Global Partners Fund Limited v Babcock & Brown Limited

Court of Appeal (NSW)|2010-06-16|Before: Spigelman CJ, Giles JA, Tobias JA, Hammerschlag J

The Applicant seeks to recoup losses made by the partnership prior to it becoming Managing General Partner. It claims that the respondents owed tortious or fiduciary obligations to investors in the partnership, and that breaches of those duties caused the losses.

The respondents are all members of the Babcock & Brown Group. The First Respondent is the primary holding company and is in liquidation. The Second and Third Respondents are subsidiaries of the First Respondent and are registered in Australia and Delaware respectively. The Fourth Defendant is also a subsidiary of the First Respondent and is registered in the Cayman Islands. It was the Managing General Partner of the partnership at the time of the contested investments.

His Honour refused to grant leave to proceed against the First Respondent, which is in liquidation.

The Applicant sought leave to appeal to this Court.

Construction of the exclusive jurisdiction clause 1 The reference to disputes that "aris[e] out of or in connection with [the partnership agreement" in the exclusive jurisdiction clause encompass the full range of proceedings that might be brought in the multiple jurisdictions from which investors could come. [56]-[58] [101] [102]

2 An exclusive jurisdiction clause in a commercial contract is not to be narrowly construed. It is not appropriate for disputes that, in a practical sense, arise from the contractual relationship, to be determined by courts other than that to which the parties have agreed to submit their disputes. [60]-[66] [101] [102] Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160; Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45; Ashville Investments Ltd v Elmer Contractors Ltd [1989] 1 QB 488; Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2008] 1 Lloyd's Rep 254, considered. IBM Australia Ltd v National Distribution Services Limited (1991) 22 NSWLR 466; Ferris v Plaister (1994) 34 NSWLR 474; United Group Rail Services Limited v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618, referred to.

3 There is no basis for a narrow interpretation of an exclusive jurisdiction clause in the context of a contract intended to have international operation. [67]-[69] [101] [102] Incitec Ltd v Alkimos Shipping Corporation [2004] FCA 698; (2004) 138 FCR 496, considered.

4 The Fourth Respondent is entitled to enforce the exclusive jurisdiction clause with respect to the claims against itself, and with respect to the identical claims against the Second and Third Respondents. [73] [101] [102]

5 In a context where the contract confers rights on identified non-parties, the exclusive jurisdiction clause should be construed as binding the parties with respect to proceedings in which those rights might arise. Consequently, the Second and Third Respondents, though not parties to the agreement, are entitled as a matter of construction to approach the Court, in their own right, and request the exercise of the discretion to grant a stay. [73] [79]-[80] [101] [102] Donohue v Armco Inc [2001] UKHL 64; [2002] 1 Lloyd's Rep 425; Winnetka Trading Corp v Julius Baer International Ltd [2008] EWHC 3146; [2009] 2 All ER 735; Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 Lloyd's Rep 767; Morgan Stanley & Co International plc v China Haisheng Juice Holdings Co Ltd [2010] 1 Lloyd's Rep 265, referred to.

Stay of proceedings 6 In an application for a stay based on an exclusive jurisdiction clause, the prima facie position is that a court will, in the absence of strong reasons to the contrary, enforce the clause by granting the stay. [88] [101] [102] Akai Pty Ltd v The People's Insurance Co Limited (1996) 188 CLR 418; Incitec Ltd v Alkimos Shipping Corporation [2004] FCA 698; (2004) 138 FCR 496, considered. Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; Metropolitan Tunnel and Public Works Limited v London Electric Railway Co [1926] Ch 371; Huddart Parker Limited v The Ship "Mill Hill" (1950) 81 CLR 502; FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1997) 41 NSWLR 559; The Eleftheria [1970] P 94; [1969] 2 WLR 1073, referred to.

7 In the context of an international investment arrangement, potentially involving multiple different jurisdictions, the strength of the prima facie position is of a high order. [88] [101] [102]

8 Considerations that are relevant to an application for a stay on forum non conveniens grounds are not applicable to an exclusive jurisdiction clause. [91] [101] [102] Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; Akai Pty Ltd v The People's Insurance Co Limited (1996) 188 CLR 418; FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1997) 41 NSWLR 559, referred to.

9 The applicant did not identify any "strong reasons" which could justify the Court not ordering a stay.

Leave to proceed against the First Respondent 10 The trial judge was correct to refuse to grant leave to proceed against the First Respondent. This conclusion is reinforced by the weight his Honour ought to have given to the inability of the First Respondent to finance litigation. [97] [101] [102] Ogilvie-Grant v East Liquidator of Gordon Grant and Grant Pty Ltd (1983) 7 ACLR 669; [1983] 2 Qd R 314, applied. Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123, referred to.

2 Direct the applicant to file a notice of appeal within 14 days.

iN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 2010/00026129

SPIGELMAN CJ GILES JA TOBIAS JA

Thursday 12 August 2010 Global Partners Fund Limited v Babcock & Brown Limited (in liquidation) and Ors Judgment 1 SPIGELMAN CJ: The applicant (GPF) is the managing general partner of an investment scheme (the Partnership) constituted as a limited partnership under the Limited Partnership Act 1907 (UK). In proceedings instituted in the Commercial List of this Court, GPF sought to recoup from the respondents losses allegedly suffered by the Partnership on an investment made prior to GPF becoming the managing general partner. GPF seeks leave to appeal against interlocutory orders made by Hammerschlag J which had the effect of requiring any such proceedings to be determined in England. 2 The first respondent, Babcock & Brown Limited (in liquidation) (BBL) was at all relevant times the holding company of the Babcock & Brown Group (BB Group). BBL was listed on the Australian Securities Exchange. Voluntary administrators were appointed to BBL on 13 March 2009. It was later placed into liquidation on 24 August 2009 by a resolution of its creditors. BBL has never had any employees. 3 The second to fourth respondents were, at all relevant times, BB Group members: (i) Babcock & Brown International Pty Limited ( BBI ) is an Australian registered company. It is a majority-owned subsidiary of BBL, and is the holding company of all of the BB Group's operating entities. BBI has never had any employees. (ii) Babcock & Brown LP ( BBUS ), a limited partnership formed under the laws of Delaware, USA, is an indirect wholly-owned subsidiary of BBI. (iii) BBGP Managing General Partner Limited ( BBMGP ), a company incorporated in the Cayman Islands, is an indirect wholly-owned subsidiary of BBI. BBMGP was the original managing general partner of the Partnership. It continued as such until it was removed pursuant to a resolution by the stipulated majority of limited partners passed in October 2009. It was replaced by GPF. 4 Because BBL was in liquidation it was necessary for GPF to obtain leave to proceed against it. His Honour dismissed GPF's motion seeking leave. 5 His Honour also dismissed the proceedings against BBI and set aside the summons against BBUS and BBMGP. The principal basis of his Honour's judgment was his conclusion that GPF had no standing to make the claims, by reason of the fact that a partnership had no separate legal personality and claims based on the alleged breaches could not be partnership property. Accordingly, his Honour concluded that GPF had no proper basis for purporting to institute proceedings on behalf of the partnership. 6 His Honour proceeded to confirm his conclusions on alternative bases. He found that he would have made the same orders on the basis of an application of an exclusive jurisdiction clause and, in the further alternative, on general forum non conveniens grounds. His Honour held that, in the further alternative, he would have ordered a temporary stay. 7 Related proceedings, to which I will refer below, have been commenced in England. I do not find it necessary to set out the evidence before the Court with respect to the involvement of solicitors on both sides of these and the English proceedings. These are matters that would have been of greater moment with respect to the forum non conveniens basis of the orders made by Hammerschlag J. However, in my opinion these proceedings should be resolved on the basis of the exclusive jurisdiction clause. I also do not find it necessary to consider the further alternative bases for Hammerschlag J's conclusion as to whether GPF is a proper plaintiff or whether there should be a temporary stay. It is also unnecessary to deal with the respondents' notices of contention.

