My Reasoning
206 In my opinion, it is more appropriate, within the meaning of s 5(4)(b)(i) that this proceeding be determined by the Supreme Court of Western Australia. I reach this conclusion after balancing the various arguments raised for and against the transfer motion. I should make it clear that there was weight on both sides of the scale. My reasons for reaching that conclusion are as follows.
207 All of the applicants' claims are of a type which, so far as corporations are involved, would normally have been brought in a State Court until it was thought that this Court had been vested with jurisdiction under the Corporations Law. I acknowledge that s 565 of the Corporations Law, and its predecessors, incorporate by reference some of the principles of bankruptcy, an area of law which has long been federal in its nature. However the essential nature of all of the applicants' claims is that each claim is what Northrop J described in Coutts as "a State claim". I appreciate that Northrop J was considering transfer of that case under the "interests of justice" test in s 5(4)(b)(iii). At p 7 of his reasons, his Honour said this:
"In order to enable the cross-vesting legislation to operate fairly and justly it is important, in my opinion, that the background to the legislation be remembered. In cases of the kind presently before the Court, in the interests of justice, it is important to ensure that the State Courts deal with those matters which, essentially, are State matters, while the Federal Court deals with those matters which are, essentially, federal matters. Otherwise the problem sought to be resolved by the cross-vesting legislation will rise again." [The problem previously identified by his Honour was that more and more cases were coming to the Federal Court in reliance upon the accrued jurisdiction and thus having an adverse effect on the Supreme Courts of the States and Territories.]
208 This proceeding is, as I have held, within this Court's jurisdiction only by reason of the third basis of the respondents' cross-claims. It will be recalled that the first two bases were breach of contract and estoppel. The third basis, the claim based on s 52 of the Trade Practices Act, validly invokes this Court's jurisdiction and, as I have held, brings the applicants' claims into its accrued jurisdiction. The factual platform for the estoppel claim is virtually the same as that for the s 52 claim. But the first two of those bases are not federal in their nature and furthermore they are, as I have explained above, in large measure common to the WA Proceeding. That is not to suggest that the s 52 claim is to be regarded as subordinate to the other two claims. However, it does serve to accentuate the extent to which the claims on both sides of the case are State claims.
209 If the matter were to proceed in this Court, it would be open to the unsuccessful parties to appeal, as of right after trial, to the Full Court and, subject to obtaining special leave, to the High Court of Australia on grounds which could include a complaint that my decision on the jurisdiction issues was wrong and this Court never had any jurisdiction to hear and determine this matter. Several million dollars have already been expended by the parties on these proceedings. There is evidence (see paragraph 62 of Mr S R Paterniti's affidavit sworn 28 January 2000) from which I infer that that figure to date is not less than $18 million. My firm impression is that there will be many more interlocutory motions to be heard (there are two pending, one on either side, relating to extensive amendments to pleadings). My assessment is that many more millions of dollars will be expended in bringing this matter to trial and on the actual hearing of it. There will also be a substantial allocation of this Court's resources. Virtually all of that prospective expenditure will be wasted if a jurisdictional challenge were to be mounted by the parties against whom judgment is entered after trial in this Court. The respondents argued that doubts about jurisdiction should not be a relevant factor when deciding which Court was the more appropriate to determine the proceeding. They relied upon the observations of Gummow J in McIntosh v National Australia Bank Ltd (1988) 17 FCR 482 at 483-484. In that case his Honour was considering a motion by the respondent for an order under s 86A of the Trade Practices Act that the proceedings be transferred to the Supreme Court of New South Wales. There were no parallel proceedings pending in that Court. The basis for the respondents' motion was what it contended was a real doubt as to whether the accrued jurisdiction of the Court had been attracted in respect of certain non-federal claims brought against it by the applicant. His Honour said this (at 483-484):
"To remit or transfer a proceeding is to exercise jurisdiction in respect of it: Johnstone v Commonwealth (1979) 143 CLR 398, Pozniak v Smith (1982) 151 CLR 58. It follows, in my view, that s 86A is not to be construed as authorising the transfer of matters for determination in a proceeding in this Court on the footing that uncertainty as to existence of jurisdiction in this Court makes the transfer "in the interests of justice".
