Amalgamated Wireless (Australasia) Ltd v McDonnell Douglas

[1987] FCA 481

Re: AMALGAMATED WIRELESS (AUSTRALASIA) LIMITED
And: McDONNELL DOUGLAS CORPORATION; McDONNELL DOUGLAS INFORMATION SYSTEMS PTY
LIMITED and MICHAEL ROBERT SELWOOD DANE
No. NSW G338 of 1987
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.(1)

CATCHWORDS

Practice and Procedure - Service of originating process - Respondent an overseas corporation - Leave given by Judge under O.7 r.2 of Federal Court Rules to serve respondent by leaving Application with solicitors in Australia - Application to set aside service - Whether O.7 r.2 applies only to respondents resident in Australia - Relevance of the question whether the respondent carried on business in Australia at the date of the order - Leave to appeal against dismissal of motion.

Federal Court Rules Orders 7, 8.

HEARING

SYDNEY

#DATE 25:8:1987

Counsel for the Applicant: Mr C A Sweeney

Solicitors for the Applicant: Mallesons Stephen Jaques

Counsel for the First Respondent: Mr J M Ireland

Solicitors for the First Respondent: Baker & McKenzie

No appearance for the Second and Third Respondents

ORDER

The Notice of Motion of 13 August 1987 be dismissed.

McDonnell Douglas Corporation pay the costs of that motion incurred by Amalgamated Wireless (Australasia) Limited.

Leave to appeal against orders (1) and (2) above be refused.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The principal proceedings between the present parties were commenced on 24 July 1987. Upon that day an application was made to Morling J. in chambers on behalf of the applicant, Amalgamated Wireless (Australasia) Limited, seeking injunctions against three respondents. The first respondent, McDonnell Douglas Corporation, is an American company. The second respondent, McDonnell Douglas Information Systems Pty. Limited, is a company incorporated in Australia; and the third respondent, Michael Robert Selwood Dane, is resident in Australia. Morling J. made interlocutory injunctions in terms of paragraphs 1 and 2 of the Application, which was shown to him and was in fact filed on the same day. He further made an order in relation to service which was in these terms:

"Service of notice of these orders, and the

Application and of the affidavits in support be made by 5.00 p.m. on 24 July 1987. Such service may be effected by leaving copies of the documents at the offices of Baker and

McKenzie at 50 Bridge Street, Sydney."

1. I am informed by counsel who made the application to Morling J. -- and this is accepted by counsel for McDonnell Douglas Corporation -- that at the time of the application the learned Judge was informed that McDonnell Douglas Corporation was a United States company, that he was shown a letter from the solicitors acting on behalf of the present applicant to Messrs Baker and McKenzie inquiring about acceptance of service of process in the present matter, that he was told that Messrs Baker and McKenzie had previously had instructions to accept service on behalf of McDonnell Douglas Corporation of process issued in other proceedings, that he was shown a letter dated 20 July 1987 from a firm of American attorneys, Messrs Irell and Manella, addressed to the solicitors for the applicant in which they stated that they represented McDonnell Douglas Corporation and -- in response to a letter of demand sent to that company on behalf of the applicants -- said that they had not been able to obtain instructions at that stage as to a substantive response. This letter, which is before me, makes it quite clear that the attorneys were in contact with McDonnell Douglas Corporation in regard to the matter. His Honour was further shown the reply to that letter, sent by the solicitors for the present applicant, in which they pressed their request for appropriate undertakings; and also certain process issued by McDonnell Douglas Corporation in the United States of America against the present applicant. At the conclusion of that matter, as I have said, his Honour thought it proper to make an order that service, inter alia, of the Application be effected by serving Messrs Baker and McKenzie at their Sydney office.

2. The matter came before Morling J. again on 27 July 1987. The orders which had been made on 24 July expired by effluxion of time on 27 July. On the latter date undertakings were given, in terms corresponding with the terms of the orders, but on behalf of the second and third respondents only. The result is that since 27 July there has been no order or undertaking relevantly binding the first respondent, McDonnell Douglas Corporation.

3. On 3 August 1987 Messrs Baker and McKenzie filed a Notice of Motion on behalf of McDonnell Douglas Corporation in which they sought certain orders. The only order presently relevant is the first sought by the Notice of Motion: that service of the Application upon the first named respondent be set aside.

4. A considerable amount of evidence has been tendered by each of the parties relating to the question whether McDonnell Douglas Corporation carried on business in Australia on 24 July 1987. Certain matters appear to be quite clear. First, it is said, and without contradiction or denial, that McDonnell Douglas Corporation maintains no office or other premises in this country. Secondly, it is shown that McDonnell Douglas Information Systems Pty. Limited, the second respondent, is wholly owned, and is controlled by McDonnell Douglas Corporation. It seems that, as from 1 July 1987, this Australian subsidiary has been the vehicle by which contracts in this country have been, and will in the future be, undertaken by the McDonnell Douglas organization.

