Australia Health & Nutrition Association Limited v Hive Marketing Group Pty Limited

Supreme Court of NSW|2018-08-10|Before: McDougall J

Solicitors: Baker McKenzie (Plaintiffs) Squire Patton Boggs (First Defendant) James Tuite & Associates Lawyers (Second Defendant) File Number(s): 2018/170625

Judgment

HIS HONOUR: The second defendant (Emirat) seeks orders that the proceedings brought against it be dismissed, or permanently stayed, or that service of the summons on it be set aside. It relies upon an "exclusive jurisdiction" clause in the contract between it, the first plaintiff (Sanitarium) and the second defendant (Hive) pursuant to which it is sued.
If Emirat's application fails, the plaintiffs seek leave to proceed against it.

The relevant principles

One of the principal functions of exclusive jurisdiction clauses is to ensure that all disputes are determined in a coherent manner by a single jurisdiction. Such clauses seek to minimise the risk that related disputes will be determined by multiple tribunals, with possibility of divergent findings of fact or law. See Spigelman CJ (with whom Giles and Tobias JJA agreed) in Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) [1] at [67].
Spigelman CJ reinforced the underlying policy considerations in Global Partners at [84] where his Honour said: [84] It is, of course, true that the existence of an exclusive jurisdiction clause is not determinative. The fact that the relevant power of the court is conferred in discretionary terms indicates that other considerations may be taken into account. However, the case law with respect to exclusive jurisdiction clauses is clear and unequivocal. The cases reflect important policy considerations, relevantly, that parties should be held to their contractual bargains and that resolution of disputes arising from contractual arrangements should occur in a coherent and consistent manner and as expeditiously and efficaciously as possible. This suggests that the fewest different jurisdictions should be involved in resolving the fewest number of separate proceedings.
Thus, his Honour said at [89], one would need strong reasons, or strong cause, or substantial grounds, or strong countervailing circumstances, not to enforce that aspect of the parties' bargain.
There is a well entrenched presumption that where parties contract on an equal footing and negotiate, as part of their bargain, an exclusive jurisdiction clause, they should be held to that term (as others) of their bargain. See Toohey, Gaudron and Gummow JJ in Akai Pty Ltd v People's Insurance Co Ltd [2] at 445; Spigelman CJ in Global Partners at [67]; and Allsop J in Incitec Ltd v Alkimos Shipping Corporation [3] at [42] - [43], [45], [47].
The strength of that consideration - the desirability of holding parties to their freely negotiated bargain - has been expressed in various ways: "strong cause" must be shown for overriding it [4] ; a party seeking to enforce its bargain does not have to justify its decision to do so [5] . Considerations of inconvenience and the like to the parties themselves are not to the point, because the parties must be taken to have been considered those matters in reaching the bargain they did. As Allsop J put it in Incitec at [49], "the direct consequences of the bargain entered… generally, can be set to one side". I set out that paragraph: [49] At the outset, it should be recognised that the second competing consideration should not be expressed too broadly. To the extent that the operation of the exclusive jurisdiction clause causes financial or forensic inconvenience to the party which bound itself to the clause, that, of itself, is to be seen as only the direct consequence of the bargain entered and, generally, can be set to one side. What really are of importance in weighing against the operation of the exclusive jurisdiction clause are: (a) the inconvenience, if any, whether financial or other, caused to third parties; (b) the effect, if any, upon the due administration of justice; and (c) any other appropriate public policy consideration that can be discerned in all the circumstances.
That last point may be put in somewhat different terms. Spigelman CJ said in Global Partners at [91] that "the approach applicable to forum non conveniens is not applicable to an exclusive jurisdiction clause"

