Foord v Puretec Pty Ltd
[2022] FCA 280
•24 March 2022
FEDERAL COURT OF AUSTRALIA
Foord v Puretec Pty Ltd [2022] FCA 280
File number(s): VID 391 of 2019 Judgment of: ANDERSON J Date of judgment: 24 March 2022 Catchwords: PRACTICE AND PROCEDURE — application by Cross-Claimant for default judgment by reason of Cross-Respondent’s failure to appear (r 5.22(a)), failure to attend mediation (r 5.22(c)) and failure to participate in this proceeding (r 5.22(d)) — compliance with the requirements of r 10.70 of the Federal Court Rules 2011 (Cth) — circumstances in which a party is in default within r 5.22 — judgment entered Legislation: Competition and Consumer Act 2010 (Cth) Schedule 2
Federal Court of Australia Act 1976 (Cth)
Federal Court Rules 2011 (Cth)
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 33 Date of hearing: 24 March 2022 Counsel for the Cross-Claimant: Mr G King Solicitor for the Cross-Claimant: Hall & Wilcox Counsel for the Cross-Respondent: The Cross-Respondent did not appear ORDERS
VID 391 of 2019 BETWEEN: CHRISTOPHER FOORD
First Applicant
MARILYN FOORD
Second Applicant
AND: PURETEC PTY LTD (ACN 164 806 688)
Respondent
AND BETWEEN: PURETEC PTY LTD (ACN 164 806 688)
Cross-Claimant
AND: QMP INC (C1759324)
Cross-Respondent
ORDER MADE BY:
ANDERSON J
DATE OF ORDER:
24 MARCH 2022
THE COURT ORDERS THAT:
1.Judgment be entered for Puretec against QMP for the following amounts:
(a)$649,333.50 for the claim;
(b)$31,477.89 for legal costs fixed pursuant to r 40.02(b) of the Rules; and
(c)$25,215.00 for interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
ANDERSON J:
BACKGROUND
This is an interlocutory application brought by the Cross-Claimant (Puretec), seeking default judgment against the Cross-Respondent, QMP, Inc. (QMP).
The proceeding was first issued by Christopher Foord and Marilyn Foord (Applicants), in which they alleged that a water filter (Filter) supplied by Puretec cracked and leaked water in April 2016, damaging the property owned by the Applicants at 8 Foord Lane, Dromana, in Victoria.
The Applicants sought damages pursuant to s 272 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL) for alleged negligence in the design and manufacture of the Filter. More specifically, the Applicants relied on expert reports obtained from Trevor Rowlands of Materials Solutions Australia to allege that:
(a)the Filter experienced fatigue cracking;
(b)the Filter contained a circumferential linear discontinuity which promoted the initiation of fatigue cracking;
(c)the Filter was made from polycarbonate, rather than styrene acrylonitrile (as advertised); and
(d)polycarbonate is an inappropriate material in service conditions of cyclic stressing.
The Applicants claimed $831,391.55 for damage caused by the Filter supplied by Puretec.
In its defence filed in this proceeding, Puretec denied liability, disputed the amounts claimed by the Applicants, and said further that the Filter was designed and manufactured by QMP.
On 1 May 2020, Puretec filed a Notice of Cross-Claim and Statement of Cross-Claim in this proceeding, seeking indemnity from QMP for the Applicants’ claim.
In the Statement of Cross-Claim, Puretec alleges that QMP is liable to indemnify Puretec for the Applicants’ claim based on s 274 of the ACL, as well as alleging breach of contract and negligence by QMP, which give rise to a claim for damages or contribution pursuant to section 23B of the Wrongs Act 1958 (Vic).
The Notice of Cross-Claim and Statement of Cross-Claim were filed on 1 May 2020 and served on the Cross-Respondent in accordance with Division 10.6 of the Federal Court Rules 2011 (Cth) (Rules). Service was effected on 28 September 2020.
On 11 February 2021, the Applicants and Puretec attended and reached a settlement at mediation. QMP did not attend the mediation and did not file any notice pursuant to r 15.09 of the Rules.
OTHER MATTERS - SERVICE OF CROSS-CLAIM
Puretec filed consent orders for the dismissal of the Applicants’ claim on 31 March 2021. Puretec submits that QMP is aware of this application and the Cross-Claim because:
(a)correspondence has been sent by email, post and personal service to the details registered for QMP with the Secretary of State in California;
(b)those details are consistent with the contact details on QMP’s website; and
(c)QMP received correspondence of those details because it lodged an insurance claim in response to that correspondence.
Further, QMP’s insurer confirmed by email dated 11 November 20211 that it received a letter sent from Puretec, dated 7 June 2021, and that QMP has been notified that the insurer does not agree to cover its liability for this claim.
Puretec submits that it necessarily follows that if QMP forwarded that letter to the insurer, and has been told that the insurer does not agree to provide cover for this claim, then QMP is aware of this proceeding and this application.
As QMP is based in California in the United States of America (USA), the Cross-Claim documents were sent by the Court to the Central Authority in the USA to be served pursuant to the Hague Convention and Division 10.6 of the Rules.
Rule 10.70(2)(a)(i) requires that, for default judgment to be entered, the Court must be satisfied that the initiating process was served on QMP by the method of service prescribed by the internal law of the USA.
