The Phosphate Co-operative Co. of Australia Ltd v SGS Supervision Services Inc

[1993] FCA 206

Re: THE PHOSPHATE CO-OPERATIVE COMPANY OF AUSTRALIA LIMITED
And: SGS SUPERVISION SERVICES INC.
No. VG257 of 1992
FED No. 206
Number of pages - 10
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
IN ADMIRALTY
GENERAL DIVISION
Gray J(1)

CATCHWORDS

Practice and Procedure - service out of the jurisdiction - foreign tort - whether damage suffered wholly or partly in the Commonwealth - forum non conveniens - whether Federal Court a clearly in appropriate forum.

Words and Phrases - "damage"

Federal Court Rules O.8 r.1

Trade Practices Act 1975 s.52, s.53

Darrell Lea Chocolate Shops Pty. Ltd. v Spanish Polish Shipping Co. Inc. (the "Katowice II") (1990) 25 NSWLR 568

Voth v Manildra Flour Mills Pty. Ltd. (1990) 171 CLR 538

Phillips v Eyre (1870) LR 6 QB 1

McKain v R.W. Miller and Co. (South Australia) Pty. Ltd. (1991) 104 ALR 257

HEARING

MELBOURNE, 18 March 1993

#DATE 7:4:1993

Counsel for the applicant: Mr D.F.R. Beach

Solicitors for the applicant: Phillips Fox

Counsel for the respondent: Mr J.H.L. Forrest

Solicitors for the respondent: Darvall McCutcheon

ORDER

1. The motions the subject of the notice of motion filed on 11th

February 1993 are dismissed.

2. The defendant pay the plaintiff's costs of the motions.

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

JUDGE1

GRAY J This proceeding was commenced by the filing of an application and statement of claim on 14th July 1992. The plaintiff invokes the Admiralty jurisdiction of the Court.

1. The relief sought in the application is as follows:-
   

"On the grounds appearing in the accompanying Statement of Claim the plaintiff claims damages for breach of contract and/or duty in and about the manner in which the defendant carried out a survey of holds 2 and 5 of the vessel "Moon Valley" which was used for the carriage of its cargo of urea and other products from the port of Vancouver, Canada to the Ports of Geelong, Yarraville and Adelaide."

1. Three causes of action are identifiable in the statement of claim. Each arises from the engagement by Esso Chemical Canada, allegedly as agent for the plaintiff, of the defendant to survey the vessel "Moon Valley" at Vancouver in British Columbia, and to report upon its suitability to carry a cargo of granular grade urea in bulk. The defendant inspected the vessel and issued a certificate dated 4th August 1991, stating that holds 2 and 5 of the vessel were clean, swept, dry and in order to receive the designated cargo. It also issued a report of inspection dated 12th August 1991, stating that the holds were swept dry and suitable to carry the intended cargo. It is alleged that, in reliance on the certificate, the plaintiff agreed to use the vessel to carry its intended cargo and in reliance on the report, the plaintiff took up and paid for a bill of lading and arranged for the cargo to be loaded on the vessel and shipped to Australia. It is alleged that, when the vessel was unloaded at Geelong, Yarraville and Port Adelaide, the cargo was found to have been contaminated by water and rust. The first cause of action pleaded is in negligence. The second is for breach of contract. The third is based on ss.52 and 53(aa) of the Trade Practices Act 1974.

2. Without notice to the defendant, the plaintiff applied for leave to serve the application and statement of claim on the defendant, pursuant to O.8 r.1(ad) of the Federal Court Rules, out of the jurisdiction and in Canada. That application was successful. On 29th September 1992, Ryan J gave the plaintiff leave to serve the defendant out of the jurisdiction. Service was duly effected on 22nd October 1992 in Vancouver, British Columbia. The defendant filed a notice of conditional appearance on 8th February 1993. Three days later, the defendant filed a notice of motion, seeking to discharge the order of Ryan J, or to stay the proceeding or set aside the originating process. The motion was argued before me on 18th March 1993.

