Internet Business Systems Australia Pty Ltd v Webb & Ors [2007] VSC 347

1 The plaintiff claims that the defendants agreed to sell all their shares in Southpac Finance Systems Pty Ltd ("Southpac") and Bureau Services Australia Pty Ltd ("Bureau") for $1,400,000. The plaintiff relies upon an agreement allegedly entered into in December 2005, alternatively, an agreement entered into in November 2006. The defendants deny the existence of any such agreement.

2 The plaintiff is a company incorporated in Victoria. The third and sixth defendants are companies incorporated in New South Wales. Each of the other four defendants is an individual who lives in Sydney.

3 The defendants seek to have this proceeding transferred to the Supreme Court of New South Wales, pursuant to s5(2)(b)(iii) of the cross-vesting legislation.[1]

4 The substantial question before me is whether this court or the NSW court is the more appropriate forum for determining the parties' dispute.

5 The application is brought pursuant to s5(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987, which relevantly provides:

(a) a proceeding (in this sub-section referred to as the 'relevant proceeding') is pending in the Supreme Court (in this sub-section referred to as the 'first court'); and

(iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of another State or of a Territory,

the first court shall transfer the relevant proceeding to that other Supreme Court.

6 The principles in relation to an application under s5 were comprehensively considered by the High Court in the recent decision in BHP Billiton Limited and Schultz.[2]

7 The High Court has affirmed that, in determining pursuant to s5(2)(b)(iii) whether it is in the interests of justice to order a transfer, a court must be satisfied as to which court is the "more appropriate forum", in the sense that it has the most real and substantial connection with the subject matter of the proceeding. This has been described as involving a "nuts and bolts" exercise.[3]

8 There is no exercise of judicial discretion involved in such an application. If it appears to the court that it is in the interests of justice that the proceeding be transferred, then the court "shall transfer" the proceeding.

9 Factors which may be relevant include the connection between the alleged conduct and the jurisdiction, the governing law, any choice of jurisdiction clause, as well as issues of cost and convenience to the parties, including where the parties and witnesses live and carry on business. The High Court has also affirmed that it is inappropriate to start from a presumption that a plaintiff's initial choice of forum carries independent weight.

10 It is not necessary for me to resolve the difference in various authorities as to whether there is any onus of proof on an applicant for an order for transfer under s5.[4] That is because I am satisfied that NSW is by far the most appropriate jurisdiction.

11 The plaintiff relies upon the December 2005 or November 2006 agreements, both of which are said to have been partly written, partly oral and partly to be implied. The plaintiff claims that the first defendant, John Webb, entered into each agreement on behalf of all defendants.

12 Alternatively, the plaintiff alleges that the defendants represented to the plaintiff that they considered themselves bound by the December 2005 agreement, and further represented in November 2006 that they would execute "the document". The plaintiff alleges that it relied upon those representations to its detriment and the defendants are therefore estopped from denying that they are bound by one or other agreement. Alternatively, the plaintiff seeks damages for breach of s52 of the Trade Practices Act 1974 or s9 of the Fair Trading Act 1999.

13 The final claim is against Mr Webb, for damages for breach of warranty of authority, if it be found that he did not have authority to act on behalf of the other defendants in connection with the agreements.

14 For each cause of action, the only pleaded conversations are between David Brykman on behalf of the plaintiff and Mr Webb on behalf of all defendants. The amended statement of claim does not specify how many such conversations occurred, or where.

15 The defendants deny that either agreement or any relevant representation was made.

16 The plaintiff's current pleading seeks an order for specific performance of one or other agreement. However, affidavits filed for the cross-vesting application confirmed the matter raised in paragraph 6 of the defence, namely, that in March 2007 the defendants sold all of their Southpac and Bureau shares to another party. As such, the plaintiff accepts that specific performance is no longer possible and that its only remedy will be damages.

17 The two page letter, which the plaintiff says constitutes the written part of the December 2005 agreement, contains no choice of law or choice of jurisdiction clause.

18 In so far as the November 2006 agreement is said to be in writing, its terms are contained in an unexecuted document headed "share sale agreement". The plaintiff seeks to draw comfort from clause 13 of that document, which provides:

This Agreement will be governed by and construed in accordance with the laws of the State of Victoria and the parties agree to submit to the jurisdiction of the Courts of that State.

