BANK OF AMERICA v BANK OF NEW YORK

Court of Appeal (NSW)|1994-12-09|Before: Rolfe J, Meagher JA, Powell JA, Kirby P

KIRBY P, MEAGHER and POWELL JJA 9 December 1994, 23 December 1994 [1994] NSWCA 17

PRACTICE AND PROCEDURE - forum non conveniens - concurrent proceedings in NY and NSW - NSW proceedings stayed - summons for leave to appeal - alleged misunderstanding of SCR Ptl0 RIA, R2 - deprivation of legitimate forensic advantage Trade Practices Act claim

TRADE PRACTICES - US proceedings - whether stay of NSW proceedings deprives party of legitimate forensic advantage - held: It does not.

(1) No error had been shown in the reasons of Rolfe J to authorise the disturbance of his order staying the proceedings in New South Wales.

Ocean Sunline Special Shipping Co Inc v Fay (1988) 165 CLR 197; Voth v Manildra Flour Mills Pty Ltd and Anor (1990) 171 CLR 538, applied;

(2) Submissions made concerning the meaning and application of Ptl10 R2 SCR could not be allowed to succeed because of the different case presented at trial.

Coulton and Ors v Holcombe and Ors (1986) 162 CLR 1, applied;

(3) Semble (per Meagher JA, Powell JA concurring): Notwithstanding the amendment of the Supreme Court Rules, the Supreme Court is not authorised to allow actions to proceed against foreign residents who do not submit to the jurisdiction unless there is an arguable case within PtlO RIA SCR.

Esanda Finance Corporation Ltd v Wordplex Information Systems Ltd (1990) 19 NSWLR 146 (SC), doubted;

(4) Possible deprivation of reliance on Trade Practices Act 1974 (Cth) was not shown to involve a loss of a relevant forensic advantage by the order staying proceedings and in any case did not outweigh the clear inappropriateness of choosing New South Wales as the forum for resolving the parties' dispute.

Sentry Corporation Ltd v Peat Marwick Mitchell and Co. (1990) 95 ALR 11 (FFC), referred to;

TRADE PRACTICES - promise to act in good faith - allegation of unconscientious conduct on part of corporations - loss of relevant forensic advantage if proceedings stayed in New South Wales as a "clearly inappropriate forum" and required, in effect, to be heard in United States - trial judge (Rolfe J) rejects claim - on summons for leave to appeal - held: (1) No error was shown in Rolfe J's determination of the point; (2) Leave refused.

WORDS AND PHRASES - "clearly inappropriate forum". Trade Practices Act 1974 (Cth), s51A, s52. Supreme Court Rules, Ptl0 RIA and R2. ORDERS Summons dismissed with costs.

Kirby P An outline of the essential facts is contained in the reasons of Meagher JA.

The process before the Court is a summons for leave to appeal. Within the Court, different views have been expressed concerning the extent of the reasons (if any) which should be given when refusing to grant leave upon such a summons. See eg Southern Cross Exploration NL and Ors v Fire and All Risks Insurance Co Ltd and Ors [No 2] (1990) 21 NSWLR 200 (CA), 214, 215, 218 and Laboutie v Director of Public Prosecutions and Anor, Court of Appeal (NSW), unreported, 13 December 1994. It is my view that reasons, however short, should always be given, unless the point raised is extremely simple and the reasons for rejecting it have been sufficiently demonstrated during oral argument. This is not such a case.

Nevertheless, in my opinion, unless the Court turns the summons for leave into the hearing of the substantive appeal or unless it is absolutely essential to deter nine finally the substantive point in deciding whether the case is one for leave, the reasons given by the Court in refusing leave should trespass as little as possible into remarks upon the substantive rights of the parties. The very purpose of the leave barrier provided by Parliament, at least in proceedings of the present kind, is to remit the parties to litigation elsewhere: either in a court in this State, or in another jurisdiction. It would be unfortunate if remarks made in disposing of a leave application, were misconstrued to be concluded opinions on the substantive rights of the parties. The whole point of refusing leave in this case would be to require such substantive rights to be determined in a forum found to be more appropriate, viz a court in the United States of America.

