Hub Capital Limited v Challock Pty Ltd & Ors [1999] QSC 21

3 The issue for resolution in the Queensland proceedings are whether Mr Harrington and/or his company Challock entered into an agreement with HUB to provide consultancy services in connection with the management of HUB's business; whether Mr Harrington engaged in misleading and deceptive conduct or made misleading statements to HUB; and whether Mr Harrington and AMG induced Challock to breach its contract of employment with HUB. HUB is a Queensland company with office premises in Brisbane. Its business is as a venture capital funds manager.

4 Mr Harrington has sought declarations from the Supreme Court of Victoria that he was not a party to the alleged agreement or that if he was it did not give rise to legal relations between them.

5 It is not disputed that there ought to be one hearing and determination of the matters in dispute between the parties to avoid costs and inconvenience and any risk that inconsistent findings of fact and/or law might be made in the two jurisdictions. The question to be determined is which court should decide the matter. The applicants raise a number of matters which they contend would lead to the conclusion that the Victorian Supreme Court is the more appropriate forum but the most compelling, they submit, is that the Victorian proceedings were commenced first. Mr L Kelly, who appears for the applicants, relies upon observations of Ipp J in Central Bore Nickel N L v Richfile Pty Ltd (1995) 16 WAR 230 at 234 that the policy of the cross-vesting legislation is to discourage competing litigation in different jurisdictions and where a party considers that a proceeding has been commenced in an inappropriate forum the proper course is to apply in that forum to transfer the proceeding to that which it contends is the more appropriate forum rather than to commence proceedings in the desired forum. There is ample authority to conclude when all else is equal that the more appropriate forum is where the litigation was commenced, Teserioro v Matstar Pty Ltd (1990) 93 ALR 607; Perpetual Holdings Pty Ltd v Leviathan Pty Ltd (1991) 30 FCR 524. To decide whether all else is equal it is necessary to set out something of the history of the dealings between the parties. This is not to suggest that some of the matters to which I shall refer are not in contest but to identify the range of the contest, the connection with each jurisdiction, and the circumstances leading to two sets of proceedings being on foot.

6 In 1998 HUB wished to engage a suitably qualified person to manage its business in Brisbane and to that end opened negotiations with Mr Harrington in May. Mr Harrington travelled to Brisbane and discussed terms of engagement with Mr P Skerman, chairman of the board of directors of HUB, and Mr P Rogers another of HUB's 4 directors. Mr Rogers sent Mr Harrington a letter dated 11 June 1998 offering him the position of managing director of HUB and setting out proposed terms. Mr Rogers deposes that Mr Harrington said that he wanted his company, Challock, to be a party to the contract and an amended letter of offer to reflect this change was sent to him in Melbourne by facsimile transmission. The letter concluded that if the terms of the offer were agreeable that agreement could be communicated by signing a copy of the letter and faxing it to the office of an associated company. Mr Rogers deposes that the following day he received confirmation of acceptance of the offer in the way suggested.

7 In due course Mr Harrington removed to Brisbane and worked in HUB's office from early July 1998 until 1 September 1998 when he resigned. HUB alleges pre-contractual representations by Mr Harrington to the effect that there would be a long term commitment to the management of HUB and its business and, by implication, that if the negotiations came to fruition there was no appreciable risk that Mr Harrington and Challock would terminate their relationship with HUB in the short term. The written offer provided for a 10 year agreement with a limited right to terminate on 3 months notice.

8 HUB alleges that Mr Harrington negotiated with AMG whilst at HUB's Brisbane office in July or August 1998. Mr Harrington tendered his resignation in Brisbane to Mr Skerman on 2 September to be effective immediately and indicated that he had taken a position as principal in another venture firm. A press release from AMG dated 4 September 1998 stated that Mr Harrington would return to AMG as an executive director and principal.

