In the matter of HIH Insurance Limited (In Liquidation) [2014] NSWSC 545

Judgment (ex tempore) 1HIS HONOUR: In each of the three proceedings before the Court (called for convenience the Smith proceedings, the Baldock proceedings and the DBW Super proceedings), the plaintiffs appeal to the Court from decisions of the liquidators of the HIH Group rejecting proofs lodged by the plaintiffs in the nature of claims for damages for misleading and deceptive conduct said to have been committed by the defendants in connection with the affairs of the HIH Group, the effect of which is said to have been to cause the share price of HIH prior to its liquidation to be inflated, by reason of which the plaintiffs say that they paid more for their shares in HIH than they were worth. In the Smith proceedings, 117 plaintiffs claim approximately $16 million. In the Baldock proceedings, 2860 plaintiffs claim $145 million, and in the DBW Super proceedings in this Court, two plaintiffs claim $2,100,000. 2In other proceedings, in the Federal Court, which for convenience I will call the Cuong Ly proceedings, 16 applicants make a similar claim for an estimated total amount of $356,000. Although there is an additional element in the Baldock proceedings, in that in those proceedings the plaintiffs assert that they individually relied on the alleged misrepresentations as well as propounding a case of indirect causation based upon the impact of the misleading and deceptive conduct on the market, the cases are otherwise substantially identical. On both sides of the record it is agreed that all four proceedings should be heard and determined in the one court, although the vehicle by which this might occur - whether through one of the proceedings being a test case, or common preliminary questions being identified, or all of the proceedings being heard together - has not yet been the subject of detailed consideration. 3In that context, the plaintiffs in the proceedings in this Court apply pursuant to (Cth) Corporations Act 2001, s 1337H(2), for an order that the proceedings in this Court be transferred to the Federal Court. Behind that order is the contemplation - though, of course, it would be a matter only for the Federal Court - that the transferred proceedings would then be case managed together with the Cuong Ly proceedings already in that Court, and I proceed on the assumption that it is highly likely that that would eventuate. 4Accordingly, many of the usual considerations on an application such as the present do not arise in this case. All both parties have indicated that, if the application in this proceeding succeeds, the defendants will not apply to have the Federal Court proceedings transferred to this Court; and likewise, should this application be unsuccessful, the plaintiffs will not resist and will consent to the transfer of the Federal Court proceedings to this Court. Accordingly, I need not be troubled by the prospect that by failing to make a transfer order there is a risk that the proceedings would be determined or would remain in separate courts. 5Corporations Act, s 1337H(2), relevantly provides that if it appears to the transferor court - which for present purposes is this Court - that having regard to the interests of justice, it is more appropriate for the relevant proceeding to be determined by another court that has jurisdiction in the matter - which the Federal Court unquestionably has - the transferor court may transfer the relevant proceeding to that other court. 6Although, initially, the interlocutory processes filed in each of the matters invoked (Cth) Jurisdiction of Courts (Cross Vesting) Act 1987, s 5, Corporations Act, Part 9.6A, Div 1 operates to the exclusion of the Jurisdiction of Courts (Cross Vesting) Act: see s 1337A(2)(a). Accordingly, the application falls for consideration under s 1337H and not under the Jurisdiction of Courts (Cross Vesting) Act. Nonetheless, the test is largely the same, being one that is concerned with whether it is more appropriate for the proceeding to be determined by the transferee court having regard to the interests of justice. The one potentially relevant distinction between the two statutes is that under the Jurisdiction of Courts (Cross Vesting) Act, transfer is mandatory when the Court forms the view that the other court is the more appropriate forum, whereas under s 1337H it appears to be only discretionary. That said, it would be a very rare case, if there be one at all, that, if the Court formed the view that having regard to the interests of justice it was more appropriate for the proceeding to be determined by the other court, that it would on discretionary grounds decline to make a transfer order. 7As with the Jurisdiction of Courts (Cross Vesting) Act, however, it is insufficient that there be two courts which may be considered equally appropriate for the purpose. An applicant for the transfer of proceedings under s 1337H bears the onus of showing that it is more appropriate for the proceeding to be determined by the transferee court. 8Many of the cases, particularly under the Jurisdiction of Courts (Cross Vesting) Act, have involved considerations that might be described as geographic or venue related pertaining to the convenience of witnesses, parties and access to documents, having regard to the location of proceedings. In circumstances where the issue is between the Supreme Court of New South Wales and the Federal Court of Australia in its New South Wales District Registry, issues of venue are irrelevant. There is no greater geographical convenience in one of those courts over the other. 9Issues of jurisdiction, both as to competence and as to geographical reach, are also irrelevant. Each court unquestionably has jurisdiction to determine civil proceedings under the Corporations Act and when doing so the reach of each court's jurisdiction is national. 