Metropolitan Glass & Glazing Ltd v The Ship "Lydia Oldendorf"
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
AD.9-SD/00
ADMIRALTY ACTION IN REM AND IN
PERSONAM
BETWEEN
METROPOLITAN GLASS AND GLAZING LIMITED
First Plaintiff
AND
UNIAO BRASILEIRA DE VIDROS S.A.
Second Plaintiff
AND
THE TILE WAREHOUSE LIMITED
Third Plaintiff
AND
CERAMICA PORTOBELLO S.A.
Fourth Plaintiff
AND
THE SHIP 'LYDIA OLDENDORF'
First Defendant
AND
MITSUI OSK LINES
Second Defendant
Hearing: 3, 4 October 2000
Counsel: Lisa Cunningham for
applicant/second defendant
Piers Davies for first defendant
Colin Lucas for respondent/plaintiffs
Judgment: 17 October 2000
JUDGMENT OF LAURENSON J
Solicitors: Chapman Tripp Sheffield
Young, DX CP 24029, Auckland
Jordan Smith & Davies, DX CP 20525, Auckland
Hesketh Henry, DX CP 24017, Auckland
Introduction
[1] This is an interlocutory application to set aside an ex parte order for directions as to service. The central issue is the question of how service may be affected on a foreign company which is not registered as an overseas company in New Zealand pursuant to s.334 of the Companies Act 1993 ("the Act"). This is an issue which I am informed is of particular practical interest to litigants who are involved in proceedings under the Maritime Transport Act 1994 in relation to the carriage of goods by sea.
Factual background
[2] This proceeding arises out of alleged damage suffered to various cargoes on board the "Lydia Oldendorf" during a voyage from Brazil to Auckland in June/July 1999. The first and second plaintiffs have claimed for damage to a container load of pattern flat glass in the amount of $17,130.97 and the third and fourth plaintiffs have claimed for damage to four container loads of glazed ceramic tiles in the amount of $55,693.84.
[3] The plaintiffs initiated the proceeding by way of notice of proceeding in rem and in personam and statement of claim dated 23 March 2000. These documents were served on an employee of Seatrans New Zealand Limited ("Seatrans") at its Auckland office on 29 March 2000. Service was effected at this address in the belief that the second defendant ("Mitsui") was, as stated in the intituling to this proceeding, a company incorporated pursuant to the laws of Japan but having a place of business at the office of Seatrans New Zealand Limited, 71-79 Customs Street East, carrier.
[4] On the basis of this belief the plaintiff had determined that service could be effected on Mitsui in New Zealand pursuant to s.389(1)(c) of the Act. This section states -
Service of documents on overseas companies in legal proceedings -
(1) A document, including a writ, summons, notice, or order, in any legal proceedings may be served on an overseas company in New Zealand as follows:
(a) By delivery to a person named in the overseas register as a director of the overseas company and who is resident in New Zealand; or
(b) By delivery to a person named in the overseas register as being authorised to accept service in New Zealand of documents on behalf of the overseas company; or
(c) By delivery to an employee of the overseas company at the overseas company's place of business in New Zealand or, if the overseas company has more than 1 place of business in New Zealand, at the overseas company's principal place of business in New Zealand; or
(d) By serving it in accordance with any directions as to service given by the court having jurisdiction in the proceedings; or
(e) In accordance with an agreement made with the overseas company.
(2) The methods of service specified in subsection (1) of this section are the only methods by which a document in legal proceeding may be served on an overseas company in New Zealand.
[5] Following service on it, Seatrans notified its insurer and Mitsui. Mitsui's solicitors then advised the plaintiffs' solicitors -
[a] It was not correct to say that Mitsui had a place for business in New Zealand at the offices of Seatrans;
[b] Mitsui was not listed on the register of overseas companies in New Zealand because it did not carry on business in New Zealand within the meaning of s.332 of the Act.
[c] That Mitsui's presence in New Zealand was confined to its association with Seatrans and that this association extended only to Seatrans being its indent agent.
[d] There was otherwise no association between Mitsui and Seatrans.
