Louminco Pty Ltd v Birla Nifty Pty Ltd

REASONS FOR JUDGMENT 1 There are two extant proceedings between the parties. They were started at almost the same time. 2 On 23 June 2009, Birla Nifty Pty Ltd (Birla Nifty) and Ric Jose (Mr Jose) started an action in the Supreme Court of Western Australia (Civil Action 2153 of 2009) (the WASC action) again Louminco Pty Ltd (Louminco). On 26 June 2009, Louminco started this action against Birla Nifty and Mr Jose (the FCA action). 3 Birla Nifty and Mr Jose have applied to have the FCA action transferred to the Supreme Court of Western Australia, pursuant to s 5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) (the Cross-Vesting Act). This judgment deals with that issue. 4 The FCA action, when commenced, was supported by a statement of claim. The pleadings have now been completed, subject to a foreshadowed application by Birla Nifty and Mr Jose to amend their defence and to make a cross-claim against Louminco. As things stand, the issues are relatively narrow. 5 Birla Nifty owns and operates the Birla Nifty Cooper Operation Mine in Western Australia. Mr Jose is an employee of Birla Nifty. The defence, without alleging any particular status on his part, denies that he is its Chief Mining Engineer (although he describes himself as the Chief Mining Engineer of the group including Birla Nifty), or that, in respect of the relevant conversations, he was its agent. 6 In either August 2007 or January 2008, Birla Nifty contracted with Welgard Fixed Plant Management Pty Ltd (Welgard) for the design and construction of a paste fill plant. That project involved the engineering design, procurement and management of the construction of the plant on site. Welgard could only subcontract any part of those works with the prior written consent of Birla Nifty. 7 The balance of the allegations in the statement of claim are denied, but no other facts are asserted in the defence which Birla Nifty or Mr Jose wish to prove at the hearing. The allegations are as follows. 8 Welgard subcontracted to Louminco the design, fabrication and supply of materials and consulting services for the project. Birla Nifty knew of, and consented to, that subcontract. Pursuant to the subcontract, Louminco has provided consulting, procurement and management services to Welgard for the project (identified by various invoices dated between 9 May 2008 and 31 December 2008) to the value of $248,288. That had also occurred with Birla Nifty's knowledge and consent. 9 On 23 September 2008, Kingsley Barnes of Louminco and Mr Jose discussed the concerns of Louminco that Welgard was well in arrears of its payments under the subcontract. Mr Jose wanted the project to proceed to completion quickly. He said (as pleaded) that Birla Nifty "would ensure payment by using amongst other things contractual remedies it had available to it" under its contract with Welgard, to ensure that Louminco would be paid all moneys that were owed to it by Welgard for past and future invoices under the subcontract. Mr Jose is alleged to have confirmed that telephone conversation in an exchange of emails between Mr Barnes and Mr Jose of 24 and 25 September 2008, namely that Birla Nifty would use its contractual remedies under cl 12.4 of its contract with Welgard to ensure that Louminco was paid for all past and future amounts owing to it by Welgard for the project. Louminco relied on those representations to continue to supply services and materials to the project. Consequently, it did not take any action to recover moneys owing to it in respect of the project from Welgard, and it also agreed to extend further credit to Welgard and did not otherwise take action to secure its position or to secure payment. It is alleged that Louminco subsequently committed further labour and materials for future works to the project to the value of about $160,000 which it would not otherwise have committed to the project relying upon the representations by Mr Jose. 10 There is a separate contractual claim against Birla Nifty. It is alleged that Mr Jose in October and November 2008 requested Louminco to provide administration services to the project direct, on the basis that Birla Nifty would assure payment of the Welgard invoices are given by Birla Nifty before goods were released by Louminco. The value of those services and details of the supporting invoices is given. They totalled $20,578. 11 Louminco's claims against Birla Nifty and Mr Jose are for losses sustained by the allegedly misleading representations made in trade and commerce, to induce Louminco to continue to supply services and materials to the project. That conduct on the part of Birla Nifty through Mr Jose is said to contravene s 52 of the Trade Practices Act 1974 (Cth) (the TP Act). Mr Jose is sued as Birla Nifty's agent in making those representations, and for having been directly or indirectly knowingly concerned in them, pursuant to s 75B(1) of the TP Act. There is an alternative plea that, by reason of those representations, Birla Nifty agreed to guarantee payment of all amounts owed at that time and in the future by Welgard to Louminco pursuant to the subcontract, and that Birla Nifty has refused to satisfy that guarantee. In the further alternative, Louminco claims that Birla Nifty is estopped from denying that there is an agreement in terms of the alleged guarantee because of the representations, its reliance upon them, and the loss it has suffered as a result. 