Chevalier Wholesale Produce Ltd v Joes Farm Produce Ltd Hc Ak Civ-2010- 404-4229

• Jurisdiction: New Zealand
• Judge: Bell
• Judgment Date: 17 November 2011
• Neutral Citation: [2011] NZHC 1891
• Docket Number: CIV-2010-404-4229
• Court: High Court
• Date: 17 November 2011

BETWEEN

Chevalier Wholesale Produce Limited

Plaintiff

and

Joes Farm Produce Limited

First Defendant

And

Michael Joe

Second Defendant

[2011] NZHC 1891

CIV-2010-404-4229

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application under r5.49(3) High Court Rules (appearance and objection to jurisdiction) by defendant for dismissal or stay of proceeding and leave to file a statement of defence out of time — plaintiff was a New Zealand company which supplied fruit and produce — defendant was a Fijian company — second defendant had provided guarantee by fax — plaintiff claimed for outstanding amount of produce supplied — provision in terms of trade for payment of interest and costs — whether plaintiff had arguable case under r6.27(2) (service out of New Zealand without leave) — whether the contract was made or entered into in New Zealand under r6.27(2)(b)(i) — whether contract was wholly or partly performed in New Zealand under r6.27(2)(b)(ii) — whether contract was to be governed by New Zealand law either by its terms or by implication under r6.27(2)(b)(iv).

Counsel:

M C Black for Plaintiff

S Khan and J Gandhi for Defendants

JUDGMENT OF ASSOCIATE JUDGE Bell

1 The defendants apply for the dismissal or stay of the proceeding, and also for leave to file a statement of defence out of time.

2 The plaintiff is a New Zealand wholesale supplier of fruit and produce. The first defendant is a Fiji company which carries on a wholesale business in Suva selling fruit and vegetables. Mr Joe, the second defendant, is the director of the first defendant. The plaintiff supplied the first defendant with fruit and produce from 2003 to 2005.

3 In this proceeding the plaintiff claims the sum of $394,849.70 as the amount outstanding for fruit and produce supplied, plus interest charges, bank fees and collection costs said to have fallen due. For its claim, the plaintiff relies on a document called “credit account application form” which contains terms and conditions of trade. Mr Joe signed the form on behalf of the first defendant. The terms and conditions of trade contain a personal guarantee by Mr Joe.

4 Although the proceeding began in July 2010, the plaintiff did not serve the first defendant until April 2011. The plaintiff had to apply for an order for substituted service on Mr Joe. In ordering substituted service, I provided that Mr Joe could have 30 working days after service to file a statement of defence.

5 As recorded in a case management conference minute of 22 June 2011, Mr Gandhi, appearing for both defendants, advised the court that the defendants intended to challenge the jurisdiction of this court to hear the proceeding. The defendants have not filed a protest to jurisdiction under r 5.49. The defendants have applied under r 5.49(3). I treat that application as effective, notwithstanding the absence of any appearance to protest the jurisdiction.

6 The application is governed by r 6.27 to 6.29 of the High Court Rules. In Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd, 1 the Court of Appeal has given authoritative guidance how rr 5.49 and 6.27 to 6.29 should be applied in these cases. Without repeating what the Court of Appeal said, I follow its decision. Under r 6.29

the plaintiff must show that it has a good arguable case that its claim is within one or more of the paragraphs in r 6.27. Once it establishes that, it must show that the court should assume jurisdiction because there is a serious issue to be tried, New Zealand is the appropriate forum for the trial, and any other relevant circumstances support an assumption of jurisdiction. 2

Good arguable case under rule 6.27(2)

7 The plaintiff needs to establish that there is a good arguable case that its claim falls wholly within one or more of the paragraphs in r 6.27. The grounds under r 6.27(2)(b) in the notice of proceeding the plaintiff relied on to serve the defendants overseas without requiring leave of the court were:

• (a) The contract was made or entered into in New Zealand;

• (b) The contract was wholly or in part performed in New Zealand; and

• (c) The contract was, by its terms or implication, to be governed by New Zealand law.

8 In McConnell Dowell Constructors Ltd v Lloyd's Syndicate 396, 3 the Court of Appeal held that a plaintiff could rely on grounds outside those set out in the notice, if there was no prejudice to the defendant.

