Litigation involving an overseas party: can you commence proceedings by post?
|Services:||Competition & Consumer Law, Dispute Resolution & Litigation, Insurance, Intellectual Property & Technology, International Desk|
|Date:||13 September 2017|
|Author:||Hayley Upton, Associate|
What you need to know
- An Australian business might contemplate litigation against an overseas party for a wide variety of reasons, such as a claim arising from a breach of contract with a foreign-based supplier or manufacturer.
- One of the first hurdles in such litigation is ensuring that originating process documents are served correctly, which is where the Hague Service Convention comes into play – this is a treaty to which Australia is one of many member parties, and it facilitates the service of court documents to overseas parties.
- The requirements of the Hague Service Convention were recently explored in a decision of the US Supreme Court, which dealt specifically with service by post and serves as a useful reminder that some homework will be required to ensure the validity of this method of service.
A case study on attempted service by post
Water Splash Inc (Water Splash) is a Texas corporation that manufactures aquatic playgrounds. Tara Menon (Menon) is a former employee of Water Splash who resides in Quebec, Canada.
In 2013 Water Splash initiated proceedings against Menon for commencing work for a competitor while still employed by Water Splash.
In circumstances where Menon lived in Canada, Water Splash obtained permission to serve process documents by post. When Menon failed to respond or enter an appearance, the trial judge ordered default judgment against Menon.
Menon subsequently filed a motion to set aside the judgment on the ground that she was not properly served under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Service Convention). The Hague Service Convention is a treaty which allows for the service of process documents from one member country to another, and to which the United States and Canada are both members. After the trial judge denied the motion, Menon appealed to the Texas Court of Appeals, which reversed the trial judge’s decision and agreed that the Hague Service Convention prohibits service of process by mail.
Ordinarily a decision of the Court of Appeals is final. However, if a party wants the Supreme Court to review a decision for legal error they can file a 'petition for writ of certiorari'. In this instance, Water Splash’s petition was successful and the Supreme Court granted certiorari to resolve the conflict. The Supreme Court’s decision was handed down in May 2017.
What does the Hague Service Convention say about service by post?
To determine whether the Hague Service Convention allowed service of process documents by mail in the Water Splash case, the Supreme Court looked to the text of the treaty and the context in which words are used. The Court held that the primary method of service under the Hague Service Convention is set out in Articles 2 to 7 which require that:
- each state establish a central authority to receive requests for service of documents from other member countries
- when the central authority has received the relevant documents it must serve the documents or arrange to have them served by an appropriate agency
- after service is carried out the central authority must complete a certificate of service which states that the document has been served and details the method, place, date and recipient.
The Court noted however that this was not the only method of service approved by the Hague Service Convention, and referred to service through diplomatic and consular channels (Article 8), by agreement between two member countries (Article 11) and methods permitted by internal laws of the member countries (Article 19).
The issue of contention before the Court in the Water Splash case was the meaning of the postal provision in Article 10:
Provided the State of destination does not object, the present Convention shall not interfere with –
- the freedom to send judicial documents, by postal channels, directly to persons abroad
- the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination
- the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination.
The Court held that the case revolved around whether the phrase in Article 10(a) 'send judicial documents' included sending documents for the purposes of service. In particular, the Court was concerned with the meaning of the word 'send'. The Court adopted a broad interpretation of the term and determined that there was no apparent reason why the term should not include the transmission of documents for a particular purpose such as service. The Court held that in circumstances where the text of the Hague Service Convention is limited to service of documents, and having regard to the structure and drafting history of the treaty, it would be strange if Article 10(a) related to something else.
The Court went on to caution that while Article 10(a) encompasses service by mail, it does not follow that the Hague Service Convention affirmatively authorises service by post. Article 10(a) merely allows the freedom to serve documents through postal channels so long as the receiving member country does not object. Put simply, in cases subject to the Hague Service Convention, service by mail is allowed if:
- the receiving country has not objected to service by mail, and
- service by mail is otherwise authorised under the applicable law in the jurisdiction where proceedings are to be commenced.
In the Water Splash case, the Court accepted that the first limb was satisfied in that Canada had not objected to service by mail. However, the Court remanded the matter to the Texas Court of Appeals to consider whether service by mail is permitted under Texas law.
What does this mean for Australian businesses?
Australia became a member of the Hague Service Convention in 2010. A full list of the member countries can be found here.
Australia allows service by mail under Article 10 so long as:
- it is permitted in the jurisdiction in which the process documents are to be served, and
- documents are sent by registered mail.
Australian businesses may find themselves in litigation with overseas parties for a wide variety of reasons. For example:
- Australian-based businesses that develop or distribute products to Australian consumers often rely on foreign manufacturers and suppliers, making them particularly vulnerable to cross-border disputes when a problem arises with the product (such as a flaw or safety concern that raises product liability issues)
- Australian brand owners may come across foreign-based parties engaging in conduct that infringes their intellectual property rights, such as operating a website that reproduces material protected by Australian copyright or trade mark laws.
Australian businesses may have causes of action against foreign parties based on breach of contract, negligence claims, infringement of intellectual property rights or claims brought under the Australian Consumer Law (ACL), to name a few. Only a few months ago we shared an update about a US-based business that was pursued by the Australian Competition and Consumer Law Commission for breaches of the ACL, and ordered by the Federal Court of Australia to pay a $3 million penalty.
Where the claim is based on a contractual breach, it’s important to first consider the ‘choice of laws’ provision in that contract to ensure proceedings can be commenced in Australia. In some cases, contracts will expressly state that disputes will be resolved under the laws of another jurisdiction. If an Australian business wants to have the opportunity for disputes to be addressed and heard on home turf, this will need to be addressed during contract negotiation.
Assuming proceedings can be commenced in Australia, a potential litigant should carefully consider their proposed method of serving originating documents on the opposing party. The Water Splash decision is a valuable reminder that where cross-border litigation involves another party to the Hague Service Convention, and service of documents is proposed to be managed by post, it’s critical to check whether this method of service will be recognised in the jurisdiction of the recipient.
It is also important to note that Australia is party to a number of bilateral treaties on judicial assistance. These treaties offer a method for the service of documents where the country is not a member of the Hague Service Convention and diplomatic channels or private process servers are not convenient or possible.
1. Water Splash, Inc. v Menon, 581 U.S.___(2017).
2. Ibid, pp. 2-3.
3. Ibid, p. 3.
4. Ibid, p. 5.