[6] The plaintiffs responded by applying ex parte for substituted service pursuant to inter alia r.211 of the High Court Rules ("the rules") in the following terms -
1. Personal service of the notice of proceeding in rem and in personam and the statement of claim in this proceeding ("the proceedings") on the second defendant, Mitsui O.S.K. Lines Limited ("Mitsui"), not being required.
2. The service of the proceedings which has already taken place on Mitsui at the offices of its New Zealand agents Seatrans New Zealand Limited ("Seatrans"), 71-79 Customs Street East, Auckland, be deemed effective service.
3. The standard time limits for service of a notice of appearance and a statement of defence by Mitsui begin to run from the date of service on Mitsui of a copy of the Court's directions as to service.
UPON THE GROUNDS THAT:
a. Mitsui is a company incorporated under the laws of Japan;
b. Seatrans is Mitsui's general agent in New Zealand;
c. The proceedings were served on Seatrans on 29 March 2000;and
d. Service of the proceedings on Seatrans has brought them to the attention of Mitsui.
[7] The matter came before a Judge in Chambers on 13 June 2000. He directed
[a] Orders accordingly in terms of application notwithstanding Chapman Tripp's letter of 12.4.2000 subject to following -
[a] In para (1) "being" changed to "be";
[b] In para (2) adding at end "subject to order 2 below";
[c] In para 3 amending last line to read "Mitsui of a sealed copy of this order";
[d] Application as per para 4 adjourned.
[b] Since whether Seatrans agency extends to authority to accept service of documents on Mitsui's behalf may be unclear, leave to Mitsui to apply to rescind this order but order to remain in force if no such application made within 14 days of service as per para 3 of order 1.
[8] Mitsui then applied pursuant to the leave reserved to rescind the orders made on the grounds that Seatrans' agency did not include authority to accept service of documents on behalf of Mitsui.
[9] The plaintiffs opposed the application to rescind. In doing so it is conceded that the initial service of the papers upon Seatrans was not in accordance with s.389(1) of the Act and that the only method by which service of the proceedings can be effected upon Mitsui under s.389 is pursuant to orders made pursuant to s.389(1)(d).
The Issue
[10] The particular issue which arises in this case is to determine the extent of this Court's jurisdiction to make directions as to service pursuant to s.389(1)(d). In order to answer this question it is necessary to consider the relevant provisions of the Act and the High Court Rules in relation to service.
Companies Act 1993
[11] This Act provides a code for the service in New Zealand of two separate categories of documents on two separate categories of companies.
[12] The two categories of documents are -
[a] Documents including a writ, summons, notice, or order, in any legal proceedings; and
[b] Documents other than those referred to in [a] above.
[13] The two categories of company are -
[a] Companies which are defined in s.2 of the Act as -
(a) A company registered under Part II of this Act;
(b) A company re-registered under this Act in accordance with the Companies Re-registration Act 1993; and
(c) Overseas companies which are defined in s.2 of the Act as "bodies corporate" that are incorporated outside New Zealand.
[14] Section 387 refers to the service of legal documents in New Zealand on a New Zealand company and s.388 refers to other documents to be served on this category of company.
[15] Section 389 deals with service in New Zealand on overseas companies of legal documents and s.390 deals with service of other documents in New Zealand on overseas companies.
[16] The important point to note here is that the Act does not purport to provide for the service outside New Zealand of any documents on overseas companies.
[17] The matter of service on overseas companies outside New Zealand is dealt with within rules 219-227 of the Rules.
