MH Publications Limited v Komori (UK) Limited HC Auckland CIV 2007-404-6520
[2008] NZHC 2570
•17 September 2008
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2007-404-6520
BETWEEN MH PUBLICATIONS LIMITED Plaintiff
ANDKOMORI (UK) LIMITED First Defendant
ANDDDJ GRAPHIC MACHINERY LIMITED Second Defendant
ANDTUS (UK) LIMITED Third Defendant
Hearing: 25 and 26 August 2008
Appearances: P. Grace and P. Edwards - Counsel for Plaintiff
W. Akel and J. Baigent - Counsel for First Defendant
A. Ross and M. Wisker - Counsel for Second Defendant
I. Gault and H. Steele - Counsel for Third Defendant
Judgment: 17 September 2008 at 12.00 pm
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment was delivered by the Registrar
on 17
September 2008 at 12.00 p.m. pursuant to r 540(4) of the High Court Rules 1985.
Solicitors: Barter & Co, Barristers & Solicitors, PO Box 197, Albany Village, North Shore City
Simpson Grierson, Barristers & Solicitors, Private Bag 92518, Auckland
Chapman Tripp, Barristers & Solicitors, PO Box 2206, AucklandBell Gully, Barristers & Solicitors, PO Box 4199, Auckland
MH PUBLICATIONS LIMITED V KOMORI (UK) LIMITED AND ORS HC AK CIV 2007-404-6520 17
September 2008
Introduction
[1] The plaintiff (“MHP”) seeks orders setting aside the defendants’ protests to jurisdiction in this proceeding.
[2] The proceeding concerns the sale to MHP of a second hand Komori Lithrone L440ISP printing press (“the press”), the supply of services for installation and other matters in respect of that press. MHP’s claim is that the press was delivered to New Zealand damaged and defective and that as a result it has suffered loss. MHP also claims that the defendants knew of the damage and defects but deliberately or negligently concealed this from MHP.
[3] MHP is a printing company. It is both incorporated in New Zealand and carries on business here.
[4] Each defendant is a company incorporated in the United Kingdom. The first defendant (“Komori”) supplied the press. The second defendant (“DDJ”) effectively acted as a broker or agent for the sale of the press to MHP. The third defendant (“TUS”) carries on business in the United Kingdom as a specialist engineering firm providing advice and services, in particular regarding printing presses of the type involved in this proceeding.
[5] Each of the three defendants has filed a protest to the jurisdiction of this Court. The principal claim from the defendants is that the contract between the parties for the sale and installation of the press includes an exclusive jurisdiction clause by which the dispute is to be litigated in the United Kingdom. This is said to be by virtue of the fact that the contract incorporates standard terms and conditions which include a clause submitting to the jurisdiction of the United Kingdom.
[6] The defendants advance additional grounds to support this protest to jurisdiction, namely, that none of the causes of action fit within rr 219 or 220 High Court Rules, that MHP does not have a good arguable case, and, lastly, that the New Zealand High Court is forum non conveniens.
[7] In its current application, MHP seeks orders pursuant to r 131(6) High Court
Rules setting aside those protests to jurisdiction.
[8] In doing so, the principal submissions from MHP appear to be:
(a) The contract for the supply of the press did not incorporate any standard terms and conditions and so no exclusive jurisdiction clause applies here.
(b) In terms of r 219 of the High Court Rules, there is a reasonable link or connection with New Zealand in this proceeding, satisfying both the spirit and letter of that rule.
(c) MHP has a good arguable case that the damage to and defects in the press were present prior to shipment of the press to New Zealand, that the defendants were aware of these and deliberately concealed them from MHP, and that the defendants failed to identify and repair the damage and defects when supervising the installation of the press in New Zealand.
(d) In terms of the defendants’ forum conveniens argument, New Zealand is the most convenient place in which to have this dispute determined.
[9] In the hearing before me on 25 and 26 August 2008, counsel for the second defendant adopted the submissions of counsel for the first defendant insofar as they related to DDJ. This decision should be read on that basis.
Background Facts
[10] MHP is a printing company carrying on business in New Zealand. Komori manufactures printing presses and sells these, as I understand it, in the United Kingdom in addition to other places. DDJ markets and supplies Komori presses in the United Kingdom. TUS provides engineering services in the United Kingdom, in particular for printing presses. Mr Dean Trewin (“Mr Trewin”) is the managing director of TUS.
[11] In February 2005 MHP began negotiations with DDJ for the purchase of the press. It is a large printing machine capable of producing double sided printing using four colours.
[12] The press had been used by a printing company from July 1999 to March
2004, at which time it had been sold back to Komori as part of a trade-in type
arrangement. In June 2004, Komori installed it at Ashford Colour Press Limited (“Ashford Colour”) in Guildford, England as an interim measure pending delivery of a new Komori press they had ordered. As such, by the first half of 2005 it had been used for almost six years.
[13] On 17 March 2005, MHP signed and faxed back to DDJ a letter dated 11
March 2005 sent by DDJ, which MHP says served only to reserve the press pending an inspection of it in the United Kingdom. Under a section on “Price” in the letter, the press is said to be supplied at the stated price “and subject to our standard terms and conditions of sale”. Mr David Jarrett, the managing director of DDJ (“Mr Jarrett”) refers to this in an email dated 16 March 2008 as a “provisional contract” so as “to take the press off the market and reserve it pending [MHP’s] visit” (see exhibit DJ1 of 28 March 2008 affidavit). Komori has suggested that this formed the contract between the parties, as discussed below.
[14] The defendants say that “the standard terms and conditions” referred to were attached to the letter of 11 March 2005. Specifically, Mr Jarrett states (affidavit dated 28 March 2008) that a copy of the standard terms and conditions was “sent to MHP the same day via fax, email and registered post”. Conversely, it is MHP’s position that it never received the standard terms and conditions. Mr Hansard, the managing director of MHP, deposes that he has searched MHP’s records and found no trace of these terms and conditions being sent by registered post or fax, found no document fitting the description of DDJ’s terms and conditions, and “cannot recall ever seeing, receiving or discussing such a document” (affidavit dated 20 May
2008).
