Challenger Group Holdings Limited v Concept Equity Pty Limited

Supreme Court of NSW|2005-04-27|Before: Einstein J, Waller J, Mr P

CITATION : Challenger Group Holdings Limited v Concept Equity Pty Limited [2005] NSWSC 374

DECISION : Conditional stay of proceedings before Supreme Court of New South Wales. Upon condition being satisfied dismiss defendant's motion seeking to stay New South Wales proceedings and alternatively seeking that New South Wales proceedings be transferred to Supreme Court of Victoria under cross-vesting legislation.

CATCHWORDS : Practice and procedure - Parallel proceedings - Stay of proceedings - Cross-vesting application - Principles concerning mode of dealing with cross applications (1) for stay of proceedings and (2) seeking cross-vesting orders - Proceedings commenced by plaintiff in Supreme Court of New South Wales one-day prior to commencement by defendant of proceedings in Supreme Court of Victoria - Claim that New South Wales proceedings amounted to an abuse of process or close to such as brought in circumstances which were unconscionable in order to pre-empt threatened Victorian proceedings - Allegation that plaintiff/plaintiff's solicitors had by correspondence exchange stolen a march on defendant/defendant's solicitors - Equity - Declarations - Negative declarations - Utility

Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW). LEGISLATION CITED : Service and Execution of Process Act 1992 (C'th)

Asher & Ors v Goldman Sachs & Co & Ors (Waller J, Queen's Bench, 21 October 1991, unreported) Bankinvest AG v Seabrook (1988) 14 NSWLR 711 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 BHP Billiton Ltd v Schultz [2004] HCA 61 Brooker v Bell [1989] 1 Lloyd's Rep 516 Camilla Cotton Oil Co v Granadex SA [1976] 2 Lloyd's Rep 10 Clay, In re; [1919] 1 Ch 66 Commonwealth of Australia v Cockatoo Dockyard Pty Ltd [2003] NSWCA 192 CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 David Leahey (Aust) Pty Limited v Mcpherson's Limited [1991] 2 VR 367 Dyson v Attorney-General [1911] KB 410 First National Bank of Boston v Union Bank of Switzerland [1990] 1 Lloyd's Rep 32 Greinert v Jarrett [2004] NSWSC 209 Guaranty Trust Company of New York v Hannay & Company [1915] 2 KB 536 CASES CITED : Hughes Motor Service Pty Ltd v Wang Computer Pty Ltd (1978) 35 FLR 346 I E Du Pont de Nemours v Agnew (No 2) [1988] 2 Lloyd's Rep 240 L & W Developments Pty Ltd v Della [2003] NSWCA 140 McHenry v Lewis (1882) 22 Ch D 397 McKinnon v Adams [2003] VSC 116 Meadows Indemnity Co Ltd v Insurance Corporation of Ireland Plc [1989] 2 Lloyd's Rep 298 Messier-Dowty Ltd v Sabena SA [2000] 1 WLR 2040 Minister of State for Employment, Workplace Relations and Small Business v Community and Public Sector Union (2001) 109 FCR 303 New Hampshire Insurance Co v Aerospace Finance Ltd [1998] 2 Lloyd's Rep 539 Pegasus Leasing Ltd v Cadoroll Pty Ltd (1996) 59 FCR 152 Saipem SpA v Dredging V02 BV & Anor [The Volvox Hollandia] [1988] 2 Lloyd's Rep 361 Sohio Supply Co v Gatoil (USA) Inc [1989] 1 Lloyd's Rep 588 Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 Sterling Pharmaceuticals Pty Ltd v Boots Company (Australia) Pty Ltd (1992) 34 FCR 287 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538

Challenger Group Holdings Limited (Plaintiff) PARTIES : Concept Equity Pty Limited (Defendant)

Mr G Lucarelli (Plaintiff) COUNSEL : Mr P Wood (Defendant)

