Andrews v Bells Sports Australia Pty Ltd & Ors [2006] QDC 249

DISTRICT COURT OF QUEENSLAND CITATION: Andrews v Bells Sports Australia Pty Ltd & Ors [2006] QDC 249 PARTIES: GUY ANDREWS Plaintiff/Respondent and BELLS SPORT AUSTRALIA PTY LTD (ACN 075 349 334) First Defendants and NOEL PHILLIPS and DEBBIE JUNE PHILLIPS Second Defendant and PROFILE DESIGN INC Third Defendant/Applicant and ANTHONY FORBES and GLENN FORBES Fourth Defendants and CANNIBAL IN SPORT PTY LTD ACN 053 135 970 Fifth Defendant and YIH CHENG MFG CO. LTD Third Party FILE NO: 885 of 2001 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: Southport DELIVERED ON: 2 August 2006 DELIVERED AT: Brisbane HEARING DATE: 20 March 2006 -- 1 of 13 -- 2 JUDGE: Dearden DCJ ORDER: Judgment Be Entered On Behalf Of The Third Defendant CATCHWORDS: APPLICATION – Application for Summary Judgment – Real Prospects of Success – Jurisdiction Uniform Civil Procedure Rules r 376 Trade Practices Act 1974 (Cth) ss 4, 5, 74B, 74D Corporations (Application of Laws) Act 1989 (Cth) s 74 Cases Cited: Bray v F Hoffman-La Roche Ltd (2002) 190 ALR 1 Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 Queensland Pork Pty Ltd v Lott [2003] QCA 271 COUNSEL: Mr M R Bland for the Plaintiff Mr K Holyoak for the third Defendant SOLICITORS: MacDonnells for the Plaintiff Barry and Nilsson Lawyers for the third Defendant Introduction [1] This litigation, which on the face of it, has now involved five separate defendants and a third party, has had a long and tortuous history. For the purpose of this judgment, it is necessary only to set out a brief background of the matter. The plaintiff, whom I am informed by counsel is “the reasonably well-known Iron Man1” was participating in the Gold Coast Rotary charity bicycle race on 30 August 1998 when, at the Gold Coast Highway at Burleigh 1 T p 10 -- 2 of 13 -- 3 Heads, the handlebar stem of the bicycle he was riding broke, causing him to fall and sustain personal injuries2. Litigation Background [2] At the hearing of this matter before me on 20 March 2006, the plaintiff was granted leave to discontinue proceedings against the second, fourth and fifth defendants. The first defendant is deregistered, has been since 26 June 20013 and therefore has not, in reality, been in existence since prior to the commencement of the litigation. The third defendant issued third party proceedings against Yih Cheng Mfg Co. Ltd4, but those proceedings have not yet been served5. [3] Relevantly (insofar as the third defendant is involved), the cause of the failure of the handlebar stem is asserted to be a failure of the metal on that stem6. [4] In the further amended statement of claim7, the plaintiff pleads that the third defendant is a corporation incorporated according to the laws of the United States of America8 and is capable of being sued9. The second amended defence of the third defendant10 admits that the third defendant is a limited liability company incorporated in the United States of America and that it exists as a 2 Statement of claim filed 29 August 2001, paras 6-9 3 Affidavit of Mathew Thomas Deighton sworn 17 March 2006, filed by leave on 20 March 2006, paras 3 and EXMTD 02 4 Third party notice (document 41) filed 29 August 2005 5 T p 7 6 Statement of claim para 10(a) 7 Document 32 filed 7 March 2005 8 Second amended defence of the third defendant, para 5(a); Corporations (Application of Laws) Act 1989 (Cth) s 74 9 Para 2(k) – further amended statement of claim 10 Document 45 – filed 2 March 2006 -- 3 of 13 -- 4 separate entity for the purposes of the application of Australian law, if Australian law applies to it11. The Mystery of the Handlebar Stem [5] I am indebted to Mr Holyoak, counsel for the third defendant for the following analysis of the plaintiff’s pleadings and affidavit material in respect of the issue as to how the relevant handlebar stem came to be fitted to the bicycle which the plaintiff was riding on 30 August 199812. [6] The alternative pleadings include: (a) The first defendant was the manufacturer of the handlebar stem13; (b) The handlebar stem had been imported by the first defendant for sale in Australia14; (c) Further or alternatively, the handlebar stem was manufactured by the third defendant15; (d) The bicycle was assembled by the fourth defendants, their servants, agents or employees16; (e) The bicycle was assembled by the first defendant, their servants, agents or employees; (f) Alternatively, the fifth defendant imported the handlebar stem to Australia from Security Bicycle Accessories (a corporation or 11 Second amended defence of the third defendant, para 5(b) 12 Outline of submissions on behalf of the third defendant, paras 6 & 7 13 Further amended statement of claim, para 2(c) 14 Further amended statement of claim, para 2(c) 15 Further amended