Kingston Estate Wines Pty Ltd (ACN 063 167 813) v Vetreria Etrusca SRL - [2007] SADC 102

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
KINGSTON ESTATE WINES PTY LTD (ACN 063 167 813) v VETRERIA ETRUSCA SRL
[2007] SADC 102
Reasons for Decision of His Honour Judge Muecke
12 October 2007
PRIVATE INTERNATIONAL LAW - STAY OF PROCEEDINGS - FOREIGN JURISDICTION CLAUSES
Application for a permanent stay of these proceedings - whether there is a contractual choice of law or choice of court - whether sufficiently strong reasons to grant stay - stay refused.
Akai Pty Ltd v. People’s Insurance Co Ltd (1996) 188 CLR 418, 424-425; Oceanic Sun Line Special Shipping Co Inc v. Fay (1988) 165 CLR 197, 224; Huddart Parker Ltd v. The Ship “Mill Hill” (1950) 81 CLR 502, 509; The “Eleftheria” [1970] P 94, 99 and 103; (1969) 2 All ER 641, 645 and 648; Prestige Holdings Pty Ltd v. Kevjen Pty Ltd [2003] QSC 006 at para. 29, applied.

KINGSTON ESTATE WINES PTY LTD (ACN 063 167 813) v VETRERIA ETRUSCA SRL
[2007] SADC 102

This is an application by the defendant for an order that all further proceedings in the within action be stayed permanently. The application is based principally on the submission that this is a dispute between the parties to a contract, by which contract the parties have agreed that disputes between them will be determined by a court in Italy, viz. the Florence court, section of Empoli.
By summons filed in this court on 23 April 2007 Kingston Estate Wines Pty Ltd (ACN 063 167 813) (“the plaintiff”) instituted proceedings against Vetreria Etrusca SRL (“the defendant”) claiming damages for breach of an agreement entered into by them whereby the defendant would supply wine bottles of a specific type and quality for use by the plaintiff for the bottling of wine products in the plaintiff’s winery business (“the Supply Agreement”). The plaintiff alleged that the bottles supplied to it by the defendant did not comply with the quality specifications as outlined in the Supply Agreement, and were not fit for the purpose for which they were intended. The plaintiff alleged that the bottles supplied to it by the defendant were faulty, in that the bottles had failed and cracked during the wine bottling process or subsequent to the wine bottling process. The plaintiff alleged that the bottles supplied to it by the defendant did not possess the qualities which an agent of the defendant had held out to the plaintiff by sample or model of the bottles the plaintiff was to receive under the Supply Agreement. The plaintiff alleged that during certain bottling runs numerous bottle breakages occurred. It gave details of such alleged breakages. It alleged that bottle breakages were witnessed by the person who was alleged to be the agent of the defendant. Those breakages, including the ones allegedly witnessed by the defendant’s agent, occurred at premises in South Australia of a company who had been engaged by the plaintiff to carry out bottling runs. The plaintiff particularized the loss and damage it suffered and claimed from the defendant.
It its Statement of Claim the plaintiff alleged that it was a corporation duly incorporated under the laws of South Australia whilst the defendant was a corporation duly incorporated under the laws of Italy. It alleged that the defendant carried on the business of the manufacture and supply of wine bottles to the wine industry in Australia and elsewhere for use in bottling wine in commercial bottling operations. It alleged that the defendant was, and at all material times had been, present within Australia through its managing agent Boncorp Holdings Pty Ltd, formerly Boncorp International Pty Ltd (together referred to as “Boncorp”) and Mr Philip Bonvino. It particularized the basis upon which such allegations were made. In particular, it particularized that Mr Bonvino held the position of “Sales and Marketing Manager” of the defendant and held himself out as having that position; that Mr Bonvino used letterhead bearing the defendant’s name and referring to the defendant’s internet website; and that the Supply Agreement bears the corporate names of the defendant and Boncorp. The plaintiff further alleged that Mr Bonvino was the person who negotiated the Supply Agreement between it and the defendant and that he was predominantly the person with whom the plaintiff had corresponded with respect to the matters alleged in the Statement of Claim.
