Federal Court Grants Leave for Demurrage Claim Against Foreign Defendants

OUTCOME: Allowed

FEDERAL [COMPANY] v [COMPANY] [2016] FCA 1043 File number: NSD 934 of 2016

Judge: [NAME] of judgment: 22 July 2016

Legislation: Australian Consumer Law (Cth) ss 18, 29(1)(d) Competition and Consumer Act 2010 (Cth) Sch 2 Corporations Act 2001 (Cth) ss 127(1), 129(5) Federal Court Rules 2011 (Cth) rr 10.42, 10.43

Cases cited: [COMPANY] "[NAME]" v [COMPANY] (No 2) (2008) 251 ALR 620 [COMPANY] v [COMPANY] [1983] 2 AC 34 [COMPANY] v [NAME] Corporation [1955] 2 QB 327 [NAME] v [COMPANY] (In Liq) (2006) 24 ACLC 1526 [COMPANY] v [COMPANY] (2015) 331 ALR 108 [NAME] v [COMPANY] (1996) 68 FCR 539 [NAME] v [COMPANY] (1990) 171 CLR 538

Date of hearing: 22 July 2016

Registry: New South Wales

Division: General Division

National Practice Area: Admiralty and Maritime

Category: No Catchwords

Number of paragraphs: 32

Counsel for the Plaintiffs: [redacted]

Solicitor for the Plaintiffs: [redacted]

BETWEEN: [COMPANY] First [COMPANY] Plaintiff

AND: [COMPANY] First Defendant

[NAME] Defendant

[NAME] Defendant

[COMPANY] Defendant

[NAME]) [COMPANY] Defendant

JUDGE: [NAME] OF ORDER: 22 JULY 2016

THE COURT ORDERS THAT:

1. The plaintiffs have leave to serve the originating application, statement of claim and this order on each of the second, third and fourth defendants in Fiji.

2. The plaintiffs' costs of the interlocutory application filed on 7 July 2016 be the plaintiffs' costs in the cause.

3. The proceeding be stood over to 2 September 2016 for further directions Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR

JUDGMENT (REVISED FROM THE TRANSCRIPT) [NAME]: 1 [COMPANY] and [COMPANY], the plaintiffs, seek leave to serve the originating application and statement of claim on the second, third and fourth defendants, [NAME] and [COMPANY] ([NAME]), in Fiji. Both Mr [NAME] and Mr [NAME] were directors of [NAME]. [NAME] is a Hong Kong company and was the owner of MV [NAME]. [NAME] is an Australian company, whose secretary is [NAME] (also a director). It is the ship manager of [NAME] under an agreement between [NAME] dated 1 January 2008. 2 The originating application seeks judgment in the sum of AUD300,000 against [NAME] [NAME] and [NAME], together with [NAME], or damages.