19 This document presents a number of serious problems for the plaintiff. It is incomplete: for example, various schedules have been left blank. It has been marked up to show revisions, and does not look like a final agreement. More substantively, the only persons named as vendors are Mr Webb, his wife, Christina Webb, and the company which is trustee of their family trust; the document does not envisage any sale to the plaintiff by the fourth to sixth defendants. Although Mr Brykman's first affidavit deposes that Mr Webb told him that all the defendants would execute "that document", the plaintiff has not put forward any evidence to explain how that was to occur, given that the fourth to sixth defendants were not parties to the document. Whether any agreement was in fact entered into between the parties will need to be resolved at trial.

20 Even if I assumed for present purposes that some or all of the defendants had in fact agreed to the inclusion of clause 13, that would be a weak factor in favour of the retention of the proceeding by this court, for the following reasons.

21 Here the causes of action are based on common law principles of contract and agency, and standard misleading and deceptive conduct provisions. There is no basis for believing that any cause of action is likely to be governed by a law that is unique or peculiar to Victoria, or unable to be readily applied by the NSW court.

22 As far as choice of jurisdiction is concerned, whilst an exclusive choice of jurisdiction clause may be highly persuasive in a transfer application, clause 13 does not purport to involve an exclusive choice of jurisdiction.

23 In this case, I would give little weight to clause 13 (even if I accepted that the defendants had agreed to it), in comparison with the convenience factors discussed below.

24 It is not clear where the various causes of action arose. There is a dispute as to where and how many relevant meetings and conversations occurred.

25 Mr Brykman says that John Webb attended his office in St Kilda Road, Melbourne, where he countersigned the December 2005 letter on behalf of all defendants. He also mentions that he met with Mr Webb and the fourth defendant, Gregory Moxon, in Melbourne on "several occasions", although he does not provide the date or subject matter of any such meeting. His affidavits are silent as to whether there were any meetings in Sydney.

26 On the other hand, Mr Moxon says that he only met with Mr Brykman on one occasion outside Sydney, on 1 June 2006, to discuss a draft employment contract. He denies ever having met Mr Brykman in Melbourne in the presence of Mr Webb. He says that he and Mr Webb met Mr Brykman in Sydney on 5 May and 1 June 2005. Mr Webb has also informed him that he met with Mr Brykman on four other occasions, twice in Sydney and twice in Melbourne.

27 On the evidence currently before me, the location of relevant meetings and conversations is a neutral factor as far as the transfer application is concerned.

28 The central subject matter of the alleged agreements between the parties was the sale of shares in two companies, which were incorporated in and carried on business in Sydney. While the location of the shares themselves is of little relevance to the transfer application, the effect of the proposed purchase would have been that the plaintiff would have bought and operated Sydney businesses.

29 David Brykman is the sole director and the chief executive officer of the plaintiff. He describes himself as the sole owner of the plaintiff's business. He lives in Melbourne. It is not suggested that, other than David Brykman, any officer or employee of the plaintiff took part in any relevant event or is involved in instructing lawyers in relation to the proceeding.

30 In his first affidavit, Mr Brykman deposed that the plaintiff carries on "all its business operations from one site" at St Kilda Road in Melbourne. But, according to a current extract from the plaintiff's web-site, which was tendered by the defendants, the plaintiff also has an office at Milsons Point in Sydney. Although Mr Brykman deposed in a subsequent affidavit that the plaintiff "does not maintain an office in Sydney", the plaintiff has not explained to the court how and why its web-site shows it as having a Sydney office.

31 The first and second defendants, Mr and Mrs Webb, live in Sydney. Mr Webb is a director of the third defendant ("Erimos"), which is incorporated in NSW and has its registered office in Sydney. The fourth defendant, Mr Moxon, and the fifth defendant, Helen Woodward, both live in Sydney. The directors of the sixth defendant ("Zayken") are Scott Woodward and his wife, Andrea Woodward, who both live in Sydney. Zayken is incorporated in NSW and has its registered office in Sydney. None of the defendants operates any business in Melbourne.