[15] Arrangements were then made for MHP representatives to travel to the United Kingdom to inspect the press. And, from 21 March 2005 to 1 April 2005, work was undertaken on the press by Mr Trewin and a Mr Fielding of TUS. This work was recorded on Komori worksheets and an invoice was issued by Mr Trewin to Komori on 8 April 2005 (as attached to Mr Trewin’s affidavit dated 23 April 2008).
[16] On 30 March 2005, two officers of MHP (Mr Ivan van Niekirk and Mr John
Fleming) travelled from New Zealand and attended a demonstration of the press in
the United Kingdom at Ashford Colour (“the demonstration”). Also present at the demonstration were Mr Jarrett, Mr Trewin and two Komori employees.
[17] MHP contends that there were several problems evident with the press at the demonstration. These essentially involved doubling and alignment issues on the printing tests. “Doubling” apparently occurs where a shadow appears behind the ink mark on the paper. It seems there was also an overflow of red ink on the press.
[18] MHP maintains that its officers were assured by Mr Trewin, however, that the press was capable of printing four-colour work, that the doubling and alignment issues would be fixed together with any other problems on the press, and that the red ink overflow would be cleaned before shipment. MHP contends that Mr Trewin said that when the press was dismantled for dispatch to New Zealand he would ensure that any problems were repaired and settings returned to zero.
[19] On the return of the MHP representatives to New Zealand, negotiations on a reduced price and regarding the press generally were carried out via a range of emails, faxes and letters between the parties. Key communications appear to be:
(a) 13 April 2005 – An email from Mr Fleming of MHP to Mr Jarrett of DDJ, setting out the terms of the offer. This email concludes, “if the above conditions are acceptable to DDJ/Komori we possibly have the basis of an agreement”.
(b) 21 April 2005 – An email from Mr Jarrett to Mr Fleming accepting the terms of the offer “on the proviso that the order is confirmed by the end of the week”.
(c) 22 April 2005 – A purchase order faxed by MHP to DDJ, stating that the order was “as per email agreement” and “subject to satisfactory engineer’s report”.
(d) 22 April 2005 – A letter (received on 25 April 2005) from Mr Jarrett to Mr Fleming confirming receipt of the order. This letter repeats the statement, under the heading “Price”, that the price of ₤510,000 is “subject to our standard terms and conditions of sale”. The defendants say that the letter
enclosed the terms and conditions but MHP disputes this. The letter also enclosed a pro forma invoice for the purchase price from DDJ – namely a deposit of ₤51,000, to be paid directly to DDJ’s bank account, and the balance of ₤459,000, to be paid by irrevocable letter of credit with a UK bank, “payable in the UK on site against presentation of the shipping documents”.
[20] It is MHP’s contention that the contract was concluded in New Zealand on 21
April 2005 with the email acceptance by Mr Jarrett of the terms of the offer – and that it is not therefore subject to DDJ’s standard terms and conditions. This is strongly disputed by DDJ and Komori, who say, inter alia, that the emails constitute negotiations and not the conclusion of the agreement. MHP reiterates its position that those standard terms and conditions were never discussed with nor received by MHP.
[21] It is accepted that the sale contract was conditional on a satisfactory engineer’s report being obtained. This report was undertaken by Mr Trewin of TUS (“the engineer’s report”).
[22] On 25 April 2005, Mr Jarrett forwarded an email to Mr Fleming attaching the engineer’s report. It also attached a fax from Mr Trewin to a Mr Brian Sims of Komori (dated 13 April 2005), which was forwarded to a Mr Neil Sutton of Komori, and then to Mr Jarrett on 22 April 2005 (“the email attachment”). In this attachment Mr Trewin states:
“Please find attached the report as requested. I have been as brief as I dare without it being too obvious. However, it leaves it a bit weak. If I claim I have specifically visited to do the inspection then they will consider me rather incompetent not to have spotted the jacket damage that exists. If I pad the report out by detailed reporting on cylinder gears and bearings the same applies.
Let me know what you think.”
[23] The engineer’s report was attached to this email. It was a reasonably brief document occupying approximately 2½ pages.
[24] The initial deposit of ₤51,000 was paid to DDJ on or about 27 April 2005 and forwarded to Komori on 19 May 2005. As had been agreed, a letter of credit in favour of DDJ was set up by the finance company providing finance to MHP for the purpose of the purchase. The finance company confirmed to DDJ the receipt of this letter of credit on or about 13 May 2005, and a copy was forwarded to Komori on 15
May 2005.
[25] On 16 May 2005, Komori issued confirmation of the order of the press to DDJ. [26] MHP says that DDJ subsequently requested that the balance of the purchase
price be paid directly to Komori for tax reasons. As such, it seems that Komori rendered invoices to MHP for the full purchase price (on 6 June 2005) and for the shipping costs (on 22 June 2005) and MHP made payment on these invoices.
[27] The parties agree that the sale contract was a “free on board” (FOB) contract. Thus, the risk passed from the vendor to the purchaser at the time that the press was put on board the ship for delivery. This occurred at the port of Hull in the United Kingdom.
[28] The press was dispatched from the port at Hull on 10 June 2005 and arrived in
New Zealand at MHP’s premises on 30 July 2005.
[29] It seems that on its arrival in New Zealand there was evidence of damage to a number of the press’ components and a large red ink spill was evident. The defendants say that MHP advised them of this damage on 2 August 2005. Damage to the delivery belt and ranger drum was discovered subsequently. MHP also says that spare rollers were not delivered, and it alleges these have not yet been delivered, despite numerous requests.
[30] Around 8 August 2005, MHP lodged a claim with its insurance company in relation to this damage. However, the claim was rejected (on 5 January 2006) on the basis that the damage had occurred during dismantling or handling in the United Kingdom before the press was shipped.
[31] From August to September 2005, an engineer from TUS, Mr Mark Spence, came to New Zealand to oversee the commissioning of the press. Mr Richard Naylor
of Komori also came to demonstrate the operation of the press. It seems that numerous problems identified with the press were raised with Mr Spence, including (most significantly) the doubling and the problem with the ranger drum. According to MHP, these problems were not repaired.
[32] The defendants say that, during this time, Komori provided to MHP four replacement cylinder jackets, a PQC screen and software.
[33] In an email on 13 September 2005, however, Mr Fleming of MHP advised Mr Jarrett of DDJ that the press was “running well at the moment” and that they had “already turned out some reasonably technical work”. Nevertheless, the email does go on to detail some issues they were having with the press. On 15 November 2005, Mr Fleming again emailed Mr Jarrett about sourcing an air valve and added the comment that they were “pleased with the SP”.
