Mg Kailis Pty Ltd v UNITRADE Holdings Ltd - [2005] WADC 198

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: MG KAILIS PTY LTD -v- UNITRADE HOLDINGS LTD [2005] WADC 198

CORAM: EATON DCJ

HEARD: 12 SEPTEMBER 2005

DELIVERED : 2 NOVEMBER 2005

FILE NO/S: CIVO 157 of 2005

BETWEEN: MG KAILIS PTY LTD (ABN 47 008 684 802)
Plaintiff
AND
UNITRADE HOLDINGS LTD
Defendant

Catchwords:

Practice and procedure - Application for service out of the jurisdiction - Place of contract - Postal Acceptance Rule - Instantaneous Communications Rule - Place of breach

Legislation:

Rules of the Supreme Court 1971 O 10

Result:

Leave granted

Representation:

Counsel:

Plaintiff: Mr D N Ryan
Defendant: Not applicable

Solicitors:

Plaintiff: Talbot & Olivier
Defendant: No appearance

Case(s) referred to in judgment(s):

Brinkibon Ltd v Stahag Stahl GmbH [1983] 2 AC 34
Coates as Liquidator of Campus Holidays Ltd (in liq) v Charles Porter & Sons Pty Ltd (1990) 2 ACSR 733
Entores Ltd v Miles Far East Corporation [1955] 2 QB 327
Pivot v Hoechst [2000] VSC 262

Case(s) also cited:

Clifton v Palumbo [1944] 2 All ER 497
Gibson v Manchester City Council [1979] 1 WLR 294
Grainger & Son v Gough (Surveyor of Taxes) [1896] AC 325
Harvey v Facey [1893] AC 552
Henthorn v Fraser [1892] 2 Ch 27
McIver v Richardson (1813) 1 M & S 557
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401
Spencer v Harding (1870) LR5CP 561
Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93

