1 HIS HONOUR: The plaintiff in these proceedings (Management) sues the defendant (Group) for damages for the alleged breach of a management agreement made between them on 2 August 2007. Group's position is that the management agreement was terminated or abandoned by consent: the consent having been given at a board meeting of Group on 28 March 2008. Group says that the board meeting was called to discuss, and the consent to termination or abandonment of the management agreement was given, in circumstances where Mr Brian Magee (the sole director and shareholder of Management) and Ms Jennifer Page, whose services had been provided by Management to Group pursuant to the management agreement, had allowed themselves to be overpaid amounts totalling in excess of $1.3 million of their true entitlements. Group has commenced proceedings against Mr Magee and Ms Page in the Supreme Court of Victoria to recover the alleged overpayments.
2 The Court is concerned today with an application by Group that these proceedings be transferred to the Supreme Court of Victoria pursuant to s 5(2)(b) of the Jurisdiction of Courts (Cross-vesting) Act 1987. Management opposes that application.
3 One of the matters on which Management relies can be dealt with immediately. It accepts that Mr Magee and Ms Page will be essential witnesses in both proceedings. It says however that their respective states of health are such that they should not have to travel to Victoria. That submission assumes that they will not be required to do so unless the order sought by Group is made. However, on 6 May 2009, the Supreme Court of Victoria (Robson J) heard an application that what I might call the Victorian proceedings be transferred to this State under the cross-vesting legislation. His Honour dismissed that application with costs. Accordingly, the Victorian proceedings will continue in that State and Mr Magee and Ms Page will be required to give evidence in them. Thus, unless they can persuade the Supreme Court of Victoria to make other arrangements (for example, perhaps, the taking of their evidence on commission in this State) they will have to travel to Victoria to give evidence in any event.
4 Under s 5(2)(b) of the Act, the Court is required to consider, relevantly, two things. One is whether the proceedings in this Court arise out of or are related to the proceedings in the Supreme Court of Victoria, and it is more appropriate that the issues be determined in the Supreme Court of Victoria (s 5(2)(b)(i)). The other (which arises in the alternative) is whether it is otherwise in the interests of justice that these proceedings be determined by the Supreme Court of Victoria (s (5)(2)(b)(iii)).
5 It is convenient to start with some general observations. Both proceedings arise out of the contractual relationship between Management and Group. Although the relevant management agreement was made on 2 August 2007, it appears to be common ground that Management had been the manager of Group's investment activities for about three years before that date, and that the relationship continued up until (by agreement, repudiation or otherwise) about 28 March 2008.
6 It is also common ground that Management provided to Group the services of Mr Magee and Ms Page. Indeed, Mr Magee and Ms Page were directors of Group for a number of years until each resigned on 9 April 2008.
7 It is also common ground that, under the management agreement from time to time in place, Mr Magee and Ms Page were entitled to be paid expenses on various bases for or in connection with activities carried out by them on behalf of Group.
8 As I have said, it is Group's case that they over-claimed in excess of $1.3 million of their entitlements. Group relies on a report prepared by a firm of accountants, Grant Thornton, to substantiate the overpayments.
9 It is clear that the board meeting of 28 March 2008 was called to consider the alleged overpayments and what should be done about them. It is equally clear that there will be a very substantial divergence in the evidence as to what was discussed and agreed at that meeting. I apprehend that Mr Magee and Ms Page may say that they made no admission that they had been overpaid, and that they did not, on behalf of Management, consent to the termination or abandonment of the management agreement. I apprehend that the evidence for Group will be to the opposite effect on both those propositions.
10 In resolving the issues in these proceedings, it will be necessary for the Court to decide what happened, and what if anything was agreed, at the meeting of 28 March 2008. Given that it is likely that diametrically opposite accounts will be given of what happened and what (if anything) was agreed, the Court will be required, in deciding those matters, to form a view of the credibility of the competing witnesses. The suggestion that the Court can decide those issues, and assess credibility, without reference to the alleged overpayments strikes me as being totally implausible (and I have tried not to be intemperate in my language). Even if the proceedings are heard separately, it is inevitable in these proceedings that Mr Magee and Ms Page will be cross-examined at some length as to the alleged overpayments. That seems to me to be something that would be relevant on at least two bases. First, and most obviously, it would be relevant to the question of credit. If the Court were to conclude that Mr Magee and Ms Page had acted, knowingly, in the way alleged by Group, it could be something going adversely to their credit. But secondly, and perhaps more significantly, it seems to me that a resolution of the underlying dispute as to the alleged overpayments is likely to be relevant as part of the factual matrix against which the Court will undertake an assessment of what was said and done and what (if anything) was agreed at the meeting of 28 March 2008. The Court would be very severely hampered in performing that task if it could not have regard to all relevant evidence, including, for the reasons I have just given, evidence as to the events leading up to, and forming the basis of, the meeting in question.