Background Facts 8 The proceedings arise out of an investment by the Partnership of approximately €52 million (US$70 million) in the acquisition of Coinmach Service Corporation (Coinmach), a Delaware company. Coinmach was the holding company of a group of companies which carried on the business of providing coin operated laundry equipment for residential apartment buildings and other locations in the United States. 9 GPF alleges, in summary, that: (i) In 2007, a "deal team" within the BB Group ( BB Coinmach Deal Team ) identified and developed a proposal to acquire Coinmach. The BB Coinmach Deal Team consisted of executives and employees of one or more companies in the BB Group. (ii) In June 2007, approval was given on behalf of the Partnership to invest approximately US$70 million of the Partnership's money in the acquisition of Coinmach. The Partnership was to make its investment as part of a consortium that included other BB Group entities or associates, together with the Royal Bank of Scotland ( RBS ). RBS was also to provide a portion of the debt finance required to complete the transaction. Completion of the transaction was delegated to the BB Coinmach Deal Team.

(iii) Pursuant to the transaction and associated documents: A. if the Coinmach acquisition was completed, BBUS would receive from the consortium a fee of approximately US$21 million ( Success Fee ); and B. if the Coinmach acquisition was not completed, the consortium was required to pay to Coinmach a fee of US$17 million ( Cancellation Fee ). (iv) After June 2007, there was a prolonged and severe deterioration in credit and equity markets worldwide. (v) In or about November 2007, RBS decided that it did not wish to proceed with the Coinmach acquisition. RBS proposed to the BB Coinmach Deal Team that the consortium withdraw from the Coinmach acquisition, on the basis that RBS would pay the whole of the Cancellation Fee - including that part for which the other members of the consortium, including the Partnership, would otherwise be liable ( RBS Proposal ). (vi) The BB Coinmach Deal Team rejected the RBS Proposal and instead negotiated with RBS and Coinmach an arrangement which enabled the Coinmach acquisition to complete on 20 November 2007 and which involved concessions being made to RBS by Coinmach and BBUS to ensure the deal went ahead. 10 GPF alleges that the completion of the transaction was delegated to the BB Coinmach Deal Team (which included, or was supervised by, relevant BB Group senior executives), and that the conduct of the BB Coinmach Deal Team, in rejecting the RBS Proposal and proceeding with the investment, involved: (i) a failure to obtain fully informed consent from the Partnership to the conflict which existed between the interests of the Partnership and the interests of BBL, BBI and BBUS; (ii) a failure to disclose material facts that the Partnership was entitled to know before proceeding - namely the RBS Proposal and the commercial circumstances which surrounded it - to someone on behalf of the Partnership who was independent of the BB Coinmach Deal Team; (iii) a failure to act strictly in the interests of the Partnership, and with reasonable care and diligence. 11 GPF's case is that BBL, BBI and BBUS are responsible at law for the conduct of the BB Coinmach Deal Team. It is further alleged that the conduct of the BB Coinmach Deal Team, and the knowledge of senior executives of the BB Group who were members of, or supervised it, are to be attributed to BBMGP. Each of BBL, BBI, BBUS and BBMGP is therefore said to be liable for breach of fiduciary duty (as principal or accessory) and for breach of a common law duty of care to the Partnership. BBMGP is also said to be liable for breach of certain terms of the partnership agreement. 12 GPF asserts that, notwithstanding the global scope of the operations of the BB Group, its centre of gravity and ultimate control was in Sydney. Specifically, it asserts that the conduct complained of - which turns on the rejection of the RBS Proposal - occurred in New York, subject to ultimate control from Sydney.

British Proceedings 13 Following BBMGP's removal as managing general partner of the Partnership, steps were taken to transfer documents and records of the Partnership to GPF. In the course of this process, BB Group companies found that they were in possession of documents which may have been the subject of the Partnership's legal professional privilege, particularly legal advice relating to the dispute concerning the investment in Coinmach. Two Limited Partners of the Partnership who were members of the BB Group and Babcock & Brown Limited (UK) commenced proceedings in the Chancery Division of the High Court of Justice in England seeking a declaration that they were entitled to access to these documents notwithstanding any legal professional privilege attaching to them. These proceedings are contested. 14 Furthermore, on 23 December 2009 solicitors acting on behalf of "The Babcock & Brown Group" wrote a Pre-Action Letter to GPF in accordance with the English Civil Procedure Rules, foreshadowing proceedings by BBMGP to recover amounts claimed to be due as management fees and compensation for termination of its appointment as managing general partner of the Partnership. 15 On 29 January 2010 GPF commenced the proceedings in this Court. On that same day solicitors for GPF in London replied to the Pre-Action Letter disputing BBMGP's entitlement to management fees and termination compensation, in large measure, on the basis of the conduct raised in the proceedings in this Court. 16 On 1 February 2010 BBMGP, BBI and BBUS commenced proceedings in the Commercial Court, Queens Bench Division of the High Court of Justice seeking recovery of management fees and compensation for termination. Going beyond the Pre-Action letter, the applicants in those proceedings also sought a negative declaration to the effect that they had not breached any duties owed, and had no liability to, the Partnership and GPF in relation to the Coinmach transaction. All respondents, other than BBL, have submitted to the jurisdiction of the English courts. 17 With respect to the negative declarations sought in London, I note that in the proceedings in this Court, GPF seeks to agitate the claims for management fees and termination compensation by means of a similarly negative pleading. Mr T G Parker SC, who appeared for GPF, accepted that the compensation proceedings in London will involve the same issues that GPF seeks to agitate in Sydney. 18 There are overwhelming commercial and policy considerations to support the proposition that only one court should determine the whole of the dispute between the parties. The issue before this Court is which court that should be.

