AUSTRALIAN RELIANCE GROUP PTY LTD -v- COVERFORCE INSURANCE BROKERS VICTORIA PTY LTD [2016] WASC 244 (9 August 2016)

3 The proceedings were commenced by the plaintiff (ARG) against the first to fourth defendants by originating process dated 19 February 2016, seeking an injunction under s 33 of the Corporations Act or the court's inherent jurisdiction to restrain the first and second defendants from registering any transfer of shares held by ARG in the first defendant to the second defendant (Byron Dreaming) or any retransfer by Byron Dreaming, or seeking an order to reinstate such shares, as appropriate. The first defendant has changed its name since the material events but consistent with the approach of the parties, I will refer to the first defendant as Reliance Insurance.

4 The injunction application was heard by the court on the day it was filed. It became apparent during the course of the hearing that a transfer of the shares had already been effected to Byron Dreaming and that those shares had then been transferred by Byron Dreaming to an entity known as Coverforce Victoria Holdings Pty Ltd (Coverforce Victoria). Accordingly, the restraint aspect of the injunction application fell away. The matter was adjourned to 15 March 2016 before the Master and further adjourned to 5 April 2016. On that date, orders were made that ARG bring an application for joinder of Coverforce Victoria and the matter was otherwise adjourned. On 19 April 2016, orders were made (relevantly) that Coverforce Victoria be joined as the fifth defendant and that ARG file its statement of claim by 10 May 2016.

5 The statement of claim was filed on 12 May 2016. Following correspondence, the defendants brought an application for production of a document referred to in the statement of claim as the PSC sale agreement and which the defendant said they needed in order to plead their defence (affidavit of Fraser Ricupero filed 5 July 2016, FPR11). That application was programmed to a hearing but dismissed by consent on 26 May 2016, ARG having by then provided the document in redacted form. Following the defendants' request, further and better particulars of the statement of claim were filed on 20 May 2016.

6 This application was then filed on 30 May 2016. The defendants filed their defence on 2 June 2016. A reply was filed on 1 July 2016. ARG filed an affidavit of discovery on 15 July 2016.

7 The contentions in ARG's statement of claim can be summarised as follows:

(a) Until 18 February 2016, ARG and the second to fourth defendants (Byron Dreaming, Sun Devil and Howarth) were each the holders of shares in Reliance Insurance. Two hundred shares had been issued and they were held as follows: ARG (70), Byron Dreaming (62), Sun Devil (62) and Howarth (6).

(b) Those shareholdings were governed by a Shareholders Agreement dated 3 December 2013, made between each of ARG, Byron Dreaming, Sun Devil and Howarth.

(c) Since 19 February 2016, all shares have been held by Coverforce Victoria, a company incorporated on 18 February 2016.

(d) The Shareholders Agreement imposes obligations upon any shareholder seeking to transfer its shareholding to first offer those shares to parties nominated as governing shareholders by way of a 'transfer notice'.

(e) There are terms that govern the issue of a transfer notice, including that the transfer notice is to remain open for 30 days and that the purchase price to be paid if a governing shareholder elects to purchase the shares is to be 80% of 'fair value'. Fair value is ascertained in accordance with a formula and is to be certified by the auditor of Reliance Insurance.

(f) A breach of the transfer notice provisions (for example, by purporting to transfer shares without first issuing a transfer notice) may comprise a default event. Upon a default event, a shareholder may issue a notice to the defaulting party and the defaulting party is then deemed to have issued a transfer notice. A defaulting party irrevocably appoints any two directors of Reliance Insurance to sign share transfer forms.

(g) On 15 January 2016, ARG entered into a share sale agreement by which it was to sell its shareholding in Reliance Insurance to a company called PSC Insurance Group Limited (PSC). It was a condition precedent to the proposed PSC sale agreement that ARG obtain certain consents from the shareholders of Reliance Insurance. Communications ensued between ARG and Reliance Insurance about the PSC sale agreement. On 5 February 2016 Reliance Insurance alleged a default event had occurred and that ARG was deemed to have issued a transfer notice.

(h) On 17 February 2016, Reliance Insurance notified ARG that in response to the deemed transfer notice, Byron Dreaming (a governing shareholder) wished to acquire the shares proposed to be sold by ARG to PSC. Reliance Insurance asserted the price had been determined in accordance with the Shareholders Agreement and provided share transfer forms for execution.