[34] From September 2005 to August 2006 MHP engaged local engineers in relation to the doubling problem and the alleged damage to the press. MHP maintains that it also attempted to get assistance from Komori and DDJ to fix these problems.
[35] In August 2006, MHP says it discovered that damaged cylinder jackets were the cause of the doubling problem, and replacement jackets were fitted on all units of the press. MHP argues that the result of this was that the press began working properly for the first time since delivery.
[36] Consequently, MHP filed its present statement of claim against the three defendants on 18 October 2007. The causes of action maintained against each defendant are:
• As against Komori – breach of the Sale of Goods (United Nations Convention) Act 1994 (“CIGSA”); breach of contract; negligence; negligent misstatement; breach of the Contractual Remedies Act 1979, of the Fair Trading Act 1986 and of the Consumer Guarantees Act 1993; deceit; negligent misstatement.
• As against DDJ – breach of the Consumer Guarantees Act 1993; negligent misstatement.
• As against TUS – negligence; deceit.
In addition, MHP has indicated that it is likely to file amended pleadings if jurisdiction is granted.
[37] MHP claims that it has suffered a loss, currently estimated at NZ$1,935,676.00, as a result of the damage to the press and the doubling problem. This loss is said to comprise foregone profits on lost sales, increased costs on actual sales, the cost of spare parts not provided and repair work undertaken.
[38] As a preliminary point, it is patently clear that MHP is not a “consumer” as defined in s 2 of the Consumer Guarantees Act 1993 and thus in my view the causes of action alleging that DDJ and Komori breached this Act are clearly untenable. Therefore, I do not intend to address these causes of action in this judgment.
The Protest to Jurisdiction
[39] The defendants have filed a protest to jurisdiction under r 131 of the High
Court Rules, which provides in part:
“131 Appearance under protest to jurisdiction
(1) A defendant who objects to the jurisdiction of the Court to hear and determine the proceeding in which he has been served may, within the time limited for filing his statement of defence and instead of so doing, file and serve an appearance stating his objection and the grounds thereof.
(2) The filing and serving of an appearance under subclause (1) shall not be or be deemed to be a submission to the jurisdiction of the Court in the proceeding.
(3) A defendant who has filed an appearance under subclause (1) may apply to the Court to dismiss the proceeding on the ground that the Court has no jurisdiction to hear and determine it.
(4) On hearing an application under subclause (3), the Court,—
(a) If it is satisfied that it has no jurisdiction to hear and determine the proceeding, shall dismiss the proceeding; but
(b) If it is satisfied that it has jurisdiction to hear and determine the proceeding, shall dismiss the application and set aside the appearance.
…”
[40] As such, MHP now applies to the Court to set aside the defendants’ appearance under r 131(5) and (6):
“(5) At any time after an appearance has been filed under subclause (1), the plaintiff may apply to the Court by interlocutory application to set aside the appearance.
(6) On hearing an application under subclause (5), the Court,—
(a) If it is satisfied that it has jurisdiction to hear and determine the proceeding, shall set aside the appearance; but
(b) If it is satisfied that it has no jurisdiction to hear and determine the proceeding, shall dismiss both the application and the proceeding.”
[41] Rule 131 must be read in conjunction with r 219 High Court Rules. It provides:
“219 When allowed without leave
Where in any proceeding a statement of claim or counterclaim and the relevant notice of proceeding or third party notice cannot be served in New Zealand under these rules, they may be served out of New Zealand without leave in the following cases:
(a) Where any act or omission for or in respect of which damages are claimed was done or occurred in New Zealand:
(b) Where the contract sought to be enforced or rescinded, dissolved, annulled, or otherwise affected in any proceeding, or for the breach whereof damages or other relief is demanded in the proceeding—
(i) Was made or entered into in New Zealand; or
(ii) Was made by or through an agent trading or residing within New
Zealand; or
(iii) Was to be wholly or in part performed in New Zealand; or
(iv) Was by its terms or by implication to be governed by New Zealand law:
(c) Where there has been a breach in New Zealand of any contract, wherever made:
(d) Where it is sought to compel or restrain the performance of any act in
New Zealand:
(e) Where the subject-matter of the proceeding is land, stock, or other property situated in New Zealand, or any act, deed, will, instrument, or thing affecting such land, stock, or property:
…”.
[42] The relevant principles for applying rr 131 and 219 are considered at length in
Bomac & Ors v F Hoffman-La Roche Limited & Ors HC AK M456-A01 3 May
2002 at [23] to [48] and Evatt & Anor v Jaffe & Anor HC AK CIV-2003-404-4881 1
September 2005 at [7]. I have also had regard to Stone v Newman CA3/02 21 March
2002 at [20] to [26], Worldwide NZ LLC & Anor v QPAM Limited & Ors HC AK CIV-2006-404-1827 29 June 2007 and Commerce Commission v Koppers Arch Wood Protection (NZ) Ltd [2007] 2 NZLR 805.
[43] The following principles emerge from these authorities:
• An application under r 131 encompasses two issues: (1) whether jurisdiction exists; and (2) whether the Court in its discretion ought to decline jurisdiction. The ultimate question is “whether the Court is satisfied that there are sufficient grounds for it properly to assume jurisdiction” or whether the argument is “sufficiently strong to warrant”
that result: Kuwait Asia Bank EC v National Mutual Life Nominees Ltd (No
2) [1989] 2 NZLR 50 (CA) per Cooke P at 54 and 56.
• A foreigner residing outside New Zealand will not lightly be subjected to the local jurisdiction – although it seems that the practical importance of this principle may have been reduced by developments in transport, communication and technology, and its constitutional significance seems to have been ameliorated by the doctrine of forum conveniens.
• For a Court to assume jurisdiction over a defendant who is outside its jurisdiction, two elements are required:
(1)that there is a good arguable case for prima facie jurisdiction for service outside New Zealand (under rr 219 or 220); and
(2) that the plaintiff has a good arguable case against the particular defendant (in other words, on the merits). A finding that r 219 applies is not determinative – despite the broad terms of the rule, the Court retains a discretion as to whether it is appropriate to accept jurisdiction. This is why a plaintiff needs to establish a good arguable case notwithstanding that prima facie jurisdiction exists under r 219.