The plaintiff alleged in its Statement of Claim that the United Nations Convention on Contracts for the International Sale of Goods (“the Vienna Convention”) applies to the Sale Agreement and by reason of the Vienna Convention, and its incorporation into the laws of South Australia by reason of the Sale of Goods (Vienna Convention) Act 1986, the Supply Agreement included implied terms that the bottles supplied to them by the defendant were to be fit for the purpose of use in a commercial wine bottling operation and were to possess the qualities which Boncorp, on behalf of the defendant, held out to the plaintiff as a sample or model of the bottles the plaintiff was to receive under the Supply Agreement.
By Interlocutory Application filed in this court on 24 May 2007 the defendant applied for an order that all further proceedings in the action be stayed permanently. The application was supported by an affidavit of Leneen Veronica Forde.
Ms Forde’s affidavit refers to and annexes a copy of the Supply Agreement which she said, on information, was entered into by the plaintiff and the defendant. The Supply Agreement refers to the defendant supplying bottles to the plaintiff “in accordance with its general sales conditions which are attached, this document needs to be signed and accepted by Kingston Estate”. Ms Forde refers to Clause 11 of the General Sales Conditions attached to the agreement. That clause reads:
11. Conventional court of law
For any disputes, none excluded, arising from the interpretation, execution or application of this contract, the competent court of law shall be the Florence court, section of Empoli, even in the case the payment has been agreed against a draft and this, with express exclusion of any other conventional court of law or court mentioned by the law.
The Supply Agreement and the General Sales Conditions annexed to Ms Forde’s affidavit are in English and are both signed by the plaintiff and the defendant. At the top of each page of the Supply Agreement the name “boncorp” appears above the defendant’s name and mark.
At the foot of pages 3 and 4 of the General Sales Conditions (but not on the foot of pages 1 and 2, nor on any of the three pages of the Supply Agreement) appear the following words in italics:
The present document is an accurate translation of the original document written in Italian.
For any controversy, the original Italian document prevails.
Ms Forde’s affidavit refers to information given to her by the Chairman of the Board of Directors of the defendant. That information included the fact that the defendant’s head office is in Italy, that the defendant does not have an office in Australia and never has had, and that the defendant does not have an agent in Australia. Ms Forde also refers to information from the Chairman that on or about 29 September 2005 the defendant issued proceedings in the Court of Florence, Branch Court of Empoli (“Florence Proceedings”) by summons. The summons is annexed to her affidavit, as is an English translation of it. By this summons the defendant claimed against the plaintiff a sum of nearly $173,000 for damages and monies allegedly owed by the plaintiff to the defendant in relation to the plaintiff’s alleged breach of the Supply Agreement. Annexed to Ms Forde’s affidavit is a true copy of the plaintiff’s defence to the Florence Proceedings and an English translation of it. It was alleged that the plaintiff filed that defence in the Florence Proceedings on or about 4 May 2007.
Ms Forde refers to the first hearing of the Florence Proceedings being scheduled for 31 May 2007, less than a week after the interlocutory application was filed on behalf of the defendant in these proceedings for a permanent stay of them.
Ms Forde states in her affidavit that by reason of the matters referred to in it the plaintiff and the defendant have by contract submitted to the jurisdiction of a foreign court, namely the Florence Court, section of Empoli. She expresses the opinion that it is inappropriate in the circumstances for this court to hear the plaintiff’s claim in view of those contractual arrangements and the proceedings in Italy, and accordingly this court should permanently stay these proceedings.
An affidavit of Antonia Anna Mercorella was filed on 29 June 2007 on behalf of the plaintiff. In it Ms Mercorella states that she had been informed by the plaintiff’s Commercial Manager that the signed Supply Agreement was as reproduced in Ms Forde’s affidavit. Ms Mercorella states that the agreement included the General Sales Conditions which were also reproduced in Ms Forde’s affidavit.