(i) Each of Byron Dreaming, Sun Devil and Howarth transferred their shares to Coverforce Victoria.

(j) ARG disputes that its entry into the PSC sale agreement or its subsequent communications comprised a breach of the Shareholders Agreement and disputes that there were any grounds for a deemed transfer notice. ARG challenges the appointment of a second director to Reliance Insurance on about 11 February 2016 and challenges the transfer of the shares it previously held to Byron Dreaming.

(k) Further, ARG challenges the conduct of each of Byron Dreaming, Sun Devil and Howarth in transferring their shares in Reliance Insurance to Coverforce Victoria and asserts they did not comply with the notice provision of the Shareholders Agreement in that, in summary, they did not first offer to sell their shares to ARG.

(l) ARG seeks relief under various heads, including for breach of the Shareholders Agreement. It asserts that the defendants induced each of the other defendants to breach the Shareholders Agreement and so interfered with contractual relations. It asserts that Byron Dreaming held the shares in Reliance Insurance that were transferred from ARG on constructive trust, that Reliance Insurance knowingly assisted in a breach of that trust and that Coverforce Victoria received the shares knowing of the breach of trust. It says the conduct of Reliance Insurance (by its director Mr Jim Malady) was oppressive. It seeks relief under s 233 of the Corporations Act, damages, accounts of profit, a declaration that the relevant shares in Reliance Insurance are held on trust for ARG and other relief (some in the alternative).

8 By their defence, the defendants assert (in summary) that:

(a) As a result of the entry into the PSC sale agreement and subsequent communications, a default event occurred under the Shareholders Agreement and accordingly ARG was deemed to have issued a transfer notice and the defendants' actions in reliance on the deemed transfer notice provisions and the notice itself were valid.

(b) The appointment of the second director to Reliance Insurance was valid and if not, any acts undertaken by him were in any event validated under the terms of the Shareholders Agreement.

(c) The transfer of the shares held by ARG to Byron Dreaming was valid and the price as determined in accordance with the Shareholders Agreement was paid to ARG's bank account.

(d) Each of Byron Dreaming, Sun Devil and Howarth entered into a share sale agreement with Coverforce Victoria but such agreement was entered into after ARG's shares in Reliance Insurance had been transferred validly to Byron Dreaming.

(e) Each of the defendants had, at all material times, a bona fide belief that ARG was in default of the Shareholder Agreement.

(f) In general, the defendants deny the construction of the Shareholders Agreement as pleaded by ARG and deny any liability to ARG.

9 By its reply, ARG joins issue with the defence and, relevantly, asserts that Byron Dreaming is estopped from asserting that ARG was in breach of the Shareholders Agreement. ARG relies in particular on alleged conversations between Mr Jim Malady (on behalf of Byron Dreaming) and Mr Paul Dwyer (on behalf of PSC).

10 It is apparent from the written submissions and the supporting evidence that the defendants pursue this application on the ground that there is a nexus with Victoria because the jurisdictional clauses in both the Shareholders Agreement and the PSC sale agreement provide that the governing law of the contracts is Victoria and, at least with respect to the Shareholders Agreement, the parties submit to the nonexclusive jurisdiction of Victoria. It is also said that taking into account the location of witnesses and lawyers, reasons of efficiency and economy favour a hearing in that state.

11 ARG contends there is no particular difference between the applicable laws of Victoria and those of Western Australia (ARG also refers in its written submissions to a prior uncompleted agreement called the Sun Devil Share Sale Agreement and notes its governing law is Western Australia: the relevance of that agreement based on the pleadings seems marginal). ARG says potential witnesses reside across Western Australia, Victoria, New South Wales and the USA such that there is no obvious efficiency in the matters being heard in Victoria. It notes that Bennett & Co does not have an office in Victoria. It also asserts that the defendants have delayed in bringing the application and the delay should weigh against a transfer.

12 The principles that apply on such applications (and applications under the similar s 5(2)(b) of the Jurisdiction of Courts (Crossvesting) Act 1987 (WA)) were not in issue between the parties. They are well summarised elsewhere: see H v D [2012] WASC 291 (Pritchard J); Australian Zircon NL v Austpac Resources NL [2010] WASC 166 (Corboy J); Resource Equities Ltd v Carr [2007] WASC 246 (Martin CJ); BHP Billiton Limited v Schultz [2004] HCA 61; (2004) 221 CLR 400.

