Hancock Prospecting Pty Ltd v 150 Investments Pty Ltd

Background

1. This application involves a possibly novel, and complex, situation as to the transfer of proceedings, which have been commenced in the Supreme Court of New South Wales, to another Court, the Supreme Court of Victoria under s 1337H of the Corporations Act 2001 (Cth).
2. By Originating Process filed on 25 June 2020, the Plaintiff, Enares Pty Limited ("Enares"), seeks orders to acquire a minority shareholding in Sumo Australia Limited ("Sumo") at a price of 0.2 cents per share, as against some 19 remaining shareholders in Sumo. About a month after those proceedings were commenced, those shareholders or some of them ("Shareholders") commenced oppression proceedings in the Supreme Court of Victoria challenging the circumstances in which Enares became a 90 per cent shareholder in Sumo and its entitlement to proceed to compulsory acquisition under s 664F of the Act, albeit that the Shareholders seek relief in the oppression proceedings by which their shares in Sumo would be bought out but on a different financial basis from that which arises at a compulsory acquisition under s 664F of the Act. That oppression claim could have been, but was not, brought by interlocutory process in this Court, where the Supreme Court (Corporations) Rules 1999 (NSW) allow substantive relief to be sought by interlocutory process, which would here have been in the nature of a cross-claim impeaching the relief sought in the Originating Process.
3. I will first address the evidence on which the parties rely, then the parties' submissions, and then the applicable principles and the determination which follows from them.