The evidence

Emirat's case, consistent with the authorities, is that it wished to have the benefit of its bargain. Accordingly, its evidence did no more than say that.
The plaintiffs relied on two affidavits, one sworn by their solicitor in this court and one by a solicitor of the Supreme Court of England and Wales. Relevantly, that evidence was to the effect that: 1. the likely cost of conducting the dispute in this court would be of the order of $330,000; and 2. the cost of conducting the same dispute in the High Court of England and Wales would be of the order of £462,000 to £662,000.
That is a very substantial difference in costs. Its significance is magnified by the consideration that the amount effectively at issue is of the order of $1.4 million, or approximately £800,000.
The parties appeared content to proceed on the assumption that recovery pursuant to a costs order would operate in much the same way in both jurisdictions; that is to say, if costs were to be assessed on the ordinary basis or its equivalent, the same percentage would likely to be allowed.
Hive's evidence was to the effect that it wished to file a cross-claim against Emirat. However, it has deferred doing so until the outcome of Emirat's application becomes known.
Hive's evidence pointed out, further, that it would be "expensive and onerous… for Hive to litigate overseas", and that its witnesses and lawyers were all residents of this State. The affidavit asserted also that the promotion was one run in this country, open only to Australian residents, and governed (as between Sanitarium, Rebel and Hive) by the law of this State.
I have to say that I do not understand the significance of that further evidence. It might have been relevant to a forum non conveniens argument. But as Spigelman CJ said in Global Partners at [91], that is not the approach taken in an application of this nature.
Alternatively, and to put the matter in the way that Allsop J did in Incitec (see at [17] above), that further evidence should be disregarded because considerations of cost and convenience are among the very matters that the parties must be taken to have considered when striking the bargain they did.

The parties' submissions

Mr Darams of Counsel, who appeared with Mr Brendan Jones of Counsel for Emirat, relied on the exclusive jurisdiction clause. He submitted that there were no strong or substantial reasons for disregarding it. In particular, he submitted, the invidious situation in which, Hive said, it found itself should not be determinative, because it was the choice of Hive, in entering into a contract that contained the exclusive jurisdiction clause in question, that had led to that situation arising.
As to the position of Rebel, Mr Darams submitted that it should not be regarded as a "third party" of the kind to which Allsop J had referred in Incitec at [49]. In any event, Mr Darams submitted, Rebel had chosen to become involved in the overall transaction comprising the two separate agreements, and even if it were not aware of the detail of the risk transfer agreement, nonetheless its position and interests should not trump those of Emirat.
Mr Pike of Senior Counsel, who appeared with Ms Rich of Counsel for the plaintiffs, relied upon the fact that Rebel was not a party bound by the exclusive jurisdiction clause. He submitted that to refuse a stay would lead to multiplicity of proceedings. That in turn raised the spectre of inconsistent findings where there was one overall transaction that gave rise to related issues arising out of the same facts.
Mr Pike submitted that it would be contrary to the interests of justice to force Sanitarium and Rebel to litigate in England, given that the promotion agreement was one for performance in this country, the relevant witnesses were citizens of this country, and that the costs of litigating in England were likely to be out of all proportion to the amount at stake (a factor to be contrasted, he submitted, with the costs that would be incurred here).
Mr Le Plastrier of Counsel, who appeared for Hive, adopted the submissions of Mr Pike. In addition, Mr Le Plastrier pointed to particular provisions of the promotion agreement that showed, he submitted, that Hive was effectively the agent of Emirat. Indeed, Mr Le Plastrier went so far as to submit that Emirat was bound by that agreement. In any event, Mr Le Plastrier submitted, Emirat must have understood that disputes arising out of the promotion agreement would be litigated in the courts of this state, and must be taken to have accepted that state of affairs in relation to the overall transaction.