Minter Ellison (Plaintiff) SOLICITORS : Clayton Utz (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2090/05 Challenger Group Holdings Limited v Concept Equity Pty Limited JUDGMENT Background 1 Challenger Group Holdings Ltd ["Challenger"] and Concept Equity Pty Ltd ["Concept"] are the parties to two sets of proceedings: · the present proceedings commenced in the Equity Division by Challenger on 23 March 2005; · proceedings 2040 of 2005 commenced by Concept in the Commercial and Equity Division Commercial List of the Supreme Court of Victoria on 24 March 2005. 2 Concept which was incorporated in Victoria, carried on business throughout Australia as a merchant banker and financial adviser. Challenger [previously Challenger International Ltd and then Challenger Financial Services Group Ltd] which was incorporated in New South Wales, carried on business throughout Australia as a provider of financial services. 3 The notices of motion presently for hearing concern in which forum the proceedings should be heard. The nature of the proceedings 4 Subject to some questions concerning the precise relief sought in the Summons presently filed before this Court, it is immediately plain that both sets of proceedings seek to litigate essentially the very same issues. 5 In short the litigation concerns an agreement constituted by a letter ["the Letter Agreement"] dated 30 April 1997 on Concept letterhead countersigned on behalf of Challenger on 12 May 1997 and sent by facsimile by Challenger to Concept at its Melbourne office on 13 May 1997. 6 In consideration of Concept introducing it to a number of merger and/or acquisition opportunities in the financial services sector, Challenger agreed that in the event that it (or any related or associated entity) formed a business relationship or made a business agreement with any party introduced by Concept (including any related or associated entity of the introduced party), then Challenger would pay to Concept a fee based on the total consideration value or benefit of the business agreement or business relationship formed equivalent to 5% for the first $10 million, 3% for the next $10 million and 1.5% for all amounts thereafter. 7 The dispute concerns a claim by Concept that in about December 1999 it introduced Associated Planners Group Ltd ["APG" or "the Target"] to Challenger as a possible merger and/or acquisition opportunity for Challenger and that during 2004 Challenger entered into a merger agreement with APG whereby Challenger would require all of APG's shares by issuing 5.69% Challenger shares for each APG share. The merger was duly consummated after the approval by this Court on 13 August 2004 of a Scheme of Arrangement whereby Challenger merged with and/or acquired APG. 8 Concept claims that pursuant to the above-described Letter Agreement Challenger became obliged to pay the sum of $1,865,000 together with any Goods and Services Tax applicable. 9 On 18 August 2004 Concept rendered an invoice to Challenger claiming the amount of $2,051,500 which has not been paid and is sought as an amount of damages due. 10 The above recitation of the ambit of the dispute to be litigated is generally taken from the terms of the Statement of Claim in the Victorian proceedings. The sole information identifying the material issues to be discerned from the terms of the Summons filed in the proceedings in this Court has to be taken from the 15 declarations sought, and from the claim to an order directing Concept to withdraw the above-described invoice. The precise communications leading to commencement of the two sets of proceedings 11 It is convenient to review the events leading to the commencement of the two sets of proceedings. The short position is as follows: · on 13 May 2004, Concept notified Challenger of an intended claim to commission under the contract in relation to Challenger's acquisition of APG. On 20 May 2004, that proposed claim was rejected. On 27 August 2004, Concept submitted to Challenger numerous documents and a tax invoice for $2,051,500. On 13 September 2004, Minter Ellison, on behalf of Challenger, rejected the invoice and set forth reasons for the rejection.

· on 8 March 2005, Clayton Utz replied by facsimile to the 13 September 2004 letter, set forth reasons as to why Concept's claim was valid and stated: "If our client does not receive payment of the invoice within fourteen (14) days, our client will institute legal proceedings in the Supreme Court of Victoria to recover payment of the fee the subject of the invoice, together with interest and costs."

· on 9 March 2005 Minter Ellison wrote to Clayton Utz stating: "We are seeking instructions from our client on the matters raised by you. We will endeavour to respond to your letter as soon as possible although we may not be able to do so within the 14 day deadline you have stipulated. Since it took almost six months to answer our 13 September 2004 letter we assume, unless we hear from you to the contrary, that a few extra days delay in getting back to you with our client's response will be acceptable." (page 18 of the Ulman affidavit). · Mr Northam, from Clayton Utz, obtained instructions to allow further time if necessary; · on 23 March 2005, one day after the initial deadline, Challenger, rather than replying to the 8 March 2005 letter, commenced the NSW proceeding by Summons. The declarations were directed to the absence of liability of Challenger to Concept. Also on 23 March 2005, Minter Ellison faxed a copy of the Summons to Clayton Utz;

