Intercoal Limited v Tarong Energy Corporation Limited

nature of the proceeding 2 The application lodged by the applicant on 28 November 2005 is for a claim pursuant to s 82 of the Trade Practices Act 1974 (Cth) and damages. 3 The statement of claim describes the applicant as a company listed on the Australian Stock Exchange but the shares of which were suspended from quotation. 4 The claim describes the respondent as at all material times a Government Owned Corporation pursuant to the Government Owned Corporations Act 1993 (Qld) and as the owner/operator of the Tarong coal-fired power station ('the power station') being a joint owner of the Tarong North power station and the supplier of power for the State of Queensland. 5 The claim further pleads that the respondent has a substantial degree of power in the market for the supply of coal. Three markets are identified. First, coal-fired power stations in Queensland; second, consumers of coal in Queensland; third, the national electricity market. 6 The claim recounts that on 19 May 2005, the applicant and two other companies, Metallica Minerals Limited ('Metallica') and SE QLD Energy Pty Ltd ('SE QLD') entered into a share sale agreement pursuant to which Metallica agreed to sell to the applicant and the applicant agreed to buy from Metallica all the issued capital of SE QLD being satisfied by the applicant issuing to Metallica 30 million shares. There was a condition precedent to the completion of the sale and purchase. In order to satisfy this the applicant issued a prospectus dated 3 June 2005 inviting its then shareholders to participate in a non-renounceable pro-rata rights issue of approximately 15 million shares to raise the sum of $3 million. It is pleaded in the claim that it was a requirement of the applicant by reason of the Corporations Act 2001 (Cth) that if it became aware that its prospectus contained a misleading or deceptive statement materially adverse from the point of view of an investor or alternatively a new circumstance that had arisen since the prospectus was lodged which would have been required to have been included in the prospectus, a supplementary prospectus was required to be lodged with opportunity given to investors to withdraw their application and be repaid subscription monies. 7 In the prospectus the applicant made express statements, which it is pleaded taken together, indicate that it was of the view that it had prospects in the future of commencing negotiations with the respondent for the supply of coal to the power station. 8 The claim then pleads that by certain correspondence the respondent, for the purpose of preventing the entry of the applicant into the market, alternatively for the purpose of deterring or preventing the applicant from engaging in competitive conduct in the market, and with direct reference to the prospectus made certain communications to the applicant. The statement of claim pleads matters from which the intent of the respondent is said to be inferred. Other related events are pleaded. 9 The claim then states that by reason of the conduct of the respondent, the applicant formed the view that it was required pursuant to s 724 of the Corporations Act to issue a supplementary prospectus and refund application monies. In those circumstances it was unable to fulfil the condition precedent to the share sale agreement. It claims by reason of the respondent's conduct to have suffered loss and damage being not less than $1 million. 10 The respondent's notice of motion is supported by affidavits of Mr P Ware, Corporate Counsel for the respondent; Mr G Clifton, Special Counsel of the respondent's solicitors; and Mr SW Sharry, solicitor in the employ of the respondent's solicitors. 11 It is common ground that the application for transfer falls to be considered in the context of s 48 of the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules, particularly O 10 r 1(2)(f). It is also common ground that the approach of the Court should be that sanctioned by the reasoning of the Full Court (Bowen CJ, Woodward and Lockhart JJ) in National Mutual Holdings Pty Ltd v Sentry Corporation (1988) 83 ALR 434 at 442 where the Court said: 'The balance of convenience is important, but its weight must vary from case to case. Ultimately the test is: where can the case be conducted or continued most suitably, bearing in mind the interests of all the parties, the ends of justice in the determination of the issues between them, and the most efficient administration of the court? It cannot and should not, in our opinion, be defined more closely or precisely.' Application of these principles may be seen in other authorities relied upon by the respondent, namely Squires v Stephenson (1981) 53 FLR 164; Aquila Resources Limited v Pasminco Limited [2004] FCA 39; Australian Competition and Consumer Commission v Pauls Ltd [2002] FCA 71; BWK Elders (Australia) Pty Ltd v Westgate Wool Company Pty Ltd (No. 6) [2002] FCA 807; Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltd [2003] FCA 430.

residence of witnesses 12 The respondent submits that the great majority, if not all of the witnesses to be relied upon reside in Queensland. This is said to follow from the fact that it is likely that the respondent's intention will be a significant element in the proceeding. Likely witnesses are identified and their place of residence in Queensland likewise identified: see the affidavit of Mr Clifton.

