The Mount Lyell Mining and Railway Company Ltd v Roxon Company Oy
[1994] FCA 848
•11 Nov 1994
S+&, 97-
JUDGMENT No. ..... , ...., ....J ,,-,,,,
IN THE FEDERAL COURT OF AUSTRALIA
| NEW SOUTH WALES DISTRICT REGISTRY | No. NG 503 of 1994 |
| GENERAL DIVISION |
BETWEEN :
THE MOUNT LYELL MINING & RAILWAY
COWANP LIMITED
Applicant
AND :
ROXON COEIPMIES OY
First Respondent
MD:
SELECT ENGINEERING SERVICES PTY
LIMITED
Second Respondent
| CORAW: | SACKVILLE J. | ||
| PLACE : | SYDNEY | ||
| DATE : |
|
PRINCIPAL
MINUTES OF ORDER RECIlSfRI
m COURT ORDERS THAT:
Leave be granted to the applicant, pursuant to Order 8 rule
| 3 . |
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| dealing with, the shares held by it in the issued capital of Roxon Pty Limited. |
2 of the Federal Court Rules, to serve the application and
amended statement of claim on the first respondent outside
the Commonwealth of Australia and in Finland.2 . The affidavit of John Francis Cromwell Carr-Gregg sworn 10 November 1994 be served upon the first respondent at or about the ~ u . , c : time as service of the application and amended statement of claim is effected.
4. The first respondent, by itself, its servants and agents be restrained up to 5 pm on 23 November 1994 from doing or causing to be done, otherwise than in the ordinary course of business, any act calculated to have the effect of substantially diminishing the value of the shares held by it in Roxon Pty Limited.
5 . Themotionbestoodoveruntil 9.30amon23November 1994.
6. The parties have liberty to apply before Justice Sackville on 48 hours notice.
Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
BETWEEN :
THE I4OUNT LYELL MINING h RAILWAY
COMPANY LIMITEDApplicant
AND:
ROXON COMPANIES OY
First Respondent
AND:
SELECT ENGINEERING SERVICES PTY
LIMITEDSecond Respondent
REASONS FOR JUDGMENT
The Proceedinas
This ex parte application came before me as Duty Judge on 10
November 1994. Mr Pembroke, who appeared with Mr Davie for the
applicant, sought orders granting leave to serve the application
and amended statement of claim on the first respondent outside
Australia and in Finland, pursuant to Order 8, rule 2 of the
Federal Court Rules. Mr Pembroke also sought an order in the
| Australian company, Roxon Pty Ltd. At the conclusion of the | nature of a Nareva injunction restraining the first respondent from disposing of or dealing in certain shares held by it in an | hearing I made orders to the effect of those sought and indicated that I would publish my reasons at 2.15 pm today. I now do so. | |
| I note that, as with all matters determined ex parte, I have not | |||
| bad the benefit of argument and evidence from the first | |||
| respondent. Any conclusions expressed by me must be understood | |||
| with that in mind. Furthermore, there may be other issues, beyond those referred to in this judgment, that the first respondent would wish to raise. | |||
| The proceedings were commenced by the filing in the Registry of a statement of claim by the applicant. This was done on 5 August 1994. The statement of claim named two respondents - a Finnish company, Roxon Companies Oy, as first respondent and an Australian company, Select Engineering Services Pty Ltd ("SES") | |||
| as the second respondent. The first respondent is a company incorporated in Finland. At the material times, it conducted the business of designing, manufacturing and supply of heavy duty equipment forthe mining industry. SES is a company incorporated in Victoria and, at the material times, it carried on the business of supplying and servicing heavy duty equipment for the mining industry. | |||
| Mr Pembroke informed me that the statement of claim had not been | |||
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| The Amended Statement of Claim | |||
| At the commencement of the ex parte application, Mr Pembroke was granted leave to file an amended statement of claim. In the amended statement of claim the applicant pleads a case against the first respondent, as the manufacturer of a Roxon Stroke- Master BML 150 " jaw crusher". This is a heavy machine, which was acquired by the applicant around August 1988 and used to crush ore at the Mount Lye11 mine in Queenstown, Tasmania. The pleadings allege that the jaw crusher did not perform to specifications, experienced excessive interruptions and maintenance requirements, and had defects that prevented it crushing ore at a satisfactory rate. The case against SES is pleaded on the basis that SES sold the jaw crusher to the applicant and breached express and implied warranties given by it as the seller. Other allegations are made against SES, but it is unnecessary to recount them here. | |||
| The case against the first respondent is pleaded on two bases. First, it is alleged that the first respondent represented to the applicant that the jaw crusher would have certain performance characteristics and features. The applicant claims that the | |||