Ms Mercorella refers to her instructions as to the circumstances in which the Supply Agreement arose. She refers to the plaintiff’s Business Development Manager, who lives in South Australia, receiving email correspondence during July 2004 from Mr Philip Bonvino of Boncorp advising that Boncorp was the managing agent for the defendant in Australia. In the email Mr Bonvino asked whether the Business Development Manager of the plaintiff would be interested in meeting with him and another to discuss the sale of the defendant’s products. A meeting occurred in July 2004 in Adelaide. In August 2004 Mr Bonvino, through Boncorp, provided a quotation to the plaintiff for the supply of wine bottles. In February 2005 the plaintiff’s Business Development Manager and the plaintiff’s Production Planner met with Mr Bonvino and another to discuss pricing, colouring and quality of wine bottles which could be supplied to the plaintiff by the defendant. The terms of supply were subsequently agreed and became embodied in the Supply Agreement and the General Sales Conditions.
Ms Mercorella’s affidavit goes on to refer to the plaintiff’s Production Manager being present and observing numerous regular breakages of bottles supplied by the defendant during bottling runs. She refers to Mr Bonvino attending with the plaintiff’s Production Planner at a bottling run when bottles supplied by the defendant broke. She refers to a meeting with Mr Bonvino in respect of the issue of bottle breakages and further, about a reminder that had been sent by the defendant to the plaintiff in respect of an outstanding invoice. At that meeting Mr Bonvino said to the plaintiff’s officers that the plaintiff should ignore the reminder and that he would arrange for a suspension of the outstanding invoice until the issue of bottle breakages had been resolved. I infer that it was this invoice upon which the defendant in these proceedings sued the plaintiff in these proceedings in the Florence Proceedings.
Ms Mercorella exhibits to her affidavit a number of documents. They were documents apparently generated by Mr Bonvino and Boncorp. One letter written by Mr Bonvino is apparently on the defendant’s letterhead and at the foot of it there is reference to “Vetreria Etrusca Australia”. There is also there reference to a website of There is an address at Tullamarine in Victoria with an Australian telephone number and facsimile number. There is also an email from Mr Bonvino to an officer of the plaintiff in which Mr Bonvino describes himself as “Sales & Marketing Manager” for the defendant. That email is apparently generated from an email address of “[email protected]”. Mr Bonvino’s business card is also attached which describes him as “Sales and Marketing Manager” for Vetreria Etrusca Australia of Tullamarine in Victoria. It carries the defendant’s name and mark. An email sent on 12 December 2005, apparently from the defendant in Italy to an officer of the plaintiff, is copied to Mr Bonvino and refers to the defendant as having “received from our agent” the plaintiff’s claim in respect to the alleged broken bottles. The defendant apparently wrote that “We urgently need to receive samples of claimed bottles to better evaluate the problem”. Finally there is an email dated 1 July 2004 from Mr Bonvino to an officer of the plaintiff in which Mr Bonvino states that Boncorp International “is the managing agent for Vetreria Etrusca in Australia”. An email from Mr Bonvino dated 29 June 2004 refers to how contact between Mr Bonvino and the plaintiff originated and that refers to Boncorp International being the managing agent of the defendant in Australia and New Zealand.
In her affidavit Ms Mercorella states that on or about 21 September 2005 lawyers in Australia wrote to Boncorp, as the agent of the defendant in Australia, advising that the bottles did not comply with the requirements of the Supply Agreement and were defective and, as a result, the defendant was in breach of that agreement. She states that, in accordance with Rule 33 of the District Court Civil Rules 2006, the claim letter provided the defendant with details of the damages and costs incurred by the plaintiff relating to the bottles. She states that no response to the claim letter has ever been received.
