Fletcher v Commissioner of Taxation

[1992] FCA 388

JUDGMENT NO. - a d -- 388 ~2

IN THE FEDERAL COURT OF AUSTRALIA)

WESTERN AUSTRALIAN DISTRICT	j NO. WG is of 1992
REGISTRY GENERAL DIVISION	1

Between: MINPROC TITANIUM AUSTRALIA

PTY LIMITED

Applicant

and: GINATTA MRINO TITANIUM

S.P.A. & OTHERS

Respondents

EX TEMPORE JUDGMENT

EINFELD J PERTH 10 MARCH 1992

The applicant, Minproc Titanium Australia Pty Limited (MTA), moves the Court for leave to serve the application and statement of claim in the present proceedings upon three respondents in Italy, respectively being Ginatta Torino Titanium S.P.A. (GTT), and Ugo and Marco Ginatta. The papers in the matter indicate that the claim by MTA against GTT is for damages for contravention of Part V of the Trade Practices Act 1974 (the Act) and for breach of contract, a declaration, and an order under section 87 of the Act.

entered into certain agreements with GTT, of whom Ugo and Marco

The statement of claim establishes that the damages are of the order of 11 billion Italian lire plus $A3 million. There may also be other claims but that is enough to indicate the size of the matter before the Court. The basis of the claim is that MTA

Ginatta are directors or principals, by which GTT was to supply to MTA technology and know-how concerning the production of titanium crystals. It was the intention of the parties, so far as the documentation establishes it, that this technology and know-how would be supplied to MTA for development in Australia of electrolytic production of titanium crystals from titanium tetrachloride. Amongst other things, the allegation is that the documents should be construed so as to establish a representation or warranty by GTT that their technology and know-how would permit this production process to proceed at a particular rate of production with a particular power consumption. For the right to use this technology and know-how, and in consideration of the agreements entered into, it is alleged that MTA paid licence fees of 6 billion lire to GTT.

The evidence alleges that as a consequence of obtaining the rights under the agreements, MTA then proceeded to test the process so as to establish whether the representations by GTT of

be met. These testings of the process were apparently conducted	the production capacity and the power consumption could in fact
in Australia and the United States, and MTA expended considerable sums of money in these experimentary analyses. The evidence presently before the Court is that the testing established that the representations of GTT and its directors about the capacity were not able to be realised.
As a consequence MTA comes before the Court upon a number of different legal bases. It alleges one or more breaches of warranty in the relevant documentation. It also alleges that there were breaches of section 52 of the Act, which outlaws representations in trade or commerce that are misleading or deceptive or likely to mislead or deceive. The Trade Practices Act, both in its terms and by reason of its constitutional limitation, may primarily be used only against a corporation who commits such a contravention but sections 75B and 82 of the Act permit recovery of damages from individuals who induce, aid and abet, or are knowingly concerned in the contravention by corporations of the relevant provisions of the legislation.
The statement of claim also alleges breaches of the Fair Trading Acts of the States of Western Australia and Queensland. For present purposes it is not necessary for me to examine those provisions. They are, in relevant respects, the same as the equivalent provisions of the Trade Practices Act and are commonly used in litigation in this Court to support or back up alleged contraventions of the Trade Practices Act. In this case they do not add anything to the cause of action under that Act, although
there may be some factual difficulty in identifying the State in reliance was sought to be placed upon their provisions because
which this production process, planned by MTA with GTT's technology, was going to take place. Under Australian law that might once have been thought relevant to establish the appropriate court where the case should properly be heard.
However, that distinction is really not important in this particular case because of recent Australian cross-vesting laws permitting the Federal Court to exercise the jurisdiction of
state courts and apply state law as needed to resolve a particular dispute.
The question of service outside the territory of the Commonwealth of Australia of legal process issued in Australian courts is governed, so far as the Federal Court is concerned, by order 8 of the Federal Court Rules. Rule 1 of order 8 provides a number of alternative bases upon which originating process can qualify for service outside Australian territory. It is sufficient to say for present purposes that more than one of these clauses apply to the facts of this case as presently before the Court. The most relevant are:

(a) where the proceeding is founded on a cause of action arising in the Commonwealth;

(ab) where the proceeding:

(i) is for the enforcement, rescission, dissolution, rectification or annulment of a contract; or

(ii) otherwise affects a contract; or

(iii) is for damages or other relief in respect of and the con tract: the breach of a contract;

(iv) is made in the Commonwealth; or

is made on behalf of the person to be served

(v) by or through an agent carrying on business

or residing in the Commonwealth; or

(vi) is governed by the law of the Commonwealth or of a State or Territory;

where the proceeding is founded on a breach of an

(b) Act, where the breach is committed in the

Commonwealth ;
(c)	where the proceeding is founded on a breach, wherever occurring, of an Act, and is brought in respect of, or for the recovery of, damage suffered wholly or partly in the Commonwealth;
( f )	where the proceeding i s a proceeding i n r e s p e c t o f which the person t o be served h a s submi t t ed t o
the j u r i s d i c t i o n o f the Cour t ;