In the nature of a leave application (even one as extensively argued as the present), it is unnecessary and usually inappropriate to express a final view concerning the substance of the dispute between the parties. The whole of the evidence has not been adduced. This Court has seen none of the witnesses. A number of legal contentions of complexity remain to be resolved. Resolution of the substantive dispute is not determinative of the question before us on the summons for leave to appeal. That question, ultimately, concerns, in this case, the procedural issue of the venue for the trial of the parties' dispute. Expressed in legal terms, the question is whether the claimants have sufficiently demonstrated error on the part of the primary judge in the Commercial Division of the Supreme Court (Rolfe J) in deciding to stay their proceedings in this Court upon the ground that the Court is a "clearly inappropriate forum". See Ocean Sunline Special Shipping Co Inc v Fay (1988) 165 CLR 197, 247; Voth v Manildra Flour Mills Pty Ltd and Anor (1990) 171 CLR 538, 557. This is the test to be applied by Australian courts. Some indication of how it will be applied, in relation to proceedings having a connexion both with an Australian and a United States jurisdiction, can be discerned in Voth. In that case, the High Court of Australia confirmed the minority opinion expressed by me in this Court that the action commenced in New South Wales should be stayed on the ground that this Court was a clearly inappropriate forum in which to permit it to proceed. See Voth v Manildra Flour Mills Pty Ltd (1989) 15 NSWLR 513 (CA), 537.

At the threshold of considering the application for leave to appeal, it is important to remember the oft-repeated words of caution which apply to an appellate of court when it is invited to intervene in such a determination. To the usual injunctions of restraint which exist in the case of procedural orders, discretionary in character, which involve matters of practice, must be added the particular injunction to special restraint in respect of the exercise of this kind of discretion. In Voth (above), the majority (Mason CJ, Deane, Dawson and Gaudron JJ) observed, at 565:

"Ordinarily,... it would be unnecessary for the primary judge to do more than briefly indicate that, having examined the material in evidence and having taken account of the competing written or oral submissions, he or she is of the view that the proceedings should or should not be stayed on forum non conveniens (ie *clearly inappropriate forum") grounds."

In the present case, Rolfe J, by providing extensive reasons, went beyond the statement of an impressionistic kind sanctioned by the High Court in the foregoing passage. To that extent, his Honour's approach invited the challenges which have been mounted upon this summons. In saying this, I do not criticise the course which his Honour took. The litigation concerns substantial sums. It is important to the parties. There was a question raised concerning the proper interpretation of Rules of this Court, lately amended. There was a suggestion of a relevant forensic advantage which the claimants would lose if their proceedings in this State were stayed and they were required to litigate their cause in the United States. The existence of a legitimate juridical advantage is certainly a consideration which must be taken into account in deciding whether proceedings, lawfully commenced in New South Wales, should be stayed upon the ground that this jurisdiction is a "clearly inappropriate forum", cf Goliath Portland Cement Co Ltd v Bengtell and Anor (1994) 33 NSWLR 414 (CA), 434. In a practical sense, the determination made by Rolfe J is effectively final in this sense, that it puts an end to the proceedings in this country. Theoretically (and as a matter of law), the stay could be lifted. However, the prospect of that occurring is extremely remote.

These were doubtless some of the reasons for the care taken by his Honour to respond to the arguments of the parties. They certainly explain the expedition granted by this Court and the provision of reasons for rejecting the summons.

Two matters only caused me concern in the arguments for the claimants. The first related to the meaning and application of Pt10 R2 SCR, and the effect of the amendment of the Rules. The controversy is outlined by Meagher JA in his reasons. Some support for the claimants' submission on this point is to be found in the opinion of Giles J in Esanda Finance Corporation Ltd v Wordplex Information Systems Ltd (1990) 19 NSWLR 146 (SC), 154. See also Pendall Nominees Pty Ltd v M and A Investments Pty Ltd (1989) 18 NSWLR 383 (SC), 394f.