Place of formation of contracts

9 As to formation of the contract under r 6.27(2)(b)(i), the plaintiff's evidence is that it supplied the first defendant with fresh produce from 2003. The defendants' director says that the contract for supply was not formed in New Zealand but was made in Fiji. He says that it was entered into through discussions with the plaintiff's representatives while on visits to Fiji.

10 In response, the plaintiff attaches to its affidavit the credit account application form with the terms and conditions of trade. The plaintiff says that it sues on that document as setting out its terms. It also contains the second defendant's written guarantee. The defendants signed the form in December 2005.

11 There are separate contractual arrangements that require separate consideration: the supply between the plaintiff and the first defendant, and the second defendant's guarantee. The supply arrangements ran from 2003 to September 2005. The plaintiff does not sue for any supply later than September 2005. The plaintiff supplied the defendant under orders placed by the first defendant. Each order placed and accepted was a separate contract, albeit on a running account basis. There is no evidence that the first defendant was bound to buy from the plaintiff. It could choose whether, what and how much to order. Likewise there is no evidence that the plaintiff was legally bound to meet every order the first defendant placed (even if it was commercially advantageous to do so). Each order by the first defendant was an offer, which resulted in a contract on acceptance. There is no evidence how each order was accepted. The onus is on the plaintiff to show that each contract was made in New Zealand. There could be acceptance in New Zealand if the postal rule applied. That is the rule that, when negotiations are by post, the contract is formed at the place where the acceptance is posted — Byrne v van Tienhoven. 4 Written communications between the parties appear to have been by fax. For instantaneous communications, such as by fax, there is acceptance at the place where the offeror receives the acceptance of the offer – Entores Ltd v Miles Far East Corporation. 5 In the absence of any evidence that the first defendant's orders were accepted by post, the plaintiff has not shown a good arguable case that the sales were made in New Zealand.

12 The plaintiff counters this by referring to its terms of trade. They include:

2.1 Any instructions received by Chevalier Wholesale Produce from the customer for the supply of produce shall constitute a binding contract and acceptance of the terms and conditions contained herein.

The plaintiff says that these terms apply retrospectively, so that an order sent by the first defendant to the plaintiff in New Zealand constituted the formation of a contract in New Zealand. In some cases, terms of a contract may apply retrospectively. The example normally cited is where parties proceed on the basis of an intended agreement with the expectation that once the terms are fully agreed they will be applied retrospectively, as in Trollope and Colls Ltd v Atomic Power Constructions Ltd. 6 That is not the case here. The circumstances in which the credit account application form was signed were that the plaintiff gave the defendants time to pay debts that had built up. There is no evidence of negotiations to set the terms of trade. Clause 2.1 applies to any new orders placed by the first defendant, but it does not change the effect of contracts the parties have already made. There is nothing in the terms and conditions of trade that shows an intention to disturb rights that had already accrued. Clause 2.1 does not change the place of acceptance of contracts already made.

13 More generally, the terms and conditions of trade signed in December 2005 might be at best an agreed variation of earlier agreements for supply to operate prospectively, that is, on any parts of earlier agreements that remained unperformed. In so far as it relates to past sales, it is not a new contract between the plaintiff and the first defendant. Rule 6.27(2)(b) does not apply to agreements varied in New Zealand, if they were not otherwise made or entered into in New Zealand. The plaintiff has not shown a good arguable case that the sales were made in New Zealand.

14 The matter is otherwise with the guarantee by the second defendant. There is no evidence that Mr Joe had given the plaintiff a guarantee before. The plaintiff's general manager, Mr Janssen, says that the contract was drafted in New Zealand and faxed to Fiji for the defendants' signing and return. The copy of the credit account application form put in evidence shows that it was faxed from the defendants on 12 December 2005. As the guarantee was given by fax, the postal rule does not apply. This document is the basis for the plaintiff's claim against the second defendant. The contract of guarantee constituted by the signing of the credit account application form containing the guarantee provision was formed when the

defendants faxed the signed form back to the plaintiff in New Zealand. It is the receipt of the fax in New Zealand that completes the formation of the contract. The guarantee was given in New Zealand

15 Mr Joe denies that the documents he signed were intended to have contractual effect. He says that he...