Decision

The essence of the opposition to Emirat's application lies in the suggested risk of multiplicity of proceedings, with the consequent possibility of inconsistent findings on issues of fact and law. That risk would arise, it is said, because if Emirat is granted, in one form or another, the relief that seeks then: 1. Sanitarium and Rebel would be free to continue their action against Hive in this court, pursuant to the promotion agreement; but 2. Sanitarium and Hive would be compelled to litigate their dispute with Emirat in the courts of England.
The second matter is, of course, a direct consequence of enforcing (by granting Emirat one form or other the relief that it seeks) the exclusive jurisdiction clause contained in the risk transfer agreement. The three parties to that agreement committed themselves to litigating their disputes in the courts of England. Two of them can hardly complain if, disputes having arisen, the third insists on observance of that stipulation.
The risk of multiplicity of proceedings and inconsistent findings thus must be based on the assumption that Sanitarium and Rebel would continue with their action against Hive in this court, even in circumstances where they were required to prosecute their related action against Emirat in the courts of England. But there is no reason why Sanitarium and Rebel could not do in the courts of England what they have done in this court: namely, sue both defendants on both agreements (according to their view of the respective liabilities of each defendant under each agreement).
Thus, it seems to me, the spectre of multiplicity and inconsistency will only materialise if Sanitarium and Rebel decline to take a choice that is available to them, and instead insist on taking proceeding in two different jurisdictions, against different defendants, arising out of the one overall transaction. If (and only if) Sanitarium and Rebel take that course, the fundamental common issue - Emirat's liability under the risk transfer agreements - will be raised for decision in two different courts.
Sanitarium, Rebel and Hive say that the proper way to avoid this outcome is to deprive Emirat of the benefit of its bargain, and to permit the proceedings in this court to continue. That submission overlooks the fact that there is an alternative course, readily available to Sanitarium and Rebel, which would lead to one hearing in which all disputes between all parties could be resolved. That alternative course is one to which Sanitarium and Hive are, as to the fundamental common issue just identified, contractually committed.
No one has pointed to any reason why Sanitarium and Rebel could not, at the same time as proceeding with their claim under the risk transfer agreement against Emirat in an English court, proceed at the same time in the same court with their claim under the promotion agreement against Hive, and indeed in the same action. It will be noted that cl 20 of the risk transfer agreement gives the English courts exclusive jurisdiction to hear and decide "all disputes arising out of or in connection with" the risk transfer agreement. On the facts of this case, a dispute in relation to the promotion agreement that, in effect, was backed, or underwritten, by the risk transfer agreement would fall within those words.
It is obvious that all disputes arising out of the overall transaction should be resolved, so far as possible, in one proceeding in one court. Contractually, the only court that can resolve the disputes in so far as they involve Sanitarium, Hive and Emirat under the risk transfer agreement is a court in England. There was no submission that such a court could not also hear, in the same proceeding, the dispute between Sanitarium, Rebel and Hive under the promotion agreement.
Three of those four parties have bound themselves contractually to litigate one aspect of their disputes exclusively in the courts of England. They have also, as it seems to me, given those courts jurisdiction in disputes that arise out of or in connection with their contract. I accept that it would be more expensive and less convenient for two of those three parties to litigate their disputes in England. But that is the consequence of their acceptance of cl 20 of the risk transfer agreement.
That leaves only one party, Rebel, that has not bound itself to accept the exclusive jurisdiction of the courts of England. I accept that it will suffer the disadvantages of increased expense and lessened convenience if, against its preference and will, it joins with Sanitarium in litigating in England.
So viewed, the fundamental question for decision on Emirat's application seems to me to come down to this: is the spectre of multiplicity and inconsistency, which is within the power of one out of four litigants to raise from the grave or dispel, a sufficient reason for depriving another litigant of the benefit of its contract against the remaining two litigants? In a sense, Rebel's position is that it can bring about the consequences of multiplicity and possible inconsistency simply by proceeding with its action in this court against Hive alone. The risk that Rebel may do so is said to be a sufficient reason for overriding the strong inclination towards recognising Emirat's right to insist upon the benefit of its exclusive jurisdiction clause.
The simple fact is that the parties, having documented their overall transaction in two separate contracts to which not all are parties and which contain inconsistent jurisdiction clauses, have created a situation where one or other, Emirat or Rebel, will suffer disadvantage. Emirat will suffer disadvantage if it is deprived of the benefit of the exclusive jurisdiction clause. Rebel will suffer disadvantage if, effectively for practical rather than legal reasons, it is constrained to continue with its litigation in the courts of England.
The position of Sanitarium and Hive is, in my view, neutral in the analysis. It is neutral because each has bound itself, at least in respect of differences under the risk transfer agreement, to accept the exclusive jurisdiction of the courts of England.
The issues cannot be divorced. As between Sanitarium and Rebel on one side and Hive on the other, a key issue will be Hive's entitlement to refuse to indemnify Rebel in circumstances where Emirat has refused to indemnify Hive. That will involve, necessarily, an analysis of the legal and factual justifications for Emirat's position. Exactly the same issues will be raised in the litigation between Sanitarium, Hive and Emirat. Something must give. Is it to be the commercial interest and contractual right of one of the litigants to maintain its exclusive jurisdiction clause? Or is it to be the commercial interest of another litigant to maintain its understandable desire to litigate in a more convenient and less expensive forum?
So analysed, I do not think that the interest of Rebel in litigating in this court is a consideration of sufficient strength, or substance, so as to deprive Emirat of the benefit of its exclusive jurisdiction clause. Rebel must have known, when it signed the promotion agreement, that Emirat had agreed to underwrite Hive's obligation to indemnify Rebel for the value of vouchers that Rebel honoured. If Rebel chose not to investigate the terms on which that indemnity was offered, it can hardly complain because they are, in this one respect, unsatisfactory to it. And if Rebel did investigate, it can hardly complain if Emirat later insists on the observance of one of those terms.
The facts with which I am concerned are substantially different to those with which Allsop J was concerned in Incitec. His Honour, having considered the relevant facts at some length, concluded at [66] that "[t]he balance is a fine one". On the very different facts before me, the same could be said.
In circumstances where the risk that is said to justify depriving one party to the litigation of the benefit of a contractual right that it enjoys against two of the three others can be either promoted or dispelled by the actions of the fourth, I do not feel inclined to say that the risk provides any sufficient justification for depriving a party of its contractual right.