3. Order 8 r.1(ad) provides as follows:-
   "Subject to Rule 2, originating process may be served outside the Commonwealth in the following cases - ........ (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;"

1. It should be noted that no attempt was made to rely upon the cause of action in contract. In the circumstances, it is unlikely that the plaintiff could have succeeded in showing that a breach of any contract occurred in Australia, for the purposes of r.1(aa), or that any relevant contract was made in Australia, made on behalf of the defendant through an agent carrying on business or residing in Australia, or governed by the law of Australia or of a State or Territory, within the meaning of r.1(ab). Counsel for the plaintiff did make reference in argument to r.1(c), which permits service out of the jurisdiction where the proceeding is founded on a breach, wherever occurring, of an Act, and is brought in respect of, or for the recovery of, damage suffered wholly or partly in Australia. He drew attention to the provisions of s.5(1) of the Trade Practices Act 1974, under which, inter alia, ss.52 and 53 are extended to the engaging in conduct outside Australia by bodies corporate carrying on business within Australia, and to the existence of some evidence that the defendant has a managing director in Australia. The argument concentrated, however, on the cause of action in negligence, that being the only one which would attract the operation of r.1(ad). It is unnecessary for me to make any finding in relation to r.1(c).

2. Counsel for the defendant sought first to attack the basis of the order of Ryan J, contending that the plaintiff had not established that its claim was for the recovery of damage suffered in the Commonwealth. He pointed, correctly, to the absence of evidence that any deterioration in the cargo of urea on board the "Moon Valley" happened within the territorial waters of Australia, as distinct from on the high seas or in the territorial waters of Canada. His argument was that the word "damage" in O.8 r.1(ad) means damage of a kind which constitutes the element giving rise to a complete cause of action in negligence, and not consequences of such damage. He referred to cases dealing with questions such as the running of limitation periods, which are to the effect that the relevant damage is suffered at the time when the injury occurs, even though the injured party might be unaware of it until a much later time. Thus, if the deterioration in the cargo of urea had all occurred before the "Moon Valley" entered Australian waters, the cause of action in negligence would be complete, and there would be no damage suffered within the Commonwealth.

3. This argument is completely inconsistent with the judgment of Carruthers J in Darrell Lea Chocolate Shops Pty. Ltd. v Spanish-Polish Shipping Co. Inc. (the "Katowice II") (1990) 25 NSWLR 568, at pp 574-577 and with the authorities which his Honour there cited. That case was concerned with the provision of the rules of the Supreme Court of New South Wales which is in terms similar to O.8 r.1(ad) of the Federal Court Rules. At pp 576-577, his Honour said:-
   

"Certain principles may be deduced from the authorities. A clear distinction must be drawn between "injury" and "damage". "Damage" in the rule is to be contrasted with the element necessary to complete a cause of action. Concisely stated, "damage" is used in the rule to encompass the disadvantage or detriment suffered by the plaintiff as a result of the tortious act or omission of the putative defendant. Accordingly it has a much wider meaning than "injury". Secondly, the rule was intended to facilitate access to this Court in relation to actions for foreign torts. Undoubtedly, the rule in its original form was intended to overcome the reasoning in Distillers Co

(Bio-Chemicals) Ltd v Thompson (1971) 1 NSWLR 83; (1971) AC 458, where the Privy Council held that, under the Common Law Procedure Act 1899, s. 18, a cause of action did not arise within the jurisdiction when only the event which completed the cause of action occurred in the jurisdiction: see Flaherty v Girgis (at 266) per McHugh JA. Of course the plaintiff must nevertheless have "a good arguable case" for service out of the jurisdiction: see Vitkovice Horni A Hutni Tezirstvo v Korner (1951) AC 869 at 880 per Lord Simonds and Contender 1 Ltd v LEP International Pty Ltd

(1988) 63 ALJR 26; 82 ALR 394. Thirdly, it is damage to the plaintiff, with which the rule is concerned."