· on 24 March 2005, Concept commenced the Victorian proceedings by writ and statement of claim seeking recovery of $2,051,500. A copy of the writ, statement of claim and summons for directions were faxed by Clayton Utz to Minter Ellison under cover of a letter dated 24 March 2005 in which strong objection was taken to Challenger's conduct. Service of the writ was effected pursuant to the Service and Execution of Process Act, 1992 (Cth). Vigorous correspondence ensued between the solicitors. 12 It is convenient at this stage to record the terms of the summons filed by Challenger in this Court. It sought the following relief: · A declaration that on the true construction of the Agreement (as defined in the Schedule below), and in the events which have occurred, the defendant is not entitled to any commission from the plaintiff with respect to or arising from the Transaction (as defined in the Schedule below). · A declaration that the Agreement contained an implied term that if the plaintiff did not form a business relationship or make a business agreement with a third party introduced by the defendant within a reasonable time from the initial introduction, the introduction would be mutually treated as having lapsed or as being spent or inoperative as an introduction for the purposes of the Agreement. · A declaration that the Agreement contained an implied term that if the plaintiff used the defendant's services but did not within a reasonable time from when the defendant rendered those services form a business relationship or make a business agreement with a third party introduced by the defendant, the plaintiff's use of those services would be mutually treated as not having resulted in the formation of a business relationship or business agreement with the third party for the purposes of the Agreement. · In the alternative…, a declaration that the Agreement contained an implied term that if the plaintiff did not form a business relationship or make a business agreement with Associated Planners Group Limited ("APG") within a reasonable time from the initial introduction of APG to the plaintiff, the introduction would be mutually treated as having lapsed or as being spent or inoperative as an introduction for the purposes of the Agreement. · In the alternative…, a declaration that the Agreement contained an implied term that if the plaintiff used the defendant's services but did not within a reasonable time from when the defendant rendered those services form a business relationship or make a business agreement with APG, the plaintiff's use of those services would be mutually treated as not having resulted in the formation of a business relationship or business agreement with APG for the purposes of the Agreement. · A declaration that, on or by a date prior to the Transaction, a reasonable time from the defendant's introduction of APG and the plaintiff forming a business relationship or a business agreement with APG within the operation of the Agreement had elapsed without the plaintiff having formed a business relationship or a business agreement with APG. · In the alternative…, a declaration that, on or by a date prior to the Transaction, the plaintiff had not, within a reasonable time from the initial introduction of APG to the plaintiff, formed a business relationship or made a business agreement with APG for the purposes of the Agreement. · A declaration that, on or by a date prior to the Transaction, a reasonable time from the plaintiff's use of the defendant's services and the plaintiff forming a business relationship or a business agreement with APG within the operation of the Agreement had elapsed without the plaintiff having formed a business relationship or a business agreement with APG. · In the alternative…, a declaration that on or by a date prior to the Transaction, the plaintiff had not, within a reasonable time from the plaintiff having used the defendant's services, formed a business relationship or made a business agreement with APG for the purposes of the Agreement. · A declaration that the plaintiff's use of the defendant's services did not result in the formation of any business relationship or business agreement between the plaintiff and APG for the purposes of the Agreement. · A declaration that the defendant's introduction of APG to the plaintiff in December 1997 was not the effective cause of the Transaction. · A declaration that the event or events giving rise to the defendant's entitlement to payment under the Agreement did not occur. · A declaration that the Invoice (defined in the Schedule) is not payable by the plaintiff. · An order directing the defendant to withdraw the Invoice in writing. · A declaration that the Agreement is at an end. · In the alternative, a declaration that the Agreement is at an end so far as relates to APG and the Transaction. 13 A proposed amended summons was tendered during the hearing of the motions and is referred to below. The issues as foreshadowed by counsel appearing for Challenger 14 Mr Lucarelli, of counsel, appearing for Challenger, submitted that his client's case was that: · throughout late 1999 and early 2000, there were discussions between Challenger and APG concerning a possible acquisition of the target by Challenger; · by April of 2000 the negotiations had ceased, no business arrangement having been entered into between Challenger and APG; · in approximately April 2000 or thereabouts an executive from Challenger indicated that Challenger was not interested in acquiring at the price offered; · between 2000 and 2004 nothing further was done by the Concept to promote a merger or acquisition of APG by Challenger, nor did Challenger invite Concept to do anything to promote any proposed acquisition; · Challenger's case would be that in about April 2004 an officer of APG who was unaware of the earlier 1999 discussions, contacted the then managing director of Challenger and proposed that Challenger merge with APG. 15 Mr Lucarelli shortly submitted that the principal issues to be litigated would be: The first implied term · Whether there is to be implied into the Letter Agreement what was put as "the usual term" that the introducers' fee is only payable if the introduction is the effective cause of the transaction. The alternative implied term · In the alternative, whether there is to be implied into the Letter Agreement a term that after a reasonable period from an introduction, if there was no formation of a business arrangement or business relationship, both parties would treat the introduction as being spent or as no longer operative for the purposes of the agreement. Persons involved in the later transaction 16 The submission was that in regard to material pertinent to the issue concerning the first implied term, Challenger would need to call all pertinent persons involved in the actual transaction in 2003 and 2004 to give evidence that they knew nothing about the earlier discussions, knew nothing about what had been produced by the Concept in 2000 and that the effective cause of the transaction was a unilateral, unsolicited approach by APG to Challenger in the year 2003. Persons Involved in the earlier transaction 17 The submission was that in regard to material pertinent to the issue concerning the second implied term, at an evidentiary level the following issues arise: · what Concept in fact did during the period of introduction; · what was the depth and quality and extent of the information Challenger, acquired of the target [because if, for instance, Challenger acquired only superficial information during the period of the introduction, the Court would be more likely to find that a reasonable period for the purposes of the second implied term, would be shorter than it would be if Challenger had been provided with a very detailed due diligence report conducted by KPMG]; · the quality of the information acquired by Challenger would necessarily inform what was a reasonable period after which the introduction would be seen to have lapsed - on this issue, all persons involved in the initial introduction would require to be relevant witnesses to say what it was that they had done and what information they had received in order for the Court to be in a position to assess the quality of that information. The motions presently before the Court 18 Challenger seeks an order restraining Concept from taking any further step in the Victorian proceedings until further order or with Challenger's prior written consent. 19 Concept seeks the following orders: · that the NSW proceedings be stayed pending the hearing and determination of the Victorian proceedings; · in the alternative that the NSW proceedings be transferred to the Supreme Court of Victoria pursuant to s. 5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW). The principles The interface between applications for a stay of proceedings and applications pursuant to the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) 20 Somewhat curiously it appears that there is no authority dealing with the proper approach of the Court where the interface between on the one hand, an application for a stay of proceedings and, on the other hand, an application brought pursuant to the cross vesting legislation, falls for determination. 21 However the joint judgment of Gleeson CJ, McHugh and Heydon JJ in the very recent decision of the High Court of Australia in BHP Billiton Ltd v Schultz [2004] HCA 61 not only reaffirms the intention of the cross-vesting legislation but also (at [18]) pointed out that: "[t]here is nothing unusual, either in the State or the federal judicature, about actions between residents of different Australian law areas. Federal diversity jurisdiction is an obvious example. Actions in New South Wales courts are commonly brought by residents of other States, especially when the residence or principal place of business of the defendant is New South Wales. Reference is sometimes made to one forum or another being the "natural forum" . Such a description is usually based upon a consideration of "connecting factors", described by Lord Goff in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 as including matters of convenience and expense, such as availability of witnesses, the places where the parties respectively reside or carry on business, and the law governing the relevant transaction. Lord Templeman described such factors as "legion", and said that it was difficult to find clear guidance as to how they are to be weighed in a particular case ." [emphasis added] 22 Their Honours (at [14] and [15]) made the following observations:

"In the context of the Cross-vesting Act, one is not concerned with the problem of a court, with a prima facie duty to exercise a jurisdiction that has been regularly invoked, asking whether it is justified in refusing to perform that duty. Rather, the court is required by statute to ensure that cases are heard in the forum dictated by the interests of justice . An application for transfer under s 5 of the Cross-vesting Act is brought upon the hypothesis that the jurisdiction of the court to which the application is made has been regularly invoked . If it appears to that court that it is in the interests of justice that the proceedings be determined by another designated court, then the first court "shall transfer" the proceedings to that other court. There is a statutory requirement to exercise the power of transfer whenever it appears that it is in the interests of justice that it should be exercised. It is not necessary that it should appear that the first court is a "clearly inappropriate" forum. It is both necessary and sufficient that, in the interests of justice, the second court is more appropriate.

The reason why a plaintiff has commenced proceedings in a particular court might, or might not, concern a matter related to the interests of justice. It might simply be that the plaintiff's lawyers have their offices in a particular locality. It is almost invariably the case that a decision as to the court in which an action is commenced is made by the plaintiff's lawyers, and their reasons for making that choice may be various…. The interests of justice are not the same as the interests of one party, and there may be interests wider than those of either party to be considered. Even so, the interests of the respective parties, which might in some respects be common (as, for example, cost and efficiency), and in other respects conflicting, will arise for consideration. The justice referred to in s 5 is not disembodied, or divorced from practical reality…" [emphasis added] 23 Their Honours referred with approval to the following passage from the judgment of Street CJ in Bankinvest AG v Seabrook (1988) 14 NSWLR 711:

