Sigma Coachair Group Pty Limited v Bock Australia Pty Limited

[2009] NSWSC 684

CITATION:	SIGMA COACHAIR GROUP PTY LIMITED v BOCK AUSTRALIA PTY LIMITED & ANOR [2009] NSWSC 684
HEARING DATE(S):	Friday 22 May 2009; Thursday 4 June 2009
JUDGMENT DATE :	23 July 2009
JURISDICTION:	Common Law
JUDGMENT OF:	Hall J at 1
DECISION:	Dismiss the second defendant’s application on the amended notice of motion in respect of order (3).
CATCHWORDS:	PRIVATE INTERNATIONAL LAW - jurisdiction - leave to proceed under UCPR r 11.4 against a foreign defendant - cross application to set aside service under UCPR r 12.11 - compressors manufactured by German company (the second defendant) sold to Australian supplier (the first defendant) who sold them onto Australian plaintiff company - plaintiff constructed air conditioning units using the compressors in air conditioning units installed in trains in India and allegedly suffered damage when the plaintiff claimed the compressors failed - misleading and/or deceptive conduct under the Trade Practices Act and negligence pleaded against German manufacturer – whether claims had insufficient prospects of success - where representations contained in the catalogue, operating instructions and data plate affixed to the compressors which were provided by German manufacturer to the Australian supplier upon sale of compressors were representations provided by German manufacturer to the plaintiff in NSW – the act relied upon and giving the plaintiff its cause for complaint (the representations) occurred in NSW – claims fall within the grounds of Schedule 6 UCPR and at least for the purposes of the application had sufficient prospects of success - Supreme Court of NSW not a clearly inappropriate forum - second defendant's application to set aside service dismissed
LEGISLATION CITED:	Trade Practices Act 1974 (Cth)
CASES CITED:	Agar v Hyde (2000) 201 CLR 552 Aussie Home Security Pty Ltd v Sales Systems Australia Pty Ltd (2000) 172 ALR 141 Barton v Croner Trading Pty Ltd (1984) 3 FCR 95 Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 Brix-Neilsen v Oceaneering Australia Pty Ltd [1982] 2 NSWLR 173 CE Underwriting & Insurance (Aust) Pty Ltd v Barden (NSWSC, Rolfe J, 19 October 1994, unreported) Challenor v Douglas [1983] 2 NSWLR 405 Colloseum Investment Holdings Pty Ltd v Vanguard Logistics Services Pty Ltd [2005] NSWSC 803 Commonwealth of Australia v Griffiths [2007] NSWCA 370 Darrell Lea Chocolate Shops Pty Ltd v Spanish Polish Shipping Co Inc (The “Katowice II”) (1990) 25 NSWLR 568 Delco Australia Pty Ltd v Equipment Enterprises Incorp (2000) 100 FCR 385 Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 Flaherty v Girgis (1985) 4 NSWLR 248 Henry v Henry (1996) 185 CLR 571 Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd (1993) 117 ALR 507 Jackson v Spittall (1870) LR 5 CP 542 Maclaine Watson & Co Private Ltd v Bing Chen [1983] 1 NSWLR 163 NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558 Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1993) 44 FCR 485 Ramsey v Vogler [2000] NSWCA 260 Sedgwick Ltd v Bain Clarkson Ltd (1994) 56 FCR 578 Street v Luna Park Sydney Pty Ltd [2009] NSWSC 1 Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 The Queen v Toohey; ex parte Attorney-General (NT) (1980) 145 CLR 374 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR Walplan Pty Ltd v Wallace (1985) 8 FCR 27 Westpac Banking Corporation v Commonwealth Steel Co Ltd [1983] 1 NSWLR 735
TEXTS CITED:	Extraterritorial application of Australian statutes proscribing misleading conduct (2005) 79 ALR 296
PARTIES:	SIGMA COACHAIR GROUP PTY LIMITED v BOCK AUSTRALIA PTY LIMITED & ANOR
FILE NUMBER(S):	SC No 2007/20418
COUNSEL:	P: J A Soars D: M R Hall
SOLICITORS:	P: HWL Ebsworth D: Finlaysons Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HALL J

THURSDAY 23 JULY 2009

No 20418 of 2007

SIGMA COACHAIR PTY LTD (FORMERLY AIR INTERNATIONAL TRANSIT PTY LIMITED) v BOCK AUSTRALIA PTY LIMITED & ORS

JUDGMENT

1 HIS HONOUR: These proceedings concern an application for leave to proceed against a foreign defendant, which is opposed, and a cross-application to set aside judgment and service.

(1) The plaintiff’s notice of motion

2 By notice of motion filed on 13 February 2009, the plaintiff seeks orders pursuant to Rule 11.4, Uniform Civil Procedure Rules 2005 (UCPR):-

(1) For leave to proceed against the second defendant (“Bock Germany”), a foreign defendant.

(2) Judgment against the second defendant for damages and costs pursuant to Rule 16.7, UCPR.

3 The motion also seeks an order pursuant to Rule 30.1, UCPR that the proceedings be set down for a hearing on damages.

4 In support of the motion, the plaintiff relied upon the affidavits of:-

(1) Susan Doherty sworn on 12 February 2009, 8 April 2009 and 20 April 2009.

(2) John Walsh sworn on 19 February 2009 and 20 February 2009.

(3) Joseph Schembri sworn 9 April 2009.

(4) Richard Lewis Bull sworn 20 April 2009.

(2) The second defendant’s notice of motion

5 The second defendant filed an amended notice of motion on 17 March 2009 seeking the following orders:-

(1) That the judgment obtained by the plaintiff against the second defendant be set aside pursuant to Rule 36.16, UCPR.

(2) That the order that the plaintiff have leave to proceed against the second defendant be set aside pursuant to Rule 36.16, UCPR.

(3) That service of the amended statement of claim on the second defendant be set aside pursuant to Rule 12.11, UCPR.

(4) That specified paragraphs of the amended statement of claim be struck out pursuant to Rule 14.28, UCPR or alternatively the claims disclosed therein be dismissed pursuant to Rule 13.4, UCPR.

6 The second defendant relied upon the affidavit evidence of John Bennett McFail sworn 6 March 2009 and of Thomas Hagenlocher sworn 5 March 2009.

Procedural background

7 Proceedings were commenced by statement of claim filed 22 November 2007. On 25 July 2008, an amended statement of claim (ASOC) was filed.

8 The first defendant, a company incorporated in Australia, was served with the amended statement of claim on 25 July 2008. The first defendant entered an appearance on 28 May 2008 to the initial statement of claim and served a defence to the amended statement of claim on 13 January 2009. No orders were sought by the plaintiff against the first defendant in its abovementioned notice of motion.

9 The second defendant was served with the amended statement of claim on 7 November 2008 at the administration address in Germany listed on its website (

10 Service was effected in accordance with the Attorney-General’s arrangements pursuant to Rules 11.9 to 11.11, UCPR. There is no dispute that the second defendant received a sealed copy of the amended statement of claim.

11 The second defendant did not appear. The plaintiff applied ex parte for leave to proceed against the second defendant pursuant to Rule 11.4, UCPR. On 4 March 2009, the Registrar granted leave to proceed against the second defendant pursuant to Rule 11.4, UCPR and judgment was entered against it with damages and costs to be assessed.

Factual background

12 The plaintiff is a company incorporated in Australia that carries on the business of the design, manufacture and supply of heating, ventilation and air conditioning systems for mobile applications.

13 The first defendant is a company incorporated in Australia. It supplied refrigerant compressors to the air conditioning and refrigeration industry, including to the plaintiff, and it also services those compressors.

14 The second defendant is a company incorporated in Germany. It manufactures the compressors that were, in due course, supplied by the first defendant in Australia.

15 The plaintiff had discussions with the first defendant from about March 2001 as to the terms on which it could purchase compressors manufactured by the second defendant for use in air conditioning units to be installed on trains in India, and as to their suitability for the proposed use.

16 The plaintiff alleges that it entered into a contract with the first defendant in about November 2001 on terms that it would purchase compressors at a fixed price of A$2,900 per unit as it may order from time to time.

17 A number of compressors were ordered by the plaintiff and supplied by the first defendant to the plaintiff. The plaintiff constructed air conditioning units using the compressors, and installed the units in trains in New Dehli, India. In late 2002, a number of compressors allegedly failed when the suction reeds in the compressors were damaged in field commissioning trials in New Dehli.