(a) On an application under s 1337H(2) of the Corporations Act, the court may transfer proceedings if the court is satisfied it is in the interests of justice to do so.

(b) The court is also to take into account the requirements of s 1337L - first, 'the principal place of business of any body corporate concerned in the proceeding or application' (s 1337L(a)); second, 'the place or places where the events that are the subject of the proceeding or application take place' (s 1337L(b)); and third, 'the other courts that have jurisdiction to deal with the proceeding or application' (s 1337L(c)).

(c) The court is to pay no regard to the plaintiff's choice of forum. An application is to be approached without a presumption that the forum in which the proceedings have been commenced is more appropriate: Equinox Engineering and Installation v Puffin Installation Services [2008] WASC 183 [6] (Martin CJ).

(d) If there are no identifiable distinctions between the alternative fora in terms of the interest of justice, it may be that a court will conclude it is appropriate to leave the case where it is: Resource Equities v Carr [11]; Australian Zircon v Austpac [78] [79].

(e) The decision to be undertaken under transfer applications is a 'nuts and bolts' management decision as to which court in the pursuit of the interests of justice is the more appropriate forum to hear and determine the substantial dispute: Resource Equities v Carr [8] (citing BHP Billiton v Schultz).

14 The defendants rely on the evidence of Colleen Platford, a partner in the Sydney office of Gilbert & Tobin. In her affidavit, Ms Platford says:

(a) The application to transfer was foreshadowed in correspondence on 14 March 2016 and repeated subsequently. The defendants' desire to see a statement of claim before making a decision was foreshadowed before the Master on 15 March 2016. Following receipt of the statement of claim on 12 May 2016, there was further conferral between the parties as to a transfer application but it did not result in any agreement (Platford Affidavit [13], [14], 16]).

(b) Both the Shareholders Agreement and the PSC sale agreement are governed by the laws of Victoria (Platford Affidavit [37]).

(c) As to Reliance Insurance, its principal place of business and documentary records are in Victoria. One of its two current directors (Mr James Malady) resides in Victoria. The other (Mr James Angelis) resides in Sydney, but travels frequently to Melbourne.

(d) As to Byron Dreaming, its registered office and principal place of business are located in Victoria and both its directors (Mr Jim Malady and Ms Tracy Malady) reside in Victoria.

(e) As to Sun Devil, its registered office and principal place of business are located in Victoria but its sole director (Mr James Neate) resides in the USA, although he has family in Victoria.

(g) Coverforce Insurance has its registered office and principal place of business in New South Wales. One of its directors (Mr Jim Malady) resides in Melbourne. Two other directors (Mr James Angelis and Mr Jitendra Dutt) reside in Sydney (see generally Platford Affidavit [37]).

(h) PSC, a third party which potentially may be compelled by subpoena to give evidence, is based in Victoria (Platford Affidavit [39]).

(i) If a trial is held in Western Australia, there will be costs associated with airfares and accommodation for witness travelling from Melbourne and Sydney and that such costs will be avoided (or mitigated) if the trial is held in Victoria (Platford Affidavit [42]).

The defendants also relied on the Shareholders Agreement as attached to the affidavit of Jonathan Asquith dated 19 February 2016.

15 ARG relies on the affidavit of Fraser Ricupero, a solicitor employed by Bennett & Co, in opposing this application. Mr Ricupero attaches various communications passing between the parties' solicitors throughout the course of these proceedings and in relation to the interlocutory steps outlined above. Certain transcript extracts are also relied upon. In essence, the attachments are relied upon in support of ARG's submission that the defendants have delayed in bringing this application and that they have utilised the processes of the court in pursuing interlocutory applications or seeking programming directions by way of 'tactical manoeuvring'.

16 It is not in issue that ARG's registered office is in Perth and its director resides in Perth.

17 Four matters for consideration can be distilled from the submissions and evidence: the alleged delay in bringing the application; the proper law of the agreements; the location of witnesses and places of business; and the location of the respective parties' lawyers.

18 I do not consider that there has been any relevant delay on the part of the defendants in bringing the transfer application. It is to be expected that initial attention would be focussed on the injunction application. It was then appropriate to await provision of a statement of claim to properly assess whether an application should be pursued: see Resource Equities v Carr [52]. The application was filed some 18 days after the statement of claim was served.