statement of claim, para 2(h) 16 Further amended statement of claim, para 2(i) -- 4 of 13 -- 5 business based in New York) who in turn purchased the goods from the third defendant or the third party17; (g) Alternatively, the handlebar stem was manufactured by the third party18; (h) Alternatively, the handlebar stem was sold by Alico through High Spec Trading Co in Taiwan to the first defendant19; (i) Alternatively, the first defendant then supplied the handlebar stem to the second, fourth and/or fifth defendants20; (j) At some date prior to 30 August 1998 the first defendant sold or supplied the handlebar stem to the second defendants21; (k) On some date prior to 30 August 1998 the fourth defendant and/or fifth defendant sold or supplied the handlebar stem to the plaintiff as part of the bicycle assembled by or on behalf of the fourth defendant and/or fifth defendant22. [7] Counsel for the third defendant then asserts that the affidavit material filed by or on behalf of the plaintiff in these proceedings reveals “at least in part inconsistently with the plaintiff’s own pleadings23: (a) The bicycle, containing the stem, was given to the plaintiff as a gift from a sponsor, Cannibal Clothing Company (the fourth defendants)24 approximately two years prior to the incident in question at some time in late 199625; 17 Further amended statement of claim, para 2(l) 18 Further amended statement of claim, para 2(m)(i) 19 Further amended statement of claim, para 2(m)(v) 20 Further amended statement of claim, para 2 (n)(vi 21 Further amended statement of claim, para 4 22 Further amended statement of claim, para 5 23 Outline of submissions on behalf of the third defendant, para 7 24 See affidavit of Lisa Honeychurch sworn 23 January 2004 25 Affidavit of Guy Andrews sworn 23 January 2004, para 3 -- 5 of 13 -- 6 (b) Cannibal Clothing Company (the fourth defendants)26 purchased a number of parts for the bicycle from “Gold Coast Triathlete” and the balance of the parts direct from a company in the USA called “Security Bicycles”27; (c) The plaintiff was informed by representatives of “Gold Coast Triathlete” (the second defendant) that if they supplied the part it would have been obtained from the first defendant28; (d) The information outlined (above) in paras (a)-(c) was the full extent of the knowledge of the plaintiff as to the origin of the parts29; (e) The bicycle, including the handlebar stem, was a gift as part of a sponsorship arrangement30; (f) The fifth defendant purchased and/or imported the handlebar stem from Security Bicycle Accessories in the United States of America31. [8] It is clear (as Mr Houghton, on behalf of the third defendant submits32) that the source of the handlebar stem is “entirely unclear”. On the current state of the evidence, it appears that the handlebar stem was manufactured by the third party33, labelled by the third party with the name “Profile” 34 and was imported by the third defendant into the United States of America from the third party in 26 Affidavit of Lisa Honeychurch sworn 23 January 2004, para 4 27 Affidavit of Guy Andrews sworn 23 January 2004, para 4 28 Affidavit of Guy Andrews sworn 23 January 2004, para 5 29 Affidavit of Guy Andrews sworn 23 January 2004, para 6 30 Affidavit of Lisa Honeychurch sworn 23 January 2004, paras 4 7 22(a); affidavit of Guy Andrews sworn 23 January 204, para 3 31 Affidavit of Lisa Honeychurch sworn 1 December 2003, para 9; affidavit of Lisa Honeychurch sworn 23 January 2004, paras 20 & 23, and Exhibit LMH3 32 Outline of submissions para 8 33 Affidavit of Mark Vandermolen, sworn 22 February 2006 34 Affidavit of Mark Vandermolen, sworn 22 February 2005, para 4(j) -- 6 of 13 -- 7 Taiwan35, was likely to have been manufactured by the third party after 199436 and was advertised for sale in the third defendant’s “Profile 1994” catalogue printed in 199337. [9] The third defendant relevantly asserts that it “has not at any time had a business entity owned or controlled by it located in Australia” and “has not ever exported any bicycle parts, including bicycle stems, to retailers or consumers in Australia on its own behalf”38. However, “independently owned and operated businesses in Australia who wished to acquire products of the third defendant in the United States of America” could “acquire those products for … resale in Australia, from a retailer in the United States of America”39. The Issue for Judgment [10] Both Mr Holyoak40 for the third defendant and Mr Bland41 for the plaintiff agree that the issue to be decided in this judgment is whether there is any “real prospect” 42 of establishing that the third defendant carried on business within Australia at the relevant time43. 