[18] A further matter to note in relation to overseas companies relates to the provisions of s.334 of the Act which requires that some overseas companies must register on the New Zealand Overseas Register of Overseas Companies. This requirement arises in relation to those overseas companies which carry on business in New Zealand. The term "carrying on business in New Zealand" is defined in s.332 of the Act as follows -
332 Meaning of "carrying on business" -
For the purposes of this Part of this Act,-
(a) A reference to an overseas company carrying on business in New Zealand includes a reference to the overseas company--
(i) Establishing or using a share transfer office or a share registration office in New Zealand; or
(ii) Administering, managing, or dealing with property in New Zealand as an agent, or personal representative, or trustee, and whether through its employees or an agent or in any other manner:
(b) An overseas company does not carry on business in New Zealand merely because in New Zealand it--
(i) Is or becomes a party to a legal proceeding or settles a legal proceeding or a claim or dispute; or
(ii) Holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs; or
(iii) Maintains a bank account; or
(iv) Effects a sale of property through an independent contractor; or
(v) Solicits or procures an order that becomes a binding contract only if the order is accepted outside New Zealand; or
(vi) Creates evidence of a debt or creates a charge on property; or
(vii) Secures or collects any of its debts or enforces its rights in relation to securities relating to those debts; or
(viii) Conducts an isolated transaction that is completed within a period of 31 days, not being one of a number of similar transactions repeated from time to time; or
(ix) Invests its funds or holds property.
[19] Sections 389 and 390 dealing with the service of legal and other documents in New Zealand on overseas companies do not make any distinction between overseas companies which are or are not registered on the New Zealand Register of Overseas Companies. As stated above, s.2 of the Act defines an overseas company as being -
A body corporate that is incorporated outside New Zealand.
[20] The final matter to note at this point in relation to s.389 is that subsection (2) states that -
The methods of service specified in subsection (1) of this section are the only methods by which a document in legal proceedings may be served on an overseas company in New Zealand.
[21] So far as the present case is concerned Mitsui is not registered on the New Zealand Register of Overseas Companies and it submits that it is not required to do so. The issue of whether it should or should not be so registered was not taken up by the plaintiffs and therefore, for the purposes of this application, Mitsui is to be regarded as an overseas company which is not registered on the New Zealand Register of Overseas Companies and is not required to do so.
[22] Mitsui is thus -
[a] An overseas company which is not registered on the New Zealand Register of Overseas Companies;
[b] It does not have a place of business in New Zealand;
[c] It has not made any agreement regarding service upon it in New Zealand.
The result is, as was conceded by counsel for the plaintiffs, Mitsui can only be served in New Zealand if service can be effected in accordance with s.389(1)(d), i.e. in accordance with directions as to service given by a Court having jurisdiction in the proceedings.
[23] In the present case it is not disputed that this Court does have jurisdiction in this proceeding, namely pursuant to s.210 of the Maritime Transport Act 1994.
[24] The key question is to determine the nature and extent of this Court's powers to make directions as to service for the purposes of s.389(1)(d).
[25] The plaintiffs submitted that the inclusion of this subsection was a clear indication that the legislature intended that this Court should have a discretion as to how service could be effected in New Zealand given that the methods of service provided by the remaining subsections were otherwise all inclusive.
[26] The plaintiffs further submitted that the order made on 13 June 2000 was in effect an order for substituted service and accordingly it fell within the discretion envisaged by the subsection. This arose from the fact that there was sufficient evidence to justify the view that Seatrans was Mitsui's general agent in New Zealand and that Seatrans was in effect Mitsui's place of business in New Zealand and the effect of service on Seatrans had in fact been adequately brought to the attention of Mitsui. Therefore despite the fact that the plaintiffs accepted that Mitsui did not have a place of business in New Zealand, in the particular circumstances there was a relationship between Seatrans and Mitsui which was sufficiently close to ensure that the documents served on Seatrans would be and had been brought promptly to the attention of Mitsui.
[27] It was further submitted that in these circumstances the order was such that it met precisely the type of situation that the discretion of s.389(1)(d) was designed to deal with.
[28] Viewing the particular situation quite pragmatically in this light then, the plaintiffs submission has some attraction. In reply, however, counsel for the first defendant pointed out that if the subsection did permit what were in effect orders for substituted service then real practical problems could arise from the point of view of the proposed overseas litigant in that such persons or companies could be visited with substituted service on agents who might not in turn react sufficiently promptly to enable the proposed litigant to respond.
[29] Counsel for Mitsui submitted that while s.389(1)(d) refers to directions as to service being given by the Court it does not define the nature of the powers that the Court may make pursuant to the subsection. Because the Act did not refer to any such powers, then if there were to be directions as to service, these could only be founded in the High Court Rules.