The evidence on which the parties rely

1. The Shareholders, in support of the application for the transfer of the proceedings to the Supreme Court of Victoria, rely on the three affidavits of their solicitor, Ms Garcia, dated 31 July 2020, 17 August 2020 and 21 August 2020. In her first affidavit, Ms Garcia contends, by way of submission, that the Supreme Court of Victoria is a more appropriate forum for the determination of the issues in the compulsory acquisition proceedings and the oppression proceedings, and (more significantly for the conclusion that I will reach below) that there is an overlap in the legal issues to be determined in both proceedings, either by reference to the issue of value arising in both proceedings for an acquisition of the minority shares, or, because the order sought in the oppression proceedings would potentially affect the number of shares held by Enares and its standing to continue with the compulsory acquisition application.
2. Ms Garcia refers to the domicile of the parties and, in particular, the location of registered offices of the corporate defendants who are among the Shareholders. I recognise that is a factor to which the Court must have regard under s 1337H of the Act, although it seems to me of limited practical significance where both this Court and the Supreme Court of Victoria would likely conduct the proceedings by audio visual means, at least while the Australian courts are dealing with the Covid-19 pandemic, and the physical location of parties to proceedings or witnesses called by them will be of lesser significance.
3. Ms Garcia also refers to aspects of the oppression proceedings brought in the Supreme Court of Victoria, which, importantly, attack the circumstances in which Enares acquired additional securities in Sumo, initially by conversion of its debt to equity, then by underwriting a future equity raising by Sumo, and being paid fees in respect of the underwriting by way of shares in Sumo issued to it and, third, by converting a further substantial debt into a substantial number of shares in Sumo, at a discount for the then price at which Sumo was seeking to raise capital.
4. Ms Garcia refers, importantly, to an order sought by the Shareholders to modify the share register of Sumo to reduce the number of shares held by Enares by the number of shares required to address the allegedly oppressive conduct. She in turn refers to a suggested overlap in legal issues, a matter to which I will return below. She also refers to matters relating to the balance of convenience of parties and witnesses, which again seem to me to be of lesser weight, so far as all of them would be addressed by conducting a hearing by audio visual means, whether that occurred in the Supreme Court of Victoria or in this Court. Ms Garcia also referred to the manner in which the Supreme Court of Victoria deals with oppression proceedings, but I need not focus on her evidence as to that practice generally, where her third affidavit addresses the conduct of these proceedings more specifically.
5. By her affidavit of 17 August 2020, Ms Garcia identifies a number of witnesses in respect of the proceedings but, again, it seems to me that that matter has limited weight so far as the proceedings would likely be conducted by audio visual means. She emphasises that the Shareholders' claim in the oppression proceedings relates to conduct which occurred between early 2019 and February 2020, in a period predating the compulsory acquisition notice, but a remedy is sought in the oppression proceedings impeaching Enares' standing to proceed with compulsory acquisition as a 90 per cent holder of shares in Sumo.
6. Ms Garcia also refers to an open offer made by the Shareholders to transfer the oppression proceedings to the Supreme Court of New South Wales, on the basis that they be heard together with the compulsory acquisition proceedings. That offer has not been accepted by Enares, at least so far as it is conditional on the proceedings being heard together. Enares responds that it seeks to pursue the compulsory acquisition proceedings separately from the oppression proceedings. It seems to me that that offer, and its rejection, is of considerable significance to the outcome of this application. If this Court considers, as it appears the Supreme Court of Victoria considers, that the two proceedings should be heard together, then the only place they can be heard together is the Supreme Court of Victoria. They cannot be heard together in this Court, because this Court cannot order the Shareholders to transfer the oppression proceedings here, and their offer to do so on terms that they be heard together with the compulsory acquisition proceedings has been rejected by Enares. In those circumstances, it seems to me that the options available to this Court are confined, so far as they are either to permit the proceedings to continue separately, or to transfer them to the Supreme Court of Victoria so that they can be heard together.
7. By a third affidavit dated 21 August 2020, Ms Garcia addresses a listing of the oppression proceedings before Riordan J in the Supreme Court of Victoria on 21 August 2020. His Honour was there informed of the application to be heard today in this Court, and adjourned the hearing of the proceedings in the Supreme Court of Victoria to allow this transfer application to be heard. Importantly, his Honour recorded the Supreme Court of Victoria's present expectation that the trial of the oppression proceeding would there be fixed for February 2021, adopting a significantly expedited timetable to that which was assumed in some of the evidence led by Enares, to which I refer below. His Honour also identified orders which were likely to be made in respect of access to documents in relation to expert evidence in the oppression proceedings, depending upon the outcome of this application.
8. His Honour noted, at page 5 of the transcript, his tentative view that the proceedings should be heard together. His Honour also identified a question whether the proceedings could be heard in New South Wales more quickly than they could be heard in Victoria, but it seems to me that that question does not arise in this application. It does not arise, first, because it is not a matter for this Court to assess the speed with which matters are heard in different courts, where all courts do their best to hear matters promptly, having regard to the constraints of their respective workloads. It does not arise, second, because, as I have noted above, Enares' unwillingness to accept the terms on which the Shareholders would transfer the oppression proceedings to the Supreme Court of New South Wales means that the proceedings cannot be heard together in this Court, and the oppression proceedings will remain in the Supreme Court of Victoria in any event. The only question then is whether the compulsory acquisition proceedings should be transferred to the Supreme Court of Victoria to be heard together with them.
9. Enares, in turn, relies on the affidavit dated 10 August 2020 of its solicitor, Mr Latimer, which refers to a number of matters in relation to the scope of the compulsory acquisition proceedings and recognises, correctly, in my view, that the compulsory acquisition proceedings would likely be narrower in scope than the oppression proceedings. Mr Latimer points to several matters which he contends link the proceedings with New South Wales, but it seems to me that those have equally limited weight to those which Ms Garcia referred to identify a link with Victoria, given the manner in which Courts are presently conducting proceedings. Mr Latimer also indicated his view as to the time which would likely be taken to hear the oppression proceedings in the Supreme Court of Victoria but it is apparent that Riordan J contemplates a substantially expedited timetable for the hearing of the proceedings, by comparison with that which Mr Latimer assumed.