9 Thereafter correspondence took place between the parties through their solicitors (Norton Smith & Co in Victoria for the defendants). On 8 September the defendants' solicitors wrote stating that the failure by HUB to pay fees to Mr Harrington and Challock as agreed was regarded as a total failure to perform its side of the bargain and constituted a repudiation of the agreement which was accepted. By letter dated 15 September HUB's solicitors denied repudiation, described the nature of the loss sustained by Mr Harrington's abrupt departure, and indicated "a present intention to prosecute an action for damages for breach of contract ... and for inducing breach of contract". Enquiries were made about receipt of service of process.

10 Invitations were made for HUB's solicitors to forward any proceedings to the defendants' solicitors so that they could decide if there was any conflict in acting for all three defendants and so accept service, which HUB's solicitors declined. Between 4 and 9 November without prejudice letters were exchanged and by letter dated 13 November HUB's solicitors proposed an attempt to resolve the dispute. Further correspondence ensued and it appears that the parties could not agree a venue for their settlement conference.

11 In a telephone conversation on 2 December 1998 between Mr G Jenkins of Clayton Utz (for HUB) and Mr A Green of Norton Smith, Mr Jenkins mentioned that he was preparing a statement of claim and Mr Green asked for a copy in draft. Under cover of a letter dated 18 December 1998 HUB's solicitors sent a draft statement of claim to the defendants' solicitors "without prejudice" to "facilitate settlement discussions ..." and "expressly reserved its rights to make such amendments it considers appropriate prior to issuing proceedings and formally serving them on your clients" (the parties have agreed that this letter may be placed before the court). The writer concluded:

* attend a settlement conference of our client's claim; and

* meet our client's travel expenses with respect to such conference,

by 4 January 1999 we have instructions to file and serve the proceedings."

12 On 24 December the defendants' solicitors responded by faxed letter that they considered the matters raised in the draft statement of claim to be without substance and that there would be no point "by the meeting your client has proposed".

13 On 30 December 1998 HUB's solicitors received by facsimile transmission a copy of a writ issued out of the Supreme Court of Victoria that day and a letter seeking instructions for service. On 4 January 1999 HUB's solicitors asked if the defendants' solicitors had instructions to accept service. The defendants' solicitors suggested on 5 January 1999 that rather than issue proceedings the better course would be to counter-claim in the Victorian proceedings.

14 By letter dated 13 January 1999 to the defendants' solicitors HUB's solicitors enclosed by way of service the writ and statement of claim in this action noting that they were yet to be served with the defendants' Victorian process. The writer protested at the defendants' institution of proceedings in Victoria against the background of the foreshadowed Queensland proceedings. Letters debating this passed between the parties.

15 In deciding which is the more appropriate forum it is relevant to consider with which jurisdiction the action has the most real and substantial connection keeping in mind that there is no bias in favour of the jurisdiction selected by the plaintiff, Bankinvest AG v Seabrook (1988) 14 NSWLR 711; Erbamere Pty Ltd v Campbell's Formal Wear Pty Ltd unreported decision of Ryan J on 16 September 1991 (No.1159 of 1991); Rothwells Ltd (in liq) v Connell (1995) 30 ATR 242. The material shows a much stronger connection with Queensland than with Victoria. The alleged contract was more likely than not formed in Queensland (the communications were by facsimile transmission and not by post), it was, so far as it went, performed in Queensland; the alleged representations by Mr Harrington were made in Queensland, and the alleged breach took place in Queensland. HUB has sustained its damage, if any, in Queensland.

16 Mr O'Donnell QC, who appears for HUB, submits that the Victorian proceedings raise limited issues and it is improbable that a court would make the declarations sought in a vacuum, as it were, citing cases such as The University of New South Wales v Moorehouse (1975) 133 CLR 1 at 10 and 24 and C E Heath Casualty & General Insurance Ltd v Pyramid Building Society (in liquidation) [1997] 2 VR 256. I should not say much about the merits but the Victorian pleading does not seem to engage appropriately the real issues between the parties and to have a case run by a counter-claim, as would happen here were the proceedings to be transferred, is not entirely satisfactory, it would be a case of the relatively small tail wagging the comparatively large dog, as Olsson J observed in Munro v Excel Finance Corporation Ltd BC 9300459, decision of 9 September 1993.

