Pivot v Hoechst
[2000] VSC 262
•27 June 2000
SUPREME COURT OF VICTORIA
COMMON LAW DIVISION
No. 5973 of 1999
| PIVOT and ANOR | Plaintiffs |
| v. | |
| HOECHST and ANOR | Defendants |
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JUDGE: | HEDIGAN, J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 June 2000 | |
DATE OF JUDGMENT: | 27 June 2000 | |
CASE MAY BE CITED AS: | Pivot & Anor v. Hoechst & Anor, Universal Foods Third Party | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 262 | |
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Service out of the jurisdiction – Third party proceedings – Rules 7.01(f) and 7.02(3) of Rules – Claim in contract – Whether contract made within Victoria.
Rule 7.07(3) – Whether appropriate to permit joinder in of claims in tort and for breach of statutory duties.
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APPEARANCES: | Counsel | Solicitors | |
| For the 1st & 2nd Defendants For the Third Party | Mr A. Flower Mr A. Klotz | Jeffrey Willetts & Associates Norris Coates | |
HIS HONOUR:
This is an application by the third party in the proceeding Universal Foods Corporation (hereinafter called "Universal Foods") that the service on it out of the jurisdiction of a third party notice, and the third party notice itself, be stayed on the basis that the claims set out in the statement of claim endorsed on the third party notice do not fall within Rule 7.01(1)(f)(i), (g)(i) or (j) of the Rules.
The proceeding is one in which the plaintiffs ("Pivot" and "Gibsons" respectively) have sued Hoechst Australia Ltd. ("Hoechst") and ARMS International Pty. Ltd. with respect of certain consequences flowing from the sale and supply by the defendants of the yeast product known as Redstar Phaffia ("Redstar Phaffia").
According to the allegations in the statement of claim, the plaintiffs were the suppliers of Aquaculture Feed Rations in Tasmania and the defendants imported Redstar Phaffia. Another company, Nortas Pty. Ltd. ("Nortas") grew and farmed semen fish at Mornington in Tasmania. The position apparently is that the practice in the semen farming industry is to introduce into the diet of the farm fish a pigment that would produce in the farm fish a red-pink colouration of the flesh, colouration that occurred naturally in free ocean salmon. The claim is that the defendants represented to Nortas and the plaintiffs that Redstar Phaffia would produce this colouration introduced into the diet of the farm salmon fish and that it had other characteristics not here necessary to set out. The claim is that the representations made by the defendants were false in that Redstar Phaffia failed to produce adequate colouration of the flesh of the fish and lacked the qualities in other respects allegedly represented. These representations are said to have been made from December 1992 until about August 1994 and continuing. Nortas, relying upon the representations took supply and delivery of the Aquaculture feed with the Redstar Phaffia added from the plaintiffs between January 1995 and July 1996. The plaintiffs, also relying upon the defendants' representation, had ordered and taken delivery of the quantities of Redstar Phaffia in the same period from the defendants. Thus the plaintiffs manufactured and delivered to Nortas fish food pellets containing Redstar Phaffia bought from the defendants. It is claimed that the terms of the agreement between the plaintiffs and Nortas as to the supply of the fish feed pellets with the Redstar Phaffia included terms that they were of merchantable quality and fit for the purpose for use as feed to salmon fish to pigment their flesh.
It is alleged that in July 1996 the fish farmed by Nortas and fed with the pellets manufactured by the defendants with the Redstar Phaffia failed to sufficiently pigment the flesh of the fish with the result that Nortas claimed compensation for the loss and damage allegedly suffered as a consequence of the poor colouration. In March 1999 the plaintiffs settled with Nortas by paying the sum of $250,000, inclusive of legal costs. The defendants claim they had this liability arising under provisions of the Goods Act and the Trade Practices Act. It was also alleged that Nortas' claim was also properly found in negligence against the defendants as well as in making the false representations that were misleading and deceptive within the meaning of s.2 of the Trade Practices Act. Thus, in this proceeding by the plaintiffs against the defendants, the claim is that the defendants were liable to Nortas for the same loss and damage as it was incurred by the plaintiffs who were entitled to contribution pursuant to the provisions of the Wrongs Act 1958. Both Pivot and Gibsons are companies situated in carrying on their business from Victoria.
