Schib Packaging Srl v Emrich Industries Pty Ltd
[2005] VSCA 236
•7 October 2005
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 3763 of 2005
| SCHIB PACKAGING S.r.l. | |
| Applicant | |
| v. | |
| EMRICH INDUSTRIES PTY LTD | Respondent |
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APPLICATION ON SUMMONS
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JUDGES: | CHARLES and ASHLEY, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 7 October 2005 | |
DATE OF JUDGMENT: | 7 October 2005 | |
MEDIUM NEUTRAL CITATION: | [2005] VSCA 236 | 1st revision – 16 November 2005 |
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Application for leave to appeal – Service out of jurisdiction of County Court writ – Claim for damages for breach of contract – Contract claimed to be made in Victoria – Whether acceptance received in Victoria – Indorsement required by Rule 7.02(1) not included on writ – Whether an irregularity capable of dispensation under Rule 2.04 – Judge not in error in refusing to stay or strike out action – County Court Rules 2.01, 2.04, 7.01(1), 7.02(1).
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr M. Clarke | Rigby Cooke Lawyers Carter Newell Lawyers |
| For the Respondent | Mr M.F. Wheelahan, S.C. with Mr T. McEvoy | Mason Sier Turnbull |
CHARLES, J.A.:
This is an application by Schib Packaging S.r.l. ("Schib") under s.74(2D) of the County Court Act 1958 seeking leave to appeal against orders made in the County Court on 2 September 2005. On that day a judge refused Schib's application to strike out or stay the action brought by Emrich Industries Pty Ltd ("Emrich") against Schib.
Schib constructs machinery and conducts its business in Milan, in Italy. It has no place of business in Australia. Emrich is a company incorporated in Australia, conducting business here, principally providing packaging solutions for Australian clients.
Emrich claims in its statement of claim and supporting documents that it discussed with Schib the construction of a machine by Schib and that by facsimile dated 2 April 2003 Schib offered to supply this machine to Emrich at a cost of 130,000 euros. Then, by a purchase order dated 19 June 2003 faxed to Schib, Emrich made a counter offer for a machine with added specifications at a cost of 135,800 euros net to Schib. Emrich claims that this counter offer was accepted by Schib by a facsimile dated 2 July 2003 setting out the terms and conditions, which included, inter alia, delivery at around 30 November 2003 and payment of 39,300 euros with the order. The machine had been commissioned by Emrich for one of its customers, PZ Cussons, with whom Emrich had a supply contract with a potential profit of some $176,680. On 30 June 2003 Emrich paid Schib 39,300 euros, being the first instalment for the order of the machine. Emrich claims, however, that Schib was unable to deliver the machine on time, and by letters exchanged between the parties, Schib requested an extension of time to June 2004 as the final delivery date, which was agreed to by Emrich.
Emrich subsequently inspected the machine and conducted a Factory Acceptance Trial at Schib's works in Italy. Emrich claims that the machine failed the tests and that it was never delivered.
On 14 October 2004 Emrich issued a writ out of the County Court of Victoria intended for service on Schib in Italy. On 29 March 2005, the writ and a statement of claim attached were served on Schib in Monte di Malo, in Italy.
In the statement of claim, Emrich alleged, first, that time was of the essence for the delivery of the machine and that Schib failed to deliver the machine by the final delivery date, June 2004. Secondly, Emrich alleged that Schib failed to construct the machine in accordance with the contractual specifications. As a consequence of those breaches of contract, Emrich claims to have suffered loss and damage in three forms; first, the amount it paid Schib for the order of the machine which has not been refunded; secondly, loss of profit from losing the supply contract with PZ Cussons, and, thirdly, loss and damage in relation to costs incurred in having four of its staff attend Schib's premises in Italy to inspect the machine and conduct the factory acceptance trial. The total of these three amounts is claimed to exceed $200,000, but Emrich by its statement of claim abandoned the excess over and above $200,000 and claimed that sum, interest and costs in the writ.