Ms Mercorella states that on or about 29 September 2005 the defendant issued the Florence Proceedings. She states that it is her view that that was the direct result of the formal notice provided in the claim letter, and was initiated prior to the 90 day notice period stipulated by Rule 33 after which the plaintiff could commence proceedings against the defendant in Australia. She states that following the elapse of the required 90 day notice period the plaintiff issued these proceedings.
Ms Mercorella states that on or about 4 May 2007 the plaintiff filed a responsive document in the Florence Proceedings. That document is reproduced as part of the documents annexed to Ms Forde’s affidavit. Ms Mercorella states that in the Italian proceedings, by its responsive document, the plaintiff asserts, inter alia, that the Italian court does not possess jurisdiction over the matters of the Italian proceedings for reasons set out in that document. They include that the summons in the Italian proceedings is invalid due to a defective Power of Attorney as required by Italian Law at the time of issuing legal proceedings. Ms Mercorella states that these are preliminary proceedings yet to be determined in the Florence Proceedings. Ms Mercorella also states that she is instructed by an officer of the plaintiff that an Italian version of the Supply Agreement was never provided by the defendant to the plaintiff. (This is claimed to be a reason why the plaintiff asserts Clause 11 invalid.)
Finally, Ms Mercorella states that the bottles supplied to the plaintiff by the defendant were at all times intended for filling with wine in Australia and to contain Australian wine; there are approximately 240,300 bottles supplied by the defendant to the plaintiff stored in South Australia; and the bottling runs where bottles broke are in South Australia and persons who were present at the bottling runs are all based in Australia, including Mr Bonvino. She refers to a number of persons who may be witnesses in the matter all of whom are located in Australia. They include Mr Bonvino, persons from the companies that were contracted to do the bottling runs, persons who conducted testing of the bottles, and any experts who may be called in respect of assessment of damages.
A further affidavit of Antonia Anna Mercorella was filed on 30 August 2007. This was a result of an issue that arose as to when the plaintiff gave notice to the defendant, in accordance with Rule 33, of its claim against the defendant in respect of damages and costs incurred by the plaintiff relating to the bottles, and when the defendant issued the Florence Proceedings. Earlier affidavits had referred to these two events having occurred in September 2005 (the Rule 33 notice on or about 21 September 2005 and the Florence Proceedings on or about 29 September 2005). Ms Mercorella’s second affidavit states (and it was ultimately agreed) that these two events occurred in 2006 and not in 2005. It was agreed that the plaintiff’s Rule 33 notice was sent to Boncorp as the agent of the defendant in Australia by letter dated 21 September 2006 (being also the date upon which it was filed in this court). An annexure to Ms Mercorella’s second affidavit indicates that the defendant’s summons issued out of the Court of Florence occurred on 9 October 2006. The summons (including an English translated version of it) and other documents were hand delivered to the plaintiff’s offices at Greenhill Road Hazelwood Park on or about 27 November 2006. I infer that the defendant issued the Florence Proceedings as a direct result of receiving the plaintiff’s Rule 33 notice.
The plaintiff issued these proceedings on 23 April 2007.
The application for a permanent stay of these proceedings was argued before me on 30 and 31 August 2007. Mr Hoile appeared as counsel for the applicant/defendant and Mr Dal Cin appeared as counsel for the respondent/plaintiff. I am grateful to both counsel for their careful and thorough submissions on the law and the relevant facts.
The legal principles that guide me on the application appear to be well established and settled.
A choice of law clause in a contract does not constitute a submission to the jurisdiction of the courts of a particular legal system. A choice of courts clause does (Akai Pty Ltd v. People’s Insurance Co Ltd (1996) 188 CLR 418, 424-425).