It is also claimed that the terms as to merchantability and suitability were implied into the agreement between the plaintiff and the defendants in the same way. The plaintiffs therefore claim against Hoechst and ARMS. The claim is founded on the statutes referred to and negligence.
This matter came under my management in the Major Torts List and I granted leave to the first defendant (it being apparently generally agreed that the second defendant stands in no different position) to join as a third party Universal Foods Corporation, it being alleged that to me that Universal Foods Corporation was the supplier to Hoechst. That leave to serve a third party notice and accompanying statement of claim was, of course, provisional in the sense that all rights in the third party to argue as to jurisdiction or other measures impugning the third party proceeding were reserved, if it wished to do so. In the event, Universal Foods Corporation entered a conditional appearance and issued the summons to which I have referred.
The plaintiffs and the second defendant appeared on the summons but took no part in the proceeding which was contested between Hoechst and Universal Foods, both represented by counsel. Both Hoechst and Universal Foods filed affidavits with substantial exhibits. The affidavit on behalf of Universal Foods was sworn by Mr David Letcher, a partner of the Melbourne solicitors of Universal Foods, based upon information provided by Mr Foell, a senior attorney employed by Universal Foods. It makes it clear that the third party notice was served on Universal Foods at its place of business in Milwaukee in the State of Wisconsin, USA.
It may be convenient at this point to set out the relevant provisions of Rule 7 and I do so:
"7.01. (1) Originating process may be served out of Australia without order of the Court where –
...
(f)the proceeding is one brought to enforce, rescind, dissolve, rectify, annul or otherwise affect a contract, or to recover damages or other relief in respect of the breach of a contract, and the contract –
(i)was made within Victoria;
(ii)was made by or through an agent carrying on business in residing within Victoria on behalf of a principal carrying on business or residing out of Victoria; or
(g)the proceeding is brought in respect of a breach committed within Victoria of a contract wherever made, even though that breach was preceded or accompanied by a breach out of Victoria that rendered impossible the performance of that part of the contract which ought to have been performed within Victoria;
...
(i)the proceeding is founded on a tort committed within Victoria;
(j)the proceeding is brought in respect of damage suffered wholly or partly in Victoria and caused by a tortious act or omission wherever occurring;
...
7.02.(1) Originating process served on any defendant out of Australia in accordance with this Order shall, at the time of service on that defendant contain an indorsement stating the facts and the particular paragraph of Rule 7.01 relied upon in support of such service.
(2) If the originating process does not contain the indorsement referred to in paragraph (1) at the time it is filed, the plaintiff may, in accordance with paragraph (3), amend the originating process to include the indorsement.
(3) The originating process shall be taken to be amended upon the filing by the plaintiff of a copy of the originating process with the indorsement included.
...
7.07.(1) This Rule applies to –
(a)a counterclaim against the plaintiff and another person joined as defendant under Rule 10.03 where the person joined is not already a party to the proceeding; and
(b)a third party notice filed in accordance with Order
(2) A counterclaim or third party notice may be served out of Australia without leave where the claim made by the defendant in the counterclaim or third party notice is of such a kind that if the claim were made by writ or other originating process, the originating process could be served out of Australia without order of the Court under Rule 7.01.
...
7.08. (1) An application for leave under Rule 7.06 or 7.07 shall be supported by affidavit or other evidence showing the grounds upon which the application is made.
(2) The Court may grant such leave if the case is a proper one for service out of Australia.
(3) Upon making an order under Rule 7.06 or 7.07 the Court may give directions with respect to service and the time for filing an appearance or for attendance before the Court or otherwise."
Rule 7.07(2), of course, gives a party the right to serve a third party notice without leave if the party can bring the claim within one of the sub-rules of 7.01. Both Mr Klotz for the third party and Mr Flower for Hoechst treated the summons as dealing with the same questions that would have been raised if the third party notice had been served without leave, instead of with a grant of leave from me.