210 In that case his Honour reached the conclusion that there was no uncertainty as to the jurisdiction of this Court in respect of the non-federal claims. The respondents' counsel had indicated in address that if his Honour reached that conclusion, then the interests of justice did not favour transfer and the application for transfer would not be further pressed.
211 I think McIntosh can be distinguished from the present case. First, the doubt was the sole basis for the respondent's motion in that case. In this application it is simply one, although an important one, of several factors which in my view make it more appropriate that the proceeding be determined by the Supreme Court. Secondly, the doubt about jurisdiction was very narrowly confined in McIntosh and easily resolved by Gummow J on an examination of the pleadings. The present matter is far more complex, even labyrinthine, as the above reasons may demonstrate. There are so many different computations of circumstances, any one of which might, on appeal, disclose a jurisdictional deficiency. There would be no such problems in the Supreme Court.
212 These proceedings are not simply "related to" the WA Proceeding. There is, as the applicants submit, a real and very significant overlap between the two sets of proceedings. The respondents' motion, filed on 11 February 2000, whereby in effect they seek to have most of the matters presently being litigated before the Supreme Court in the WA Proceeding brought into their cross-claim, is a further clear indication of the common issues. I refer also to my analysis above of the common ground in the pleadings in the two sets of proceedings, and the other matters showing the degree of overlap.
213 The Supreme Court (on 20 January 1998) has stayed the WA Proceeding in anticipation that this Court's decision in this application may determine whether the WA Proceeding will ever need to go ahead. The proceeding in this Court has become much more protracted than was to be expected when that stay order was made. The Supreme Court cannot be expected to stay proceedings before it indefinitely. There is evidence before me that the defendants in the WA Proceeding have, on 28 February 2000, filed a chamber summons seeking a partial lifting of the stay orders made on 20 January 1998, so that an injunctive order may be made restraining the respondents from commencing any further actions in this Court which seek against the defendants in the WA Proceeding any of the relief sought in that proceeding.
214 I think that it is undesirable for such a situation to continue, because it tends to bring the justice system into question. It is even more undesirable, to the point of being unthinkable, that two sets of proceedings with so much in common might go ahead in the two courts with the risk of inconsistent findings. The logical course is for one set of proceedings to be heard by the same judge. The respondents seek to do this by their proposed further amendments to their cross-claim. In view of the preponderance of State claims compared to the respondents' claim under s 52 of the Trade Practices Act, it seems to me much more appropriate that the disputes be resolved in the Supreme Court. In making that assessment, I have not ignored what, on the respondents' case, can be described as the potential "knock out" effect of their s 52 claim i.e. that even if the applicants are successful in all their claims, success by the respondents in their claim under s 52 of the Trade Practices Act has at least the potential to render the applicants' victories not only pyrrhic but worthless.
215 My assessment is that the bulk of the evidence in the case will be concerned with the applicants' claims relating to the taking of Securities at a time of insolvency or near insolvency, the breach of the former directors' duties and the like, whether the sale proceeds can be traced, and the respondents' defences to those allegations. The evidence in respect of the s 52 claim is likely to emerge as part of the breach of contract and estoppel claims. Its status as an independent case, in evidentiary terms, is likely to be relatively minor.
216 I accept the applicants' submission that if they are successful in this proceeding, there is bound to be a further application under s 564 of the Corporations Law to the Supreme Court on behalf of the funding creditors to obtain a degree of priority in the liquidation of TBGL and BGF. There is, if this proceeding is transferred to the Supreme Court, at least the potential for the same judge who hears the principal proceedings to determine the application under s 564 of the Corporations Law. This is a relevant factor, but not one to which I would attribute as much weight as I do to the foregoing factors.