Background 3 [NAME] seek to recover against all the defendants in respect of claims for demurrage under a charter party entered into by [NAME], through the agency of [NAME], with [NAME]) [RESPONDENT], the fifth defendant. The fixture note for the charter of [NAME] between [NAME] and [NAME] provided for demurrage to be payable at the rate of USD5,500 per day pro rata. A company associated with members of the group of companies controlled by, among others, Mr [NAME] and Mr [NAME], known as the "[COMPANY]", arranged for the shipment of a cargo on [NAME] between Suva, Fiji and Betio, Kiribati. 4 On 17 December 2015, [NAME], as carrier, issued a bill of lading for the cargo to be carried on [NAME] under which [RESPONDENT], the first defendant, a company in the [COMPANY] also incorporated in Fiji, was the shipper. The bill of lading incorporated on its face a provision that freight was payable as per the charter party dated 22 October 2015, which was the source of a demurrage claim. 5 There were delays at the loading port that resulted in [NAME] making a demurrage claim for about USD192,000 most of which was paid, leaving a small amount owing being about USD2,154.78. When the ship arrived at the discharge port on 11 January 2016, she went on demurrage that lasted until 8 March 2016. The total demurrage incurred for that period of the charter was USD321,319.72. The total of the two amounts for demurrage of USD323,474.50 is the sum period for which [NAME] seek judgment against [NAME]. This application does not concern that claim. 6 As the time during which the ship was on demurrage in Betio mounted, Mr [NAME] began negotiating with members of the [COMPANY], principally through emails he sent to [NAME], who was designated as "Group Asset/Logistics Manager" of the [COMPANY] at the foot of emails that he sent and copied to Mr [NAME]. Under Mr [NAME] signature block appeared "[COMPANY]" together with a logo, an address, phone and other contact details. Immediately below that material appeared the logos, business and domain names of five entities, including "[COMPANY]" and "[COMPANY]", without any indication as to whether each entity was a corporation, such as by the use of the word "[COMPANY]" or "[COMPANY]". 7 On 23 January 2015, Mr [NAME] emailed Mr [NAME], under the subject line "Guarantee for Demurrage Payment", writing that he had copied in: [NAME] [COMPANY] and [NAME], [COMPANY]. I have forwarded your request for a direct guarantee from us because we were concerned with the [NAME]. Sounds like a notarised company guarantee is what you are after, but please advise if you require a different guarantee. Again, thanks for working with us to keep this discharge progressing. 8 Mr [NAME] replied on 25 January 2016 "yes, that is the sort of thing" and that [NAME] would not ask for a bank guarantee. Mr [NAME] then emailed Mr [NAME] on 26 January 2016 asking whether "a guarantee like this" would avoid the need for "us needing to pay for demurrage every week or so". 9 Subsequently on 1 February 2016, Mr [NAME] attached to an email he sent to Mr [NAME], Mr [NAME] and Mr [NAME] a draft deed of undertaking of two pages that had the heading at its top "on letterhead of company giving the undertaking", that Mr [NAME] said in the email "we ask [NAME] to provide". The draft deed named [NAME] as the parties to whom it was addressed. The email also said that the letter "needs to be on company letterhead and originally signed/witnessed by two directors. pls [sic] send us a scanned copy and send original letter by courier to us." He gave [NAME]'s address in Australia. 10 The significance of the failure to identify the covenantor under the proposed deed is crucial. Following his sending that email on 1 February 2016, Mr [NAME] communicated by email with Mr [NAME], Mr [NAME] and Mr [NAME] about the wording of the proposed deed, but at no point did Mr [NAME] correspondence state a proposal that identified a covenantor different to "[NAME]" as the party to the deed. 11 After more drafting exchanges between the four men, on 9 February 2016, Mr [NAME] sent a final draft to [NAME] and [NAME] and followed up by email, on 11 February 2016, seeking provision of the deed asking whether it could be executed as soon as possible. Mr [NAME] replied that he was hoping to do so that day between travels. 