It is clear that the arguments advanced by the claimants to this Court, concerning their entitlement to have leave to proceed under Ptl10 R2 SCR, are in this respect significantly different from those made before the primary judge. There, they repeatedly asserted that they could establish "a prima facie case" and "a prima facie entitlement to relief'. This is the way in which Rolfe J dealt with the matter. To permit the claimants, before this Court to alter their argument, is not simply to allow them to advance a new proposition of law, unaffected by the facts, as would be permissible. See Connecticut Fire Insurance Co v Cavanagh

[1892] AC 473, 480; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 438. At the trial, counsel for the opponents conducted the proceedings, tendered evidence and chose to test the claimants' evidence, by reference to the legal issue which the claimants proffered. In my view, it would involve an impermissible procedural unfairness to the opponents to permit the claimants, in this Court, to advance different legal propositions, and to suggest a different legal test, to which different facts could be pertinent. See Coulton and Ors v Holcombe and Ors (1986) 162 CLR 1, 8f.

Iam presently minded to agree with what Meagher JA has written concerning the meaning and operation of Ptl0 RIA and R2 SCR However, in the approach which I would take, it is unnecessary to resolve the point because it was not properly raised at first instance. It cannot now be raised in this Court.

THE SUGGESTED LOSS OF A RELEVANT FORENSIC ADVANTAGE

The second question of concern is whether, by his orders, Rolfe J deprived the claimants of the juridical advantage of litigating their claim under the Trade Practices Act 1974 (Cth). The issue presented by this argument is not entirely novel. With the growth of international trade and the activity of multinational corporations, disputes having a connexion with two or more jurisdictions, will often present significant questions for the choice of venue. That choice may sometimes be of critical significance for the ultimate outcome of the dispute. See AS Bell, "Responses to forum shopping in transnational litigation: Recent developments and new directions" unpublished paper, 1994. See also Sentry Corporation Ltd v Peat Marwick Mitchell and Co (1990) 95 ALR 11 (FFC), 24; Green v Australian Industrial Investment Ltd (1989) 25 FCR 532, 539, 545; The Al Battini [1993] 2 Lloyd's Rep 219, 221. This fact helps to explain the "litigious appetite" of parties in disputes said to have transnational connexions. See DA Technology Australia Pty Ltd and Anor v Discreet Logic Inc and Anor, Federal Court (Gummow J), unreported, 10 March 1994, 14.

The existence of procedural advantages of great significance in different jurisdictions has been recognised both in this country (see Goliath, above) and in the United States (see Piper Aircraft Co v Reyno 454 US 235 (1981), 252. Dr Bell points out in his paper that, given the different results which can flow according to the venue chosen, it will sometimes be the duty of a party's lawyers to engage in forum shopping, ie to seek to identify and commence proceedings in the forum which, by virtue of its procedural and substantive law, offers the client the greatest prospects of success. It has led to "reverse forum shopping" by which the other party may employ strategies in an attempt to negative any procedural or substantive disadvantages. See Bell, 4. These appear to be the competing objectives behind the respective suits of the present parties in New South Wales and New York. I make no criticism of them. But there is much good sense in the opinion of Bright J (in dissent) in China Trade and Development v MV Choong Yong 837 F 2d 33 (2nd Circ, 1987) at 40:

"[I]Jn this day of exceedingly high costs of litigation... courts have an affirmative duty to prevent a litigant from hopping half way around the world to a foreign court as a means of confusing, obfuscating and complicating litigation already pending for trial in a court in this country."

But can it be said that, if the claimants' proceedings are stayed here, they will lose the facility of relief under the Trade Practices Act which they would undoubtedly have in this jurisdiction, and be forced to litigate in New York at a disadvantage that could even prove fatal to their cause? Rolfe J gave consideration to this argument. He was obviously unimpressed by the substance

of the claims under the Act as they were suggested to him. He had before him some material which suggested that, by the rules of private international law operating in the State of New York, it was possible that the principles of the Act would be taken into account there in determining the claimants' legal rights. In fairness, it should be said that this was by no means certain. Legal commentaries placed before this Court have suggested that since the decision of the New York Court of Appeals in Babcock v Jackson 12 NY 2d 473; 191 NE 2d 279 (1963); [1963] 2 Lloyd's Rep 286 (NYCA), there is no firm doctrinal basis for the choice of law rule in that State of the United States of America. The decisions of the courts of that State have been said, in the Commentary, to evidence inconsistency.

See generally HL Korn, "The Choice of Law Revolution: a Critique" 83 Columbia L Rev 772 (1983), 960 ff.