In his affidavit filed on 6 April 2021 (First Forder Affidavit), Mr Christopher David Forder deposed that, to the best of his knowledge, the internal law which governs the service of an initiating process in California is Article 4 of the California Code of Civil Procedure (CCP).
Mr Forder deposed that Section 416.10 of the CCP states that a summons may be served on a corporation by delivery to ‘the person designated as agent for service of process’ (416.10(a))’ or to ‘the president, chief executive officer, or other head of the corporation, a vice president, a secretary or assistant secretary, a treasurer or assistant treasurer, a controller or chief financial officer, a general manager, or a person authorized by the corporation to receive service of process’ (416.10(b)).
On 19 November 2020, the Court filed and posted to the solicitors for Puretec, a Certificate of Attestation, received from ABC Legal Services, LLC, which stated that:
(a)the Cross-Claim documents were served on 28 September 2020;
(b)Kevin Hardin attended 25070 Ave Tibbits, Valencia, CA 91355 and handed the documents to ‘Freddy Viudal, designee’ who accepted them voluntarily; and
(c)Kevin Hardin declared the details to be true and correct under penalty of perjury under the laws of the State of California.
Mr Forder deposed that the spelling ‘Viudal’ on the Certificate of Attestation was a typographical error, and that the person served was ‘Freddy Vidal’ who is QMP’s Chief Executive Officer.
Puretec submits that the requirements in r 10.70 of the Rules are satisfied given:
(a)the Notice of Cross-Claim and Statement of Cross-Claim were served personally by the Central Authority in the USA and the Certificate of Attestation was sent to the Court by the Central Authority’s agent;
(b)the method of service is consistent with the method of service prescribed by the internal law for service of documents in California, USA, as set out in paragraphs 10-12 of the First Forder Affidavit; and
(c)the documents were served on 28 September 2020 which is more than 42 days ago as required by rule 10.70(3) of the Rules.
Having considered the First Forder Affidavit, I find that r 10.70(1) of the Rules applies to this proceeding because the Certificate of Attestation dated 9 October 2020 stated that service had been duly effected.
Pursuant to rule 10.70(2), I am also satisfied that the initiating process was served on QMP by a method of service prescribed by the internal law of the United States of America and was served with sufficient time to enable QMP to enter an appearance in the proceeding.
DEFAULT JUDGMENT
Puretec’s application for default judgment is governed by rr 5.23 and 10.69 of the Rules.
Puretec submits that QMP is in default within the meaning of r 5.22 of the Rules, given it has not filed any notice of appearance (r 5.22(a)), did not attend the mediation (r 5.22(c)) and has not participated in this proceeding at all (r 5.22(d)).
Accordingly, Puretec submits that QMP is in default, and the Court’s power to order judgment against it is enlivened.
Rule 5.23(2)(c) allows the Court to grant the relief claimed in the Statement of Cross-Claim, which is an indemnity for Puretec’s liability to the Applicants, or in the alternative damages which amount to an indemnity, plus costs and interest.
CONSIDERATION
There is a sufficient basis for the Court to be satisfied that Puretec is entitled to the amount claimed, given the indemnity is quantified by the precise settlement sum which has been paid to the Applicants, which totalled $615,000.
This is because the Cross-Respondent’s liability to indemnify the Cross-Claimant (pursuant to s 274 of the ACL) extends to all costs incurred as a result of the failure of the Filter to comply with the implied guarantee. Further, those costs are therefore not limited to the standard basis.
Having said that, those costs ($34,333.50) are reasonable and proportionate given the amount claimed exceeded $800,000, the litigation was on foot for almost two years, there were several case management hearings, the expert evidence evolved over time and included coordinated destructive testing and joint testing, the statement of claim was amended, and the parties attended a (successful) mediation.
Accordingly, the correct amount claimed from QMP is $649,333.50 as indemnity damages, plus legal costs and interest.
There is a sufficient basis for the Court to be satisfied that those amounts are reasonable and appropriate because:
(a)the disbursements are supported by invoices (annexure CDF-7 to the First Forder Affidavit) and are costs which the Cross-Claimant needed to incur to participate in this proceeding;
(b)at the time of the First Forder Affidavit, the professional fees claimed for pursuing the Cross-Claim ($12,000) were discounted by about one-third from the amount actually charged to the Cross-Claimant to reflect that those costs were only claimed on the standard basis; however
(c)even before that discount those amounts are reasonable and proportionate given the work involved (particularly arranging service overseas) and as Mr Forder’s affidavit notes, the hourly rate in the Federal Court Scale at the time was $650, whereas the Cross-Claimant was charged significantly less: $305 for a senior associate and $375 for a partner.
Puretec paid the sum of $615,000 to the Applicants on or about 25 March 2021. It has lost the use of that money due to the manufacturing defect created by QMP, and those costs form part of QMP’s liability as alleged in the Statement of Cross-Claim.
Puretec is therefore entitled to interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth). However, it does not seek interest from the date of the Notice of Cross-Claim, but rather seeks interest from the date the settlement sum was paid. Accordingly, interest calculated from 25 March 2021 to 24 March 2022 would be $25,215.00, being 4.1% for 365 days.
DISPOSITION
Having considered the above matters, I find that judgment must be entered for Puretec Pty Ltd against QMP for the following amounts:
(a)$649,333.50 for the claim;
(b)$31,477.89 for legal costs fixed pursuant to rule 40.02(b); and
(c)$25,215.00 for interest pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth).
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anderson. Associate:
Dated: 24 March 2022
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