12 Finally, late on 12 February 2016, Mr [NAME], from the email address "[EMAIL]" sent an email to Mr [NAME] stating simply: "[NAME], attached", and sent copies to Mr [NAME] and Mr [NAME] at the same domain name email address. The email attached a copy of the final version of the deed dated 12 February 2016. It was on the letterhead of [COMPANY] ([COMPANY]) a company incorporated, according to its letterhead, in Port Vila, Vanuatu and was executed by Mr [NAME] and Mr [NAME], under each of whose name appeared "Director". Mr [NAME] witnessed their signatures. 13 The deed provided a guarantee for demurrage that was [COMPANY] to AUD300,000 "including interest plus legal costs" and, near the conclusion a covenant that: C. we warrant that the signatories below have the Authority to instruct lawyers and execute this document. (emphasis added) 14 Immediately underneath that covenant, the deed stated that it was governed by Australian law and that "any dispute arising out of or in any way connected with this letter of undertaking should be subject to the exclusive jurisdiction of the Federal Court of Australia in Sydney". 15 At the foot of the deed, underneath the signatures, in small print and having the appearance of being a footer at the end of the page appeared the name "[COMPANY]". That name could appear to relate to the status of the signatures, as "Director" of Mr [NAME] and Mr [NAME] above it, but there was no corporate seal affixed nor statement of the "directors" executing the deed on behalf of a company. That may not have been necessary in any event for the document to operate at common law as a deed given by the company: cf Norton on Deeds (Sweet & Maxwell, 1928, 2nd ed) at 7, and, of course, it is not necessary under ss 127(1) and 129(5) of the Corporations Act 2001 (Cth). 16 However, the problem with the document was that, according to company searches in Vanuatu, [COMPANY] had been struck off the register of corporations on 12 November 2014 and hence did not exist as a corporation at the time at which Mr [NAME] provided Mr [NAME] with the deed that he and Mr [NAME] had executed as its directors. 17 The deed also acknowledged that, first, no demurrage had been paid as at 12 February 2016, secondly, the total demurrage then payable at the discharge port was USD115,069.72 and, thirdly, that the demurrage was continuing to accrue at the rate of USD5,500 per day pro rata. 18 After Mr [NAME] received the email attaching the executed deed in Australia, [NAME] caused the cargo to be discharged from [NAME] and refrained from continuing to exercise their lien over the cargo. 19 [NAME] allege, in the statement of claim, that in the circumstances, each of Mr [NAME], Mr [NAME] had warranted that, first, [COMPANY] was an incorporated entity (i.e. had a present existence as a corporation), secondly, Mr [NAME] and [NAME] were authorised by that entity to sign the deed and, thirdly, that entity was guaranteeing the demurrage payable to [NAME] in accordance with the terms of the deed (i.e. up to the amount of AUD300,000). 20 In the events that transpired, [NAME] claim the whole of the amount of AUD300,000 the subject of the guarantee as damages against each of Mr [NAME], Mr [NAME]. In the alternative, [NAME] allege that [NAME] and [NAME] engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of ss 18 and or 29(1)(d) of the Australian Consumer Law (Cth) in Sch 2 to the Competition and Consumer Act 2010 (Cth). Relevantly, s 29(1)(d) provides that: 29(1) A person must not, in trade or commerce, in connection with the supply or possible supply of … services … (d) make a false or misleading representation that a particular person has agreed to acquire … services. 21 The statement of claim appears to allege that each of Mr [NAME], Mr [COMPANY] represented that he or it had agreed to acquire the services of [NAME] arranging for the discharge of the cargo at Betio. Alternatively, the damages claim against each of Mr [NAME], Mr [NAME] is not [COMPANY] to the amount of the guarantee.