The parties' submissions

1. Turning now to the parties' written submissions, Mr Sirtes, who appears for the Shareholders, seeking the transfer of the proceedings to the Supreme Court of Victoria, refers to a legal issue which has, ultimately, become a significant factor in the application. He refers to the possibility that, if the compulsory acquisition application is determined in favour of Enares, then the Shareholders would cease to be shareholders of Sumo, by the time the oppression proceedings were heard, and would potentially be deprived of the opportunity of obtaining relief, if the view adopted in several cases in the Supreme Court of Western Australia (namely, Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd (No 2) [2012] WASC 169; Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd (No 2) [2013] WASC 143; (2013) 94 ACSR 151; Jebb v Superior Lawns Australia Pty Ltd [2017] WASC 335; (2017) 123 ACSR 388) are followed, or may, alternatively, be restricted to rely on s 234(c) of the Corporations Act so far as they would be former members of Sumo. Mr Sirtes also refers to matters which are relevant to the determination of a transfer application under s 1337H of the Act, to which I will refer below, and undertakes analysis of the residence of the parties, which has a degree of artificiality attached to it, as far as a number of parties are corporate entities and is also of limited significance given the matters to which I have referred above as to the manner in which the proceedings would likely be conducted.
2. Mr Sirtes then returns to the issue of overlap of legal issues between the proceedings, both in respect of the question of standing, to which I have referred above, and in respect of the different approach to valuation which might be adopted in the oppression proceedings on the one hand and in compulsory acquisition proceedings on the other.
3. Mr Sirtes also addresses the alternative relief sought by the Shareholders, by way of a stay of the proceedings in the Supreme Court of New South Wales, pending the determination of the oppression proceedings in the Supreme Court of Victoria. I pause here to note that it seems to me that there is little attraction in that course. A significant difficulty that arises from the present circumstances is that, as Enares recognises in submissions, the question of which proceeding is heard first may have an impact on their substantive outcome. Where staying one proceeding and allowing the other to proceed first may have a substantive impact, it seems to me that it is not a desirable way in which to address the issue. To put that proposition another way, it is by no means a desirable result that a party's substantive rights be affected by a procedural decision as to which of two proceedings are heard first.
4. I turn now to the submissions made by Mr Muston, with whom Mr Birch appears for Enares. Mr Muston submits that it is not more appropriate that the compulsory acquisition proceeding be heard in the Supreme Court of Victoria and that it would be contrary to the statutory framework under Pt 6A.2 of the Act to permit the Shareholders to "hijack" the compulsory acquisition proceedings under s 664F, which are intended to be a simple statutory process, by the commencement of oppression proceedings in a separate Court. I put aside the fact that oppression proceedings were commenced in a separate Court, which is a difficulty that the transfer provisions under s 1337H of the Act can address. It seems to me that the pejorative term "hijack" is not appropriate in the circumstances. I accept that the process for compulsory acquisitions under s 664F of the Act is a relatively straightforward process, with narrow specified criteria as to valuation, supporting a compulsory acquisition where the applicant is a 90% shareholder. However, in this Court, and in any other Court which maintains the facility for a cross-claim, it is not to "hijack" proceedings to raise an issue in them which may impugn the standing of a party to pursue the claim for compulsory acquisition. To put that proposition another way, it seems to me that there would have been nothing inappropriate in the Shareholders bringing a cross-claim in the compulsory acquisition proceedings, raising the question of oppression in answer to the application for compulsory acquisition, at least so far as that cross-claim for oppression was seriously arguable. Where the corresponding claim is brought in another court, an issue then arises as to how the two proceedings should be managed, whether separately or together.
5. Mr Muston also submits, and I accept, that the two proceedings being heard together is likely to delay the proceedings to some extent, although it appears that that delay may be less than might have been anticipated given the expedition contemplated by Riordan J's observations in the Supreme Court of Victoria. I accept that, even if the proceedings are heard in February 2021 in the Supreme Court of Victoria, they are likely to take longer to determine when heard together, than would the compulsory acquisition proceeding heard on its own, because there a wider range of issues and a larger number of witnesses will be involved. However, it does not follow that the two proceedings heard together will take longer to determine than the two proceedings heard separately, and they may well be more efficiently heard together than separately.