19 It is true that Bennett & Co continued to work on the matter post receipt of the statement of claim but 18 days does not comprise undue delay, and the transfer application had at all times been foreshadowed. Nor do I consider there is any substance to ARG's assertion that the manner by which the defendants have engaged in and utilised the processes of the court should weigh against their application. Based upon the correspondence in evidence, the defendants' actions by way of interlocutory applications and conferral as to proposed orders have been conventional.

20 The defendants did not suggest the governing law provision prevented the matter proceeding in Western Australia. Nor does any agreement to submit to the jurisdiction of Victoria prevent a transfer or weigh to any real extent in this mix. There was no suggestion that different principles with respect to the construction of contracts or any other causes of action would apply, depending on the forum. The construction of a contract is governed by principles that form part of a unified body of common law: Kable v Director of Public Prosecutions for the State of New South Wales [1996] HCA 24; (1966) 189 CLR 51.

21 No party pointed to any particular procedural advantage pertaining to either forum. ARG put much store in the fact that the matter can be dealt with in this court's CMC list and can be dealt with, it is assumed, expeditiously. I accept there is no evidence of what may occur on a transfer, but it does seem to me that a court in Victoria would also deal with any matter expeditiously if it were shown to require such a response.

22 The evidence as to the location of the defendants, PSC and proposed witnesses is not compelling. It is likely that one witness, Mr Malady, will give evidence on behalf of three of the defendants. It is unclear as to whether any of the other directors will give evidence. Senior counsel for the defendants noted that the issue arises only if the defendants decide it is a case in which they would wish to call witnesses. Clearly that decision has not been made as yet.

23 The location of the places of business and records of the corporate defendants does not suggest any forensic prejudice in this case: there would not appear to be any difficulty with documents being available electronically or otherwise in Perth. Whilst the defendants submit that the business of Reliance Insurance was commonly referred to as the 'Melbourne business' (defendants' written submissions [3]), that submission does not add any evidentiary weight. There seems to be no real relevance attached to the place of meetings or the place of the registered offices.

24 In some cases, witness preparation may be a legitimate concern: see Resource Equities v Carr [50]. Mr Neate presumably will be proofed from overseas regardless of forum. Any witnesses who reside in New South Wales have the advantage that they can be proofed by Gilbert &Tobin in Sydney. The defendants have chosen to be represented by lawyers in Sydney (despite now seeking a trial in Victoria) so it can be inferred that some travel for the purposes of trial and proofing was anticipated by the defendants. I add that in light of the estoppel plea in the reply, it may also be necessary for Mr Dwyer to give evidence and I take that into account.

25 In any event, it should be possible to take the evidence of at least some witnesses by video link, a course generally encouraged now where appropriate. At this stage, there is uncertainty as to how many witnesses may be called by the parties and how many would be required to travel.

26 It is true that there may be some additional expense by way of travel to Perth and accommodation expenses but that is likely to be balanced by the expense of witnesses and lawyers travelling to Melbourne from Perth if the matter were transferred.

27 It is equally unclear how many witnesses would be called for the plaintiff but its director is based in Perth and it seems that other potential witnesses, including the auditor, reside in Perth.

28 It does not seem to me that the location of witnesses points to any forum being the more appropriate.

29 The defendants have twice chosen to be represented in this matter by lawyers based in Sydney, initially by Minter Ellison and more recently by Gilbert & Tobin. Both those firms have offices in Perth. Bennett & Co does not have an office in Melbourne and if the services of that firm were retained following any transfer, it is inevitable that Mr Bennett (and perhaps others) would need to travel to Melbourne, at least for any trial. In this day and age of mutual recognition legislation, this is not a matter that should weigh heavily in the mix: Resource Equities v Carr [34] [37]. Further, appearances by counsel by video link for directions hearings and the like is not uncommon. If there is a transfer, Bennett & Co lawyers may need to travel to Melbourne. If there is no transfer, Gilbert & Tobin lawyers may need to travel to Perth (as against to Melbourne). In either scenario, lawyers may need to travel and I am not persuaded that one scenario is to be favoured over another.

30 As Corboy J said in Australian Zircon v Austpac [79], it may be that cases where competing jurisdictions are equally appropriate are rare. However, I consider this is one of those cases. The respective interests are finely balanced. It is a matter of impression. When one applies 'nuts and bolts' case management principles, there is nothing of any substance that points to the interests of justice being preferred by either Western Australia or Victoria as a forum. On that basis, I consider it is appropriate to leave the proceedings in Western Australia. Accordingly, the application for transfer is dismissed.