Fenbury Limited (in Liquidation), Dolfine Developments Pty Ltd (in Liquidation) and J N Taylor Finance Pty Ltd (in Liquidation) v Hongkong and Shanghai Banking Corporation Limited and Hongkong Bank of Australia..

[1996] SASC 5514

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA DEBELLE J

CWDS
Practice and procedure - Jurisdiction - service out of the jurisdiction - first defendant served in Hong Kong - second defendant lawfully served in Sydney - first defendant applies to set aside order granting leave to serve - whether service properly effected pursuant to Rule 18.02(i) - whether Rule 18.07 authorised grant of leave - order granting leave to serve first defendant set aside. Supreme Court Rules 18.02,18.03 and 18.07, referred to. Laurie v Carroll (1957) 98 CLR 310; Re Eager (1882) 22 Ch D 86; Re Cliff
(1895) 2 Ch 21, applied. K W Thomas (Melbourne) Ptg Ltd v Groves (1958) VR
189; Kinhill Engineers Pty Ltd v Zhen Yun Ltd (1992) 165 LSJS 178; Zwillinger v Schulof (1963) VR 407; Sostad v Waldson (1925) 3 DLR 779, discussed.

HRNG ADELAIDE, 28 February 1996 #DATE 22:3:1996

Counsel for plaintiffs:     Mr R A Finkelstein QC with
  Mr J D Karas

Solicitors for plaintiffs:    Fisher Jeffries

Counsel for defendants:     Mr N Young QC with Mr S Wishing

Solicitors for defendants:    Finlaysons

ORDER
Application granted.

JUDGE1 DEBELLE J This is an application to set aside an order granting leave to serve a summons out of the jurisdiction.

2. The plaintiffs are three companies in liquidation. The liquidation of all three companies is being administered in South Australia. The first defendant is a banking corporation which is incorporated in and carries on business in Hong Kong. The second defendant is a company incorporated in Victoria. It is a wholly owned subsidiary of the first defendant. Its registered office is in Sydney. I will call the second defendant "the Hong Kong Bank Australia".

3. The relief claimed by the plaintiffs in this action falls under two broad headings. First, the plaintiff Fenbury Ltd (in liq) seeks declarations that the defendants are liable as constructive trustees to account to it for losses alleged to have been suffered by it and for equitable damages. In addition, the second and third plaintiffs seek declarations that a ship's mortgage and subsequent payment of $A7m. to the defendants is voidable. They seek damages, restitution and other orders.

4. On 7 December 1995 the plaintiffs served the summons on the second defendant at its registered office in Sydney. On 6 December 1995, a Master of this Court made an order granting the plaintiffs leave to serve the first defendant in Hong Kong. The fiat discloses that the order was made pursuant to Rule 18.07. The summons was served on 8 December 1995. The first defendant entered an appearance on 6 February 1996 and on the same day applied to set aside the order made on 6 December granting leave to serve the summons.

THE ISSUES
5. The application is made on one ground only, namely, that the Master had no jurisdiction to grant leave. Although the Master made the order pursuant to Rule 18.07, the parties are agreed that the plaintiffs are at liberty to argue whatever ground they think is available to them under Rule 18. The plaintiffs rely on Rules 18.02(i) and 18.07. No other ground was relied on.

RULE 18.02 6. At common law, a summons issued out of this Court does not run outside the State: Laurie v Carroll (1957) 98 CLR 310 at 322. Thus, in the absence of any extension of its jurisdiction by statute or by the Rules of Court, this Court has no jurisdiction to authorise service of proceedings outside South Australia. Rule 18.02 provides for a service outside Australia. A summons may be served outside Australia whenever the subject matter of the claim relates to a matter falling within paras(a) to (n) of Rule 18.02. The Rules are a complete code so that, subject to Rule 18.07, the Court cannot order service where the subject matter of the action does not fall within Rule 18.02: in Re Eager (1882) 22 Ch D 86; in Re Cliff (1895) 2 Ch 21.

7. It is common ground that, with one exception, the subject matter of the relief claimed by the plaintiffs does not fall within any of the paragraphs of Rule 18.02. The exception is para(i) of Rule 18.02 on which the plaintiffs rely. It provides:
    "A summons may be served out of Australia without leave of
    the Court whenever the subject matter of the claim is or
    relates to ...
    (i) an action properly brought against a person duly served
    within the jurisdiction to which a person out of the
    jurisdiction is a necessary or proper party."

8. The question whether the plaintiff is able to rely on para(i) turns on the meaning of the phrase "within the jurisdiction". The effect of the plaintiffs' argument is that the word "jurisdiction" is not limited to South Australia but signifies the whole of Australia. Thus, the plaintiffs contend, the service on the Hong Kong Bank Australia in Sydney attracts the operation of para(i).