"The cross-vesting legislation passed by the Commonwealth, the States and the Territories both conferred on each of the ten courts Australia-wide jurisdiction and set up the mechanism regulating the transferring of proceedings from one of these ten courts to another. In relation to transfer, the common policy reflected in each of the individual enactments is that there must be a judicial determination by the court in which proceedings are commenced either to transfer or not to transfer the proceedings to one of the other nine based, broadly speaking, upon consideration of the interests of justice ... It calls for what I might describe as a 'nuts and bolts' management decision as to which court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantive dispute." [emphasis added] The power to stay proceedings 24 Mr Wood of counsel for Concept, submitted, as I accept, that the Court has power to stay proceedings that are frivolous or vexatious or an abuse of the process of the Court pursuant to Part 13, rule 5 of the Supreme Court Rules 1970. 25 Further, where there are multiple proceedings the Court also has an inherent power to grant a temporary or limited stay as part of its general power to control its own proceedings: Sterling Pharmaceuticals Pty Ltd v Boots Company (Australia) Pty Ltd (1992) 34 FCR 287, 290-291, 294; Hughes Motor Service Pty Ltd v Wang Computer Pty Ltd (1978) 35 FLR 346, 351, 355. 26 As Mr Wood submitted, the existence and exercise of the power was upheld by the New South Wales Court of Appeal in L & W Developments Pty Ltd v Della [2003] NSWCA 140, where some of the relevant considerations are discussed (at [51] and [52]).

27 The New South Wales Court of Appeal in Commonwealth of Australia v Cockatoo Dockyard Pty Ltd [2003] NSWCA 192 at [32], [54] - [73] and [75] - [77] discussed the power to stay a proceeding where there are concurrent actions. Mr Wood's submission was that the reasoning of McColl JA in that case concerning the significance of the identity of the parties, the factual substratum and the legal bases of the respective claims were helpfully analysed by Austin Jin Greinert v. Jarrett [2004] NSWSC 209 at [22] - [28]. In particular his Honour said at paragraph [26]: "If, however, the proceeding first initiated was commenced for the purpose of forestalling the threatened proceeding in the other jurisdiction, the motive of the party commencing the first proceeding might be held against him." Negative declarations 28 Mr Wood made the following submissions with respect to the proper approach to be taken to negative declarations:

"The approach taken to negative declarations, particularly in the context of forum disputes, has been discussed in a number of cases. In The Volvox Hollandia [1988] 2 Lloyd's Rep 361 Kerr LJ stated (at pages 364 and 371): "Properly viewed, these claims for negative declarations are a novel type of pre-emptive forum shopping with novel implications. They distort the settled law and practice governing the rights of shipowners to seek to limit their liability."

"Claims for declarations, and in particular negative declarations, must be viewed with great caution in all situations involving possible conflicts of jurisdictions, since they obviously lend themselves to improper attempts at forum shopping."

In Guaranty Trust Co of New York v Hannay & Company [1915] 2 KB 536 Pickford LJ said at 564-5: "I think that a declaration that a person is not liable in an existing or possible action is one that will hardly ever be made, but that in practically every case the person asking it will be left to set up his defence in the action when it is brought….I am not prepared to say it is beyond the power of the Court in a very exceptional case to make such a declaration."

Pickford LJ's dictum was cited with approval in Camilla Cotton Oil Co v. Granadex SA [1976] 2 Lloyd's Rep 10 at 14; I E Du Pont de Nemours Co v. Agnew (No 2) [1988] 2 Lloyd's Rep 240 at 248; Brooker v. Bell [1989] 1 Lloyd's Rep 516 at 517; Meadows Indemnity Co Ltd v. Insurance Corporation of Ireland Plc [1989] 2 Lloyd's Rep 298 at 301-2 and 307; First National Bank of Boston v. Union Bank of Switzerland [1990] 1 Lloyd's Rep 32 at 36 and 39.

In Dyson v. Attorney-General [1911] KB 410 Lord Hardy MR stated at 417: "I desire to guard myself against the supposition that a person who expects to be made defendant, and who prefers to be plaintiff, can, as a matter of right, attain his object by commencing an action to obtain a declaration that his opponent has no good cause of action against him. The court may well say: 'Wait until you are attacked and then raise your defence', and may dismiss the action with costs."

In Asher and others v. Goldman Sachs & Co and others (unreported, Queen's Bench, 21 October 1991) Waller J stated at page 4: "The Court will watch with special caution actions for declarations of non liability by parties who are not natural plaintiffs. (See Guaranty Trust Company of New York v. Hannay & Company [1915] QB 356 particularly Re Clay [1919] 1 Ch 66 particularly 78, and Camilla Cotton Oil Co v. Granadex SA and Tracomin SA ; [1976] 2 Lloyd's Rep 10, particularly page 14 column 1.)"…

In Camilla Cotton Oil Co v. Granadex SA [1976] 2 Lloyd's Rep 10, 14 Lord Wilberforce after quoting from Guaranty Trust Co stated at 14-5: ""Hardly ever" is not the same as "never" but he words warn us that we must apply some careful scrutiny. So I inquire whether to grant such a negative declaration would be useful.