32 David Brykman is the only potential witness identified by the plaintiff. He lives in Melbourne.

33 As there is a clear dispute as to whether Mr Webb had any authority to act on behalf of the other five defendants, each of the other defendants or their directors is likely to have to give evidence, at least on this issue. Whether or not they will all wish to attend other parts of the trial in their capacity as parties, not witnesses, is less clear, but it is certainly their right to do so.

34 I accept that it is no longer the onerous task for witnesses to travel between Sydney and Melbourne that it might have been many years ago.[5] I also note that, due to technological changes, evidence can more readily be given by video-link from another jurisdiction. But additional cost and inconvenience may well be incurred in adopting either of those courses. In some cases, evidence by video-link may be regarded as less satisfactory, particularly where (as here) there are likely to be questions of credit.

35 Both sides sought to place great weight on the inconvenience which they said would be placed on them, their businesses and their clients, if the trial was held interstate. Each sought to argue that the burden would be greatest for their side.

36 Mr Brykman founded the plaintiff's business in 1999. He describes it as providing "business critical software solutions" for the financial services industry. The plaintiff designs, builds, installs, hosts and maintains relevant software. This includes the provision of full support services, including a helpdesk and after hours maintenance. Service agreements with clients often require the provision of services within specified time frames, especially for "mission critical" functions. The plaintiff has more than 10,000 users of its systems worldwide.

37 Mr Brykman's affidavits do not provide a solid factual foundation for his assertions that "it is critical" that he is in Melbourne, or that the plaintiff would suffer more than the defendants were the trial to be held interstate. His affidavits are full of conclusions and arguments, and short on specific details. Unlike the defendants, Mr Brykman does not explain how many employees the plaintiff has, or what their precise roles are. It appears from a web-site extract that the plaintiff's software support manager is Paul Martin, a person not suggested to be connected with this proceeding.

38 Mr Brykman says that he is "closely involved in all critical areas of the business" and maintains direct personal relationships with all customers. He is also contractually bound to several of the plaintiff's customers to act as their IT department head or chief advisor. As CEO, he attends to business and internal management matters such as financial, accounting, tax and compliance procedures and human resources. But he does not depose to direct personal involvement in the hands-on provision of IT services, or say that he is needed in Melbourne for technological reasons. The fact that IT staff operate under his direction and supervision does not mean that he must be physically present for them to perform their tasks. Nor does he explain why his functions as CEO could not be performed during the trial via telephone or the internet. Whilst there would no doubt be some inconvenience for Mr Brykman to attend a trial in Sydney, I am not persuaded that the plaintiff's business or its clients might suffer in any real sense from his absence from Melbourne for a week or so.

39 Southpac and Bureau are and were also involved in the information technology industry. Southpac has developed proprietary software for use by financial institutions and government departments. Like the plaintiff, it provides extensive software and around-the-clock support services. Bureau provides computer systems operations for clients, such as end of day processing and finance applications. Southpac's business is substantially the product of Mr Webb (the first defendant), Mr Moxon (the fourth defendant) and Scott Woodward (a director of Zayken). Messrs Webb, Moxon and Woodward still work in the Southpac business. Mr Moxon is the CEO, Messrs Webb and Woodward are involved in more technical roles.

40 In March of this year, the shares in Southpac and Bureau were acquired by a company in the White Clark Group of companies. Southpac has now changed its name to White Clarke Asia Pacific Pty Ltd. On 30 June 2007, Bureau ceased trading, its business having been transferred to Southpac.

41 Mr Moxon has deposed that, if there is a problem with the hardware or software for the Bureau business, Mr Woodward is "the only person with the technical skills capable of fixing the problem". As far as the Southpac software is concerned, whilst there are other software developers, Mr Moxon has deposed that Mr Webb, the Manager of the User Support Division, is the person who is able to rectify issues faster than anyone else, based on his experience and involvement in the software design. Mr Woodward, the Manager of Research and Development, is described as the "major person to support John Webb if there is a critical failure of Southpac's software." Mr Webb specialises in software rectification and Mr Woodward in hardware rectification. Mr Webb and Mr Woodward are not allowed to take leave at the same time, to ensure that there is continuous support for the systems.

42 Whilst it is not possible for me to conclude on the evidence how often system failures or significant problems occur, I accept that they are not infrequent. I also accept that such a failure may cause significant loss to a client, as well as the loss of a client.

