Shirlaw v Taylor

[1991] FCA 415

Re: WESTPAC BANKING CORPORATION and FEDGOLD PTY. LTD.
And: P. and O. CONTAINERS LIMITED; P. and O. CONTAINERS SHIPPING LIMITED; P.
and O. FERRYMASTERS A.B. (formerly FERRYMASTERS A.B.) and JOHAN i HALLEN
PARTIHANDEL A.B. (formerly JOHAN ANDERSON CHARKUTERIAFFAR A.B.)
Nos. Q G94 and Q G96 of 1990
FED No. 415
Practice
102 ALR 239
30 FCR 320

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Practice - service outside Commonwealth - meaning of indemnity within Federal Court Rules - whether includes indemnity which is not express or implied term of contract - meaning of "proceeding" in O.8 r.1(g).

Federal Court Rules, O.5 r.11; O.8 r.1(d), (g)

HEARING

BRISBANE

#DATE 24:7:1991

Counsel for cross-claimants: Mr P.D. McMurdo

Solicitors for cross-claimants: Thynne and Macartney

Counsel for first cross-respondent: Mr J. Sullivan

Solicitors for first cross-respondent: Morris Fletcher and Cross

Counsel for second cross-respondent: Mr G.A. Thompson

Solicitors for second cross-respondent: Bain Gasteen Smith

ORDER

The order of 6 September 1990 giving leave to serve a cross-claim on Johan i Hallen Partihandel A.B. (formerly Johan Anderson Charkuteriaffar A.B.) of Sweden be struck out.

Service of that cross-claim be struck out.

The cross-claimants pay Johan i Hallen Partihandel A.B.'s (formerly Johan Anderson Charkuteriaffar A.B.) costs of and incidental to the proceedings against it, to be taxed.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

These are applications by a Swedish company, Johan i Hallen Partihandel A.B., in two related suits, in each of which the applicant seeks an order setting aside service of a cross-claim upon it and consequential relief. Although the two suits will require to be considered separately at the trial, there is no difference between them which is significant for present purposes; it is enough to set out the detailed allegations in one of them, namely G94 of 1990 in which the plaintiff is Westpac Banking Corporation; in the other case (G96 of 1990) the plaintiff is Fedgold Pty. Ltd.

1. In G94 of 1990, the plaintiff, Westpac Banking Corporation, sued two defendants, P. and O. Containers Limited and P. and O. Containers Shipping Limited for damages on the following allegations. The plaintiff alleged that about September 1989, a company called J.C. Hutton Pty. Ltd. sold certain goods to Johan Andersson Charkuteriffon A.B. (apparently an alternative spelling of Johan Anderson Charkuteriaffar A.B.) of Sweden to be transported c.i.f. to the port of Gothenburg (Gotenborg) Sweden. The plaintiff alleged that the defendants, or one of them, undertook by a contract evidenced by a certain bill of lading to carry the goods from Queensland to Gothenburg; that Fedgold Pty. Ltd. acquired title to the goods; that in consideration of an advance Fedgold Pty. Ltd. caused the bill of lading to be endorsed to the order of the plaintiff and passed property in goods to the plaintiff. The pleading went on to allege that goods were delivered at Gothenburg without the production of the bill of lading, that Johan Andersson Charkuteriffon A.B. had not paid for them and that one of the defendants was liable for breach of the contract contained in or evidenced by the bill of lading, for conversion, or for breach of a duty of care to the plaintiff.

2. The defendants delivered a defence and by leave of the Court served cross-claims against P. and O. Ferrymasters A.B. of Sweden ("Ferrymasters") and Johan i Hallen Partihandel A.B. (formerly Johan Anderson Charkuteriaffar A.B.) of Sweden ("Johan i Hallen").

3. The defendants' cross-claim against Ferrymasters and against Johan i Hallen made certain allegations against Ferrymasters which might be broadly described as constituting a complaint that, in breach of contract and in breach of a duty of care, it delivered the goods to Johan i Hallen without production of the bill of lading. As against Johan i Hallen, the defendants alleged that it had induced delivery of the goods by Ferrymasters by misrepresentation and in breach of a duty of care which it owed to the defendants, who are designated "cross-claimants" in the pleading being described.

4. That pleading concluded:
   

"22. The Plaintiff's loss and any liability of the First Cross-Claimant for that loss has been caused by the Second Cross-Respondent's false representation to the First Cross-Respondent which involved the First Cross-Claimant in a conversion of the goods or by the Second Cross-Respondent's breach of duty.