This being the position, not I hope unduly simplified, can it be said that there is any utility, from the point of view of the Swiss proceedings, in allowing the claim stated in par. 1 of the writs to proceed? In my opinion there are several reasons why there is not…"

In Sohio Supply Co v Gatoil (USA) Inc [1989] 1 Lloyd's Rep 588, Lord Justice Straughton stated at 593: "First, the Texan action is an action for a negative declaration commenced by the buyers when, as is quite plain, they were apprehensive that proceedings might be commenced against them in England. I would not do anything to encourage that sort of proceeding. Another Division of this Court in the case of Saipem SpA v Dredging V02 BV [1988] 2 Lloyd's Rep 361 was equally discouraging about applications for negative declarations."

In New Hampshire Insurance Co v Aerospace Finance Ltd [1998] 2 Lloyd's Rep 539 at 542-543 Walker J applied Re Clay and The Volvox Holandia and struck out the application for a negative declaration both on the grounds that there was no jurisdiction to grant a negative declaration where no claim has been made and it was an abuse of process. " 29 It may be accepted that the cautionary approach to negative declarations exhibited by the above authorities is clearly appropriate. However as will appear from what follows this is not an end to the matter. Concept's submissions 30 The submissions put on behalf of Concept relied upon three grounds for the ordering of a stay of the present proceedings: · the use of claims for negative declarations as a form of forum shopping; · the fact that with one, or perhaps two, exceptions the declarations sought are said to fail the test set in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at [45] - [48]; · the rush by the plaintiff to commence the NSW proceeding having induced the defendant not to commence first in Victoria. 31 This submission put by Concept was that:

"[T]he NSW proceeding was brought in circumstances that were unconscionable or represented an unconscientious exercise of the plaintiff's legal rights to invoke this Court's jurisdiction by way of claims for negative declarations, where it was not the natural plaintiff, and where there was a pre-emption of the threatened Victorian proceeding. Whether the plaintiff's conduct amounted to the abuse of process stricto sensu or something less does not affect the availability of relief by way of stay." 32 Emphasis was put upon the proposition that the particular circumstances leading to Challenger first commencing the New South Wales proceedings were very relevant. The proposition was that on 9 March 2005, Challenger's solicitors requested a few extra days in which to get back to Concept's solicitors with Challenger's response, inferentially by reason of the reference to the judgment in David Leahey (Aust) Pty Limited v Mcpherson's Limited [1991] 2 VR 367. Concept afforded extra time. Instead of communicating back to Concept's solicitors, Challenger instituted a pre-emptive proceeding by way of seeking negative declarations. 33 The submission was that accordingly it was open to the Court to draw the inference that Challenger engaged in diversionary conduct and took advantage of the extra time to file the Summons in the Supreme Court of New South Wales, pre-empting a first filing by Concept. That conduct of Challenger is said to fortify the basis for a stay. Challenger's submissions 34 The contradictor submission put on behalf of Challenger was in summary as follows: · on the basis of CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345, the principles to be applied by the Court in order to determine whether to grant the anti-suit injunction sought by Challenger are different to the principles apposite in deciding whether to stay proceedings in this court; · the operative principle governing the granting of a stay of action in this court is still the principle in Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 namely whether the court whose proceedings are sought to be stayed is clearly an inappropriate forum; · the principles informing the anti-suit injunction revolve around three integers: - the protection of the integrity of this court's process once set in motion; - the prevention of the unconscientious exercise of legal rights, - the restraint of proceedings which are considered in equity vexatious or oppressive.

· equity considers other proceedings to be vexatious or oppressive if those other proceedings are such that there is nothing to be gained from them over and above what is to be gained or can be gained in the proceedings in this Court, and equity will consider rival proceedings as vexatious or oppressive if there is complete correspondence between the two sets of proceedings, [meaning correspondence as to subject matter, correspondence as to parties, correspondence as to the relief which either court or both courts can grant and/or correspondence as to the applicable law]; · having regard not only to the complete correspondence of parties, subject matter, relief and applicable law, but also having regard to the other factors pointing to New South Wales, also having regard to the burden which will fall upon Challenger if it and its many witnesses are required to litigate in Victoria, having regard to where the relevant events occurred, that the continuation of the Victorian proceedings fitted into the category of being vexatious or oppressive on Challenger in equity, thus enlivening the Court's discretion to grant an anti-suit injunction; · before the Court would entertain any anti-suit injunction the Court must also be satisfied that it is an appropriate court in the Voth sense, ie that it is not a clearly inappropriate court to hear these proceedings. Dealing with the issues 35 In my view the precise nature of Challenger's particular conduct [examined below] makes it inappropriate to determine the fate of the motions before the Court relying as a determinative touchstone upon the circumstance that Challenger commenced its proceedings prior to the commencement by Concept of its proceedings. As was put by Lee and Tamberlin JJ in a somewhat different, albeit related set of proceedings in the Full Federal Court in Pegasus Leasing Ltd v Cadoroll Pty Ltd (1996) 59 FCR 152 (at 160):