35 Affidavit of Mark Vandermolen, sworn 22 February 2006, para 4(a) & (b) 36 Affidavit of Mark Vandermolen, sworn 22 February 2005, para 4(o) 37 Affidavit of Mark Vandermolen, sworn 22 February 2006, para 4(o) 38 Affidavit of Mark Vandermolen, sworn 22 February 2006, para 5 39 Affidavit of Mark Vandermolen, sworn 22 February 2006, para 6 40 T p 39 41 T pp 63-64 42 Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 per Williams JA at para 17, Atkinson J at para 47 43 Trade Practices Act 1974 (Cth) ss 5, division 2A, part V -- 7 of 13 -- 8 Leave to Amend the Plaintiff’s Statement of Claim by Filing of the Further Amended Statement of Claim on 8 March 2005 [11] The plaintiff filed a further amended statement of claim on 8 March 200544 which pleaded45 that the third defendant was liable for the plaintiff’s injuries by virtue of ss 74B and 74D of the Trade Practices Act 1974 (Cth)46 (TPA). It is not in dispute that leave is required to file that further amended statement of claim pursuant to UCPR r 37647. However, the issue of leave with respect to the further amended statement of claim becomes irrelevant if the summary judgment application by the third defendant is successful. The Law – Summary Judgment Application [12] In Deputy Commissioner of Taxation v Salcedo48, the relevant test was described by Williams JA as follows: “The Judge determining [a summary judgment application] is essentially called upon to determine whether the respondent to the application has established some real prospect of succeeding at trial”49. Atkinson J in Salcedo characterised the test as being that “the Court must consider whether there exists a real, as opposed to a fanciful, prospect of success” and further stated that “if there is no real prospect that a party will be successful in all or part of a claim, and there is no need for a trial, then ordinarily the other party is entitled to judgment”50. 44 Document 32 45 Further amended statement of claim, para 16A 46 Outline of argument for the plaintiff, para 2 47 T p 62 (Mr Bland) 48 [2005] 2 Qd R 232 49 Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 per Williams JA at para 17 50 Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 per Atkinson J at para 47 -- 8 of 13 -- 9 The Law – Trade Practices Act 1974 (Cth) [13] If the plaintiff is to have any prospect of succeeding against the third defendant (who at this stage is the only party remaining in the proceedings) it must have a “real prospect” of succeeding pursuant to TPA ss 74B and 74D. In order to do so, the plaintiff has to rely on the provisions of TPA s 5(1) which relevantly provides that “…part V [which includes ss 74B and 74D] extend to the engaging in conduct outside Australia by bodies corporate incorporated or carrying on business within Australia …”. [14] The third defendant is incorporated in the United States of America and is a foreign corporation within the meaning of that term in TPA s 4. The definition of “corporation” relevantly provides that it “means a body corporate that: (a) is a foreign corporation51”. The key issue then is whether the third defendant is “carrying on business within Australia52. Submissions of the Parties [15] In respect to this argument, Mr Bland (on behalf of the plaintiff) asserts that the affidavits of John Sunde53, (a former director of the first defendant) and Mark Vandermolen54, (Director of Product of the third defendant) “demonstrate that at the relevant time there was apparently a repetition of these transactions that 51 TPA 1974 s 4 52 TPA 1974 s 5(1) 53 Sworn 16 December 2005 54 Sworn 22 February 2006 -- 9 of 13 -- 10 extended to Australian customers”55. In short, Mr Bland submits that the affidavit of Mr Sunde (the former director of Sports Plus Australia Pty Ltd which was subsequently purchased by Bells Sports Australia Pty Ltd [the first defendant]) indicates that Sports Plus Australia Pty Ltd imported goods from Profile Design, among other bicycle component suppliers56. The affidavit of Mark Vandermolen57 indicates that “the third defendant has supplied independently owned and operated businesses in Australia who wished to acquire products of the third defendant in the United States of America as these parts were distributed in the United States of America and could be purchased by any retailer in the United States of America. An Australian retailer could, if it wished, acquire those products for its own use and resale in Australia from a retailer in the United States of America”58. [16] Mr Bland submits that the information in those affidavits of John Sunde and Mark Vandermolen indicate that the third defendant’s product was, at the relevant time, being supplied into Australia, therefore the “area in which the third defendant carried on its business extended to Australia59” and consequently that of itself “is sufficient to invoke the extra-territorial operation of [the TPA] pursuant to s 5 [of the TPA]”60. Mr Bland concludes that submission by arguing that his client therefore has “a real and not fanciful prospect of succeeding at trial” based on his submissions in respect of the extra- territorial operation of TPA s 561. 