When parties do contract to submit their disputes to the exclusive jurisdiction of the courts of another country they should, prima facie, be held to their bargain (Akai, at 427). Where that occurs the courts of this country regard such agreement as a submission of such disputes to that other country and will, in the absence of countervailing reasons, stay proceedings brought here to decide those disputes (Oceanic Sun Line Special Shipping Co Inc v. Fay (1988) 165 CLR 197, 224 per Brennan J). Those countervailing reasons must be strong reasons which a plaintiff that institutes proceedings here bears an onus to establish and prove. Even though there is “a strong bias in favour of maintaining the special bargain” (Huddart Parker Ltd v. The Ship “Mill Hill” (1950) 81 CLR 502, 509), where there is a submission to the exclusive jurisdiction of the courts of another country, the courts of this country nevertheless retain a discretion to refuse a stay of proceedings commenced here if sufficient cause is shown (Akai, at 428). In exercising a discretion not to grant a stay “the court should take into account all the circumstances of the case”. The court “should give full weight to the prima facie desirability of holding the plaintiff to its agreement” and should “be careful not just to pay lip service to the principle involved, and then fail to give effect to it because of a mere balance of convenience” (The “Eleftheria” [1970] P 94, 99 and 103; (1969) 2 All ER 641, 645 and 648).
The first question I need to consider is whether Clause 11 of the General Sales Conditions of the Supply Agreement is a clause whereby the parties to the Supply Agreement chose the law which would apply to their agreement, or whether the parties chose a legal system which they intended to have jurisdiction over their agreement, or both.
I have no doubt that, according to the English translation of Clause 11, the parties did not, by that clause, choose the law upon which their bargain should be governed. The clause, as translated, says nothing about what law shall be applied in respect of any disputes between the contracting parties. My understanding of the ultimate position of the parties before me was that neither party disputes that the proper law to govern their contract is the law of the Vienna Convention. If I have misunderstood that, I am satisfied that it cannot be said that the parties have, by Clause 11, chosen the law of Italy as the law to govern their contract.

The next question is whether Clause 11 is a clause whereby the parties submitted to the jurisdiction of the Florence court. The proper construction of Clause 11 is a matter of dispute between the parties. The dispute is whether the dispute between the parties, or perhaps more accurately whether the plaintiff’s claim against the defendant, is a “dispute … arising from the interpretation, execution or application of” the Supply Agreement. Mr Dal Cin submitted that the plaintiff’s claim does not arise from the interpretation of the Supply Agreement. Rather, it is a claim based upon a breach of that agreement and the alleged failure by the defendant to supply bottles which comply with the quality requirements specified by the Supply Agreement. Mr Dal Cin submitted that the plaintiff’s claim does not arise from a dispute arising from the execution of the Supply Agreement. He submitted that there was no dispute about its execution. He submitted that “execution”, when used in relation to an instrument, “connotes the completion of all formalities such as signing, sealing, etc necessary to give validity or legal efficacy to the instrument” (Prestige Holdings Pty Ltd v. Kevjen Pty Ltd, Supreme Court of Queensland, Muir J, [2003] QSC 006 at para. 29). Finally, Mr Dal Cin submitted that the dispute between the parties does not arise from the application of the Supply Agreement. He submitted that what is meant by that phrase in Clause 11 is that the clause was intended to apply where there is not a dispute about facts, but there is a dispute about how the contract applies to those facts. He submitted that such a construction makes commercial sense because it makes commercial sense for the parties to agree that whether or not the contract applies to undisputed facts is to be determined in a particular place – in this case in Florence in Italy.
In my view the parties, by Clause 11, appear to have chosen the Florence Court as the court for any disputes arising from particular and specific aspects of their contract. It would have been easy for the contracting parties to provide that the Florence Court be the competent court to decide any and all disputes arising between them that relate in any way to their contract. That is not what Clause 11 provides. By choosing particular and specific aspects of their contract which they agreed, if there is a dispute, would be decided by the Florence Court, they may well be said to have made a positive choice to limit disputes which were to be heard by the Florence Court, allowing or envisaging disputes arising otherwise to be heard by courts situated elsewhere.
Whatever one may say about those matters, I have no doubt that the English translation of Clause 11 is at least ambiguous and unclear. Certainly, all the words after “section of Empoli” make little sense grammatically, and they read as if the original Italian may be difficult to translate easily into English.