The Partnership Agreement 19 As I have noted above, the Partnership was established by, and registered pursuant to, the Limited Partnerships Act 1907 (UK). Section 5 of that Act expressly requires registration. It also provides that a limited partner is not to take part in the management of a partnership (s 6(1)). As the title of the Act suggests, a principal purpose of the legislation is to limit the liability of investing partners. 20 The Partnership was established under an agreement dated 1 July 2005 and styled "Limited Partnership Agreement" (LPA). The LPA is governed by English law. As is required for recognition and registration as a limited partnership, the LPA provides for a General Partner and a number of Limited Partners. Those who invest in the Partnership are "Limited Partners". The LPA anticipates "Commitments" - being funds advanced as capital and loans - being made to the Partnership by investors who become Limited Partners by signing a Deed of Adherence and, upon acceptance, becoming parties to the LPA. The Partnership's business and affairs are managed by a "Managing General Partner". The "principal place of business" of the Partnership is identified as an address in the Cayman Islands. 21 Funds were raised from investors pursuant to a Private Placement Memorandum issued by Babcock and Brown Investment Management Ltd (BBIML), another member of the BB Group, being a company incorporated in the UK and regulated by the Financial Services Authority of the UK. The Memorandum was directed only to what is called, in the argot of this industry, "sophisticated investors" and, accordingly, the Partnership was an unregulated collective investment scheme for purposes of the relevant UK legislation. It is unnecessary to set out any part of the Memorandum. It is sufficient to note that the "global" nature of the BB Group and of the investments for the proposed Fund is frequently referred to and the fact that the investments to be made by the Partnership were to be generated by the BB Group is emphasised. 22 Of particular relevance to these proceedings is the "exclusive jurisdiction" clause in cl 18.11 of the LPA. That provision is in the following terms: "This Agreement and the rights, obligations and relationships of the parties hereto under this Agreement and in respect of the Private Placement Memorandum shall be governed by and construed in accordance with the laws of England and all the parties irrevocably agree that the courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Agreement or the Private Placement Memorandum or the acquisition of Commitments, whether or not governed by the laws of England, and that accordingly any suit, action or proceedings arising out of or in connection with this Agreement or Private Placement Memorandum or the acquisition of Commitments shall be brought in such courts. The parties hereby waive, to the extent not prohibited by applicable law, and agree not to assert by way of motion, as a defence or otherwise, in any such proceeding, any claim that it is not subject personally to the jurisdiction of such courts, that any such proceedings brought in such courts is improper or that this Agreement or the Private Placement Memorandum, or the subject matter hereof or thereof, may not be enforced in or by such court."