18 The plaintiff’s case is that the failure of the compressors and consequently, the failure of the air conditioning units, occurred when the compressor was started in full cooling mode and there were pressures on the suction side of the compressor of less than 19 bar (Abs) which corresponds to 1,799 kPa (G).

Causes of action alleged to arise against the second defendant in the amended statement of claim

19 The amended statement of claim contained claims for breach of contract, misleading and deceptive conduct under the Trade Practices Act 1974 (Cth), and negligence against the first defendant arising out of the contract to supply the compressors which were used in the construction of air conditioning units for trains in New Dehli, India.

20 The plaintiff alleged the following causes of action against the second defendant in the amended statement of claim:-

(1) Misleading or deceptive conduct under the Trade Practices Act .

(2) Negligence.

21 As to the misleading or deceptive conduct claim against the second defendant, the plaintiff asserts (ASOC, paragraph 19) that representations were made by the second defendant to the plaintiff about the compressors in the form of:-

(1) A catalogue for the Compressors which identified a capacity regulation valve as an available accessory.

(2) Operating instructions for the Compressors which identified:-

(a) a capacity regulator as an accessory which may be fitted to the Compressors; and

(b) the maximum starting pressure on the suction side of the Compressors as 19 bar (Abs) which corresponds to 1,799 kPa (G).

(3) The data plate affixed to each of the Compressors which identified that the maximum starting pressure on the suction side of the compressors as 19 bar (Abs) which corresponds to 1,799 kPa (G).

22 The plaintiff claims that by way of the catalogue, operating instructions and data plate, the second defendant represented to the plaintiff that the compressors were suitable for use in air conditioning systems starting in full cooling mode at pressures on the suction side of the Compressor up to a limit of 19 bar (Abs) which, as stated above, corresponds to 1,799 kPa (G) (ASOC, paragraph 20).

23 The plaintiff alleges it relied upon the representations and was induced by them (amended statement of claim, paragraph 23):-

“(a) to enter into the Contract for the supply of Compressors if so ordered by the Plaintiff;
(b) to place orders for Compressors pursuant to the terms of the Contract for the supply of Compressors; and/or
(c) to use the Compressors in air conditioning systems constructed and installed by the Plaintiff in trains in New Dehli, India .”

24 The alleged representations were said to be misleading, deceptive or likely to mislead or deceive contrary to s.52 or s.53 of the Trade Practices Act (ASOC, paragraph 24).

25 Alternatively, the plaintiff claims that the first defendant was the agent of the second defendant in the sale of the compressors in Australia within the meaning of s.84 of the Trade Practices Act and at common law (ASOC, paragraph 23). The plaintiff provided the following particulars in this respect (ASOC, paragraph 25):-

“(a) the Plaintiff repeats paragraphs 18 and 19;
(b) letter dated 27 March 2001 from the First Defendant to the Plaintiff
(c) letter dated 1 May 2001 from the First Defendant to the Plaintiff;
(d) email dated 14 November 2001 from Mr Benson of the Plaintiff to Mr Downie of the First Defendant;
(e) email dated 16 November 2001 from Mr Downie of the First Defendant to Mr Benson of the Plaintiff;
(f) letter dated 22 November 2001 from the First Defendant to the Plaintiff;
(g) email dated 23 November 2001 from the Plaintiff to the First Defendant; and
(h) facsimile dated 28 November 2001 from the First Defendant to the Plaintiff .”

26 As it is alleged the first defendant as agent for the second defendant carried out the misleading or deceptive conduct, the second defendant is said to be liable under s.84 for the conduct of the first defendant (ASOC, paragraph 26).

27 The second cause of action claimed by the plaintiff to arise against the second defendant is that of negligence. The plaintiff pleads specific alleged misrepresentations (ASOC, paragraphs 40(a) and 41(a)) and an alleged breach of duty to warn (ASOC, paragraphs 40(b) and 41(b)). The plaintiff pleads that the second defendant (ASOC, paragraph 39):-

“(a) knew or ought to have known that the Plaintiff relied upon the Second Defendant to exercise reasonable skill, care and diligence in identifying the performance characteristics of the Compressors including the maximum pressure under which the Compressor was fit to operate;
(b) knew and intended that the Plaintiff would act upon the reliability and accuracy of the information the Second Defendant provided about performance characteristics of the Compressors including the maximum pressure under which the Compressor was fit to operate;
(c) assumed responsibility to the Plaintiff for the accuracy and reliability of the information provided to the Plaintiff about the performance characteristics of the Compressors including the maximum pressure under which the Compressor was fit to operate .”

28 The plaintiff relied upon the following correspondence (ASOC, paragraph 39):-

“(a) a facsimile from the First Defendant to the Plaintiff dated 27 March 2001;
(b) a facsimile from the First Defendant to the Plaintiff dated 1 May 2001;
(c) an email from the Plaintiff to the First Defendant dated 14 November 2001;
(d) an email from the First Defendant to the Plaintiff dated 16 November 2001;
(e) email dated 9 November 2001 from Klaus-Peter Wirausky of the Second Defendant to Mr Benson of the Plaintiff;
(f) a facsimile dated 28 November 2001 from first Defendant to the Plaintiff;
(g) a facsimile letter dated 18 January 2002 from the First Defendant to the Plaintiff .”

29 In the circumstances, the plaintiff alleged the second defendant owed a duty to the plaintiff (ASOC, paragraph 40):-

“(a) to exercise reasonable skill, care and diligence in and about the provision of information to the Plaintiff about the performance characteristics of the Compressors including the maximum pressure under which the Compressor was fit to operate;
(b) to warn the Plaintiff that the Compressors may fail when starting in full cooling mode at pressures on the suction side of the Compressor of no more than 1,000 – 1,400 kPa (G).”

30 As a result of the alleged failure of the compressors and subsequently, the air conditioning units, the plaintiff claimed (ASOC, paragraph 41) that the second defendant breached its duty to the plaintiff as provided in the previous paragraph.

The general principles

31 The UCPR allow service outside Australia without prior leave of the court.

32 Pursuant to Rule 11.4, UCPR, if originating process is served on a defendant outside Australia, and the defendant does not enter an appearance, the plaintiff may not proceed against the defendant except by leave of the Supreme Court. As discussed at paragraph [11], the second defendant did not appear and the plaintiff was granted leave to proceed ex parte on 4 March 2009.

33 The second defendant has also made application for an order to set aside originating process under Rule 12.11, UCPR. The making of an application for an order under Rule 12.11, UCPR does not constitute submission to the jurisdiction of the court: Rule 12.11(4), UCPR.

34 Pursuant to Rule 11.7(2), the Supreme Court may make an order of a kind referred to in Rule 12.11, UCPR:-

“ (a) on the ground that the service of the originating process is not authorised by these rules, or

(b) on the ground that the court is an inappropriate forum for the trial of the proceedings .”

35 In Agar v Hyde (2000) 201 CLR 552 at [55], the High Court referred to three considerations upon which the Court may determine an application to set aside service, or to have the Court decline to exercise jurisdiction. These may be stated as follows:-

(1) That the claims made are not claims of a kind which are described in Schedule 6 to the UCPR (formerly Part 10, Rule 1A).

(2) That the Court is an inappropriate forum for the trial of the proceeding.

(3) That the claims made have insufficient prospects of success to warrant putting an overseas defendant to the time, expense and trouble of defending the claims.

36 The second defendant also seeks to have the order granting leave to proceed and the judgment obtained by the plaintiff on 4 March 2009 set aside or varied after it has been entered on the basis that it was given or made in the second defendant’s absence, whether or not the second defendant knew about the application: Rule 36.16(2)(b), UCPR.