The third party notice is comprised of a notice and an accompanying statement of claim. The third party statement of claim pleads that Hoechst was at all relevant times a company incorporated pursuant to the laws of the State of Victoria and that the third party was a corporation incorporated pursuant to the State of Wisconsin. It alleges that Universal Foods was the manufacturer of Redstar Phaffia and that Hoechst purchased quantities of it from the third party for re-sale to its customers, claiming the terms of that sale agreement included that the Redstar Phaffia was reasonably fit for the purchase of incorporation into fish feed pellets and was of a merchantable quality. It alleges that if the Redstar Phaffia was not reasonably fit for the stated purpose or of merchantable quality, as alleged, so that Hoechst was liable to purchasers from it, either on the bases referred to or negligence, then Universal Foods was liable on the same grounds to Hoechst. The claim for contribution is founded upon s.23B of the Wrongs Act. The third party notice itself alleges that the agreements for sale referred to in paragraph 4 of the third party's statement of claim were made within Victoria or alternatively that the breach was committed within Victoria wherever the contract was made; or alternatively the proceeding was founded on the tort committed within Victoria or in respect of damage suffered wholly or partly in Victoria and caused by a tortious act of omission wherever occurring. It identified Rules 7.01(1)(f)(i), (g), (i), (j) of the Rules and that part of Rule 7 if it was relied on.
Mr Letchers' affidavit deposes to the fact that Universal from 1980s until the mid-90s sold Phaffia to various parties around the world and that it manufactured it during defined periods. It also states that due to Universal's policy with respect to retaining files it no longer has in its possession all documents relevant to the sale of Phaffia. Moreover, it is said that many of its employees have left. Strangely, the affidavit proceeds to say that it is apparent from the documents that Mr Foell had been able to retrieve, and his recollection, that there was never any agreement between Universal and Hoechst as suggested in paragraph 4 of the third party's statement of claim. However Mr Foell apparently accepts (see paragraphs 8 and 9) that Phaffia was supplied at various times by Universal "to and at the request of Hoechst and is shipped to Tasmania". This would appear arguably to accept that there was an agreement for purchase and sale between Hoechst and Universal Foods although the goods were to be delivered other than to Victoria. It also appears that Universal had shipped Phaffia at the request of the second defendant which, according to Foell, Hoechst required in abut 1995. Mr Letchers' affidavit, based upon information and belief, is that all Phaffia to Australia went to Tasmania for use by Gibsons, that is, the second plaintiff. My provisional view that, quite apart from the affidavit of Mr Dieter Krusic-Golub, the managing director of Hoechst Australia Ltd. and its exhibits, that there clearly an arguable case that the arrangements between Universal Food and Hoechst were such that Universal Foods shipped Redstar Phaffia to Tasmania pursuant to a "commercial arrangement" between them. This was conceded by Mr Klotz who was inclined to say that there was no formal distribution agreement. However the arrangement clearly was a contractual arrangement. Ultimately, Mr Klotz accepted that the issue was whether the request for Phaffia and the agreement to supply it by delivery to Tasmania, founded upon an invoice being sent by facsimile transmission to Victoria, was a contract made in Victoria. On that basis it would appear that the position was that there was probably a separate contract each time such an order was placed and that there was a contract to supply on the same basis on each occasion until such time as it was challenged. It is not in dispute that Phaffia was shipped only to Tasmania. Both Gibsons and Nortas were Tasmanian registered companies carrying on business in Tasmania. The affidavit of Mr Krusic‑Golub deposes to the fact that the second defendant had been a distributor of Phaffia in Australia prior to 25 August 1995 and after that date the first defendant Hoechst Australia Ltd became the supplier of Phaffia in Australia and that at all times the supplier to both Hoechst and ARMS had been Universal Foods Corporation, the manufacturer and supplier of it. On 25 August 1995 ARMS sold various of its assets to Hoechst, including ARMS's right to distribute Phaffia in Australia. According to this deponent, no formal distribution agreement was entered into between Universal Foods and the first defendant. Neither was the agreement between Universal Foods and ARMS assigned to the first defendant. But Hoechst had been a distributor pursuant to other agreements of products of Universal Foods and, according to this deponent, the practice of ordering which he describes evolved with the acquiescence of Hoechst and Universal Foods without any formal lawyer-prepared agreement being entered into. The practice followed was that upon a customer placing an order for Phaffia, Hoechst would place an order with the third party by a facsimile transmission. The deponent exhibits copies of actual orders of Phaffia involving these parties. Upon receipt of the order, Universal would ship the goods as directed and send to Hoechst an invoice for the price of the goods. Once again there is produced copies of the third party invoices in respect of the same matters addressed to Hoechst in respect of Hoechst's orders. These are the transactions TAS37230 and TAS37231 respectively. These are the transactions for the ordering and dispatch of Phaffia the subject of this proceeding, that is the Phaffia allegedly defective. A second affidavit of Mr Krusic-Golub with respect to the invoices produced indicates they were always sent to Hoechst by Universal Foods by facsimile transmission. This is, as I apprehend and later refer to, instantaneous transmission for the purposes of the law of contract.