23 Clause 2 of the LPA makes provision for the investors to become Limited Partners in the following terms: "Further Partners may be admitted as Limited Partners by the Managing General Partner at any time up to the expiry of 12 months after the First Closing Date provided that they each sign and deliver to the Managing General Partner a Deed of Adherence upon acceptance of which by the Managing General Partner they each shall be admitted to the Partnership and treated as an "Investor" and "Limited Partner" for all purposes of the Agreement." 24 The word "investor" in the LPA is defined, relevantly, to encompass: " … any person who becomes a Limited Partner by signing a Deed of Adherence pursuant to clause 2 …" 25 Appended to the LPA is a form pursuant to which an investor subscribes funds to the partnership. The document is described as a "Deed of Adherence for Investors wishing to become Limited Partners in Babcock & Brown Capital Partners". 26 The Deed of Adherence replicates cl 18.11 of the LPA in terms as follows: "14. This Deed of Adherence and the rights, obligations and relationships of the parties under this Deed of Adherence and the Partnership Agreement and in respect of the Private Placement Memorandum shall be governed by and construed in accordance with the laws of England. 15. The Applicant irrevocably agrees that the courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Deed of Adherence, the Partnership Agreement, the Private Placement Memorandum, or the acquisition of Commitments whether or not governed by the laws of England, and that accordingly any suit, action or proceedings arising out of or in connection with this Deed of Adherence, the Partnership Agreement, the Private Placement Memorandum, or the acquisition of Commitments shall be brought in such courts. The Applicant hereby waives, to the extent not prohibited by applicable law, and agrees not to assert by way of motion, as a defence or otherwise, in any such proceeding, any claim that the Applicant is not subject personally to the jurisdiction of such courts, that any such proceeding brought in such courts is improper or that this Deed of Adherence, the Partnership Agreement or the Private Placement Memorandum, or the subject matter hereof or thereof, may not be enforced in or by such court." 27 BBMGP is a party to the LPA and as such became a Partner. Furthermore, cl 14.4.3 provides, relevantly with respect to BBMGP: "On removal the Managing General Partner shall become a Limited Partner with respect to any rights or interests it may have at such time … " 28 BBL, BBI and BBUS are not parties to the LPA. However, they are members of the "Babcock and Brown Group" as defined in the LPA and as referred to in the Private Placement Memorandum. On the issues of construction that have arisen, it is pertinent to note the extent to which, in confirmation of a principal theme in the Private Placement Memorandum, the LPA envisages that members of the BB Group other than BBMGP will be involved in making decisions with respect to the Partnership's investments. 29 The relevant provisions are: "5.5.2 Neither the Partnership nor the Managing General Partner shall charge fees to Portfolio Companies in connection with the making or holding of investments by the Partnership. 5.5.3 Notwithstanding clause 5.5.2, members of the Babcock & Brown Group (other than the Managing General Partner) shall be entitled to accept and retain for their own account: (a) all arrangement fees, syndication fees and any other transaction fees received by them; (b) any underwriting fees received by them; (c) all agency, directors' fees and benefits, monitoring fees and management fees received by them; (d) any fees or commissions of any description whatsoever received in connection with proposed transactions which do not proceed to completion; and (e) all other fees received by them including without limitation: (i) investment banking fees; (ii) corporate finance fees; and (iii) advisory fees, whether or not such fees relate to a transaction involving the Partnership, and none of them or the Managing General Partner shall be obliged to account to the Partnership for any such fees in any circumstances. … 16.3.2 The Fund Investment Committee (as defined in the Private Placement Memorandum) will refer to the Advisory Board any proposed investment transaction; (a) where no member of the Babcock & Brown Group is investing directly in the transaction; (b) where the transaction is part of a syndication and a member of the Babcock & Brown Group has already invested in such transaction; (c) where it is proposed that the Partnership will invest an amount in excess of 15% of Total Commitments in the securities of any single Portfolio Company and its Associates; or (d) where the proposed investment has a target gross IRR return of less than 25%. The Managing General Partner will not proceed with any transaction of the types set out above without ensuring that the prior consent of the Advisory Board has been obtained. 16.3.3 The Advisory Board will be consulted by the Managing General Partner on conflicts of interest which arise in the management of the Partnership. The Managing General Partner shall not however be obliged to consult the Advisory Board with respect to conflicts which arise during the ordinary course of business of the Babcock & Brown Group which shall include conflicts which may arise from any of the following matters: (a) the provision of acquisition finance, banking and foreign exchange services to Portfolio Companies by the Babcock & Brown Group on arm's length terms; (b) the competition for investment opportunities with the Partnership by other clients and customers of the Babcock & Brown Group; (c) the provision of corporate and advisory services to Portfolio Companies or to clients of the Babcock & Brown Group entering, or proposing to enter into, corporate finance or other transactions with Portfolio Companies on arm's length terms; (d) the holding, underwriting, syndication, making a market in or otherwise dealing in equity, debt or other finance for Portfolio Companies or their vendors or potential purchasers and the publication of research in connection therewith; (e) the provision of investment management and advisory services to clients, including with respect to investment opportunities similar to or the same as those sought by the Partnership; and (f) the operation, management or provision of advice in respect of investment trusts, funds and other associated activities, or the investment by the Babcock & Brown Group into such activities, where the investment objectives of such vehicles overlap with those of the Partnership." 30 The "Fund Investment Committee" referred to in cl 16.3.2 is identified in the Private Placement Memorandum as follows: "Investment proposals will be submitted to the Fund Investment Committee under the basic process outlined above. The Fund Investment Committee comprises four executives from Babcock & Brown; Jim Babcock, Phil Green, Edward Hanson and Mike Maxwell; as well as an independent member; George Magan. George Magan will be the Chairman of the Fund Investment Committee. The Fund Investment Committee is ultimately responsible for making investment decision on behalf of the Fund. Unanimous approval of the Fund Investment Committee is required prior to an investment being made. The Fund Investment Committee has responsibility for determining the overall asset allocation of the Fund and its investment strategy." 31 The place of business of the Partnership is expressly stated to be the Cayman Islands. The Managing General Partners, both BBMGP and GPF, are incorporated in the Cayman Islands, which has numerous advantages as a tax haven and as a regulatory haven. It is not, however, the most convenient location for real investment decision making. The Private Placement Memorandum expressly stated that the "Fund Team", which "has responsibility for organising the deal stream that will arise from B&B's global activities" would be located in the Babcock & Brown UK office. The ultimate decision maker, being the "Fund Investment Committee", comprised persons located in a number of different nations. 32 The indirect involvement of BB Group corporations in the affairs of the Partnership, is further reinforced by the fact that BBL, BBI and BBUS are "associates" of BBMGP and, therefore, "Indemnified Persons", within the meaning of the LPA. Accordingly, each of the respondents to these proceedings is entitled to the benefit of the following provisions of the LPA: "17.1 Exculpation None of the Indemnified Persons shall have any liability for any loss to the Partnership or the Partners arising in connection with the services to be performed hereunder or pursuant hereto, or under or pursuant to any management agreement or other agreement relating to the Partnership or its respect of services as a Nominated Director or member of the Advisory Board or which otherwise arise in relation to the operation, business or activities of the Partnership save in respect of any matter resulting from such Indemnified Person's fraud, wilful misconduct, bad faith or reckless disregard for their obligations and duties in relation to the Partnership or, save in the case of Indemnified Individuals, their gross negligence. 17.2 Indemnity The Partnership agrees to indemnify and hold harmless out of Partnership Assets the Indemnified Persons against any and all liabilities, actions, proceedings, claims, costs, demands, damages and expenses (including legal fees) incurred or threatened arising out of or in connection with or relating to or resulting from the Indemnified Person being or having acted as a general partner or manager in respect of the Partnership or arising in respect of or in connection with any matter of other circumstance relating to or resulting from the exercise of its powers as a general partners or manager or from the provision of services to or in respect of the Partnership or in respect of services as a Nominated Director or member of the Advisory Board or which otherwise arise in relation to the operation, business or activities of the Partnership provided however that any Indemnified Person shall not be so indemnified with respect to any matter resulting from their fraud, wilful misconduct, bad faith or reckless disregard for their obligations and duties in relation to the Partnership or, save in the case of Indemnified Individuals, their gross negligence. 17.3 Continuing Effect For the avoidance of doubt, the indemnities under clause 17.2 shall continue in effect notwithstanding that the Indemnified Person shall have ceased to act as general partner or otherwise to provide services to or in respect of the Partnership or to act in any of the capacities described in clause 17.2." 33 The scope of the exclusive jurisdiction cl 18.11 must be construed having regard to these provisions and to the scheme envisaged in the Private Placement Memorandum to which cl 18.11 explicitly extends. Clause 18.11 falls to be construed against the background of other, interrelated contracts contemplated by the scheme. 34 The LPA is dated 1 July 2005. On 8 July 2005, BBMGP, on behalf of the Partnership, entered into a "BBCP Syndication Rights Agreement" with BBI which contained the following provisions (noting that "B&B" refers to BBI and "BBCP" refers to the Partnership): "1 Investment Rights 1.1 Where any member of the Babcock & Brown Group is arranging a syndication: (a) of any equity interest owned by it in any other person or entity; or (b) for the purpose of acquiring such an equity interest; (the total amount of investment to be syndicated being "the Syndicated Amount") B&B shall cause such member of the Babcock & Brown Group to offer to BBCP the right to invest in at least 25% of the Syndicated Amount. If BBCP and the member of the Babcock & Brown Group offering such investment both participated in such investment, their investments shall together be referred to in this Agreement as a "Joint Investment"). 1.2 Notwithstanding clause 1.1, B&B has no obligation to cause an offer to be made to BBCP of a participation in an investment where; (a) the Syndicated Amount is less than US$5 million; (b) B&B determines in good faith that tax or regulatory issues associated with participation by BBCP in a Joint Investment are too great to justify the investment; or (c) B&B determines in good faith that its purpose in making or syndicating the investment is not limited to receiving a financial return on its investment but is also for a Strategic Purpose that is inconsistent with offering this investment right to BBCP. For the purposes of this Agreement a Strategic Purpose includes, without limitation, improving a competitive position, supporting one or more affiliates, enabling entry into a particular market, bringing in one or more targeted investors whose involvement B&B believes would provide a strategic benefit or relationship advantage, and other purposes directed at enhancing or creating a business or business-related activity or relationship. 1.3 B&B shall endeavour in good faith to establish an investment review procedure that will provide BBCP with reasonable notice and information on any proposed syndication on which the Investment Committee of BBCP may be required to make a decision whether or not to make an investment." 35 I note that this Agreement is governed by the laws of England. 36 Furthermore, on 29 July 2005, BBMGP entered into an Advisory Agreement relating to the Partnership with BBIML. Recital D of this Agreement stated (noting again that "BBCP" is the Partnership): "Babcock & Brown International Pty Limited, or its Associates may originate, assess and recommend certain investment opportunities, which BBCP will have a right to participate in pursuant to the terms of a Syndicated Rights Agreement between Babcock & Brown International Pty Limited and the Managing General Partner dated [on or about the date hereof]. Following the final determination of an investment recommendation by the Fund Investment Committee, BBIML has agreed to communicate such advice to the Managing General Partner pursuant to the terms hereof and to undertake the other responsibilities of BBIML set out herein." 37 The Advisory Agreement provided: "1 Appointment and functions 1.1 The Managing General Partner hereby appoints BBIML to be its adviser in connection with the management by the Managing General Partner of the Portfolio and accordingly BBIML agrees to provide, or to procure that one of its Associates shall provide, the following services to the Managing General Partner: (a) to document where necessary and to pass on to the Managing General Partner the advice of the Fund Investment Committee relating to the merits, structure and financing of any acquisition or disposal of investments and to assist the Managing General Partner to negotiate and arrange each such acquisition or disposal relating to the Portfolio; … 1.2 BBIML shall ensure that all recommendations communicated to the Managing General Partner comply with the Investment objectives, Investment restrictions and strategies of BBCP as described in the Offering Memorandum and the Managing General Partner will be under no obligation to make independent investigation or verification to ensure such compliance. 1.3 It is anticipated that in the ordinary course of making its decisions regarding the investments of BBCP, the Board of Directors of the Managing General Partner will rely on the investment recommendations of the Investment Adviser, provided such recommendations are within the investment restrictions of BBCP, and the Board of Directors are under no obligation to verify independently any investment recommendations made by the Investment Adviser. However, the Board of Directors of the Managing General Partner will have exclusive authority to make all investment decisions and is not obliged to follow such recommendations. It is anticipated that the Managing General Partner will typically act upon the recommendations of BBIML and will incur no liability to BBCP, Limited Partners of BBCP or any other person for doing so." 38 This is the way a Cayman Islands company, like BBMGP, gets the job done. Again, this Agreement is governed by English Law.