5. Thirdly, there is evidence regarding the involvement in Australian affairs of personnel associated with McDonnell Douglas Corporation outside Australia. For the most part, these personnel appear to be American citizens who have from time to time come to Australia for a particular occasion, such as the negotiation of a contract or the seeking of some order, or who have been seconded to Australia for a period. It also appears that the Australian activities undertaken on behalf of the McDonnell Douglas organization -- if I can use that neutral term -- are within the supervisory jurisdiction of Miss Madeleine Wall, who is based in the United Kingdom and employed by the United Kingdom subsidiary of McDonnell Douglas Corporation, but who holds a position as vice-president and chief counsel of "McDonnell Douglas Information Systems International". Miss Wall says that this is a name given by McDonnell Douglas Corporation to describe the business operations which sell McDonnell Douglas information systems internationally, that is outside the United States and Canada. I understand by this that, although Miss Wall does not hold any formal position in the corporate entity known as McDonnell Douglas Corporation, she is involved in a senior position in the international activities sponsored by the American corporation. She apparently has visited Australia on a number of occasions and has a significant role in supervising activities in this country. There are examples in the evidence of other senior personnel who have a close connection in regard to other aspects of the Australian business.

6. For the reasons I will indicate, I do not think that it is necessary for me to reach any final conclusion on the question, which has been argued, as to whether McDonnell Douglas Corporation carries on business in this country. However, as the matter has been pressed and counsel ask me to make a finding, my conclusion is that McDonnell Douglas Corporation does not, as such and in person, carry on business in Australia. However, I think that it does carry on business in Australia through its agent, McDonnell Douglas Information Systems Pty. Limited.

7. The reason why I come to the first of those two conclusions is that, although it is plain that the United States company is extremely interested in what happens in Australia and that it supervises very closely the activities in this country, providing personnel and advice and apparently also contract documents and expertise in regard to information systems, the actual business activities -- that is to say the earning of income by entering into contracts -- is something which is done directly by the second respondent, McDonnell Douglas Information Systems. If one were looking at financial records, I have no doubt that they would show that the income derived from the Australian activities is included on the profit and loss account of McDonnell Douglas Information Systems, as income derived by that company. There may or may not be outgoings to recompense the United States parent company for the assistance which it has given. In terms of the relationship between the McDonnell Douglas organization and parties with whom contracts are signed, I think that it would be correct to say that they would be entitled to look to McDonnell Douglas Information Systems and, if litigation occurred, for example, to sue that company rather than McDonnell Douglas Corporation. For these reasons it seems to me that the actual business activity, which is undoubtedly being carried out in regard to information systems, is with the Australian subsidiary, the second respondent.

8. On the other hand, the degree of involvement of the United States parent is so great that it is impossible to characterize this as being merely a case where a company purchases shares in another company and leaves that other company to carry on its own business on its own account. McDonnell Douglas Corporation is more than an investor in the Australian subsidiary; it is concerned to use the Australian subsidiary as part of a world-wide information systems enterprise. The local company has apparently been set up to run its business as part of the world-wide McDonnell Douglas organization; and ultimately on behalf of the parent company in America.

9. Reference was made by counsel for McDonnell Douglas Corporation to the decision of Brandon J. in The "Theodohos" (1977) 2 LLR 428. The judgment in that case contains a useful discussion of what is involved in carrying on a business. It emphasizes that a question of degree will frequently arise. Approaching this matter as one of degree, one has to say that the activity by the Australian subsidiary is on behalf of the American parent.

10. I have made those findings because counsel seem to think that it is important and -- perhaps, on a view of O.7 r.2 of the Federal Court Rules which I do not take, it is necessary -- to make a finding about carrying on business. But it seems to me that the answer to the whole problem can be found in O.7 r.2, which is unambiguously worded. Order 7 deals with service. Rule 1 provides that, subject to the provisions of the order, originating process shall be served personally on each respondent. Rule 2 states how personal service shall be effected. The rule provides that personal service of a document is effected on a corporation by leaving a copy of the document with some person, apparently an officer of -- or in the service of -- the corporation and apparently of or above the age of 16 years, at the registered office of the corporation; or, if there is no registered office, at the principal place of business or the principal office of the corporation; or as the Court or a Judge may direct.