(I set aside the issue as to the law of what country should be applied in construing Clause 11 of the General Sales Conditions of the Sale Agreement. I note that Mr Hoile submitted that I should construe Clause 11 by applying Australian law.)
The Sale Agreement, by the General Sales Conditions that are incorporated in it, has, at least on the bottom of two of the four pages of the General Sales Conditions, provided that “The present document is an accurate translation of the original document written in Italian. For any controversy, the original Italian document prevails.”
The original Italian document was not before me. It has never been made available to the plaintiff. That is one of the bases upon which the plaintiff wishes to argue in the Florence Proceedings that Clause 11 is invalid. The absence of the original Italian document has precluded the plaintiff from the opportunity of checking whether what is said to be the English translation of Clause 11 is an accurate one. It appears to me to be important not only to be able to check the accuracy of the words, but also of the punctuation and of the sense of the words before the clause can be properly construed.
Whatever else can be said about it, the English translation seems to make it clear that where there is a controversy about the document the original Italian document will prevail. I have no doubt that there is a controversy about Clause 11 and its proper construction. In those circumstances, and where the original Italian document is not before me, my conclusion is that I cannot say whether, on a proper construction of the Sales Agreement, the parties have chosen a particular forum or jurisdiction in which the dispute of the plaintiff’s claim is to be resolved.
If I am wrong in that conclusion, and if it is the case that I should construe the English translation of Clause 11 according to the rules of construction under Australian law, I would conclude that the dispute represented by the plaintiff’s proceedings issued in this court is not a dispute arising from the interpretation, execution or application of the Sales Agreement. Rather, it is an allegation by the plaintiff that the defendant has breached the Sales Agreement it has with the plaintiff. The interpretation of the contract is not alleged to be in dispute. There is no allegation that either party has not properly executed the contract. There is no dispute as to whether or not the contract applies as between the two parties. In my view, a suit by the plaintiff that the defendant is alleged to have breached its contractual obligations is not a dispute that I would find was contemplated by the parties as being one which was to be the subject of the exclusive jurisdiction of the Florence Court.
Assuming that the parties have chosen the Florence Court as the court to which they will submit their disputes, exclusive of other courts, I would then need to consider whether the plaintiff has discharged the onus on it of proving strong enough reasons to convince me to refuse to order a stay of proceedings. I am satisfied that strong enough reasons have been established for my not to grant a stay of the proceedings in this court. I consider that there are very significant, even overwhelming, reasons which favour the plaintiff having the opportunity to run its case in this country. The bottles supplied to it by the defendant, the two bottling lines where the defendant’s bottles apparently broke, and almost all conceivable witnesses as to the bottles which are the subject of the plaintiff’s claim are in this country. I do not consider the fact that the plaintiff seems to have already gone some way to “defend” the defendant’s summons in the Florence Proceedings is of sufficient weight to counter the very significant features that are against the ordering of a stay. Furthermore, I consider that the allegations on behalf of the defendant that it does not have an office in Australia, never has had, and does not have an agent in Australia have been very significantly undermined by other sworn evidence, including significant documentary evidence. That evidence has not been contradicted on behalf of the defendant since it was filed and served. Mr Bonvino is likely to be an important witness both as to discussions concerning the bottles and their intended use by the plaintiff, and as to the fact that a number broke during bottling. Mr Bonvino is in Australia.
This is not a case where an Australian resident went overseas looking to buy bottles from a supplier who had no connection with Australia. On the evidence before me there are strong grounds to conclude, even at this early stage, that it was the defendant who sought to introduce its product to Australian consumers via an apparently legitimate agent in Victoria.
In the end I have concluded that the plaintiff has made out very strong reasons for me to refuse to stay these proceedings. That conclusion supports the refusal of a stay if the proper construction of the contract is that the parties have not chosen the Florence Court as the court to which they will submit their disputes, exclusive of other courts.
The defendant’s application for a stay is dismissed.
I shall hear the parties as to costs.