6. Mr Muston also advances a submission that the combination of the proceedings would prevent a consensual resolution of the proceedings, since Enares would be prohibited from seeking to settle the oppression proceeding while the compulsory acquisition proceeding remains on foot. Mr Muston here refers to s 664D(3) of the Corporations Act, which provides that the 90% holder, or an associate of that person, must not give a benefit to a person during any proceedings by the Court to determine an application under s 664F by the 90% holder, if the benefit is not afforded to all holders of securities in the class under the compulsory acquisition notice. It appears that possibility arises because the notice for compulsory acquisition was addressed to a wider range of persons than those who now bring the oppression proceedings.
7. I am not persuaded that the Court should be disturbed about the application of the section in that situation. First, contrary to Mr Muston's submission, it does not prevent settlement but merely has the consequence that settlement cannot take place in respect of the Shareholders, in the oppression proceedings, without its benefit of it being extended to all holders of the relevant securities. It is by no means apparent to me that the Court should be disturbed because settlement is not possible, in respect of the Shareholders in the oppression proceedings, on a basis that favours them over other holders in the relevant class. There is, so far as the facts emerge, no suggestion that any oppression which affects them in their capacity as shareholders would not also affect other members of the class in the same capacity. It therefore seems to me that the consequence which Mr Muston identifies as a matter of concern is not a matter of concern, but instead the proper working out of the statutory regime which is intended to ensure that some members of a class whose shares are acquired are not benefited to the exclusion of other members of the class.
8. Mr Muston also addresses, in submissions, the proposed witnesses in the two proceedings, but again I give little weight to that matter given the observations I have made above as to the manner in which the proceedings would likely be conducted both by this Court and the Supreme Court of Victoria.
9. Mr Muston refers to the issues in the oppression proceedings, and points to matters that may well be raised by Enares in defence of those proceedings, including the commercial justification for the relevant transactions. Mr Muston also identifies the risk of delay to the hearing of the compulsory acquisition proceedings, if it was joined with the oppression proceedings, to which I have referred above. Mr Muston submits there are a lack of common issues between the compulsory acquisition proceedings and the oppression proceedings, and that proposition is correct in one sense. There is not here an overlap in events, or an overlap in timing, or possibly even an overlap of witnesses, putting aside expert valuation evidence, between the compulsory acquisition proceedings and the oppression proceedings. There is, however, an essential overlap in logic as between the two proceedings, so far as the events which are challenged in the oppression proceeding are the means by which Enares became a 90% shareholder in Sumo, and that 90% shareholding is the essential starting point for its compulsory acquisition proceeding.
10. Mr Muston responds to Mr Sirtes' expressed concern as to the risk that the applicants in the oppression claim may be deprived of standing, or of the opportunity for relief, for reason of the compulsory acquisition of their shares by contending that that will not be the case. He refers, in that respect, to the decision of the Federal Court of Australia in Boart Longyear Ltd [2019] FCA 62; (2019) 370 ALR 30 at [35]ff. I accept that the Federal Court there expressed that view, although Mr Sirtes is correct in pointing to a different approach taken in the earlier cases in the Supreme Court of Western Australia to which I referred above, and that leaves open the possibility that the Supreme Court of Victoria might follow either approach.
11. If this matter had been determinative in the application, I might well have invited Enares to commit itself more formally to the correctness of the proposition for which it contended, by an undertaking that it would not raise, in the oppression proceedings, any contention that the Shareholders no longer had standing to pursue the proceedings, or were not entitled to relief, as a result of the compulsory acquisition of its shares. I have not taken that course, first, because it does not seem to me that that matter is ultimately determinative in this application and, second, because an undertaking by Enares not to raise those matters would not necessarily prevent the Supreme Court of Victoria from needing to have regard to them as relevant matters.
12. Mr Muston also refers to issues as to valuation, in respect of the oppression proceedings, and to the width of the discretion available to the Court in determining valuation questions in oppression proceedings. He in turn points to the fact, which may be of some significance in this application, that it appears that the Shareholders do not seek to remain as shareholders in Sumo, but instead contend they should be bought out on a different valuation basis than that which would be applied in compulsory acquisition proceedings.
13. Mr Muston in turn responds to the proposition that Enares has not accepted the suggestion that the oppression proceedings could be transferred to this Court, by emphasising that Enares seeks to reserve its "right to maintain" that the two matters should be heard separately. It does not, of course, have a "right" to have the matters heard separately, as distinct from advancing a contention that that is the way in which they should be heard, where that is a management issue for the Court, to be determined in a way which will promote the interests of the just, quick and cheap resolution of the real issues in dispute in the proceedings.