• If these two elements are proved, the Court should not exercise its overall discretion to dismiss the proceeding on other grounds. Conversely, if the defendant satisfies the Court that there is no good arguable case, then the proceedings in New Zealand should be dismissed, regardless of any other discretionary considerations.
• The onus is on the plaintiff to prove a good arguable case both in terms of compliance with rr 219 or 220 and on the merits. However, the onus will shift to a defendant who resists the application in reliance on an affirmative defence, such as the application of the Limitation Act 1950. The question is to be assessed at the time that the r 131 application is heard and on the evidence that is then before the Court. The Court is to have regard to all of the admissible material before it.
• A “good arguable case” is not a “light” criterion because it will determine the issue of jurisdiction conclusively. It is a higher test than is required for a statement of claim to survive an application for strike out, which is based on tenability or arguability.
• It has been said that a “good arguable case” will be established where the Court comes to a provisional or tentative conclusion that the plaintiff is probably right. However, the Court of Appeal in Stone v Newman did not consider that this gloss on the test was helpful in New Zealand. Instead, the Court posed the test (at [26]) as follows:
“What is a good arguable case is a straightforward test which comes down to a matter of judgment, in all the circumstances, having regard to the principle of restraint concerning a foreign citizen resident overseas.”
• Harrison J has subsequently observed in Bomac that the “good arguable case” test is not significantly different to the test that there is a serious question to be tried. (See also Commerce Commission v Koppers Arch Wood Protection (NZ) Limited (Koppers Arch) and Baxter v RMC Group plc [2003] 1 NZLR 304 from para [21].) His Honour held that there are two requirements – (1) a substantial or serious legal issue for trial; and (2) a credible or plausible factual basis for arguing the legal issue, for which the touchstone is that the claim is more than merely speculative or conjectural.
• The Court will not at this stage determine any areas of factual dispute between the parties. Where there is a genuine and plausible dispute of fact
– which can only be determined on examination and cross-examination under oath – the Court must assume jurisdiction. The Court must also take into account that the plaintiff will not have had the benefit of discovery at this stage. However, uncontested affidavit evidence must ultimately disclose sufficient grounds for the Court to assume jurisdiction – the Court will not accept uncritically vague and improbable assertions.
• The mere fact that the application raises difficult questions of law requiring extensive argument will not preclude the Court determining the protest to jurisdiction.
• In exercising its discretion, the Court may have regard to forum non conveniens factors – such as the association or connection of the proceeding with New Zealand. Although different considerations and a different onus of proof apply when forum non conveniens arguments are addressed, the fact that a forum non conveniens argument is raised will not preclude the Court from considering the protest to jurisdiction.
• If the Court accepts that the plaintiff has a good arguable case, it may then move to consider the issue of forum non conveniens.
[44] Furthermore – and of great importance in the present case – it seems that it is not necessary for the plaintiff to prove a good arguable case in relation to all of the causes of action against each defendant. Instead, it is sufficient to ground jurisdiction if there is a good arguable case that any one cause of action against a protesting defendant can succeed: see Koppers Arch at [37] to [39] and Worldwide NZ LLC v QPAM Ltd at [54].
[45] Lastly, it needs to be emphasised that the question is to be looked at in relation to each individual defendant – thus, if there is no good arguable case against a particular defendant, the plaintiff’s application in relation to that defendant must be dismissed.
Exclusive Jurisdiction Clause
[46] The first argument put forward by the defendants here is that MHP submitted to the jurisdiction of the English Courts pursuant to an exclusive jurisdiction provision contained in clause 14 of DDJ’s standard terms and conditions (“the standard terms and conditions”). Clause 14 states:
“This Contract shall be construed according to the laws of England and the Buyer hereby agrees to submit to these and exclusive jurisdiction of the Courts of England.”
[47] The proper approach to exclusive jurisdiction clauses is set out by Brandon J in The Eleftheria [1969] 2 All ER 641 at 645, as cited by, for example, Kidd v van Heeren [1998] 1 NZLR 324 at 331-332 and Leaweld Ltd & Anor v Nice Spa & Ors HC AK CIV-2003-404-000536 21 November 2003 at [18]:
“The principles established by the authorities can, I think, be summarised as follows:
(I) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the English court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion, whether to do so or not.
(II) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown.
(III) The burden of proving such strong cause is on the plaintiffs.
(IV) In exercising its discretion, the court should take into account all the circumstances of the particular case.
(V) In particular, but without prejudice to (IV), the following matters, where they arise, may properly be regarded:
(a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts;
(b) Whether the law of the foreign court applies and, if so, whether it differs from English law in any material respects;
(c) With what country either party is connected, and how closely;
(d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages;
(e) Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would –
(i) be deprived of security for that claim,
(ii) be unable to enforce any judgment obtained,
(iii) be faced with a time-bar not applicable in England, or
(iv) for political, racial, religious or other reasons be unlikely to get a fair trial.”
[48] However, before addressing these principles, a preliminary issue here is whether the exclusive jurisdiction clause was part of the contract between MHP and Komori/DDJ. The defendants say that DDJ’s standard terms and conditions were incorporated into the contract by reference in the letters of 11 March 205 and 22
April 2005. MHP strongly disputes this.
[49] Whether a particular contract incorporates one party’s standard terms and conditions is to be determined by applying the normal principles of offer and acceptance: Nalder & Biddle (Nelson) Ltd v C & F Fishing Ltd CA145/05 31 July
2006 at [28].
[50] It is well established that a contract (oral or written), can refer to and incorporate written documents (such as a party’s standard terms and conditions) without actually attaching these documents to the communications that constitute the contract: see, for example, Burrows Finn & Todd Law of Contract in New Zealand (3ed 2007) from p 192. However, there needs to be unequivocal evidence as to the terms that were offered and accepted by the parties to the contract at issue: Nalder & Biddle (Nelson) Ltd v C & F Fishing Ltd at [30]. This is an application of the strict requirement that the parties’ offer and acceptance are on exactly the same terms – that the offeree unreservedly assented to the precise terms proposed by the offeror: Reporoa Stores Ltd v Treloar [1958] NZLR 177, 187.
