Note: Castel Electronics Pty Ltd (Buyer) bought air-conditioning products from TCL Airconditioner (Zhongshan) Co. Ltd. (Vendor) in China for resale in Australia.

Alleging that Vendor had failed to ship products on time and that supplied products did not meet contractual specifications, Buyer sued Vendor for breach of contract. The trial court dismissed the claim. The Supreme Court of Victoria, Davies, J., dismissed Vendor's appeal that there was error in the service of process outside Australia.

Buyer served legal process in China on Vendor, a chinese corporation, summoning it to appear before court in Australia under the Australian Supreme Court (General Civil Procedure) Rules 2005 (Victoria), r 7.05. Buyer argued the contract was made in the Australian State of Victoria, governed by Victoria's law, and breached in Victoria. Vendor asserted that Buyer's service of claim was not authorized by r. 7.01 because the sales contracts were made in China, governed by Chinese law, and the breach, if existing, occurred in China. The Australian court ruled that service outside of Australia was justified under the Supreme Court Rules (SCR), rr 7.01(f)(i) and (iii), but not under r 7.01(g).

The appellate Judge stated Buyer was required "to show a strong arguable case as to the existence of the jurisdictional facts supporting service of a claim outside of Australia." Vendor argued the contracts were made in China because its invoices were offers that Purchaser accepted by signing and returning to Vendor in China by fax, email, or by obtaining a commercial LC payable to Vendor in China. Buyer made a strong arguable case, however, that the sales contracts were formed in Victoria because the invoices sent by Vendor to Buyer were offers that became a contract once Buyer accepted the terms of the invoice in Australia per the United Nations Convention on Contracts for the International Sale of Goods 1980, Art 14(1). It argued the fact that payment was made possible by LC payable to Vendor in China had no bearing on whether Buyer was allowed to serve Vendor with process outside of Australia.

Buyer made a strong arguable case that the contracts were governed by the law of Victoria because the Vendor's products were to be distributed in Australia, manufactured according to Australian specifications, and the parties agreed disputes would be arbitrated in Australia. The Judge concluded that these factors outweighed Vendor's manufacture of products inside China.

The Appellate Judge did not believe that Buyer made a strong arguable case that the contracts were breached in Victoria. If there was any breach, it occurred at the port of shipment from China and not the port of delivery. Nonetheless, the Judge dismissed the appeal and upheld the original order that Vendor be liable for Buyer's initial court costs because it was within the court's discretion to order costs against Vendor.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.