Obviously, in an application of this kind, it is impossible for this Court to explore such a consideration in depth. The sole questions which are presented to us are whether it has been demonstrated that the discretion of the primary judge miscarried in such a way as to lead to a relevant injustice and whether, if leave were granted, there would be sufficient prospects of success in the appeal, that the orders made by Rolfe J would be changed so as to justify the grant of leave.

In my view, these questions must be answered in the negative. I see no error in Rolfe J's treatment of the provisions of the Trade Practices Act said to be applicable. The assessment of the significance of that consideration was, by law, committed primarily to his Honour. The case is one concerning an agreement(s) alleged to have been made in the United States of America. It was made between (putting it broadly) United States corporations on behalf of their Australian subsidiaries. It is alleged to be governed by the laws of a State of the United States of America (either New York or California). All of the critical written correspondence and oral communications passed between the parties in the United States. In a sense, the only fact connecting the proceedings with New South Wales, is the circumstance, fortuitous in international transactions of this character, that the debt, the subject of the alleged agreement, was nominally owed by a New South Wales subsidiary of one of the United States corporations.

Therefore, even making proper allowance for the suggested juridical advantage said to flow, particularly from the application of s51A of the Trade Practices Act, it was open to Rolfe J to conclude that the courts of New York were more clearly appropriate as the venue for the resolution of the dispute. Put more accurately, and in terms of the binding authority of Australian law, it was open to his Honour to conclude, as he did, that New South Wales was, in the circumstances, a clearly inappropriate forum. See Voth, 570.

Tam sure that it will be understood by the court in the United States of America which comes to try any outstanding issue between the parties, that the disposal of the proceedings in this Court, both at first instance and on appeal, has of necessity, addressed procedural questions. Any views on the substantive rights of the parties are strictly incidental to the exercise of our jurisdiction on the forum issue. No final views on the substantive rights have been reached. It is the whole point of the proceedings before this Court that those substantive rights should be determined by the appropriate court in the United States of America.

The summons for leave to appeal should be dismissed with costs.

Meagher JA This is an application for leave to appeal against a decision of Rolfe J.

It arises in the following circumstances. The claimants (or one of them) sought to purchase loans owing by the Linter Group Ltd to Bank of New York Australia Ltd (one of the opponents), which is the Australian subsidiary of the other opponent, Bank of New York. The claimants are Bank of America and its subsidiary, Bank of America Australia Ltd.

The basal document out of which the dispute arose is an "offer letter" of 18 November 1993, the most important excerpts of which are in the following form:

"Each of BofA - Australia and BNYA hereby agrees (1) that upon execution and delivery by both of the undersigned parties, this offer letter is intended to be the legally binding agreement of BofA Australia and BNYA, and (2) this offer letter (a) may be executed in any number of counterparts (original or facsimile) and all of such counterparts (original or facsimile) taken together shall be deemed to constitute one and the same instrument, (b) shall be governed by and construed in accordance with the internal laws of the State of California and (c) supersedes our prior letter to Mr Leonard Weiss, dated as of November 2, 1993.

"Please indicate acceptance of the Offer and confirm our understanding of your representations regarding the principal and interest on the Loans by signing this letter in the space provided below and returning this letter to me. BofA - Australia's obligations under this offer letter will terminate and be of no further effect if I have not received the fully executed letter no later than 12 noon, Los Angeles time, on November 19,1993. An executed copy of this offer letter may be returned to me by facsimile prior to such deadline, at (213) 345-5004. Notwithstanding the execution and return of this offer letter on or before the above-stated deadline, this offer letter and all of BofA - Australia's obligations hereunder will terminate on December 15, 1993, if, on or prior to 5:00pm, Los Angeles time on such date, a definite purchase agreement and other related documentation satisfactory to BofA - Australia and its counsel are not executed and in effect.

"This offer letter, the purchase agreement and related documentation and all of the terms and conditions contained herein (including price) and therein are confidential, and, unless otherwise public, neither you nor we shall disclose any thereof except to the extent required by law."

It was signed by persons purporting to act on behalf of the two subsidiaries.

It will readily be observed that it contemplated execution of formal assignment documentation.