11. The effect of the rule, as I understand it, is that prima facie personal service is effected upon a corporation by leaving it with an appropriate person at the registered office or at the principal place of business. If that is done, no further question arises. However, the rule ends by giving to the Court, and to a Judge of the Court, a general discretion to direct a different method of personal service. If service is effected in accordance with that direction, the process has been personally served. And if the direction requires service within Australia, the corporation has been served within the jurisdiction.

12. There is no limitation imposed upon the ambit of the discretion given by r.2. I see no reason for reading in any such limitation. No doubt, in considering whether the discretion should be exercised and, if so, in what manner, any Judge will have regard to the degree of likelihood that service effected in a particular way will speedily come to the notice of persons responsible for the conduct of the corporation's affairs. In a case where the respondent is an overseas corporation that question requires consideration of whether service within the jurisdiction pursuant to such an order will be likely to be quickly known to the persons who are directing the affairs of the overseas corporation. In the present case there could have been no doubt that the service on Messrs Baker and McKenzie would quickly come to the knowledge of the directors of the United States company. Messrs Baker and McKenzie were acting on behalf of that company and there was a close established contact in respect of this very matter.

13. It is submitted on behalf of McDonnell Douglas Corporation that this rule is inapplicable to the case of a company which is not carrying on business within Australia. It is said that the fundamental rule is that a respondent is only subject to the writ of the court if within Australia and that O.7 must be read as providing only for usual cases, where the respondent is within Australia. The contrast, it is said, is with O.8, which deals with service outside the jurisdiction.

14. I do not see any reason to read down O.7 r.2 in the manner contended. Historically, no doubt, it is correct to say that a plaintiff could only obtain redress against a defendant if able to serve that defendant within the realm. But in more recent times provisions have been made to permit service outside the jurisdiction. Order 8 is an example of such a provision. The reason, of course, for such provisions is that travel has become easier. Even if events occur within the jurisdiction, which give rise to a cause of action, a defendant may have departed the jurisdiction before service can be effected. In a commercial context, for example in relation to some matters which might arise under the Trade Practices Act 1974, it is arguable that a cause of action could accrue against a particular respondent notwithstanding that such respondent had never been within the jurisdiction in the traditional sense; that is, in the case of an individual, physically within Australia or, in the case of a corporation, conducting business within Australia.

15. If it had been intended that O.7 r.2 be limited to respondents who are within the jurisdiction in the traditional sense, this might easily have been stated. For example, O.7 could have been headed "Service of respondents who are within the jurisdiction". Alternatively, the discretion given by r.2 might have been limited, so as to apply only where the corporation was within Australia in the traditional sense. This has not been done and, it seems to me, deliberately not done. There is much to be said, as a matter of policy, for allowing the determination of the appropriate method of personal service to be unconstrained, except by considerations of practicality and fairness.

16. If my interpretation of O.7 r.2 is correct, it matters not whether or not McDonnell Douglas Corporation carries on business in Australia. The position simply is that the rule is available and has been used in the present case. Service having been effected in accordance with the order made by Morling J., McDonnell Douglas Corporation has been personally served. If I am wrong in my construction of the rule and it is available only in respect of a corporation which carries on business -- either itself or through an agent -- within Australia, my finding that the company carries on business in Australia through its agent McDonnell Douglas Information Systems means that the rule is available in the present proceeding. The result is the same in either case. The order was properly made and the present application must be dismissed.
    
    (Counsel for McDonnell Douglas Corporation sought leave to appeal. Leave was opposed by counsel for the applicant).
    

17. Application is made by counsel on behalf of McDonnell Douglas Corporation for leave to appeal to a Full Court against the decision, which I have announced, and the order which I propose to make. It seems to me that the matter is quite clear and that, even if one accepts the alternative view of O.7 r.2, the issue is a factual one. There is no doubt in my mind as to the validity of the order that was made by Morling J.

18. Furthermore, I am influenced by the fact that this is a preliminary matter, which has nothing to do with the ultimate determination on the merits of the case or even, so far as I can see, with the entitlement of the parties to conduct themselves in any particular way commercially. It is not, for example, to be equated with the making of an interlocutory injunction, which may often have a powerful commercial effect, although the order is not yet final. If the view I have expressed turned out to be wrong, the only result would be that the applicant would seek leave to serve McDonnell Douglas Corporation in America. It would have to show a prima facie case; but, assuming that this was shown by an appropriate affidavit, leave would undoubtedly be granted. All of this would take some time; and it seems to me far preferable for the time to be spent, and the resources of the parties to be expended, in having the matter dealt with on its merits.

19. The orders that I make are that the Notice of Motion of 13 August 1987 be dismissed. I order that McDonnell Douglas Corporation pay the costs of that motion incurred by Amalgamated Wireless (Australasia) Limited. I refuse leave to appeal against those orders.