On 10 May 2005 Schib filed a conditional appearance. Then on 24 May Schib filed a summons in the County Court challenging the proceedings on jurisdictional grounds. The summons sought to have the proceedings struck out on the grounds that, first, the court did not have jurisdiction to hear and determine the proceeding; alternatively, that "the State of Victoria is an inconvenient forum to hear and determine the subject matter of the proceeding"; and alternatively, that the writ was not served in accordance with the laws of Italy, being the country in which service was purportedly effected.
The application came on for hearing before a judge in the County Court Practice Court on 2 September. Before the commencement of the hearing, Schib sought and was granted leave to file an amended summons to include the seeking of the following orders: that service of the writ be set aside or, alternatively, the proceeding be stayed on the ground that the claims in the writ do not come within r.7.01(1) of the Rules of Court, or on the basis that the writ does not contain the endorsement required by r.7.02(1) of the rules.
On 2 September the judge dismissed the summons, giving oral reasons. The foregoing material shows that originally Schib raised four grounds for seeking relief from the judge. Of these four, Schib raised before the judge the argument of forum non conveniens, but her Honour held that Victoria was not an inappropriate forum on the basis that the contract had been made in Victoria. This ground is no longer pursued in this Court. A second ground, that the writ was not served in accordance with the laws of Italy, was not taken before the judge, and is not pressed in this Court. That leaves two grounds, whether the Court has jurisdiction, and secondly the absence of the endorsement required by r.7.02(1) of the rules. I now turn to them.
The jurisdiction point
Where service is to be effected on a defendant outside Australia, the in personam jurisdiction of the Supreme Court is attracted if one of the heads in r.7.01(1) of the Supreme Court Rules is satisfied. The County Court Rules contain identical provisions in r.7.01(1). The jurisdiction of the County Court, unlike the Supreme Court, is, however, limited by s.36 of the County Court Act 1958, which requires a material part of the cause of action to have arisen within Victoria. Rule 7.01(1)(f)(i) gives jurisdiction where the proceeding is one brought to enforce, or recover damages in respect of the breach of, a contract and the contract was made within Victoria. Both parties before the County Court judge and in their submissions to this Court have addressed the jurisdictional issue on the basis that Emrich claims, and Schib denies, that the relevant contract was made within Victoria, accepting therefore that the making of the contract within Victoria would satisfy s.36 of the County Court Act. Emrich accepts that as plaintiff it bears the onus of establishing that there is a strongly arguable case, more than a prima facie case, that the relevant conditions of r.7.01 have been satisfied.[1]
[1]Dewhurst & Co. Pty. Ltd. v. Cawrse [1960] V.R. 278 per Dean, J.; Williams v The Society of Lloyd's & Ors [1994] 1 V.R. 274 at 291 per McDonald, J.
When a contractual offer (or counter offer) has been accepted by non-instantaneous means of communication, the postal acceptance rule applies and the contract is made at the place of acceptance.[2] Both parties in this Court, however, accept that when a contractual offer (or counter offer) has been accepted by instantaneous means of communication, as in this case where the parties corresponded by facsimile, the postal acceptance rule does not apply and the contract is made at the place where the acceptance is received by the offeror.[3] Paragraph 3 of Emrich's statement of claim includes an allegation that on or about June 2003 Emrich and Schib entered into an agreement for Schib to supply a "packaging machine being an automatic line for wrap soap in upright position single row" for AUD $242,500. The particulars supplied allege that the agreement was partly oral, partly written and partly implied. To the extent that it was oral, the agreement was alleged to be constituted by discussions between Emrich and Paolo Formilan, an authorised officer of Schib. To the extent that it was written, it was said to be constituted by agreement by an offer in writing from Schib dated 2 April 2003 and accepted by Emrich by purchase order form dated 19 June 2003. The documentary evidence placed by the parties before the County Court judge, however, departed from this formulation, as also did the submissions of both parties. The documentation showed that Schib faxed to Emrich on 2 April 2003 a proposal in some three pages headed "Offer No. 60 Rev/03" for the supply of an "automatic line for wrap soap in upright position single row", with project date, norms and general terms and conditions included, and a price specified of 131,000 euros net. On 19 June 2003 Emrich replied by facsimile to Schib with a letter stating "Please find confirmation order attached for the PZ Cussons line", and referring to Schib's previous offer by the words "as per Offer No. 60 Rev/03". Emrich's response referred to a price in euros of 135,800. Schib responded with a further fax to Emrich on 2 July 2003, with a letter in the following form -
[2]Lewis Construction Co. Pty. Ltd. v. Tichauer SA [1966] V.R. 341.