17 The balance of convenience in respect of witnesses may be somewhat speculative at this stage but a preponderance of witnesses would favour Brisbane or are not inconvenienced by Brisbane compared with the number who favour Melbourne. With the ready availability and use of video and telephone links for giving evidence these inconveniences can be minimised for witnesses whose evidence will not be lengthy. I accept that credit issues even for these witnesses may intrude. In my experience expert witnesses armed with a document viewer can readily give accountancy type evidence electronically.

18 Mr Harrington deposes that if the proceedings remain in Queensland there will be a significant disruption to AMG's business activities particularly if the trial occurs in the next 12 to 18 months. Mr Harrington deposes that AMG has three principal employees including himself who all live in Melbourne. He deposes that AMG is currently in the process of raising $30M to $50M in capital and once that is complete by about mid April 1999 the three principals "will be involved in an intensive program of seeking appropriate investments, primarily in Victoria and New South Wales". This program suggests some travel in the two States. Wherever the trial is conducted there will occur disruption to AMG's business. Indeed most, if not all, of the individual witnesses are engaged in business and it will necessarily be disruptive for all of them the closer the action gets to a hearing and at the hearing itself.

19 Mr O'Donnell has strongly urged the procedural advantages of a hearing in this court due to the more detailed ADR provisions in the Supreme Court Act 1991, ss.94-116, and in the Rules of Court, O.99. It is true that this court has case appraisal in its armoury of alternative dispute resolution procedures and it seems that the Victorian Supreme Court has not, but I would not wish to be drawn into any comparison of the respective merits of each jurisdiction's programs for alternative dispute resolution. The parties recognise that this matter is appropriate for mediation and there are mechanisms suitable in each jurisdiction to undertake such a process.

20 There appear to be no obvious advantages in terms of when a trial might be had in one jurisdiction over the other. In both fairly prompt hearings may be had when the action is ready to proceed.

21 I turn to the final consideration - the weight to be given to the commencement of proceedings first in Victoria. I acknowledge the force of Ipp J's comments in Central Bore Nickel and the statement of practice by Spender J in Teserioro v Matstar Pty Ltd (1990) 93 ALR 606 at 608 and O'Loughlin J in Perpetual Holdings Pty Ltd v Leviathan Pty Ltd (1991) 30 FCR 524 at 530 that in the absence of special circumstances litigation should be pursued in the court in which it was first commenced. Debelle J in the Federal Court in Pegasus Leasing Ltd v Cadoroll Pty Ltd BC 9300537, decision of 9 December 1993, gave no great weight to the fact that the plaintiff was the first to commence proceedings because both it and the defendants were ready to commence proceedings if negotiations failed. His Honour commented that the plaintiff "was just a little quicker off the mark and plainly intended to forestall the proceedings in the Federal Court of which Minter Ellison [for the defendants] had given notice".

22 The dealings between the parties revealed in the correspondence shows that the defendants were aware that HUB intended to issue proceedings should the negotiations not eventuate or fail on a particular date not far in the future. A draft statement of claim (albeit subsequently amended) had been sent and an ultimatum given that HUB would institute proceedings in a few days after the Christmas/New Year break. The inference is irresistible that issuing proceedings in Victoria was an attempt to forestall the commencement of proceedings in Queensland of which HUB had given clear notice. In that circumstance I give the first commencement of proceedings little weight as a factor in deciding the more appropriate forum.

23 HUB has undertaken to apply to the Supreme Court in Victoria to transfer those proceedings to Queensland or alternatively to apply for a stay of those proceedings and must do so to comply with the rules of the Supreme Court of Victoria concerning its conditional appearance next week.

24 Taking into account all the factors to which I have made reference, I am of the view that the more appropriate forum for hearing this dispute between these parties is in the Supreme Court of Queensland and I decline to transfer these proceedings to the Supreme Court of Victoria.

25 I dismiss the summons and will hear submissions as to costs.