The Decision of Hammerschlag J 39 His Honour exercised jurisdiction under s 67 of the Civil Procedure Act 2005 which confers on the Court a power to stay proceedings.

40 His Honour set out the legal principles applicable in a case where there is an exclusive jurisdiction clause, as follows: "[118] Both in the United Kingdom and in this country, where parties to a contract have agreed by an exclusive foreign jurisdiction clause to submit to the exclusive jurisdiction of a foreign court, such a clause does not operate to exclude the forum court's jurisdiction. However, the court will hold the parties to their bargain, and grant a stay of proceedings, unless the party seeking that the proceedings be heard can show that there are strong reasons against doing so. There is a strong bias in favour of granting a stay of proceedings in the event that there has been a submission to the exclusive jurisdiction of a foreign forum. In considering such an application the court should take into consideration all the circumstances of the particular case, but the application is not to be assimilated to cases where a stay is sought on the principle of forum non conveniens , nor is it a matter of mere convenience…"

His Honour set out the relevant authorities. 41 With respect to BBMGP, which is a party to the LPA, his Honour's conclusions were quite clear. He said: "[131] But whether or not the provision is so construed there can by no doubt that these proceedings (with the fourth defendant as a party) have been commenced by the plaintiff in breach of cl 18.11. That breach is in no way assuaged by the fact that there are other defendants as well. The fourth defendant's position does not involve an attempt to enforce any third party right … [132] No good reason was identified why the plaintiff's claims could not properly be determined in the jurisdiction agreed to … [133] The plaintiff has not identified any good reason why full faith and credit should not be given to cl 18.11 or why the fourth defendant should not be entitled to enforce it."

42 BBL, BBI and BBUS at first instance, and in this Court, contended that, on its proper interpretation, the exclusive jurisdiction clause covered actions and proceedings brought against third parties. His Honour summarised the position advanced for GPF on this issue of interpretation as follows: "[126] The plaintiff puts that on its proper construction, cl 18.11 does not extend to a suit, action or proceedings other than one between parties to the Partnership Agreement. It puts that there is nothing in the language of the provision to suggest that the parties intended the clause to extend to disputes with non-parties. It puts that cl 18.15 makes it clear that third parties acquire no rights under the Partnership Agreement … " 43 His Honour noted that the interpretation of cl 18.11 of the LPA was a matter for the proper law of the contract, namely English law. He referred to the evidence before him in this respect: "[127] The second, third and fourth defendants called Adrian Briggs, a Professor of International Law in the University of Oxford to give evidence on the construction of cl 18.11 under English law. His opinion is that it would be open to an English Court to interpret cl 18.11 as a promise according to which the parties to the Partnership Agreement promised each other that they would bring proceedings against each other and that they would bring proceedings against any other person sued in respect of the same broad transaction, in England and only in England." 44 His Honour rejected GPF's case as follows: "[129] I have no difficulty in concluding that the proceedings in this Court arise out of or are in connection with the Partnership Agreement or the PPM or the acquisition of Commitments. At the very least and without being exhaustive: a on its own case, the plaintiff purports to sue on the basis that it is the Managing General Partner under the Partnership Agreement; b its claims for breach of duty are in relation to investments made by the Partnership and which the Partnership Agreement contemplates; and c the Summons seeks declarations concerning the operation of the Partnership Agreement. [130] I prefer the second, third and fourth defendants' construction of cl 18.11 as extending to disputes arising out of or in connection with the Partnership Agreement, the PPM or the acquisition of Commitments between any party to the Partnership Agreement and a third party. The provision states that the Courts of England "are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with […]". It does not say that the courts of England are to have exclusive jurisdiction to settle any disputes between them or between the parties . Whether a party would be entitled to a decree for specific performance of the provision where a party to the agreement (not it) and a third party was involved would depend on whether the court considered it had a legitimate interest in doing so, and upon all other considerations relevant to grant of discretionary relief." 45 His Honour concluded: "[134] Had the plaintiff established standing I would have ordered a permanent stay of these proceedings against all defendants on the basis of cl 18.11 alone. 46 Additional issues arose in the case of the first respondent. Leave was required by reason of the fact that it is in liquidation. Accordingly the primary judge was asked to exercise his discretion to grant leave pursuant to s 500(2) of the Corporations Act 2001 (Cth). 47 His Honour set out the well known passage from the judgment of McPherson J in Ogilvie-Grant v East Liquidator of Gordon Grant and Grant Pty Ltd (1983) 7 ACLR 669 at 671-672; [1983] 2 Qd R 314 at 316-317. By reference to this and other authorities his Honour identified the relevant legal principles applicable to the exercise of this discretion as follows (at [169]): "a The purpose of the prohibition against commencing proceedings against a company in liquidation is to avoid a multiplicity of proceedings when the appropriate procedure is to lodge a verified proof of debt with the liquidator. b The onus is on the claimant to demonstrate why leave should be granted. c The plaintiff must satisfy the Court that its claim has a solid foundation and gives rise to a serious dispute (sometimes termed a serious issue to be tried). d Factors relevant to the exercise of the discretion may include but are not limited to: i. the degree of complexity of the legal and factual issues involved; ii. the prospects that a proof of debt will be rejected; and iii. the stage to which the proceedings, if already commenced may have progressed." 48 His Honour referred to the evidence of the liquidator as to the financial position of the first respondent, noting: BBL owns 99.81% of BBI. BBL's assets are inter company subordinated loans receivable from BBI, together with a small amount of cash and a fund of US$7.5 million, claimed by both BBL and BBI. BBL's primary liabilities to holders of subordinated notes exceeds $610 million together with unpaid fees and expenses to the liquidators. BBI has over $3 billion in loans outstanding to its senior banking syndicate. Repayment of BBI's loan to BBL is subordinated to the loans from the banking syndicate. 49 His Honour referred to the liquidator's opinion that the realisable value of BBI's loan to, and its shareholding in, BBI was "nil". He further noted the evidence of the liquidator to the following effect: "[175] … that having regard to the current financial position of the first defendant (in particular, the fact that there are no funds available for distribution to creditors), the liquidators have not yet invited creditors to lodge proofs of debt in accordance with s 553 of the Corporations Act (Cth), they do not anticipate calling for proofs of debt in the foreseeable future, and in fact may never call for proofs of debt unless they are successful in recovering additional funds for distribution to creditors." 50 His Honour also referred to funds raised from the subordinated note holders to enable the liquidator to conduct examinations. His Honour rejected a number of bases upon which the liquidator submitted that leave should be refused. However, his Honour concluded: "[182] Nevertheless, for the following reasons I would not grant leave in the circumstances that currently prevail. [183] The plaintiff has itself taken the position that the proof of debt procedure is inappropriate. It wishes rather to sue. The liquidators have not called for and may never call for, proofs of debt. Leaving aside the possibility of an appeal under s 1321 of the Corporations Act (Cth) against the liquidators' failure or refusal to call for proofs of debt (which is unlikely given the plaintiff's steadfastness that proceedings are the proper course), proceedings are properly called for if the plaintiff is to establish liability on the part of the first defendant. The factual and legal issues are complex. [184] In the absence of any reason why the proceedings against the first defendant could not be heard in England (and none was suggested), they should properly be brought there. The plaintiff does not need leave to take that course, and proceedings there would ensure that the issues would be dealt with with all relevant parties present. [185] Moreover, the fourth defendant would be entitled to restrain proceedings in this jurisdiction on the basis of cl 18.11 and it may be assumed with some degree of certainty that it would do so. Further, for the same reasons as pertain to the other defendants, this is a clearly inappropriate jurisdiction for such proceedings."