9. The plaintiffs' submission fails to give the correct effect to the word "jurisdiction" in the context of Rule 18.02. The noun "jurisdiction" has several meanings, two of which are relevant in this context. One meaning signifies legal or other authority and the other signifies the territory over which that authority extends. It is used in this latter sense in Rule 18.02. The phrase "within the jurisdiction" appears in almost all of the paragraphs in Rule 18.02. On each occasion, it has the same meaning, namely, the area over which this Court has jurisdiction, that is to say, the territorial bounds of South Australia. This Court cannot, as a general rule, make rules of court which have an extra-territorial operation. The intention is that Rule 18.02 should refer to the jurisdiction which the Court exercises in South Australia. Thus, in para(a) which enables a summons to be served outside Australia where the subject matter of the claim relates to "real or personal property situate within the jurisdiction", the expression "within the jurisdiction" is intended to refer to a claim relating to real or personal property within South Australia and not to real or personal property elsewhere in Australia. Had it been intended to refer to real or personal property in other States or Territories, the para(a) would have been expressed differently. Similarly, para(e) enables service out of Australia where a tort is committed within the jurisdiction. If it had been intended to refer to torts committed in other States or Territories as well as in South Australia, para(e) would also have been expressed differently. There is nothing in Rule 18 which suggests that the expression "within the jurisdiction" is being used in para(i) in any sense different from its use in the other paragraphs in Rule 18.02.

10. Further support for this conclusion is to be found in the legislative antecedents of Rule 18.02. Its predecessor was Order 11, rule 1(i) of the Supreme Court Rules 1947 which authorised service out of the jurisdiction whenever "any person out of the jurisdiction is a necessary or proper party to an action properly brought against some other person duly served within the jurisdiction". That rule had always been understood to mean that there was at least one party within the jurisdiction of the Court out of which the summons was issued: see, for example, K.W. Thomas (Melbourne) Pty Ltd v Groves (1958) VR 189. Although Rule 18.02(i) is expressed in different terms, it was not intended to alter the operation of the previous rule. Rule 18.02(i), therefore, applies only where a person is served within South Australia.

11. The summons was served on the Hong Kong Bank Australia in Sydney. The service was not, therefore, within South Australia. The plaintiffs are, therefore, unable to rely on para(i) of Rule 18.02. RULE 18.07

12. The plaintiffs also relied on Rule 18.07(i). It provides:
    "An originating process which does not come within
    Rule 18.02, or other process of the Court, may be served out
    of the State with the leave of the Court."

13. There is a degree of ambiguity in the Rule. Its meaning turns on what is meant by the adjectival expression "which does not come within Rule 18.02". On one view, it could mean that the Court has authority to grant leave to serve a summons outside Australia where the subject matter of the action falls outside the matters listed in Rule 18.02. This is the meaning contended for by Mr Finkelstein QC, who appeared for the plaintiffs. On the other hand, the expression could signify that the Court has authority only to grant leave to serve originating process which is not a summons. This is the meaning contended for by Mr Young QC, who appeared for the first defendant. Mr Young's submission was limited to the question of jurisdiction to make the order. If jurisdiction existed, the first defendant does not challenge the exercise of discretion to make the order. The resolution of the apparent ambiguity lies in a consideration of the means by which legal proceedings in this Court are instituted and in the history of this Rule.

14. All actions under the Rules are now commenced by summons: Rule 7.01. Rule 5 defines "an action" to include "any form of proceeding in the Court". Thus, all proceedings in the Court, be they an action as usually understood or other forms of proceeding, are now commenced by summons. The Rules also acknowledge the existence of legislation which might require proceedings to be commenced by process other than a summons. Thus, Rule 7.02 provides that a summons under the Rules shall be deemed to be a writ, motion, petition, originating summons or any other form of originating process which is referred to in any statute or statutory instrument. Rule 66 is a complementary provision.

15. Rule 18 provides for service out of the jurisdiction. It establishes a dichotomy between service out of South Australia but within the Commonwealth of Australia, for which Rule 18.03 provides, and service outside Australia for which Rule 18.02 provides. Rule 18.03(1) provides:
    "An originating process may be served outside the State but
    within Australia without leave."

16. The Rule has been drawn having in mind the provisions of both the Service and Execution of Process Act (Cth), and the federal scheme establishing cross-vesting of jurisdiction. It will be noticed that there is no limitation on the subject matter of the originating process. The operation of Rule 18.03 is not confined to a summons. Thus, it is possible to serve anywhere in Australia any kind of originating process which has been issued out of this Court in respect of any matter which is justiciable in this Court.

17. Rule 18.02 provides:-
    "A summons may be served out of Australia without leave of
    the Court whenever the subject matter of the claim is or
    relates to (the kind of actions listed in paras(a) to (n) of
    the Rule)."