I should observe that it is not necessary, on a motion of this kind, for the Court to come to a final conclusion about the merits of the case or of any aspect of the case, or whether the case is likely to succeed. This is because rule 2 ( 2 ) of order

8 sets out three basic criteria for the exercise of the

jurisdiction sought to be energised in this notice of motion:

Where the Court i s s a t i s f i e d o f the f o l l o w i n g m a t t e r s -

( a ) t h a t the proceeding i s a proceeding i n which the

Court h a s j u r i s d i c t i o n ;

(b) t h a t the proceed ing i s a proceeding t o which r u l e

1 a p p l i e s ; and

( c )	rel ie f which he seeks,
t h a t the a p p l i c a n t h a s a prima f a c i e c a s e f o r the

the Court may, by order , grant l e a v e t o serve

o r i g i n a t i n g p roces s	o u t s i d e	the	Commonwealth	under	t h i s
Order.

Where all these criteria are in existence, the Court then has an ultimate discretion as to whether to grant leave for extra- territorial service.

This is a proceeding in which the Court has jurisdiction and it is certainly one to which some paragraphs of rule 1 of order 8

apply - The third criterion of rule 2 ( 2 ) as to whether the applicant has a prima facie case for the relief being sought requires attention to the evidence which has been placed before the Court in this matter.

This evidence consists of some affidavits to which are annexed or exhibited a number of documents. One affidavit was of Philip Donald Bush who is described as a technical consultant and is a doctor of philosophy in metallurgy with 25 years of experience in mineral processing technology, seven years specifically with titanium processing. Dr Bush was involved in the testing of the technology of GTT with a view to analysing the veracity of the representations made by that company in its documentation and contacts with MTA. His evidence is sufficient to establish that there is a prima facie case for the relief sought. It is prima facie evidence to support the truth of the assertions, or most of them, in the statement of claim.

There is also an affidavit before the Court by Colin William Lockhart who is a solicitor in Perth acting for MTA. Mr

Lockhart deposes, in substance, to the surrounding or peripheral

legal bases upon which the statement of claim is based. One of the matters which he brings to attention is that the agreements between the parties include their consent to submit to the jurisdiction of Australian courts which, under the system which operates here in terms of trials of issues such as these, primarily means the Federal Court of Australia.

Whilst the particular provisions of the agreement in this regard are not entirely definitive, they and the surrounding circumstances of the matter, including the negotiations between the parties, correspondence and other documentation exhibited before me, indicate that the parties clearly had in mind that the Federal Court would be able to exercise jurisdiction in the matter in the event that a dispute arose under or pursuant to the agreements between the parties. I am satisfied that the applicant establishes a prima facie case for the relief which he seeks in this Court.

The final matter for consideration is whether the Court should exercise its discretion to grant the relief sought in the notice of motion. There are no criteria established under the rules which might govern this discretion. One matter could be that even though a prima facie case was established, it was felt by the Court that the case was weak or trivial. I see no reason to come to that conclusion here. The case is obviously a matter of substance. It is clear that MTA has spent a very large sum

that if an appropriate breach can be established, they must at	of money on the exercise involved and it seems fairly obvious
least have a reasonable chance of recovering all or a significant portion of the moneys expended. That says nothing about the possibility raised in the statement of claim that they have also suffered a significant loss of profits from the alleged breaches by GTT and its directors of the Trade Practices Act and of the warranty.
Another matter which I raised with senior counsel in the course of argument on discretion was whether leave might not be granted because the case should properly have been brought in a state court. That matter involves fairly sophisticated and fine attention to the relations between federal and state entities in Australia and particularlythe jurisdictions of federal and state courts. Until the recent cross-vesting legislation, these differences could result in cases failing because they were brought in the wrong place. However, under that legislation, the various state and federal courts now have the capacity to transfer to one another cases more appropriately heard in a jurisdiction other than the one in which they were commenced.
Accordingly, it is permissible for me either to transfer this application for leave to the Western Australian or Queensland Supreme Courts now or to grant leave to serve the process outside the Commonwealth and then transfer the case to one or other state court.
It is conceded that this could be a reason for refusing the
exercise of the court's discretion on this motion and for adjourning it for further hearing in a state court. On
consideration of the facts that have been placed before the Court, however, I do not consider that this is a reasonable action to take or a reasonable basis for the exercise of a discretion not to grant the relief sought here. The matter is properly in this Court; this Court has jurisdiction and power to grant the relief sought; and it is convenient for the Court to finalise the application here and now.
Another discretionary matter arising under private international law goes to which country might be the appropriate forum for the hearing of this case. It is sufficient for present purposes to say that I am satisfied that there is a strongly arguable case for this litigation to be conducted in the courts of Australia as opposed to the courts of Italy. Having regard to my views about the appropriateness of the Federal Court for the siting of the litigation in Australia, no grounds exist for refusing the leave sought on this basis.
For these reasons it seems to me that the case on the motion has been made out. I therefore order that the applicant be granted leave to serve the application and statement of claim upon the respondents outside the Commonwealth of Australia. The costs of the motion will be costs in the cause.

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