Construing the Exclusive Jurisdiction Clause 51 On the expert evidence of English law before this Court, there is no relevant difference between Australian and English Law with respect to the interpretation of the LPA. I will therefore proceed without separate reference to that evidence. 52 GPF accepted that cl 18.11 applied to some of the issues which arise between GPF and BBMGP. BBMGP is a party to the LPA and issues such as those which arise with respect to its claim for fees and termination compensation are clearly encompassed within cl 18.11. 53 However, in the case of all defendants, GPF contended that its causes of action, other than those involving the termination of BBMGP, do not "arise out of or in connection with" the LPA, by reason of the fact that they depend on rights created at law, rather than by the contract. Furthermore, GPF maintained its contention that BBL, BBI and BBUS are not parties to the LPA and, for that reason, cl 18.11 does not apply to any of the claims made against them. These two contentions were characterised by Dr A Bell SC, who appeared for BBI, BBUS and BBMGP, as raising an issue of subject matter scope and party scope. 54 The Commercial List Statement identifies the nature of the case advanced on behalf of GPF. After setting out the background details, including the Coinmach Acquisition and allegations of fact with respect to conduct in that respect, the Statement identifies the "claims" made in the following manner: Each of BBL, BBI and BBUS "owed fiduciary obligations to the Investment Partnership" … "in acting (through the BB Coinmach Deal Team) on behalf of the Investment Partnership" and the identified obligations which had been breached (C36 and C37). Each of BBL, BBI and BBUS owed the Partnership and the Managing General Partner "fiduciary obligations and obligations in tort to exercise reasonable care" … "in acting (through the BB Coinmach Deal Team) on behalf of the Investment Partnership to effect the Investment Partnership's investment in the Coinmach acquisition" and those obligations were breached (C38 and C39). "BBMGP owed fiduciary obligations to the Investment Partnership" … "in acting as Managing General Partner" of certain identified kinds including the fiduciary conflict rule, to take steps with respect to an investment and those obligations were breached (C40 and C41). "BBMGP owed to the Investment Partnership fiduciary obligations and obligations in tort to exercise reasonable care …" in acting as the Managing General Partner of the Investment Partnership and those obligations were breached (C42 and C43). Each of BBL, BBI and BBUS received a benefit from, or participated in, breaches of the fiduciary duties alleged against BBMGP when each had knowledge of, or was on notice of, those breaches (C47). 55 Each of these claims turn, and turn only, on the involvement of the respective respondents in the decision making process which led to the investment in Coinmach. There is no doubt that that investment was made for the purposes of the Partnership and pursuant to the provisions of the LPA.

Subject Matter Scope 56 I cannot see how the words "in connection with" can be read down so as not to extend to claims of the character referred to in the immediately preceding paragraphs. Such an interpretation may have been available if the clause went no further than referring to disputes which "may arise out of" the LPA, although I am inclined to the view that it would respond. However, the addition of the words "in connection with" make it clear that so narrow an interpretation cannot be adopted. 57 The breadth of the parties' intention is reinforced by the application of the exclusive jurisdiction clause beyond disputes arising under or in connection with the LPA itself, to encompass any disputes "which may arise out of or in connection with … the Private Placement Memorandum or the acquisition of Commitments". With respect to each Limited Partner the conclusion is further reinforced by the repetition of the same exclusive jurisdiction clause in cl 15 of the Deed of Adherence and by the addition in that clause of "proceedings arising out of or in connection with" the Deed of Adherence itself. 58 These extensions clearly encompass the full range of proceedings that could be launched in the broad range of jurisdictions from which investors could come with respect to the original investment, as well as the conduct of the affairs of the Partnership. 59 Furthermore, cl 18.11 states that disputes are to be dealt with in the English courts "whether or not governed by the laws of England". The contract is, by the very same clause, governed by the laws of England. The clause expressly contemplates disputes governed by foreign law. Accordingly, the words "in connection with" are clearly intended to extend exclusive jurisdiction beyond disputes under the contract. 60 Finally, in my opinion an exclusive jurisdiction clause should be interpreted in the same liberal manner as is authoritatively established with respect to arbitration clauses. The two kinds of clauses have frequently been treated as legally cognate and authorities on the scope of arbitration clauses are frequently cited in authorities on exclusive jurisdiction clauses. In both cases, all disputes which, as a matter of substance, arise from the contractual relationship between the parties are intended to be determined by the same tribunal. It is not appropriate to give general words in such a commercial context a narrow interpretation, with the consequence that some disputes which, in a practical sense, arise from the contractual relationship could be determined by courts or tribunals other than that to which the parties have agreed to submit their disputes. 61 The oft-quoted decision of Gleeson CJ in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, made with respect to an arbitration clause, is applicable to exclusive jurisdiction clauses. His Honour said (at 165): "When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument." 62 As Allsop J (as his Honour then was) said in Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45, with respect to an arbitration clause: "[164] … The court should, however, construe the contract giving meaning to the words chosen by the parties and giving liberal width and flexibility to elastic and general words of the contractual submission to arbitration. [165] This liberal approach is underpinned by the sensible commercial presumption that the parties did not intend the inconvenience of having possible disputes from their transaction being heard in two places. This may be seen to be especially so in circumstances where disputes can be given different labels, or placed into different juridical categories, possibly by reference to the approaches of different legal systems. The benevolent and encouraging approach to consensual alternative non-curial dispute resolution assists in the conclusion that words capable of broad and flexible meaning will be given liberal construction and content. This approach conforms with a common-sense approach to commercial agreements, in particular when the parties are operating in a truly international market and come from different countries and legal systems and it provides appropriate respect for party autonomy." 63 See also Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2008] 1 Lloyd's Rep 254 especially at [12]-[13] and [31]; IBM Australia Ltd v National Distribution Services Limited (1991) 22 NSWLR 466 at 477 and 483; Ferris v Plaister (1994) 34 NSWLR 474 at 496-498, 504; United Group Rail Services Limited v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618 at [3]. 64 As Bingham LJ (as his Lordship then was) said in Ashville Investments Ltd v Elmer Contractors Ltd [1989] 1 QB 488 at 517, with respect to the scope of an arbitration clause: "I would be very slow to attribute to reasonable parties an intention that there should in any foreseeable eventuality be two sets of proceedings." 65 To similar effect are the observations of Lord Hoffman in Fiona Trust supra: "[13] In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction." 66 This approach reinforces the conclusion to which I have come on the basis of the natural and ordinary meaning of the words "in connection with". The approach is especially apt in the context of a contract with an international dimension. 67 A significant purpose of an exclusive jurisdiction clause is to ensure that all disputes are determined in a coherent manner by a single jurisdiction. There is a clear commercial interest in minimising the possibility of a dispute being determined by multiple tribunals, with the consequent prospect of divergent findings. Furthermore, the parties, in advance, have determined that a particular jurisdiction is acceptable to them, both in terms of the speed and efficacy of its civil dispute resolution procedures and for the competence and skill of its judges and lawyers. A party to such a clause should be held to its contractual obligations, whether enforced by another party on a contractual basis or by means of the exercise of a discretion conferred upon the Court. 68 As is well known, all nations make exorbitant claims to jurisdiction - in common law systems, generally turning on service and in civil law systems, generally turning on citizenship or domicile, together with a range of additional possible linkages. The possibility that a multiplicity of jurisdictions would have some basis for hearing disputes by reason, for example, of the location of investments or investors, particularly where the contract was intended to operate on a global basis, could lead to delays in resolving matters and to inconsistencies in the outcomes of identical or cognate disputes. There is no basis for a narrow interpretation of an exclusive jurisdiction clause in the context of a contract intended to have international operation. 69 The considerations identified by Allsop J (as his Honour then was) with respect to a time charter have close analogies with an international investment contract of the kind presently under consideration. In Incitec Ltd v Alkimos Shipping Corporation [2004] FCA 698; (2004) 138 FCR 496 his Honour said at [31]-[32]: "[31] … [T]his is a clause agreed between international commercial parties, in respect of a contract (the time charter) which might well produce through its performance and in its life disputes brought by third parties against one or other or both of ASC and Hyundai in possibly disparate and varied legal systems. That is the natural possibility to be taken to be known to both such contracting parties in the deployment and operation of a time chartered container/ bulk carrier such as the Alkimos . These participants in international commerce who did not share a common domestic legal system chose one of the leading dispute resolution centres in the world and one of the leading centres for maritime arbitration. These are all matters well known to the parties who chose the clause provided by BIMCO. No fact is apparent which would lead one to expect from the surrounding circumstances that the parties were intending any narrow construction to be given to the words or to conclude that the clause was directed to some part of the mutual commercial affairs of the parties reflected in the time charter, and not another. Also, the presence of clause 42 in the time charter and the consequent conclusion that the parties expressly agreed upon a clause in the time charter dealing with the resolution of the responsibility for cargo claims would lead one to be careful before one concluded that the words of the incorporated arbitration clause were not intended to cover rights and liabilities inter se arising out of third party cargo claims. [32] The above considerations tend in favour of giving the words in question a wide or generous construction …" 70 GPF's contention that cl 18.11 does not respond to its claims with respect to losses arising from the Coinmach transaction should be rejected.