(1) Causes of action within the grounds for service out of Australia as stated in Schedule 6

37 Originating process may be served outside Australia in the circumstances referred to in Schedule 6: Rule 11.2, UCPR. The claims by the plaintiff in the proceedings must fall within one of the paragraphs of Schedule 6 UCPR. The plaintiff relies upon sub-paragraphs (a), (d), (e), (i) and (w) of that Schedule. The relevant paragraphs of Schedule 6 are in the following terms:-

“ (a) if the proceedings are founded on a cause of action arising in New South Wales,
…
(d) if the proceedings are founded on a tort committed in New South Wales,
(e) if the proceedings, wholly or partly, are founded on, or are for the recovery of damages in respect of, damage suffered in New South Wales caused by a tortious act or omission wherever occurring,

…

(i) if the proceedings are properly commenced against a person served or to be served in New South Wales and the person to be served outside New South Wales is properly joined as a party to the proceedings,
…
(w) if the proceedings, so far as concerns the person to be served, fall partly within one or more of the foregoing paragraphs and, as to the residue, within one or more of the others of the foregoing paragraphs .”

38 The inquiry as to whether the plaintiff’s claim is founded on one of the paragraphs in Schedule 6 is not directed to an assessment of the strength (in the sense of the likelihood of success) of the plaintiff's claim: Agar (supra) at [48]-[51]. The application of the paragraphs of Schedule 6 depends on the nature of the allegations which the plaintiff makes, not on whether those allegations will be made good at trial.

(2) “Inappropriate forum”

39 The principles of forum non conveniens as authoritatively stated by the High Court in Voth (supra) were summarised in Henry v Henry (1996) 185 CLR 571 at 586-587 as follows:-

“In Voth , this court adopted for Australia the test propounded by Deane J in Oceanic Sun , namely, that a stay should be granted if the local court is a clearly inappropriate forum , which will be the case if continuation of the proceedings in that court would be oppressive, in the sense of “seriously and unfairly burdensome, prejudicial or damaging”, or, vexatious, in the sense of “productive of serious and unjustified trouble and harassment ”. It was also held in Voth that, in determining whether the local court is a clearly inappropriate forum, “the discussion by Lord Goff in Spiliada of relevant `connecting factors’ and `a legitimate personal or juridical advantage’ provides valuable assistance ”. (emphasis added)

40 In Colosseum Investment Holdings Pty Ltd v Vanguard Logistics Services Pty Ltd (supra) at [69], Palmer J summarised the factors relevant to the exercise of the Court’s discretion to decline jurisdiction on forum non conveniens grounds:-

“i) a consideration of the true nature and full extent of the issues involved in proceedings in the local court and in the foreign court;
ii) whether, in the light of that consideration, the foreign court has jurisdiction to deal with the same subject matter as is before the local court;
iii) the degree of connection which both proceedings share with the law of the foreign court and the law of the local court;
iv) where the relevant acts or omissions occurred;
v) where the parties reside and carry on business;
vi) whether local professional or other standards of care have a bearing on the legal quality of the relevant acts or transactions or the liability of the parties;
vii) where and how the damage was suffered;
viii) where the relevant evidence in the action is to be found;
ix) whether the application to the local court for a stay or dismissal has been made with reasonable promptness;
x) the stage which proceedings in the foreign court have reached in comparison with the stage of proceedings in the local court;
xi) the order in which the two sets of proceedings were instituted and the costs which have been incurred in each;
xii) whether each court recognises the orders and decrees of the other;
xiii) which court can provide more effectively for the complete resolution of the whole of the controversy between the parties;
xiv) that a party properly invoking the jurisdiction of the local court has a prima facie right to insist upon the exercise of that jurisdiction, so long as that prima facie right is not given undue emphasis;
xv) that considerations of comity and restraint should be taken into account where a defendant carries on business in a foreign country and the jurisdiction of the courts of that country would be recognised under local conflict rules;
xvi) the undesirability of allowing two independent actions involving the same question of liability to proceed contemporaneously in the courts of different countries;
xvii) whether the dominant purpose of a party in commencing proceedings in one jurisdiction or another is to prevent another party from pursuing remedies available in the courts of another country having jurisdiction:

Oceanic Sun Line at 248; Voth at 570-571; Henry at 578-579, 588-589, 590, 592-593; Agar v Hyde (2000) 201 CLR 552, at [42]-[43]; CSR v Cigna at 399, 401.”

41 I have considered the application of these principles in this judgment at paragraphs [140] – [146].

(3) Insufficient prospects of success

42 In Agar (supra) at [60], the High Court observed that the degree of satisfaction required was the same as that required for an ordinary application for summary judgment.

43 In Commonwealth of Australia v Griffiths [2007] NSWCA 370, Beazley JA with whom Mason P agreed said:-

“ 11. The general principles relating to the summary disposal of proceedings are well-known: see General Steel Industries Inc v Commissioner for Railways (NSW) & Ors [1964] HCA 69;(1964) 112 CLR 125 at 129. If it is demonstrated that there is a real question to be tried , the matter is inappropriate for the entry of summary judgment: Dey v Victorian Railway Commissioners [1949] HCA 1;(1949) 78 CLR 62. The tests stated in the authorities as to whether it is appropriate that a case be disposed of by the entry of summary judgment include statements such as that the matter is “ so obviously untenable that it cannot possibly succeed ”; “ manifestly groundless ” or “ would involve useless expense ”: see General Steel Industries at 129.
12. The summary disposal of proceedings or part thereof deprives a party of the right to a contested hearing. For that reason it is said that the requirement for establishing that there is no triable issue is demanding: Air Services Australia v Zarb (Court of Appeal, 26 August 1998, unreported)…” (emphasis added)

44 The onus is on the second defendant to show that the causes of action are doomed to fail, are unarguable or that there is no real question to be tried.

The TPA claim – the first question

45 The first matter for determination is whether the plaintiff’s claim against the second defendant under the Trade Practices Act pleads a cause of action arising in New South Wales under paragraph (a) of Schedule 6, and, if so, whether it has insufficient prospects of success.

46 In the amended statement of claim, the plaintiff claimed that the second defendant made certain representations to the plaintiff in Australia through its alleged agent, the first defendant (ASOC, paragraph 19). The representations allegedly made by the second defendant were, as previously noted, said to have been in the form of a catalogue, operating instructions and a data plate. By reason of these matters, the plaintiff alleged that the second defendant engaged in misleading or deceptive conduct contrary to s.52 and s.53 of the Trade Practices Act (ASOC, paragraph 24). Alternatively, the first defendant is alleged to have been the second defendant’s agent pursuant to the deeming provision in s.84 of the Trade Practices Act (ASOC, paragraphs 25-26), and accordingly is liable for the alleged misleading or deceptive conduct of the first defendant.

47 A cause of action will arise within the jurisdiction if the act on the part of the defendant which gives the plaintiff his or her cause of complaint has occurred within the jurisdiction: Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 at 468.

48 In determining where misleading or deceptive conduct has taken place, the same rules are applied as in relation to foreign torts: Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd (1993) 117 ALR 507 at 518-20. A breach of s.52 of the Trade Practices Act by a misleading or deceptive statement occurs where the statement is received: Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1993) 44 FCR 485; Sedgwick Ltd v Bain Clarkson Ltd (1994) 56 FCR 578; Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539; Delco Australia Pty Ltd v Equipment Enterprises Incorp (2000) 100 FCR 385; Ramsey v Vogler [2000] NSWCA 260.

49 Justice Stein summarised the authorities in this area in Ramsey (supra) at [39] to [44]:-

“39 In Distillers Co v Thompson [1971] AC 458 at 468 the Privy Council said that the correct approach is to look at the events constituting the tort and ask, where in substance the cause of action arose.
40 Diamond v Bank of London & Montreal Ltd [1979] 1 QB 333 concerned fraudulent and negligent misrepresentations made by telephone and telex in Nassau to Mr Diamond in London. Donaldson J had held that the tort of fraudulent misrepresentation was committed in Nassau when the telexes were sent and from where the representator spoke on the telephone. The Court of Appeal disagreed. Lord Denning MR, with whom in separate judgments, Stephenson LJ and Shaw LJ agreed, said at 345 - 346:-
‘It seems to me that in the case of fraudulent misrepresentation, when it is made by telephone or by telex, as it was here, the tort is committed at the place where the message is received - wherever it is heard on the telephone by the receiver or tapped out by the telex machine in the receiver's office. It was so held in Canada in Original Blouse Co Ltd v Bruck Mills Ltd (1963) 42 DLR (2d) 174. The judge there said that when a communication is made by telephone or by telex, it is to be regarded in the same way as a letter sent by hand or a message sent by word of mouth by a messenger to the recipient. In such a case there could be no doubt that the fraudulent misrepresentation was made at the point where it was received and where it was acted upon.’
41 In Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538 at 567 - 8 Mason CJ, Deane, -Dawson and Gaudron JJ noted that:-
‘In some cases an act passes across space or time before it is completed. Communicating by letter, telephone, telex and the like provide examples. In Diamond v Bank of London & Montreal Lord Denning MR stated that a representation or a statement effected by telephone or telex takes place "where the message is received - wherever it is heard on the telephone by the receiver or tapped out by the telex machine in the receiver's office". In the view of Stephenson LJ the situation was like the publication of a defamation or the act charged as an offence in Director of Public Prosecutions v Stonehouse in that although initiated outside the country it "operates on persons and property in this country".’