It will also be observed that it provided that "this letter and all of BofA - Australia's obligations" will "terminate" on December 15, 1993 if the documentation was not executed by that date. That date came and went without execution of the documents, and between 16 and 20 December it was agreed to "extend" the "letter offer" until 15 January 1994. The 15 January date also came and went without execution by the parties of whatever documentation was contemplated. On or about 10 February a second extension was negotiated until 28 February, during which period, again, nothing occurred. On 4 March 1994 the opponents (or one of them) called the deal off.

The claimants assert that the opponents are in breach of contract. The difficulty is they could not decide of what contract breach was alleged. Rolfe J held they were not in breach of any, and, having regard to the state of the evidence and such documents as set out the claimants' assertions (in the absence of strict pleadings), it is impossible to disagree with him. The claimants set up three alternative

URJ BANK OF AMERICA v BANK OF NEW YORK (Meagher JA) 7

versions of the contract on which they relied. The first was a written agreement dated 18 November 1993 between the two parent companies (Bank of America and Bank of New York). There was obviously no such agreement. The document postulated the sale of property by one subsidiary (Bank of New York Australia Ltd) to another (Bank of America Australia Ltd), and those were the parties who executed it. It did not concern the property of either parent, not did it contain any promises by either parent to the other. The second version of the contract relied on was one between Bank of America (the parent) and Bank of New York Australia Ltd (the opponent subsidiary). This was said to be a written contract arising out of the "letter offer" of 18 November 1993. This contention must fail for the same reason. The third contract alleged was a contract between the two subdivisions, arising not out of the letter of 18 November, but out of the dealings of February 1994. This seems bizarre, as it is possible to see how it could be alleged that the subsidiaries entered into a contract in November 1993, but it is impossible to see how they did so in February 1993. The central plank of the claimant's case at first instance thus failed.

At the hearing before us, Mr Spigelman QC, learned senior counsel for the claimants, sought to rely on a contract between the subsidiaries based on the 18 November 1993 letter. However, I agree with the contention of Mr Nettle QC, learned senior counsel for the opponents, that he not be permitted to do so. At the trial Mr Nettle did not seek to cross-examine any of the claimant's witnesses, and he submitted that he would (or at least might) have done so if this new alternative contract had been formulated at first instance.

A summons which, as I have said, was later heard by Rolfe J, asserting the claimants' case against the opponents was served in New York on Bank of New York and in Australia on Bank of New York Australia. The former never submitted to the jurisdiction. The claimants therefore sought leave under Pt10 R2 to proceed in New South Wales against the Bank of New York, a ruling which the Bank of New York resisted; and the opponents sought orders that service of the claimants' proceedings be stayed, or, alternatively, that the proceedings be set aside. The opponents sought their relief, as to the Bank of New York, because it did not come within any of the paragraphs of Ptl0 RIA, and as to Bank of New York Australia because New South Wales was not a convenient forum.

About the only contention common to all parties was that it was convenient that whatever rights the claimants (or either of them) had against the opponent parent should be heard at the same time and in the same forum as the rights which it or they had against the opponent subsidiary.

The claimants' motion was unsuccessful and the opponents' motion was successful. On all points I think Rolfe J was correct. The reason why his Honour held that neither of the claimants could pursue the Bank of New York, a foreign resident, in New South Wales was the absence of any necessary jurisdictional nexus within the meaning of Pt10 R1A and because there was no prima facie case demonstrated against that company. The reason why his Honour held that they could not pursue the Bank of New York Australia Ltd was that New South Wales was an inconvenient forum.

In New South Wales, until 1988, Pt10 R1A provided that an order for service outside the jurisdiction could be made only in a number of designated categories. An applicant for such an order had to demonstrate that, prima facie, his case came within one of the categories. If it did not, he could not obtain an order. Moreover, if he commenced proceedings without obtaining such an order the service was invalid. In 1988 the rules were amended. Prior authorization was no longer

required before service could be effected on a foreign resident. Service was effected, and then leave to proceed could be obtained under R2. Mr Spigelman attributed a revolutionary effect to the 1988 amendments; according to his submissions, they had the effect of enabling the court to authorize proceedings to be constituted against a defendant even if the plaintiff did not have a prima facie case falling within one of the R1A categories. He cited some dicta in a decision of Giles J in Esanda Finance Corporation Ltd v Wordplex Information Systems Ltd (1990) 19 NSWLR 146 at 154. Those dicta might or might not support the submission; it is not entirely easy to tell. But, in my view, if they do they are wrong. In my view the only extra flexibility the rule changes effected was by permitting service out of the jurisdiction without leave to enable defendants to submit to the jurisdiction if they wanted to, in which case no court application would be necessary. They did not authorize a court to allow actions to proceed against foreign residents even if there was no arguable case with RIA. If they did, what was the point of R1A, at least as expressed in its present language?