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| Secondly, it is alleged that the first respondent owed a duty of care to the applicant to ensure, inter alia, that the crusher was manufactured with proper skill and diliq-n-0 and that thr applicant was promptly informed of any design defects. The applicant claims that the first respondent breached its duty of care and that in consequence the applicant sustained loss and damage. The relief sought by the applicant includes damages under the general law and under s.82 of the Trade Practices Act 1974. The losses are said to amount to over $11 million, although the quantum claimed may be affected by the fact that in October 1994 the applicant entered into a contract for the sale of Mt Lye11 Mine. | |||
| The Proceedinas in Finland In June 1993 the present applicant commenced proceedings in Finland against a company known as "Roxon Oy". According to Mr Carr-Gregg (who is a solicitor employed by the applicant), he formed the view at that time that the Finnish company with which the applicant had dealt had no presence or assets in Australia. Mr Carr-Gregg also deposed that he was influenced by the fact that he had been advised that a judgment obtained in Australia could not be enforced in Finland. | |||
| It appears that the proceedings in Finland were instituted against the wrong company, although it belonged to the same group of Finnish companies. Roxon Oy, as the company which the | |||
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| the operating assets of the company now known as Roxon Companies | |||
| Oy (the first respondent) were transferred to another company | |||
| within the group, which was given the name Roxon Oy. It was the latter company that the applicant inadvertently sued in Finland. In due course the first respondent was added to the Finnish proceedings. | |||
| The proceedings in Finland were essentially conducted (SO it appears from translations of court documents) as a claim by the applicant in contract. The first respondent resisted the claim on the ground that there was no "business, contractual or other relation according to which Roxon Companies Oy would be liable to the claims stated in the writ". In the event, the District Court in Finland delivered a judgment on 30 September 1994, in which itruledthat no purchase or other contractual relationship had been concluded between the first respondent, or the company now known as Roxon Oy, and the applicant. Accordingly, the action brought by the applicant was dismissed "as directed to wrong defendants". |
Chanae of Strateq
Mr Carr-Gregg states in his af f idavit that he first became aware of the fact that the first respondent had a significant asset in Australia in early 1994. That asset consists of the entire shareholding in Roxon Pty Ltd, a company which is incorporated in the Australian Capital Territory and which apparently carries
| According to a balance sheet of Roxon Pty Ltd as at 31 December on the business of manufacturing and selling mining equipment. | 1993, the company had net assets in excess of $5 million. It | |
| also appears that the first respondent has had its shareholding in Roxon Pty Ltd since late 1990. | ||
| Mr Carr-Gregg gave as his reason for not immediately instituting | ||
| proceedings in Australia, once he had discovered the existence of the asset, the fact that the Finnish court had fixed a hearing in June 1994 for the determination of preliminary legal questions. Mr Carr-Gregg thus decided that the appropriate course was to await the judgment of the Finnish court. That judgment was ultimately handed down on 30 September 1994. | ||
| Mr Carr-Gregg deposedthatthe applicant now "accepts the binding | ||
| nature" of the Finnish court's determination. By that I understand him to mean that the applicant no longer seeks to make out a claim in contract against the first respondent. However, it does seek to press its claims based on misleading and deceptive conduct in contravention of the Trade Practices Act 1974 and on breach of duty. I should add that there is nothing in M r Carr-Gregg's affidavit to explain why searches were not carried out prior to early 1994, since these would have revealed the existence of the first respondent's assets in Australia. Mr Pembroke conceded that there was no explanation other than the fact that the appropriate searches were simply not undertaken. | ||
| In any event, the present proceedings were filed in August 1994, | ||
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| statement of claim were filed at that time to preserve the applicant's position in the face of the possible application of limitation provisions. It has taken another month or so, after the Finnish court's decision, to activate the present proceedings. | ||
| Mareva Iniunction My initial reaction to Mr Pembroke's application on behalf of the applicant for a Marevq injunction against the first respondent | ||
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nearly five years.