42 The members of the Court added:-
If a statement is directed from one place to another place where it is known or even anticipated that it will be received by the plaintiff, there is no difficulty in saying that the statement was, in substance, made at the place to which it was directed, whether or not it is there acted upon.


43 Diamond was applied by French J in Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (No 2) [1993] FCA 430; (1993) 44 FCR 485; at 493. His Honour accepted that the making of representations by telephone and facsimile from outside Australia communicated to Paper Products within Australia constituted conduct by Tomlinsons in this country for the purposes of the Trade Practices Act 1974.

44 In Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 547 - 548 the Full Federal Court applied Diamond and Paper Products. After reference to Voth (including its reference to Distillers) the Court said:-
‘The primary judge held that the evidence showed a prima facie case that the conduct constituted by the Christiansen statement (the express representation and the first implied representation) occurred in Australia. It was open to him so to hold. Mikkelsen made the call from Australia which elicited the statement. The statement was heard by Mikkelsen in Australia. Mikkelsen was acting for Bannerton, and was negotiating in Australia with the lender of funds for Bannerton's building project in Australia. In those circumstances, there is nothing artificial in saying that the conduct occurred in Perth, where the inquirer was located, and where the statement would be and was acted on.’”

50 In Delco (supra), the applicant, a company incorporated and carrying on business in South Australia as a pipeline construction contractor, alleged that the respondents made certain false representations concerning the quality of machinery acquired by the applicants. The representations were made in telephone discussions and by facsimiles sent from the US to the applicant’s office in South Australia. As the applicant received the representations in South Australia, the applicant’s cause of complaint was held to have occurred in South Australia.

51 In Sydbank (supra), misleading or deceptive representations were made by the agent of a Danish corporation in Denmark to the applicant in Australia by telephone. The Court held that the applicant’s claim for damages under s.82 of the Trade Practices Act arose where the representations were heard, which was Australia.

52 On the facts asserted by the plaintiff, the acts on the part of the second defendant which are relied upon as giving the plaintiff the grounds for its cause of action are deceptive representations about the operational suitability of the compressors. The plaintiff submitted that as the alleged representations were received, read and relied upon by the plaintiff in New South Wales, the cause of action under the Trade Practices Act arose in New South Wales.

53 The second defendant submitted that those paragraphs of the amended statement of claim which allege a claim under the Trade Practices Act do not disclose any cause of action arising in New South Wales on the basis that there is no conduct of the second defendant which was directed at the plaintiff in the jurisdiction. The amended statement of claim, it was contended, does not particularise any instance of communication by the second defendant directly to the plaintiff.

54 The catalogue alleged to have contained the misrepresentations was given to the plaintiff by the first defendant. In his affidavit sworn 9 April 2009 at paragraph 10, Mr Schembri states that Downie Group Industries Pty Ltd, a predecessor company of the first defendant, provided the catalogue to the plaintiff. Mr Hagenlocher states at paragraph 17 of his affidavit sworn 5 March 2009 that the second defendant did not provide catalogues to the plaintiff by email, post or through the means of an agent. Although the catalogue was published by the second defendant in Germany, Mr M R Hall of counsel contended on behalf of the second defendant that the source of supply of the catalogue to the plaintiff was Downie Group Industries (the first defendant).

55 In respect of the operating instructions, Mr Hagenlocher stated in his affidavit sworn 5 March 2009 that the “the operating instructions for all of our products are shipped with the compressors at the time of purchase by a distributor” (at paragraph 26). Mr Hagenlocher explained at paragraph 28 that at no time did the second defendant provide the operating instructions to the plaintiff by email, post or through the means of an agent. The operating instructions were supplied to the first defendant when the second defendant shipped the compressors to the first defendant. Mr Hall’s submission was that the first defendant must have then supplied the operating instructions to the plaintiff.

56 Similarly, Mr Hagenlocher stated at paragraph 35 of his affidavit sworn 5 March 2009 that a data plate is fitted to each compressor supplied by the second defendant. It was Mr Hagenlocher’s evidence that the second defendant did not supply the data plate separately to the plaintiff.

57 It was submitted by Mr Hall that the evidence demonstrates that the second defendant provided the catalogue, operating instructions and data plate to the first defendant. The first defendant was responsible for passing these communications onto the plaintiff. Accordingly, Mr Hall submitted that direct communication from the second defendant to the plaintiff cannot be established, and on that basis, breach of s.52 of the Trade Practices Act by the direct conduct of the second defendant could not be claimed.

58 As discussed above, the alternative argument made by the plaintiff in the amended statement of claim is that the second defendant by means of an agent, the first defendant, made the representations to the plaintiff.

59 According to Mr Hagenlocher, the first defendant was established in 2001 as a joint venture between Bock Holding GmbH and Downie Group Industries Pty Ltd (affidavit of Thomas Hagenlocher sworn 5 March 2009 at paragraph 6). Bock Holding GmbH directly holds 50% of the shares of the first defendant. Bock Holding GmbH is a wholly-owned subsidiary of the second defendant (affidavit of Thomas Hagenlocher sworn 5 March 2009 at paragraph 4).

60 Mr Hall on behalf of the second defendant submitted that although this evidence demonstrates a shareholding arrangement, it does not demonstrate an agency agreement. No formal or express agency agreement existed at any time between the first and second defendant (Exhibit SAD3 to the affidavit of Susan Doherty sworn 20 April 2009 at p.5-6).

61 The first and second defendants did not share common directors. The managerial directors of the second defendant were not involved in the management of the first defendant (affidavit of Thomas Hagenlocher sworn 5 March 2009 at paragraph [7]). The second defendant did not exercise management or control of the first defendant in its day-to-day business, and had no power to do so (affidavit of Thomas Hagenlocher sworn 5 March 2009 at paragraph [8]). The first defendant did not have express or implied authority to contract on behalf of the second defendant. The companies, on Mr Hagenlocher’s evidence, operated as separate and independent entities (affidavit of Thomas Hagenlocher sworn 5 March 2009 at paragraph [9]).

62 The effect of this evidence, according to Mr Hall, is that the first defendant, as the second defendant’s distributor, acted independently and separately in its own interests in entering into a contract to supply compressors to the plaintiff. This contract required the first defendant to purchase the compressors from the second defendant, which it did, before reselling those compressors to the plaintiff.

63 On that basis, Mr Hall submitted the claims based on s.52 and s.53 of the Trade Practices Act cannot be established as they rely on an agency relationship which has not been made out.

64 Ms J A Soars of Counsel who appeared on behalf of the plaintiff relied upon the decision of Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 at [148], in which Merkel J held that conduct of an overseas company may also be said to be conduct that has taken place in Australia where the particular conduct is engaged in by the subsidiary or its officers on behalf of, or as agent for, its parent.

65 Bray (supra) involved an international price fixing arrangement between a number of foreign corporations in respect of vitamin products manufactured and sold by them or their subsidiaries. Some of those subsidiaries were Australian corporations.

66 Ms Soars cited in an article “Extraterritorial application of Australian statutes proscribing misleading conduct” (2005) 79 ALR 296, in which the author, Justin Gleeson SC, states at 308:-

“ Applying Bray to s.52, conduct by a foreign corporation outside Australia may still be caught by s.52 where the foreign corporation can be seen to be directing and acting through an Australian agent which is the immediate contravenor .”

67 Ms Soars observed that actual agency is alleged, although whether it can be established is a question of fact for determination at a final hearing. The particulars of some of the factual matters relied upon by the plaintiff to establish the agency are:-

(1) The second defendant’s website which describes the distributors outside of Germany as “ sales agents ” (exhibit SAD1 to the affidavit of Susan Doherty sworn 12 February 2009 at p. 78).