REsidence of parties 13 The evidence shows that the head office of the respondent is in Brisbane. 14 The evidence shows that the applicant, although having its registered office in Victoria, maintains an office in Brisbane. Further its internet website does not reveal any offices in Western Australia and refers to its Brisbane address under 'contact details'.

legal representatives 15 The respondent has engaged the Brisbane firm of Clayton Utz solicitors to act on its behalf in the dispute from its inception in about July 2005. If the proceeding was to continue in the Western Australia District Registry it is said that the respondent would face extra expense and inconvenience as there would be an unavoidable need to retain solicitors in both States.

place where cause of action arose 16 It is submitted for the respondent that the alleged cause of action raised in the application and statement of claim was likely to have arisen in Queensland. Reference is made to the identification of markets in the statement of claim (see above at [5]), also to the share sale agreement referring to the purchase of shares in SE QLD, a company carrying on business in Queensland and additionally the holder of the Kingaroy Coal Project, through a tenement in Queensland. 17 As to the alleged purpose of the respondent, the authors of the correspondence reside in Queensland. A meeting pleaded relevantly to the issue of the respondent's intention took place at offices in Queensland. 18 On a review of the statement of claim as a whole, the allegations made therein and the proceeding itself, has no connection with Western Australia. 19 So far as the prospectus is concerned it is said that the 'corporate directory' in it lists the Brisbane office of the applicant; names an accounting firm of Brisbane as the auditors for the prospectus; names another firm of accountants of Brisbane as the independent accountants; and names a company of Brisbane as the independent geologists. The only connection to Perth in the prospectus is that the solicitor to the offer is identified as a person from the applicant's solicitors in Perth (of a different firm to that representing it in the current application) (its 'usual solicitor').

place where proceeding commenced 20 The proceeding was commenced in the Western Australia District Registry but the respondent contends that this factor is outweighed by the other abovementioned factors.

applicant's grounds of opposition 21 The applicant's contentions are supported by an affidavit of Mr AS Phillips, a director of the applicant and Mr MP Caulfield, a solicitor of the applicant's solicitors.

choice of solicitors and counsel 22 Mr Phillips deposes that he has had commercial dealings with lawyers in Western Australia in his capacity as the director of other public companies. He has formed the view that the applicant's usual solicitor was a meticulous, experienced and efficient corporate lawyer. Accordingly she was engaged for the preparation of the prospectus and dealing with the capital raisings referred to in the statement of claim. Additionally, since the commencement of the dispute the applicant has retained the service of one of the partners of its present representatives as solicitor and counsel of choice regarding him as a highly experienced corporate litigator. 23 Mr Phillips also deposes that he had formed the view that the applicant would be unlikely to retain experienced corporation litigation solicitors in Brisbane on the basis that the majority would be conflicted from acting against the interests of the State of Queensland. He further deposes that if the proceeding was transferred to the Queensland District Registry, the applicant would be obliged to locate and instruct fresh solicitors at considerable costs and expense. 24 In response to this evidence, the respondent relies on the affidavit of Mr Sharry to the effect that the only law firms carrying on business in Brisbane which are likely to have a conflict 'in acting against the interests of the respondent' are the respondent's present solicitors and two other named firms. 25 In reply the applicant states this misses the point in that the conflict addressed by Mr Phillips relates to acting 'against the interests of the State of Queensland' and not just 'against the interests of the respondent'. 26 I am unable to accept Mr Phillips' evidence that, in any event, the majority of firms in Brisbane would be 'conflicted' from acting for the applicant because that would place them in conflict with the respondent and hence the interests of the State of Queensland. Further, I am unable to accept his evidence that the applicant would be obliged to locate and instruct fresh solicitors at considerable cost and expense. It is open to the applicant, if the proceeding was transferred, to continue to rely on its solicitors in Perth. They unquestionably could act through agents to the extent that was required. However, in the jurisdiction of the Court there is no barrier arising from the location of solicitors in different States acting for different parties. Indeed, in the reasoning in National Mutual Holdings the Court was at pains to stress at 441, that s 48 of the Federal Court of Australia Act recognises the national character of the Court. 27 Therefore, I do not accept the submission of the applicant it would be disentitled of its choice of counsel without good cause if the respondent's motion were granted. 28 In National Mutual Holdings at 442, the Court said that 'if the party who commenced the proceedings chose that place capriciously the court would be justified in giving no weight to the choice of place'. Counsel for the respondent suggests that the evidence relating to the choice of applicant's counsel indicated that the action was capricious. I am unable to agree with that submission. In my view the affidavit of Mr Phillips makes apparent that he had what he considered to be good reasons arising from his experience as a director of public companies to wish to retain the services of the applicant's solicitors and of one of their number as counsel.