11 On the first basis - credibility - it might not be possible for Group to lead evidence from the relevant employees of Grant Thornton who carried out the forensic investigation to which I have referred. But on the second basis - direct relevance - it would.
12 It seems to me to be intolerable, particularly taking into account the dictates of s 56 of the Civil Procedure Act 2005, that this Court should undertake the tasks to which I have referred, as part of the process of determining the real issues in these proceedings, and that at the same time the Supreme Court of Victoria should undertake substantially the same tasks in resolving the issues in contest there.
13 It is obvious that in each case the Court will be required to make a judgment as to the credibility of the relevant witnesses and as to the events leading up to the meeting (by which I mean, the alleged overpayments and the circumstances relating to them). It cannot be in the interests of justice that those matters be determined twice: doubling the expense to the parties, doubling the consumption of Court time, and with the risk of inconsistent findings of credibility or fact.
14 For those reasons alone, it is in my view clear that the order should be made. Since I have reached that view on the basis of "the interests of justice" (s 5(2)(b)(iii)) it is unnecessary to express a concluded view on the alternative basis. However, I will say that I would have made the order on that alternative basis had it been necessary to do so. Clearly, both proceedings arise out of or are related to the same subject matter. Clearly, there will be a substantial common substratum of fact, and substantial community of witnesses. The Supreme Court of Victoria has decided that the proceedings before it are to remain there and to be decided by it. In those circumstances, and substantially for the reasons that I have given, I would have concluded that it is more appropriate for these proceedings to be determined by that Court.
15 I should say that Mr Goldsmith, solicitor, who appeared for Management, provided the Court with helpful written submissions in which he undertook a detailed analysis of the issues in these proceedings and the issues in the Victorian proceedings. In that analysis, Mr Goldsmith pointed to a number of ways in which, although there was a common factual background, the proceedings differed. I have taken those submissions into account, although I have to say that to some extent they overstated the differences in the issues. Again, Mr Goldsmith in those submissions dealt with what he said were the "totally different" factual issues in the two cases. I have taken those submissions into account also, although again I think they somewhat overstate the real position.
16 But even accepting, for the purposes of argument, the submissions made by Mr Goldsmith, the reality is that the fundamental task that the Court in each case will have to determine - being the fundamental task that I have identified earlier in these reasons - is the same; and it is entirely unacceptable that two Courts should be faced with undertaking that fundamental task in two sets of proceedings, at a substantially greater expense than would be involved if that was done in one proceedings.
17 For those reasons, I make an order in accordance with prayer 1 of the defendant's notice of motion filed on 15 or 29 May 2009 (I put the matter that way because the document in question bears both dates). I will hear the parties on costs.
18 Group seeks its costs of the notice of motion on an indemnity basis, and seeks an order that those costs be assessed forthwith. Management accepts that it must pay the costs of the application but opposes an order on an indemnity basis. Further, it opposes an order that the costs be assessed forthwith.
19 It is convenient to deal with the latter point first. These proceedings were commenced in the commercial list. They are thus governed, to the extent of its terms, by Practice Note SC Eq 3. Paragraph 57 of that Practice Note states that "[u]nless otherwise ordered, a party in whose favour an order for costs is made may proceed to assessment of such costs forthwith". That cast upon Mr Goldsmith an obligation of showing why costs should not be assessed forthwith. In my view, he has failed to discharge that obligation. On the contrary, the very fact that the proceedings are to be cross-vested to the Supreme Court of Victoria makes it clearly appropriate that the general position established by paragraph 57 of the Practice Note should apply in this case.