(2) The first defendant’s claim in its defence that it acted as the local distributor of products manufactured by the second defendant (paragraph 4.1) and that for the purpose of its dealings with the plaintiff, it was the agent of the second defendant (paragraph 26.2). It has particularised the agency as being an implied agency (Exhibit SAD3 to the affidavit of Susan Doherty sworn 20 April 2009 at p.5-6).

(3) According to extracts from the second defendant’s website, the first defendant is a “ subsidiary company ” of the second defendant (Exhibit SAD1 to the affidavit of Susan Doherty sworn 12 February 2009 at p.79-80).

(4) According to the second defendant’s website, the first defendant is a company formed as a result of a joint venture between the second defendant and Downie Industries Pty Ltd formed in November 2001 (Exhibit SAD2 to the affidavit of Susan Doherty sworn 8 April 2009 at p.23). It was submitted for the plaintiff that it can be inferred that the joint venture was for the purpose of expanding and increasing the sales of the second defendant’s products.

68 Ms Soars submitted that alternatively, if no true agency relationship could be established by the plaintiff, an analogy could be drawn with the decision in Barton v Croner Trading Pty Ltd (1984) 3 FCR 95. In that case, the defendant was an importer and distributor of toys and supplied them to a large national retailer, Woolworths. Attached to the toys were labels containing representations. No agency relationship subsisted between the defendant and the retailer; their relationship was that of wholesale distributor and retailer of the goods respectively. In determining whether the representation was a contravention of s.53(a) or (c), the Federal Court considered the conduct of the defendant as a whole and took into account all the surrounding circumstances (at 106). The Court recognised that the prospective purchaser never made any direct contact with the defendant, that the retailer was at liberty to do what it liked with the goods and that the defendant had no control over the retailer in this respect. However, the Court found that (at 107):-

“ Nonetheless, the surrounding circumstances indicate that the defendant was seeking to implement a scheme for the marketing of the goods, a central feature of which was the display for sale to the public of goods bearing labels intended to be read by the public. The defendant required a retail outlet to market its product, and Woolworths, by assuming that role in the defendant’s marketing plan, acted as an intermediary between the defendant and the ultimate purchasers …
In this sense also, the position of Woolworths may be seen, not as the agent of the defendant in any strict sense, but rather as a convenient medium through which the defendant chose to pass its message – as a channel for communication between the defendant and consumers , the class of persons primarily intended to be protected by s 53 .” (emphasis added)

69 In Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199, a hotel operator, Radisson, was found to have engaged in misleading and deceptive conduct in relation to brochures prepared by a third party for a home unit development which was to be operated by Radisson. The advertising material contained statements about Radisson’s own opinions and expectations regarding the success of the development and used the Radisson name to associate the project with Radisson. Accordingly, Radisson was found to have adopted the representations.

70 The plaintiff alleges in paragraphs 25 to 26 of the amended statement of claim that the first defendant was the agent of the second defendant in the sale in Australia of the compressors within the meaning of s.84 of the Trade Practices Act.

71 Section 84(2) operates as a deeming provision whereby conduct “engaged in on behalf of a body corporate” by an agent within the scope of its actual authority shall be deemed to have been engaged in by the body corporate. In this case, the conduct of the first defendant will constitute conduct of the second defendant if the conduct was engaged in “on behalf of” the second defendant, and, the first defendant can be said to be an agent of the second defendant.

72 In Mr Hall’s submission, s.84(2) cannot be satisfied on the evidence discussed above at paragraphs [55]-[56]. In particular, he submitted that no conduct of the first defendant was engaged in “on behalf of” the second defendant.

73 The phrase “on behalf of” suggests some involvement with the activities of the corporation, in this case, the second defendant. The phrase is not one with a strict legal meaning and is used in a wide range of relationships: Walplan Pty Ltd v Wallace (1985) 8 FCR 27 at 37. The relationships to which the phrase applies are those that are “in some way concerned with the standing of one person as auxiliary to or representative of another person or thing”: The Queen v Toohey; ex parte Attorney-General (NT) (1980) 145 CLR 374 at 386.

74 In NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558, Lindgren J gave a non-exhaustive definition of “on behalf of” at [1244]:-

“ It seems to me that an act is done ‘on behalf of’ a corporation for the purpose of s.84(2) if either of two conditions is satisfied: that the actor engaged in the conduct intending to do so ‘ as representative of’ or ‘ for ’ the corporation, or that the actor engaged in the conduct in the course of the corporation’s business, affairs or activities .” (emphasis added)

75 I have, for the reasons stated below, concluded that the plaintiff’s claim against the second defendant under the Trade Practices Act does plead a cause of action under paragraph (a) of Schedule 6 and that it cannot be said to be a cause of action that is devoid of prospects of success.

76 The representations upon which the plaintiff’s claims are based were contained in the catalogue, operating instructions and data plate. The second defendant in Germany published these materials. The second defendant provided each of these to the first defendant with the compressors as part of the sale. The materials were supplied to assist in providing relevant technical information to explain and facilitate the sale of the compressors. Even if provided to the first defendant by the second defendant, it was implicit in the sale of the compressors, and could be envisioned by the second defendant, that the materials could act as a conduit for or means of transmitting such information to the Australian market. Providing the materials to the first defendant, and not directly to end purchasers and users, did not mean that the materials were not also intended to be supplied for use by potential customers in New South Wales.

77 The representations, although originating in Germany, were conveyed or provided by the second defendant for use by the plaintiff in New South Wales. Even if the materials were supplied indirectly to the plaintiff, in the sense that the first defendant acted as an agent or intermediary, the representations were directed to a purchaser or user, in this case the plaintiff, in New South Wales and were relied upon in New South Wales.

78 In this way, the act giving the plaintiff its cause for complaint, that is, the representations made by the second defendant in the context of the sale of the compressors, can be characterised as occurring in New South Wales. Accordingly, I consider that the misleading or deceptive conduct occurred in New South Wales.

The torts claims – the second question

79 The second question whether the tort claims can be said to fall within one or more of the following paragraphs of Schedule 6:

“(a) if the proceedings are founded on a cause of action arising in New South Wales,

(d) if the proceedings are founded on a tort committed in New South Wales, or

(e) if the proceedings, wholly or partly, are founded on, or are for the recovery of damages in respect of, damage suffered in New South Wales caused by a tortious act or omission wherever occurring.”

80 As discussed earlier, the plaintiff frames the tort claims in two ways. The first is as a claim for negligent misrepresentation (amended statement of claim, paragraphs 40(a) and 41(a)), and the second is for breach of duty based on a failure to warn (amended statement of claim, paragraphs 40(b) and 41(b)).

81 As discussed at paragraph [47], the plaintiff’s cause of action will arise in New South Wales if the act or omission giving rise to the plaintiff’s “cause for complaint” occurs in New South Wales: Distillers (supra).

82 In Distillers (supra), the Privy Council rejected the proposition that every part of a cause of action or the last ingredient of the cause of action must have occurred within the jurisdiction. The Privy Council expressed the correct test at 468D-E:-

“ It is not the right approach to say that, because there was no complete tort until the damage occurred, therefore the cause of action arose wherever the damage happened to occur. The right approach is, when the tort is complete, to look back over the series of events constituting it and ask the question, where in substance did this cause of action arise ?” (Emphasis added)

83 The principle from Jackson v Spittall (1870) LR 5 CP 542 that “the act on the part of the defendant which gives the plaintiff his cause of complaint must have occurred within the jurisdiction” was accepted by the Privy Council in Distillers (supra) at 466D and 468F-G.

84 The difficulty involved in applying the rule was alluded to by the majority of the High Court in Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575 at [43]:-

“Reference to decisions such as Jackson v Spittall (1870) LR 5 CP 542, Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 and Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 show that locating the place of commission of a tort is not always easy. Attempts to apply a single rule of location (such as a rule that intentional torts are committed where the tortfeasor acts, or that torts are committed in the place where the last event necessary to make the actor liable has taken place) have proved unsatisfactory if only because the rules pay insufficient regard to the different kinds of tortious claims that may be made. Especially is that so in cases of omission. In the end the question is ‘where in substance did this cause of action arise’ ( Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 at 468; Voth (1990) 171 CLR 538 at 567)? In cases, like trespass or negligence, where some quality of the defendant's conduct is critical, it will usually be very important to look to where the defendant acted, not to where the consequences of the conduct were felt ( Voth (1990) 171 CLR 538 at 567).”