12 The WASC action has not yet progressed very far. The endorsement on the writ is that Birla Nifty claimed from Louminco $544,731, being the amount paid by Birla Nifty to Louminco for a paste delivery system for installation at the Birla Nifty Copper Operation Mine, which was not fit for the purpose for which it was to be supplied. Consequently its claim is for moneys had and received by Louminco, which are held for the benefit of Birla Nifty. It also sought declarations that, during the course of design and construction of the plant, it did not make any representations to Birla Nifty which constituted misleading or deceptive conduct, and that Louminco is not entitled to any relief pursuant to s 82 of the TP Act or otherwise "notwithstanding the assertions to the contrary" made by Louminco to Birla Nifty on about 22 June 2009. Mr Jose's claims are limited to the claims for negative declarations in similar terms to those sought by Birla Nifty. 13 The writ has been amended, without leave (leave not being required), by making more explicit that the negative declarations sought concern the conduct of Birla Nifty alleged by Louminco in a document provided to Birla Nifty on or about 22 June 2009 entitled "Draft - 2nd version - Federal Court of Australia - Between Louminco Pty Ltd v Birla Nifty Pty Ltd and Ric Jose - Statement of Claim". Reference to "the assertions to the contrary" made by Louminco to Birla Nifty on about 22 June 2009 have been removed. 14 That proceeding has not yet progressed beyond that stage. 15 Pursuant to O 29A r 6(b) of the Supreme Court Rules of the Supreme Court of Western Australia, the next step is a status conference on 14 September 2009. On that occasion, the Case Management Registrar, in consultation with the parties, is to determine whether the matter should proceed on pleadings, whether any further pleadings are necessary, and other determinations as to any third party proceedings, as to matters of discovery and inspection, interrogatories, mediation, and as to the progress of the matter to trial. Case management directions may be given at that time and from time to time. One option is that the matter be referred to the Commercial and Managed Cases list. In that event, the matter will be docket managed by a particular judge likely to hear the trial of the case. It is referred to that list if it is suitable for more intensive case management, or having regard to matters such as the need for expedition, the complexity of the issues, or the length of the trial. It is possible that Birla Nifty and Mr Jose may seek an adjournment of the WASC action if their current investigations about whether Louminco has somehow breached a contract with Birla Nifty or otherwise is arguably liable to it has not been completed. 16 It is apparent that the WASC action was commenced to secure that Court for the determination of any issues between the parties. At that time, it was inappropriate to commence the WASC action. So much is clear from the affidavit of Mr Jose. He met with the managing director of Louminco on 22 June 2009. They discussed the informal resolution of Louminco's claim, when Mr Jose was given a copy of the proposed statement of claim, which he was told reflected action proposed to be taken by Louminco to start the FCA action. Mr Jose says that, as he anticipated a dispute going to litigation, he then instructed solicitors to institute recovery proceedings and to seek the negative declarations. In other words, as his counsel acknowledged at the hearing of this application, it was a tactical decision to start the WASC action. It was a decision to bring proceedings prematurely. Birla Nifty and Mr Jose were not in fact in a position to bring proceedings, and so in my view commenced the WASC action for an inappropriate purpose at that point. 17 That is not to say that the issues between the parties, present and potential, depending upon what they ultimately transpire to be, may not be more appropriately heard in Western Australia. However, that is not the same as determining at this point that the FCA action should be transferred to the Supreme Court of Western Australia and, as is apparent from the submissions, in effect consolidated with a premature proceeding. It is apparent that that is the intention of Birla Nifty and Mr Jose because, in communications between solicitors immediately following the institution of the two separate proceedings, they make the point that the issues in the two proceedings are allegedly the same, and that the claim in the FCA action could be brought by way of counterclaim in the WASC action. In other words, assuming the WASC action was properly instituted and for a proper purpose, it would be no longer necessary for that action to claim the negative declarations sought. If the consolidation of the two actions were to occur, the claim for negative declarations could simply be abandoned, leaving Louminco to sue by cross-claim to assert the claims which it is now making in the FCA action. 18 As noted above, Birla Nifty and Mr Jose are not presently in a position to make any claims in any cogent way against either Louminco or, indeed, Welgard. 19 Mr Jose has deposed to being the Group Chief Mining Engineer of Aditya Birla Minerals Limited, of which Birla Nifty is a wholly owned subsidiary. He is authorised to swear that affidavit on behalf of Birla Nifty. He refers to the contract between Welgard and Birla Nifty of about August 2007 in relation to the paste fill plant. He asserts that part of those works concerned a paste delivery system which was subcontracted to Louminco, although he says that he was not aware of that subcontract at the time it was entered into. He also acknowledges that, in late October 2008, due to financial issues arising between Welgard and Louminco, Welgard consented to Louminco directly invoicing Birla Nifty, and Birla Nifty paying Louminco directly in relation to the paste delivery system. Birla Nifty, between December 2008 and February 2009, paid directly to Louminco some $647,408. 