[3]Brinkibon Ltd. v. Stahag Stahl GmbH [1983] 2 A.C. 34 at 41-42 per Lord Wilberforce; Fujitsu Australia Ltd. v. Dewar Electronics Pty. Ltd. & Anor [2001] VSC 222 at [50]-[51] per Gillard, J.
"Order confirmation No. 03/00479 dated 02.07.03
FAO Mr Steve Richardson
Re: Your purchase order No. 6638 dated 19/06/03
Project: PZ Cussons Australia Pty. Ltd.
Thank you very much for choosing Schib Packaging S.R.L.
We acknowledge receipt of your captioned order for an Automatic Overwrapping Line for soap in upright position as per our Offer No. 60 Rev/03, with automatic reel splicer on 2nd film reel holder.
We are pleased to confirm your order as follows:
DESCRIPTION OF THE GOODS;"
There followed a description of the goods and the price quoted by Emrich, 135,800 euros, as well as provision for technical details, and terms and conditions including payment terms. After these matters, the final two lines of this fax contained the following:
"You are kindly requested to countersign copy of this order confirmation and fax it back to us for acceptance. Thank you.
Best regards,
Schib Packaging S.r.l.
Tecla Schizzarotto
Administrator _________________________________
Your stamp and signature for acceptance"
This document was, on 12 August 2003, returned by fax from Emrich to Schib with initials in the place for stamp and signature for acceptance, and one handwritten notation under the heading Technical Details, Electrical Requirements, where the electrical requirement "four wires" had been amended with the written words "five wires (plus neutral and earth)" added in handwriting and the same initials.
On the basis of this material, the judge said that she did not accept that the forwarding of the countersigned document on 12 August 2003 was the last stage of the acceptance of the contract. Instead, her Honour upheld Emrich's submission that the contract was accepted by the previous document dated 2 July, faxed by Schib to Emrich. The judge said that the return of the document on 12 August "was just confirmation that the contract had been formed", and that she was reinforced in her decision by the fact that there was a six-week gap between the two facsimiles. In the circumstances her Honour said that it was strongly arguable that the contract was made in Victoria as required by r.7.01(1)(f)(i) of the Rules of Court.
The written submissions of the parties to this Court show that there is no dispute between them as to the documentation or the written terms of the contract. Mr Clarke for Schib argued that the documentation shows that the contract was not formed until Emrich confirmed its acceptance of Schib's counter offer by executing and sending by facsimile the terms of that counter offer from Melbourne to Italy on 12 August 2003. He relied on the agreed proposition that the contract is made when the last act necessary to create a binding contractual obligation took place within the jurisdiction, and that, where a contract is concluded as a result of instantaneous means of communication, it is made where the acceptance is received. Accordingly he argued that the contract was made in Italy and that Emrich is unable to show a strongly arguable case that the contract was made within Victoria. He submitted that the County Court judge's decision was therefore wrong, that the court lacked jurisdiction over Schib in respect of the action, and service out of the jurisdiction was not authorised by r.7.01(1). Accordingly the judge should have set aside the writ or alternatively set aside service of the writ in accordance with r.7.05 or r.8.09 of the Rules.
In this Court Mr Clarke argued that the document of 2 July was not an unqualified acceptance of Emrich's order of 19 June and argued that this was shown not only by the document's terms, but also by reference to what were said to be differences between the terms of the document of 2 July and those of the document of 2 April relating to the dimensions of the product ordered, the speed of operation, terms of payment, time of delivery date, and packing of the product. He submitted that this showed that the document of 2 July must be taken to be a counter offer. He relied on Howes v. Miller[4] and Lewis Construction Co Pty Ltd v. Tichauer S/A[5]. This, however, was not the way in which the matter was argued before the judge. We were told that none of these differences were put to her Honour. Instead, counsel for Schib merely argued that "Exhibit AJC.9 to the affidavit of Andrew John Cheetham sworn 22 June 2005 shows that the contract was not formed until the plaintiff confirmed its acceptance of the defendant's counter offer in varied terms by executing and sending by facsimile the terms of that counter offer from Melbourne to Italy on 12 August 2003". The reference to “in varied terms” might simply mean the handwritten alteration to the facsimile of 12 August, or an elliptical reference to other alterations in the facsimile of 2 July, but there was no explanation in argument of this distinction, if the latter was intended.