"[a] more comprehensive examination of the competing considerations relating to the interests and circumstances of justice is required" 36 It is plain enough that these parties and their legal advisers may be regarded as sophisticated. Whilst the tactic adopted by Challenger may be regarded by some as falling outside the spirit and intent with which putative parties communicating with one another through their legal advisers in relation to threatened legal proceedings may be expected to deal with one another, subject to carefully protecting against permitting any abuse of its process, the Court must at the end of the day deal with the interests of justice as the relevant lodestar. 37 I am not satisfied that Challenger is shown to have committed an abuse of the process of the Court. It cannot be said that the proceedings were mala fide in terms of being commenced by a motive other than a bona fide desire to determine the dispute: cf McHenry v Lewis (1882) 22 Ch D 397 at 414 per Scrutton LJ. Nor can it be said that the proceedings were brought to obtain perceived procedural advantages. No undertaking not to commence proceedings in New South Wales prior to giving a response to Clayton Utz's letter of 8 March 2005 was given in terms by Minter Ellison in their letter of 9 March 2009. It appears that no such undertaking was sought. Whilst the flow of correspondence can certainly be understood as having lulled Concept and its solicitors into a false sense of confidence that nothing further would occur until Minter Ellison had responded to the matters raised in the Clayton Utz letter, the fact is that no undertaking not to commence proceedings in New South Wales had been given in terms and that the legal advisers for both parties must be taken to be well aware of the high likelihood that each of their clients required to prepare for litigation wherever and whenever first instituted. 38 Mr Wood sought to rely upon the passage earlier recited from the judgement of McColl JA in Commonwealth of Australia v Cockatoo Dockyard (at [77]) referring to circumstances in which cases falling short of abuse of process may lead to orders moulded to cure difficulties falling short of such abuse. Accepting entirely this approach it is of course not an easy matter to discern precisely which form of conduct [seen to fall short of abuse of process and yet deserving of critical comment] should be visited (1) with relief which would have been appropriate had it amounted to an abuse of process or (2) with some and if so which lesser form of relief apt to redress the situation. Each case must depend upon its very specific circumstances. There can be no hard and fast rule to govern such situations. 39 It does not seem to me that Concept is likely to gain solace in the instant particular circumstances by any such moulding of orders because, subject to one proviso, the only material form of orders which could be made in its favour to satisfy its complaint would stay the proceedings in this Court. However the proper exercise of the Court's discretion is not to view Challenger's above described conduct as so close to an abuse of process as to justify granting a such a stay. Here the touchstone must be the interests of justice and the interests of justice do not warrant such a stay order. 40 The proviso referred to above is intended to refer to the power of this Court to stay the present proceedings in the event that Challenger does not undertake to this Court to pay on an indemnity basis, the entirety of the costs incurred by Concept in relation to the commencement of the Victorian proceedings. It seems to me that this undertaking should extend to all costs incurred by Concept in the settling of the Victorian originating process and to all costs incurred by Concept on any appearances in the Victorian proceedings. Naturally this Court does not have any jurisdiction to deal with costs of proceedings in the Supreme Court of Victoria and there is no intent to make any order of that nature. As a matter of procedure all that this Court would be doing is to impose a conditional stay of the New South Wales proceedings pending Challenger providing the above described undertaking. 41 It cannot be said that on the evidence, the Supreme Court of New South Wales is in any sense an inappropriate forum for the determination of the present proceedings. Nor can it be said that the Supreme Court of Victoria is an inappropriate forum for the determination of the proceedings. Each Court has a fair claim to be regarded as a natural forum. Indeed I am quite clear that had the sole motion before this court been that pursued by Concept for the proceedings to be cross vested to the Supreme Court of Victoria then the interests of justice would have dictated the dismissal of the motion. The number of witnesses resident in Sydney likely to be called by Challenger clearly outweigh by a considerable margin the number of witnesses likely to be called by Concept. The records of both Challenger and APG likely to be relevant to the proceedings are situated in New South Wales. The circumstance that the proceedings in Victoria were commenced in the Commercial List of the Supreme Court of Victoria and that the New South Wales proceedings were commenced in the Equity Division rather than in the Equity Division Commercial List is of no real consequence, it being quite plain that a transfer to the Commercial List would quintessentially in commercial matters of this kind, be a regular occurrence. Each Court should be regarded as capable of properly expediting as appropriate the hearing of such proceedings. The procedures adopted by each Court are materially identical or as close as may be to one another. 42 Notwithstanding the vehemence of the attack upon the claims to declaratory relief in terms of the Summons filed in this court, it seems clear enough that the issues which will fall for determination in the proceedings and in a certain cross-claim, will throw up precisely those issues sought to be litigated in the Victorian proceedings. As Bell, 'Forum Shopping and Venue in Transnational Litigation' Oxford University Press 2003, has observed following an extensive examination of sundry parameters of negative declaratory proceedings, the traditional resistance to the 'natural' order of litigation being inverted and perceptions that negative declaratory relief run counter to considerations of comity now require to be viewed in light of Lord Woolf MR's observation in Messier-Dowty Ltd v Sabena [2000] 1 WLR 2040, 2050-1 that:

"The approach is pragmatic. It is not a matter of jurisdiction. It is a matter of discretion. The deployment of negative declarations should be scrutinised and their use rejected where it would serve no useful purpose. However, where a negative declaration would help to ensure that the aims of justice are achieved the Court should not be reluctant to grant such declarations. They can and do assist in achieving justice…. While negative declarations can perform a positive role, they are an unusual remedy insofar as they reverse the more usual roles of the parties. The natural defendant becomes the claimant and vice versa. This can result in procedural complications and potential injustice to an 'unwilling' defendant. This in itself justifies caution in extending the circumstances in which negative declarations are granted, but subject to the exercise of appropriate circumspection, there should be no reluctance to their being granted when it is useful to do so." 43 The observations of Lord Woolf MR were cited with approval by Bongiorno J in McKinnon v. Adams [2003] VSC 116 (at para 68) and by the Full Federal Court of Australia in Minister of State for Employment, Workplace Relations and Small Business v Community and Public Sector Union (2001) 109 FCR 303, 342. 44 Travelling through the checklist of matters often taken into account in cross vesting applications as well as in applications that one court stay its proceedings in favour of another, [subject to what I have said in relation to a conditional stay] I cannot see any particular factor which (1) requires an exercise of the discretion in favour of a permanent stay of these proceedings or (2) requires that these proceedings be cross vested to the Supreme Court of Victoria by reference to the interests of justice criterion. I here refer to matters such as: · the date upon which either set of proceedings were commenced; · the relative progress of each set of proceedings; · the conduct of the parties with respect to the relative progress of each set of proceedings; · financial disadvantage to either party by reference to the place where the proceedings on to be determined; · the public interest; · the procedures of the respective Courts and the expedition likely to be achieved in terms of an early hearing date before those Courts. Section 21 of the Service and Execution of Process Act 1992 (Cth) 45 Concept relied upon section 21 of the Service and Execution of Process Act 1992 in support of the proposition that the section operated to preclude Challenger from procuring an order restraining Concept from taking any further step in the Victorian proceedings. Section 20 is in the following terms:

"If an initiating process has been served under this Division, a court of a State that is not the place of issue must not restrain a party in the proceeding from taking a step in the proceeding on the ground that the place of issue is not the appropriate forum for the proceeding." 46 For the reasons earlier set out it seems to me unnecessary to determine this issue. Orders to be made 47 It is appropriate for the following orders to be made:

(1) Order staying the proceedings before this Court until such time as Challenger undertakes to this Court to pay on an indemnity basis, the entirety of the costs incurred by Concept in relation to the commencement of the Victorian proceedings, being such costs as were incurred by Concept in the settling of the originating process as well as all costs incurred by Concept in or relating to any appearances in the Victorian proceedings;

(2) Upon Challenger giving to the Court the undertaking referred to in Order 1: · dismiss paragraphs 1 and 2 of Concept's Notice of Motion filed on 12 April 2005; · stand paragraph 6 of Challenger's Notice of Motion filed on 1 April 2005 over generally with liberty to restore on 1 day's notice. 48 The parties are given leave to address on costs of the motions and on other directions to be given in these proceedings

I certify that paragraphs 1 - 48 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 27 April 2005

      Susan Piggott
      Associate

27 April 2005

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.

Utility Jurisdiction of Courts (Cross-Vesting) Act 1987(NSW)

At a glance

Court

Decision date

Before

Source

Judgment (37 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (13)

Cited By (4)