20 As to indemnity costs: Mr Lucarelli of counsel for Group took the Court to the transcript of the proceedings in the Supreme Court of Victoria before Robson J in which his Honour heard, and dismissed, the application by Mr Magee and Ms Page to cross-vest those proceedings to this State. Mr Goldsmith appeared for Mr Magee and Ms Page on that application. On a number of occasions, he submitted that both proceedings involved substantially the same facts and circumstances; and that they were related because of those substantially similar facts and circumstances, and because the 2007 management agreement was at the core of both sets of proceedings; and that there was what he called, perhaps infelicitously, "a duplicity of witnesses".
21 Mr Lucarelli submitted that it was entirely inappropriate for Mr Magee and Ms Page to have taken that position before Robson J and for Management to have taken what he submitted was the opposite position in the application in this Court. (As I have said already, Mr Magee is the sole director and shareholder of Management, and it is reasonable to assume that his acts can be attributed to that company to the extent necessary to enable this issue to be resolved.)
22 Thus, Mr Lucarelli submitted, there was a "relevant delinquency" justifying the award of indemnity costs (see the judgment of Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at 89) [44].
23 Mr Goldsmith submitted that what he had said in the hearing before Robson J was said before he had the benefit of reading Group's list response in these proceedings, and reflected what he thought would be the issues in these proceedings rather than what, from that document, appeared to be much more limited issues. Further, he submitted, Robson J appears to have rejected entirely the submissions that he put. Unfortunately, as I have said, the Court does not have the benefit of his Honour's reasons for judgment.
24 Accepting for the moment that Mr Goldsmith did not have the benefit of the list response, I still have difficulty in understanding how that really bears on the question of indemnity costs. It is clear, reading the transcript of the hearing before Robson J, that Mr Goldsmith was (understandably enough) addressing the substance of the issues in both proceedings. Specifically, it is clear that he was addressing the proposition that I have identified and affirmed in my reasons given for making the cross-vesting order: namely, that any assessment of the issues in the two sets of proceedings will involve an examination of the alleged overpayments, and this will necessarily involve a searching examination of the credibility of the competing witnesses including specifically Mr Magee and Ms Page.
25 I do not think that the accuracy of those aspects of Mr Goldsmith's submissions to Robson J that I have identified is affected in any adverse way either by the issues in these proceedings as they now appear from the list response or from the fact that his Honour dismissed the application for cross-vesting. His Honour appears to have done so because, for a number of reasons (some of which may perhaps be gleaned from observations made by him in the course of argument and others of which appear from the affidavits in support of the application that I have dealt with) he did not consider that it was appropriate that the Victorian proceedings be cross-vested to this Court. Further, I would infer, there were particular circumstances relating to the chronology of events including the filing of these proceedings that were sufficient to dissuade his Honour from the view that the interests of justice required the making of a cross-vesting order.
26 Having said all that, the question is whether the alternating positions taken by Mr Magee and Ms Page in Victoria and Mr Magee's creature Management in this Court can be said to amount to relevant delinquency for the purpose of supporting an order for indemnity costs. In my view, they can. That is because it is not in the interests of justice, and not consistent with the obligations imposed on parties by s 56(3) of the Civil Procedure Act 2005, for a party to blow hot and cold, or to approbate and reprobate, according to where it perceives its tactical advantage to lie from time to time.
27 In addition, Mr Goldsmith submitted that a factor of significant importance in my decision to order cross-vesting was the need to avoid dual examination of credibility, with a consequent risk of inconsistent findings. He submitted that that formed no part of the grounds relied upon by Group in support of its application. The answer to that seems to me to be that, having read the affidavit evidence and the parties' written submissions, I called on Mr Goldsmith first. Mr Lucarelli's written submissions make it clear that Group relied, among other things, on the fact that there would be common witnesses in both proceedings and a common factual background, involving (among other things) the investigations to which I have referred already more than I would hope to have done.
28 In those circumstances, I do not regard Mr Lucarelli's inability to put the submission in terms (because he was not given an opportunity to do so) as tending against the order sought.
29 Accordingly, I order the plaintiff to pay the defendant's costs of the defendant's notice of motion filed on 15 or 29 May 2009 and I order that those costs be assessed on the indemnity basis. I order further that exhibit PX2 remain with the file but that exhibits PX1 and DX1 be returned to the parties by whom they were tendered.