43 The computer systems on which Messrs Webb and Woodward work are based in North Sydney. Security is obviously paramount, given their client base. In order to provide "remote" support to their clients from Melbourne, they would require access to five independent hardware environments. I accept that the cost and inconvenience of doing that would be considerable, even assuming that the clients were prepared to have their systems operated from another location.

44 Whilst I accept that Messrs Moxon, Webb and Woodward work for a larger organisation than the plaintiff, it does not follow that there would therefore be less inconvenience caused were they to attend trial in Melbourne.

45 It follows that the consequence of a trial in Melbourne, rather than in Sydney, is not mere inconvenience and cost (although that will plainly be a factor), but may give rise to serious hardship in the conduct of the Southpac business. This has the potential to have a serious impact on at least three of the defendants.

46 The plaintiff's counsel pointed out that there will be some inconvenience to the defendants in having to give evidence, wherever the trial may be held. I accept that may be so. But if the trial is held in NSW, it is more likely that the defendants might be able to attend to work whilst "on call" to attend court at relatively short notice; the inconvenience can thereby be minimised. If the trial is held in Melbourne, this court as well as the parties may well be inconvenienced if interstate witnesses are not readily available in the event that the evidence proceeds more quickly on some days.

47 It is not disputed that any real inconvenience to the defendants would only arise at trial. But the plaintiff's argument that therefore there is "no warrant for the proceeding to be transferred at this juncture" is misconceived. An application for transfer should ordinarily be made as soon as possible, not left until just before trial. Indeed, an application for transfer may be refused on the grounds of delay. It is also generally desirable that the court which is going to hear the trial should manage the interlocutory stages of the proceeding.

48 The plaintiff also seeks to rely on Mr Brykman's personal circumstances. His wife is expecting their third child in "late 2007/early 2008." However, the trial is unlikely to occur in either State within the next 4 months, given that there are pleading issues still to be resolved before the provision of discovery, the preparation of witness statements and the like. As specific performance is no longer possible, there is no apparent need for an urgent trial date.

49 Mr Brykman is one of the primary caregivers for his father, who is a "high dependency invalid"; he usually attends his residence twice daily. Mr Brykman's affidavits are ambiguous as to whether his father is in an aged care facility or at home. In any event, Mr Brykman's mother is able to assist her husband.

50 Assuming that regard may be had to the personal obligations of a witness to a family member, any inconvenience to Mr Brykman in relation to his family is more than outweighed by the personal obligations of some of the defendants, which are set out in Mr Moxon's affidavits.

51 Having weighed up these considerations, particularly the issues of relative inconvenience to the parties, I am of the opinion that NSW is clearly the more appropriate jurisdiction for this matter. I propose to order that the proceeding be transferred to the Supreme Court of New South Wales.

[1] By their summons dated 27 June 2007, the defendants also sought to strike out certain parts of the amended statement of claim. As that is an application which ought to be brought before a Master, I declined to hear that part of the summons. Both sides agreed that the strike out application would have no bearing on the transfer application.

[2] [2004] HCA 61; (2004) 221 CLR 400.

[3] Ibid at [13] per Gleeson CJ, McHugh and Heydon JJ, quoting from Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 713-4.

[4] In BHP Billiton v Schultz Gummow J, with whom Hayne J agreed, said at [71] that there is no such burden of proof; the other members of the court made no express observation on the point. In the subsequent decision of Ewins v BHP Billiton [2005] VSC 4, Gillard J expressed the opinion at [23] that an applicant does carry such a burden, albeit a low one. On the other hand, in McLeod v Munro [2005] VSC 375, Dodds-Streeton J has said that she considers the observations of Gummow J to be persuasive, an opinion which is shared by Harper J in Holt v Foreham [2006] VSC 148 at [12]- [15], and by Whelan J in Slater & Gordon Pty Ltd v Porteous [2005] VSC 398 at [20]- [21].

[5] Contract Media Sales (Aust) Pty Ltd v Roads & Traffic Authority of NSW [1999] VSC 391 per Beach J; Ross Mollison Group Pty Ltd v The Really Useful Co (Aust) Pty Ltd [2000] VSC 256 per Warren J; Toll (FHL) Ltd v Finemore [2001] VSC 467 per Warren J.