85 In the case of a negligent misrepresentation directed from one place to another, the tort is committed at the place to which it was directed whether or not it was acted upon there, provided it was a place where it could have been reasonably anticipated that it would be received by the plaintiff or brought to the plaintiff’s attention, even if in fact it is received by the plaintiff elsewhere: Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 568; Delco Australia Pty Ltd v Equipment Enterprises Incorp (2000) 100 FCR 385 at [30]; Aussie Home Security Pty Ltd v Sales Systems Australia Pty Ltd (2000) 172 ALR 141 at [65].

86 The plaintiff submitted that in this case, the negligent representations were directed by the second defendant to the plaintiff in New South Wales, and were received by the plaintiff in New South Wales (ASOC, paragraph 19). Alternatively, the plaintiff claimed that the first defendant, as agent, directed communications, which originated with the second defendant, to the plaintiff. These communications were said to be misleading about the performance characteristics of the compressors (ASOC, paragraph 40(a)).

87 The plaintiff also alleged that the second defendant failed to warn the plaintiff (amended statement of claim, paragraphs 40(b) and 41(b)).

88 In Voth (supra), the joint judgment of Mason CJ, Deane, Dawson and Gaudron JJ adopted the test for determining where a cause of action arises expressed in Jackson v Spittall (supra) and explained in Distillers (supra). Their Honours explained the application of the test to cases where the relevant act is an omission (at 567):-

“ It may sometimes be that the ‘cause of complaint’ is the failure or refusal of the defendant to do some particular thing – in other words, an omission. It makes no sense to speak of the place of an omission. However, it is possible to speak of the place of the act or acts of the defendant in the context of which the omission assumes significance and to identify that place as the place of the ‘cause of complaint’. That is what was done by Goddard LJ in George Monro Ltd v American Cyanamid and Chemical Corp [1944] KB 432 at p.439, where the failure to warn as to the nature of goods was treated as an aspect of their sale. Sale took place outside the jurisdiction and accordingly, in the view of his Lordship, the tort was committed outside the jurisdiction.”

89 In George Monro (supra), the negligence alleged was that an American corporation sold a dangerous substance to the plaintiffs in America without a warning. Goddard LJ characterized the tort as follows (at 439):-

“ the alleged tort which was committed was a wrongful act or default. It was the sale of what was said to be a dangerous article without warning as to its nature. That act was committed in America, not in this country .”

90 The approach which can be distilled from the decisions in Jackson v Spittalli (supra), George Monro (supra), Distillers (supra) and Voth (supra) is that it is some act of the defendant, and not its consequences, that must be the focus of attention.

91 In Distillers (supra), (A) a company incorporated in Great Britain was a manufacturer of pharmaceutical preparations. A company incorporated in New South Wales (B) sold these preparations in New South Wales. B purchased the produced from A in England. One of the products was a sedative which contained thalidomide. B in New South Wales sold this product to consumers, who suffered injury.

92 As the goods were not defective or incorrectly manufactured, the negligence was a failure to warn that the goods would be dangerous if taken by an expectant mother in the first three months of pregnancy. That warning might have been given by putting a warning notice on each package as it was made up in England or it could have been communicated to persons such as the medical practitioners, the wholesale and retail chemists, patients and purchasers in New South Wales. The plaintiff was entitled to claim that the lack of warning was negligence by the English company (A) in New South Wales causing injury to the plaintiff there. The act (which must include omission) which gave the plaintiff a cause for complaint in law was the act on the part of the English company, that is, the failure to warn. The act of ingestion of the drug by the plaintiff's mother was rendered irrelevant.

93 Distillers (supra) was also relied on by Ms Soars as an authority for the principle that a foreign manufacturer owes a duty of care to an Australian purchaser, notwithstanding that there was an intermediary and no direct contractual relationship between them. Reference was made to the fact that no agency relationship was required to be established in Distillers (supra).

94 The plaintiff’s contention was that the facts of the Distillers (supra) are analogous to the present case. Ms Soars relied upon the relationship and communications between the parties, namely that:-

(1) The second defendant manufactures the compressors in Germany and sells them to its distributors.

(2) The second defendant includes a data plate and operating instructions with the compressors.

(3) The first defendant was the local distributor of compressors in Australia.

(4) The plaintiff entered into an agreement to purchase compressors from the first defendant.

(5) The plaintiff received the compressors in New South Wales with the data plate and operating instructions.

95 On that basis, the plaintiff submitted that the failure to warn occurred in New South Wales, and therefore the tort was committed in New South Wales.

96 Mr Hall submitted the torts claims as alleged in the amended statement of claim were not maintainable. He relied, in this respect, upon the fact that the communication of material by the second defendant to the first defendant was completed in Germany and there was no direct communication by the second defendant to the plaintiff in Australia. As discussed above, the second defendant published the relevant material in Germany and supplied it to the first defendant. On Mr Hall’s submission, the only direct communication was between the first defendant and the plaintiff. In response to the plaintiff’s reliance on an agency relationship between the first and second defendants, Mr Hall repeated his submission that the first defendant was not an agent of the second defendant.

97 On that basis, Mr Hall submitted that the second defendant could not have committed the tort of negligent misrepresentation or a failure to warn in New South Wales.

98 I have concluded otherwise. I will return to this aspect and the reasons for the conclusion.

99 It was also submitted by Mr Hall that the claim for economic loss based upon a negligent statement as pleaded does not fall within any recognised category of duty. At paragraph 39 of the amended statement of claim, the plaintiff relied on correspondence between the parties as particularising the claim that the second defendant owed a duty of care to the plaintiff. At subparagraph (e), an email chain from Klaus-Peter Wirausky of the second defendant to Mr Benson of the plaintiff dated 9 November 2001 is referred to (located at Exhibit G to the affidavit of Thomas Hagenlocher sworn 5 March 2009). The remaining correspondence relied upon by the plaintiff is between the plaintiff and the first defendant.

100 Mr Hall submitted that the email (Exhibit G) constituted the totality of communication between the second defendant and the plaintiff. The submission was also made that these emails demonstrate that the second defendant did not assume responsibility to protect the plaintiff against loss, and in fact specifically negatived any assumption of responsibility.

101 The email at Exhibit G is a reply to an earlier email from Mr Benson to Mr Hagenlocher dated 8 November 2001 in which Mr Benson states:-

“ As the Project Buyer for Air International Transit I am responsible for purchase of all materials in the New Dehli Rail Project, Bock Australia has been selected as a potential bidder for the supply of 480 compressors to this Project. I have been referred to you by Bruce Downie.
We are considering BOCK compressor model HG4/650-4S for this application and would appreciate some technical assistance in relation to the need for a check valve. Please find attached our basic refrigeration schematic. Our preference is not to use a check valve in this case.
Could you please advise whether or not this is feasible in the case of the HG4/650-4S and whether the exclusion of a check valve would affect warranty for the BOCK compressor .”

102 On 9 November 2001, Mr Wirausky replied by email, stating:-

“ Regarding the schematic drawing of your system, we can not give any solution if it is necessary to use a check valve or not.
The use of a check valve is depending on the position of the components (condenser higher than compressor,…) from the refrigeration circuit, the working condition and the expected temperature at these components.
Generally the use of a check valve is a safety device against condensation (liquid refrigerant) coming back to the compressor (independent which type of compressor you are using).
Therefore the use (or not) is in the hand of Air International …” (emphasis added)

103 On 12 November 2001, Mr Benson responded by email requesting that the second defendant “confirm acceptance of the application of the compressor in this design without a check valve”.