The third party's submissions may be summarized in the following way. (1) That the first defendant had failed to endorse the third party notice with sufficient facts under Rules 7.01 and 7.02 to support service under Rule 7.01 because it merely recited the relevant rules sought to be relied on. It argued that any defect in that endorsement could not be cured by an amendment after the writ was served and on that basis alone the third party notice should be set aside. Mr Klotz relied upon an unreported decision of Beach, J. of this Court in Whinnen v. Cussons (International) Ltd.[1] and a decision of McDonald, J. of this Court in Schweitzer v. Kronen Verwaltungs & Ors[2]. (2) That the burden lay on the first defendant to establish on a consideration of the admissible material that there was a strong argument for the opinion that the conditions provided for by Rule 7.01 or such of them as might be relied on had been satisfied. I do not apprehend that principle was much in dispute: see Siskina (Owners of Cargo Lately Laden on Board) v. Distos Compania Naviera S.A.[3] and see Williams v. The Society of Lloyds[4]. In that case McDonald, J. stated:
"If at the end of the day the plaintiff has been successful in discharge of the onus in respect of some of the claim made, but not others, it is for him to elect whether he will proceed only with those claims of which he has established that Rule 7.01 authorising to serve out of the jurisdiction or have the whole proceeding stayed on the basis that the statement of claim contains of course causes of action in respect to which the defendants could not be served out of the jurisdiction."
Such claims, he said, cannot be tacked onto the claims which the plaintiff is justified in serving out of the jurisdiction, relying upon Gosman v. Ockerby[5], and other cases referred to. However, as will later appear, the situation in relation to a third party proceeding is different. It was therefore argued for the third party that Hoechst had to persuade the court that there was a strong arguable case in respect of each cause of action on which it relied, it being argued that Hoechst had failed to meet that burden on the basis that not only had it not endorsed the third party notice with the facts that supports service out of the jurisdiction in accordance with 7.01 but the statement of claim contained no effective pleading that does so.
[1]Unreported, 24 February 1998.
[2]Unreported, 18 December 1998
[3](1979) A.C. 210.
[4][1994] 1 V.R. 274 at 291.
[5](1908) V.L.R. 298.
So far as the claim that the Notice with the Statement of Claim did not amount to an indorsement of sufficient facts, but only identified the relevant Rules is concerned, the contract was pleaded, the place where it was made (Victoria) was stated (page 2), the place of incorporation, the relevant Rules and the details of the contribution claim. Mr Klotz accepted that at best his point was very technical, that there was absolutely no prejudice to his client (apparently meaning that Universal Foods well understood the nature of the claim and how it fell within the Rules, Mr Foell knowing on receipt of the documents what the allegation was), and appeared to abandon the argument at one point. I am of the opinion that the combination of the Notice and the Statement of claim disclosed sufficient facts. In addition, it is clear from Mr Letchers' affidavit that the third party was absolutely aware of the facts as to the contracts on which reliance was placed, notwithstanding Mr Foell's claim that they did not appear to establish a contract. In Whinnen whilst upholding in that case that there was no endorsement sufficient to give a defendant notice of the ground on which the plaintiff claimed to be entitled to serve the originating process out of the jurisdiction that is, identify some facts, Beach, J. went on to state that the statement of facts was required so that "a defendant is given an appropriate opportunity to determine whether to object that the court ought not to hear and determine the proceeding on the ground that the proceeding is not within Rule 7.01(1) before filing an appearance or conditional appearance in the proceeding." The third party knew from the course of its business with Hoechst that Hoechst conducted its business from Melbourne (Universal Foods faxed Hoechst there) and that it was incorporated in Victoria and must have been aware at all times as to what the facts were upon which the third party claim was based.