expense to parties 29 The applicant also submits that where proceedings are transferred, extra expense to a litigant where there is an existing imbalance of financial resources is a relevant factor. Just that factor was taken into account by Heerey J in Cultivaust Pty Ltd v Grainpool of WA [2000] FCA 974. There his Honour considered that financial aspects loomed large because Cultivaust was a small company and Grainpool was a substantial statutory corporation. 30 The affidavit of Mr Caulfield supports the existence of such a contrast in the present application. It exhibits an extract from the annual report to 30 June 2004 of the respondent. That discloses a total equity on a consolidated basis of $856 556 000. The submissions for the applicant state (with no objection being taken to the statement) that for the financial year ended 30 June 2004, the applicant made an after-tax loss of $374 000 and had net assets of $286 000. 31 I do not agree with the submission for the respondent that the different financial position of the parties is not a relevant issue. It is part of the factual matrix and there is every reason why account should be taken of it. There is no evidence of the applicant's current financial position and counsel for the respondent has indicated that questions may arise as to the applicant's capacity to meet its costs if the applicant was unsuccessful. 32 In my view the financial difference between the two companies is a significant matter to be taken into account. It weighs in favour of the applicant's opposition to the transfer, although it may not necessarily always be so in other circumstances. If, for example, the applicant continued with its present solicitors and selected counsel acting for it, the additional costs may not necessarily be much greater than those which the applicant would face if the litigation continued in the Queensland District Registry. 33 Counsel for the respondent also submits that any additional cost is a consequence of the applicant having unrealistically chosen representation from a location remote from the matters raised by the application and statement of claim.

application premature 34 The applicant also submits that the respondent's application is in all respects premature. It is said there is not sufficient evidence before the Court for it to be able to assess what is the 'proper place' for the conduct of the proceeding. Further, it is submitted the respondent has put no evidence before the Court as to which persons may be called to give evidence at trial and the respondent has not filed a defence. Additionally there is no evidence that the respondent will be prejudiced should any persons mentioned in its affidavits be required to travel to Perth to give evidence and two of them are said in the evidence to be willing to give evidence in Perth. Additionally, there will be further pre-trial steps. Further, if the proceeding was not transferred, the respondent would not be precluded from making an application at an appropriate time under O 30 r 6(2) of the Federal Court Rules for an order that the trial be held at a place other than the proper place. Alternatively, it is suggested the notice of motion be stood over to a later stage, that the pre-trial aspects be conducted in Perth, particularly utilising the video-link facility of the Court. 35 I agree with the submissions for the respondent that the test should be applied on the circumstances as they are now known and that if the motion were to be held over that may delay or prejudice the respondent's motion. Certainly it may affect the continuity in the management of the litigation. I am not persuaded by the respondent's submissions in favour of adjournment or delay in the resolution of the motion.

modern application of rule 36 The applicant also submits that the test in National Mutual Holdings was determined in 1988 at a time significantly before the present era where the Court is equipped with video-link facilities and operates on a fully national basis. It is said that approaching the relevant rules relating to transfer in a modern way makes unnecessary the transfer of the proceeding. 37 I agree with the submission for the respondent that the test in National Mutual Holdings is what binds this Court. Further, I do not consider that it in any way inhibits the taking into account of the present day manner in which the Court operates with the assistance of technology. 38 Additionally, I cannot see, as I have previously said, that if the proceeding was transferred that necessarily entails the applicant not being represented by its chosen solicitors and counsel from Western Australia.

conclusion 39 In applying the test in National Mutual Holdings the Court must form an opinion on 'where can the case be conducted or continued most suitably, bearing in mind the interests of all the parties, the ends of justice in the determination of the issues between them, and the most efficient administration of the court'. 40 The financial difference between the applicant and the respondent is significant. However, there is not evidence that the applicant would be unable to conduct the litigation if it were transferred or that the level of expenses would inhibit it from pursuing its claim. Further, there is no evidence that the solicitors and counsel presently chosen by the applicant could not continue to fulfil that role on behalf of the applicant if the proceeding was transferred. 41 Apart from that financial aspect, I consider that all of the other factors favour the conclusion that the ends of justice would be best served and the most efficient administration of the Court encouraged if the proceeding was transferred to the Queensland District Registry. Both of the parties have offices in Queensland; the markets the subject of litigation are in Queensland; the witnesses are more probably than not going to be in Queensland (with the whereabouts of expert witnesses not being presently known); the events are alleged to have taken place in Queensland; and the documents in issue are more probably than not located in Queensland. 42 Applying the test, I am therefore of the view that the respondent's motion should be granted. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.

Counsel for the Respondent: W Martin QC with L Nixon