20 On 24 December 2008, Welgard went into administration. Mr Jose says that in early January 2009, Birla Nifty engaged GR Engineering Services Pty Ltd to complete the construction and commissioning works on the paste fill plant, and to report on any defects in relation to it. He refers to commissioning problems in relation to the plant between January and May 2009 concerning the paste delivery system, so that Birla Nifty ceased operation of and dismantled the paste delivery system from the plant in May 2009, although it remains at the mine. Subsequently, a temporary alternative paste delivery system has been installed and is in use at the mine. GR Engineering Services Pty Ltd from January 2009 has been requested to examine, report on and rectify any defects in relation to the paste fill plant generally, and has been investigating solutions to problems with the paste delivery system, and been considering a report on its rectification including concerning any defects in relation to that system. Its report had not been submitted at the time of the WASC action, and apparently has still not been completed. 21 Consequently, neither Birla Nifty nor Mr Jose are in a position to assert firmly a claim against Louminco and certainly not in terms which could specify what that claim is for and why it is made. 22 Indeed, contrary to the directions given in the FCA action on 23 July 2009, with a view to a defence and any cross-claim being filed so as to be able to understand the extent of commonality between the two proceedings, Birla Nifty and Mr Jose have filed a "holding" defence (as Mr Jose describes it). They do not intend to file any cross-claim in this proceeding because, he claims, such matters would concern the same subject matters in claims as those which arise in the WASC action which his solicitors are "preparing for filing" in the WASC action, and so may expose Birla Nifty and himself to an allegation that pursuing those matters in the WASC action is itself an abuse of process. I do not need to comment upon that attitude. 23 The application is made by Birla Nifty and Mr Jose under s 5(4)(b)(iii) of the Cross-Vesting Act. That section provides for a proceeding in the Federal Court to be determined by the Supreme Court of a State or Territory, relevantly, the Supreme Court of Western Australia, if it appears to the Federal Court that it is in the interests of justice that the relevant proceeding be determined by the Supreme Court of Western Australia. 24 The issue, it is submitted, is whether the Supreme Court of Western Australia is a more appropriate forum, upon a fair balancing of all of the factors relevant to the "interests of justice". 25 The submissions of the Birla Nifty and Mr Jose interests are based upon the convenience of the parties, particularly directed to where a trial of the foreshadowed possible issues between the parties might more conveniently be held. They classify the proceedings in the WASC action as being an action for money had and received, or alternatively for damages for breach of contract, and negative declarations in respect of conduct under the TP Act. It is not at all clear that the claim for money had and received is properly made. Such a claim may be maintained if there has been a total failure of consideration from one contracting party to another: Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 350-1. The evidence from Mr Jose does not indicate that Birla Nifty is asserting a total failure of consideration in respect of the moneys paid direct by Birla Nifty to Louminco of $647,408 in respect of the paste delivery system component of the overall project. Indeed, although that system is no longer currently in use, Mr Jose's affidavit indicates that there are alleged to be a number of unspecified defects, and that consultants have been engaged to determine the best course to determine how those defects might be addressed. It does not suggest a total failure of consideration. That claim, and the claim for damages for breach of contract is clearly premature. It is an anticipatory claim only. It is not even clear that the claim will ever be progressed, depending upon the outcome of the expert's report which is being sought. The evidence does not indicate when it will be made available. 26 The fact is that Birla Nifty and Mr Jose have no clearly articulated claim against Louminco at present, and it is not clear indeed whether they will ever have one, and if so in what terms it will be expressed. 27 The claim for negative declarations is one in respect of which, as presently appears, orders are inappropriate. There is doubt about the utility of negative declarations, particularly in respect of provisions under Pt V of the TP Act, and in particular s 52 of the TP Act. It establishes a norm of conduct so that, by other provisions of the TP Act, its contravention may give rise to an entitlement to recover damages. Doubts about the utility of negative declarations were discussed by the Full Court (per Beaumont, Gummow and Carr JJ) in Jenkins v NZI Securities Australia Ltd (1994) 52 FCR 572 (Jenkins) at 576-7. Those views find support in the observations of the High Court (per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ) in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 355-7, [45]-[49]. The Full Court decision in Jenkins applied generally the observations in University of New South Wales v Moorhouse (1975) 133 CLR 1 at 9-11 per Gibbs J. 28 See also the remarks of Gummow J in Kawasaki Steel Corporation v Owners and Others Interested in the Ship "Daeyang Honey" (1993) 120 ALR 109 at 114, and of Einstein J in Challenger Group Holdings Limited v Concept Equity Pty Limited [2005] NSWSC 374 at [29]. 