Party Scope 71 With respect to the proposition that cl 18.11 does not respond to claims made against non parties to the agreement, there are judgments which have interpreted an exclusive jurisdiction clause to bind a party with respect to proceedings against a non-party. (See Donohue v Armco Inc [2001] UKHL 64; [2002] 1 Lloyd's Rep 425 at [60]-[61] per Lord Scott of Foscote (although the issue was not argued in the House of Lords. See at [14] per Lord Bingham).) Lord Scott's approach was applied to the clause construed in Winnetka Trading Corp v Julius Baer International Ltd [2008] EWHC 3146; [2009] 2 All ER 735 at [28]-[29]. On the other hand, other exclusive jurisdiction clauses have been interpreted as applying only to proceedings between the parties. (See, eg, Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 Lloyd's Rep 767 at 777-778; Morgan Stanley & Co International plc v China Haisheng Juice Holdings Co Ltd [2010] 1 Lloyd's L Rep 265 at [21]-[30] noting the observations with respect to Lord Scott's judgment in Donohue supra at [30].) 72 Each contract must be interpreted in its context. Similar, even identical, words do not necessarily have the same meaning in different contexts. 73 In the present case, it hardly needs saying that BBL, BBI and BBUS do not have contractual rights with respect to the exclusive jurisdiction clause, because they are not parties to the LPA. BBMGP does have such rights which, in my opinion, it is entitled to assert both with respect to the claims against itself, and with respect to the closely related, indeed, relevantly identical, claims against BBL, BBI and BBUS. The focus of such an assertion is the fact that GPF, which is a party to the contract, has agreed to conduct litigation "arising out of or in connection with" the LPA in England. However, BBL, BBI and BBUS are also entitled to approach the Court, in their own right, to request that the Court exercise its discretion to grant a stay. This is so because of their involvement in the affairs of the Partnership, as envisaged by the LPA itself, and the rights conferred upon them as Indemnified Persons under the LPA. 74 GPF sought to categorise the first three respondents as "non parties". However, there are non parties and non parties. These respondents are not strangers to the LPA. 75 I have set out at [29]-[32] above the provisions of the LPA that directly refer to the involvement of the members of the BB Group in the decision making processes of the Partnership. These proceedings concern the internal decision making processes of the BB Group that determined how the funds of the Partnership were to be invested, particularly the decision-making process that led to the Coinmach transaction being completed. The obligation imposed upon GPF by cl 18.11 should be interpreted to extend, at least, to the participants in the decision making processes envisaged by the LPA. 76 The proceedings in this Court arise, and arise only, from the internal decision making processes for which the LPA provides, namely the making of investments. By reason of the structure of the BB Group, the functions of BBMGP, as the Managing General Partner under the LPA, were subject to the assistance and direction of other members of the Group in the manner alleged in the Commercial List Statement. Indeed, that participation is the very foundation of the causes of action which GPF seeks to agitate in this Court. 77 An important clue to resolving this issue is found in the indemnity provisions in the LPA which I have set out at [32] above. Each of the Respondents is entitled to the benefit of those provisions. Dr A Bell SC, who appeared for BBI, BBUS and BBMGP, informed the Court that his clients intended to rely on these provisions as a contractual defence to the applicant's claims. GPF did not suggest that such issues do not legitimately arise. 78 Notwithstanding the fact that BBL, BBI and BBUS are not parties to the LPA, they cannot be categorised as members of an undifferentiated group of "non parties". It may well be that cl 18.11 will not apply to other non parties. However, the respondents in the present case are in a quite distinct category. 79 In a context where the very contract confers rights on identified non parties, the choice of law and exclusive jurisdiction clauses should be construed as binding the parties with respect to proceedings in which such an indemnity may arise. Furthermore, the principles underlying the conclusion that such a clause should not be narrowly construed set out at [60]-[69] above, apply, at least, to include claims against non parties who are so closely connected with the implementation of the contract as are BBL, BBI and BBUS. 80 In my opinion the GPF's contention that, as a matter of construction, cl 18.11 does not apply to proceedings against BBL, BBI and BBUS should be rejected.