[51] A document will be incorporated into the contract if the party who is said to be bound “knew that it was intended to be of contractual effect”, “received it with reasonable notice that it contained conditions”, or “if it is obvious to a reasonable
person that it must have been intended to have contractual effect, as where the document is of a kind that generally contains contractual terms” (Burrows Finn & Todd at para 7.2.2). It will ordinarily be “sufficient if adequate notice is given identifying and relying upon the conditions and they are available on request”. However, other considerations might apply if a condition is particularly onerous or unusual (Circle Freight International Ltd v Medeast Gulf Export Ltd [1988] 2
Lloyd’s Rep 427, 433 per Lord Justice Taylor) – the extent of notice required may vary depending on how onerous or unusual the terms or conditions are: see Burrows Finn & Todd at para 7.2.2(b), referring to Spurling Ltd v Bradshaw [1956] 2 All ER
121, 125 per Denning LJ and Interfoto Picture Library Ltd v Stilletto visual Programmes Ltd [1989] QB 433. Lastly, separate considerations may also apply in standard form contracts and cases where there is a course of dealing between the parties (see Chitty on Contracts (29ed 2004) from para 12-008).
[52] And on these aspects, adequate notice must be received before the contract is made: Olley v Marlborough Court Ltd [1949] 1 KB 532; Burrows Finn & Todd at para 7.2.2(a). A term cannot be incorporated into a previously concluded contract by subsequent notice.
[53] A relatively recent case in this area is the Court of Appeal’s decision in Nalder
& Biddle (Nelson) Ltd v C & F Fishing Ltd. (Leave to appeal was refused by the Supreme Court in Kahala Holdings Ltd (Formerly Nalder & Biddle (Nelson) Ltd) v C & F Fishing Ltd [2006] NZSC 98.) In summary, NBL contracted to refit a 77m purse seiner tuna fishing vessel and to build a skiff for CFL. This ultimately resulted in NBL bringing a claim against CFL for payment. CFL counter-claimed, raising allegations against NBL for defective workmanship and delay. The relevant issue for present purposes was whether NBL’s terms of trade limited its liability to CFL.
[54] The events surrounding the contract were these. NBL had prepared and submitted a two volume proposal for the work in December 2001. Included in this was a tender section relating to each component of the work and a separate section headed “Terms and Conditions of Trade for Business Customers”. These terms included provisions which purported to exclude and limit NBL’s liability. There was no evidence that CFL had accepted this proposal. It was found that CFL had clearly
wanted to renegotiate the scope and price of the work if it were to contract with
NBL.
[55] Subsequently, in May 2002, the parties entered into a contract for the building of the skiff through a series of correspondence, culminating in a fax from NBL agreeing to contract “as per general agreement supplied”. This correspondence did not refer to the December 2001 proposal or NBL’s terms of trade.
[56] Then, in December 2002, they agreed in principle that NBL would complete the refitting work. This work began in January 2003. NBL would produce job cards detailing particular items of the work and the price, which CFL would sign with a notation “customer acceptance of work”. Some of these job cards included the words, “We understand and accept your terms of trade and limitation of liability”.
[57] There was no evidence that the parties had discussed the terms of trade section of the 2001 proposal at any time during this negotiation. Instead, they had “negotiated afresh”, albeit using the tender section of the proposal as a foundation (at [35]). The Court held that it was “decisive” that NBL had not attempted to challenge the claim that CFL’s representative was unaware of the proposal’s limitation provision during these negotiations (at [32]).
[58] Moreover, the parties had entered into a separate contract in March 2003 in which CFL had refused to agree to the inclusion of an exemption clause and the parties had finally agreed to a clause limiting NBL’s liability to $5 million. These events were seen by the Court (at [34]) as confirming the “inherent improbability” of CFL agreeing to an exemption clause (and to a perhaps lesser degree, a limitation clause).
[59] The Court found that the job cards were intended by NBL to function as an acknowledgement of the exclusion and limitation clauses in the proposal in situations where the parties had signed that proposal. However, “within the contractual structure actually agreed between the parties” they did not have that function (at [42]). Without a signed proposal incorporating the terms behind the job cards, they functioned only to define the scope and price of the work to be performed.
[60] As such, it is clear that one party’s awareness that the other party has standard terms and conditions does not of itself suffice to incorporate these terms into the particular contract. Nor is it inevitable that a party’s express acknowledgement of the existence of “standard terms and conditions” thereby incorporates those terms and conditions without further evidence as to the content of those terms and that these have been accepted as forming part of the contract. (On this, see J A Nicoll & Patston, “Terms of Trade – Getting Paid” Auckland District Law Society Seminar 1
April 2008 at 14).
[61] As I see it, the two key issues in determining here whether the standard terms and conditions were incorporated into the contract are, first, when (and by way of what communications) the contract was concluded and, secondly, whether the parties’ agreement thereby encompassed those terms by reference.
When contract concluded
[62] Komori submits that the contract was concluded on either 17 March 2005 or
22 April 2005 or, as a third option, between 11 March 2005 and 22 April 2005 on a
“global approach”.
[63] Komori contends first that the 11 March 2005 letter was an offer and MHP’s signing and returning this letter on 17 March 2005 provided the acceptance. Komori supports this construction by submitting that MHP would have had an action for breach of contract had the press not been provided. The 11 March letter expressly stated that the press was to be supplied “subject to our standard terms and conditions of sale”. Komori submits that, although the contract was varied thereafter, primarily in relation to price, there is no suggestion that the standard terms and conditions were varied.
[64] In my view this submission is untenable. The subsequent negotiations after this date clearly show that the parties were not yet ad idem as to the terms on which they were contracting, including essential terms such as the price.
[65] Alternatively, Komori relies on Mr Fleming’s 13 April 2005 email to which Mr Jarrett responded on 21 April accepting the proposal on the proviso that the order was confirmed by the end of the week. MHP then faxed a purchase order to DDJ on
22 April 2005. On that date, Mr Jarrett sent a letter to MHP (received on 25 April
2005) confirming the purchase order. (It is unclear to me, however, which communications the defendants are here alleging constituted the offer and acceptance.)
[66] Lastly, the defendants suggest that the contract was concluded between 11
March 2005 and 22 April 2005 on a “global approach” (per Meates v Attorney- General [1983] NZLR 308, 377 per Cooke J; Paper Reclaim Ltd v Aotearoa International Ltd [2006] NZLR 188), looking at all of the correspondence in this period and distilling the terms of the contract.