23. The Plaintiff's loss and any liability of the Second Cross-Claimant for that loss has been caused by the Second Cross-Respondent's breach of duty.

AND the First Cross-Claimant and the Second Cross-Claimant each claim against each of them the First Cross-Respondent and Second Cross-Respondent -

(a) an indemnity against the Plaintiff's claim;

(b) judgment for any amount that may be found due from the Cross-Claimant to the Plaintiff;

(c) judgment for the amount of any costs the Cross-Claimant may be adjudged to pay to the Plaintiff and for the amount of its own costs of defending this action and of the proceedings against the Cross-Respondent".

1. The relevant proceedings were served upon Ferrymasters and Johan i Hallen; the former company has also served a cross-claim upon Johan i Hallen.

2. Johan i Hallen has, as explained above, applied for orders setting aside service of the cross-claim of the first and second defendants, setting aside the order giving leave to serve that cross-claim and other relief. The only relevant provisions of Order 8 Rule 1 permitting service out of the jurisdiction appear to be paras (d) and (g).
   Contribution or indemnity

3. It was argued by counsel for Johan i Hallen that the claim against it is not one "for contribution or indemnity in respect of a liability enforceable by a proceeding in the Court" within the meaning of Order 8 Rule 1(d). The basis of the claim against Johan i Hallen is (paras 19 and 20) a false representation and (para 21) a breach of a duty of care. The pleading which Johan i Hallen attacks does not allege fraud, but presumably that is what is meant, since the claim is made under the general law, which does not give a remedy in damages for innocent misrepresentation. What the pleading says is that the claim against Johan i Hallen is for an indemnity against the plaintiff's claim and for "judgment for any amount that may be found due from the Cross-Claimant to the plaintiff".

4. There is no claim for contribution, but there is in one sense a claim for indemnity; the pleading says so. However, in my opinion, one should consider the substance of what is claimed rather than the language used. What is claimed against Johan i Hallen is a money judgment in respect of misrepresentation and breach of a duty of care and the proper description of that claim is one for damages.

5. In Birmingham and District Land Company v London and North Western Railway Company (1887) 34 ChD 261, the English Court of Appeal had to consider the scope of a provision in the English Rules permitting joinder of third parties against whom indemnity was claimed. Cotton L.J. said the rule "must mean where the defendant claims a direct right to indemnity by contract express or implied" (271). The Judge went on to discuss the right of a trustee to indemnity against a cestui que trust which (he implied) should for this purpose be treated as one resting in contract. Bowen L.J. said:
   

"But it is quite clear to my mind that a right to damages, which is all that the Defendants have here if they are entitled to anything, is not a right to indemnity as such. It is the converse of such a right. A right to indemnity as such is given by the original bargain between the parties. The right to damages is given in consequence of the breach of the original contract between the parties" (274, 275).

1. If A sues B for breach of a contract of sale of goods, sold by B, and B seeks to recover the amount he will have to pay A by suing his vendor C, the question may arise whether the suit by B against C is one for "indemnity". If it is, then a rule such as the one being considered in this case will enable service on C out of the jurisdiction. If the analysis in the Birmingham and District Land Company case is applied, it is not enough for B to show that his claim is for damages for breach of contract in a sum which will indemnify him in respect of A's claim; B's claim against C is not one for "an indemnity", unless the contract says expressly or implicitly that an indemnity will be provided. The rationale of the rule permitting service out of the jurisdiction of claims for indemnity is that such a claim is likely to be factually related to and conveniently tried with the original claim, against which indemnity is sought. It may be thought that there is not much practical justification for discriminating between a claim for damages for breach of contract where the damages will amount to an indemnity, on the one hand, and, on the other, a claim for an indemnity expressly given by contract, the right to indemnity being dependent upon showing a breach. But it does not appear to be a proper course for a single Judge to decline to apply the Court of Appeal's decision, which appears not to have been departed from in this country. That is so, although that case concerned a rule governing third party proceedings, rather than one of the kind with which I am concerned. The English case has been applied by the New Zealand Court of Appeal: McLaren Maycroft and Co. v Fletcher Development Co. Ltd. (1973) 2 NZLR 100 at 116.