1. It was not suggested that I should decline to follow the decision of Carruthers J. Even though it is not binding on me, it is closely reasoned, and I regard it as correct, in the light of the evident purpose of O.8 r.1(ad). Taking a similar view of the word "damage" in O.8 r.1(ad), I am required to direct attention to whether the plaintiff claims in respect of disadvantage or detriment suffered by it in Australia as a result of the alleged tortious omission of the defendant. The particulars of loss and damage contained in the statement of claim all relate to expenditure incurred in Australia, allegedly as a result of the damage to the cargo. They include items such as transfer of another stored product (sulphate of ammonia) to accommodate the lump urea, sandblasting of a hopper to break up lumps of urea, screening of urea, the use of a front-end loader on lump urea, the transfer of other urea to meet market demand, the incurring of extra unloading costs and detention charges and loss by reason of unsaleability of some of the cargo. All of these items fall clearly within the word "damage", when construed in the way it was in the Darrell Lea case. I therefore reject the argument that the plaintiff has not shown itself to come within the terms of the rule.

2. Counsel for the defendant then sought to argue that the order of Ryan J should be set aside on the ground that this Court is a forum non conveniens. This argument founded the proposition that I should stay the proceeding or set aside the originating process. It was common ground that this Court should not decline to deal with the proceeding unless it could be shown that this Court is a clearly inappropriate forum for the resolution of the dispute between the parties. See Voth v Manildra Flour Mills Pty. Ltd. (1990) 171 CLR 538. Attention must be directed to the question whether this Court is inappropriate, rather than to whether a court in another country is appropriate, or more appropriate than this Court.

3. Counsel for the defendant emphasized the factors which linked the disputes between the parties with the Province of British Columbia. Any contract under which the defendant conducted its inspection of the "Moon Valley" was negotiated and entered into between representatives of Esso Chemical Canada and the defendant. Evidence of the making of the contract, and of its terms would undoubtedly come from witnesses likely to be found in Vancouver. The proper law of such contract would be the law of British Columbia. Evidence that Esso Chemical Canada entered into the contract as agent for the plaintiff would most probably come from representatives of Esso Chemical Canada, although it is conceivable that witnesses as to any such agency might have to come from Australia as well. It was contended that evidence of the carrying out of the inspection, and its adequacy or otherwise, would depend on witnesses likely to be in Canada. I am by no means sure that this is the case. The plaintiff desires to lead evidence from people who inspected the ship after the unloading of its cargo in Australia, and whose evidence would be directed to suggesting that the state of the holds at that time cast light on their state at the time when the inspection was conducted in Vancouver. To the extent to which expert evidence might be called as to the appropriate standard of care of a person carrying out an inspection such as that carried out by the defendant, expert witnesses might be called from anywhere in the world. The appropriate standards are much more likely to be recognised internationally than to depend upon any peculiarities of the law of British Columbia or of Canada. So far as the plaintiff's claim is laid in negligence, I am prepared to assume that the law of British Columbia would be of considerable importance. There seems to be enough left of the rule in Phillips v Eyre (1870) LR 6 QB 1 to require that an Australian court dealing with an allegation of tortious conduct in a country other than Australia should have regard to the actionability of the conduct of the alleged tortfeasor by the law of the place where that conduct took place. See McKain v R.W. Miller and Co. (South Australia) Pty. Ltd. (1991) 104 ALR 257, at pp 275-276.

4. There are also substantial factors connecting the dispute between the parties with Australia. The plaintiff's witnesses as to the condition of the cargo on the unloading of the "Moon Valley" at Geelong, Yarraville and Port Adelaide are likely to reside here. So are its witnesses as to the nature and extent of the loss alleged to have been suffered by the plaintiff in consequence of the alleged damage. There is evidence before me that the plaintiff would desire to call a witness who inspected the "Moon Valley" and its cargo at Port Adelaide, one or more witnesses who inspected the vessel and its cargo at Geelong and Yarraville, witnesses who performed chemical tests on the urea after its arrival in Australia and other witnesses as to loss and damage suffered by it.

5. This case is therefore to be distinguished from the result in Voth's case. The factors which connected the dispute between the parties in that case with the State of Missouri were substantially more numerous and powerful than those which connect the present dispute with British Columbia. The application of the forum non conveniens principle is not by way of a mere balance of connecting factors, or of convenience or inconvenience to the respective parties. Unless this Court were clearly inappropriate, it would be wrong for this Court to decline to deal with a matter in which its aid has been invoked and in which its process has been served outside Australia in accordance with its rules. In the present case, this Court is not a clearly inappropriate forum.

6. For those reasons, the notice of motion filed on behalf of the defendant on 11th February 1993 must be dismissed with costs.