The applicable principles

1. I now turn to the applicable principles, as to which there is little dispute between the parties. Section 1337H of the Act provides that, where a proceeding is brought with respect to a civil matter arising under the corporations legislation (as defined) in a State Supreme Court, that Court may transfer the relevant proceedings to another Court, if it appears to the first Court that, having regard to the interests of justice, it is more appropriate for the relevant proceedings to be determined by the other Court. There is no doubt that the Supreme Court of Victoria has jurisdiction to determine the compulsory acquisition proceedings, for the purposes of the application of that section, and the question is therefore whether it is more appropriate that those proceedings be determined by that Court.
2. Section 1337L in turn identifies several matters for the Court to consider in determining whether to transfer the proceedings, and requires the Court to have regard to the principal place of business of any body corporate concerned in the proceeding on application, a matter to which Counsel referred; the place or places where the matters that are the subject of the proceedings took place, which Counsel also addressed; and the other Courts that have jurisdiction to deal with the proceedings.
3. Matters relevant to the exercise of the discretion whether to transfer the proceedings to another Court also include the existence of a substantial overlap between the issues arising in proceedings in a different Court, whether it would be more efficient or less time-consuming or less costly for the proceedings or issues to be resolved in another Court, and whether the risk of inconsistent findings will be removed if proceedings are heard in that other Court: Roff v Aqua Distributors Pty Ltd (1996) 22 ACSR 248; Zhu v Tech Universal (HK Macau) Development Pty Ltd [2005] FCA 256; (2005) 53 ACSR 704; Re Tasmanian Botanics Pty Ltd [2019] NSWSC 885 at [11]ff.
4. In Hancock Prospecting Pty Ltd v 150 Investments Pty Ltd [2017] FCA 520; (2017) 120 ACSR 495, Yates J in turn observed, by reference to authority, that the application of the section involves a balancing exercise between relevant factors that inform the question whether it is or is not in the interests of justice to transfer a proceeding; and that the question involves an essential practical management decision as to which Court, in the pursuit of the interests of justice, is more appropriate to hear and determine the relevant question, here, the compulsory acquisition question. His Honour also there emphasised the significance of the risk of conflicting findings of fact or conflicting orders, and the potentially unnecessary drain on judicial and other public or private resources, in determining that question. I followed that approach in Re Tasmanian Botanics Ltd above at [13].