(ii) The applicant made a considered decision to institute proceedings in Finland and changed course only when it failed in those proceedings. It is true, so far as the evidence shows, that the proceedings were instituted under a misapprehension as to whether the first respondent had any assets in Australia. However, the correct position became known in early 1994, but nothing was done at that stage to commence action in Australia. It is also true that the application and statement of claim were filed in early August 1994, but this was done only to preserve the applicant's position in the face of possible limitation difficulties.
(iii) Insofar as there was a misapprehension as to the assets held by the first respondent in Australia, the misapprehension was due to the applicants's failure to make appropriate inquiries before early 1994.
There was a three month delay from the date the application and statement of claim were filed until the present notice of motion was filed.
In the end, I have decided, not without some misgivings, that it is appropriate to grant an injunction restraining the first respondent disposing of or dealing with its shareholding in Roxon
| Pty Ltd, at least for a short period. In Patterson v BTR |
Fnaineerina iAust\ Limited (1989) 18 NSWLR 319, Gleeson CS rejected a submission that it is necessary for a plaintiff or applicant seeking a Mareva injunction to establish a likelihood on the balance of probabilities that a def-nAant or responderc will dissipate assets. The Chief Justice stated the relevant principles this way (at 321, 322, 325):
"The remedy is discretionary, but it has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant's absconding, or of assets being removed out of the jurisdiction or dlsposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.
The appellant submitted that the true test to be applied is whether the plaintiff has established the likelihood in question upon the balance of probabilities. This submission must fail. First, it is open to the theoretical objection concerning the conceptual difficulties involved in applying the standard of balance of probabilities to future, as distinct from past, events referred to by Lord Reid in Davies v Tavlor [l9741 AC 207 at 212. Secondly, it is too inflexible. It is not difficult to imagine situations in which justice and equity would require the granting of an injunction to prevent dissipation of assets pending the hearing of an action even though the risk of such dissipation may be assessed as being somewhat less probable than not. Thirdly, the test has been considered and rejected in England, for reasons which are convincing. It was specifically rejected by Mustill J in Third Chandris ShiDDinq GorDoration v Unimarine SA [l9791 QB 645, at 652, at least by implication, by the Court of Appeal in Ninemia Maritime Cor~oration v Trave [l9831 1 WLR
1412. "
This formulation has been applied in this Court by von Doussa 3. in Beach Petroleum NL v Johnson (1992) 9 ACSR 404, at 405-406.
| His Honour noted that it is not necessary to show an active | intention on the part of the respondent to defeat the applicants | |
| from recovering the judgment. It is enough to show that, in the absence of relief, there is a danger that the assets will be de with in a way ... -t will prevent t .~e applicant recovering the fruits of any judgment. | ||
| On the material available to me (which, I stress, has not been tested) I think there is a danger that the assets within Australia might be removed by the first respondent. As W Pembroke pointed out, to use the language of Lord Denning MR, which found its way into Mr Carr-Gregg's affidavit, the shares could be removed from Australia "at the stroke of a pen": Third chandris ShiDDina Cor~oration v Unimarine SA [l9791 QB 645, at 667. While the first respondent has, on the evidence before me, done nothing to warrant a finding that it intends to dissipate assets within Australia, it would be very easy to remove the asset in this case, by disposing of the shareholding to another entity. | ||
| There are other facts, going to the balance of convenience, that suggest that an order should be made, at least until the first respondent has an opportunity to put its case. There appears to be no mechanism for reciprocal enforcement of judgments between Australia and Finland, suggesting that there may be difficulties in enforcing a judgment of an Australian court in Finland: compare Montecchi v Shimco lUKl Ltd [l9791 1 WLR 1180, at 1184, per Bridge L.J. More importantly, the shareholding of the first | ||
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| for a short period is unlikely to create any prejudice to the first respondent. If, however, there is such prejudice, the first respondent will have an early opportunity to demonstrate it. | ||
| The test formulated by Gleeson C.J. in Paterson v BTR Enaineerinq JAustl Ltd requires that there be a prima facie cause of action | ||
| against the defendant. I do not think it either necessary or appropriate to go into the evidence at this stage. It is sufficient to say that, on an ex parte basis, I think that there is evidence of a cause of action by the applicant against the first respondent based on damages flowing from a breach of duty in the design and manufacture of the jaw crusher. | ||
| Service outside Australia | ||
| Mr Pembroke applied for leave under Order 8, rule 2 of the | ||
| Federal Court Rulea for the amended statement of claim to be served outside Australia. Order 8, rule 2(1) and (2) provides as follows: |
2(1) Service outside the Commonwealth of originating
process is not valid under this Order unless-
the service is in accordance with the prior leave
(a) of the Court given under sub-rule (2); (b) the Court confirms the service under sub-rule
( 4 ) ; or (c) the person served waives objection by entering an appearance.