[67] Conversely, MHP submits that, on normal offer and acceptance principles, the agreement was concluded by the email negotiations, and in particular the correspondence on 13 and 21 April. It submits that the fact that the agreement had been concluded by the 21 April email was confirmed by the placement of the purchase order “as per email agreement”.
[68] The 13 April email appears to me to be no more than a request for information on DDJ/Komori’s position – it states that the parties “possibly have the basis of an agreement” if DDJ agreed to the proposed terms. As such, the 21 April email cannot be seen as acceptance of a binding offer (regardless of a further question whether the proviso - that MHP confirm the order - contained therein meant that no legal agreement had been reached until MHP had done so).
[69] Instead, in my view the 21 April email is an offer, accepted via MHP faxing the purchase order to DDJ on 22 April. This acceptance was subject to a satisfactory engineer’s report. Notwithstanding the addition of this condition, I am of the view that the parties clearly intended that they had at this stage concluded a binding agreement, subject only to a satisfactory report being completed. At this stage, MHP would have been entitled to terminate the agreement only if the report had been unsatisfactory. On this, see, for example, Lerner v Schiehallion Nominees Ltd [2003] 2 NZLR 671; Burrows Finn & Todd at para. 8.2.3(b).
[70] The acceptance via facsimile was complete at the time and place at which it was received by DDJ: see Burrows Finn & Todd at para. 3.4.6. Therefore, the offer was accepted and contract concluded on 22 April 2005, in England.
Terms of the contract
[71] The defendant says that, regardless of when the contract was concluded, the standard terms and conditions were part of and incorporated into the contract by reference. Specifically, they say:
• The standard terms and conditions were obviously intended as a contractual document.
• The standard terms and conditions have contractual effect because MHP knew that they were intended to be a contractual document or received the document with reasonable notice that it contained conditions. In addition the defendant says that the document has contractual effect because it would have been obvious to a reasonable person that it must have been intended to have contractual effect (for example, because it is of a kind that generally contains contractual terms).
• Reasonable notice of the standard terms and conditions was given to MHP.
• The parties here are commercial entities. Standard terms and conditions invariably apply to such contracts of sale between commercial parties, and submission to jurisdiction clauses are standard in international contracts such as the one at issue here.
[72] In response, MHP says that there was no reference in any of the emails surrounding and constituting the contract to any standard terms and conditions, and that they were therefore not incorporated into the contract.
[73] MHP submits that the letter of 11 March cannot constitute reasonable notice of incorporation as there is no evidence that the parties intended the agreement to include any of the terms and conditions referred to in the letter at all. Instead, it submits that the letter was merely an agreement to reserve the press pending further inspection. MHP contends that there was no discussion at this time regarding essential terms or any of the other matters set out in the 11 March letter, and as such, the reference to terms and conditions was irrelevant at that stage.
[74] MHP contends also that it is not clear from the terms of the letter whose terms and conditions were being incorporated – Komori’s or DDJ’s – and that this ambiguity is contrary to the concept of reasonable notice.
[75] It is MHP’s position that the terms and conditions were not available nor sent to MHP – and so there was nothing to indicate that either this agreement or any subsequent agreement could be on that basis. MHP says that there is no proof produced by DDJ that they were sent, such as fax transmission records. The only evidence that they were sent appears to be the unsubstantiated claim to this effect in Mr Jarrett’s affidavit.
[76] Most significantly, MHP submits that the negotiations between the parties started afresh after the MHP representatives returned to New Zealand. MHP says that there was no mention in these negotiations of the 11 March letter or the standard terms and conditions. It notes that the terms and form of the agreement reached in these emails were significantly different to those contained in the 11 March letter, in terms of price (₤510,000 versus ₤565,000 in the 11 March letter), the agreement being subject to an engineer’s report, spare parts being included and in its reference to a demonstrator.
[77] Thus, MHP submits that the factual position here with respect to the 11 March letter is analogous to that of the tender document in Nalder & Biddle (Nelson) Ltd v C & F Fishing Ltd. Komori rejects this analogy, however, arguing that an exclusion and limitation of liability clause is quite different to the exclusive jurisdiction clause at issue here.
[78] Secondly, MHP says that the 22 April letter did not incorporate the standard terms and conditions into the contract, because, by this time, the bargain had been struck. In any event, MHP submits that the terms and conditions were never sent with the 22 April letter and that the first time MHP saw them was when they were annexed to Mr Jarrett’s affidavit filed in respect of the present application. It is MHP’s submission that the circumstances here in relation to the 22 April letter are analogous to the job cards in Nalder & Biddle (Nelson) Ltd v C & F Fishing Ltd.
[79] MHP goes on to submit that the decision in Circle Freight International can be distinguished here. In that case there had been a course of dealing between the
companies, involving at least eleven invoices being issued containing notice that the business was conducted on standard terms. Secondly, the notice referring to the standard terms and conditions in Circle Freight International said they were available on request, and the defendant had never asked to see them. Here, MHP says that the terms and conditions were not said to be available nor were they sent at all. Lastly, there was evidence in Circle Freight International that the defendant knew that standard terms applied to freight forwarding agents and expected some of these terms would be imposed.
[80] As I have noted above, I am of the view that a binding contract was reached between the parties on 22 April 2005 and therefore the 25 April letter could not constitute relevant and timely notice of the standard terms and conditions.
[81] Nor am I persuaded that the reference to DDJ’s standard terms and conditions in the much earlier letter of 11 April was sufficient to incorporate these into the terms of the contract. Irrespective of whether MHP actually received the standard terms and conditions (and it denies it did so), the parties’ negotiations had moved on from this point and there is no evidence of any reference to the standard terms and conditions in the email negotiations constituting the contract and/or the immediate context in which it was concluded. This was not a “course of dealing” scenario where the terms of the present agreement might be illuminated by those in earlier contracts. Nor is it a case where MHP has been shown to habitually enter into international sale of goods contracts such that it could be inferred that MHP was aware of what has been said to be the standard practice of including a submission to jurisdiction clause.