104 On 13 November 2001, Mr Markus Kielnhofer of the second defendant replied to Mr Benson by email in the following terms:-

“ Mentioned check valve:-
Please consider that not only a liquid flow from refrigerant condenser back to compressor occur, also a gas condensation of refrigerant vapour in the cylinder heads of those compressors is a big problem and produce a failure. The most case regarding this problem are always assign to refrigerant vapour condensation.
Acceptance:-
We generally can not give acceptance for a refrigeration plant which we have not tested and checked by our own . As I can see on the below emails you have rationalized the liquid receiver. Can you really guaranty [sic] that the expansion valve always get enough liquid refrigerant? Only by this way a very fine regulation is given.
We have checked your mentioned refrigeration plant very carefully and compared it with our experience. We do not expect some problems but we also can not give you a general acceptance for your plant .” (emphasis added)

105 Ms Soars referred to a purchase order from the first defendant to the second defendant dated 27 November 2001 (Exhibit B to Mr Hagenlocher’s affidavit) for two HG4/650-4S motor compressors, which were “THE FIRST TWO PROTOTYPE UNITS FOR AIR INTERNATIONAL FOR INDIA”. In the purchase order, the total quantity over three years was stated as 480 compressors, “IF COMP’S PASS THE TEST”.

106 Exhibit B, according to Ms Soars, was relevant in demonstrating that the second defendant knew that the plaintiff required prototype compressors, and that if satisfactory, an order would be placed for 480 compressors.

107 In his affidavit sworn 20 April 2009, Mr Bull stated that the plaintiff received three sample Bock compressors to build the plaintiff’s prototype unit and for validation (at paragraph [12]). The sample bock compressors came with operating instructions.

108 Ms Soars submitted that a letter from Mr Philips of the first defendant to Mr Benson of the plaintiff dated 18 January 2002 (Exhibit 2) also establishes that the second defendant was aware that the plaintiff was a potential customer. The letter was in the following terms:-

“ I have received reply from Bock concerning usage of there [sic] compressors in other railway applications.
Unfortunately they are not aware of other usages in railway application. …
As you know we have the MTR project in Hong Kong and the other usages has been for Queensland railway which have purchased a total of 130 HA4 compressors which have no been in use for over six years with great success.
In this time there has not been one warranty claim on these compressors and have proven to be a very reliable smooth running and quiet compressor.
To date there has only been two compressors sent back for repair which failed due to system related problems. One being with excessive moisture in the system and the other was a liquid condition. In all we can say that the compressor has well and truly stood up to the railway conditions in this application.
See following report from Thermair.
The proposed G+HG4/650-4S compressor in question for New Dehli Project is similar to the comp’s used in above application ….”

109 Ms Soars submitted that on this evidence, the second defendant assisted the first defendant in providing information about the compressors and their use in railway applications.

110 Evidence was also referred to by Ms Soars which shows that the second defendant’s representatives had direct meetings in Australia with the plaintiff’s representatives in relation to the sale of compressors generally from time to time. A facsimile sent from Mr Wirausky of the second defendant to Mr Philips of the first defendant on 2 May 2000 refers to “the meeting at Air International with Thomas Hagenlocher (05.04.2000)” (tendered and marked as Exhibit 1 at p.6). Information was provided in the facsimile in relation to the compressors and was to be passed on to Air International. Mr Philips forwarded this document to Mr Schembri of the plaintiff. The handwritten comments addressed to Mr Schembri refer to that meeting and the information requested.

111 Similarly, Mr Philips forwarded to Mr Bull a facsimile sent from Mr Wirausky to Mr Philips on 8 April 2001 containing information about the “terminal box”. Handwritten comments on the document refer to Mr Bull’s meeting with Bruce Downie and Thomas Hagenlocher “last week” (tendered and marked as Exhibit 1 at p.7).

112 The decision in Distillers (supra) that a foreign manufacturer owed a duty of care in respect of a failure to warn an Australian purchaser was relied upon by Ms Soars as an answer to Mr Hall’s submission that no recognised category of duty of care is pleaded in the amended statement of claim. Although Distillers (supra) did not concern economic loss, Ms Soars submitted that the principles as stated in that case can be extended to a claim for economic loss if the requirements for economic loss are made out at final hearing.

113 In relation to the principles involved in claims for negligent misstatement causing economic loss, Ms Soars relied upon the statement by Brereton J in Street v Luna Park Sydney Pty Ltd [2009] NSWSC 1 at [242], which was in the following terms:-

“ These cases establish that it is insufficient, to support imposition of a duty of care to avoid foreseeable risk of economic loss occasioned by inaccurate or misleading statements, that the plaintiff suffers loss because it has relied (as the defendant knew or ought reasonably to have known it would) on the defendant’s careless statement. It is necessary, in addition, either:

§ that the defendant intended the plaintiff to rely on it [San Sebastian; Esanda (McHugh J)] – or, at the very least knew or ought reasonably have known that it would be communicated to the plaintiff for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the relevant kind in reliance on it and thereby risk incurring of economic loss if it should be inaccurate or misleading [Esanda (Brennan CJ)]; or

§ that there be a “special relationship of proximity”, involving “vulnerability” on the part of the plaintiff (in the sense that the plaintiff is unable to protect itself from the consequences of a defendant’s carelessness), and/or “assumption of responsibility” on the part of the defendant.”

114 Ms Soars submitted that the correspondence in Exhibit G to Mr Hagenlocher’s affidavit and the purchase order at Exhibit B shows the second defendant knew that prototype compressors were being ordered, and that the data plate and operating instructions which would be received with the compressors would be relied upon by the plaintiff.

115 The contention advanced by Mr Hall was that there was an express denial of reliance by the plaintiff upon any representation on the part of the second defendant as to the use of the compressors in a particular refrigeration unit. Mr Hall also submitted that the plaintiff was not in a special relationship of proximity involving vulnerability in the sense that the plaintiff could not protect itself from the consequences of the second defendant’s negligence. The plaintiff was in a position to conduct its own tests and the second defendant did not adopt responsibility for the design or use of the compressors.

116 In light of Brereton J’s comments in Street (supra), Ms Soars submitted that the plaintiff does not need to establish or plead assumption of responsibility by the second plaintiff. The test as stated by his Honour as extracted above at paragraph [113] phrases assumption of responsibility as an alternative element to reasonable foreseeability.

117 In any event, Ms Soars contended that whether there was an assumption of responsibility, and in turn, whether it was indeed negatived, is a matter to be established at the final hearing. I consider the contention in that respect a valid one. To the extent to which it can be proved, Ms Soars submitted that the matters discussed above demonstrated the second defendant had knowledge that the information provided would be received and relied upon by the plaintiff.

118 In respect of any negativing of that assumption, Ms Soars disputed whether on the proper construction of Exhibit G, all assumption of responsibility was negatived as it only refers to the refrigeration plant to be constructed by the plaintiff, not to the compressors manufactured by the second defendant.

119 I will make further findings on this issue at the conclusion of this judgment.

Damage suffered within the jurisdiction

120 The plaintiff also submitted that the proceedings are for the recovery of damages in respect of damage suffered in New South Wales caused by a tortious act or omission wherever occurring under paragraph (e) of Schedule 6.

121 The plaintiff is a company incorporated in New South Wales. Its principal place of business is in New South Wales (affidavit of John Walsh sworn 19 February 2009 at paragraph 4).

122 The following paragraph of the amended statement of claim is relevant to loss and damage:-

“ 46. By reason of the Second Defendant’s breach of the duty of care and contravention of section 52, alternatively s 53 of the Trade Practices Act 1974, the Plaintiff has suffered loss and damage .”

123 The loss and damage is particularised at paragraph 45 of the amended statement of claim as follows:-

“ (a) Losses incurred to date in ascertaining the cause of, and remedying, the defect including costs associated with conducting tests, materials, support in New Dehli during testing and rebuilding, travel and associated costs;
(b) Alternatively, additional unexpected expenditure in ascertaining the cause of, and remedying, the defect including costs associated with conducting tests, materials, support in New Dehli during testing and rebuilding, travel and associated costs;
(c) Costs associated with rebuilding the compressors (parts and labour), staff, support in Dehli (including subcontractors), travel and associated costs;
(d) Alternatively, additional unexpected expenditure in costs associated with rebuilding the compressors (parts and labour), staff, support in Dehli (including subcontractors), travel and associated costs;
(e) Losses associated with delay in payment by end customer due to defective compressors;

(f) Alternatively, additional unexpected expenditure associated with delay in payment by end customer due to defective compressors;
(g) Lost opportunity to successfully tender for further train air-conditioning contracts;
(h) Further or in the alternative, the loss of opportunity to the Plaintiff to renegotiate with the First Defendant, alternatively, the Second Defendant, the price to be paid for the Compressors and/or the warranty period to be allowed by the First Defendant and that the First Defendant would pay the Plaintiff’s costs in relation to the development of the Compressors for use on trains. “

124 The word “damage” is used to encompass the disadvantage or detriment suffered by the plaintiff as a result of the tortious act or omission of the plaintiff and has a much wider meaning than “injury”: Darrell Lea Chocolate Shops Pty Ltd v Spanish Polish Shipping Co Inc (The “Katowice II”) (1990) 25 NSWLR 568 at 576. This includes any compensable damage caused by the tort, including economic loss: Flaherty v Girgis (1985) 4 NSWLR 248; Brix-Neilsen v Oceaneering Australia Pty Ltd [1982] 2 NSWLR 173; Challenor v Douglas [1983] 2 NSWLR 405; Colloseum Investment Holdings Pty Ltd v Vanguard Logistics Services Pty Ltd [2005] NSWSC 803 at [41].