[4][1970] V.R. 522 at 527.
[5][1966] V.R. 341 at 345.
Mr Wheelahan for Emrich argued today that, if these matters had been raised before her Honour, Emrich would have relied on Article 19 of the Vienna Convention, to which Italy and Australia are both parties, and which is part of Victorian domestic law. Furthermore, although counsel for Schib did argue below that the contract was not concluded until the facsimile of 12 August was sent, no attempt was made to withdraw the statements contained in Mr Cheetham's affidavit of 22 June, and to which I shall refer shortly.
In my view, Schib should not now be permitted to depart from the way in which the arguments were addressed to her Honour or to rely on the matters raised here by Mr Clarke in relation to the differences between the documents of 2 April and 2 July. Some of these differences must inevitably have sprung from requests orally made by representatives of Emrich to Schib, and probably before Emrich's order of 19 June was sent to Schib, as is shown by the addition of a new item, and the increase in price in euros between Schib's communication of 2 April and Emrich's offer of 19 June. Had these differences now mentioned by Mr Clarke been raised before the judge, Emrich would have been entitled to submit further affidavit material to the court dealing with the substance of these oral negotiations.
Mr Wheelahan argued that the judge had correctly held that the contract was made within Victoria. He submitted that on the evidence there was no dispute that on 2 July 2003 a contract came into existence when Schib sent its acceptance to Emrich in Victoria by fax dated 2 July 2003 and Schib then acted on that acceptance. Accordingly, the applicant's fax of that date was received by the respondent in Victoria and the contract, being made by instantaneous communication, was thereby made in Victoria. Mr Wheelahan also submitted that Schib's request in the fax of 2 July that Emrich countersign and return a copy of the order confirmation was no more than a request for confirmation of a contract which was already on foot as from 2 July and upon which Schib had already acted.
In my opinion the judge was entitled to conclude that Emrich had made out a strongly arguable case that the contract was made in Victoria when Emrich received Schib's facsimile dated 2 July 2003. That document in terms acknowledged receipt of Emrich's "captioned order" and stated that Schib was pleased to confirm Emrich's order. The price mentioned was the price Emrich had offered in its previous communication of 19 June. The judge was entitled to infer from the correspondence that there had been oral communications beforehand between Emrich and Paolo Formilan of Schib. It is noteworthy that Schib's solicitor, Andrew John Cheetham, in his affidavit of 22 June 2005 made after instructions had been taken from Schib, swore that the documents confirmed that Schib by its facsimile of 2 July "then accepted the plaintiff's counter offer to purchase an 'automatic line for wrap soap with an additional reel splicer on 2nd film reel holder' in the sum of 135,850 euros net", and "the defendant further evidenced acceptance of the plaintiff's counter offer by acting on the acceptance". Mr Cheetham in his affidavit added "the plaintiff [Emrich] confirmed the acceptance by facsimile dated 12 August 2003". I do not take these comments as an admission of law but rather as an acknowledgement, by a solicitor after having taken instructions from his client Schib, that no matter of substance remained in negotiation between Schib and Emrich after 2 July 2003. On this basis the contract was, I think, made on 2 July and the judge was correct in concluding that it was strongly arguable also that the last communication of 12 August 2003 was merely confirmation that the contract had already been concluded.
The absence of the endorsement required by r.7.02(1)
Rule 7.02(1) of the County Court Rules requires the originating process served on any defendant out of Australia in accordance with Order 7 to contain an endorsement stating the facts and the particular paragraph of r.7.01 relied upon in support of such service. Emrich accepts that the writ served did not contain any such endorsement and, therefore, that Emrich failed to comply with this rule. The issue is the legal effect of the failure to comply with r.7.02(1).