217 On the other hand, I have recognised the strength of the respondents' submissions. Usually applications for transfer are brought very early in the course of proceedings. The delay is not quite as long as the respondents' claim (the applicants' made a cross-vesting application in December 1998, which remains undetermined) but it is considerable. However, the circumstances are unusual, to say the least. It was not until comparatively recently that it became apparent that the cross-vesting legislation was in real constitutional peril. There was the equal division in the High Court (on 2 February 1998) in Gould v Brown (1998) 193 CLR 346 and then, of course, Re Wakim was handed down on 17 June 1999. In such exceptional circumstances, delay does not, in my opinion weigh as heavily as it would in a normal case.
218 The same reasoning tends to reduce what would otherwise have been the significance of the extensive exercise by this Court of its jurisdiction, including the hearing of some 68 separate interlocutory proceedings and two appeals to the Full Court. But any benefit which may have been derived from those interlocutory skirmishes will carry through when this application is transferred to the Supreme Court of Western Australia. I acknowledge that I have acquired, as the respondents assert, a knowledge of this matter. I would not describe it (as they do) as "an intimate knowledge". The proceedings have been dragged out for so long, that I have had to re-familiarise myself with the matter on each occasion when it came before me. I have no doubt that any Supreme Court Judge will be able to familiarise himself or herself very readily with the history of the matter and the issues which are raised in it.
219 One of the factors relied upon by the applicants in support of the transfer of the proceedings was their proposal, foreshadowed in a version of the proposed eighth amended statement of claim, to sue the respondents under s 574 of the Companies Code for damages for what was said to be their knowing involvement in contraventions of the Companies Code. The applicants contended that the Federal Court would not have jurisdiction over those claims, but that the Supreme Court would have jurisdiction, and that the claims could be added by the foreshadowed amendment to their statement of claim if this proceeding were transferred to the Supreme Court. The respondents submitted that such a course would confer a significant forensic advantage upon the applicants and a concomitant forensic disadvantage upon them. The applicants had chosen not to institute the proposed proceedings in the Supreme Court and might avoid statutory time bars by relying upon the fact that the principal application had been commenced in this Court in 1995. I have decided not to give any weight to the applicants' submissions on this point as demonstrating (on their case) the appropriateness of transferring this proceeding to the Supreme Court. The applicants have had plenty of opportunity to bring the foreshadowed claims either in the Supreme Court or in this Court. I do attach some weight to the respondents' submissions about prejudice as affecting the appropriateness or otherwise of such transfer. However, I am confident that when the Supreme Court deals with the application to amend, it will take into account the matters raised by the respondents. There are conditions which can be attached to the granting of leave to amend in circumstances such as these. In the overall context of the matters in issue, I consider that this issue is a relatively minor one. In my view, it does not cause the balance to tilt against the appropriateness of the transfer of this proceeding to the Supreme Court.
220 The main factor which has concerned me is whether the respondents will suffer prejudice by the application of the State Evidence Act rather than the Federal Evidence Act and, if so, the extent of such prejudice. The respondents submitted that they had prepared their evidentiary material for the trial of this case on the footing that the Commonwealth Evidence Act would apply, and that there are significant differences between the provisions of the State Evidence Act and the Commonwealth Evidence Act. The respondents' evidence on this point can be found in the affidavit of Mr S R Paterniti sworn 28 January 2000 (which contains submissions also) between paragraphs 63 and 97. The respondents also deal with this matter of prejudice in their written submissions dated 11 February 2000, which were further developed in oral submissions on 10 March 2000.
221 There was a dispute between the parties as to whether s 11(1)(c) of the Cross-Vesting Act (or its Western Australian equivalent) would be likely to alleviate any difficulties encountered by the respondents. Section 11 (1) relevantly provides as follows:
"Conduct of Proceedings
11(1) [Law to be applied] Where it appears to a court that the court will, or will be likely to, in determining a matter for determination in a proceeding, be exercising jurisdiction conferred by this Act or by a law [of * the Commonwealth or] a State relating to cross-vesting of jurisdiction -
(a) . . .