[82] Overall, I am of the view that the evidence does not establish that MHP either knew that the terms in the 11 April letter were intended to be part of the contract or had reasonable notice that DDJ/Komori were contracting on the basis of conditions contained therein. Nor is there any evidence before this Court corroborating Mr Jarrett’s assertion that he sent the terms and conditions to MHP. Thus as I see the position, it has not been established here that MHP was in receipt of what might have been found to be standard terms and conditions constituting an inherently contractual document which must have been intended to have contractual effect.
[83] For all these reasons, I am of the view that the exclusive jurisdiction clause does not form part of the agreement entered into between MHP and DDJ/Komori.
Rule 219 – Reasonable Link or Connection to New Zealand
[84] It has been said that the purpose or spirit of r 219 “is to allow proceedings to be served out of the jurisdiction without leave if there is a reasonable link or connection between the proceedings and New Zealand”: Fang & Ors v Jiang & Ors HC AK CIV-2004-404-005843 3 February 2005 at [8].
[85] In terms of this “spirit”, MHP contends generally that there is a reasonable link or connection with New Zealand here for the following reasons:
(a) The defendants knew that the press had to meet the requirements of MHP, a company resident and operating in New Zealand;
(b) The representations regarding the capabilities of the press were received and relied upon by MHP in New Zealand;
(c) The press and spare parts were delivered, installed and commissioned in
New Zealand, and remain in New Zealand;
(d) The contract required the defendants to supply an engineer to oversee the installation in New Zealand and someone to demonstrate the press in New Zealand.
(e) The engineering report was sent to and relied upon by MHP in New
Zealand;
(f) The defects and damage were discovered in New Zealand;
(g) The failure to identify and fix the defects and damage during the commissioning of the press were failures which took place in New Zealand; and
(h) MHP’s loss was sustained in New Zealand. It is quantified in New Zealand dollars, and includes losses which flow from lost business opportunities and losses on existing contracts, which are all in New Zealand.
[86] Conversely, DDJ emphasises that MHP went to the United Kingdom to buy a press there, that payment was made in pounds sterling, that the sale contract was FOB United Kingdom, that a United Kingdom engineer inspected the press, and that any defects claimed must have arisen before the press left the United Kingdom.
[87] More specifically, MHP relies on paragraphs (a), (b)(i), (b)(iii), (b)(iv), (c) and (e) of r 219. In addressing these submissions, it is convenient to deal first with the argument that New Zealand law is the proper law of the contract (r 219(b)(iv)).
Contract to be governed by New Zealand law (r 219(b)(iv)).
[88] Where parties to a contract expressly stipulate that it is to be governed by the law of a particular country, that law will usually be the proper law of the contract, provided the stipulation is bona fide and legal and there is no reason for avoiding the choice on grounds of public policy: Laws of New Zealand, “Conflict of Laws: Choice of Law” at para 117. Conversely, if the parties do not so stipulate, the proper law of the contract is to be determined by the terms of the contract and all of the surrounding circumstances – in other words, by determining which jurisdiction has the closest and most real connection with the transaction: Laws of New Zealand, “Conflict of Laws: Choice of Law” at para 118.
[89] The proper law of the contract is to be determined at the time that the contract is entered into – as opposed to retrospectively or with regard to the parties’ subsequent conduct. Factors that the Court may consider in making this determination (as listed in Laws of New Zealand, “Conflict of Laws: Choice of Law” at para 118) are, as relevant:
• the place where the contract was made;
• the place where the contract is to be performed;
• the nature and location of the subject-matter of the contract;
• the currency in which payment is to be made;
• the place of the parties’ residence or business;
• the terminology of the contract;
• the form of the documents; and
• a choice by the parties that the Courts of a particular country are to have jurisdiction over the contract.
[90] In the present application, the defendants contend that the proper law of the contract is that of the United Kingdom.
[91] In addition to relying on the exclusive jurisdiction clause, Komori emphasises that the contract is a straightforward sale of goods contract, in which MHP purchased a press located in England for ₤510,000. The press was supplied FOB United Kingdom port (Hull) – at the point that it was delivered to Hull, ownership and risk passed to MHP.
[92] Komori also says that the contract’s terms and implementation show that the proper law of the contract is clearly English law. It emphasises a number of factors – first, that the alleged contractual misrepresentations were made at Ashford Colour in England; secondly, the price was subject to a satisfactory engineer’s report undertaken in England; thirdly, the press was to be professionally removed, packed and/or loaded into containers ready for sea shipment in England (from Hull); fourthly, that DDJ would arrange in England for an engineer to supervise the installation and commissioning of the press (delivery having already taken place and ownership transferred FOB); fifthly, that payment was by way of irrevocable letter of credit in pounds sterling opened and confirmed via a bank in Manchester payable on presentation of shipping documents; and sixthly, that in any event MHP claims damage to the press occurred in England. Komori relies on Scottish and Newcastle International Ltd v Othon Ghalanos Ltd [2008] 2 All ER 843 at [53] for the proposition that FOB contracts are naturally associated with the place of delivery, that the country of shipment is the place of performance (by delivery on board the ship) and the contract will be governed by the law of that country (absent countervailing considerations).
[93] On the other hand, as I have already noted, MHP strenuously denies ever receiving the standard terms and conditions that contained the exclusive jurisdiction clause. It says that, looking at the contract as a whole, the closest and most real connection is with the New Zealand legal system.
[94] In response to Komori’s argument that the place of performance of a FOB contract is the place of delivery, MHP contends that this is too simplistic in that the FOB factor is not determinative of which legal system has the closest connection but is to be weighed together with all the other factors. Also, MHP contends that the contract at issue here is not just a FOB contract in that there were ongoing obligations, to be performed in New Zealand, which must be taken into account. MHP says that Scottish and Newcastle International Ltd v Othon Ghalanos Ltd is of little assistance first, because it is based on a presumption that is not present in New Zealand’s choice of law principles and which cannot jettison a proper consideration of all of the factors, secondly, because “countervailing considerations” exist in the present case which point away from a strict reliance on FOB factors, and thirdly because a contrary conclusion was reached in Longbeach Holdings Ltd v Bhanabai
& Company Ltd [1994] 2 NZLR 28 (CA), in which the place where the contract was made was indicative of the governing law, even though there was no arguable case there for delivery in New Zealand.