[30] There are three rules which make provision for the making of directions as to service. These are rules 8, 211 and 415. The plaintiffs submitted that r.8 did not apply because in the present case there was no doubt as to who had to be served and there was a clear procedure under the rules as to how service could be effected overseas.
[31] Rule 211 which deals directly with the issue of substituted service states -
Substituted Service
If it appears to the Court that reasonable efforts have been made to effect service of any document by any of the modes permitted or required under these rules and either that the document has come to the knowledge of the person to be served or that prompt personal service thereof cannot be effected, the Court may -
(a) Direct -
(i) That instead of service, such steps as are specified in the order be taken for the purpose of bringing the document to the notice of the person to be served; and
(ii) That the document be deemed to have been served on the happening of any specified event, or on the expiry of any specified time:
(b) Where steps have been taken for the purpose of bringing, or which have a tendency to bring, the document to the notice of the person on whom it is required to be served, direct that the document be deemed to have been served on that person on a date specified in the order:
(c) Subject to such conditions as the Court thinks fit to impose, dispense with service of any document on any person and give leave to the party by whom the document is required to be served to proceed as if service thereof had been effected on that person.
[32] It was submitted by counsel for Mitsui and accepted by the plaintiffs' counsel that this rule could not apply in the present case because there was no evidence that reasonable efforts had been made to effect service by any of the modes permitted or required under the rules. This was accepted by the plaintiff.
[33] Rule 451 is not applicable to the present case because this rule falls within Part IV of the rules dealing with procedure in special cases. The present application and the substantive proceeding do not come within that category.
[34] If one steps aside from the circumstances of the present case then it is not difficult to see that situations may arise where in relation to the service of an overseas company directions may be appropriate under r.8. Any directions so made would then fall within the terms of s.389(1)(d). Apart from this situation I agree that s.389(1)(d) does not by itself permit a wider discretion to enable the Court to make directions as to service.
[35] The position in relation to an application for substituted service pursuant to r.211 is, however, quite different. In Environmental Solutions Limited v Jesco Dosiertechnik Gmbh & Co KG (1999) 9 NZCLC 261,854, Master Gambrill held that the High Court of New Zealand's jurisdiction under s.389(1)(d) extends to an overseas defendant's company only if the overseas defendant's company is shown to have conferred a jurisdiction on the High Court by submitting to it, or agreeing to submit to it. Reference was made to a decision by the Court of Appeal in Von Wyl v Engler [1998] 3 NZLR 416. This case was concerned with whether an overseas judgment in personam was enforceable in New Zealand. Richardson P considered the issue of submission to jurisdiction with reference to Dicey & Morris on The Conflict of Laws (12th ed) 1993. At p.421 he said -
The foundation of the jurisdiction in personam is service of the writ or other originating process. Personal service on a defendant present within the jurisdiction and, where it is impracticable to serve the proceeding in the prescribed manner, substituted service within the jurisdiction by taking such steps as the Court may direct to bring the proceeding to the defendant's notice, satisfy that requirement. And it seems there is no jurisdiction to order substituted service within the jurisdiction on a defendant who was outside the jurisdiction when the proceeding was issued (p 303). The principle underlying the concept of submission to the jurisdiction is that a person who would not otherwise be subject to the jurisdiction of the Court may preclude himself or herself by his or her own conduct from objecting to the jurisdiction and thus giving the Court an authority over that person which, but for that submission, it would not possess (p 310). Accordingly, the onus is on the party seeking to enforce the foreign judgment to establish that the non-resident accepted the jurisdiction of the foreign Court to determine the proceeding. It follows that a person who appears merely to contest the jurisdiction of the Court does not thereby submit -
In order to establish that the defendant has, by his conduct in the proceedings, submitted or waived his objection to the jurisdiction, it must be shown that he has taken some step which is only necessary or only useful if the objection has been waived or never been entertained at all (p 311).