In Whinnen v. Cussons (International) Ltd.[6], Beach, J. held that any defect in an endorsement of this kind cannot be cured by amendment after the writ is served. However, in Fujitsu Australia Ltd. v. Dewar Electronics Pty. Ltd.[7], Gillard, J. did not follow the earlier decision of Beach, J., but held that the court could dispense with compliance with r.7.02(1) if it was in the interests of justice to do so. In this Court, Mr Clarke's written submissions, in reliance on Whinnen, argued that any defect in the endorsement cannot be cured by amendment after the writ is served. He sought to distinguish the decision of Gillard, J. in Fujitsu on the ground that where no endorsement has been included, a complete lack of compliance could not be cured. Accordingly the service of the writ should have been set aside on this ground. The argument was that r.7.02(1) imposes a strict obligation upon a plaintiff. It was argued that the obligation under the rule is mandatory and the argument stressed the use of the word "shall" in r.7.02(1). It was argued that service out of Australia is an example of a court exercising an extraordinary extraterritorial jurisdiction, and that provisions dealing with the exercise of jurisdictional powers of the court are generally to be read as obligatory and that enactments laying down the procedure to be followed in commencing or prosecuting an action in a court must be followed. The argument accepted that the rule is not absolute but is subject to the framework and language of the legislation.[8] Mr Clarke's argument concluded that failure to include the required endorsement on court documents in certain circumstances will constitute a fatal irregularity.
[6]Unreported, 24 February 1998.
[7][2001] VSC 222.
[8]Hatton v. Beaumont (1978) 20 A.L.R. 314 at 319.
In my opinion there is nothing in this point. Rule 2.01 of the County Court Rules provides -
"(1) A failure to comply with these rules is an irregularity and does not render a proceeding or step taken, or any document, judgment or order therein a nullity.
(2) Subject to rules 2.02 and 2.03, where there has been a failure to comply with these rules, the Court may -
(a) set aside the proceeding, either wholly or in part;
(b)set aside any step taken in the proceeding, or any document, judgment or order therein;
(c)exercise its powers under these rules to allow amendments and to make orders dealing with the proceeding generally."
By r.2.04 the Court may dispense with compliance with any of the requirements of these rules, either before or after the occasion for compliance arises.
The failure of Emrich's solicitors to include the correct endorsement on the writ was, having regard to the terms of r.2.01, an irregularity, rather than a nullity and did not render service of the writ and statement of claim ineffective. The judge's decision to dispense with the requirements of r.7.02 was a discretionary decision under r.2.04. No argument has been made on behalf of Schib that it was misled or deceived or suffered any prejudice by the absence of the relevant endorsement.
Neither before the County Court judge nor in this Court did Schib's counsel point to any real prejudice it had suffered by Emrich's failure to endorse the writ with the facts and the particular sub-paragraph of r.7.01 relied upon in support of service.
The interests of justice therefore do not require that the writ be set aside by reason of the absence of the endorsement. Rule 7.02 must, I think, be read subject to the power under r.2.04 to dispense with any of the requirements of the rules. Reliance was placed by Schib upon Deverall v. Wannunup Development Nominees Pty. Ltd.[9], but the statements of principle by Anderson, J. in this case in my view support Emrich rather than Schib. The applicant has not demonstrated any appellable error in the conclusions of the County Court judge that she preferred the view of Gillard, J. in Fujitsu to that of Beach, J. in Whinnen and accordingly held that the failure to include the endorsement was only an irregularity. Her Honour also held that no prejudice had been caused by the lack of the endorsement evidenced by the fact that the defendant was represented before her arguing its application to set aside service.
[9](1995) 12 W.A.R. 561 at 565.
In seeking leave to appeal, it was necessary for the applicant to establish that the decision of the judge was wrong or attended with sufficient doubt to warrant its being considered on appeal. I do not think that the applicant has demonstrated any such error. The application for leave to appeal should be dismissed.
ASHLEY, J.A.:
I agree.
CHARLES, J.A.:
The order of the Court is that the application for leave is dismissed with costs.
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