10In support of the transfer application and the contention that it was more appropriate for the proceeding to be determined in the Federal Court, the major factor raised was that the Federal Court proceedings are more advanced than the proceedings in this Court. That they are so is unsurprising, in the sense that they instituted some three months before the first of the proceedings and two months before the second and third of the proceedings were instituted in this Court. Although it is not clear that they are ready to take a hearing date, it would seem that they are at least approaching the time at which a hearing date might be allocated. In the Supreme Court proceedings, further pleading and interlocutory steps remain to be completed. If left to their own devices there is little doubt that the Federal Court proceedings would come on for hearing before the proceedings pending in this Court. However, if the Federal Court proceedings were transferred to this Court and are not delayed to await the Supreme Court proceedings so as to be heard together with them, there is no reason why they could not be given an early hearing date in this Court. And the Supreme Court proceedings are transferred to the Federal Court, that court will then be confronted with essentially the same case management issue, as to whether the Cuong Ly proceedings should be heard first and at a relatively early date in that court, or should abide the completion of pleading and interlocutory steps in transfer proceedings. 11In essence, if the Cuong Ly proceedings are heard separately from the proceedings currently in this Court, there is no detriment involved in the proceedings in this Court not being transferred to the Federal Court. If the Cuong Ly proceedings are to be heard together with the proceedings currently in this Court, then their relatively more advanced state of preparation will be of no advantage, whether that be in the Federal Court or in this Court. For that reason, it seems to me that the more advanced state of the Cuong Ly proceedings does not provide a reason for thinking it more appropriate that the Supreme Court proceedings should be transferred to the Federal Court. Given that something like 15 years has passed since the events that underlie the proceedings and any loss by the plaintiffs was suffered, that the significance of the potential of an early hearing for the proceedings in the Federal Court is even less. 12Against the transfer application, it was submitted that there were outstanding interlocutory applications in this Court. While that is so, those applications could as easily be dealt with in the Federal Court and I do not see their pendency as bearing on which is the more appropriate court, in the interests of justice, to determine the substantive proceedings. 13However, two factors do weigh in favour of this Court as the more appropriate forum. The first is it is this Court who appointed the liquidators and this is the Court of the liquidation of the HIH Group. The natural forum for proceedings in a winding up, as appeals against the liquidators decision are, is the court with the supervision of the administration. For that reason, this Court is the natural forum for applications of the present kind. 14Secondly, if one looks at the proceedings as a whole, what might be described as the centre of gravity of the proceedings is plainly in this Court. The Federal Court proceeding involves some 16 applicants with claims of $356,000. The proceedings this Court involve more than 3,000 plaintiffs with claims of more than $160 million. 15In cases like this, particularly where the issue is finely balanced, it may be helpful to endeavour, as best one can, to contemplate the reference of an independent arbiter associated with neither Court to the situation, assuming that all the proceedings should be heard together, deciding in which of the two courts that ought to take place. It seems to me that both the consideration that this Court is the natural forum for proceedings in the HIH winding up, and the centre of gravity considerations to which I have averted, would incline such a person to the view that it was manifest that, of the two courts, the closer connection and the more appropriate forum was the Supreme Court of New South Wales. 16In any event, the balance has not been tilted in favour of the Federal. Accordingly, I am not satisfied that having regard to the interests of justice it is more appropriate for these proceedings to be determined by the Federal Court, and I will order that the interlocutory processes in each matter be dismissed. 17So far as the question of costs is concerned, while I have contemplated whether the appropriate order might be only that the defendant's costs be costs in the proceedings, given that it might be said that such an application would be required in any event, it seems to me that in circumstances where the plaintiffs invoked the jurisdiction of this Court in the first place; where, had the plaintiffs commenced these proceedings in the Federal Court, the issue would never have arisen; and where the plaintiffs have now unsuccessfully applied to have the proceedings transferred to the Federal Court, it is apparent that the costs associated with the present application have been incurred because of the manner in which the plaintiffs chose to institute the proceedings, and should be borne by the plaintiffs. 18Accordingly, in each matter the Court orders that: (1)The interlocutory process be dismissed. (2)The plaintiffs pay the defendants' cost of the interlocutory process. 19The Court directs that: (3)The proceeding be listed before me for directions on 16 May 2014 at 10.00am. (4)The defendants' interlocutory processes in proceedings 2013/320171 and 2013/345623 be listed for hearing before me on 13 June 2014 with a half day estimate. (5)The defendants lodge with my Associate and serve an outline of submissions in respect of those motions by 9 June 2014 and the plaintiffs lodge and serve an outline of submissions by 12 June 2014.