he may be proceeded against on other bases as well. That is because it is only necessary that a prima facie case be established for any one of the causes of action relied on for the relief sought: Bray [v F Hoffman-La Roche Ltd (2003) 130 FCR 317] at [47]-[55] per Carr J, [176]-[191] per Branson J; Ho [(2006) 24 ACLC 1526] at [45]-[46]. 34 Of course, I cannot make, and am not making in these reasons, findings of fact that are in any way determinative of the ultimate issues in these proceedings. Nor is it the purpose of the rule that that be done. That purpose is, as Lee J identified in Century Insurance Ltd [1996] FCA 376, that the Court be satisfied that a controversy exists between the parties that warrants the use of its processes to resolve that controversy so as to justify the exercise of the long-arm jurisdiction that r 10.43 authorises, in order to expose a foreigner to this country's jurisdiction. 17 As there, in these reasons I am not making any findings of fact that are in any way determinative of the ultimate issues in the proceedings. I am merely identifying that a controversy exists between Mr Vautin and Bertram that warrants the use of the Court's processes to resolve it, so as to justify the use of the long-arm jurisdiction of the Court under r 10.43 to serve Bertram in the United States. 18 The proceedings appear to fall within the following items in r 10.42, namely proceedings under: item 1: based on a cause of action arising in Australia, namely, the breach in Australia of the statutory guarantee in s 54 of the ACL constituted by the supply of goods, being the yacht, to Mr Vautin; item 12: based on a contravention of an Act, namely, the non-compliance with the statutory guarantee in s 54(1) committed in Australia, being that supply; item 13: based on a contravention of a law, wherever occurring, seeking relief in relation to damage suffered wholly or partly in Australia, namely, the loss or damage that Mr Vautin claims, having purchased the yacht here and it being defective; and item 15: based on the relief under the ACL that Mr Vautin seeks.

Conclusion 19 In all of the circumstances, for the reasons I have given, I am satisfied I should make orders permitting service of the originating application and associated documents on Bertram outside the jurisdiction and in the United States under the Hague Convention. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.