(b) . . .
(c) the rules of evidence and procedure to be applied in dealing with that matter shall be such as the court considers appropriate in the circumstances, being rules that are applied in a superior court in Australia …".
[The provisions in the two Acts are identical save that the State Act has the additional words which I have inserted in parenthesis near the asterisk above].
222 I think that it is clear that when this proceeding is transferred to the Supreme Court of Western Australia, that Court will not be exercising jurisdiction conferred by the State Cross-Vesting Act. I think it is also sufficiently clear that it will not be exercising jurisdiction conferred by the Commonwealth Cross-Vesting Act. That is because s 4 of the Commonwealth Cross-Vesting Act contains the condition, in s 4(1)(b), that the Supreme Court would not, apart from that section, have jurisdiction with respect to that matter - see Poignand v NZI Securities Australia Limited (1992) 109 ALR 213 at 219. Accordingly, I do not think that s 11 will have any application. In that regard I differ, respectfully, from Tamberlin J's assessment to the contrary in Activate No 1 Pty Ltd v Equuscorp Pty Ltd [1999] FCA 619 at para 15. The reality is that the Supreme Court would have jurisdiction under s 86(2) of the Trade Practices Act. Even if s 11(1)(c) of the Cross-Vesting Act applied, there would be no guarantee that the Commonwealth Evidence Act would be applied at the hearing in the Supreme Court. It would be a matter in the Supreme Court's discretion depending upon which rules the Court considered to be appropriate in the circumstances.
223 I accept that there are significant differences between the two Evidence Acts. I do not propose to rule upon each of the series of legal arguments raised on either side about the extent, in practical terms, of those differences. My impression is that they are not quite as significant as the respondents maintain but somewhat more significant than the applicants contend. The applicants submitted that I should take into account proposed amendments to the State Evidence Act which are at present being considered by the Western Australia Parliament. I do not think that, when considering the appropriateness or otherwise of the transfer of this proceeding, it would be proper to do so. It would be simply too speculative. Some of the evidentiary problems (with s 79C of the State Evidence Act, one of the sections here relevant) surfaced in a fairly recent decision of a Full Court of the Supreme Court of Western Australia, Bristile Holdings Ltd v Giacci Brothers Pty Ltd [2000] WASCA 48. In the reasons for decision of the Court (comprising two judges, Owen and Steytler JJ) their Honours said this (at para 34):
"In our opinion s 79C is hopelessly inadequate for modern commercial litigation. In the absence of a legislative solution perhaps O29 r2(1) provides a mechanism for overcoming some of the deficiencies in the section. But it cannot be ignored. We think that this application should have been approached as if it were an application for orders ahead of trial to facilitate proof of matters under the section. That this course is open is clear on the authorities …"
224 Unfortunately the authorities (reviewed in Bristile) suggest that Order 29 rule 2(1) of the Rules of the Supreme Court of Western Australia can only be used to facilitate proof of matters in issue which are largely peripheral, although not completely, formal. However, there does appear to be some glimmer of hope, arising from their Honours' observations in Bristile, for parties who find themselves in the respondents' situation.
225 As to the degree of prejudice, the respondents have, for understandable reasons, largely tendered their evidence of prejudice by way of examples rather than on an exhaustive basis.
226 While I accept that, to a degree, the respondents will have to review their evidence to accommodate the requirements of the State Evidence Act, I am not satisfied on their evidence that the degree of prejudice will be such as to outweigh the factors which I consider make it more appropriate that this case should be determined by the Supreme Court.
227 Most of the foregoing reasoning is based on the relationship between the proceeding in this Court and the WA Proceeding. I have also found that this proceeding arises out of and is also related to the various winding up proceedings and is also related to the proof of debt proceedings. I would have found in favour of transfer even without having made those findings. However, those findings together with the degree of the relationship between the various sets of proceedings makes it even more appropriate, in my opinion, that this proceeding should be determined by the Supreme Court of Western Australia.