2(2) [Conditions to be satisfied] Where the Court is satisfied of the following matters-
(a) that the proceeding is a proceeding in which the Court has jurisdiction; (b) that the proceeding is a proceeding to which rule 1 applies; and
(C) that the applicant has a prima facie case for the relief which he seeks, the Court may, by order, grant leave to serve originating process outside the Commonwealth under this Order."
Mr Pembroke said that the claim against the first respondent, as
pleaded, came within a number of sub-paragraphs of 0.8, r. l. These are paras. (ac) , (ad), (b), (c) and (g) , which read as
| follows | : |
"(ac) where the proceeding is founded on a tort
committed in the Commonwealth;
(ad) where the proceeding is founded on, or is for the recovery of, damage suffered wholly or partly in the Commonwealth caused by a tortious act or omission, wherever occurring;
where the proceeding is founded on a breach of an
(b) Act, where the breach is committed in the Commonwealth;
(c) where the proceeding is founded on a breach, wherever occurring, of an Act, and is brought in respect of, or the recovery of, damage suffered wholly or partly in the Commonwealth; (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."
I think that on the material presented to me the requirements of Order 8, rule 2(2), subject to one matter, have been satisfied
| originating process outside Australia. | and that an order should be made granting leave to serve the | |
| The qualification relates to one matter I did not appreciate at the time I made the orders ex parte, on 10 November 1994. There is, in my view, sufficient evidence (without having had the benefit of argument from the first respondent) to conclude that the applicant has a prima facie case for relief, within Order 8, rule 2(2) (c), in relation to the cause of action based on breach of duty. However, Order 8, rule 2 (2) (c) has been read as requiring the applicant to demonstrate a prima facie entitlement to each particular cause of action pleaded: Tvcoon Holdinas Ltd v Trencor Jetco Inc (1992) 34 FCR 31, at 35, per Wilcox J. The matter I did not appreciate was that (subject to any further submissions from Kr Pembroke) it is not apparent from the affidavit of Kr Carr-Gregg that evidence has been adduced of the representations alleged to have been made by or on behalf of the first respondent, that in turn are said to have induced the applicant to purchase the machine. If this is correct, the orders I made yesterday may need to be modified in relation to the cause of action based on misleading and deceptive conduct within the Trade Practices Act 1974. However, I shall hear further from M r Pembroke on this issue when I hand down these reasons. | ||
| Orders : | ||
| The orders I made on 10 November 1994 were as follows: | ||
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amended statement of claim on the first respondent outside 2 of the Federal Court Rules, to serve the application and the Commonwealth of Australia and in Finland. 2. The affidavit of John Francis Cromwell Carr-Gregg sworn 10 November 1994 be served upon the first respondent at or about the same time as service of the application and amended statement of claim is effected.
The first respondent, by itself, its servants and agents, be restrained up to 5 pm on 23 November 1994 from selling or disposing of, charging or otherwise encumbering or dealing with, the shares held by it in the issued capital of Roxon Pty Limited.
4. The first respondent, by itself, its servants and agents, be restrained up to 5 pm on 23 November 1994 from doing or causing to be done, otherwise than in the ordinary course of business, any act calculated to have the effect of substantially diminishing the value of the shares held by it in Roxon Pty Limited.
5 . The motion be stood over until 9.30 am on 23 November 1994.
6. The parties have liberty to apply before Justice Sackville on 48 hours notice.
Although, as the result of an omission, an undertaking as to
| damages was not proffered at that time, it is appropriate for such an undertaking now to be given to the Court. | I certify that this and the preceding 13 |
| pages are a true copy of the Reasons for Judgment of the Honourable Justice |
zkville.
I
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Associate: I- f .'... . Dated: 11 November, 1994
| Heard: | 10 November, 1994 |
| Place : | Sydney |
| Decision: | 11 November, 1994 |
Appearances: | Mr M. Pembroke and M r T. Davie instructed by Allen Allen & Hemsley Solicitors appeared for the Applicant. |
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