Conclusion and orders

Emirat has made good its claim to relief in one form or another. It follows from this that the application by the plaintiffs for leave to proceed must be dismissed.
As between Emirat and the plaintiffs, costs should follow the event of each notice of motion. That is to say, the plaintiffs should pay Emirat's costs of its notice of motion and of their notice of motion. Although Hive opposed the relief sought by Emirat, the reality is that it was the plaintiffs who made the running. In the circumstances, it seems to me, no order as to costs should be made in respect of Hive.
The parties did not direct submissions specifically to the form of relief that should be granted were I to conclude, as I have done, that Emirat should have the benefit of the exclusive jurisdiction clause. The decision in Global Partners is clear authority for the proposition that proceedings brought in defiance of an exclusive jurisdiction clause may be dismissed (see Spigelman CJ at [5] - [7], [99]). That is the course I propose to take, as between Sanitarium and Emirat. The dismissal will not bar the bringing of further proceedings (see s 91 of the Civil Procedure Act 2005 (NSW)).
In theory, that will leave the action to proceed as against Hive. What should happen is a matter for the parties to consider, in the light of my reasons and orders. I shall list the matter for directions to give them a chance to do so.
I make the following orders: 1. order that as between the first plaintiff and the second defendant, the proceedings be dismissed. 2. Order the plaintiffs to pay the second defendant's costs of the second defendant's notice of motion filed on 21 June 2018. 3. Order that the plaintiffs' notice of motion filed on 30 July 2018 be dismissed with costs. 4. Make no other order as to the costs of either notice of motion. 5. List the matter for directions in the Commercial List on 17 August 2018.

Endnotes

(2010) 79 ACSR 383.
(1996) 188 CLR 418.
(2004) 138 FCR 496.
See Brandon J in The "Eleftheria [1970] P 94 at 99, cited with approval by Allsop J in Incitec at [42].
See Allsop J in Incitec at [45]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 August 2018

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