EATON DCJ: The plaintiff by ex parte originating motion seeks leave to serve notice of a writ out of the jurisdiction pursuant to O 10 r 1(e), (f) and r 3 of the Rules of the Supreme Court 1971. The plaintiff's application is supported by an affidavit sworn by Benjamin Alan Patton sworn 26 August 2005.
Order 10 r 1 provides that service of a writ or notice of a writ out of the jurisdiction is permissible with the leave of the court whenever, inter alia, the action is one brought to enforce, rescind, dissolve, annul or otherwise effect a contract or to recover damages or obtain other relief in respect of the breach of the contract being in either case a contract made within the jurisdiction, or which by its terms or implications is governed by the law of Western Australia. Service outside the jurisdiction may also be permissible where the action is brought in respect of a breach committed within the jurisdiction of a contract wherever made.
Order 10 r 3 provides that unless service is to be effected within the Commonwealth of Australia, leave granted under r 1 or r 2 should be leave for service out of the jurisdiction of notice of a writ, and not the writ itself. An application for the grant of leave shall be supported by an affidavit stating the grounds on which the application is made and that, in the deponent's belief, the plaintiff has a good cause of action and showing in what place or country the defendant is, or probably may be found. Order 10 r 4(2) provides that no such leave shall be granted unless it is made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction under that order.
The notice of writ of summons proposed to be served out of the jurisdiction contains a statement of claim which asserts, inter alia, that the plaintiff is and was at all material times a company duly incorporated in Australia and carrying on the business of a wholesale seller of seafood products. It also asserts that the defendant was at all material times a company duly incorporated in Hong Kong and carrying on, amongst other things, the business of importing seafood products.
The plaintiff seeks to recover a liquidated amount, the sum of $68,165.26 being the amount which the defendant should have paid to the plaintiff pursuant to agreements made between them in October and November 2004. By the proposed statement of claim the October agreement is said to have been entered into in or about 28 October 2004 and is constituted by email communications passing between Benjamin Alan Patton on behalf of the plaintiff and Edmond Szeto on behalf of the defendant on 28 October 2004, and a revised commercial invoice from the plaintiff to the defendant dated 28 October 2004 forwarded by facsimile transmission that day.
The November agreement is said to be constituted by email communications between those two persons, between on or about 10 November 2004 and 12 November 2004 and a revised commercial invoice from the plaintiff to the defendant dated 13 November 2004 forwarded by facsimile transmission that same day.
Dealing firstly with the October agreement, it is clear that a series of emails comprising, effectively, the negotiations as to price, culminated in a shipment of live coral trout by the plaintiff to the defendant by air from Cairns Airport in Queensland to Hong Kong. Mr Patton deposed that a commercial invoice on the plaintiff's letterhead dated 12 October 1999 (sic) was sent to the plaintiff to the defendant by facsimile transmission on 28 October 2004. The substance of that invoice begins with the phrase "We can offer for shipment: live coral trout". The estimated time of arrival in Hong Kong is said to be 29 October 2004. The remainder of the detail relates to the number of fish, the size of the fish and the price per kilogram. The shipment being offered is, in summary, four bins comprising 1,035 fish weighing 1,188 kilograms for a total value of $49,156 plus an amount of $41.38 which is unspecified. At the foot of that document below a line for a signature are the words "your confirmation of the above is requested by return of this order with your signature of acceptance". There does not appear to be any responding email from the defendant to the plaintiff. Mr Patton, in his affidavit, explained:
"Once fish are packed the plaintiff is better able to determine the quantity and weight of the fish to be shipped. At that time a revised commercial invoice is prepared and forwarded, ordinarily by facsimile transmission, to the client identifying the fish that have been packed for shipping. The fish are then shipped."
He then referred to a document dated 28 October 2004 being a commercial invoice issued by the plaintiff to the defendant and sent by facsimile transmission in respect of 1,085 fish for a total price of $48,359.50. That document is said to have been faxed at 9.03 am on 29 October 2004, and is described as "revised invoice". The terms and conditions stipulate that the plaintiff's bankers are Westpac Banking Corporation of Adelaide Street, Fremantle with an appropriate account name and number.
So far as the November agreement is concerned there was again a series of emails in early November which partly expressed the plaintiff's concern that they had not been paid for the October contract. There was clearly a reluctance on the part of the plaintiff to send any more fish to the defendant in the absence of payment. It appears that the defendant assured the plaintiff that payment would be made for both the shipment that had been received and the shipment that was being negotiated. On that basis the same procedure was embarked upon. The plaintiff faxed a document to the defendant indicating that it could offer for shipment live coral trout in certain specified numbers, weights and price for arrival in Hong Kong on 13 November 2004. As with the previous transaction there was a further commercial invoice entitled "revised invoice" dated 13 November 2004 in respect of 498 fish having been forwarded by air from Cairns to Hong Kong for a total sum of $26,209.60.
It is apparent that there was some complaint about the state or quality of the fish received at Hong Kong and a credit was claimed for sick fish. Subsequently the plaintiff issued an adjustment note to the defendant in respect of the order delivered on 13 November 2004.
Mr Patton deposed to having met with representatives of the defendant in Hong Kong on 30 September 2004. He said that at that meeting it was agreed between the parties that terms of payment for live coral trout shipped to the defendant would be payment within seven days of the seafood product landing in Hong Kong.