55 T p 58 56 Affidavit of John Sunde sworn 16 December 2005, paras 3 & 4 57 Sworn 22 February 2006 58 Affidavit of Mark Vandermolen, sworn 22 February 2006, para 6 59 T p 54 60 T p 54 61 T p 59 -- 10 of 13 -- 11 [17] Mr Holyoak, on behalf of the third defendant, submits firstly that the third defendant “can’t be shown to have put [the handlebar stem] in circulation in Australia … by any act of business within Australia”62 and secondly, that “there is no evidence that any business selling [handlebar] stems or otherwise was conducted in Australia by [the third defendant] other than people operating their own businesses that might bring [the third defendant’s] product in”63. [18] Mr Holyoak submits further that “although the applicant third defendant has the onus of proof [in respect of a summary judgment application], once a prima facie case has been made out entitling the applicant to judgment, then an evidentiary onus shifts to the respondent64, and he relies on Queensland Pork Pty Ltd v Lott65 as authority for that submission. [19] As Merkel J observed in Bray v F Hoffman-La Roche Ltd66: “the expression ‘carrying on business’ [in the Trade Practices Act] is not defined although s 4(1) defines ‘business’ as including a business not carried on for profit.” Merkel J goes on to observe that “whether a corporation is carrying on business within Australia is very much a question of fact”67. The decision on appeal of the Full Federal Court in Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 did not overturn the decision by Merkel J at first instance on this point. [20] Ultimately, Mr Bland, on behalf of the plaintiff, submits that, for the purposes of the Trade Practices Act s 5, a foreign corporation carries on its business in 62 T p 49 63 T p 50 64 Outline of submissions on behalf of the third defendant, para 26 65 [2003] QCA 271 per Jones J 66 (2002) 190 ALR 1, para 60 67 Bray v F Hoffman-La Roche Ltd (2002) 190 ALR 1, para 62 -- 11 of 13 -- 12 whatever locality its product ends up68. In that respect Mr Bland relies upon the affidavits of John Sunde69 and Mark Vandermolen70 which relevantly indicate that the firm of which Mr Sunde was a director did, from time to time, import product sold by the third defendant, and the third defendant acknowledges that product which it sold in the United States of America could be imported by Australian retailers. However, as Mark Vandermolen clearly states “The Third Defendant did not put goods into circulation in Australia by itself or by any distributor or agent”71. Conclusion [21] In my view, there is no direct evidence that has been placed before this Court which explains how the particular handlebar stem on the plaintiff’s bicycle found its way to Australia (although there are various possibilities which are canvassed in the plaintiff’s pleadings), nor is there any direct evidence other than that product sold by the third defendant has, without being marketed directly or indirectly by the third defendant in Australia, found its way to Australia. [22] I accept (as submitted by Mr Holyoak on behalf of the third defendant72) that there is “no evidence that there was any business being done by the third defendant, rather than independently-operated businesses [conducted] on their own behalf in distributing goods of the third defendant in Australia.” It is clear, 68 T p 58 69 Sworn 16 December 2005 70 Sworn 22 February 2006 71 Affidavit of Mark Vandermolen, sworn 22 February 2006, para 6 72 Outline of submissions of the third defendant, para 46 -- 12 of 13 -- 13 I believe, that carrying on a business by a company requires something more than being passively aware that the company’s product is finding its way to a particular locality (in this case, Australia). It is, in my view, an inevitable conclusion, then, that the third defendant was not, at the relevant time in respect of these proceedings, “carrying on business in Australia”. Having reached that conclusion, I find that there is no “real prospect” of the plaintiff succeeding at trial, nor (particularly given the very narrow point) is there any need for a trial. The conclusion that there is no “real prosect” of success is not, I consider, displaced by any evidence relied upon by the plaintiff. Order [23] Accordingly, I order that judgment be entered on behalf of the third defendant. [24] Given the conclusion that I have reached in respect of the summary judgment proceedings, it is no longer necessary for me to consider the plaintiff’s application for leave pursuant to UCPR r 376. [25] I will hear the parties on costs. - - - - - -- 13 of 13 --