2. I was referred in this connection to authorities such as Unsworth v Commissioner for Railways (1958) 101 CLR 73 at 86 and Brambles Constructions Pty. Limited v Helmers (1966) 114 CLR 213, but did not find those to be of any assistance. Depending on context, a lawyer might well describe as one for indemnity a claim for damages in which the measure of damages is the amount which the plaintiff is liable to pay to another party. But the Birmingham and District Land Company case is authority against treating the word "indemnity" in rules of this kind as covering such a claim for damages. In my view, the claim by the defendants against Johan i Hallen is not within Order 8 Rule 1(d).
   Proceeding properly brought

3. The other provision of Order 8 Rule 1 which might justify the joinder of Johan i Hallen is Rule 1(g):
   

"where the proceeding is properly brought against a person served or to be served in the Commonwealth and the person to be served outside the Commonwealth is properly joined as a party to the proceeding".

Read quite literally, this is capable of covering the present case, because there is a proceeding in each case properly brought against at least one person served in the Commonwealth, namely the second defendant. However, it was argued that paragraph (g) does not refer to cross-respondents and that both cross-respondents are outside the Commonwealth.

1. The first point to note is that if paragraph (g) applies, it must do so on the basis that "the proceeding" there referred to is the claim against Ferrymasters and Johan i Hallen, both foreign companies. There is no suggestion that Ferrymasters was served in Australia and, on that basis, the paragraph cannot apply. The view I have taken of the operation of the rule is consistent with Order 5 Rule 11(1) and Order 5 Rule 11(2) which read as follows:
   "(1) Subject to this Order and to Order 11, a proceeding on a
   

cross-claim shall follow as nearly as may be the course of the proceeding on the originating process in respect of which the cross-claim is filed.

(2) Subject to this Order and to Order 11, and without limiting the

generality of sub-rule (1), these Rules apply to a cross-claim and the proceeding arising from it as they apply to the originating process in respect of which the cross-claim is filed and the proceeding arising from it".

1. It should also be noted that the word "cross-claim" in those rules is defined in Order 1 Rule 4 so as to include a "counter-claim, cross-action, set-off, and third party claim"; it plainly includes the claim with which I am concerned.

2. Reliance was placed upon remarks made in Elders IXL Ltd. v Lindgren Pty. Ltd. (1987) 79 ALR 411 at 414. I accept the view of Fox J. there set out that "for the purposes of the rules, a respondent to a cross-claim is not to be regarded as joined as a party to the principal proceeding"; at least, that is generally so. I am of opinion that in applying the rule one treats the case as if the only claim on foot were that made by the cross-claimant against the cross-respondents. For that reason, paragraph (g) cannot cover the present case.
   The Proper Forum

3. Although it is in strictness unnecessary to do so, in case the matter goes further I will express my view on this point. It was argued that the Federal Court is a "clearly inappropriate forum" because the alleged wrongful acts occurred abroad, both co-respondents are foreign companies and the relevant witnesses reside in Sweden.

4. It was held in Voth v Manildra Flour Mills Pty. Ltd. (1990) 97 ALR 124 that the proper principles to be applied in determining this issue are set out in Oceanic Sun Line Special Shipping Company Inc. v Fay (1988) 165 CLR 197 at 247, 248. The important points to notice for present purposes are that:
   

1. The applicant (Johan i Hallen) has to show

that this Court is so inappropriate a forum

for the determination of the proceedings

against it that "their continuation would

be oppressive and vexatious" to it.

2. The adjectives "oppressive" and "vexatious"

are not to be narrowly or rigidly construed.

1. The main point taken by counsel for the cross-claimants is that, the onus being upon Johan i Hallen, it must fail because it has not indicated that there is any issue to be tried; for all one knows, the facts may be uncontested. These considerations are of particular importance where there is no suggestion that there is any disadvantage, from the point of view of Johan i Hallen, in having the matter continue in this Court, other than the practical inconvenience of contesting a matter in the antipodes. Nor is the case otherwise one in which Johan i Hallen could properly complain of oppression. In particular, there is no suggestion that there is any distinction in law or procedure which is relevant to selection of the proper forum. I do not say that to satisfy the onus Johan i Hallen must set out in detail the defence it would advance; but where it does not even say that there is anything in the allegations against it which is likely to be contested, I cannot see why the continuation of the proceedings against it in this country could be thought to be oppressive or vexatious in any sense. That is, it appears to me that were it not for the inconveniently narrow (in the present case) scope of Order 8 Rule 1, it would in the circumstances be perfectly proper to let the proceedings against Johan i Hallen continue.

2. In each case, the order of 6 September 1990 giving leave to serve a cross-claim upon Johan i Hallen Partihandel A.B. as well as service of that cross-claim are struck out. The cross-claimants must pay Johan i Hallen's costs of the proceedings against it, to be taxed.