There does not appear to be any formal agreement reached between the plaintiff and the defendant beyond the oral agreements worked out on 30 September 2004, and the communications or leading up to the October and November agreements.
The plaintiff sues on the October and November agreements alleging breach of contract. The plaintiff says that the contract in each case was made within the jurisdiction, that is, within Western Australia. The plaintiff also relies upon the proposition that the action is brought in respect of a breach committed within the jurisdiction of that contract.
Counsel for the plaintiff has provided me with written submissions. Counsel urges that the documents faxed by the plaintiff to the defendant containing the words "we can offer for shipment" are documents which indicate a willingness to consider a sale or an invitation to treat. Counsel submits that the use of the word "can" is important because it indicates that the seller retains the freedom to reject any proposal should one be forthcoming. That being the case, the plaintiff submits that it is the defendant who makes the offer to purchase fish from the plaintiff in particular terms relating to number, size and price per kilogram, and it is the plaintiff which accepts the defendant's offer. Counsel for the plaintiff submits that an acceptance is generally effective to conclude a contract only when the fact of acceptance is communicated to the offerer, but that there is an exception to the general rule regarding communication, that being the postal rule. The plaintiff submits that the postal rule stipulates that acceptance takes place when a letter is posted. By analogy, says the plaintiff, the postal rule should apply to electronic mail or "emails" passing between the plaintiff and the defendant. The plaintiff concludes its argument in that regard in the following terms:
"In the Present case, the plaintiff's business is located in Fremantle, Perth (sic) and the acceptance of the contract, in accordance with the posting rule, is at all times made in Western Australia. It follows, in relation to the issue as to where the contract was ultimately formed, that it was in Western Australia."
The postal rule has been stated correctly. Where a contract is made by post the acceptance is complete as soon as the letter of acceptance is put in the post. Counsel for the plaintiff says that the postal rule by analogy should apply to instantaneous communications. In Entores Ltd v Miles Far East Corporation [1955] 2 QB 327 Denning LJ said:
"My conclusion is that the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offerer: and the contract is made at the place where the acceptance is received."
It is very clear in this case, particularly given that the product being bought and sold is live fish being transported by air over many thousands of kilometres, that speed of communication and transport is of the essence. It is hardly surprising in those circumstances that the parties to these agreements did not contemplate that such documentation as might be generated in the course of their negotiations would be entrusted to the post. In accordance with the vast bulk of modern commerce, documentation and communication between the parties was in electronic form, being instantaneous or almost instantaneous in nature whether it be by way of email or facsimile transmission.
In the case referred to, Lord Denning held that a telex message should be considered to be a form of instantaneous communication resulting in acceptance by telex being effective only once it is received by the offerer. Despite the fact that a telex may not be completely instantaneous the court considered that the parties were to be regarded for all intents and purposes as being in each other's presence. So far as I can tell, in the present case, communications were not primarily conducted by telephone but by email. They appear to have been directly conducted between the plaintiff and the defendant and not through a third party. The same appears to apply to facsimile transmissions. The latter would be regarded as instantaneous communication, whereas email is notoriously not so. An email message passes from the sender's computer once the sender has clicked "send" to the internet service provider serving that sender. It may then move electronically through a series of computers before arriving through another internet service provider and ultimately to the addressee's computer.
In Pivot v Hoechst [2000] VSC 262 a decision of Hedigan J in the common law division of the Supreme Court of Victoria, his Honour considered an application by a third party that the service on it out of the jurisdiction of a third party notice and the third party notice itself be stayed. At par 16 his Honour said:
"In the case of the despatch and receipt of messages that are virtually instantaneous, the approach of the courts has been to regard the transaction as being virtually done as though the parties were in each other's presence or speaking over the telephone. The ordinary postal acceptance rule does not apply to communications of this kind."
He referred, by way of authority for that proposition to Entores Ltd v Miles Far East Corporation (op cit) which, he said, was approved by the House of Lords in Brinkibon Ltd v Stahag Stahl GmbH [1983] 2 AC 34. His honour said that those authorities had been applied in numerous Australian cases.
At par [03 – 400] the author of "Carter on Contract" has the following to say about the justification for the postal acceptance rule:
"Although various justifications for the postal acceptance rule have been suggested over the years, none has proved to be convincing. For example, notwithstanding occasional suggestions to the contrary, the rule is not based on the proposition that the post office is the agent of the offerer (or, alternatively, the common agent of both parties) to receive the communication and that therefore the acceptance should be treated as having been communicated to the offeror upon posting.
Ultimately, the postal acceptance rule is based on notions of expediency and convenience, as these are envisaged by the courts from time to time. Emphasising the need, where the parties are not in instantaneous communication with each other, for the offeree to be able to act immediately on the basis that a contract has been agreed, a letter of acceptance is binding once posted. Moreover, the offeree, having done all that can be done to communicate acceptance by posting the acceptance, is not responsible for what may happen after losing control over the letter. Of course, it is because notions of expediency and convenience do not justify the application of the rule to communications which are more or less instantaneous that the application of the rule has not been extended beyond telegrams."