125 In Colloseum Investment Holdings Pty Ltd v Vanguard Logistics Services Pty Ltd [2005] NSWSC 803 at [49], Palmer J held that if a company which is incorporated in New South Wales and has its principal place of business in New South Wales suffers economic loss by reason of a tort, it suffers damage in New South Wales regardless of where the tort was committed.

126 Similarly, damages for the purposes of paragraph (e) may include a liability for financial loss in respect of repairs to property, even where both the damage and the repairs occurred outside the state: Darrell Lea Chocolate Shops Pty Ltd v Spanish Polish Shipping Co Inc (The “Katowice II”) (1990) 25 NSWLR 568.

127 In The Katowice II (supra), the plaintiff carried on business in New South Wales as a manufacturer and retailer of chocolate. The plaintiff purchased a machine to be used in manufacture from a German company. The machine was damaged while it was being loaded onto the defendant’s vessel at Hamburg, Germany, to be shipped to New South Wales.

128 The question arose as to whether the plaintiff had suffered damage in New South Wales within the meaning of the equivalent to Schedule 6, paragraph (e). Carruthers J stated at page 577:-

“ The plaintiff carries on its business in New South Wales. It is here that its expenses are incurred, its records maintained and its profits are made. The subject machine was
required for use in its business in this State and it was contemplated that when the machine arrived in New South Wales from Germany, it would be in an operational condition. By reason of the injury occasioned to the machine in Germany, it was necessary for the plaintiff to incur the obligation to repair the machine so that it would arrive for use in the plaintiff's business in an operational condition…If one accepts that the expense was incurred in Germany, it does not necessarily mean that the damage to the plaintiff was not suffered in New South Wales. I can see nothing logically inconsistent about the physical injury to the machine being caused in Germany, the obligation to pay for the repair being incurred in Germany, and the damage, in the sense of the consequential disadvantage or detriment, being suffered by the plaintiff in this State…”

129 The plaintiff submitted that the losses claimed in the amended statement of claim constitute economic loss and damage suffered in New South Wales for the purposes of paragraph (e) of Schedule 6.

130 In Mr Hall’s submission, the compressors were not to be used in New South Wales for the purpose of deriving a profit but were rather to be used in India.

131 I am of the opinion that the pleaded cause of action in negligence can upon the alternative bases relied upon, be said to be founded on a cause of action falling within the provision of Schedule 6, paragraph (a), (b) and (c). In that respect it is open to contention on the pleaded facts that the substance of the cause of action in negligence arose in New South Wales and that the alleged damage was suffered in that state.

132 There is sufficient evidence for present purposes to conclude that the alleged misrepresentations pleaded by the plaintiff were directed to the plaintiff by the second defendant.

133 The act of suppling the compressors to a company in New South Wales (the first defendant) with the catalogue, operating instructions and data plate, for the purpose of distribution to purchasers constitutes in that State an act that may require a warning as to its capacity if, for example, the compressors themselves or their use may call for such a warning to be given. However, I express no concluded opinion as to whether there was such a requirement in this case as that would be a matter for a final hearing.

134 In other words, whether in a particular case or this case such a warning was essential is of course, a question primarily of fact for determination at trial.

Proper joinder of parties

135 The plaintiff submitted that the proceedings were properly commenced against the first defendant, who was served in New South Wales, and the second defendant, who was served outside New South Wales, is properly joined as a party to the proceedings (paragraph (i) of Schedule 6).

136 The test for jurisdiction under that paragraph was described by Palmer J in Colosseum Investment Holdings Pty Ltd v Vanguard Logistics Services Pty Ltd (supra) at [53] as follows:-

“ if a foreign party to be served had been resident within New South Wales, could it properly have been sued as a defendant in the proceedings together with another defendant which is, in fact, resident in the State?”

137 That test does not require that the foreign party and the defendant be jointly liable or sued in the alternative: Westpac Banking Corporation v Commonwealth Steel Co Ltd [1983] 1 NSWLR 735 at 739. It is sufficient if joinder would have been permitted by any of the rules of court had the foreign defendant been resident in the State: Maclaine Watson & Co Private Ltd v Bing Chen [1983] 1 NSWLR 163 at 167.

138 In Colosseum (supra), the liability of the second defendant to the plaintiffs for negligent damage was held to depend on a “substratum of fact” which was common to the plaintiffs’ claim against the first defendant.

139 It is submitted by the plaintiff that the present case is analogous to Colosseum (supra) in that the plaintiff’s claims in tort and pursuant to the Trade Practices Act against the second defendant arise out of the same substratum of facts as those claims against the first defendant.

Conclusions on the torts claims

140 In my opinion, the grounds of Schedule 6 requiring damage being suffered in New South Wales and proper joinder of parties are also established.

Clearly inappropriate forum

141 The second defendant contended that the following considerations show that New South Wales is a clearly inappropriate forum:

(1) That the Court would need to analyse publications published in German.

(2) That German engineers may need to give evidence.

(3) The action has a substantial connection with Germany.

(4) The alleged acts and omissions took place in Germany.

(5) The second defendant and its officers are located in Germany.

(6) that German law governs the tort.

142 The main factor submitted by the second defendant to establish that New South Wales is a clearly inappropriate forum is that German law governs any tort committed by the second defendant.

143 The plaintiff argued that the torts were committed in New South Wales and are governed by the law of New South Wales. Should German law govern the tort claims, this is not a determinative factor. In Zhang (supra) at [81], the High Court stated that an Australian court is not a clearly inappropriate forum merely because the choice of law rules which apply in the forum require the application of foreign law. The decisive consideration is whether the defendant has established that a trial in the forum court would be oppressive or vexatious to them (at [82]).

144 In assessing the appropriateness of the forum, I may take into account the convenience of the parties in light of the relative ease of alternative travel, the use which can be made of written statements and the possible use of video technology for cross-examination of witnesses: CE Underwriting & Insurance (Aust) Pty Ltd v Barden (NSWSC, Rolfe J, 19 October 1994, unreported). This may counter the inconvenience and impracticality which the second defendant suggested was associated with proceeding in the present forum.

145 I am of the opinion that there are sufficient connecting factors between the subject matters upon which the causes of action are based and the jurisdiction of the state of New South Wales to establish this Court as an appropriate jurisdiction. I have in reaching that conclusion had regard to the relevant criteria identified in the authorities to which I have earlier referred.

146 I do not consider the specific matters relied upon by the second defendant are such as to make this Court’s jurisdiction an inappropriate forum. Any evidentiary issues occurring in respect to German witnesses or foreign documents can be easily resolved with the use of modern technology. The fact that this Court may have to apply foreign law is not determinative.

147 Finally, I do not consider that the continuation of the proceedings would be “oppressive” in the sense referred to in the relevant authorities. In that respect the evidence does not establish that the conduct of the proceedings in this jurisdiction would occasion prejudice or unjustified difficulty or “harassment” as understood by reference to the relevant authorities to which reference has been made above.

Orders

148 I dismiss the second defendant’s application on the amended notice of motion in respect of order (3).

149 As this application only concerned order (3) sought in the second defendant’s amended notice of motion, the matter should be listed for directions for the purposes of determining the remaining relief sought in the amended notice of motion, particularly the orders in paragraphs (1) and (4).

150 I reserve the question of costs of this application.

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