29 I find that the negative declarations are a device to bring commonality to the two proceedings in circumstances where it is unlikely that they will be pursued by Birla Nifty and Mr Jose in the WASC action. The motive for their introduction is to have determined in the forum of choice of Birla Nifty and Mr Jose issues which may arise, as well as issues of which they were given notice by the managing director of Louminco a few days beforehand. 30 That is not to say that, in particular circumstances, negative declarations may not be made. However, the generality of the declarations as first sought is clearly inappropriate, reflected by the amended writ in the WASC action. Moreover, as the correspondence between solicitors for the parties indicates, the probability is that the negative declarations sought in respect of the asserted failure of Birla Nifty and Mr Jose to comply with the conduct imposed by s 52 of the TP Act are not likely to be pursued as primary relief in the WASC action. If the order sought is made, those claims are likely to be abandoned, forcing the Louminco interests to cross-claim to assert that which they are presently asserting in the FCA action. 31 At this point, therefore, I am not satisfied that it is in the interests of justice for the proceeding to be transferred to the Supreme Court of Western Australia, in effect to be consolidated with the WASC action. I find that the WASC action was premature, and was, as counsel acknowledged, a tactical proceeding to endeavour to secure a forum for the resolution of what other issues ultimately emerge between the parties, and to prevent or to deter Louminco from bringing this proceeding as it had foreshadowed. It is not in the interests of justice to cross-vest the FCA action as sought when the WASC action to which it is proposed to be tied is at such an early and uncertain stage. The jurisdiction of this Court has been properly invoked, and the issues (as the parties have defined them by their pleadings) may progress promptly to trial. 32 The balance of the material before the Court presented on behalf of Birla Nifty and Louminco indicates that, in the event that there is ultimately a dispute between Birla Nifty and Louminco as to the terms of any contract between Louminco and Birla Nifty and whether or not it has been breached, or as to the terms upon which Louminco has provided services to Birla Nifty, or as to the quality of the work Louminco has provided under its subcontract to Welgard, or in some other way, those issues are likely to "overlap" in a practical sense by a cross-claim in the FCA action or a detailed claim in the WASC action. If such issues emerge, it is likely on the material before me that a significant volume of the evidence to be adduced will be adduced from witnesses resident in Western Australia. It may therefore be appropriate, in due course, to determine whether the proper place of this proceeding should be in the Western Australian District Registry of this Court, or to determine that this action be cross-vested to the Supreme Court of Western Australia. It would be premature to address such possibilities at present. 33 I note also the risk that the proceedings in the WASC action may be more extensive than the FCA action, the issues more extensive and the hearing more prolonged. It is presently not clear how and when that proceeding will progress. Indeed, there is apparently a significant risk that at the next case management conference, Birla Nifty and Mr Jose will still not be in a position to determine whether or not they wish that action to proceed, except in respect of the claim for negative declarations. 34 If no action ultimately is advised by the expert consultants of Birla Nifty and Mr Jose, there is no reason why the FCA action should not proceed to determination. Moreover, as they have indicated that they are not in a position to make such a claim, there is no reason why this action should not proceed promptly in any event. If amended proceedings expose wider issues, the appropriate forum may need to be revisited. 35 In my view, the remarks of Selway J in Todber v Glendale RV Syndication Pty Ltd (2004) 211 ALR 390, concerning the application of s 5(4)(b)(iii) of the Cross-Vesting Act, in particular at [8] are apposite. I do not propose to make the order sought on the existing motion where the status and nature of the claims foreshadowed on the part of Birla Nifty and Mr Jose are uncertain and speculative. This Court has jurisdiction to hear and determine the present dispute. It is a discrete dispute, more evidently so because Birla Nifty and Mr Jose have elected not to cross-claim. It is a dispute which, apparently, involves evidence from a few witnesses as to the terms of communications between them, together with what I perceive at present to be largely uncontroversial documentary material. The status of the proceedings in the WASC action is not such as to satisfy me that it is in the interests of justice for the dispute in the FCA action to be transferred to that Court for hearing and determination in conjunction with that action. 36 The application is refused. I will fix a date for further directions for the matter to proceed to hearing, in the absence of any further application made as events unfold. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.