[95] In my view the weight of the factors in the present case point to the proper law of the contract being that of England. I have found that the contract was made in England, and the press was paid for in pounds sterling, through a United Kingdom bank. Moreover, despite corollary parts of the contract being performed in New Zealand – such as the installation and demonstration – it was primarily concerned with the sale and purchase of the press. This was performed entirely in England, delivery to the ship at Hull completing the transfer of ownership and risk. Other corollary parts of the contract also occurred in England, such as the preparation of the engineer’s report. This was essentially a situation where MHP went to a supplier/middleman in England and purchased the press there. The mere fact that DDJ/Komori had ongoing obligations to complete in New Zealand does not in my view counterbalance this fact.
[96] As such, I find that English law is the proper law of the contract.
Acts or omissions that were done or occurred in New Zealand (r 219(a)).
[97] In relation to the contractual causes of action, MHP says that delivery of a defective product in New Zealand qualifies as an act dome in New Zealand for the
purposes of r 219(a), citing My v Toyota Motor Co Ltd [1977] 2 NZLR 113; Adastra Aviation Ltd v Airports (NZ) Ltd [1964] NZLR 393; and Frew & Ors v Case Corporation & Ors HC INV CIV-2001-425-000020 22 December 2003.
[98] Moreover, MHP contends that it is not necessary to establish that it was the defendants who “delivered” the product in New Zealand – territoriality will be established if there is a “happening in New Zealand of acts for or in respect of which damages are claimed, regardless of whose act is in question”: Biddulph v Wyeth Australia Pty Ltd [1994] 3 NZLR 49, 55. Where a product is manufactured overseas, it is sufficient if it was reasonably foreseeable from the defendant’s point of view that the product would be sold in New Zealand (Biddulph at 55). As such, MHP submits that it is irrelevant that the press was delivered FOB to Hull because all of the parties knew that the press was to be delivered, installed and used in New Zealand.
[99] Komori replies that the only steps comprising the events pleaded in the contractual causes of action that occurred in New Zealand were the installation of the press, discovery of damage and the alleged loss. Komori maintains that these are not sufficient for the New Zealand Courts to override the submission to English jurisdiction (the exclusive jurisdiction clause) or the fact that the contract was FOB United Kingdom. It argues that, if these factors were sufficient to found jurisdiction, every contract for supply of goods to a New Zealand company would end up being dealt with by the New Zealand Courts, making r 219(a), (b) and (c) otiose.
[100] Further, Komori submits that if, as MHP claims, the damage was done in the United Kingdom, there is no act or omission in New Zealand. It says that My, Adastra Aviation and Frew are distinguishable on the grounds that delivery in New Zealand was part of the claim.
[101] Komori contends that what MHP in fact relies on is discovery of the damage, but that this is fortuitous and irrelevant – the damage could well have been discovered in England. Moreover, it says that the fact that loss was suffered in New Zealand is equally irrelevant on an essentially contractual claim and that loss is common to all claims, regardless of jurisdiction.
[102] In relation to the causes of action alleging negligence, MHP submits that Komori and TUS breached their duty of care to identify and repair any damage or defects discovered during the commissioning of the press and that this occurred in New Zealand (per r 219(a)).
[103] Moreover, MHP again submits that the suffering of “damages” is an essential ingredient of all the tortious causes of action, citing Bomac (at [44]), Biddulph at 55-
56 and Longbeach Holdings at 34. MHP contends that the damage or loss arising from the defendants’ supply of a damaged press, their failure to identify and repair the damage and defects and the misrepresentations and deceit that occurred, was all sustained in New Zealand.
[104] Komori responds that the parties’ submission to the exclusive jurisdiction of the English law and English Courts applies even if there are non-contractual claims, citing (inter alia) Circle Freight International. But, as I have found that the exclusive jurisdiction clause was not part of the agreement between the parties I do not propose to address this submission further.
[105] Secondly, Komori says that the claims in negligence and deceit arise out of the contractual relationship between the parties in what is essentially a contract case – and that this distinguishes the present situation from Biddulph and Longbeach Holdings. Komori argues that, in these circumstances, MHP should not be allowed to plead negligence as an alternative claim as a device to come within r 219(a) and effectively circumvent the position under the contractual claim. It says that this is not within the spirit of the rule. Instead, Komori says that a better approach is to base jurisdiction on what is the proper law of the tort. It submits that, for a cause of action in respect to damage to property, the proper law is the law of the country where the property was damaged: Dicey, Morris & Collins The Conflict of Laws (14ed 2006) at
1936-1937.
[106] In response, MHP denies that the claims in negligence are a “device” to allow the proceedings to come within r 219(a). It says that this argument is misconceived in that:
(a) The claims in negligence are not identical to the contractual claims – for example, they include acts and omissions arising out of the supervision and
installation of the press and the deceit claim – and that they are legitimate and credible claims; and
(b) The alternative approach proposed by the defendants would deprive r
219(a) of any meaning and is contrary to the authorities. In any event, MHP does not accept that the proper law governing the torts is English law. It says that Dicey, Morris & Collins discusses the English choice of law rules, not New Zealand’s.
[107] Komori also refers to the specific allegation pleading a failure to repair and says that this can only be dealt with as an implied contractual term as opposed to a tortious claim. Here, Komori refers to Rolls Royce New Zealand Ltd v Carter Holt Harvey [2005] 1 NZLR 324 (“Rolls Royce”) for the proposition that the Court will decline to find a duty of care in negligence where there is an express contract between the parties defining the promises one to another.
[108] In my view, arguments challenging whether the allegations are properly brought in tort (as opposed to contract) are better discussed in relation to whether MHP has a good arguable case on this cause of action. They do not impact on the particular question at issue under r 219(a), which is whether an act or omission of the cause of action occurred in New Zealand. Therefore I will consider these arguments in the next section of this judgment.
Result
[210] For all these reasons MHP fails in its application to set aside the defendants’
protests to jurisdiction.
[211] The present application by MHP accordingly is dismissed.
[212] An order is now made staying the present proceeding.
[213] As to costs, these are reserved. It is hoped that the parties might be able to reach agreement on this issue if in fact costs are sought. If the parties are unable to reach agreement on this issue of costs then memoranda may be filed sequentially and in the absence of any party advising that they wish to be heard on the matter, I will decide the question of costs based on the material before the Court.
‘Associate Judge D.I. Gendall’
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