[36] In the present case there is no suggestion that Mitsui has submitted to the jurisdiction of this Court and indeed the purpose of the present application is to contest that jurisdiction. Therefore, so far as the present case is concerned, it would not be possible for the Court to make an order for substituted service pursuant to r.211 and accordingly any direction made by the Court pursuant to that rule cannot validly amount to a direction as to service for the purposes of s.389(1)(d).
[37] As I have previously noted the order made on 13 June 2000 was in effect an order for substituted service. For the reasons which I have referred to I find that the order was invalid and must therefore be rescinded. The net result is that the plaintiffs are not able to effect service on Mitsui in New Zealand in accordance with the statutory provisions contained in the Act. It follows that their only option is to effect service overseas in accordance with the provisions of rules 218-227.
Service Overseas - the High Court Rules
[38] Rules 219-227 relate to the service of legal proceedings outside New Zealand.
[39] Rule 219 permits such service in some cases without leave of the Court. Those cases are set out in paras A-M of the rule. I was informed that the present proceeding does come within para (b)(iii), i.e. the contract in respect of which damages are sought was partly performed in New Zealand.
[40] Rule 221 requires that certain additional information be provided in the notice of proceeding., --
[41] Rule 222 states -
Mode of Service
Subject to rules 223 and 224, rules 192 to 212 shall apply to service outside New Zealand. (Rules 223 and 224 do not apply in this case).
[42] This rule has a beguiling simplicity because rules 192-212 do not make any provision for service overseas. There appear to be two alternatives, namely that the documents should be served on Mitsui in Japan in accordance with either (a) r.198 which deals with personal service in New Zealand on New Zealand corporations or (b) r. 199 which deals with personal service in New Zealand on foreign corporations.
[43] Rule 198 directs that personal service of a document on a company incorporated under the Companies Act 1993 shall be effected by service in accordance with s.387 of that Act. Rule 199 states that personal service on an overseas company (within the meaning of s.2 of the Companies Act 1993) and which, under these rules, may be served out of New Zealand shall be effected in accordance with s.389 of the Companies Act 1993.
[44] In my view it becomes clear that the service to be effected in Japan must be pursuant to r.198 and in accordance with s.387. In other words the service must be effected on Mitsui as though it was a New Zealand company in New Zealand. I reach this conclusion for two reasons -
[a] The requirements for service under s.389 are primarily directed to the situation applying to an overseas company registered on the New Zealand Register of Overseas Companies. Alternatively, service could be effected on a principal place of business in New Zealand. In the present case it is accepted that there is no such principal place of business. For the reasons which I have already mentioned this Court is not able to make an order for substituted service in the present case given that there has been no submission to jurisdiction.
[b] Rule 226 states -
Judgment by default
Where any document has been transmitted abroad for service on a party under the provisions of rule 219 and that person has not appeared, judgment by default against that party shall not be sealed without the leave of the Court, which leave shall not be granted unless the Court is satisfied -
(a) That the party applying for leave was entitled to effect service without leave in accordance with that rule; and
(b) That the document was duly served by a method prescribed by the internal law of the country where service was to be effected, being a method prescribed in respect of the service of documents in domestic actions upon persons who are within that country; and
(c) That such service was effected in sufficient time to enable that party to appear.
[45] In the commentary in McGechan - High Court Rules at 226.06(2) the comment is made that -
The party seeking to enter judgment by default should satisfy the Court that service of process was effected in accordance with both the law of the country in which the party was situated, and the law of New Zealand.
Conclusion
[46] For the reasons which I have referred to I conclude -
[a] That the order made on 13 June 2000 is invalid and accordingly it is rescinded.
[b] The plaintiffs' proper course is to effect personal service on Mitsui at its registered office in Japan pursuant to r. 198 and in accordance with s.387 of the Companies Act 1993. Such service must also comply with the requirements for service under Japanese law.
Costs
[47] Although the applicant Mitsui has been successful in this application I have the clear impression that the parties regarded this application as being something of a test case. I am therefore inclined to the view that costs should lie as they fall. I am prepared, however, to receive memoranda from counsel on the point. If so, the applicant is to file and serve a memorandum within 7 days from the date of delivery of this decision. The first defendant and plaintiff are to reply within a further 7 days.