Stay of Proceedings 81 As indicated above, his Honour exercised the jurisdiction under s 67 of the Civil Procedure Act which confers a power upon the court to stay proceedings. The power is expressed in discretionary terms. However it is a discretion that must be exercised judicially and in accordance with established principle. 82 I have set out at [40] above his Honour's statement of the applicable principles. As will appear, I agree with his Honour's reasons in this respect. The authorities his Honour cited support his conclusions. 83 GPF submitted that the existence of an exclusive jurisdiction clause is a factor in determining whether to order a stay "but it is only one factor to be weighed against others and cannot be decisive". This is not the correct approach established by the authorities. 84 It is, of course, true that the existence of an exclusive jurisdiction clause is not determinative. The fact that the relevant power of the court is conferred in discretionary terms indicates that other considerations may be taken into account. However, the case law with respect to exclusive jurisdiction clauses is clear and unequivocal. The cases reflect important policy considerations, relevantly, that parties should be held to their contractual bargains and that resolution of disputes arising from contractual arrangements should occur in a coherent and consistent manner and as expeditiously and efficaciously as possible. This suggests that the fewest different jurisdictions should be involved in resolving the fewest number of separate proceedings. 85 The importance of holding parties to their bargain in this respect has often been emphasised in the context of enforcing exclusive jurisdiction clauses and in the cognate area of enforcing agreements to submit to arbitration. (See, eg, Metropolitan Tunnel and Public Works Limited v London Electric Railway Co [1926] Ch 371 at 389, cited with approval by Dixon J in Huddart Parker Limited v The Ship "Mill Hill" (1950) 81 CLR 502 at 509. See also the frequently cited judgment in The Eleftheria [1970] P 94; [1969] 2 WLR 1073 and FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1997) 41 NSWLR 559 at 569 and the cases cited at [62] and [70] above.) 86 As Toohey, Gaudron and Gummow JJ observed in Akai Pty Ltd v People's Insurance Co Limited (1996) 188 CLR 418 at 445: "In Huddart Parker Ltd v The Ship 'Mill Hill' Dixon J referred with approval to English authority which indicated that, where there was a special contract of this nature between the parties, a foreign jurisdiction clause, the courts begin with a firm disposition in favour of maintaining that bargain unless strong reasons be adduced against a stay, it being the policy of the law that the parties who have made a contract should be kept to it." 87 To similar effect are the further observations of Allsop J (as his Honour then was), in Incitec v Alkimos Shipping Corp supra: "[43] The question is one of the exercise of a discretion in all the circumstances, but recognising that the starting point is the fact that the parties have agreed to litigate elsewhere, and should, absent some strong countervailing circumstances be held to their bargain." 88 In the case of an application for a stay based on an exclusive jurisdiction clause, the prima facie position is that a court will enforce the clause and grant the stay. In the context of an international investment arrangement, such as that presently under consideration, which potentially involves multiple different jurisdictions, the strength of the prima facie position is of a high order. (See the analysis at [62], [68]-[69] above.) 89 The kinds of considerations which may lead to the prima facie position being overturned have been frequently expressed in forceful words of equivalent import such as: "A strong bias in favour" ( Huddart Parker v The Ship "Mill Hill" , supra at 509). "Strong reasons" Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 259 per Gaudron J; Akai v The People's Insurance Co supra at 429 per Dawson and McHugh JJ and at 445 per Toohey, Gaudron and Gummow JJ. "Strong cause" The Eleftheria supra at 99. "Substantial grounds" FAI v Ocean Marine Mutual supra at 569; Incitec v Alkimo Shipping Corp supra at [42]. "Strong countervailing circumstances" Incitec v Alkimo Shipping Corp supra at [43]. 90 In the present case GPF did not identify any "strong reasons" in the sense referred to in the authorities and expressly applied by Hammerschlag J. Save for the general proposition set out at [83] above, which cannot be accepted, its submissions on the exclusive jurisdiction clause focused only on the issues of interpretation. 91 In the course of making submissions on the forum non conveniens issue, GPF identified a number of factors in support of the proposition that Australia was not a clearly inappropriate forum. However, it did not suggest that these matters were pertinent to the exercise of the discretion to order a stay on the basis of the exclusive jurisdiction clause. The authorities establish that the approach applicable to forum non conveniens is not applicable to an exclusive jurisdiction clause. (See Oceanic Sun Line v Fay supra at 230; Akai v The People's Insurance Co supra at 428; FAI v Ocean Marine Mutual supra at 569.) 92 GPF has identified no considerations which constituted "strong reasons" in accordance with the relevant authorities. In the absence of any submission to that effect, there is no reason why this Court should disturb the exercise of the discretion by the first instance judge.

Leave to Proceed Against BBL 93 The principles applicable to the application for leave to proceed against BBL, set out at [47] above, were not contested. In view of my rejection of GPF's case against the other respondents, there is no basis for granting leave to proceed against BBL alone. 94 In any event, the joinder of BBL has the appearance of a makeweight. It is a holding company that never had any employees nor, it appears, is it likely to have any relevant documents. On the uncontested evidence, and subject to the outcome of the liquidator's examinations, it has no material capacity to conduct litigation, let alone contribute materially towards any compensation awarded. 95 Hammerschlag J referred to the "current financial position" of BBL as not constituting a "persuasive consideration against the grant of leave". If the discretion fell to be re-exercised by this Court, I would have regarded it as entitled to weight. 96 In Ogilvie-Grant v East supra, when McPherson J said at 316 that the purpose of the leave requirement was, in part, to avert exposure of a company in liquidation to "expensive and time consuming" litigation, the word "expensive" has to be understood as relative to the resources available to the liquidator. The limited resources available to a liquidator, in comparison with the cost of the proceedings for which leave was being sought, was given substantial weight by Lehane J in Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123 at 128. 97 I note that it is not clear, contrary to an assumption made by Hammerschlag J, that GPF can proceed against BBL in London. Circumstances may change, perhaps even BBL's financial position. There is nothing to prevent a further application for leave. Subject to this matter, I agree with his Honour's reasons. 98 Even if I had come to a different view with respect to the other respondents, I would have refused leave to proceed against BBL. I would not have interfered with the exercise of the discretion by the primary judge. Indeed his conclusion is, in my view, reinforced by the weight I would give to the financial position of BBL.

Conclusion 99 GPF did not suggest that his Honour's orders should be varied if this Court determined the matter on the basis of the exclusive jurisdiction clause. 100 The orders I propose are:

2 Direct the applicant to file a notice of appeal within 14 days. 3 Appeal dismissed with costs. 101 GILES JA: I agree with Spigelman CJ. 102 TOBIAS JA: I agree with Spigelman CJ. **********

13/08/2010 - paragraph reference changed from "[61]-[69]" to "[60]-[69]" - Paragraph(s) 79

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.

CITATION: Global Partners Fund Limited v Babcock & Brown Limited (in liq) and Ors [2010] NSWCA 196 This decision has been amended. Please see the end of the judgment for a list of the amendments.

Akai Pty Ltd v People's Insurance Co Limited (1996) 188 CLR 418 Ashville Investments Ltd v Elmer Contractors Ltd [1989] 1 QB 488 Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 Lloyd's Rep 767 Donohue v Armco Inc [2001] UKHL 64; [2002] 1 Lloyd's Rep 425 FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1997) 41 NSWLR 559 Ferris v Plaister (1994) 34 NSWLR 474 Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2008] 1 Lloyd's Rep 254 Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 CASES CITED: Huddart Parker Limited v The Ship "Mill Hill" (1950) 81 CLR 502 IBM Australia Ltd v National Distribution Services Limited (1991) 22 NSWLR 466 Incitec Ltd v Alkimos Shipping Corporation [2004] FCA 698; (2004) 138 FCR 496 Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123 Metropolitan Tunnel and Public Works Limited v London Electric Railway Co [1926] Ch 371 Morgan Stanley & Co International plc v China Haisheng Juice Holdings Co Ltd [2010] 1 Lloyd's L Rep 265 Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 Ogilvie-Grant v East Liquidator of Gordon Grant and Grant Pty Ltd (1983) 7 ACLR 669; [1983] 2 Qd R 314 The Eleftheria [1970] P 94; [1969] 2 WLR 1073 United Group Rail Services Limited v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618 Winnetka Trading Corp v Julius Baer International Ltd [2008] EWHC 3146; [2009] 2 All ER 735

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