So far as the contract aspect is concerned the argument was that the third party had failed properly to particularize the sale agreement pleaded in paragraph 4 of the third party's statement of claim and that it could not be said that it was a contract made in Victoria. However, I am of the view that this aspect is founded upon a denial contained in paragraph 7 of Mr Letcher's affidavit (based upon Mr Foell's instruction) that there was no such agreement. As I have already indicated, I do not take the view that this submission is correct.
So far as the claim under 7.01(1)(g) is concerned, the submission is made that no reliance could be placed upon Rule 7.01(1)(g), (i) and (j) in order to come for the purposes of service within Rule 7.01. I do not intend to address the arguments advanced in support of the claim by the third party that the case does not fall within Rule 7.01 on a tortious basis because, in my view, Mr Flower abandoned any attempt to argue that, recognizing that the authorities were probably against his case on that basis. His principal submission was that the service on the third defendant should be upheld on the basis of 7.01(1)(f), that is that the proceeding is one brought to enforce, rescind, dissolve, rectify, annul or otherwise affect a contract or to recover damages or other relief in respect of a breach of contract and the contract was made in Victoria. He argued that the contract relied on is the one referred to in paragraph 4 of the statement of claim and endorsed on the third party notice, proved by the affidavit of Mr Krusic-Golub. Essentially he put the case that the contract arose in Victoria because its acceptance was communicated in Victoria. This case was put simply. It was submitted that the placing of the order was an offer to purchase the goods at a given price. No counter-offer was received that the price was unacceptable and the acceptance was communicated by the instantaneous transmission of the invoice to Hoechst in Victoria and the delivery of goods to the nominated party in Tasmania. His contention was that the acceptance was thereby received in Victoria.
In my view the affidavit of Mr Krusic-Golub enables the first defendant to discharge the burden of satisfying the Court that it has a strongly arguable case and that the contract on which it relies was made in Victoria. I have already referred to the substance of that affidavit. Exhibits to Mr Krusic-Golub's affidavit including the facsimiles indicate the correlation between order and invoice, as I have already indicated. The documents actually state "Sold to Hoechst Australia Melbourne" and, in another place "Shipped to Hobart". The invoice, which is by way of copy of the actual invoice to the transaction in each case on which the suit is brought, correlates to the order in the same transaction. There are no material alterations of any of the details and the terms of the offer are the same as in the return invoice electronically transmitted and received in Melbourne and, of course, known to be received in Melbourne by the sender Universal Foods as a consequence of the reception of the relevant facsimile invoice. In the case of the dispatch 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: see Entores Ltd v. Miles Far East Corporation[6] approved by the House Lords in Brinkibon Ltd v. Staghagstahl G.m.b.H.[7] applied in numerous Australian cases. Moreover, it would appear from the decision of the High Court of Australia in Tana v. Baxter[8] (a case concerned with s.11(1)(b) of the Service and Execution Process Act 1901 of the Commonwealth of Australia but in a third party context), the Court took a broad view of the width of language of that sub-section stating:
"The terms of the paragraph are wide enough to cover a claim for relief by a third party in respect of a contract made between other parties, provided the relief is 'by way of ... affecting such contracts'. Equally paragraph (b) covers a claim for relief by one party to a contract against a third party, if the relief is 'by way of ... affecting such contract'."
[6](1955) 2 Q.B. 327.
[7](1983) 2 A.C. 34.