Having regard to the foregoing I am inclined to the view that the postal acceptance rule is not apposite to the communications passing between the plaintiff and the defendant in this matter. Counsel for the plaintiff urges upon me that the postal acceptance rule applies by analogy. He said that it follows from the proposition that the offer to purchase was made by the defendant and the acceptance communicated by the plaintiff from within Western Australia that, in accordance with the postal acceptance rule, the contract should be regarded as having been made at the place from which the acceptance was despatched. In my view the postal acceptance rule, based as it was on notions of expediency and convenience in a time of far different modes of communication, is not applicable to this transaction or generally to transactions involving instantaneous or near instantaneous communications. If the instantaneous communications rule is to be applied in this case, then the place of contract would be the place where the acceptance of the defendant's offer was ultimately communicated to the defendant, that being Hong Kong.
The other basis for grounding the application for service outside the jurisdiction is the contention that the action is brought in respect of a breach committed within the jurisdiction. Butterworth's "Civil Procedure ‑ Western Australia" at par [10.1.14] provides:
"The general rule of common law is that the debtor must seek out his or her creditor, with the result that if the contract makes no provision for the place of payment and the creditor is within the State, failure to pay is a breach within the State. He or she is not obliged to seek out a creditor who is outside the jurisdiction."
Butterworth's "Civil Procedure – Victoria" at par [I7.01.155] provides further:
"Where a contract is silent as to the place of payment, the conduct of the parties after the date of the contract may be relevant as a circumstance from which the relevant intention of the parties might be inferred."
In Coates as Liquidator of Campus Holidays Ltd (in liq) v Charles Porter& Sons Pty Ltd (1990) 2 ACSR 733 Ipp J in the Supreme Court of Western Australia accepted that it had long been settled that prima facie where a contract is silent as to place of payment, it is for the debtor to seek out his creditor and the debt is payable where the creditor is found. He commented that the fact that the debtor lives in a different State does not ordinarily detract from the general rule.
In the matter before me Mr Patton deposed to an oral agreement made on or about 30 September 2004 in Hong Kong that the terms of payment for live coral trout shipped to the defendant would be payment within seven days of the seafood product landing in Hong Kong. There does not appear to have been any agreement at that stage as to precisely where payment was to be made. The plaintiff and the defendant have, however, been successfully doing some business on the basis of the arrangements made between them. Mr Patton said that over the period October 2004 to November 2004, the plaintiff made 12 shipments to the defendant of live coral trout. He was, he said, involved in negotiating all the sales in respect of those 12 shipments. He referred to a transaction record in that regard. It seems that payment has been received for several transactions.
Mr Patton says that between 22 November 2004 and 2 February 2005, by a series of emails, the plaintiff requested payment for the shipments under the October and November agreements. On 4 February 2005 the solicitors for the plaintiff wrote to the defendant demanding payment for those shipments. It seems that on 18 May 2005 the plaintiff received a deposit into its bank account in the sum of $5,000 from the defendant.
It is clear that the documents entitled "revised invoice" mentioned with regard to both the October and November contracts stipulate that payment is to be made to the plaintiff's account at Westpac Banking Corporation, Adelaide Street, Fremantle. The account number is specified. I infer that so far as the successful transactions completed by the plaintiff and defendant were concerned, payment was made by telegraphic transfer to that account. It appears that subsequent to the contracts, the subject of the claim, a further payment was made to that account.
It is the case that the document entitled "revised invoice" in each case is said by counsel by the plaintiff to be the acceptance of the defendant's offer to purchase. That being the case, the place of payment would not necessarily be an express term of the agreement. I do however conclude that it was an implied term of the agreement between the parties. I do so by reason of the fact that the parties had conducted several successful business transactions. It would appear that those transactions involved payment to the account of the plaintiff at Westpac Banking Corporation, Fremantle, Western Australia. There is reference in the email correspondence passing between the plaintiff and defendant to payment by telegraphic transfer. I note that, subsequent to the breach an amount of $5,000 was paid to the Westpac Account at Fremantle. The information before me is sufficient for me to conclude that it was a term of the agreement between the plaintiff and the defendant that payment would be made to the plaintiff's account at Westpac Banking Corporation at Fremantle. The general rule is that the debtor must seek out the creditor. In all the circumstances I conclude that the breach of contract complained of by the plaintiff was committed within the jurisdiction even though the contract itself may well have been made in Hong Kong.

It is incumbent upon the plaintiff in an application such as this to establish a positive case. Order 10 r 4(2) provides that no leave shall be granted unless it shall be made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction under that order. Given that I am satisfied that the action is brought with respect to a breach committed within the jurisdiction, I am prepared to grant leave for the service of the notice of the writ. Accordingly, leave will be granted pursuant to O 10 r 1(f) of the Rules of the Supreme Court to service a notice of the writ on the defendant in Hong Kong, that notice being in terms of the document which is attached to the plaintiff's ex parte originating motion and marked with the letter "A". I direct that the defendant should have 30 days from the date of service to enter an appearance.