Determination

1. It seems to me that, having regard to these matters, the question of the location of the principal place of business of the body corporate concerned, and the place or places where the matters the subject of the proceedings took place, while relevant matters in the application of the statutory test, are of limited materiality to the management decision which the Court has to make. It also seems to me, as I have observed above, the residence of witnesses is a factor of limited weight. I have regard to the fact that proceedings, if heard together, will likely take longer in the Supreme Court of Victoria than the compulsory acquisition application heard alone, although probably not longer than the two proceedings would in total take, if heard separately.
2. I also have regard to an important factor, namely, that the continuance of the compulsory acquisition proceedings in the Supreme Court of New South Wales raises a difficulty to which I referred in Re Tasmanian Botanics above. If conducted in New South Wales, the compulsory acquisition proceedings cannot be joined with the oppression proceedings, even if the Court were to form the view, as I would, that they ought to be joined with the oppression proceedings. They would, in effect, heard separately by default, because they are here in a separate State from the oppression proceedings. I recognise that that is, in part, the consequence of the Shareholders' decision to commence the oppression proceedings in the Supreme Court of Victoria, rather than by cross-claim in this Court, but I also recognise that the Shareholders have since sought to address that issue, by the offer of the transfer of the oppression proceedings to this Court so that the proceedings could be heard together, and Enares has rejected that approach.
3. Here, it seems to me that the critical issue, in respect of promoting the interests of justice, is the need to avoid procedural complexities which undermine the substantive rights of the parties, and the risk of inconsistent findings between the Courts as to matters which are critical to the determination of the proceedings.
4. First, Enares contemplates that the outcome of the proceedings might differ, depending upon which was heard first. If the oppression proceedings were determined first, and the Shareholders succeeded, Enares might be deprived by an order made in those proceedings of its ability to pursue compulsory acquisition, although I express no final view in that respect. If the compulsory acquisition proceeding was heard first, the Shareholders might be deprived of their standing to pursue the oppression proceedings, other than in their capacity as former shareholders of Sumo, or alternatively that may become a matter relevant to the discretion whether to grant relief in their favour. It seems to me that the interests of justice are not promoted by a position where the substantive rights of parties are affected by which of two proceedings is determined more quickly, particularly if that is to be determined by the workloads of two different Courts, and otherwise by matters of chance as to which proceedings are determined more quickly. It seems to me that the interests of justice would be promoted, at least, by a single Court having the opportunity to consider whether matters are to be heard together, so as to avoid the risk of procedural issues driving substantive results.
5. Second, it seems to me that there is here a significant risk of inconsistent findings, so far as it is plainly possible that the Supreme Court of Victoria could determine that an oppression case succeeded, adversely affecting the standing of Enares to pursue compulsory acquisition proceedings, after the Supreme Court of New South Wales had already determined that Enares was entitled to compulsory acquisition on the basis that it had such standing. That, it seems to me, is a prospect that has the capacity to undermine confidence in the administration of justice, so far as two Courts, dealing with matters which at least have the question of whether Enares is a 90% shareholder in common, were to reach different findings as to that result, which is of substantive consequence for the determination of both proceedings.
6. Third, it seems to me that it would not promote the interests of justice for the Shareholders to be exposed to the risk identified by Mr Sirtes as to the effect of compulsory acquisition upon their standing, if Mr Muston's confidence that there would be no such impact is not correct, particularly if Mr Muston or other counsel retained by Enares were later to assert the contrary to his present position in the proceedings in the Supreme Court of Victoria.
7. For all of these reasons, it seems to me that at least the option for the proceedings to be heard together must be preserved, and that requires that the proceedings be heard in the same Court. No doubt, that may have raised a question of difficulty if it were a matter for this Court to determine whether the proceedings should now both be heard together in the Supreme Court of Victoria or in this Court. However, as I have noted above, that question does not arise. The Shareholders' offer to transfer the oppression proceedings to this Court, on terms, has been rejected by Enares, and now the only jurisdiction that can hear the two proceedings together is the Supreme Court of Victoria, if this Court transfers the compulsory acquisition proceedings to that Court.
8. For these reasons, I am satisfied that the transfer order should be made.

Costs

1. In applications of this kind, a common order is that costs of the application be costs in the cause. Mr Sirtes submitted that, having regard to the offer made by the Shareholders for the transfer of the oppression proceedings to this Court, they should have here their costs of the application. Mr Muston pointed to particular features of that offer, in contending for an order for costs in the cause, before I indicated that it was not necessary to hear him further.
2. It does not seem to me that this is a case where the Shareholders should have their costs of the application. No doubt, the recent offer is a relevant factor, but it seems to me also a relevant factor that the need for this application has arisen from the fact that these proceedings were commenced, in the first place, in the Supreme Court of Victoria, rather than by way of cross-claim in these proceedings, where the latter course would have allowed the logically intertwined issues to be determined in the same proceedings. The expense to which the parties have had to go to address this application, and the need to address it in both the Supreme Court of Victoria and address it today in this application, in part, resulted from that choice, and that choice will, in turn, have created a distraction from the conduct of the underlying proceedings.
3. In these circumstances, it seems to me that the Shareholders' recent offer is, at best, a way of addressing the procedural difficulties that have arisen from their original choice. For that reason, I am not inclined to think that there should be an order that the Shareholders have their costs of the application by reason of that offer. I will make the usual order that the costs of the application be costs in the cause.

Orders

1. Accordingly, I make the following orders:
2. Order that, pursuant to s 1337H of the Corporations Act 2001 (Cth), Supreme Court proceedings 2020/188038 be transferred to the Supreme Court of Victoria.
3. That the costs of this application be costs in the cause.
4. These orders be entered forthwith.

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