[8](1986) 160 C.L.R. 572
Initially Mr Flower abandoned abandoned any argument based on any concept other than that in sub-paragraph (f), although later in his argument he appeared to seek to cling to the possibility of getting within (j), namely that the proceeding was brought in respect of "damage suffered wholly or partly in Victoria and caused by a tortious act or omission wherever occurring" because this was a claim for contribution or to have a liability arising in a company carrying on business in the State of Victoria, that is, that the damage sustained by Hoechst is sustained in Victoria. However finally, so it seemed to me, Mr Flower accepted the position that the decision of the Full Court in AMP Society & Ors v. GEC Diesels Australia Ltd. & Ors[9] was to the contrary of that argument. Accordingly I do not address it further.
[9][1989] V.R. 407.
I turn next to the arguments advanced concerning Rule 7.07 which specifically relates to the service out of counterclaims or third party notices. In Meliban Pty. Ltd. v. E.U. Chin Nominees Pty. Ltd.[10], Ormiston, J. considered Rule 7.07(3) which entitles the parties to come to court to seek service out of a third party when none of the detailed heads of jurisdiction is capable of being satisfied. As I have indicated, that is not the situation in this case, as I view the contract claim as being appropriately founded. At page 17 of the judgment, his Honour stated:
[10](Unreported, Ormiston, J. 16 March 1992).
"The only inference that can be drawn, in my opinion, is that in proceedings by way of third party notice or counterclaim, the Court should consider whether in the interests of justice the whole of the disputes between the parties, albeit not satisfying any head under 7.01, should be heard at the same time. It is, of course, a power to be exercised sparingly and with close regard to the possibility that its use may be oppressive and vexatious.
What is sought here is to bring in the contract claims as well as the tort claims. In my opinion, to do so in circumstances of this kind and against a defendant which engages in trade and overseas trade would not be improper, nor would it be inconsistent with the objects of the rule. It should in this modern age be the object of the courts to see that litigation as affecting all parties is resolved as soon, as speedily and as fairly as practicable by the adoption of rules such as that which has been added to the rules in this case.
If it is not oppressive and vexatious to a defendant to be brought into litigation of this kind and if the claim sought to be added is one which might fairly be added to that which is already brought between the parties, then I think an order should be made pursuant to paragraph (3) of order 7.07. Again, I bear in mind what counsel for Star Refrigeration has said, it is indeed an exercise of long-arm jurisdiction, but I trust not in circumstances which will provide any real unfairness to that third party.
In exercising the jurisdiction and in making provision for the trial of any case against it, it is of course appropriate to make due allowance for the fact the party has its officers and its principal place of business many thousands of miles away, but that will merely affect the manner in which the third party's rights will be dealt with in the course of directions for hearing of the issues raised by that third party notice.
I would, therefore, allow the first defendant to add the grounds which I have so far said are not satisfied by a proper application of order 7.01(1). It is, however, I think, consistent with what was said by the Appeal Division of this court in AMP v. GEC Diesels to make an order which will not require the serving of a new document upon that third party but to give that leave nunc pro tunc with respect to the third party notice dated 8 November 1991, since what I am doing is allowing each of the claims in contract to be litigated in the same way as appears in that document."
In that case there had been no order for service out, the ordinary practice for making an application to do so being made. In a managed list, as in this case, I find it usually more convenient to give leave to serve which, as I indicated at the commencement of these reasons, is in effect provisional on the basis that it is subject to challenge if it does not fall within Rule 7, in one way or another.
I have formed the view that it is just and convenient that the claims in negligence and various breaches of statutory duty (Wrongs Act and Goods Act) should also be tried with the claim under contract, all of the matters being closely related and all of them arising from the same set of circumstances. No election by the claimant defendant need be made, as Rule 7.07(3) permits preservation of all causes of action that are capable of argument along with the contract claim. I accept, as Ormiston, J. did, that the power to allow this should not be regarded as one to be exercised liberally. But in this case, there is barely a respectable argument against it. The parties were in full contact and well knew that the contract was made with Hoechst in Melbourne, delivery in Tasmania. The Rule was devised to enable the wider litigation to be joined in, avoiding duplication of proceedings and minimising costs. Universal Foods manufactured the very product about which the plaintiffs complain.
Accordingly, leave to join the Third Party is confirmed, both under Rules 7.01 and 7.07. If necessary (although I do not believe that it is) leave is given nunc pro tunc. The Third Party's summons is dismissed with costs.
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