Once it is perceived that R1A is still the governing rule, the barrier over which all actions against foreign residents must pass, unless the defendants wish to submit to the jurisdiction, the question which arises is whether the plaintiff, in a R2 application, must prove that he falls within one of the categories specified in RIA on a prima facie basis, or whether he must prove the existence of a merely arguable case, or whether he should prove something else. In my opinion it is unnecessary to decide this question as the claimants could not demonstrate the existence of a relevant cause of action on any conceivable basis. As far as their case in contract is concerned, I have already alluded to the fatal weaknesses in it. They are so fatal, in my view, that they preclude the claimants demonstrating a case on the only contracts on which they sued, no matter what test was applied.

However, contract was not the only cause of action pleaded by the claimants. They also, as is now so fashionable, pleaded a case based on the Trade Practices Act, another case based on unconscionable conduct and yet another based on estoppel. His Honour held that these cases, also, had not been made out even at a prima facie, or arguable, level. Again, with great respect, I agree with him. On the Trade Practices Act issue his Honour said:

"Para21 alleges each of the defendants represented to the plaintiffs that the second defendant would:

"(1) not sell the loans to anyone other than the second plaintiff;

"(ii) conclude and execute a Sale Arrangements Deed and any other documentation required for the sale and transfer of the loans from the second defendant to the second plaintiff;

"(iii) negotiate in good faith any matter required for the implementation of the Australian agreement for the sale of loans by the second defendant to the second plaintiff contained in the letter of 18 November 1993, as varied; and

"(iv) use its best endeavours to complete the sale of the loans from the defendants to the plaintiffs.

"Tn my view there is no basis for the representations alleged in (i) and

(ii). They are said to be representations in absolute terms. At best the parties agreed to try and reach an agreement. As there was no Australian agreement the representation in (iii) cannot have had any effect as implementation did not become appropriate. In the same way (iv) looks to completion and, thereby, seems to presuppose the matter, not, in my view, established, namely the existence of an agreement."

URJ BANK OF AMERICA v BANK OF NEW YORK (Powell JA) 9

Each representation relied on is in effect a representation that a promise, express or implied, in the contract will be performed. Once it is decided there is no contract as alleged, any representations which are epiphentic must also fail. A similar fate must also befall the cases based in unconscionableness and estoppel, which are based on the same alleged representations.

There is something else which should be observed about the allegation of unconscientious conduct. The transaction in dispute was a transaction between two commercial entities, not a transaction between a cheat and a widow. Every such commercial transaction, in the course of negotiation, must involve one, or both, parties occasionally making statements or indulging in conduct which strays a little from strict adherence to the truth and would not wholly commend themselves to the unqualified appreciation of a strict moralist. Such statements and such conduct cannot be stigmatized as "unconscientious" within the well known doctrines of equity. In the present case, for example, a promise or representation by one party that it would act "in good faith" is but a flimsy foundation for an allegation of unconscientiousness.

That leaves only one question, viz. whether the proceedings brought against Bank of New York Australia Ltd were brought in an inconvenient forum. To deal with this question it is necessary to remember that the present opponents had in New York commenced litigation against the present claimants seeking negative declarations arising out of the same transaction.

His Honour held that, when he took all the relevant factors into account, including the fact that most of the witnesses who would be called lived in New York, New South Wales was not a forum conveniens. Error in his Honour's discretionary judgment has not been demonstrated.

Counsel for the Claimants: JJ Spigelman QC/JR Sackar QC/JE Marshall Instructed by: Clayton Utz

Counsel for the Opponents: GAA Nettle SC/DP Robinson

Trade Practices Act 1974(Cth)

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