Consideration 22 The principles upon which leave to serve outside the jurisdiction under r 10.43 of the Federal Court Rules 2011 (Cth) is granted are well settled: [NAME] v [COMPANY] (In Liq) (2006) 24 ACLC 1526 per Finn, [NAME] JJ; see also [COMPANY] "[NAME]" v [COMPANY] (No 2) (2008) 251 ALR 620 at 627-628 [32]-[33] per [NAME] and [COMPANY] v [COMPANY] (2015) 331 ALR 108 at 117 [50]-[52] per Edelman J. 23 I am satisfied by the evidence of [NAME], in his affidavit of 6 July 2016 that [NAME] propose to serve Mr [NAME], Mr [NAME] in Fiji by personal service and that that method of service is permitted under the law of Fiji. Mr [NAME] has ascertained that Fiji is neither a party to the Hague Convention nor any other convention with Australia permitting service of curial documents. Fijian law permits service in Fiji of documents from a foreign court by personal service. 24 I am satisfied that the court has jurisdiction in the proceeding for the purposes of r 10.43(4), that the proceedings are of a kind mentioned in r 10.42 and that [NAME] and [NAME] have a prima facie case for some of the relief claimed in the proceeding. 25 In reciting facts for the purposes of giving these reasons, I take at face value the currently unanswered material in Mr [NAME] affidavit. However, that material may well be seen in another light during the course of a contested hearing and necessarily does not present whatever defences or evidence might be called by the defendants. I have not formed any final view about the nature of the proceedings. However, on the material before me, I am satisfied that [NAME] have established a prima facie case sufficient to establish what is necessary to justify the grant of leave to serve out of the jurisdiction within the principles explained at in [NAME] 24 ACLC at 1529 [9]-[10], 1535 at [45]-[46]. Those principles are that a prima facie case for relief for the purposes of r 10.43(4) is one that establishes on the material before the Court that inferences are open which, if translated into findings of fact, would support the relief claimed. Moreover, it is only necessary that a prima facie case for relief be shown to exist for any one of the causes of action relied upon for the relief so sought: [NAME] 224 ACLC at 1535 [45]-[47]. 26 On the material before me, I am satisfied that there is a prima facie case that when Mr [NAME] sent his email on 12 February 2016, attaching the deed of undertaking on the letterhead of [COMPANY], using his email address that appeared to be that of [NAME], he, Mr [NAME] gave the express warranty of authority to execute the deed that it contained in covenant C. The principles applicable to instantaneous communications of a contractual nature, including in respect of documents in the nature of the deed dated 12 February 2016 give rise to the prima facie inference that the deed was delivered in Australia when Mr [NAME] received that email: [COMPANY] v [COMPANY] [1983] 2 AC 34 at 42E, per [NAME], following [COMPANY] v [NAME] Corporation [1955] 2 QB 327. 27 In [NAME] v [COMPANY] (1990) 171 CLR 538 at 568, [NAME], Deane, Dawson and Gaudron JJ said (and see too: [NAME] v [COMPANY] (1996) 68 FCR 539 at 547E-G, per Beaumont, Drummond and Sundberg JJ): If a statement is directed from one place to another place where it is known or even anticipated that it will be received by the plaintiff, there is no difficulty in saying that the statement was, in substance, made at the place to which it was directed, whether or not it is there acted upon. 28 In my opinion, there is a prima facie case that the alleged warranty of authority was made and breached by the transmission to, and receipt by, Mr [NAME] in Australia of Mr [NAME] email of 12 February 2016 attaching the deed of undertaking from the non-existent [COMPANY] (i.e. [COMPANY]). In those circumstances, I am satisfied that the proceeding is based on a cause of action arising, and a tort committed, in Australia within the meaning of each of items 1 and 4 in the table to r 10.42. In addition, for the same reasons, I am satisfied that a prima facie case exists that the representation, the subject of the allegations of misleading and deceptive conduct amounting to a contravention of s 18 of the Australian Consumer Law, was made in Australia and falls within items 1 and 12 (the latter relating to a proceeding based on a contravention of an Act that is committed in Australia). 29 Mr [NAME] evidence demonstrated that, through email exchanges between Mr [NAME], Mr [NAME] and Mr [NAME], the ship was still on demurrage as at 4 March 2016. On 6 April 2016, the lawyers acting for [NAME] sent a letter of demand by email to [NAME], Mr [NAME], Mr [NAME] and Mr [NAME] invoking the provisions of the deed. The letter attached a demurrage invoice dated 18 March 2016 and a statement of fact time sheet dated 8 March 2016. The letter demanded payment of the sum of USD323,474.50 and that the addressees appoint a lawyer in Sydney to accept service. [NAME], a firm of [NAME], responded to that letter, saying that they had been instructed by [COMPANY] in relation to it but that they did not have instructions to accept service of any proceedings. Subsequently, on 12 May 2016 [COUNSEL] wrote to the solicitors acting for [NAME] and stated, on behalf of "our client" that [COMPANY]: "… is a shell company which holds no assets and we have no instructions to accept service in any proceedings commenced against it". 31 I have not for the purpose of these reasons considered whether the terms of the deed as signed by Mr [NAME] and Mr [NAME] themselves constituted a contractual undertaking by each of those individuals to [NAME].

Conclusions 32 For these reasons, I will order that [NAME] have leave, pursuant to r 10.43 to serve on each of Mr [NAME], Mr [NAME] and [NAME], the originating application, statement of claim and the orders made and that the costs of the interlocutory application be costs of [NAME] in the cause. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the [NAME].

Associate: Dated: 29 August 2016