18. It will be noticed that leave is not required. In Kinhill Engineers Pty Ltd v Zhen Yun Ltd (1992) 165 LSJS 178 it was held that it was necessary to obtain leave to serve under Rule 18.02. The need to obtain leave was removed by an amendment to Rule 18.02 made in 1992. Rule 18.02, therefore, differs from its predecessor, Order 11 rule 1 of the 1947 Rules which required leave, notwithstanding that the subject matter of the action fell within any of the listed paragraphs of Order 11 rule 1. In this way, the Court retained a residual discretion to refuse to allow service out of the jurisdiction, notwithstanding that the subject matter of the proceedings was within the rules: Kuwait Asia Bank EC v National Mutual Life Nominees Ltd (1991) 1 AC
187, 212.

19. More significantly for present purposes, the operation of Rule 18.02 is limited to a summons; it does not operate in respect of other originating process or other process of the Court. In this respect, Rule 18.02 has the same operation as Order 11 rule 1 which was limited to a writ of summons or notice of a writ of summons. Other rules in Order 11 dealt with service of other process: see Order 11 rule 7 to which I will return.

20. Thus, there are two important differences between the operation of Rules 18.02 and 18.03. The first is that Rule 18.02 operates only in respect of actions whose subject matter is of a kind specified in one of the paragraphs (a) to (n) whereas Rule 18.03 operates in respect of any subject matter which is justiciable in this Court. Secondly, unlike Rule 18.03 which applies to all kinds of originating process, the operation of Rule 18.02 is confined to a summons, that is to say, the originating process to which Rule 7.01 refers. Rule 18.07 has been included because of the existence of the other kinds of originating process recognised by Rule 7.02. Rule 18.07 focuses on originating process and other process to be served out of the State which does not come within Rule 7.01. The adjectival phrase "which does not come within Rule 18.02" is a recognition of the fact that actions commenced by summons have already been dealt with by Rule 18.02. Rule 18.07 has, therefore, been included to provide for service out of Australia of other kinds of originating process or any other process which are not a summons.

21. This conclusion is reinforced by the terms in which the predecessors of Rule 18 were expressed. An examination of Order 11 since it first came into operation and of all the Rules since which have dealt with service out of the jurisdiction shows that, with one exception, the Court has never had a general discretion to grant leave to serve out of the jurisdiction. The exception is to be found in Order 11, Rule 7 and its successors. Rule 18.07 was amended on 26 November 1992. Previously it had been expressed in the following form:-
    "(1) Service out of the jurisdiction may be allowed by the
    Court of the following process or notice thereof, that is to
    say,
    (a) a summons, or other originating proceeding;
     (i) in relation to any infant or person under disability,
     or
     (ii) under any Statute under which proceedings can be
     commenced otherwise than by summons;
     (iii) under any Rule or practice whereunder proceedings
     can be commenced otherwise than by summons;
    (b) without prejudice to the generality of the last
    foregoing subhead, any application, order, or notice in any
    interpleader proceedings, or for the appointment of an
    arbitrator or umpire, or to remit, set aside, or enforce an
    award in an arbitration held or to be held within the
    jurisdiction;
    (c) any application, order, or notice in any proceedings
    duly instituted in the Court whether by summons or
    otherwise."

22. That Rule will be recognised as being the successor to Order 11, rule 7.

23. Before being amended in 1992, the operation of Rule 18.07 was confined to the kinds of proceedings listed in paras(a) to (c). The subject matter of a proceeding for which leave might be granted under Rule 18.07 was not confined by Rule 18.02: Zwillinger v Schulof (1963) VR 407, 413; Sostad v Waldson
(1925) 3 DLR 779. When Rule 18.07 was amended, I do not think it was intended to convert Rule 18.07 into a provision which allows the court to grant leave to serve a summons initiating an action where the subject matter of the action falls outside Rule 18.02. It was intended to apply to the same kinds of proceedings as the repealed rule. The 1992 amendment might have been more happily expressed. But whatever its defects, it was not intended to invest the Court with a general discretion to determine whether leave should be granted in respect of actions commenced by summons where the subject matter of the action falls outside the matters listed in Rule 18.02. An amendment of that kind would have been of almost breathtaking proportion as it would have provided a means for the Court to assume jurisdiction whenever it is satisfied it should do so. The Court has never had such a wide power and I do not think it was intended to confer it by a legislative side wind in the form of the 1992 amendment to Rule 18.07. Had it been the intention to confer such a wide discretion, the Rule would have been expressed in other terms which would have left no doubt as to its intention.

24. For these reasons, the application of the first defendant is granted. The order made on 6 December 1995 granting leave to serve the first defendant in Hong Kong is set aside.